Group Chief Executive Officer’s Review

I had the pleasure of joining C&C Group in November 2020, and since then, I have been impressed by the dedication and adaptability of my colleagues, their passion for our brands and their continued commitment to protecting our stakeholders while delivering leading customer service during these challenging times.

The last twelve months have been unlike any other I have experienced in my career. The COVID-19 pandemic has created disruption on a global scale and presented unprecedented challenges and uncertainty for our industry. It has asked questions of us which we have never had to consider before and challenged us individually and collectively to look at what matters and find innovative responses. The pandemic has changed the way we work and communicate with each other and has rapidly accelerated trends in our sector, notably the adoption of technology by our customers and our business; with the majority of our colleagues, myself included, working remotely from home.

Despite the challenges, C&C has an inherently strong business model, with admired brands that embody provenance and have a real affinity with their markets, coupled with a leading distribution infrastructure of scale and reach. The strength of the Group’s brand-led distribution model, and the fundamental role we occupy in the infrastructure of the UK and Irish drinks market, were evident with a return to profitability and underlying cash generation once trade restrictions were eased in July, August and September 2020. Despite the on-trade restrictions, our core brands have performed strongly in the off-trade, with all of them taking volume share during FY2021.

We have developed and implemented our strategy during FY2021 in pursuit of becoming the preeminent brand-led drinks distribution platform serving the UK and Irish drinks market: evolving our core brand offering; enhancing our wider portfolio; accelerating the adoption of technology and driving efficiencies into our distribution network and support functions. Core to this has been maintaining a customer centric view on delivering leading service, executed by our dedicated colleagues and supported by our suppliers and wider stakeholders. We are pleased with the progress we have made on our sustainability and social responsibility objectives in FY2021, which form part of the fabric of our business model and daily decision making.

Response to COVID-19

Throughout the pandemic the Group’s key priorities have been to protect all stakeholders and support our customers. We have ensured a safe, compliant and supportive working environment for those essential employees who cannot work from home, complying with the advice of national and devolved governments, in addition to health authorities. We supported our customers with various initiatives including: picking up excess stock in outlets; replacing old kegs for new; credit terms; loan moratoriums; ranging advice and promotions for the restart of trade; and order and delivery options in preparation for the eventual reopening of the hospitality sector.

Thanks to the collective dedication of all our team, the Group’s supply chain and production facilities remained fully operational through the year and we continued to work with our partners to serve our off-trade customers.

We implemented a series of measures to streamline the business to create a more efficient cost base, maximise available cash flow, and maintain and strengthen the Group’s liquidity position. These measures included maintaining constructive dialogue with lenders throughout the period and obtaining waivers of the existing financial covenants as outlined in detail in Note 20. In addition, we issued approximately €140 million of US private placement notes (the "USPP") in March 2020 to diversify, strengthen and extend the maturity of the Group's capital structure and sources of debt finance.

We also took action to address our fixed cost base by implementing a streamlining programme which is expected to deliver annualised savings of €18 million against the pre COVID-19 cost base. This included the acceleration of the optimisation of the English and Scottish distribution networks which is scheduled to be completed by June 2021, which will consolidate volumes from three separate networks into two, bringing all our final mile English distribution in house, driving ongoing efficiencies and, in turn, enhance future margins.

Focused on reducing discretionary expenditure, the Group has postponed the majority of non-committed capital expenditure and temporary salary reductions for the Senior Management team and the Board were implemented in the first half of the financial year. We also implemented various working capital initiatives, including the negotiation of temporary extensions to supplier payments terms and agreeing payment deferrals with the UK and Irish tax authorities, and paused the payment of dividends.

In addition, we have availed of various government support initiatives which have also helped to mitigate the impact of the pandemic. This included furlough schemes to support 2,000 colleagues' jobs that were directly and adversely impacted by the pandemic and restrictions on the hospitality sector.

Reflective of the focus on our core brand-led distribution model and to rationalise the Group structure, we disposed of certain non-core assets, including the disposal of the Tipperary Water Cooler business in October 2020 for a consideration of €7.4 million and Vermont Hard Cider Company in April 2021 for a consideration of USD 20 million.

Strategic development

Our ambition is to be the preeminent brand-led drinks distribution platform in the UK and Irish markets. Despite the unprecedented market environment since the end of February 2020, the Group has continued to take decisive steps to progress our ambition, focused on: strengthening our owned brand portfolio, complimenting this with agencies and ‘equity for growth’ investments; driving efficiencies into our network which will enhance margins; and developing our ecommerce offering.

