Sales at VK owner Global Brands have fallen after the group cut the alcohol strength of its alcopops in response to government tax incentives.
The producer and distributor reduced the abv of several of its brands, including Hooch, from 4% to 3.4% to take advantage of lower taxes for drinks, with lower abv introduced in the 2023 alcohol duty review.
This led to an average £4 reduction in sale price for a case of 24 bottles, Global Brands MD Julian Atkins told The Grocer.
It resulted in revenues in the year ended 29 September 2024 tumbling by 10.8% to £66m. However, Atkins added the fall in the top line did not reflect a decline in consumer demand for the company’s drinks, which also includes VK and Reef.
An “exceptionally” poor summer and a later-than-usual freshers week for universities also contributed to the drop in sales, with some volume shifting to the early part of Global Brand’s 2024/25 financial year rather than the end of 2023/24.
“Structural changes in the late-night sector, including venue closures, also affected volumes in that channel,” Atkins said. “However, we’ve continued to see strong, sustained growth in pubs and bars, where our brands are gaining real momentum.”
Price hikes in the previous financial year helped the company recover gross margins, although the transition to lower abv added some additional costs initially. As a result, pre-tax profits decreased to £2.5m, compared with £4.2m in the previous year.
“Crucially, we’ve maintained our focus on future growth, increasing headcount by around 25% across both our UK and international teams, and stepping up investment in brand building, infrastructure, and NPD. These efforts are already paying off, with revenues up 8% year to date in FY25,” Atkins said.
“We’re also excited about our new partnership with [US supplier of cocktail mixes and ingredients] American Beverage Marketers [agreed in October], which will unlock further growth opportunities in the UK.”
Global Brands now operates in more than 70 countries, but its exports sales slipped slightly from £6.2m to £5.4m. However, overseas business remained a “key area for growth”, according to the accounts filed at Companies House. “We are confident the changes we have made in both structure and approach will pay dividends over the next few years.”
In January, it also won the distribution rights for Distil’s range that includes Blackwoods Gin and Blavod Vodka in the UK and Ireland. It built on a previous agreement to distribute Distil’s RedLeg Spiced Rum to the UK’s off-trade.
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