Shares in the London-listed drinks conglomerate C&C Group experienced a significant decline on Friday morning, dropping by as much as ten percent, following the company's unexpected profit warning. The firm, which owns popular brands including Magners cider and Tennent's lager, attributed the downturn to softer customer demand linked to economic uncertainty surrounding the UK's autumn budget.
Budget Impact on Consumer Confidence
The company revealed that trading performance towards the end of its financial year has fallen below the board's expectations, with particularly downbeat results recorded throughout November and early December. C&C directly blamed weak consumer confidence associated with the November UK budget for creating a challenging market environment.
Hospitality Sector Struggles
This decline in consumer sentiment resulted in weaker-than-anticipated demand across hospitality businesses, including pubs and bars that form a crucial part of C&C's distribution network. The company noted that customers have become increasingly cautious with their spending, creating headwinds for beverage suppliers throughout the sector.
Changing Consumer Preferences
Compounding the issue, C&C reported a noticeable shift in purchasing patterns among consumers, who have been moving away from higher-margin products like wine and spirits toward more budget-friendly beer options. This trend has further pressured the company's profitability during what is typically a strong trading period.
Financial Performance and Outlook
While trading during the critical fortnight around Christmas and New Year remained within expectations, the company pointed toward continued softness in consumer demand throughout January. C&C anticipates this challenging market condition will persist for the remainder of the current financial year.
As a result, the company now expects to deliver an adjusted operating profit of between 70 million and 73 million euros, with particular weakness noted in its distribution division. This revised guidance represents a significant downward adjustment from previous expectations.
Market Analyst Perspective
Dan Coatsworth, head of markets at AJ Bell, commented on the situation, stating: The hospitality sector has been blamed for the latest setback. Drinkers aren't spending enough in general, and when they are, they're choosing beer over higher margin wine and spirits.
Coatsworth added: Such a backdrop is unhelpful, yet C&C is pulling a few levers internally to try and reshape its business. It's simply a waiting game to see how long a proper turnaround might take.
The profit warning highlights broader challenges facing the beverage industry as consumers navigate ongoing economic pressures and adjust their spending habits accordingly.
