The report will gauge into the financial performance of Accolade Wines Holdings Europe Ltd and Carlsberg UK Ltd. Accolade Wines is regarded as the top rated wine company in UK with the volume and it is regarded as the fifth major wine producing business in the world. Carlsberg UK Limited is the active company that is incorporated during 28th August in 1903 with the registered office located in the Northamptonshire.
A comparative ratio analysis will be conducted along with the UK registered wine producing companies to further understand the operational analysis of the firm. The area of analysis would include providing an operational insight and performance by using the data from the obtained from the annual reports and share price analysis would also be conducted in the current study.
According to the reports by Market line, the European consumption of the alcoholic drinks is regarded as one of the largest in the world that accounts for 43% of the global consumption during 2015 (Messner 2016). In spite of this, the volume and sales and patter of consumption of the alcoholic drinks in that regions have are impacted by the increasing health and wellness trends with movement in the direction of higher quality products.
The health and awareness trend in the Western Europe is shaping up the influence of alcoholic drinks sector (Mas et al. 2016). Consequently, there is reduction in consumer’s alcohol intake and drinking alcoholic drinks at the moderate rate. On the negative side the consumers are being diverted towards the alternative substitutes such as non-alcoholic drinks and alcohol free lager.
A movement in the direction of premium products, particularly the alcoholic products of high quality with lower content of alcohol are predicted to grow. The alcoholic drink producers in the European region are shifting their development towards premium brand image and premium packaging since the customers are keen to pay for a higher quality and strong brand name (Callahan, Stetz and Brooks 2015). The alcoholic drinks market in the region is largely controlled by the preference of customers because of this, leading brand players are making their investment in increased marketing campaigns to promote their products and attract consumers.
Brand loyalty is regarded as the vital consumer preference in the direction of some brand influences such as new product launches and product positioning (Delmas, and Grant 2014). This provides a greater opportunity for the niche alcoholic drinks with rise in demand and if marketing is based on the quality and diversity then they can be sold at the higher rate and appeal to the Western European consumer’s requirement for healthier and premium quality alcoholic beverages.
The Western Europe drink market for alcoholic products is estimated to be around US $95.1 billion worth in respect of retail sales in 2015 with 12% fall from the preceding year. The review report obtained during 2015 represented a negative decline in the compound yearly growth rate of 2.3% (Galati et al. 2015). The market trend is regarded true in terms of total volume sales of alcoholic drinks whereas the reviewed historical data reflected that total sales volume stood 39,200 million litres (Agr.gc.ca 2018). Among the top nations in respect of retails sales and total volume of sales UK is estimated to be around $25.3 billion with 5771.8 million litres.
Figure 1: Historical retail value sales of Alcoholic drinks in Western Europe in US$ million
(Source: Agr.gc.ca 2018)
Figure 2: Figure representing top ten Alcoholic Sales in Million Litres
(Source: Agr.gc.ca 2018)
Figure 3: Top Ten Wine Companies
(Source: Agr.gc.ca 2018)
The value of the fine wine has increased by 20 pc over the last few years as the demand is rising with investors are looking for the new ways of diversifying their portfolios. UK alcohol production reached an all-time high of 6.3 million bottles in 2014 with a rise of 42 per cent at the back of favourable weather. Researchers have witnessed a rise in 3% gains in the developed market and 5% fall in the emerging market (Chong 2014). Considering the underlying net sales to the growth of 3% to 4% for the entire year across its portfolio results in increase in operating income of 5% to 7%. While it is noticed that Constellation Brands generates more than half of the consolidated revenue from the sale of beer that has bought more than $3.3 billion during the first nine months of operation (Golicic, Flint and Signori 2016). This is almost equivalent to robust wine and spirits portfolio that have generated $2.4 billion in terms of sales revenue.
Figure 4: Figure representing UK Wine Stock Market
(Source: Agr.gc.ca 2018)
The Accolade Wines Holding Europe Ltd is regarded as the world’s top wine producing company in UK in terms of volume and it is considered as the fifth largest wine company in world (Accolade-wines.com 2018). Drawing from the proud history with first wineries established in Australia and since then the company has changed into the world-wide wine corporation by making world’s some of the well-known products. Brands under the UK tags comprise Echo Falls which is the world’s third major wine product and Stowells being the top wine brand on the premises trade.
On the other hand, as the part of the UK group Carlsberg UK have over the years been brewing and selling some of the Britain’s favourite bears (Carlsberg UK 2018). Presently they include Carlsberg, Carlsberg Export and Tuborg. The company was founded during the year 1847 and it is based in Northampton United Kingdom. Carlsberg UK limited functions as the subsidiary of A/S.
Accolade Wines business models comprises of two “state of art” manufacturing, packing and delivery services that is situated in Bristol, UK, Berri and Australia (Accolade-wines.com 2018). The company has six lines of packaging with the ability of making 1200 wine bottles in each minute. The Accolade Park can pack all type of bottles ranging from glass to container.
The business model of Carlsberg comprises of global sourcing of materials (Carlsberg UK 2018). The brewing and Bottling for a large part ensures the optimal capacity use and process that are in line with central supply chain.
Accolades Wines Holdings Europe Ltd identifies that the core to being positive alcohol company in the demanding and changing business environment is to enable business innovation to match with the deals of the consumer’s requirements (Mozell and Thach 2014). During the year company the company has devoted around $20 million on improving the winemaking, packing and delivery processes in United Kingdom.
