Comment: Core brands keep drinks groups fizzing

20th May 2009 18:10

The exotic array of soft drinks offered to consumers has probably never been wider, but judging by two company updates today, thirsty but cash-strapped drinkers are turning back to the fizzy favourites they know and love.Britvic, which makes Tango and distributes Pepsi and 7UP in the UK, saw pre-tax profits in the half year to 12 April rise by 16.3% from the same period a year ago to £20m, as revenues climbed by 6.3% to £483.2m.UK carbonates were the main growth-driver, with revenues from the division climbing by 10.2% to £204.4m. This helped to offset a poor performance in struggling Ireland, where operating profit fell to nil from £4.3m as revenues remained pretty much flat at £101.m."What we're seeing is consumers switching away from some of the more niche or peripheral categories where they may be more expensive or have less of a role within their life," said chief executive Paul Moody.The same day, such trends seemed to be confirmed by Nichols, whose core beverage is Vimto. Sales of the fruity, carbonated drink were up by 11.8% in the 12 weeks to 18 April, against a total soft drinks market increase of 0.6%.Nichols is going to appeal further to consumers' loyalty to this well-known brand by starting a new advertising campaign on June 5.Britvic has also been using advertising to retain brand awareness, for example by sponsoring cricket matches to promote Pepsi and with a 'Save Tango' campaign to reassert the orange flavoured drink's cult status among teenagers.The firm, which has said it will not be launching any new brands this year 'given the lack of propensity for consumers to engage in new brands in a severe downturn', is likely to continue spending heavily to promote them.By relying on their core brands, Britvic and Vimto appear to have positioned themselves well during the downturn. They now look set to benefit from a hot summer, which will help make up for the poor weather over the last two years.But further ahead, investors will be keen to find out how the drinks companies, having weathered the recession, can position themselves for further growth once the economy rebounds.