Britvic's profits slump as consumers shun sugar
per cent drop in first-half profit, as demand for sugary carbonates
declines sharply.
The maker of Tango and Robinsons said profit after tax for the first half of 2006, ending 16 April, slipped to £6.5m (€9.49m) compared to last year's first-half result of £9.6m.
This was greatly impacted by a nine per cent drop in carbonates revenue to £159.8m, and indicated "an unexpected decline since Christmas in the full sugar carbonate market driven by an acceleration of the consumer trend towards health and wellbeing," said the company.
Total branded revenue for the first half fell 5.3 per cent to £323.5m, against last year's £341.5m.
As a result the British firm, which has a licence to make Pepsi in the UK until 2023, has confirmed full-year targets will not be met.
"We have not seen the level of recovery in the carbonates market that we anticipated…This has led to some downward pressure on pricing which we anticipate continuing for the balance of the year," Paul Moody, chief executive, said.
"Consequently, management now believes that it will deliver earnings for the full year modestly below the current range of market expectations but the continued market volatility suggests that a range of outcomes is possible."
Revenue in the Stills division, which includes squash and juice, fell by a marginal one per cent to £153.7m - affected by some "short term trading issues which have since been resolved" said Moody.
The sales and distribution of non-carbonated products was hampered by pricing and promotional problems with two customers he claimed, which in turn affected revenue.
However, the firm is working to strengthen its Stills portfolio, having recently launched a range of bottled waters, dairy drinks and juices. A return on these innovations is not expected to impact profit margins for some time though.
Meanwhile, Britvic is looking forward to a more successful summer throughout all divisions, and has attributed some of its disappointing recent performance to the traditionally "less important first half period" which takes in the tail-end of winter and the spring.
The firm will be pushing core brand marketing activity surrounding major upcoming sporting events. Pepsi is the official sponsor of the England football team at this year's World Cup starting in June.
The promotional campaign will attempt to cement Britvic's position in the "better for you" carbonates market by upping the profile of no-sugar Pepsi Max through TV advertising, online PR and consumer-facing promotions.
Also, the Robinsons brand association with the Wimbledon tennis tournament will be raised this year as Britvic unleashes its biggest promotional campaign yet, and launches the "Summer of Juice" programme to shift Britvic juice sales.
In March the manufacturer announced a £136m loss in share value, acknowledging the market for sugary drinks is in decline - causing some analysts to express concern for the industry's future as the healthy eating trend gains momentum across Europe.
And global bottled water consumption is expected to overtake fizzy soft drinks for the first time within five years, according to a recent report by Zenith International - piling the pressure on fizzy drinks firms like Britvic to adapt to survive.
