24 Jul 2018 --- British soft drink producer Britvic saw its third-quarter revenue increase by 3.4 percent boosted by sales of the company’s sugar-free and non-carbonated range. The company behind brands such as Robinson’s Fruit Shoot and Tango was also helped by the unusually warm weather experienced in Britain over the last couple of months. Revenue climbed as temperatures soared.
The good weather period coincided with the start of Britain’s sugar tax which began in April, but it exempts 94 percent of Britvic’s owned brands and 72 percent of the company’s overall portfolio.
Britvic, which also bottles Pepsi in the UK, says early indications are positive and the company expects to understand the full impact of the sugar levy by the end of the year.
However, the company could not fully take advantage of soaring temperatures because of an industry-wide carbon dioxide shortage which began to bite around the same time as the start of the soccer World Cup and barbecue season.
The soft drinks industry was particularly affected as CO2 provides the fizz in carbonated drinks, but it was in short supply after several production sites temporarily closed for maintenance work.
To ensure continuity of supply across all trading channels, Britvic scaled back its promotional activity and reallocated its resources to still drinks. However, supply has now normalized and Britvic has started rebuilding stock levels and gradually reintroducing promotions. GB Stills revenue growth was particularly strong, increasing 11.9 percent (+11.7 percent ex-SDIL).
Britvic says that because the CO2 disruption and sugar tax coincided, it makes it difficult to disaggregate the effect of the levy. The company anticipates having a more informed view of the impact at the end of the year. However, early indications remain positive for the category and Britvic, with the shift from full sugar to low or no sugar products accelerating.
“Britvic has delivered a strong underlying performance in the third-quarter, through continuing outstanding execution of no sugar carbonates and substantial growth from our stills brands,” says Simon Litherland, CEO.
“While the industry-wide shortage of carbon dioxide held back our ability to fully capitalize on the exceptional weather in GB and Ireland, we leveraged the breadth and strength of our portfolio to moderate the impact. Consequently, we remain confident of achieving market expectations for the full year.”
The UK’s sugar tax pushes up the price of sugar-sweetened soft drinks across Britain. It has two tiers; a lower rate of 18 pence per liter for beverages with a total sugar content between 5-8g per 100ml and a higher price of 24 pence per liter for drinks with total sugar more than 8g per 100ml.
Britvic has undertaken large-scale reformulation, taking positive on improving public health through its long-term and extensive reformulation program, an innovation pipeline focused on healthier products and marketing responsibly.
The company has removed more than 20 billion calories from its GB portfolio since 2013 on an annualized basis and was well placed to respond to the soft drinks industry levy.
Britvic reports third-quarter revenue of £366.9m (US$481 million), an increase of 3.4 percent on a strong comparative prior year number (+4.5 percent). Revenue excluding the Soft Drinks Industry Levy (SDIL) decreased 0.6 percent over the third quarter. Year to date reported revenue increased 4.2 percent.
GB revenue increased 8.0 percent (+1.9 percent ex-SDIL), with GB carbonates revenue increasing 6.1 percent (-2.9 percent ex-SDIL). Pepsi continued to gain share, led by "outstanding execution" of MAX.
Underlying performance continued to improve, led by strong growth for both Robinsons and J20, and further enhanced by additional display space.
Ireland revenue increased 11.3 percent (+6.6 percent ex-SDIL), against both a strong comparative period last year and disruption from the carbon dioxide shortage. The stills portfolio, including Ballygowan water, benefited from the exceptionally warm weather in the period.
France revenue declined 15.0 percent, reflecting both a very strong comparative last year and exceptionally poor weather in June. In the four weeks to 24 June, the adverse weather drove a total soft drinks market volume decline of over 14 percent and a syrups market volume decline of nearly 23 percent.
Brazil revenue increased 10.2 percent, against a soft comparative last year.
International revenue increased 8.7 percent in the quarter. In the US, Fruit Shoot continued to make progress with increased distribution and additional listings secured.
Overall, Britvic says that it was a strong underlying Q3 performance and is confident in the full year expectations.
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