C&C Investor Seminar 10 Nov 2010

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C&C Investor Seminar 10 Nov 2010 Investor Seminar Glasgow 10th November 2010 Stephen Glancey Chief Operating Officer Kenny Neison Strategy and IR Director Glasgow 10th November 2010 Overview of Today • Investor Presentation • Lunch • Brewery visit and tour • Trade Visits • Dinner and Cider Tasting Introduction • Philosophy and Progress • Our Brands • Ireland • C&C Investment Case Introducing the Presenters Marketing Overview UK • Paul Bartlett - • Kirsty Hunter – Head of Consumer Marketing Magners GB • Sandra Mitchell – Brand Director Tennent‟s Republic of Ireland Overview • Michael Merrins • Stephen Kent DISCLAIMER This presentation does not constitute an invitation to underwrite, subscribe for, or otherwise acquire or dispose of any shares or other securities of C&C Group plc (the "Company"). The presentation contains forward-looking statements, including statements about the Company's intentions, beliefs and expectations. These statements are based on the Company's current plans, estimates and projections, as well as the Company's expectations of external conditions and events. Forward-looking statements involve inherent risks and uncertainties and speak only as of the date they are made. The Company undertakes no duty to and will not necessarily update any such statements in light of new information or future events, except to the extent required by any applicable law or regulation. Recipients of this presentation are therefore cautioned that a number of important factors could cause actual results or outcomes to differ materially from those expressed in any forward- looking statements. Past performance is no guide to future performance and persons needing advice should consult an independent financial adviser. Any statement in this presentation which infers that the transactions may be earnings accretive does not constitute a profit forecast and should not be interpreted to mean that the Company’s earnings or net assets in the first full financial year following the transactions, nor in any subsequent period, would necessarily match or be greater than those for the relevant preceding financial year. Your attention is drawn to the risk factors set out in the Appendix to this presentation. They are not set out in any particular order of priority. The risks described in this document, however, are not exhaustive and consequently do not necessarily comprise all those associated with the Company and/or the recently acquired businesses. There may be other risks which may have an adverse effect on the business, financial condition, results or future prospects of the Company. DISCLAIMER C&C Group plc and its subsidiaries Wm.Magner Limited and Bulmers Limited of Clonmel Ireland are not connected to H P Bulmer Limited of Hereford, UK. Bulmers Original Cider produced by Bulmers Ltd of Clonmel is sold outside the Republic of Ireland under the name Magners Original Irish Cider. Two Years In….. Stabilise Transform Consolidate Stakeholder Approach Consumers Shareholders Customers Long Term View Suppliers Employees Point Of Differentiation We Zig while others Zag • Decentralised business model • Small Head Office - capital allocation • Shareholder alignment • Balanced investment in customer and consumer Our Objectives This Year • Successful integration of Tennent's and Gaymers • Grow with the market in Great Britain • Hold earnings in Ireland • Lay the foundation for international development • Capital structure Integration….A huge task • Transitional services for 1 year • Production volume triples • Employee base moves from 450 to 1200 • Sales Force integration in all territories • Revenue and cost delivery • Three plants versus one • Focus on business with minimal customer disruption • Separation of Spirits Division Magners GB: Perform in line with market How • Sales execution • Effective marketing • Brand renovation • Business model Source: ACNielsen & CGA Data to 4/9/2010 Ireland: Hold earnings Reality H1 2010/11: • Bulmers volume (3.4%) • Price (4.7%) • Operating Margin (0.3ppt) Focus: • Cost • Innovation • Diversification • Investment Source: ACNielsen Data to Sep 2010 Operations….continued focus on cost reduction • From FY09 Clonmel output per man from 6Khl to 9Khl • From FY09 reduce cost per HL produced from €20 to €13 • October further reduction in Ireland operations €3m annualised benefit. • Full year synergy guidance €18m Magners International Volume Growth Magners Export Growth • World cider market is growing khl 53Khl 73Khl 71Khl 82Khl 89Khl 68Khl +21%+21% +39% (2%)(2%) +15% +9%+9% +35%+35% • C&C is No 2 in GB and in the 100% top 3 Cider brands in the world 90% 80% 70% • CAGR of 15% from FY06 to North America 60% Iberia FY11 50% Australia 23 21 18 40% 30 20 20 Other Markets • North America and Australia 30% 11 7 5 11 20% 2 have been the growth engines 0 20 16 10% 9 13 15 14 0% • Plan to scale up resource in F06 F07 F08 F09 F10 H1 F11 USA Update on capital structure • Half Year Cash Surplus Free