Tennent’s toasts Scots beer exports
Brexit currency fall-out lowers earnings at Dublin-based drinks company
DRINKS firm C&C Group has declared Scottish beer exports have never been so strong after the volume of Tennent’s brands sold overseas grew by 50 per cent in the six months to August 31.
The Dublin-based company revealed it is continuing to open new markets for its Tennent’s family of beers across Europe, Asia and Africa, while noting that currency movements weighed on profits and revenues in the first half of its financial year. C&C, which acquired Tennent Caledonian Breweries for £180 million in 2009, said translating its earnings from euros into sterling had led operating profits to drop by 7.9 per cent to €55.1m.
South Africa and South Korea are among the latest export territories for Tennent’s, joining established overseas markets such as Italy, which now imports around three kilolitres (30,000 hectolitres) of the Scottish beer.
C&C’s overall exports, including Magners Original cider and Belgian beer Heverlee, grew by 10 per cent to 102 kilolitres over the period, with Tennent’s accounting for one-third of the volume. The Tennent’s brand, which has been expanded to include styles such as IPA (India Pale Ale), strong ales and stout, now accounts for around half of the volumes achieved by Magners, boosted by new “immediately accretive” distribution deals and the opening of new markets.
The company’s exploits in the export arena come as surging interest in craft beer is helping more and more Scottish brewers taste success in overseas markets.
C&C chief executive Stephen Glancey said: “If you look at Scottish beer exports I’d imagine they are the highest they have ever been, between us, BrewDog and Innis & Gunn.
“Innis & Gunn are exporting 50,000 or 60,000 hectolitres – we’ll be doing that plus – and then you have got BrewDog. And currency devaluation helps us. The interesting thing I guess is that most of the export markets are not to Europe [but to] places like Canada, Asia, [and] Africa. It’s a good opportunity for us.”
Mr Glancey downplayed the effects of depreciation of sterling against the euro since the Brexit vote, noting C&C’s reported earnings had been dragged lower because of the conversion of sterling earnings into euros.
He said there is a potential advantage to C&C in both being domiciled in Dublin, Ireland, with continued access to the single market, while having a significant manufacturing operation in Scotland. The Glasgow base gives it access to the UK market.
“We’re well positioned either way,” Mr Glancey said. “Equally with the drop in sterling, our manufacturing base in Scotland in Glasgow becomes quite a powerful asset.
“For a lot of drink companies that are dragging beer or cider across Europe to get into the UK, the drop in sterling is giving them quite significant earnings issues. We’re quite relaxed about it.
“I think it is important we get clarity as quickly as possible, and we would like to see the long-standing arrangements that Ireland has had with the UK – in terms of freedom of movement of goods and people – continue.”
Closer to home, C&C said that volumes of Tennent’s increased by two per cent in the Scottish independent free trade during the period. The brand regained market share in Scotland, where Tennent’s accounts for around two-thirds of Scottish beer sales.
There was also a positive update from C&C on cider, with Mr Glancey noting that “the fizz is back in Magners”. Volumes of Magners Original grew by 11 per cent over the period.
Mr Glancey said business in Scotland had “stabilised” following the lowering of the drink-drive limit in December 2014, which according to surveys had a big impact on sales in golf clubs and rural restaurants.
However C&C did state there is some “volatility in consumer behaviour” in the drinks industry because of “heightened economic uncertainty following the Brexit vote and subsequent devaluation in sterling”.
The company, meanwhile, welcomed the recent ruling by the Court of Session to reject the Scotch Whisky Association’s appeal against the introduction of a minimum unit price for alcohol in Scotland.
“We have been supportive of the Scottish Government since they introduced the Act,” Mr Glancey said. “Hopefully, the Scotch Whisky Association guys will now just withdraw and let the Government get on with it.”