Magners owner C&C Group says cost-of-living pressures have hit on-trade demand

C&C Group has admitted that demand from hospitality outlets has declined in recent months due to rising cost pressures on consumer spending.

The Dublin-based beverage company, which produces the cider brands Magners and Bulmers, said trading was “robust” at the start of its current fiscal year, before momentum in the on-trade slowed in the second quarter.

However, it still expects net sales of around €900 million for the six months to the end of August, an annual increase of 35 percent and a slight increase in pre-pandemic volumes.

For the same period, the company will report that operating profits more than tripled, from €16 million last year to between €52 million and €55 million this time.

It also predicts it will reach its net debt target to adjusted underlying earnings ratio of around 1.5 times due to the £55m sale of its stake in pub chain Admiral Taverns and healthy cash generation.

C&C Group’s sales have rebounded sharply as consumers have returned en masse to pubs, bars and restaurants in the British Isles following the easing of Covid-related restrictions.

UK on-trade net revenue rose to €1.21 billion last year, supported by volume growth from its branded products such as Magners and Tennent’s Lager.

The London-listed company also credited its performance to successfully managing supply chain issues such as driver and warehouse staff shortages and higher carbon dioxide prices.

As a result of these factors, it recovered from an operating loss of €63.6 million in 2020 to an operating profit of €47.9 million and reduced net debt by 38.6 percent to €271.3 million.

Alleviating concerns: Hospitality leaders cautiously welcomed Prime Minister Liz Truss’s announcement of a six-month price cap on energy bills last week

But David Forde, CEO of C&C, warned that the company “operated in a changing and challenging environment with inflationary costs” and that it would need to raise prices in response to rising costs.

“Despite the current positive sentiment in the hospitality industry after reopening, we are aware of the pressures consumers are facing and its potential impact on future demand,” he added.

C&C Group shares closed 8.1 percent lower at 159.8p on Wednesday, making it the second largest decliner on the FTSE 350 Index, behind Ocado. Since the beginning of the current year, their value has fallen by a quarter.

Today’s trade update comes a week after new Prime Minister Liz Truss announced that households would have their annual energy bills frozen at £2,500 for two years, while businesses would have their prices capped for six months.

Hospitality leaders welcomed the latest measure, though they said more help was needed to prevent more locations from closing.

“We need long-term clarity and certainty so that our brewers and pubs can plan effectively and thrive in the heart of their communities well into the future,” said Emma McClarkin, chief executive of the British Beer and Pub Association.

“The cost of doing business still poses a real threat to many, but we are encouraged by the direction this administration is taking. Now we need to hear more about business rates, VAT and keeping the beer tax low.’