Interview: John Dunsmore, former chief executive of Scottish & Newcastle

THE halcyon days when Irish cider over ice ruled the market may never return, but John Dunsmore, chief executive of Magners owner C&C Group, has proved there are other ways to bolster the fortunes of a mid-level drinks industry player.

• John Dunsmore worked his way to the top spot at S&N, later moving to C&C

The former chief executive of Scottish & Newcastle has spent the better part of the past two years overhauling C&C, which was struggling with bloated costs and voracious competition when he joined towards the end of 2008. Dunsmore and his team have managed to stabilise the trading performance, while also expanding through the acquisition of Somerset cider maker Gaymers and the 180 million purchase of Tennents, the leading Scottish lager brand employing 300 people at its Wellpark Brewery in Glasgow.

C&C's interim results tomorrow are expected to reflect the continuing recovery, though sales in its home market in Ireland will remain sluggish as high unemployment and battered consumer confidence take their toll. Performance in the UK, which accounts for about 60 per cent of profits, should be more upbeat as Magners has raised its off-trade sales volumes by some 18 per cent during the past year.

The key question will be what Dunsmore intends to do with C&C's lightly-geared balance sheet. The group's debt was all but wiped clean following the 250m sale of its spirits division to William Grant earlier this year.

"It is what they do with the balance sheet that will take the story forward," said one analyst.

"They will be asked about it, but I don't think they have come to a decision about that yet."

The options available to Duns-more include further acquisitions or increased investment, possibly through international expansion. Either way, the feeling is that a significant move is on the cards, as a lightly-geared balance sheet is inefficient.

Ironically, it could also attract unwanted attention. Analysts say a virtually debt-free business offering access to new market segments could prove tempting to one of the large players such as Carling-owner Molson Coors, whose UK portfolio is relatively narrow.

Whether it will be a case of dj vu for Dunsmore remains to be seen, though the Oxford native's tenure at the helm of C&C has already far outstripped his time as chief executive of Scottish & Newcastle.

S&N, headquartered in Edinburgh, had been at the centre of a takeover vortex even before Dunsmore's formal promotion to the top job in 2007.By the time outgoing CEO Tony Froggatt handed over the reins, overseas rivals Carlsberg and Heineken had already confirmed their interest in a joint bid for Britain's last domestically owned large-scale brewer.

The burly Dunsmore and his team mounted a spirited defence, including international legal manoeuvres against estranged joint venture partner Carlsberg.

Dunsmore believed the Danish group - which together with S&N owned the rapidly-expanding Baltic Beverages Holding (BBH) business in Russia - failed to adhere to both the spirit and rules of that arrangement when it teamed up with Heineken. He accused Carlsberg of circumventing non-takeover clauses in the BBH agreement, and of using confidential data to aid its joint bid to acquire S&N.

His calculated yet at times humorous defence included the colourful observation that rather than coming through the front door to gain control of BBH, Carlsberg was "coming through the toilet window".

Despite these efforts, S&N eventually succumbed to the consortium, but only after the predators were forced to raise their bid to 7.8 billion - about 1bn more than the initial offer. In the end, Dunsmore's reign as chief executive amounted to a scant six months.

Though he and his senior team remained under contract to S&N's new owners for a further three months, speculation inevitably arose as to where he might be headed next.

Already a popular figure within the City - a fact owed in part to his previous work as a drinks industry analyst - Dunsmore gathered further accolades for his stewardship during the battle for S&N. His handling of the situation was described as both mature and objective, in turn delivering a significant increase in the price paid to the company's shareholders.

However, it was undoubtedly frustrating on a personal level. Having originally been pipped to the top job at S&N by Australian Froggatt in 2003, Dunsmore said during the immediate takeover aftermath that he had hoped for a lengthier tenure in the chief executive's seat.

"I won't get the sympathy vote but it is unsatisfying from a work point of view," he told one journalist. "It's not like in sport, where if you play a better match, you win.

"I wanted to be in charge of S&N. I worked for the last 12 years here and I did six months as chief executive. But I don't want to sound sour."

Having reportedly turned down an informal approach to head up pubs group Mitchells & Butlers, Dunsmore's subsequent appointment at C&C caught many by surprise. The announcement in November 2008 also led to speculation that Dunsmore and his team had been brought in on a mission to overhaul the business before an eventual sale, a suggestion that the company has repeatedly played down.

Whether or not by design, a consequence of C&C's improving financial health is increased takeover chatter - albeit of a vague variety.Though further progress at the half-year stage is clearly desirable, Dunsmore may find any good news reported tomorrow adding to the bid talk.

BACKGROUND:

John Dunsmore began his working career with Scottish & Newcastle as a trainee in 1980. He served at Grand Met as a tenanted sales manager before embarking on a 13-year stint in the City as a drinks analyst.

Dunsmore re-joined S&N in 1996, and became a member of the board in 2002. He was made managing director of S&N's western European operations in May 2007, having previously been in charge of the UK business. His became chief executive in November of that year.

He left S&N in 2008 after its acquisition by Carlsberg and Heineken and joined C&C as chief executive in the November of that year.

Dunsmore lives in Edinburgh with his wife and five children.