C&C to Implement Reorganisation & Cost Reduction Programme

15/01/08 C&C Group plc, a leading manufacturer, marketer and distributor of branded beverages in Ireland and the UK, has announced a re-organisation and cost reduction programme. The programme is expected to deliver €10 million of net annual savings when fully complete.

The primary objectives of the cost reduction and re-organisation programme include:
- Strengthening C&C’s commercial presence and management team in Great Britain,  its principal cider market;
- Reducing operating costs by realigning the cost structure to the current sales volume base;
- Streamlining C&C’s organisation structure by merging its Head Office and Cider division management structures.
 
Maurice Pratt, C&C Group CEO will, on the retirement of Brendan McGuinness, Managing Director of the Group Cider division, incorporate Brendan McGuinness’ role into his existing role as Group CEO. Brendan McGuinness has recently announced his intention to retire with effect from 1st May, 2008.

The Group is creating the new role of Managing Director Magners – Great Britain. This role will spearhead the growth and further development of Magners within Great Britain, C&C’s largest cider market. The appointment will be accompanied by an increase in sales and marketing resources in Great Britain to meet the current challenges of that market. The recruitment process for this position is underway and C&C will announce an appointment in due course.

The Group is also combining the Manufacturing, Logistics, Purchasing and Technical functions under a new position of Managing Director – Supply Chain. Aidan Murphy, the current Director of Logistics, is being appointed to this position.

C&C will deliver cost savings through a reduction in headcount across all functions at C&C’s manufacturing facility in Clonmel and at its Head Office. C&C also plans to deliver cost savings in warehousing, stock management and a range of other areas within the supply chain function. The combined payroll and other savings are estimated at €20m and involve a headcount reduction in the region of 150 across the Group.

In assessing the impact of the cost reduction programme on Group’s financial performance it is necessary to factor in the general upward pressure on costs and specifically the c. 15% increase expected in ingredient costs in 2008/09. 

In this context the pro-forma impact, on the basis of estimated 2007/08 volume and revenue,  would be an operating margin improvement for C&C’s Cider division in a full year of approximately two percentage points – representing a net cost saving of €10m. C&C would expect 80% of the improvement to be reflected in the 2008/09 financial year.

The reorganisation and cost reduction programme, comprising severance and other costs, will result in an exceptional charge in the current financial year of approximately €15 million.

Maurice Pratt, C&C Group CEO, commented “Our reorganisation and cost reduction programme reflects our sharper product focus on cider and spirits & liqueurs following the sale of our Soft Drinks and Snacks businesses. When this programme is implemented, we will have a more efficient organisation structure and our cost base will be better aligned with the Group’s business needs.”

He added “We are also investing in increased resources for Magners in Great Britain to support our growth aspirations in that market.”

He concluded “This re-organisation and cost reduction programme will affect a number of C&C’s employees which is regrettable. We would like to record our appreciation for the commitment and loyalty of the affected workforce.”