Britvic, the drinks maker whose brands include Robinsons squash and Pepsi cola, insisted this morning that it was well placed to weather the sugar tax as the group insisted that it had had a “solid start to the new financial year”.
However, it spooked the market with comments on rising costs and its shares lost their fizz in early trading, falling 32p to 752p.
The group warned investors that the recent collapse into administration of Palmer & Harvey, the wholesaler, had resulted in it having to absorb “a number of one-off costs”, although it insisted that there would be no longer-term impact as customers were now being supplied by other wholesalers.
Britvic also predicted that its “business capability programme”, involving the closure of its Norwich factory and the introduction of new bottling lines and warehousing at its Rugby plant, would incur about £35 million to £40 million of one-off costs this year. “We are now in the final phase of transforming our supply chain, which will deliver significant cost and commercial benefits,” it said.
Britvic, which traces its origins to the mid-19th century, is Britain’s biggest supplier of branded still soft drinks and number two in fizzy drinks behind Coca-Cola. The FTSE 250 group’s own brands include Tango, J2O, Fruit Shoot and Teisseire. It also produces Pepsico products such as 7UP and Lipton Ice Tea.
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In the first quarter, encompassing the period to December 24, it reported revenues up 3.3 per cent to £337.2 million, although on an organic, or underlying, basis, which excludes the impact of the £55 million acquisition last year of Bela Ischia, the Brazilian soft drinks group, the increase was a more modest 0.7 per cent.
The Britvic GB division lifted revenues by 1 per cent as a market-beating 4.9 per cent increase in its carbonates business was offset by a 6.6 per cent decline in its stills revenues.
The main driver for its carbonates growth was strong demand for its sugar-free Pepsi Max, which according to Nielsen achieved a record market share for the 12 weeks to December 9.
It said that in terms of volume Pepsi Max was now the biggest low or no sugar cola across the convenience and impulse sector, ahead of Diet Coke, while the brand’s appeal had been further broadened by new ginger and cherry flavours.
Conversely, Britvic’s stills business suffered a 4.4 per cent slump in volumes, although Robinsons Refresh’d — a ready to drink all-natural spring water and juice drink to consume “on-the-go” — achieved retail sales of £7.4 million since its launch almost a year ago.
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The company is also hoping sales will be pepped up by the impending launch in the grocery sector of the more premium Robinsons “fruit creations” and cordials ranges supported by a multichannel advertising campaign.
Elsewhere, Britvic experienced a mixed first quarter. While revenues in Ireland and Brazil were boosted by acquisitions, rising by 16.5 per cent and 22.6 per cent respectively, France was down 5 per cent in a “subdued market”. On an organic basis, Brazil was down 6.5 per cent amid a “challenging consumer environment”.
Its other international revenues fell by 8.1 per cent due to comparisons with the 19.8 per cent increase in the first three months of last year that followed the launch of the Fruit Shoot multipack in America.
Simon Litherland, Britvic’s chief executive, described the trading as solid given the strong comparatives last year, adding: “Our continued focus on revenue and cost management and the delivery of the final phase of our business capability programme mean we remain confident of making further progress in 2018.”
He said that, while the introduction in April of a soft drinks industry levy in both Britain and Ireland would bring a degree of uncertainty, the group was “well placed to navigate this given the strength and breadth of our brand portfolio and exciting marketing and innovation plans”.
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Phil Carroll, a beverages analyst at Shore Capital, described it “quite a lacklustre update” from Britvic, although he acknowledged it was up against some stiff comparatives in some areas. He also expressed concern over the “unwelcome news” on exceptional costs, rating the shares a “sell”.