E-Malt.com News article: 1875

UK’s biggest brewer, Scottish & Newcastle Plc, announced on December 2, 2003 good performance from focused beer business. Its first half profit rose 7.5% as the hot summer boosted demand at off-licences for beer. Pre-tax profit rose to UK£316 million in the six months to September from £294 million in the same period a year earlier, the company said. Turnover rose 17% to £3.034 billion as beer sales by volume rose 4% to 25 million hl. Earnings and sales were helped by the first time contributions from cider maker HP Bulmer and Portugal's Central de Cervejas.

Chairman, Sir Brian Stewart said: "These results demonstrate the successful international development of S&N. The sale of the UK Managed Retail business has created a focused, and well balanced group with the operational skills, strong market positions, excellent brands, and financial flexibility to develop as one of Europe’s leading brewers.”

Chief Executive, Tony Froggatt said: "S&N has produced a strong performance in the last six months with organic volume growth of over 4%. The growth was led by Foster’s which increased volumes by 9%, Newcastle Brown up 12% and Kronenbourg, with a firm pricing policy in its two major markets France and the UK, which grew by 6%. Foster’s and Kronenbourg are brands with proven international pedigree and the plan to brew and sell them in Russia is an exciting development for the brands and BBH. “ He continued: “The priority for S&N is to build on its strong market positions and excellent brands to deliver increased returns to grow shareholder value. We will do this by focusing more closely on the customer and consumer in all our markets, and by releasing resources from within the existing business to invest in our brands.”

S&N, through its subsidiary, Scottish Courage, is the market leader in the UK with 27% of beer market share and leading brands including Foster’s, Kronenbourg 1664, John Smith’s and Strongbow. The UK beer market grew by around 1.5% during the period. Scottish Courage’s volumes fell by 1% overall. Scottish Courage’s top four brands (Foster’s, Kronenbourg 1664, John Smith’s, and Strongbow) outperformed the wider portfolio and grew volumes by 4%, led by Foster’s which grew by 8%, and Strongbow which grew by 10%. These brands contribute over 75% of Scottish Courage’s branded beer and cider volume.

The off trade market grew by around 10% boosted by the hot summer, which increased demand for ‘at home’ drinking. Scottish Courage volumes grew by 9% in the off trade, broadly in line with the market. The off trade was marked by low prices for many brands, but Scottish Courage’s prices only fell slightly (by 2.7%) during the period and the business attained growth in line with the market whilst successfully resisting discounting as heavily as several of our competitors. In contrast, demand in the on trade sector, particularly in the High Street pubs, was weaker and on trade market volumes declined nearly 3%. Scottish Courage on trade volume declined by 6%, partly due to the impact on sales of lower service levels in the supply chain. Scottish Courage achieved price increases of 1.8% by focusing on its strong brands.

S&N’s International Beer division is responsible for developing the Group’s strong and established market positions in France, Belgium, Portugal, Finland and Greece as well as exports to more than 60 countries, of which the USA is the largest single market, and S&N’s joint venture in India. The International Beer division performed well during the period, with good underlying performances from established businesses, especially Brasseries Kronenbourg in France, and S&N Importers, the premium import business in the USA, where volumes of its key brand Newcastle Brown Ale grew by 17%. Beer volumes increased by 4%. Operating margins improved from 11.6% to 12.4%, aided by the increased volumes, as well as an improved mix and good cost controls. The beer market in Western Europe during the period was strong, aided by hot summer weather. In contrast, in Northern and Eastern Europe the summer was cold. In the USA growth in the import sector remained strong although slower than in 2002.

The French beer market grew by 9% during the period, significantly boosted by an outstanding summer, following a decline of 6.5% in the comparable period in 2002. Brasseries Kronenbourg’s volumes grew by 6% in the same period. Amongst the key brands, Kronenbourg 1664 grew volumes by 11%, Grimbergen by 14%, Foster’s by 9%, and the mainstream Kronenbourg brand by 8%.

In Russia, market volume growth has recovered strongly following a decline of 6% in the first quarter of 2003. In the six months to October, Russian market volumes grew by 9.5%. BBH, its joint venture with Carlsberg, grew share with its volumes increasing over 12%. S&N said to further strengthen BBH’s portfolio, Foster’s and Kronenbourg 1664 will be brewed and distributed through the BBH network in 2004.

Looking forward the company said its anticipated performance for the eight months to December 2003 is in line with market expectations. In a statement S&N said it anticipates reasonable market conditions, “although consumer confidence remains fragile, and the summer season in Western Europe is unlikely to be as buoyant as in 2003.”



03 December, 2003