AG Barr, the maker of Irn-Bru and Rubicon juices, is "well-placed" ahead of the introduction of a UK sugar tax on soft drinks, a leading industry analyst has said.
Phil Carroll of Shore Capital Stockbrokers said that despite current "challenging market conditions", the company "enters the new financial year with a strong, efficient and flexible model and a portfolio, to management’s credit, that is extremely well-positioned to compete post the implementation of the soft drinks tax in April 2018."
Carroll added that Shore Capital was confident that "Barr can continue to deliver growth and value for shareholders in the forthcoming year and beyond."
Trading Update
Shore Capital was commenting following the publication of a trading update from AG Barr, in which the company said that it expects its full year revenue for the year to end January 2018 to be 7.5% higher than last year.
It said that it is expecting revenues of £277 million for the year, up from £257.1 million the previous year.
The group said that the ‘positive revenue performance reflects the continued success of our innovation alongside strong trading execution across our core brands’.
The company did note, however, that it has ‘not been immune’ to the cost pressures faced by many UK businesses in 2017, particularly due to the ‘weakness of Sterling’, however it remains confident it will post profit growth for the full year period.
The group will announce its full year financial results on 27 March.
Sugar Reduction
In its statement, AG Barr said that the decision to move 90% of its portfolio to a lower- or no sugar positioning, announced in March 2017, is still underway, adding that it expects 99% of its portfolio to contain less than 5% of total sugars per 100ml before the implementation of the sugar tax in the UK this coming April.
It noted that its move to reduce the sugar content of Irn-Bru, its signature product, ‘was met with widespread media interest. Our extensive research and testing in the preceding years gave us confidence that we had an excellent taste match and, whilst it is still early days, the consumer response to the new product has so far been encouraging’.
Outlook
Looking ahead to the coming year, AG Barr said that it expects 2018 to be a ‘challenging year’ for UK business ‘against a backdrop of continued uncertain economic conditions. In addition the soft drinks industry faces significant changes in regulation, customer dynamics and consumer preferences, bringing both challenges and opportunities’.
It noted, however that it believes its ‘strong and flexible business model’, coupled with an ‘exciting’ innovation platform, will enable it to maintain growth in the coming 12 month period.
Britvic Quarterly
AG Barr's trading update come a day after Britvic posted an increase in revenue in the first quarter of the year, by 3.3%, however the company saw volumes down in most markets.
Announcing its results, Simon Litherland, the group's chief executive noted that the forthcoming sugar tax is likely to bring an additional challenge in the coming year.
"The introduction of a soft drinks industry levy in the UK and Ireland brings a level of uncertainty," Litherland said.
© 2018 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.
