DCC Food & Beverage markets and sells a wide range of company owned and third party branded food and beverage products in Ireland and has a wine business in Britain. It is a market leader in a number of niche market segments in healthfoods, indulgence foods and frozen & chilled logistics.

 

DCC Food & Beverage currently employs 1,060 people.

 

			Change on prior year
	2009	2008	Reported	Constant Currency
Revenue	€305.0m	€310.1m	-1.7%	+2.1%
Operating profit	€12.1m	€15.3m	-21.3%	-20.4%
Operating margin	3.9%	4.9%

Business and Markets
DCC Food & Beverage’s businesses have a strong track record in brand building and offer deep distribution reach with extensive customer service to the retail and foodservice sectors throughout Ireland. Services provided include marketing, category management, selling (key account management, direct sales representation and van sales), distribution and merchandising. Principal customers include multiples, symbol and independent retailers, pharmacies, off licences, hotels, restaurants and cafes. In Britain, wines are sold to multiple retailers and wholesale cash and carry customers.

 

Healthfoods
In Ireland, Kelkin is the leading and most comprehensive supplier of owned and agency brands of healthy foods and beverages, fine foods and vitamins, minerals & supplements (“VMS”), selling directly to both the grocery and pharmacy sectors. The Kelkin brand is recognised as the leading brand in the ambient health / “better for you” food sector and offers a healthy choice in many food categories. It is also a strong brand in the VMS sector.

 

Indulgence Foods
Robert Roberts is a value-added distributor of indulgence products in the grocery, impulse and food service sectors. The business has a strong, complementary range of owned and agency brands, specialising in wine, snacks, hot beverages, confectionery, cakes and soft drinks. In the Irish market, Robert Roberts is the number two supplier of freshly ground coffee to both the retail and foodservice sectors, the number three supplier of savoury snacks (through the KP range) and a leading independent distributor of sugar confectionery products. Through its wine distribution business, Findlater Wine & Spirit Group, Robert Roberts is a leading distributor of wine in Ireland providing an extensive portfolio of international wine brands. This business was developed following the integration of its well established wine business, Woodford Bourne, with Findlater Grants, which was acquired during the second half of the year. Findlater Wine & Spirit Group offers its principals the largest on trade reach in the Irish marketplace.

 

In Britain, Bottle Green is a leading supplier of branded (owned and agency) and exclusive retail solutions to the multiple off trade sector of the UK wine market.

 

Logistics/Other
Allied Foods is the number one frozen food distributor in Ireland, with a developing chilled food distribution business. It offers a full range of temperature controlled supply chain solutions (procurement, brand management and selling, warehousing and distribution) to major retailers, manufacturers and food service customers.

 

Kylemore Foods Group (50% owned by DCC) is a leading operator of retail restaurants and contract catering services in Ireland.

Performance Management - key performance indicators	2009	2008
Operating cash flow	€13.7m	€25.5m
Revenue per employee (constant currency)	€300k	€299k
Working capital	12.5 days	-0.7 days
ROCE incl. intangible assets	14.1%	18.6%
ROCE excl. intangible assets	35.8%	51.2%
10 year CAGR	7.1%	11.9%

 

Performance for the Year Ended 31 March 2009
As anticipated, DCC Food & Beverage experienced a deterioration in trading in the second half of the year and as a result operating profit declined in the year by 20.4% on a constant currency basis.

 

The economic downturn in Ireland has led to changes in buying patterns in the food and beverage sector with consumers spending less and seeking greater value offerings, including increased cross border shopping in Northern Ireland. The decision by a major retailer to source third party agency brands directly from Britain has also had a negative impact. DCC Food & Beverage’s Indulgence and Healthfood businesses in Ireland were impacted by these changes and consequently operating profit declined in both businesses. The Findlater Wine & Spirit Group performed in line with expectations.

 

The frozen and chilled logistics business performed satisfactorily and continues to achieve operational efficiencies.

 

Strategy and Development
The Group’s strategy is to develop DCC Food & Beverage into a leading business that satisfies consumer and customer needs in the health and indulgence sectors and delivers an above average return on capital. This will be achieved by building organically and through acquisition.

 

The business will continue to increase its focus on brands, building on the progress that has been made to date with Kelkin (healthy foods and beverages), Robert Roberts (coffee & speciality teas), Lemon’s confectionery, and its extensive range of third party agency brands across its healthfoods and indulgence categories. The UK wine business remains focused on developing its own range of brands including French Connection and Andrew Peace.

 

Outlook
The trading environment for DCC Food & Beverage is likely to remain difficult and it is anticipated that operating profit will decline in the current year.