Rethink as Irish group loses its sparkle

Magners, a bottled Irish cider, was heralded as a triumph when launched in 2005 with a series of memorable marketing campaigns. But after this year’s miserable summer weather and signs of growing competition, C&C, the Dublin-based drinks company that owns the brand, is having to rethink.

This comes on the heels of a couple of profit warnings earlier in the year and confirmation last month that the company is cutting back investment in its factory in Clonmel, County Tipperary.

For confidence to be restored, Robert Brisbourne, an analyst at Merrion Capital, says C&C has to show that premium cider sales can start growing again. It also has to show that it can maintain the premium price tag as bigger rivals step up the competition.

Magners is 7-8 per cent more expensive than Bulmers Original, a brand owned by Scottish & Newcastle that is deliberately marketed as a direct competitor. In off-licence trade, this rises to 18-20 per cent.

Maurice Pratt, C&C’s chief executive, referred on Wednesday to the need for a “sharper competitive focus”, but declined to say whether that would include dropping the price.

C&C’s real challenge is that even if growth in the premium cider category is restored to last year’s levels, it is not clear that the company can protect its market share.

The Irish company had the field to itself back in 2006, but S&N now has 20 per cent of sales in the category. Mr Pratt admitted that he had not anticipated the amount S&N would spend on marketing to support its brand and the extent to which it was willing to undercut Magners on price.

He said he was confident Magners would continue to take the “lion’s share” of premium-packaged cider but did not rule out the possibility that it might continue to lose share to Bulmers and others.

He acknowledged that the company had lost out to S&N in pub chains, which handle about a fifth of cider volumes. Because of its much larger drinks portfolio, S&N has much better distribution in such chains. But Mr Pratt said Magners was holding its own in outlets where both products were stocked.

In spite of S&N’s greater marketing muscle, he also indicated that C&C’s spending on marketing, €40m (£28m) this year, would be trimmed in 2008 in line with slower sales.

“The category is here to stay. The issue is what can the category grow to,” Mr Pratt said.

The company had predicted previously that it would control 4 per cent of the “long alcoholic drinks” market in England and Wales by 2010. This covers bottled beers as well as cider.

C&C – which also, confusingly, owns the Bulmers name in the Republic of Ireland and markets its cider there under that name – has about 10 per cent of the long alcoholic drinks market in its home market. In Northern Ireland, where Magners was tested first, it has 7 per cent and in Scotland 3 per cent.

But as C&C acknowledges, England and Wales represent a far tougher prospect.

As if to underline the point, S&N issued a press release on Wednesday setting out plans to launch a pear cider product.

Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't copy articles from and redistribute by email or post to the web.