Alcopops leave Merrydown flat

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The Independent Online
Merrydown, the cider maker, clouded the already confused alcopop picture yesterday by claiming that the success of the market for alcoholic soft drinks, in which it is the second- biggest player, had been responsible for a fall in its profits in the six months to September.

Merrydown's warning, which sent its shares 8.5p lower to 100p, is the latest twist in a saga which has seen rival Matthew Clark blaming the burgeoning alcopops sector for a collapse in its Taunton and Gaymer cider brands while HP Bulmer dismissed the impact of the new drinks on what it claimed was a booming market for cider.

Merrydown said sales of its Two Dogs alcoholic lemonade, which is number two in the alcopop market to Bass's Hooper's Hooch, had suffered from the introduction of over 90 new products in the 15 months since it in effect created a whole new drinks sector in July 1995.

Profits fell because of a switch to newer drinks and the high advertising and promotional expenditure needed to maintain share in that fragmented market.

Richard Purdey, chairman, admitted that Bass, which claims 70 per cent of the alcopop market, had taken market share during the period. Two Dogs, which accounted for about 30 per cent last year, had fallen to about 15 per cent of the market currently.

Pre-tax profits in the six months to September fell from pounds 1.16m to pounds 670,000 on higher sales of pounds 19.4m (pounds 18.4m). Merrydown refuses to break out the proportion of sales represented by alcopops and its cider brands, Pulse, Vintage and Merrydown Original, but Paul Millman, managing director, admitted that the fall was due mainly to a change in mix away from higher-margin alcoholic soft drinks.

He dismissed suggestions that the decline at Two Dogs, which had forced it to offer discounts to clear excess stocks of canned products, represented a bursting of the alcopop bubble. Merrydown sees the pounds 300m alcopop market continuing to grow as the drinks giants such as IDV enter the fray with spirits-based drinks such as its Moscow Mule.

In cider, Merrydown continued to increase its share of the market. Pulse and Vintage Cider helped lift Merrydown's share from 4 to 4.7 per cent.