Coors' profits drop 78.3%

Carling brewer Coors, the UK's second-largest brewer with a 21% market share, saw pre-tax profits drop 78.3%, from £68.01m in 2006 to £14.75m in 2007.

The company saw overall turnover drop by 3% in 2007 to £1.32bn after a volume decline of 6.8% offset by an increase in turnover per barrel.

The large drop in profits for Coors highlights what an extraordinarily tough time major brewers are facing.

Coors saw its profit margin drop to little more than 1% of turnover last year — it made just £5m more in profit than Shepherd Neame, which has a turnover onethirteenth its size.

It sold 6.8 million barrels of beer in the UK last year, making less than £2 per barrel profit. Coors derives 60% of its volume from the pub and on-trade sector — and an even greater proportion of its margin.

Coors said: "Beer volume in our on-premise business declined by about 9 compared to 2006. "This compared to an overall industry on-premise channel decline of 6.5%, giving a market-share decline for Coors. Our off-premise volume for 2007 declined about 2%compared to 2006.

"This compared to an overall industry off-premise channel decline of 0.1%, again giving a market-share decline for Coors. These declines resulted from a difficult trading environment, with Coors attempting to balance pricing and volume." Coors reported that it had slashed its marketing, sales and administration expenses by 13% in 2007 compared to the year before. Production cost savings had been offset by input cost inflation.

Coors added: "Profit on ordinary activities before taxation saw a period-on period decline of £53.3m, (78.3%) primarily driven by an extended period of unusually rainy and cool weather in the summer of 2007, and the impact of smoke bans in the second half of 2007."

Asked about the results, a spokesman said: "Coors is legally required to submit accounts for the UK business to Companies House in London. These are compiled using UK accounting regulations and can produce different figures to those filed by Molson Coors Brewing Company in the USA.

"The US results are the ones we use to manage our business as they give the most relevant picture of the performance of the UK business. While the UK accounts showed a fall in profits in 2007, the results in the US showed a steady profit between 2006 and 2007."