TENNENT'S owner C&C Group has warned it faces a "short term trading dip" in its core markets of Scotland and Ireland as it grapples with the stricter drink driving limit and completes the integration of the Wallaces wholesale business.

The Dublin-based drinks company declared in May that profits from its Scottish operation would have been higher in its most recent financial year had it not been for the reduction in the legal drink driving limit in December.

And it has since seen those headwinds compounded by the effect of poor weather in the first quarter of its current year. Set alongside the task of completing the integration of Wallaces, the acquisition of which was completed more than a year ago, and a broadly "weak" trading backdrop, C&C braced investors yesterday for a short term dip in trading.

The warning came shortly after C&C abruptly parted company with Brian Calder, former managing director of Tennent Caledonian, in June.

C&C, which said Mr Calder had planned to step down once the integration of Wallaces was largely complete, appointed former travel industry executive Alastair Campbell as his successor.

The drinks firm said yesterday that tradition conditions in the first quarter had been "mixed". It said in an interim management statement: "The Group's core markets of Ireland and Scotland were impacted by unseasonably cold and wet weather, particularly in May.

"The recent tightening of 'drink-driving' regulation in Scotland adds to the challenges already faced by the on-premise channel and rural/community pubs appear to have been disproportionately affected. Whilst the weak trading environment and the final phase of Wallaces' integration in Scotland may mean a short term trading drip in our core markets, we continue to invest for the long term."

C&C stepped back from the auction for Spirit Pub Company last year as it mulled plans to boost distribution for its brands throughout the UK.

Its acquisition of Wallaces in Scotland, and Gleeson Group in Ireland, are part of a strategy to be a brand-led, multi-beverage supplier to the licensed trade.

However one industry source signalled yesterday that the integration of Wallaces has been far from smooth.

The long-standing customer complained it now takes significantly longer to unload deliveries because kegs of beer are dispatched in the same wagon as spirits and soft drinks. And he claimed it now takes longer to place orders through the telesales team. "I've heard of people getting deliveries at nine or ten at night," he added.

C&C said: "The integration is progressing in line with expectations and is broadly complete. Brian had intended to step down once the integration process was largely done."

The company, whose share price has dropped from €4.60 to under €3.40 in the last 12 months, has used cost savings to support an increase in marketing spend.

The latest campaigns for Tennent's and Bulmers in have been "well received so far", C&C said. "This should serve to underpin the strength of the brand led wholesaler model in Ireland and Scotland."

Greene King said on Wednesday the change in the drink-drive limit will affect sales for at least a year.

Shares in C&C Group closed down 1.3 per cent at €3.40.