Weather, or narrow product and market scope to blame for C&C profit warning?

On the day the C&C Group said that it expected its first-half profits to fall by 35% due largely to the dismal summer, SABMiller reported a 13% rise in comparable lager volumes

There is an irony in yesterday’s second profits warning within three weeks from C&C Group. On the day the producer of the Magners cider brand said that it expected its first-half profits to fall by 35% due largely to the dismal summer, SABMiller reported a 13% rise in comparable lager volumes in the three months to the end of June

As a global brewer, SABMiller is able to balance rough trading in one region with stronger performance elsewhere. So it has benefited from the hot summer in Northern Europe, while Britain and Ireland, C&C’s core market, mops up from the wettest June on record. Yet, as C&C, acknowledged, part of its difficulty is the competition it is facing from Scottish & Newcastle's revived Bulmers brand, especially in the on-trade where S&N has persuaded some chains to replace Magners with Bulmers.

C&C has been shown to be a one-horse pony in a small market (Britain and Ireland). The company has been responsible for expanding the cider category over the past three years, but it is still a comparatively small part of the long drinks market. So C&C is a potential takeover target for anyone wanting a useful, but not transforming, addition to a global portfolio, while its shares are heavily depressed as a result of the profits warnings. Molson Coors, Constellation (which owns the Taunton and Blackthorn cider brands) and InBev have all been touted as potential suitors.

S&N, however, is also in a comparatively small market in beer terms (Europe and the former USSR) and remains the subject of perennial takeover talk. That's the irony. The very problems S&N is giving to Magners emphasise its own reliance on specific geographic regions than a global stage.

 Ron Emler, 01.08.07