Divisional Review
Cider - Great Britain (GB)


Constant Currency(i) FY2010/11
€m
Magners
FY2009/10
€m
Change
%
Gaymers
Brands
FY2010/11
€m
GB Cider
FY2010/11
€m
           
Revenue 131.9 132.0 (0.1%) 152.7 284.6
Net revenue 107.2 111.1 (3.5%) 88.0 195.2
- Price /mix impact     (7.1%)    
- Volume impact     3.6%    
Operating profit 21.6 €16.5 30.9% 5.4 27.0
Operating margin (Net revenue) 20.2% 14.9% 5.3ppts 6.1% 13.8%
Volume – (khl) 745 719 3.6% 1,623 2,368

Magners
The cider category sustained its long term growth trend with retail volumes increasing by 3% in the twelve months to 19 February 2011 and value increasing by 5% over the same period. The off trade channel continues to be the source of dynamism in the category with growth of 4% compared to a flat performance in the on trade. It is anticipated that the arrival of Stella Artois Cidre in the market will accelerate category growth in 2011 via the off trade.

The AC Nielsen/CGA statistics show Magners retail volume growth of 5%, with a decline of 5% in the on trade and growth of 18% in the off trade. This represents a nine percentage point improvement for the total brand during the twelve month period. The recovery trend is attributed to both accelerated volume for Magners in the off trade and a reduced level of decline in the on trade.

There is discrepancy between the 3.6% growth in Magners volume shipped in FY2010/11 and the 5% increase in retail volumes recorded by Nielsen/CGA. However, the momentum in the brand and the recovery trend is clear. Based on volumes shipped, Magners was in positive market share territory for the year.

The differential in trade channel performance does have a significant impact on revenue. The 3.6% volume growth is more than offset by a price mix reduction in unit revenues of 7.1%. The channel switch effect accounts for 1.7 percentage points of the 7.1%. The absorption of duty accounts for a further 1.9 percentage points while increased promotional activity accounts for 3.5 percentage points. The effects of channel switch and promotional activity were more significant for trading in the second half of FY2010/11. Whilst the revenue line has yet to return to positive territory, the 3.5% net revenue decline this year compares favourably to a 15.2% decline in the previous year.

Improvements in operating margins of 5.3 percentage points more than offset the revenue decline, increasing the operating profit contribution by 31%. The re-allocation of marketing investment to support promotional activity improves margins by 2.1 percentage points. Marketing investment levels remain above 15% and represent a competitive ‘share of voice’ to support the ‘There’s method in the Magners’ campaign. The rest of the operating margin improvement in the year is attributable to the flow through of overhead and input cost reductions on the supply side of the business.

Presenting the Gaymers numbers side by side with the Magners numbers illustrates the considerable differential in the underlying economics and highlights why the primary focus of the Gaymers business is to support the development of the Magners brand. The performance of the Gaymers portfolio is covered in the review of acquired businesses on page 18.

(i) On a constant currency basis, constant currency calculation is set out on page 20

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There's method in the Magners

There's method in the Magners

Magners