In a blow to the British drinks industry, C&C Group, the maker of popular brands like Magners cider and Tennent’s lager, has issued a profit warning after seeing weaker-than-expected demand from customers. The company’s shares dropped as much as 10% on Friday morning as a result of the announcement.
C&C said that overall trading towards the end of its financial year has been “below the board’s expectations”, citing “weak consumer confidence associated with the November UK budget” as a key factor. This led to softer demand from hospitality businesses like pubs and bars in November and early December.
The company was also impacted by a shift in customer purchasing habits, with drinkers moving away from wine and spirits towards beer. C&C added that trading around the crucial Christmas and New Year period was within expectations, but pointed to further weakness this month.
“In January to date we have seen continued softness of consumer demand in the market and anticipate that this will continue for the balance of the current financial year,” the company said in a statement. As a result, C&C now expects to deliver an adjusted operating profit of between £70 million and £73 million, highlighting lower profits in its distribution arm.
Dan Coatsworth, head of markets at AJ Bell, commented: “The hospitality sector has been blamed for the latest setback. Drinkers aren’t spending enough in general, and when they are, they’re choosing beer over higher margin wine and spirits.”
He added: “Such a backdrop is unhelpful, yet C&C is pulling a few levers internally to try and reshape its business. It’s simply a waiting game to see how long a proper turnaround might take.”
The profit warning from C&C comes at a challenging time for the UK drinks industry, which has faced headwinds from factors like the cost-of-living crisis and changing consumer preferences. The company’s update will be closely watched as a barometer of the wider sector’s health.
