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Brewing Profits: Cider Takes on Beer

As the beverage industry gears up for theSummerOlympics and warmer weather, Barry Dixon, head of Davy Research, told investors that C&C is the stock to watch as cider meets the U.S.

Traditionally serving up cider to consumers in Ireland and the U.K., C&C is now hoping to grow its presence in the U.S., where it is currently the second biggest cider producer, after it bought Hornsby’s from E. & J. Gallo Winery.

Both AB InBev and MillerCoors are scheduled to launch cider products in the U.S. this year, but is there enough demand for cider in the U.S. to deliver healthy profits?

Dixon thinks so. “Cider was the tipple of choice among the founding fathers 150 years ago,” he said. “That market was basically overtaken by beer, and in recent times the beer market has slowed down.”

Dixon explained that as big brewers search for new products to boost sales, cider looks like a drink that can gain traction in the U.S. As popular brewers like AB InBev and MillerCoors campaign for cider in the U.S., Dixon is confident that the overall industry will prosper.

“These guys will put a huge amount of advertising and promotion behind the launch of cider and obviously that will help the category,” he said, predicting that C&C was well positioned to take advantage of growth in the cider industry.

C&C is currently one of the cheapest stocks in the beverage space . Dixon predicted that C&C’s stock price will increase as we enter the summer months.

“Probably close to 40 percent of cider is consumed in the months of June, July and August —it’s a good time to own the stock coming into the summer,” he said.

With the Olympics and the European football championship as additional drivers, Dixon expects C&C volume growth to continue.

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Disclosures:

Disclosure information was not available forBarry Dixon or Davy Research.

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