The Macallan maker Edrington saw revenue decrease by 15% in the year ending 31 March 2021, and is working to combat the decline by gaining a ‘significant’ stake in Berry Bros & Rudd’s No.3 London Dry Gin.
Edrington’s core revenue for the 12-month period declined to £576.2 million (US$798.7m), while profit before tax fell 21% to £178.4m (US$247.3m).
Given the challenges of the Covid-19 pandemic, Brexit and tariffs, the spirits company deemed the results ‘better than expected’. Last summer the business forecasted a “significant” decrease in sales for 2020/2021.
Scott McCroskie, Edrington’s chief executive, said: “In last year’s annual report, I anticipated a decline in profitability after several years of consistent growth as a result of the coronavirus pandemic and tariffs on single malt Scotch whisky in the USA, our largest market. Our reported results confirm that this was indeed the case, although I believe that the relatively modest declines represent a good outcome in the circumstances.”
Edrington’s Scotch brand The Macallan saw sales plummet in the last financial year due to the drop in the global travel retail market and the closure of the on-trade, but it reported ‘strong’ performances in China, Southeast Asia and Russia.
The spirits firm’s other single malts, Highland Park and The Glenrothes, suffered declines as well.
Meanwhile, Edrington invested in its Naked Grouse brand by relaunching it as Naked Malt. Premium rum Brugal experienced growth in its home market of the Dominican Republic.
McCroskie continued: “Our decision to maintain relatively high levels of brand investment meant that core contribution reduced by more than net sales, although that was mitigated by a range of cost reduction measures. Our free cash flow and net debt both improved as a result of these measures, and I am pleased that the company remained well within its lending limits and banking covenant tests.
“I am proud of the way our people have responded to the pandemic, and of the results we have achieved. The fundamentals of our business are strong, and our brands are in good health.
“Although the pandemic will continue to impact our business for some time to come, I am encouraged by the growth in sales we have seen in the first quarter of this financial year. I am confident we can navigate the challenges we face and that we are ready to progress from a position of strength.”
Claiming a stake in No.3 Gin
In its financial report, Edrington also revealed that it is set to acquire a ‘significant minority stake’ in Berry Bros & Rudd’s No.3 London Dry Gin.
Through the deal, Edrington will distribute the ultra-premium gin brand across markets including the US, Asia-Pacific, global travel retail and the Nordics. Meanwhile, family-owned Berry Bros & Rudd will maintain its distribution of No.3 in the UK, German, Italian, Spanish, Australian and Belgian markets.
The agreement, which will be finalised ‘imminently’, comes after sales of No.3 Gin soared 27% in 2020.
The two businesses have maintained distribution partnerships for years, and in 2010, Berry Bros sold the Cutty Sark Scotch whisky brand to Edrington. The brand was later acquired by La Martiniquaise.
McCroskie said: “I am really pleased that Edrington will enter into a strategic partnership with our long-term partners Berry Bros & Rudd on the No.3 London Dry Gin brand.
“No.3 complements the existing Edrington portfolio of exceptional ultra-premium spirits adding an award-winning and a beautifully elegant, classic London Dry Gin to our line-up of single malt Scotch whisky, rum, American whiskey, blended Scotch whisky and Tequila.”
Terms of the deal have not been disclosed.