By Scott Wright
THE owner of Tennent’s Lager has warned it may have to follow its recent price increase with a further increase for customers as costs continue to rise.
C&C Group served notice of a second possible price rise in six months as it said it had returned to profit amid trading conditions freer from Covid restrictions in the year to February 28.
The company made an operating profit of €47.9 million, ahead of its €45m-€47m guidance, following a loss of €63.6m the year before. It returned to the black in a year that saw 267 days of trading in the on-trade across the UK and Ireland as coronavirus restrictions eased. That compared with 117 trading days the year prior.
Chief executive David Forde said the company had produced a “solid result” in a “testing year” that had followed an even tougher period the year before, noting that C&C had navigated challenges such as the Omicron variant, supply-chain disruption, labour “continuity” issues, and the integration of Matthew Clark and Bibendum wholesale businesses.
The company said it has started the current year “strongly”, but Mr Forde said there was an “anxiety” in the on-trade because of inflationary pressure and the cost-of-living crisis.
Asked to sum up the mood within the pub trade, he told The Herald that “relief” at being open and trading again was offset with concerns about issues such as inflation and labour supply. “It is a mixture of emotions,” he said. “We are back and there is relief, but it is not straightforward. And there you get into the issues around labour shortages, supply-chain constraints, and the fact that our customers are having to work incredibly hard just to be to able to deliver the type of service that their customers need.
“I would think the feeling right now is probably a little bit of anxiety, just quite not understanding what the future has in store. Inflation is a reality. Our customers have had to take price increases and people are asking the question: how much more inflation has to come into my business as a pub owner? And equally, how much inflation can I pass on to my customers, and are they willing to take it?”
C&C increased its prices in November and said yesterday it was likely that more rises may be necessary given “additional input cost pressure, particularly at our manufacturing facilities”, even though hedging and cost savings had “provided a degree of protection against cost inflation”.
However, Mr Forde said the current challenges are not as imposing as the pandemic. He said: “The outlook is a bit uncertain. We all know that inflation is with us, the cost-of-living squeeze is with us.
“But if I look at the challenges [that] we have lived through over the last two years, what is ahead of us pales into insignificance with the challenges we have come through.”
He also raised the prospect of forthcoming events such as this weekend’s Scottish Cup Final between Hearts and Rangers and Scotland’s forthcoming World Cup play-offs against Ukraine as opportunities to drive trade. “And of course were Scotland to be successful, we will have a November [when the Wolrd Cup is held] that we have never had in the past,” he said. “It does not take much to get consumers back into the on-trade. It is an affordable luxury.”
Separately, C&C announced that it had sold its minority stake in Admiral Pub Taverns for £55m to Proprium Capital Partners. The drinks company had originally invested in Admiral, which has a portfolio of more than 1,600 pubs, with Proprium in September 2017.
As part of the divestment, C&C has agreed to long-term supply agreement with the Admiral estate that includes its owned and agency brands.
Mr Forde said the investment in Admiral had been made prior to its acquisition of Matthew Clark and Bibendum. Admiral gave it access to around 1,000 pubs in Britain, while Matthew Clark opened up distribution of C&C brands to between 20,000 and 25,000 outlets in the pub trade.
Mr Forde noted: “In terms of a vehicle to build our brands, we believe the Matthew Clark, Bibendum and TCB (Tennent Caledonian Breweries) system is a more powerful, more robust and deeper-reaching system than the minority interest in the pub estate.”
Asked if he foresees further pub closures given the challenging economic backdrop, he noted the country had lost around 10% of its pubs since the pandemic took hold.
“It is hard to see it getting easier for pubs.” Mr Forde said. “The reality is our market is not under-pubbed – there are still plenty of pubs. Consumers in Scotland do not have to walk too far to get to a pub.”
Shares in C&C closed down 5.5% at 216.23p.