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CCE’s loss may be AG Barr’s gain, says analyst

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By Rod Addy+

27-May-2014
Last updated the 30-May-2014 at 18:40 GMT

AG Barr is expected to reap benefits from its sponsorship of the Glasgow 2014 Commonwealth Games
AG Barr is expected to reap benefits from its sponsorship of the Glasgow 2014 Commonwealth Games

Soft drinks firm AG Barr is benefiting from Coca-Cola Enterprises’ (CCE’s) struggling performance, according to Shore Capital analyst Phil Carroll, commenting on the former’s first financial quarter (Q1).

“It would appear that Barr has been another beneficiary of the struggling performance of Coca-Cola Enterprises [CCE] following Britvic’s strong revenue performance in its recent interim results (GB revenue growth of 5.0%),” Carroll stated in an analyst note.

“CCE reported a calendar Q1 2014 volume decline of 9%. The sharp volume decline follows its decision to transition from two litre PET [polyethylene terephthalate] bottles to 1.75l bottles but we also believe its deep promotional strategy in the prior year period is likely to have been a factor.”

Hanna declares intention to retire

Announcing group revenue growth of 5.2% for the 15 weeks to May 11, AG Barr also revealed that chairman Ronnie Hanna would today be declaring his intention to retire from the board. The company said Hanna would present the decision at its AGM today (May 27) and aimed to step down on December 31.

John Nicholson, who joined as a non-executive director last year, would assume the role of deputy chairman with immediate effect and replace Hanna as chairman on his retirement, it said.

AG Barr’s revenue growth was ahead of the market, said Carroll. “The top-line performance by Barr is said to have been mainly volume driven with the growth spread across its core brands,” he added. The firm’s brands include Irn-Bru and Orangina.

Marketing and promotional support

“In order to drive the volume growth, management increased its marketing and promotional support in what has been a highly competitive market. The group’s strategy of increasing distribution is also said to have made further progress.”

Investec analyst Nicola Mallard called the Q1 performance “a solid start to the year”, but warned continued growth would depend on the weather this summer.

AG Barr is expected to benefit from its sponsorship of the Glasgow 2014 Commonwealth Games and the business said its innovation plans were on track.

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