Merrydown toasts Dogs' success with Rhubarb

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Fresh from its success with Two Dogs, the alcoholic lemonade from Australia, the East Sussex cider maker Merrydown is launching alcoholic rhubarb on unsuspecting UK drinkers.

Rhubarb Rhubarb, named by Two Dogs inventor Duncan MacGillivra, is 5 per cent proof and revives memories of a generation ago when Merrydown sold its own rhubarb wine.

Merrydown is hoping the tipple will repeat the success of Two Dogs, which it revealed yesterday had helped return it to the black last year after two years of losses.

The alcoholic lemonade, launched last August, has with its main rival, Bass's Hoopers Hooch, retained 90 per cent of a market estimated to be worth pounds 150m at the end of last year despite the appearance of over 50 copycat products. Merrydown is now preparing to launch into 16 European countries.

Richard Purdey, Merrydown chairman, said yesterday that Two Dogs' contribution was "undeniably a very useful boost in accelerating our recovery", which saw losses of pounds 2.7m turn into profits of pounds 2.03m in the year to March. The figures were boosted by the absence of pounds 2.2m of exceptional charges taken the previous year, but underlying margins tripled to 7.6 per cent. A final dividend of 2.5p, raising the total to 4.5p for last year, compares with just 1p before.

Demand for Two Dogs was spurred by last summer's hot weather and a shortage of supply, but Mr Purdey said they had been "very pleasantly surprised" by the continued strength of demand during the second half, including the winter.

However, he warned that the "sales, marketing and logistical phenomenon" of Two Dogs' introduction was unlikely to be repeated. A new pounds 500,000 advertising campaign is just starting in the UK.

The core cider business also did well out of last year's summer. Mr Purdey said volumes of the group's brands, including Merrydown Vintage and Merrydown Original, exceeded the 15 per cent growth recorded by the market. The group increased its market share from 3.7 per cent to 4 per cent and Mr Purdey reaffirmed his view that Merrydown would do well out of the industry's consolidation.

This had seen some brands disappear and more emphasis on brand-building by the remaining players, he said. Prices had recovered 15 to 20 per cent since hitting bottom in January 1995, when the recent price war amongst cider groups was at its height.

Mr Purdey said that Merrydown would reveal in September how it proposed to deal with the impending 50 per cent duty increase on stronger ciders over 7.5 per cent alcohol.

Merrydown's shares closed a penny higher on the news at 140p. They have more than doubled since touching a low of 67p in January 1995.