Scottish & Newcastle, the British brewer that is currently in the sights of international rivals Carlsberg and Heineken, has this morning outlined its plan for independence.
Led by newly-appointed chief executive John Dunsmore, the group said it would adopt a “leaner, tougher, faster” approach and a “fundamental step-change in culture”.
In what was effectively a sales pitch to shareholders, S&N said that the strategy would reflect an entrepreneurial, value-driven asset-management approach, with nothing sacred in the pursuit of maximising value.
The group has received two separate takeover approaches from a consortium comprising Carlsberg and Heineken, the second of which came last week at 750p per share. It has rejected both proposals because they significantly undervalued the group.
This morning S&N said it would look to replicate its achievements in the UK beer market, where it had “leveraged a 26% beer market share to grow our share of the UK major brewers pool from 46% to 60% in the last three years”.
Dunsmore said: “Let there be no doubt: for the team at S&N, shareholder value maximisation is paramount. Nothing is sacred. I passionately believe that S&N will deliver value to its shareholders that vindicates our response to the consortium proposal.”
As previously reported the company is to sell its to sell a large proportion of its French on-trade distribution business to a group called C10 for £85m, resulting in a loss on disposal of £370m. It will complete in Q1, 2008.
In the UK, following a supply-chain review, S&N has entered a brewing and packaging agreement that will see Coors UK make up to three million hectolitres for S&N’s on-trade customers.
S&N will also form a joint venture with Q-Group to build a new cider mill in Herefordshire, providing extra capacity of one million hectolitres – a 25% increase.
Another JV – with Heritage Drinks Limited – will support S&N’s “heritage” ale brands and second-tier cider brands.
An under-utilised bottling plant in Berkshire will close and remaining volumes moved to Tadcaster, Yorkshire.
These changes will produce £20m of savings each year and free up £80m of capital tied up in UK operations, the group said.
Of trading in the UK, S&N said that beer market in the third quarter had improved on the first half, with growth in the off-trade offsetting “tough conditions” in the on trade. It said Kronenbourg Draught, John Smith’s and San Miguel were enjoying record-high market shares.
Own-brand cider volumes rose 14.9% to take S&N to a 48.3% share of the cider category, driven by Strongbow, Bulmers Original and Jacques. New Bulmers products Draught and Pear would help continue to drive this growth, it said.
S&N said that overall it was on course to deliver a further 1% combined beer and cider share for the year.
