By Scott Wright

Shares in the drinks company that is a major investor in the Ardgowan distillery being developed in Inverclyde plunged yesterday after reporting a steep fall in third-quarter sales, driven by a stock shortage at a major retailer at Christmas.

Distil warned revenue for the full-year will now be “significantly below” expectations after a bruising Christmas period, when sales were also adversely affected by the de-listing of gin and vodka brand Blackwoods at a medium-sized retailer.

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The company told the City that it had decided not to take up the option to invest an additional £2 million in the Ardgowan project “in order to focus cash resources on core business”.

Distil expects to report an underlying loss of £600,000 in the year to the end of March.

The company is Distil is a cornerstone investor in the £17m Ardgowan project, which will restore distilling to Inverclyde for the first time since the Second World War. It is scheduled to open in 2014.

Don Goulding, executive chairman of Distil, said: "The third quarter, and December in particular, is the key trading period for our business, however, the wider UK spirits market was softer than anticipated during the quarter, with overall UK spirits sales down in response to a challenging economic environment.

"It is important to be able to maximise sales throughout this key trading period but, regretfully, a system issue within one of our major customers resulted in reduced stock cover."

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He added: "RedLeg (spiced rum) was performing well with a strong rate of sale, however the system issue meant that stock was not being replenished quickly enough, resulting in erratic promotional activity and out of stock issues at store level. Our team has been working hard with the customer over the quarter to resolve the issue and have together found a solution, with normality expected to return from Q4.

"Our other major retail customers performed well across the quarter, with sales at a consumer level showing on average +38% YOY growth in December.

"I am disappointed to report that despite positive brand growth, a mid-sized retailer took the decision in Q3 to reduce its gin range in response to the overall decline in the gin market, which included delisting Blackwoods 40% Gin from its stores. This news will have a significant impact on the brand; however, this gives us the opportunity to re-examine the brand positioning in the current market and focus efforts on rebuilding the brand in its home territory of Scotland with on-trade and regional off-trade listings."

Shares closed down down 38.9% at 0.55p.