AG Barr looks to move away from sugary drinks as FY sales not so sweet

29th Mar 2016 07:30

(ShareCast News) - Soft drinks maker AG Barr said it was looking to move away from sugary drinks in response to the UK government's plans to introduce an extra tax on the products as it reported its full year results.The manufacturer of Iron Bru and Tizer said cost cutting helped full year statutory pre-tax profits rise 7% to £41.3m on net revenues of £258.6m, slightly down from £260.9m a year ago.Despite the tough outlook, shareholders have been rewarded with a 10% jump in total dividend to 13.33p a share.Chief executive Roger White said market conditions were unlikely to change."We have delivered a creditable financial performance in difficult market conditions over the past 12 months through continued tight cost control, rigorous cash management, executional improvement and further investment in our brands, assets and people," he said."Market conditions in the core UK soft drinks market are not expected to substantially change as we look forward. Top-line growth remains under pressure and changes in consumer preferences offer challenges and opportunities in equal measure.""Although the details of the Chancellor's proposed soft drinks levy are still to be consulted upon, we believe our combination of brand strength, ongoing product reformulation and consumer driven innovation will allow us to minimise the financial impact on the business at the proposed point of implementation in April 2018.""Based on the Government's currently proposed metrics, should a levy be introduced, we expect at least two thirds of our portfolio will be lower or no sugar, and would therefore be levy-free at that time."White said the growth driver in Barr's overall soft drinks was water, offset by "significant" value declines in fruit juice, dilutables, sports drinks and some areas of carbonates."The market has seen growth in brands which appeal to consumers' changing lifestyles and preferences - sugar free products, lower sugar brands and premium products, such as those within mixers, have continued to outperform the overall category," he added."To ensure success in the UK market we are focusing our marketing efforts on our 'lower' and 'no' sugar products and are substantially reducing the sugar content of our portfolio to reflect consumers' changing preferences."