Bulmer seeks answer to cheap rivals

John Shepherd
Wednesday 13 July 1994 23:02
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BULMER, the cider maker, is considering the launch of more discount promotions to combat the growth of economy-priced ciders, which have achieved a 10 per cent share of the take-home market over the past 18 months.

It plans to offer a 50 per cent price reduction to drinkers of its main brands, Woodpecker and Strongbow. John Rudgard, chief executive, confirmed that prices would remain under pressure.

'The promotion has shown it is possible to get people back into brands,' he said. 'Economy brands have stabilised, although it is too early to say whether the price promotion has worked.' Strongbow accounts for 25 per cent of the total cider market.

The company saw volume sales grow by 6 per cent in the year to April while its share of the 90-million-gallon-a-year market eased from 44.5 to 44 per cent.

'Yes, we have slightly underperformed the market which grew by 8 per cent,' Mr Rudgard said. 'And yes, economy ciders were a particular feature.

'We have, however, elected not to compete aggressively in the economy-pricing sector. We are more keen to preserve profit margins and investments in brands.'

Operating profit margins on continuing businesses rose from 10 to 10.7 per cent last year on turnover up from pounds 239m to pounds 248m.

Pre-tax profits fell from pounds 19.6m to pounds 3.9m after an expected pounds 9.8m loss on discontinued operations, mainly its pectin business, and pounds 7.8m of reorganisation charges.

Drinks analysts see little scope for Bulmer to raise prices by more than 1 per cent this year and are holding firm on profit projections of pounds 24m before tax. Shares in the group, which is raising the dividend total by 6.4 per cent to 10.8p, eased 1p to 364p.

Marketing expenditure this year will be increased from pounds 19.6m to pounds 21m and Mr Rudgard said capital expenditure would top pounds 17m.

(Photograph omitted)

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