Comment - C&C Group's CEO: Not the Poisoned Chalice We Thought

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The announcement that John Dunsmore is set to vacate the CEO-ship of C&C Group at the end of this year means Dunsmore has not fulfilled the destiny we here at just-drinks had in mind for him. Unless, of course, he reverts to our type in the next two months.

When Dunsmore assumed the role at the Irish drinks group in late-2008, some observers – myself included – suggested that he was being brought in to prepare C&C for disposal. As head of Scottish & Newcastle through its divestment to Carlsberg and Heineken in early-2008, Dunsmore must have developed a taste for the slings and the arrows of a company sale, we felt. Who wouldn't? S&N played a canny hand in the struggle against Carlsberg and Heineken – so much so that S&N's shareholders, who were initially offered 720 pence per share in October 2007, were singing Dunsmore's praises come January, when they were looking at 800 pence for each share.

At the time, C&C appeared ripe for either break-up or acquisition, or both. Its flagship brand, Magners cider, had long since peaked since its explosion on to the scene in the UK in 2006. Since then, a raft of competitor cider brands had jumped on the 'over-ice' format, thereby diluting Magners' USP. Meanwhile, the group's spirits and liqueurs division, led by Tullamore Dew Irish whiskey, appeared stuck in the shadows of the Magners juggernaut.

What has happened since has seen C&C emerge as a more focused drinks company, in a far healthier state. In August 2009, Dunsmore nailed his colours to the mast, as C&C signed a deal with Anheuser-Busch InBev, to acquire the Tennent's lager brand in Scotland for GBP180m (US$292m). Two months later, C&C bought Constellation Brands' UK cider division, The Gaymer Cider Co, for GBP45m.

Dunsmore's message? We ain't sellin', we're buyin'. And cider and beer are our game.

In light of this direction shift, the divestment of the spirits and liqueurs division last year, to William Grant & Sons, was a no-brainer. 

Alongside this wheeling and dealing, Dunsmore and his lieutenant, COO Stephen Glancey, have rigorously cut costs at C&C. The effects of this could be seen today, when the group reported a rise in half-year operating profits in spite of a drop in cider and beer sales.

The firm is sticking to its prediction that operating profits will be between EUR108m (US$149.3m) and EUR115m for the current fiscal year, which is ahead of the EUR107m in full-year operating profits that it reported for its core cider business in the last fiscal year prior to Dunsmore's arrival, to the end of February 2008.   

All of this, it appears, has prompted Dunsmore to assert that he has taken the company as far as he can. 

If he has chosen to continue working in the sector, one does not expect him to be out of the game for long. Note that the CEO post at Mitchells & Butlers is up for grabs; another company that is in need of some intensive care and one that has been linked with an approach for Dunsmore in the past.

On the other hand, there is reason to believe that Dunsmore will not be in a rush. When he took the job at C&C, the company set down a raft of performance targets that would have netted Dunsmore "just under EUR7m" if all were achieved. 

One of those targets was that C&C's share price should remain above EUR2.50 for 20 days out of 40 consecutive trading days within the next five years. That target has been easily achieved in the past 12 months.

Both sides, then, look to be parting ways in decent shape.

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