Soft drinks stalwart AG Barr has given warning that price deflation and resulting retail price promotions could hobble the sales growth of many of its rivals.
However, Roger White, chief executive of the producer of Irn-Bru, Rubicon and Strathmore, said he believes his company can ride out falling prices. The group saw revenue growth of 2.7 per cent in its latest financial year compared with 0.4 per cent in the wider sector.
“It’s something we have not had to deal with historically,” White said. “But retailers don’t like it [price deflation], and they may realign their pricing and promotions.
“We will have to navigate our way through that. But we are not indicating that we don’t expect further revenue growth. Whilst our [new] year has started slowly, reflecting tough comparative trading and promotional phasing, we are confident that out management actions, combined with our proven business model, will enable us to further unlock the significant potential that AG Barr offers its shareholders this year and into the future.”
By contrast, White said if the current price deflation was sustained it would “make it more difficult for many businesses to deliver the top line growth of recent years”.
It came as the company posted a 10 per cent rise in underlying pre-tax profits to just under £42 million, on revenues of £261m in the year to 25 January.
The period saw carbonate volumes decline 1.3 per cent. while the still category grew 0.8 per cent. “Once again the overall market was driven by the performance of the water category, which has overtaken cola to become the largest single category by volume for the first time,” White said.
He added: “We are seeing a quite significant change in [consumer] behaviour. There is growth in flavoured water and energy drinks. Fruit juice has seen a significant decline.
“At the end of the day, consumers are making informed choices. They are looking for treats or products that may have health and welfare benefits.”
Sales in England and Wales, which now account for almost 60 per cent of the overall revenues, rose 3.5 per cent, while international sales rose by a shade under 8 per cent.
The group moved into the cocktail mixer sector with its acquisition of Funkin last month and its new Snapple brand partnership with Dr Pepper Snapple Group.
AG Barr is increasing the final dividend to 9.01p from 8.19p, giving a 10 per cent lift in the total payout to 12.12p.
The company confirmed that David Ritchie, chief executive of housebuilder Bovis Homes, would become its fourth independent non-executive director in April. AG Barr also flagged up that it expected to recruit further candidates to the board this year.
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