AG Barr Achieves Record Turnover Driven by Soft Drink Sales
Scottish beverage manufacturer AG Barr, the producer of Irn-Bru, has announced a year of unprecedented turnover, buoyed by robust sales of its soft drinks portfolio. Irn-Bru, in particular, experienced double-digit sales growth in England, contributing significantly to the company’s overall financial success. This performance comes amidst challenging market conditions, demonstrating the resilience of AG Barr’s brands and strategic initiatives.
Irn-Bru and Rubicon Lead Sales Surge
Irn-Bru sales witnessed a 6.4% increase, fueled by substantial growth in the English market, strategic investments in consumer marketing, and the introduction of innovative limited-edition flavors like Raspberry Ripple and Wild Berry Slush. Furthermore, sales of Rubicon fruit drinks soared by an impressive 17%. AG Barr also reported positive growth across its energy drinks, still drinks, and flavored water categories, showcasing a diverse and successful product range.
Soft Drink Strength Offsets Cocktail Weakness
The company’s strong performance in soft drinks effectively compensated for reduced revenue from its Funkin cocktails brand within the on-trade sector. Acquired a decade prior, Funkin cocktails faced headwinds due to pressures impacting hospitality venues. These challenges include cost-of-living concerns and evolving consumer preferences towards reduced alcohol consumption in social settings. Temporary supply chain disruptions also affected Funkin’s ready-to-drink canned products during the second quarter.
Profitability and Future Outlook
Despite these challenges, AG Barr demonstrated strong financial health. The company’s adjusted pre-tax profits experienced a substantial rise of 15.8%, reaching £58.5 million. Statutory pre-tax profits also increased, up by 3.7% to £53.2 million.
Chief Executive Euan Sutherland expressed optimism, stating, “We ended the year in strong financial health, with our brands and business well-positioned for further growth.” However, he cautioned that the external economic climate is anticipated to “remain challenging” due to ongoing inflation and an increase in employer national insurance contributions.
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Strategic Adjustments: Strathmore Brand Discontinuation
Looking ahead, AG Barr has announced strategic plans to discontinue its Strathmore mineral water brand later in the current financial year. This decision could potentially lead to the closure of a smaller manufacturing facility located in Forfar, Scotland. In the previous year, AG Barr closed direct sales operations in several locations and an office of its Boost energy drink brand, resulting in approximately 195 job losses as part of streamlining business operations.
Analyst Perspective and Market Reaction
Zoe Gillespie, investment manager at RBC Brewin Dolphin, commented that the Strathmore discontinuation is “unlikely to have a material impact on the company,” emphasizing AG Barr’s underlying strengths. She noted, “AG Barr has a lot of qualities as a business and continues to invest in its operations – while the drinks market is highly competitive, the company should remain in a strong position when others may struggle.”
Investor confidence in AG Barr appears robust, as evidenced by a 0.8% increase in share price to 625p in late Tuesday morning trading. Over the past year, AG Barr shares have risen by approximately 22%, reflecting positive market sentiment.