Scotch group Edrington reeling after rum struggle

Scotch whisky group Edrington is to concentrate its efforts on the premium end of the drinks market after racking up heavy losses due to a writedown on the value of its rum brand.

Ian Curle said that, despite writedowns resulting in losses, Edrington had had a 'good year'. Picture: Stuart Wallace
Ian Curle said that, despite writedowns resulting in losses, Edrington had had a 'good year'. Picture: Stuart Wallace

The Famous Grouse and Macallan owner said Brugal, in which it owns a 61 per cent stake, had suffered amid “extremely difficult” conditions in its core markets of Spain and the Dominican Republic, where rum consumption is falling and competition is fierce.

As a result, the group has revised down its growth forecasts for Brugal and taken a £239 million impairment on the brand, which traces its roots back to 1888.

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That writedown, together with a decline in overall sales across the firm, pushed Edrington to a pre-tax loss of £52.7m for the year to the end of March, compared with a £159.4m profit a year earlier.

However, chief executive Ian Curle insisted that the distiller – owned by the charitable Robertson Trust – had enjoyed a “good year”, with its whisky brands out-selling the wider market. The Macallan single malt turned in a particularly strong performance, with turnover up 10.5 per cent, while the Famous Grouse blend maintained its position as the best-selling Scotch in Scotland and the UK.

Curle said: “Our whisky portfolio performed ahead of the market and this shows the strength of our brands, which are well placed to benefit further from continuing trends towards premium spirits. Edrington’s focus in the coming years will be on this increasingly important premium end of the market and we continue to invest to support our growth objectives and our long-term prospects.”

Turnover for the Glasgow-based group dipped 2.4 per cent to £617.7m, despite Scotch volumes increasing by 2 per cent. Finance director Alex Short, who joined last year from Irn-Bru maker AG Barr, said the firm’s performance was “significantly” affected by the downturn at Brugal, although a 5 per cent fall in overall volumes was offset by higher prices per case.

However, he said that operating profit margins had declined by 2.4 percentage points to 27.2 per cent, reflecting “continued investment in our route-to-market infrastructure together with the adverse impact of foreign currency”.

Movements in exchange rates had a £5m bigger hit than a year ago, Short said, while Edrington now has its own sales, marketing and distribution companies in the US, south-east Asia and the Middle East.

The firm has also committed more than £100m to create a new distillery and visitor centre at the Macallan estate at Craigellachie in Speyside, and Curle said work was on track for completion in the spring of 2017. He added: “Edrington considers that it has brand assets that are well positioned to benefit from continuing trends towards premium spirits. However, it is evident that the market for mainstream blended Scotch and rum will continue to be competitive in the coming years.”

Edrington’s annual report also showed that the total pay package for its highest-paid director dipped to £1.28m, down from £1.5m last time, following a reduction in long-term incentive plan payments.