Thirst for cider boosts Bulmer

Cider is being drunk in far greater quantities than even the most optimistic industry analysts had forecast. John Rudgard, chief executive of the market-leading HP Bulmer group, said yesterday that more than 110 million gallons were being downed each year, and predicted a market size of 150 million gallons by the turn of the millennium.

However, this growth in the market, which has been boosted by the hot summer, may further attract the attention of the Chancellor, Kenneth Clarke. In the Budget he raised the excise duty on strong ciders over 7.5 per cent alcoholic volume by 50 per cent.

The extra tax has added 8p to the price of a pint of cider, and 28p to the popular 2-litre bottles sold by the big supermarket and off-licence chains.

"This is nothing but a tax on success," said Mr Rudgard, who added that he was disappointed by the lobbying by the big brewers to raise taxes on cider - a move he described as "David versus Goliath".

Bulmer, maker of the best- selling Strongbow and Woodpecker brands, sold almost 20 per cent more cider in the six months to 27 October, which boosted profits before tax and exceptional reorganisation costs by 12 per cent to pounds 16m. Investors were encouraged by the result, and the accompanying 7 per cent increase to 4.55p in the interim dividend for the six months to 27 October.

The profits growth lagged behind the sales advance for several reasons, chiefly sharp increases in raw material costs, which the company will partly offset by raising off-licence prices by 3.5 per cent in January, and a "sharply higher" but unspecified hike in on-licence prices.

West Country farmers, typically producing 50,000 gallons a year of mainly high strength cider, will suffer more than most from the tax increase. This autumn's apple harvest has been fermented and, unless farmers dilute the strength, prices will have to be raised sharply - a move that could meet resistance from the farmers' prime customers, who are typically drawn from low-income groups.

Cider producers have also been hit hard by a 50 per cent jump in prices for apple juice concentrate to pounds 1,200 a ton. This leap is a result of crop failures in the former east Germany and Poland, and a surge in demand for concentrate in America.

Bulmer, however, grows 65 per cent of its apple requirements and has been cultivating more orchards to meet future demand. Many smaller cider companies buy-in 90 per cent of their apples.

Industry observers predict more pain for the smaller companies next year once Matthew Clark has integrated the recently acquired Taunton Cider company with Gaymer. "When Matthew Clark comes charging out of the gate, as they will, we will be ready," said Mr Rudgard.

Small producers are already struggling to make profits, a problem created by their drive into the economy cider sector. This move, coupled with the biggger producers pushing hard on premium brands, has exacted its toll on the middle market.