Hiccup for Merrydown: Distribution delays hit volume and profits at cider maker

MERRYDOWN, the Sussex cider maker, has run into difficulties introducing its new strong cider product, Merrydown Original.

The company spent pounds 1.25m repackaging and remarketing its premium strength drink, which it used to sell as Vintage Cider.

But there have been delays in getting the product on to retailers' shelves - particularly to cash and carry traders. Shops ran down stocks of Vintage before buying in Original to replace it.

'As a result, volume and profit contribution were affected, but this can be regarded as an exceptional circumstance,' Richard Purdey, chairman, said.

Paul Millman, managing director, said the problems arose in the weeks following Original's launch in April. The introduction was completed by July, and September sales of Original were ahead of Vintage volumes in the same month in 1992.

News of the hiccup marred the presentation of interim results. Helped by an acquisition, turnover and profits rose, but Merrydown shares slipped back by 8p - or nearly 4 per cent - to close at 210p. The shares have fallen from 300p three months ago and are at a 12- month low.

Pre-tax profits were pounds 932,000 for the half year to 30 September, 22 per cent up on last time. Most of the advance was down to the purchase of Shloer, the soft drink company, from SmithKline Beecham last December for pounds 8.3m.

Soft drinks contributed 27 per cent to sales, up from 8 per cent.

Profits also benefited as Merrydown began fermenting cider for own-label sales. Making cider for supermarket own-brands added 10 per cent to group turnover.

Vintage Cider used to account for 80 per cent of Merrydown's business. Mr Millman said sales of Original were expected to outstrip Vintage, but Original would account for only 50 per cent of group turnover.

The wider spread of products, including non-taxable soft drinks, meant Merrydown was less vulnerable to possible duty increases in today's Budget, he said.

Merrydown issued shares to pay for Shloer, so earnings per share for the half year fell to 5.72p from 6.22p. The dividend is held at 1p.

David Thompson, an analyst with Merrydown's own stockbroker, Kleinwort Benson, predicts that profits for the year to next March will be pounds 3.15m, up from pounds 2.3m.

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