By Phil Boeyen, ShareChat Business News Editor
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Thursday 1st November 2001 |
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The company has reported to shareholders Thursday and says although its energy drink V has gained the number 2 spot in the UK market, the market overall has declined.
MD, Mark Cowsill, says V is the only significant brand to have grown its share in the past three months in the UK and management believes that its market share is between 8-10%.
"The market, however, as reported by Nielsen, declined for the first time ever by 4% over the last quarter. This is a significant contraction on the annual growth rate of 27% reported in the company's 2001 annual report.
"The net result of these two factors on revenues is that, whilst average weekly sales grew 51% between fourth quarter 2001 and the first quarter this year, they are below our expectation which was built on the assumption of higher market growth."
Mr Cowsill says a key factor in the drop off in market growth has been the unexpected fall in media investment in the category.
"This has fallen from GBP13.5 million last year to GBP6.2 million in 2001, a reduction of 55%.
"Surprisingly, the market leader reduced its media spend by more than half over summer which has served to reduce the profile of the energy drink category in the context of the broader cold beverage market."
Frucor has also introduced V in bottle form and multi-packs which it says offers differentiation from competition and helped increase sales.
Mr Cowsill told shareholders that energy drink consumption is still relatively low in the UK and rekindling of market growth is dependent on category investment by the major players.
"But even if historical growth levels were to be regained, it has become clear that Frucor's plans in the UK would be better achieved in conjunction with a strategic partner who could complement our capabilities.
"Indeed, as we continue to explore other major international opportunities for the business, beyond Australasia, the board believes that one, or a series of such strategic partnerships, will be the best way forward."
Frucor is currently under offer from French food and beverage company Danone at $2.35 although the independent committee says it is will also be soliciting interest from other potential bidders.
"We are permitted to do so under the takeovers code and Credit Suisse First Boston will assist us with this process," says sub-committee chairman Ian Donald.
"We believe the onus is on the independent committee to approach other potential bidders to ensure shareholders receive the best possible offer. However at this stage I don't want to speculate on the potential for competing bids to be received."
Mr Donald says the independent committee expected to release a statement, including the independent appraisal report, in the middle of next month. The Danone offer will close, at the earliest, in the first week of December.
Overall Mr Cowsill says that the outlook for the company remains promising, with stronger revenue and earnings growth anticipated over the balance of the year.
"New Zealand, Australia and the UK are all anticipated to deliver improved results in 2002," he says.
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