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S&N UK Beer Sales Drop in H1, Vows to Meet FY Targets

Posted on: Wednesday, 4 July 2007, 06:18 CDT

Despite experiencing a drop in beer sales in its domestic market during the first half, UK brewer Scottish & Newcastle has said it expects to meet its full year targets for the group as a whole.

S&N reports that in the first five months of 2007, its beer and cider market share growth accelerated, driven by increases in investment in marketing.

In its beer division, the group said it expected a relative decline in sales for the UK market in the first half, with a corresponding benefit in the second due to the timing of last year's World Cup sales. S&N said this has been accentuated by poor weather in the first half, resulting in a market decline of 5%. Despite this, the group claims that all its key brands - John Smith's, Foster's, Kronenbourg and San Miguel - have grown share of category and it expects the second half will show broadly level beer volumes for the market as comparatives improve, despite the potential impact of the smoking ban.

In cider, the brewer claims to have gained share in a market which has continued to grow strongly despite the poor weather. To capitalize on the cider opportunity, the company said it has invested heavily in the first half, skewing its annual marketing spend ahead of the peak summer period.

During the first half, the group said it continued to counter input cost pressures, and put in place a number of initiatives which will see the first GBP10 million of new cost savings phased into the UK across the second half of 2007. As a result of all these factors, S&N said operating profit in the UK will be lower in the first half compared with the previous year; however, the group still expects its UK business will meet expectations for the full year.

Internationally, the group said it continues to grow branded beers in their respective markets, particularly Sagres in Portugal and Newcastle Brown Ale in the US. Branded beer growth was also experienced in France, where S&N said its wholesale business continues to be extremely challenging and remains a key management priority.

The Edinburgh-based brewer also said it was performing well in Russia, home of Baltic Beverages Holding (BBH), S&N's joint venture with Carlsberg, benefiting from an unseasonably mild winter.

Source: Datamonitor

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