CANADA: Big Rock Brewery posts H1 slide as price hikes bite profits

• H1 net profits down 18% to CAD$1.5m (US$1.45m)
• Net sales drop 8% to CAD20.6m
• Operating profits fall 19% to CAD1.9m
• Volumes drop 14% to 93,365 hectolitres

Big Rock Brewery's price-increase strategy that helped it post a strong full-year performance has led to a fall in H1 profits, sales and volumes.

Net profits fell by 18% to CAD$1.5m (US$1.45m) in the six months to the end of June, the Calgary brewer said last week. Net sales were down by 8% to CAD20.6m over the same period while operating profits dropped by 19% to CAD1.9m.

The second quarter also saw declines, with net profits down by 19% to CAD1.4m and net sales dropping off 17% to CAD51.3m. Operating profits in the quarter fell by 22% to CAD1.8m.

Volumes fell by 14% in H1 and 17% in Q2.

The brewer said the drop in volumes was down to a cut in promotions as the company shifts emphasis from volume growth to a focus on operational profit. It said the shift has been caused by a “polarisation” that has hollowed out the beer industry's middle and left growth at the value and premium ends of the market.

The company also blamed the profits and sales drop on the fall in promotional activity, as well as price increases.

Big Rock's price-raising strategy was more successful in full-year results, released in March, when fewer promotions throughout last year helped boost profits by 63% to CAD4.1m. The jump came despite only a 1.9% increase in sales.

Looking ahead, the company said a focus on Alberta and British Columbia, which account for the largest share of Big Rock's sales, and on innovations and premium pricing are “key elements of Big Rock’s future profit growth strategy”. 

Big Rock's share price dropped by 2% on the Toronto Stock Exchange when its results were released last Thursday.

To read the company's official statement, click here.