Addressing the growing consumer demand for ‘no and low’ alcohol alternatives, C&C launched the Tennent’s Zero and Tennent’s Light brand extensions which despite restrictions in the on-trade have outperformed expectations in the off-trade. In addition, our own hard seltzer brands have been launched in Ireland through Seven Summits and Shard in Scotland which is the UK’s only draught seltzer. The strength of our final mile distribution continues to be reflected through the exclusive distribution deals completed during FY2021, including: extending our partnership with Budweiser Brewing Group in Ireland to include exclusive distribution of Budweiser; Tito’s Handmade Vodka in the UK, the No.1 selling spirit brand in the USA(i); and most recently exclusive distribution of Innis & Gunn, Scotland’s No.1 craft beer(ii), into the IFT (‘Independent Free Trade’) across the on-trade in the UK and Ireland. As part of the Innis & Gunn deal we secured a long term manufacturing contract for our Wellpark Brewery and received an 8% equity stake at only the cost of nominal share capital along with a long-term incentive scheme which will make a number of additional shares available to the Group based on performance targets .

We accelerated the optimisation of the English and Scottish distribution networks by consolidating the volumes from three separate networks currently into two. This will rationalise our depot footprint and improve our service offering, bringing all final-mile distribution in house in England and, in turn, drive ongoing efficiencies and enhance future margins. Further, the optimisation work supports the Group's sustainability agenda by eliminating transport inefficiencies and reducing product miles travelled and CO2 emissions. The network consolidation is due to be completed by June 2021.

The pandemic has accelerated the adoption of technology across business and wider society. We have witnessed increased momentum in pre COVID-19 trends within our business including ecommerce, where our customers’ order preference has accelerated towards online rather than via our contact centres. We have accelerated development of our platforms, creating new features to further enhance the customer journey including: real time stock information; guest checkout and automated online account setup. We will continue to leverage technology and its corresponding benefits to the advantage of our customer experience and service levels whilst driving the efficiencies throughout our organisation.

Financial Performance

C&C‘s reported net revenue for FY2021 of €736.9 million represents a decrease of 56.1% versus last year on a constant currency basis(iii). With our Matthew Clark and Bibendum businesses almost exclusively exposed to the on-trade, the majority of the decline has been reflected in this division with FY2021 net revenue of €337.8 million, -69.0% versus last year on a constant currency basis(iii).

Our operating loss before exceptional items in the year was €59.6 million and our overall loss before interest, tax depreciation and amortisation was €28.8 million, this excluded an exceptional operating charge in the year of €25.2 million. The Group displayed robust liquidity and net debt management during FY2021, reporting €314.6 million and €441.9 million respectively. This represents a movement in liquidity and net debt of -€20.7 million and -€115.0 million respectively versus last year.

Our receivables purchase programme has contributed €45.0 million to closing cash, an outflow of €84.0 million on a constant currency basis(iii), driven by reduced revenues as a result of trading restrictions. Close management of working capital, supported by tax deferrals, has reduced working capital outflow in FY2021 to €44.7 million.

During FY2021, the Group secured covenant waivers from its lenders, this primarily resulted in the increase in net finance costs in the year by 38.4% to €27.4 million.

Capital Allocation

In strengthening the Group’s liquidity position we have taken a number of actions to reduce the level of capital investment during FY2021, with total investment into the existing business standing at €10.0 million focused primarily on achieving our environmental targets and on optimising our operational footprint.

The Group has invested €7.8 million (£7.0 million) into the Wellpark Brewery which will remove the use of single use plastic at the site during calendar 2021, removing 150 tonnes of plastic annually. In addition, we have invested into an innovative carbon capture facility, the largest in Scotland, which will allow the brewery to store and utilise over 4,200 tonnes of CO2 per year. These investments fit with a wider Tennent’s brand campaign, “Life is bigger than beer” and the sustainability pledges that have been made as part of this.

We support the IFT with a customer loan book of €42.1 million, down from €44.7 million in the prior year, which is primarily secured by freehold assets and is conditional on the outlet procuring our products over the tenure of the agreement.

The Group provided liquidity support of €6.7 million into Admiral Taverns to support their tenants and the on-trade. Admiral Taverns now has sufficient liquidity to manage the near term challenges and deliver their strategy as trading resumes.

We remain committed to a clear and disciplined approach to capital allocation, focusing on the appropriate capital structure to deliver our strategy. Following trading re-establishing and when Group cash flow permits, we will reinstate our dividend.

Our Brands

Over the last twelve months we saw a significant and temporary shift in consumption dynamics from the on-trade to the off-trade, with the hospitality sector either locked down or under restrictions. Our net revenue derived in the on-trade shifted from approximately 80% in FY2020 to approximately 40% in FY2021. I am pleased to report that despite the obvious challenges in the on-trade, our brands have performed strongly in the off-trade where their provenance and affinity with consumers, preferencing the brands they know and trust, has driven volume share gains in all of our three core brands(iv),(v),(vi). In the off-trade, and in line with consumers’ purchasing habits, we have seen changes in pack mix with larger packs playing a more prominent role as consumers shop less frequently. This has also resulted in retailers rationalising their ranges. The trading challenges from the cancellation of key sporting events including the 2020 European Football Championships has been, in part, offset by the sustained period of warm weather we enjoyed through H1 FY2021.

