AG BARR has emerged unscathed from a tumultuous opening six months to its financial year, with profits rising as it faced extreme weather and a shortage of carbon dioxide while relaunching its core product in response to the so-called sugar tax.
The Irn-Bru maker declared it was on track to meet its expectations for the year as it reported a four per cent increase in underlying pre-tax profits to £18.2 million. That came as the Cumbernauld-based soft drinks firm navigated an extraordinary set of trading circumstances, including the advent of the Soft Drinks Industry Levy which led it to introduce a new, lower-sugar recipe of its popular Irn-Bru brand.
The company was also forced to contend with hugely-varied weather conditions, with the snow and ice brought by the Beast from the East followed by a long hot summer, and the volatility in the supply chain caused by a UK-wide shortage of carbon dioxide.
Despite the challenges, the company grew revenue by 5.5% to £136.9m and saw its core brands, including Irn-Bru and Irn-Bru Sugar Free, gain market share, helped by continued marketing investment. The company pledged to market its core brands in the second half as “aggressively” as it did in the first.
The performance gave AG Barr the confidence to lift the interim dividend to 3.9p per share, up from 3.71p.
Asked whether he had ever encountered such a volatile conditions as he did in the first half before, chief executive Roger White replied: “It has been interesting. There’s been a lot of things changing, a lot of moving parts. [It is] quite hard to disaggregate all the factors, but [we are] very pleased to put in a solid financial performance, and a strong growth performance even in volatile and quite tricky times.”
On whether the warm summer was enough to offset the disruption caused by the Beast from the East, which saw transport on major motorways grind to a halt, he added: “The way we would look at it is it sorted of balanced out in the end. That period at the end of February, early March, was pretty tricky for everybody, [with] red weather warnings in Central Scotland and lots and lots of snow in the south of the country as well. It was a tricky period but balanced out in the reporting period by a strong end in July. It was a little bit of a half of two quarters.”
AG Barr launched its new formula for Irn-Bru, which contains 50% less sugar than the previous recipe, at the end of January, before the sugar tax was introduced in April. Mr White reiterated that the bulk of drinkers could not tell the difference, despite some hardcore drinkers maintaining the taste has changed.
Under the Soft Drinks Industry Levy, manufacturers must pay 18p per litre if a drink contains between five and eight grams of sugar per 100ml, rising to 24p per litre of it contains 8g per 100ml.
Mr White said the results of AG Barr’s taste tests were ultimately mirrored in the marketplace.
He said: “As we had assumed from our research work, nine out of 10 people could not tell the difference, and that was exactly what we found. As a consequence, we are delighted to see volume growth in Irn-Bru in double-digits (percentage growth) in the period. We are very pleased to see the momentum in the brand continue.”
AG Barr noted the progress it had made with its partnerships with San Benedetto and Bundaberg. But Mr White said emphasised that it is not AG Barr’s “core mission” to bottle and grow other companies’ bands. “Our real focus is on growing the brands that we own,” he said.
While rival Coca-Cola swooped to acquire the Costa Coffee chain last month, Mr White said AG Barr has different priorities. “They have a very different scale and footprint to do things with,” he said. “But I think we can be equally as innovative and get into the right sectors to grow our business. There is still plenty of room for us to grow our business.”
Shares dipped 3p to close at 727p.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here