Pressed into growth

19 March, 2010

The cider category is in rude health, with a value growth of 16% on last year, according to Nielsen. Now worth £728 million (for the year to January 23, 2010) it is performing better than any other category and producers and retailers alike continue to have high expectations for its future.

Waitrose buyer Neil Whelpton says sales are healthy and there is “no evidence” the growth is going to stop.

“Through Christmas and the early part of 2010 our sales have continued to exceed 20%-plus and I see no reason why this will stop as cider producers continue on an innovation mission,” he says.

“Customers’ perceptions of cider have changed massively over the past five years – their knowledge and interest in cider means more and more people are

buying into it.”?Jim Helsby of the York Beer & Wine shop, has been on a buying trip to replenish stock after Christmas.

“All three producers, Ivor Dunkerton, Dennis Gwatkin and Mike Johnson, seemed reasonably optimistic about future sales,” he says. “They were pleased with their perry output for this latest?harvest – although less so with the cider crop which they tell me has been poor.

“Provided the sector emulates what the microbrewery sector has achieved – ignoring high-volume industrial cider, for example, and pursues instead the high-quality, artisan end of the market – why should it not succeed? “There needs to be a real effort to distinguish these products from the commodity ciders to ensure we don’t go down?? the path of the ‘three-for-a-tenner’ wine deals or the ‘24 cans of Legless Lager for £9.99’. That way lies a rather depressing outlook.”?Gaymer’s Peter Spencer says: “Cider is still the fastest-growing and most recession-proof category, with the highest levels of growth coming from the most premium end of the market. We expect this growth to continue, as long as the industry continues to invest in the category and attract new consumers.”

It’s been an exciting time for Gaymer, and Spencer says the future is “very bright” for the company, following a deal with Magners’ producer C&C Group in November. The deal was finalised on January 15 but the two companies aren’t working together yet,” he says.

“We are awaiting the Office of Fair Trading’s ruling on this acquisition and during this period – known as the ‘hold-separate’ period – Gaymer Cider Company and C&C are forbidden by law to discuss any areas of their business with each other. This is standard practice for all business acquisitions reviewed by the OFT.”?This holding period is expected to end around mid-April.

“At the moment we are unable to give any further information other than to say the sale has been completed. It’s business as usual, and Gaymer is developing exciting plans for the future and looking forward to a busy 2010,” adds Spencer.

Trade insiders say increased distribution routes could provide an opportunity for Blackthorn, owned by Gaymer, to take on number one brand Strongbow, which is produced by Heineken UK.

Sanjay Patel, brand unit director for cider at Heineken UK, says: “I think it’s probably one of C&C’s strategies, but there is plenty of room in the market for both brands.

“Strongbow is at least four times the size of Blackthorn and we invest significantly more in terms of ad spend and will continue to do that.

“We have a stronger history in terms of national coverage and consumers are willing to pay more for Strongbow than Blackthorn.”?The industry has welcomed the news of consolidation and Patel agrees.

“C&C takes cider very seriously and it looks to grow the category in the long-term and invest in it – all the things Heineken UK does too.”?Last year saw another acquisition when Devon Cider was bought by Aston Manor, which produces a range of ciders, including Frosty Jack’s, Kingstone Press and Duchy for the Duchy Originals brand.

Glenn Asquith, sales and marketing director for Aston Manor, says: “This acquisition has enabled us to invest in the plant at Devon, giving security and consistent supply to our customers. The market in general will benefit by receiving higher-quality products and increased supply-chain efficiencies.”?Hopes for a hot summer?Producers are looking forward to a warm summer following a chilly winter.

Helsby says: “Fermentations have been very slow due to low temperatures, so there are some shortages in the short term which won’t be rectified probably until late April or early May.”?Martin Thatcher, managing director of Thatchers, which ventured into the fruit cider market last month with Ciderberry, is keeping his fingers crossed for a sunny Easter and a hot summer.

“A nice summer makes a lot of difference. We’ve had a

cold snap which is good for the trees as they need a number of cold days to encourage them to bud. If they are under pressure they produce more fruit. Clearly what we don’t want is a late frost in April or May when the blossom and bees are out.”?Dave Smith, buyer for Booths, agrees: “If we get a very good summer, cider will come into its own. Sales have levelled off a bit in some cases but I’d put

that down to the mediocre three summers we have just had.”?A spokesman for South African cider Savanna says: “Cider has proved that it has appeal all year around, but there’s no question that the summer sees a spike in sales, and retailers need to ensure they can exploit the opportunity.

“This summer there is the added incentive of the World Cup with matches timed perfectly for people to get together to enjoy the games – all evidence points to how sales of cider increase when major tournaments are on.”?Tesco’s buyer Ian Targett says: “The key reason why cider should have good growth this year is the World Cup.

“Two years ago England didn’t qualify for the European Championship, and four years ago the cider-over-ice trend hadn’t started, so this will be the first time the new crop of cider drinkers will be able to enjoy their favourite tipple while England takes on the best football teams in the world.

“In addition, cider is still performing on the back of pear cider growth, plus the introduction of other fruit ciders gives further choice for customers to buy into the category.” Despite there being an air of optimism in the category, difficulties still exist – especially for smaller producers, according to Peter Matthews, head of off-trade at Westons.

“While we have been enjoying the revitalisation of cider, the recession has taken its toll by reducing the universe of retail outlets available for us to sell to. With shelf space condensing, brands have to perform immediately to meet the buyers’ expectations,” he explains.

“There is no doubt that the cost of entry and driving sales through promotions has greatly increased during the past 12 months, making it difficult for some of the smaller producers to gain a presence without high levels of margin deflation.”?Too many listings?Patel points to other areas that are causing him concern: “Brands moving towards RTDs are jumping on a bandwagon and chasing volumes. It’s not good for the category – and not healthy.

“My biggest concern would be suppliers and customers not looking after the long-term health of the category.

“There’s a temptation for people to produce lower-quality cider – if they do attract new consumers into the category they won’t keep them.

“From a customer point of view there’s a danger they will list too many ciders. You need to list the right ciders with product credentials and credibility.”?Large and small producers alike are waiting with bated breath to see what will be revealed in this year’s Budget, which is taking place on March 24.

Matthews says: “One of the biggest threats facing the industry is the concern of duty hikes, which would drastically damage sales almost overnight of premium brands with higher abvs, with the increase inevitably being passed on to the consumer.

“It would be unfortunate to penalise those loyal followers who enjoy the taste of premium-quality ciders and perries by using these methods.”?Patel says: “We’re trying to make the government aware what the category does for the agricultural economy and that any serious increments in duty will have an effect.”




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