View from City Road: Market share is not enough

MORE British sherry is drunk in the UK than the traditional Spanish tipple - a surprising fact to which Matthew Clark, the booze and bottled water distributor, has reason to raise its glass. It supplies half of all the home-grown variety in the supermarkets.

Unfortunately, gaining market share isn't enough when the slice is coming from a dwindling cake. The UK wines and spirits market fell by 7 per cent last year, and although the British sherry segment held up better than most, the total is what matters.

For Clark to increase profits by 9 per cent to pounds 2.4m ( pounds 2.2m) in the first six months to October is testament to its new chief executive, Peter Aikens. He has slimmed down the workforce and eliminated non-profitable lines like Taittinger champagne, whose market has slumped by 50 per cent.

By imposing minimum orders and not mixing cases he has also slashed the distribution cost per crate from 230p to just 66p, an impressive performance which has returned margins to 1990 levels.

But buying in growth is the key, which is why all eyes have been on Clark's progress in what had been the faster growing area of bottled water, which it entered via the acquisition last year of Strathmore Spring Water. Recession took its toll as consumers returned to the tap and profits from Strathmore were only 80 per cent of expectations. That should be a short-term blip, though. Strathmore is a step in the right direction.

With the grocery majors likely to keep the lid on prices, the pressure is on Mr Aikens to pick up another sizeable morsel to chew on. Until he does so the shares at 430p should not be chased despite trading on a 20 per cent discount to the market.