The going’s good in soft drinks

Good news. Each of the following comments was made recently by a British company: “We anticipate profits at the year end will be significantly ahead of last year”; “Our market has enjoyed a period of sustained growth in the first half of the 2010 calendar year”; “The 12 weeks to 3 July saw the fourth consecutive quarter of growth”.

They come from Britain’s leading soft drinks manufacturers, Nichols, AG Barr and Britvic.

Industry data shows that in the 26 weeks to 10 July, the total UK soft drinks market rose by 5.5% in value and by 1.9% in volume terms, but the market actually accelerated due to the fine early summer – it put on 7.1% in value terms in the final 13 weeks of the period, an increase of 13% over the same time in 2009.

Nichols, famous for its Vimto brand, said its soft drinks sales in the UK were 19.3% up in the first half of the year and branded its performance “exceptional” because it had outperformed the sector and increased market share.

Profits were 39% ahead of the first half of 2009 despite strong comparable figures and increasing competition.

IrnBru producer AG Barr forecast that its sales would rise by 13% in the six months to the end of July. Its new Rubicon brand had performed particularly well and, despite some concerns about future consumer spending, the group said it expects its full-year trading performance “to be ahead of management’s expectations”.

Market leader Britvic, which has the UK rights to Pepsi, said revenue in the quarter to 4 July grew by 16.2% to £289.5 million; trading was boosted by a £23.2m contribution from its French soft drinks Fruité business, which it bought for €237m in May.

Revenues over the first nine months of Britvic’s financial year were 8.5% up at £794.8m. The company said it was “confident of meeting current market expectations in the full 2010 financial year”.

Soft drinks compete directly with alcohol, but a series of companies including Greene King, Mitchells & Butlers, JD Wetherspoon, Fuller’s and Young’s have reported quiet progress so far this year, so is the wider picture less bleak than some paint it to be?

Diageo announces results next week and Pernod Ricard a few days later. Apart from the global picture, analysts will be looking at their UK performance for clues as to whether the wines and spirits sectors are picking up, no matter how tentatively.  

Finance on Friday, 20.08.2010