Edrington hails brands’ resilience despite falling sales and profits in tough year – The Moodie Davitt Report
Premium spirits group Edrington this week reported a -15% year-over-year drop in revenue for the 12 months to March 31, reaching £ 576.2million. Performance was driven by the impact of COVID-19 on retail and travel channels, as well as commercial destocking in key markets.
Base contribution (profit from brand sales and distribution at constant currency and after deduction of overheads) was £ 196.5 million, down -19%, with pre-tax profit down -21% to £ 178.4million. The company invested £ 118.9million in brand-building marketing activities during the year, down 8% from a year earlier.
Edrington’s leading brand, The Macallan, saw “a significant drop in its contribution due to a sharp contraction in global travel retail, the closings of bars and restaurants and the destocking of wholesalers in the USA”.
Edrington said consumer demand has remained strong and the company has accelerated progress in new channels such as e-commerce. The brand performed well in China, Southeast Asia and Russia.
The group noted that this was a “difficult year” for the other single malts in the portfolio, Highland Park and The Glenrothes, reflecting “a competitive category, loss of retail sales and impact. tariffs in the United States ”.
The Famous Grouse “has proven to be resilient” in its main markets in Northern and Eastern Europe and has extended its leadership position, as Scotland has declared, according to Edrington.
Brugal, Edrington’s premium rum, has generated “exceptional growth” in its domestic Dominican Republic market, where the company has been able to maintain supply and visibility to consumers.
Managing Director Scott McCroskie said: ‘In last year’s annual report, I anticipated declining profitability after several years of steady growth, due to the coronavirus pandemic and Scottish whiskey tariffs single malt in the United States, our largest market. Our reported results confirm that this was indeed the case, although I think the relatively modest declines represent a good result under the circumstances.
“The reduction in net sales reflects the restrictions linked to the pandemic as well as the commercial destocking mainly in the United States. Our decision to maintain relatively high levels of brand investment means that base contribution has been reduced by more than net sales, although this has been mitigated by a series of cost-cutting measures. Our free cash flow and net debt both improved as a result of these measures, and I’m glad the company stayed well below its credit limits and banking covenant tests.
“The fundamentals of our business are solid and our brands are healthy. While the pandemic continues to impact our business for some time, I am encouraged by the sales growth we have seen in the first quarter of this fiscal year. I am convinced that we can meet the challenges we face and that we are ready to move forward from a position of strength. “
Edrington has agreed to take a significant minority stake in No.3 London Dry Gin, the ultra-premium gin owned by Berry Bros. & Rudd. Edrington has a long-standing partnership with BB&R, which dates back almost 100 years.
The deal will see the No.3 distributed in Edrington-owned distribution markets including the US, APAC, global retail and the Nordic countries. Berry Bros. & Rudd will continue to distribute in markets such as UK, Germany, Italy, Spain, Australia and Belgium. The companies do not disclose the financial terms of the deal.