Cash Flow • C&C is well invested with strong cash flow characteristics • Capable of free cash flow conversion at 70% - 80% EBITDA • Current preference to retain flexibility and liquidity • Cash utilisation will be driven by TSR philosophy Paul Bartlett Marketing Director Kirsty Hunter Head of Consumer Marketing Magners GB Sandra Mitchell Brand Director Tennent’s Glasgow 10th November 2010 Marketing Goal: Strong Local Brands & Margin Optimisation Consumer + Customer needs by market Magners GB Tennent‟s Bulmers ROI Magners ROW Growing with Revitalise Extend share of Sustainable growing Cider brand amongst LADs consumer-led category 18-24yr olds growth Locally relevant brand strategy and execution The UK Cider Market is in long term growth Source NACM The historical advertising for Magners in the UK ran under the proposition of „time dedicated to you‟ A growing Cider category, but Magners was not differentiated enough UK CIDER GROWTH & MAGNERS SHARE GB 12.4% 14.1% Source: Magners Shipment – internal and HMRC clearance data Source: Neilson Whilst we worked on a new unique proposition for Magners in GB we successfully launched Magners Pear Volume (000s Ltr) MAT TO WE MAT TO WE BRAND 06.09.08 04.09.10 MAGNERS PEAR CIDER 0 4682 CRABBIES GINGER BEER 0 3424 BUDWEISER BREW NO 66 0 1616 GROLSCH BLONDE 0 1016 AMBER JACK 0 1001 JACK DANIELS & COLA 0 913 BULMERS SUMMER BLEND 0 656 WKD CORE 0 585 REKORDERLIG STRAWBERRY & LIME 0 574 MARSTONS CLASSIC 0 507 • Magners Pear was the seventh Pear to launch to the market in GB • Supported with heavyweight TV investment • Value Share of Pear Cider Off Trade = 16.3% • Value Share of Pear Cider On Trade = 18.6% • Being late to market has made achieving potential hard. Source: Nielsen Off Trade MAT Sept 2010 Source: Nielsen Off Trade MAT Sept 2010 In March 2010 in GB we introduced our new creative proposition The way we do things may seem a little mad, but there's reason to it. Which we launched through two TV executions „Catch‟ and „Straight‟ Heavy investment behind Magners within a well supported category (4 of the top 11 brands are cider) 1.68% % Share of Voice 2.01% Magners Cider 01/03/10 - 31/8/10 1.75% 4.01% 3.33% Carling Lager 14.49% 4.66% Strongbow Cider 11.95% 5.45% Fosters Lager 5.51% Carlsberg Lager 10.07% 6% Budweiser Beer 6.23% 9.97% Bulmers Cider 7.24% Guinness Draught Source: NMR Source: NMR This has led to a strong relationship with consumer and a clearly differentiated position APRIL MAY JUNE Salience 45% 41% 37% 44% 37% 44% 38% 38% 46% Persuasion Involvement Source: H&P Source: H&P Magners ahead of category leader on key measures ‘Excellent Quality’ ‘Worth Paying More For’ Source: Hall and Partners, Aug 2010 We will continue to innovate as Magners creates a new premium draught category through the launch of Magners Golden Draught Source:Nielsen Ons The purchase of the Gaymers business allows us to support our Growth plan for the Magners Brand Gaymers • Gives us the opportunity to meet different consumer needs without stretching Magners too far Blackthorn • Strong in the SW of England, cider heartland and will support our distribution of Magners Golden Draught Addlestones • Super premium offering that supports Magners in the top end outlets Own label • Leverage Own-Label to support Magners growth plans Summary • Magners was a phenomenon which changed perception of Cider in GB • Magners was not well differentiated from competition • Nor were customers well managed • New proposition and improved customer focus • Magners has returned to growth Tennent‟s Lager Scotland‟s No.1 Long Alcoholic Drink Brand • 1 in 3 pints of all beer consumed in Scottish pubs • Stocked by 7 out of 10 pubs • Highest rate of sale of any beer brand in the GB Off Trade • A Scottish icon • “it sits at the heart of what it means to be Scottish” CGA Aug 2010; AC Nielsen; 2010; Brand Genetic CGA Aug 2010; AC Nielsen; 2010; Brand Genetic past few years, leading few years, leading to brand past health decline Tennent ‟ s had underinvestment been suffering fromthe over SOURCE MPG & Company Estimates & Company MPG SOURCE 2009 Nielsen Jan 2010. Scotland Media Media 2010.Scotland Jan Nielsen Scotland Media Scotland Media £1,200,000 £1,000,000 £800,000 Spend £600,000 £400,000 £200,000 £0 Coors Coors Fosters Bacardi Carling Absolut Grolsch Grolsch Magners Bulmers Smirnoff Tennents Tennents Strongbow San Miguel San Stella Artois Stella Jack Daniels Jack Russian Russian Standard Southern Comfort Southern Comfort Captain Captain Morgan Rum InIn 2010,2010, we we set set out out our our new new strategy strategy to revitalise the brand Revitalise the brand Build Brand Improve brand Identify and Preference presence in exploit new amongst 18-24 Trade & build profit streams year old ABC1 Off Trade Value through drinkers innovation Advertising Quality Football Music In June 2010, we launched a new advertising campaign, aimed at ourIn 2010,target 18 we’re-24 year back old lagerin business drinkers with a new brand advertising and PR campaign..
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