A.G. Barr, the soft drinks maker best known for its IRN-BRU brand, has warned today that its full year profits are likely to be down 20% due to the disappointing weather at the start of the summer and trading challenges with some of its other products.
The company highlighted that it had cut prices last year to drive volume growth amid the challenges of the sugar tax on soft drinks, CO2 shortages and the long, hot summer. However, while a return to its traditional pricing strategy was expected to impact volumes, A.G. Barr said trading in its financial year to date had been “below our expectations”.
The group stated that this had been exacerbated by some “specific brand challenges”, particularly in its Rockstar energy and Rubicon juice drinks, as well as tough comparatives with heatwave last year.
The recipe of Rubicon was changed to avoid the sugar tax, although it has suffered a backlash among some customers who don’t like the new taste. Meanwhile, the Rockstar energy brand has had to contend with a crackdown on teenagers drinking high-caffeine drinks with several supermarkets banning the sale of such products to under-18s.
A.G. Barr said it was addressing the brand related issues with the launch of three new Rockstar products at the end of the summer and an improved the recipe for Rubicon. However, the company stressed that it would not see the benefit of these efforts until later in the second half of its financial year.
The group added that it was seeing “encouraging initial interest” in its recently launched IRN-BRU Energy product, whilst its Funkin business was continuing to perform well, boosted by the recent launch of nitro-infused cocktails in cans.
A.G. Barr stated that revenues for its half year to 27 July were expected to be down around 10% to £123m.
“Despite our strong second half plan it is not expected that we will recover fully from the volume impact in the first 5 months of this year and the current trading we are experiencing,” the company said.
As a result, it expects profits for the full year to decline versus the prior year by up to 20%.
Roger White, Chief Executive Officer, commented: “While the Funkin business goes from strength to strength, it has been a challenging start to the year for Barr Soft Drinks. Weather comparatives and trading, particularly in the impulse on-the-go market, have been even tougher than expected which, along with some brand specific challenges, have led to a short-term impact on our financial performance.
“We are focused on returning to growth and will continue to take the actions we believe necessary to succeed in the dynamic environment within which we operate”.
A.G. Barr’s share price fell by as much as 30% in early trading this morning.
NAM Implications:
- It’s called ‘managing expectations’ folks…
- …in terms of minimising surprises for the City, good of bad.
- And A.G. Barr are doing nicely, thanks…
