Stock Spirits pleased with performance amid excise increases

Branded spirits and liqueurs producer Stock Spirits Group updated the market on its trading for the period from 1 October to 6 February on Thursday, reporting that it was “on track” for the year as a whole.

The company - which was holding its annual general meeting - said that as anticipated, with effect from 1 January, there was a 10% increase in spirits excise tax in Poland, and a 13.2% increase in spirits excise tax in the Czech Republic.

As a result, and as it had expected, its businesses in both markets experienced “exceptionally strong” demand from its customers as they built up inventory in the run-up to those changes.

Overall, performance in both markets to date had therefore been “significantly ahead” of the same period last year although, based on its previous experience of such changes, Stock S[irits said it expected the current quarter would see some consequential impact from the strong first quarter.

In Poland in the first quarter, the company said the total vodka market recorded an increase in value of 4.8%, and an increase in volume of 2.3%, compared to the first quarter of last year, with growth from both the flavoured and clear vodka segments.

December was Stock's 32nd consecutive month of volume share growth, and the 28th consecutive month of value share growth compared to the equivalent month in the previous year.

Stock Spirits said that was achieved in a pricing environment which remained “very competitive”.

Its value market share at the end of December, at 29.7% moving annual total (MAT), was ahead of the previous year which was 27.9% MAT.

In the Czech Republic, Stock Spirits said the total spirits market grew in value by 6.4% and in volume by 4.9% during the first quarter.

Stock said its market share remained stable, with value market share at the end of December standing at 33.8% MAT, which was “broadly flat” on the previous year at 34.1% MAT.

In Italy, the firm said the categories in which it operated all declined slightly in the first quarter year-on-year.

However, Stock said it grew its market share in brandy, clear vodka and flavoured vodka, maintaining stable value share at 6.8% MAT at the end of December 2019 compared to 7.1% MAT a year earlier.

“We are pleased to announce that Stock recently won the tender for Beam Suntory distribution rights in Italy and expects to commence distribution in April 2020, subject to the negotiation of the final agreement,” the board said in its statement.

“The acquisition of Distillerie Franciacorta has provided us with enhanced access to key distribution channels and consumption occasions, and this has been instrumental to winning the tender for Beam Suntory's world-class premium spirits portfolio.”

As it had previously reported, its Polish subsidiary appealed an assessment in respect of its 2013 corporate income tax return to the District Administrative Court.

The company said the court hearing took place on 28 January, with the verdict expected by the end of February.

“Based on advice from our taxation and legal advisors, we continue to consider it likely that our appeals process will ultimately be successful and our position will be upheld.

“In January 2020, the Polish Tax Authority commenced an audit of our Polish subsidiary's 2014 corporate income tax return, which is currently in its early stages.”

The firm added that it was monitoring the recently-proposed additional tax on small format pack sizes of less than 300mL of alcohol in Poland, which was expected to receive a first reading in the Polish parliament shortly.

“At this stage it is too early to identify accurately or with sufficient certainty the likely impact or any response that we may make.

“We are already considering a range of potential commercial and operational actions that we could take in response to manage or mitigate the situation, including legal action under EU law.”

Finally, the company confirmed that John Nicolson was stepping down at the annual general meeting as chair of the remuneration committee, and was being replaced by Kate Allum.

Nicolson would remain a member of the committee, and membership of other committees remained unchanged.

Stock Spirits said it would announce its interim results on 13 May.

At 1305 GMT, shares in Stock Spirits were up 1.67% at 213.5p.