Can Matthew Clark refresh flat sales?

In its latest bid to win back share of the cider market, Matthew Clark has axed its managing director and launched ambitious marketing plans. But, with rival Bulmer so far ahead, it may have acted too late.

The news that drinks group Matthew Clark is looking for a top-level marketing chief, booting out its managing director, hiring 40 more sales and marketing staff and increasing its budget by as much as 10m (MW November 1) is the latest twist in what looks like a sadly predictable tale.

In September, the company stunned the City with a profits warning that showed sales of its cider brands had fallen by nearly 50 per cent in the five months since April.

The company’s policy of buying up drinks companies, cutting back production costs through axing staff and slashing marketing spend on brands always looked like a recipe for disaster.

One analyst describes the policy as a “novel approach – one that has never really been tried by any other drinks company”. The board thought that by being the most cost-efficient drinks maker, Matthew Clark could produce and sell its brands at a lower price than its rivals and get the products in front of the consumer in supermarkets and pubs. This, the board felt, was the best form of advertising.

And that was the strategy until last week. The company’s directors had blamed the slump in its cider sales on the rise of alcopops, and the tougher sales environment compared with last year’s long hot summer. But the same problems did not affect results at HP Bulmer.

The two companies control about 90 per cent of the UK cider market. Last month, Bulmer said total cider volumes had risen this year to 116 million gallons, compared with 110 million gallons last year and that sales of Strongbow are running 30 per cent ahead of last year. By contrast, Diamond White sales are 24 per cent down.

The main difference between the two companies is that Bulmer supports its main brands. In the 12 months to July, Bulmer spent 4m on advertising (Register-MEAL) – 1.7m on Strongbow alone – more than three times Matthew Clark’s expenditure at 980,000.

The company argues that its own exposure to alcopops is ten times that of Bulmer’s, because of its dependence on premium packaged ciders such as K and Diamond White. But that only serves to raise the question of why Matthew Clark has not developed its own alcopop brand.

A spokesman claims that because Matthew Clark does not have the same distribution network as the likes of Bass, which produces Hooper’s Hooch, or Carlsberg-Tetley, with the Lemonhead range, it can’t get into the market.

Even if that is true, it simply underlines the fact that Matthew Clark has failed to introduce any real innovation. It has been content to add brand extensions to its existing ranges rather than come up with genuinely new products. Its exposure to the new breed of alcopops makes new product development all the more urgent.

The statement last week seemed like a tacit acceptance that Matthew Clark has been doing it all wrong. The company is at last going to take marketing seriously, but prefers to say it is giving it “more emphasis”.

Analysts have been told to expect the new marketing chief to be in place by the new year, and new marketing money – as much as 10m – to be made available from the beginning of the next financial year in April. Matthew Clark dismisses all this as speculation, claiming it is too early to say what it is going to do. But there is one obvious measure it needs to take – invest in its brands.

Which looks like good news for Matthew Clark’s agency Grey Advertising. So far, it has had to content itself with a 1m television campaign for Blackthorn cider.

One of the great problems faced after last year’s takeover of Taunton by Matthew Clark was the fact that it combined two companies with relatively weak brands. Cider is not a market famed for its strong brands – one observer says that Bulmer’s Strongbow is the only true cider brand. And building Strongbow’s position has come at a high price in advertising and marketing.

Cider is largely a commodity market, the favoured tipple of hardened drinkers and people on low incomes. One estimate says that 30 per cent of cider is drunk by just seven per cent of its customers. Attempts at innovation in the early Nineties went some way to forging brand values into the market, and threw up high-strength brands such as K and Diamond White. But the majority of new brands have been cheap, strong white ciders, whose only brand values are that they get you very drunk, very quickly and very cheaply.

Exactly why Matthew Clark felt compelled to axe managing director Andy Nash has still not been satisfactorily answered. Nash was Taunton’s commercial director when the company finally acquired it late last year for 271m. He took on the managing director’s position when the deal went through – so has effectively only been with the merged company for ten months.

The company denies that he is a scapegoat for this summer’s sales slump. However, rumours that he was looking to leave have been circulating for some months and suggest that he was not completely happy with the merged company. Through accepting redundancy, Nash would presumably have secured a higher payout than if he had left voluntarily.

Matthew Clark is looking for someone with broader marketing experience in the drinks industry – who can turn round under-performing brands – to take over from Nash and spearhead a new marketing push. Until then, chief executive Peter Aikens will fill the marketing role.

Nash had little time to make much of a difference to the company’s strategy. At Taunton, he was part of the push into new product development during the early Nineties, which threw up successful brands such as Diamond White and K. Exactly the type of innovation experience Matthew Clark might need to take on alcopops.

Even with its belated discovery of marketing, Matthew Clark is already at a disadvantage, lagging a long way behind Bulmer. The planned marketing push will take time to have any effect. And with nothing significant happening until next year in terms of recruitment and fresh marketing support, it will lag even further behind.

Whoever takes up the marketing role should seek assurances that Matthew Clark’s conversion to marketing is real and not just something that has been used to justify a rethink and Nash’s departure.

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