Allied recovering after US bungle
THE world's number two drinks business, Allied Domecq, reported signs of recovery in the crucial US market as it battled to mend the damage caused by a ham-fisted price-increase campaign last year.
The owner of brands from Kahlua to Ballantine's decided 15 months ago to force through price rises in the cut-throat US market. But chief executive Philip Bowman admitted his American team had been overly aggressive in the fragile economic conditions, driving away customers. US head of operations Todd Martin was removed in November, and a more sensitive approach had started to pay dividends.
'I would be the first to admit our execution of some of the price rises left something to be desired,' said Bowman. 'But after months of losing market share to the competition brands, for the past 12 to 18 weeks we've been recovering.'
The US situation came as Allied was also busy destocking in America as part of a plan to cut long lead times between delivery and sale. Overall, in the first half of its financial year, North American volumes fell 2% like-for-like and trading profit was down 4%, although including acquisitions profits grew 6% to £95m. Figures for the past 13 weeks show growth for nearly all its brands in the US.
Meanwhile, the group is gearing up for a host of new launches for the first time in many years, with a cream version of Tia Maria called Tia Lusso expected to reach British shelves in June. Two new alcopops developed by Allied and distributed in a joint venture with Miller are being launched in the US this week. They are based on Stolichnaya vodka and Sauza tequila.
Globally, Bowman has cranked up the advertising spend behind his spirits and wine labels by 27% to £204m while at the same time getting more bang for his buck by cutting back the number of media buying agencies the group uses around the world. The extra advertising spend also had a bigger impact due to the sharp decline in the cost of advertising space in the past year.
Pre-tax profits in the six months to 28 February came in at £251m against £236m in the first half last year on turnover of £1.7bn, compared with £1.46bn last time. Shareholders pick up an interim dividend of 4.9p against 4.5p last time.