Figure 5: Figure Representing Operations of Accolades Wines Holdings Europe Ltd
(Source: Accolade-wines.com 2018)
Gross Profit:
Gross profit margin can be defined as the financial metric that is used to determine the organizations financial health and business (Scott 2015).
Figure 6: Gross Profit Margin
(Source: As Created by Author)
Net profit Margin:
According to Schaltegger and Burritt (2017) Net profit margin represents the left over revenue following the deductions of all the expenses from sales.
Figure 7: Net Profit Margin
(Source: As Created by Author)
Operating Return on Equity:
As stated by Warren and Jones (2018) operating return on equity signifies the amount of net income derived from the shareholder’s equity ().
Figure 8: Operating Return on Equity
(Source: As Created by Author)
According to Robson, Young and Power (2017) the return on capital employed is referred as the fiscal ratio which determines the effectiveness of the company and efficiency through which the capital employed.
Figure 9: Return on Capital Employed
(Source: As Created by Author)
Quick Ratio:
The quick ratio is largely used to provide the idea of whether the company has the ability of paying its debt back through its assets (Henderson et al. 2015).
Figure 10: Quick Ratio
(Source: As Created by Author)
Debt Equity Ratio:
As stated by Otley (2016) debt equity ratio is the fiscal ratio that specifies the comparative amount of equity of shareholder and the sum of debt employed to fund the assets of company.
Figure 11: Debt Equity Ratio
(Source: As Created by Author)
Operating leverage:
The operating leverage represents the measure of the degree to which an organization incurs the combination of fixed and variable costs (Eldenburg et al. 2016).
Asset Turnover:
The asset turnover ratio represents the efficiency to measure the organizations capacity to derive sales from its assets by associating the net sales with the average amount of total assets (Otley 2016).
Figure 12: Asset turnover ratio
(Source: As Created by Author)
Inventory Turnover:
The inventory turnover ratio is regarded as the ratio of efficiency that represents how the company is effectively using its inventory in respect to cost of goods sold and average inventory period (Henderson et al. 2015).
Figure 13: Inventory turnover Ratio
(Source: As Created by Author)
Debt Collection Period:
The debt collection period represents the number of days a company takes to collected the debt from its customers (Schaltegger and Burritt 2017).
Figure 14: Debt collection period
(Source: As Created by Author)
Trade Payment Period:
The trade payment period represents the number of days a company takes to pay its creditors (Warren and Jones 2018).
Figure 15: Trade payment period
(Source: As Created by Author)
Diluted Earnings Per Share (EPS):
The diluted earnings per represents the profit that is derived per share together with common stock equivalents (Scott 2015).
Price Earnings Ratio:
The price earnings ratio represented the level of earnings that is derived per share relative to the share price.
Figure 16: Price earnings ratio
(Source: As Created by Author)
The share price and performance for Carlsberg has reflected a fall in the price of shares since the data obtained represents the company reported a negative earnings per share and price earnings (Scott 2015).
Conclusion:
As evident from the comparative analysis it is observed that the company has incurred a better gross margin but has poor terms of liquidity as the liquidity ratio stood negatively for the Accolade Wines Holdings Europe Ltd. Additionally, the company reported negative asset turnover ratio and diluted earnings per share. The analysis states that Accolades Holdings is not better for short term investment whereas investing Carlsberg may yield investors with returns in long term investment.
References:
Accolade-wines.com. (2018). Production | Accolade Wines. [online] Available at: https://www.accolade-wines.com/our-company/production/ [Accessed 5 Apr. 2018].
Agr.gc.ca. (2018). Sector Trend Analysis – Wine, Beer and Spirits in Western Europe – Agriculture and Agri-Food Canada (AAFC). [online] Available at: https://www.agr.gc.ca/eng/industry-markets-and-trade/international-agri-food-market-intelligence/europe/market-intelligence/sector-trend-analysis-wine-beer-and-spirits-in-western-europe/?id=1481742289859#d [Accessed 5 Apr. 2018].
Callahan, K.R., Stetz, G.S. and Brooks, L.M., 2015. Risk Assessment. Project Management Accounting: Budgeting, Tracking, and Reporting Costs and Profitability, Second Edition, pp.171-200.
Carlsberg UK. (2018). Carlsberg UK. [online] Available at: https://carlsberguk.co.uk/ [Accessed 5 Apr. 2018].
Chong, S., 2014. Business process management for SMEs: an exploratory study of implementation factors for the Australian wine industry. Journal of Information Systems and Small Business, 1(1-2), pp.41-58.
Delmas, M.A. and Grant, L.E., 2014. Eco-labeling strategies and price-premium: the wine industry puzzle. Business & Society, 53(1), pp.6-44.
Eldenburg, L.G., Wolcott, S.K., Chen, L.H. and Cook, G., 2016. Cost management: Measuring, monitoring, and motivating performance. Wiley Global Education.
Galati, A., Borsellino, V., Crescimanno, M., Pisano, G. and Schimmenti, E., 2015. Implementation of green harvesting in the Sicilian wine industry: effects on the cooperative system. Wine economics and Policy, 4(1), pp.45-52.
Golicic, S.L., Flint, D.J. and Signori, P., 2016. The triple bottom line in the global wine industry. In 9th International Conference of the Academy of Wine Business Research.
Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial accounting. Pearson Higher Education AU.
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Mozell, M.R. and Thach, L., 2014. The impact of climate change on the global wine industry: Challenges & solutions. Wine Economics and Policy, 3(2), pp.81-89.
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