Magners on thin ice as its popular Irish cider becomes a fashion victim
Success story turns sour – profit warning issued and sales slump 10 per cent. By James Thompson
Saturday 12 July 2008
In 2005, the Irish brewer C&C launched its Magners Irish Cider to a fanfare in the UK after an earlier launch in Scotland. For the next two years, C&C's marketing offensive made it fashionable for an army of younger drinkers to quaff Irish cider.
Skip forward to yesterday and Magners' bubbles have gone flat, as its parent C&C issued a profit warning and said that sales had slumped by 10 per cent at its cider division.
C&C blamed a weak trading performance in June, unsettled weather and a deteriorating economy for the poor group performance and the woes at its cider division.
But industry experts have a different view. They say that Magners – C&C's export name for Bulmers outside Ireland – is too expensive, the fashion for drinking Magners has waned and that C&C is being out-muscled by rivals, such as Heineken-owned Scottish & Newcastle. Above all, they say that sales of Magners have lost their fizz as rivals have launched a plethora of new trendy cider brands on to the UK market.
So why have sales of Magners turned so sour and so quickly?
The launch of Magners Original Irish Cider in the UK in 2003 through a trial in Glasgow, which was then extended to the UK in 2005, was nothing sort of a sensation.
It's fair to say that few people in England had heard of Irish cider before 2003, despite William Magner starting commercial cider production in the Clonwell, County Tipperary, in the 1930s. In fact, C&C still produces cider from the same factory in Clonwell today.
The beauty of the Magners advertising, which is still run by C&C's long-standing agency Young Euro RSCG, is that it introduced UK consumers to the concept of drinking cider in a pint glass rammed with ice. It succeeded in selling Magners as a trendy beverage for young people, which is now drunk by men and women in equal numbers. C&C also advertised Magners as being made by a more natural production process than that of rivals. The use of advertisements showing people having fun outside under orchards was highly effective.
Sam Hart, an analyst at Charles Stanley, says that while Magners made it trendy to drink ice-cold cider, the trend appears to be losing momentum.
He says: "It was very much a fashion-driven thing in recent years. But there are signs that this fashion is coming to an end and people are moving towards other drinks. It is one of those fashion-led things and they go through a phenomenal period of growth that just wanes."
Arguably, a much bigger problem is a plethora of rivals piling into the market that Magners almost single-handedly created in the UK.
The market started to turn sour for C&C in the summer of 2006, when S&N reintroduced its Bulmers Original Cider into the UK. Previously, S&N, which was acquired by Heineken this year, had only Bulmers in Northern Ireland.
In 2006, S&N UK's marketing manager of ciders, Stephen Mosey, described S&N's reintroduction of Bulmers into the UK in terms that could have come straight out of the Magners textbook. "Bulmers Original will be positioned as a product best served over ice and aimed to attract an eclectic mix of new drinkers – both male and female – who value a heritage based product."
This year, S&N promises to keep its foot on the accelerator. A source close to the company said: "2008 will be Bulmers' most significant year yet, with a heavyweight £20m campaign, including television advertising and an outdoor poster and press campaign."
A key advantage that S&N, which is a market leader in beer, has is a bigger distribution network of outlets, particularly pubs.
However, the problems for Magners run deeper than the entry of S&N. Having almost single-handedly created the market for trendy cider in the UK, a plethora of other ciders have been introduced into pubs, super-markets and off licences
C&C sells Magners Original and Magners Light outside the UK, but S&N now has Bulmers Original, Bulmers Pear and Bulmers Light. Swedish company Kopparberg has recently laun-ched on to these shores. Magners also competes against St Helier, K Cider and Gaymer's Olde English Cider.
In its 2008 annual report, C&C's group chief executive, Maurice Pratt, acknowledged the fierce competition, when he said: "Our competition has reacted aggressively to the success of Magners since its launch in Great Britain four years ago.
While the on-trade cider sector continues to be affected by the same downturn as beer and lager, sales of cider in the overall UK market remain buoyant. According to AC Nielsen, off-trade sales of cider in outlets, such as supermarkets and off licenses, grew by 15 per cent between June 2007 and June 2008, while on-trade sales of cider in pubs and hotels grew by only 3 per cent in England and Wales.
Exane BNP Paribas analyst Nikolaas Faes says: "The [premium cider] category will still grow but the competition will grow faster than Magners." He forecasts that the total UK cider market will grow by 2 per cent this year, but the premium market will grow faster.
In particular, Mr Faes says S&N is able to offer pub landlords more profitable deals. Mr Faes said: "The Bulmers Original brand [in the UK] gives higher margins to the pub owners and cheaper prices for consumers."
In these straitened times, consumers are becoming far more price-conscious, which could mean that some shun Magners in favour of cheaper ciders. According to Tesco's website yesterday, a bottle of Magners Irish Cider costs £1.99, while Bulmers Original Cider was £1.69.
Given that it now operates in a relatively overcrowded market, Magners is likely to find that 2003 to 2006 was as good as it gets in the UK. "The boom is over. The market will never come back to those levels," said Mr Faes.
C&C Group declined to comment.
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