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Forgive my patronising tone, but I'm worried about you. I'm talking to C&C Group, who despite posting a lift in full-year sales earlier this week, looks precariously-placed to weather the current - and future - choppy waters. As companies everywhere work to line up their ducks in a row to survive the coronavirus pandemic and its wider impact, I'm worried that some of C&C ducks may be in quite a bad way.

Magners owner C&C Group had a good fiscal-2020, but the landscape has changed immeasurably since then

Magners owner C&C Group had a good fiscal-2020, but the landscape has changed immeasurably since then

On Wednesday, we reported on C&C's near-8% top-line rise from the 12 months to the end of February. Amidst the impressive performance, however, were many causes for concern.

First up was the Magners and Tennent's brand owner's recognition that its sales in the on-premise channel since March stand at zero. Sure, that's the same for all other drinks companies, but around 80% of C&C's business is on-premise related. The aforementioned flagship brands, both of which are household names in their main markets, are for consuming in pubs: Magners - and its Irish equivalent, Bulmers - over ice in a pint glass, Tennent's in the hostelries of Scotland.

Also on the list of on-premise woes for the group is its real estate footprint in the UK. The acquisition of a 47% stake in Admiral Taverns three years ago was described by one analyst at the time as "sensible". Back then, of course, COVID-19 sounded more like the name of a rock band than something that would decimate the hospitality industry in early-2020.

Next up is the Bibendum/Matthew Clark business. Combined, the two divisions, acquired in the Conviviality Brands fire-sale of 2018, are the largest drinks distributor to the UK on-premise. Also, sales from the business dwarf C&C's other three reporting units put together. Indeed, at 65% of group sales, the Bibendum and Matthew Clark units exemplify that reliance on one sales channel.

Over the water brings another headache. Seven years ago, C&C closed the deal to buy Vermont Hard Cider Co, with hopes in place to replicate Magners' runaway UK success in the US with Vermont's Woodchuck brand.

Enter hard seltzer.

The alcoholic sparkling water category has grabbed a load of headlines - and sales - in the US in recent months. Brewers have been quick to catch up, for fear their share of throat would be squeezed. Spirits companies have behaved similarly, both leveraging their established brands in the country with hard seltzers of their own. Cider, meanwhile... well, C&C's fiscal-2020 EUR34m impairment charge on Vermont tells the story better than I could.

The cherry on top of this particularly worrying cake comes in the shape of C&C's CEO - or rather, the current lack of one. Former incumbent Stephen Glancey had been with C&C since 2008 - becoming CEO three years later - before he retired at the end of February. Now, more than ever, the group is going to need strong leadership. Granted, C&C has ballast on its board in the form of chairman Stewart Gililand - ex-Whitbread Beer Co and Interbrew (now Anheuser-Busch InBev) - and former SABMiller exec Jonathan Solesbury as CFO.

However, without a figurehead at the wheel, along with a reliance on a sales channel that doesn't exist right now and a US cider business with no answer to a booming new category, navigating those waters ahead is going to be that much harder.


Expert Analysis

Beer & Cider in the United States

Beer & Cider in the United States

Beer & Cider in the United States industry profile provides top- line qualitative and quantitative summary information including: market size (value 2014- 18, and forecast to 2023). The profile also c...

VIEW REPORT

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