Fruit Shoot litigation ‘claims’ could cost Britvic further ₤8m in 2013

By Ben Bouckley

- Last updated on GMT

Related tags Fruit shoot Brand Brand management

Britvic group finance director John Gibney had more bad news relating to Fruit Shoot for investors and analysts today
Britvic group finance director John Gibney had more bad news relating to Fruit Shoot for investors and analysts today
Britvic finance director John Gibney told City analysts this morning that losses of ₤16.9m due to this year’s Fruit Shoot recall could extend to ₤25m in 2013 due to associated litigation.

He was speaking following UK firm Britvic’s preliminary full-year results announcement for the full year ending September 30 2012, where the firm announced revenue down 0.8% to ₤1.256bn ($2.01bn), as the recall hit growth by 2%.

EBITA fell 15.5% to ₤115.6m, primarily due to design faults with a new ‘MagiCap’ closure for PET bottles that saw Fruit Shoot stripped off European shelves from July 3.

The disastrous event cost Britvic ₤16.9m this year, and potentially up to ₤8m more in 2013 (for retailer settlement claims), although management estimates that EBITA would still have fallen 4% even without the recall.

What the City thought...

Reflecting on Britvic's results, one City analyst, who wised to remain anonymous, told "The general take was that they were better than expected, but our forecasts were below consensus.

"I still think there was a small beat versus consensus. But it doesn’t really give us much information to go on with regard to 2013."

CEO Paul Moody told investors and analysts this morning: “I guess that during the period that Fruit Shoot was off shelf, we saw retailers facing-up with, primarily own label, but some secondary brands as well,” 

“As we rebuild our distribution…there’s a fairly broad range of SKUs under the Fruit Shoot brand, but we are prioritizing multipacks of the two leading flavors,”​ he added.

Lasting damage to brand equity?

The firm would then focus on distribution of second and third flavors within the brand, Moody said, adding that Britvic was not currently running promotions as it simply rebuilt stock levels, with an aim to restore historical production levels by January 2013.

“Where we have re-established the brand with a retailer, we’ve pretty quickly returned to the rate of sale that we would have seen prior to the Fruit Shoot recall…While regrettable, the Fruit Shoot recall has not had any lasting damage to brand equity,” ​Moody said.

Explaining the basis for Britvic’s ₤8m figure to analyst Andrew Holland from Societe Generale, Gibney said: “The reason there is a range of ₤15 to ₤25m [Britvic’s prediction of the financial impact of the recall] over two years is the threshold for what I call ‘claims’ rather than litigation.

“So we clearly can’t comment too much more on that. As you know, we’ve incurred costs of nearly ₤17m at the moment. There’s the potential for a further ₤8m of costs to come through, and lost profit in relation to Fruit Shoot.

“If it’s towards the lower end of that range, it might well be associated with any claims.”

New US bottling agreement

Moody was keen to talk up Britvic’s “notable successes”​ in the last 12 months, with GB carbonates (particularly PepsiCo) outperforming the market in the Olympic year.

Robinson’s squash regained market share in GB, while the firm’s syrups brands in France increased volume and value share, and a fifth agreement with a US bottling partner (Pepsi-Cola Bottling Company in Central Virginia), with Fruit Shoot now distributed across nine states.

But Moody conceded that volumes down 2.1bn liters in 2012, and stills revenue loss as a result of the recall significantly hit trading in GD stills, the firm’s international division (particularly in The Netherlands and Belgium) and France, during a “difficult year for the group”.

 “Additionally, the negative macroeconomic trends, leading to weak consumer confidence, and the cold, wet summer endured across most of our markets, weighed heavily on the soft drinks market and Britvic within it,”​ Moody said.

(*Register here for free access to the first ever online event​  devoted to Operational Efficiency in food and beverage processing on November 29, organized by our sister site and William Reed Business Media.)

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