Bottom Line: Tasty Merrydown

MERRYDOWN, the cider maker, has a problem. It cannot sell much of the product it makes money on but it can shift huge amounts of narrow-margin output.

Merrydown Original, a cider with 8.4 per cent alcohol, was renamed, repackaged and re-marketed 18 months ago as a premium product at a premium price.

Unfortunately, this coincided with a sharp shift downmarket among cider consumers, forcing Merrydown deeper into low-margin, own-label production.

Merrydown is probably too small to be able to compete effectively with its larger branded rivals, Taunton Cider and HP Bulmer.

With cost reductions and luck, Merrydown might make pre-tax profits of pounds 2m in the current year. The shares, down 2p at 130p, trade on a forward multiple of 10.5 times, which is below the market, the sector and both Bulmer and Taunton. The rating could tempt a bidder.

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