C&C pares down to bitter fruit

ALTHOUGH the events of the past week have concentrated attention solely on the banking sector, companies in other sectors of the economy are also struggling, such as drinks group C&C.

The company's chief executive Maurice Pratt faces the unenviable task this week of presenting yet another set of disappointing financial results to shareholders, who have seen shares fall by 55% over the past year.

As with the banks' woes, C&C's are largely self-inflicted, caused by its board's decision to concentrate almost exclusively on producing a single drink – Magners cider, which is known as Bulmers in Ireland.

In pursuit of this strategy, Pratt has overseen the sell-off of numerous profitable businesses and strong brands deemed 'non-core' as the company chased apparently easy profits from cider. The first to go was its snacks arm, which was best known for Tayto crisps, followed by its soft drinks division, which was off-loaded last year.

Several weeks ago, Pratt flogged the group's wine distribution arm, FindlaterGrants, to DCC at a loss of almost €6.5m, having purchased the company for €16m in 2001.

This focus on a single brand worked well while the group's cider sales expanded, but now its volumes and profits have been steadily eroded by the emergence of aggressive competitors such as Heineken in Britain and declining economic prospects in Ireland.

C&C's portfolio outside of cider consisting of two small distribution arms in the North and a few minor spirits brands.

The company's only real attraction for investors is its pledge to retain its dividend at last year's level, although this could come under pressure if Magners continues to underperform. In that scenario, the only comfort for shareholders is the prospect that, given its incredibly low share price, some larger group may eventually step in and acquire it.