E-Malt.com News article: 3513

UK: Britain's biggest brewer Scottish & Newcastle announced on October 20 robust performance for the first nine months of the year despite poor summer weather, which dampened beer markets across Western Europe. Since the end of the summer period beer markets have recovered to anticipated levels.

This performance is due to improving operational efficiency and good progress from our key brands, the company said. Greater competitiveness across our businesses combined with recovering demand gives us confidence we will meet market expectations for 2004. This robust performance and improving competitiveness positions the group well for further progress in 2005.

The UK beer market, as has been widely reported, was relatively weak in the third quarter with poor summer weather compounded by a drop-off in off trade demand following the end of the Euro 2004 football championships.

In the context of these testing market conditions, the UK business had a positive third quarter, continuing the strong performance of the first half of the year. The top four beer and cider brands (Foster’s, Kronenbourg 1664, John Smith’s, Strongbow) performed well with volumes for the year to date being +5%; these brands are the key contributors to improving share. This growth has been achieved with no additional discounting, and net sales per hectolitre were slightly ahead for the third quarter.

Operationally, the business continues to perform well with high levels of service, good control of costs, and strong cash generation. This improved efficiency is enabling us to invest significantly more in advertising behind our brands; a key driver of improving volumes and margins in the future. As previously indicated, A&P spend will increase by around 1.5% points of net sales for the full year.

In France volumes in July and August were, as anticipated, markedly lower than in 2003. As a consequence of the wet summer against extremely tough comparatives we now anticipate the French beer market will decline by around 6% for the full year. However, Brasseries Kronenbourg’s premium brands (Kronenbourg 1664, Grimbergen and Foster’s) continue to gain share (volume –3.5% for the year to date) and total volumes for the third quarter were ahead of those in 2002.

Demand has improved since the end of the summer, and for the balance of the year we expect beer market volumes to be at more normal levels.

Pricing for the period was positive, in line with recent trends. The price reductions in the off trade, which took effect from October 1st as a result of the Sarkozy initiative, are not anticipated to have a marked immediate impact as the cost impact will be absorbed through ongoing efficiencies in production and a realignment of promotional spend. For 2005 these changes are likely to boost consumer demand slightly and potentially create a more competitive retailer environment. Brasseries Kronenbourg, with its leading position and strong brands is well positioned to compete in this new environment.

In our other European markets we experienced a similar pattern of weather affected summer volumes, and a subsequent recovery in demand. Our businesses in these markets generally performed well with good brand performances for the year to date from Sagres (volume +4%) in Portugal and Grimbergen (volume +7%) in Belgium. In Finland the 32% reduction in excise duty and entry of Estonia into the EU, whilst stimulating consumer demand for beer, created a complex commercial environment to manage. In this context we are very pleased with both value and volume progression of our key brands, Lapin Kulta and Karjala. In the USA, Newcastle Brown Ale continues its double digit growth well ahead of the import sector.

Regarding Eastern Europe (Baltic Beverages Holding), the results for the third quarter of 2004 will be announced on 4 November 2004. Results for the first six months showed beer volume growth of 13%, net sales up 30% (US dollars) and EBITDA up 12% (US dollars). Since then BBH’s largest business Baltika has announced volume growth of 25% for the third quarter, benefiting from the high levels of investment in sales, distribution and marketing this year.


24 October, 2004