Britvic eyes ‘fruit shoot’ growth opportunity in US
Announcing its full-year results for the year ending October 2 2011, the company said that it was pursuing growth within its ‘core’ export and travel business, European acquisitions and licensing and franchising deals.
Britvic’s reported a group revenue of £1.29bn for the year (£1.12bn: 2010) and EBITDA of £138m for 2011 against £131m for last year.
But CEO Paul Moody said the 2011 had been a “very challenging period” for soft drinks manufacturers due to accelerated cost inflation in February and the UK VAT (value added tax) increase in January.
“The summer weather disappointed and impacted soft drinks sales in each of our markets. Furthermore the growing economic challenges have altered the spending power and behaviour of consumers,” he added.
US distribution deals
Central to the company’s international growth strategy is Britvic’s children’s fruit juice based beverage brand Fruit Shoot, which is the UK’s top selling brand (Nielsen); the firm said today it had achieved a 17 per cent market share in Australia just a year after its launch last November.
Within the US, Britvic said it began distributing Fruit Shoot in 2008, and in 2009 signed a long-term distribution agreement with Buffalo Rock.
The company said it commenced trials with other US-based Pepsi bottles in 2011, and had now concluded three further agreements.
The first is with Gross & Jarson (the third-largest US Pepsi bottler) to distribute Fruit Shoot in Kentucky; a long-term deal with Pepsi Bottling Ventures (PBV) will also see Fruit Shoot distributed and manufactured (for the first time in the US) in North Carolina.
During the second half (H2) of 2012, Britvic would supply a proprietary concentrate from its Dublin facilities – through a newly created Irish company called Britvic World Brands – to PBV and other bottlers, allowing it to stop shipping finished goods from the UK.
A third agreement with Pepsi Beverages Company (PBC) will see Fruit Shoot distributed within Florida and Georgia.
Although it withdrew its Robinsons range from the Nordics, Britvic said its Fruit Shoot deals were a “major step forward in the development of our international growth strategy”.
Irish sales slump
But closer to home, the firm suffered a tougher time in Britain (GB) as still drinks revenues slumped to £351.2m from £362m litres, hit by a wet summer that affected sales of Robinsons and other brands, the move to double from single concentrate in Robinsons products and weak economic conditions.
Full-year GB carbonate revenues rose from £468.4m to £502.6m, but in Ireland Britvic said it had been hit by “very challenging macro-economic conditions” and bad weather, which affected both take-home and pub and club sales.
Nielsen data registered an 8.7 per cent decline in pub and club sales alone, and Britvic’s Irish production volumes fell (210.8m litres, 229.1m: 2010) and revenue fell from £162.8m from £179m year-on-year.
In a note this morning on Britvic’s results, Panmure Gordon analyst Damian McNeela said Britvic’s results reflected its ability to make cost savings “to minimise the impact of lower brand contribution due to higher raw material costs”.
Given a more “benign outlook” for input cost inflation, McNeela said he expected the company to deliver double-digit earnings per share growth over the next three years.
