The Investment Column: Bulmer set to regain sparkle

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The Independent Online
HP BULMER, the Strongbow and Woodpecker cider maker, has given its investors a few Scrumpy-style headaches over the past couple of years.

But the company appears to have turned the corner. Mike Hughes has come in as chief executive from Guinness and expanded the horizons of the previously sleepy group. Bulmer is not just a cider company, he says, but competes against other "long alcoholic drinks" such as bitter and lager.

His optimism has been helped by a 10 per cent increase in pre-tax profits to pounds 24.6m after last year's horrors when Bulmer was caught out by cheap continental beer imports and problems with white cider pricing.

Mr Hughes' strategy is to concentrate on the group's top brands, aiming to make Strongbow one of Britain's top five long alcoholic drinks brands within five years. Currently in 11th place, that would mean overtaking Heineken, Carlsberg and Tetley bitter. It would also mean doubling cider drinking in the UK, where it accounts for only 6 per cent of the drinks market.

This might have British drinkers reaching for the paracetamol but Mr Hughes believes the success of Guinness, another strong-tasting drink, proves it's possible, though Diageo clearly has deeper pockets.

Strongbow certainly enjoyed a good 1998. Sales rose 9 per cent, helped by a successful advertising campaigns starring TV presenter Johnny Vaughan. Woodpecker edged sales up by 3 per cent and will make a return to TV advertising later this year. Scrumpy Jack suffered a sales setback but new sponsorship deals, such as a contract with the England cricket team, should raise the profile. More funds will be put behind the free sampling of cider in pubs and at major entertainment events in order to get people to try the drink.

Internationally, the business is going well and with growth in the United States and South Africa, the overseas division could soon account for a third of sales.

On Greig Middleton's current year forecast of pounds 27m the shares - up 6p to 370p yesterday - trade on a meagre forward rating of 11. Bulmer may not fulfil all its ambitious goals but, with a plausible strategy gaining momentum, the shares should go higher.