In Scotland, our Tennent’s brand has performed strongly with the underlying brand health reflected in Tennent’s gaining both volume and value share in the off-trade(iv). Tennent’s off-trade volume and value share of 26.5% and 21.6% respectively as at 21 February 2021 represents growth of 1.1% and 0.7%(iv) with net revenue growth in the off-trade of 22.0% versus FY2020. We have continued to invest behind our ‘Life is bigger than beer’ campaign and deliver against the sustainability pledges which were made as part of this. In addition, there has been successful new product development in the year with the launch of Tennent’s Zero and Tennent’s Light, reflecting the commitment of the brand to the continuing changes in consumer preferences. The Zero and Light variants have secured over 1,500 listings in the off-trade during FY2021, with Tennent’s Zero voted as the Scottish Local Retailer Product of the Year 2020, an award that is chosen by the retailers themselves. Our direct to convenience business in Scotland, which supplies our own portfolio and a range of third party products, has continued to establish itself with year on year volume growth of 70%.

In Great Britain, Magners has grown volume share of apple cider in the off-trade to 9.7% as at 21 February 2021 representing growth of +0.4%(vi). Overall volumes in the cider category were aided by the sustained period of warm weather through spring and summer in 2020.

In Ireland, Bulmers’ off-trade volume and value share of cider of 50.5% and 50.8% respectively as at February 2021 represents growth of 3.7% and 4.3%(vi) which in part was supported by the exceptionally good weather during spring and summer 2020. The introduction of Budweiser into our Irish portfolio, strengthens our position as the third biggest supplier of LAD to the off-trade(vi). Lastly, as part of the ‘no and low’ trend emerging, we launched a hard seltzer brand in Ireland, Seven Summits, which is resonating well with consumers.

Performance of our brands outside the key markets of the UK and Ireland has been understandably challenging with these markets experiencing the same trading restrictions as the UK and Ireland, with volumes weighted to the on-trade, and significantly reduced tourism in our key European markets. As a consequence Magners and Tennent’s reported volume declines versus FY2020 of -46.1% and -32.6% respectively.

Premiumisation remains a strategic focus for our business, however the performance of our super premium and craft brands during FY2021 has been disappointing, with it significantly impacted by the closure of the on-trade. Our super premium and craft portfolio has limited exposure in the off-trade unlike our local and core brands. With the lifting of restrictions in the on-trade we anticipate that our super premium and craft portfolio will recover quickly.


With the on-trade either locked down or under restrictions throughout FY2021, trading in our distribution businesses has been significantly impacted. However, the capability and effectiveness of our final mile distribution was reflected in the distribution deals we have secured and our ability to react to the easing of restrictions, notably in July, August and September 2020. Central to this is the strength of our relationships, quality of our service and value of our proposition. During the period, we maintained market leading service levels, as reflected in our customer satisfaction index scores and On Time In Full (‘OTIF’) deliveries, and despite the global supply chain challenges presented by the pandemic we have minimised product range issues.

Our leading scale and reach into the on-trade markets of the UK and Ireland ensures that we have superior access to data and the best insight into macro and regional trends. We continued our development of our proprietary data assets during FY2021 and in addition we signed an agreement with SalesOut, a leading data company, to augment our in-house assets. Our data and insight capability provide a valuable advantage in driving the performance of our own brands. We will continue to leverage this asset to drive revenue and profit growth across our product range and attract complimentary agency brands or “equity for growth” brand partnerships.

Environmental, Social and Governance

The Group recognises its responsibility to society and the importance of our Environment, Social and Governance (“ESG”) strategy and commitments, and the increasingly important role this plays in the decision making of our stakeholders. We are pleased with the progress made during FY2021 on our sustainability agenda including trialling electric vehicles and optimising our distribution network which will result in reducing fleet mileage. In addition, we developed our portfolio with the introduction of ‘no and low’ alcohol variants, and put in place health and wellbeing external support systems for our colleagues. Lastly, we have continued to develop our strategy and enhance transparency across all levels of the business, with an ESG board committee formed during FY2021 and the launch of an ESG strategy. We have created six pillars through which we will execute our ESG strategy: Reduce our Carbon Footprint; Sustainably Source our Products and Services; Ensure Alcohol is Consumed Responsibly; Enhance Health, Wellbeing and Capability of Colleagues; Build a more Inclusive, Diverse and Engaged C&C; and Collaborate with government and NGOs. Together these will support C&C in delivering to a better world.

Our ESG commitments and achievements have been discussed in more detail on pages 50 – 67.