Soft drinks are fizzing despite flat economy

DIRECTORS OF Scottish soft drinks firm AG Barr say their brands are performing well in a challenging market after defying analyst expectations to post a hike in revenues.

The group — which makes Irn Bru and produces the Forfar-based Strathmore spring water range — saw sales rise by 4.3% during the 14 weeks to May 5, despite a wet April, low high street footfall and tough competition.

The weather was a particular challenge for the firm and the drinks industry, with wet and cold conditions stopping consumers reaching for juice at the supermarket.

In a management statement ahead of its annual meeting in Glasgow, Barr said it had managed a “robust” spring performance and had continued its strategy of investing in its brands and marketing.

High-profile campaigns were launched for Irn-bru, while the Rubicon brand of fruit drinks has just begun its first TV advertising drive.

Meanwhile, costs are expected to continue to grow, with inflation driving up production prices by around 5% in the year.

“Management actions to mitigate the impact on margins are well under way, with pricing changes completed and additional efficiency plans in place to support our longer term cost control actions,” Barr said in a statement.

“We have started the new financial year with all of our core brands performing well in difficult market conditions.

“During the course of the period the unseasonal weather for the time of year has impacted the market and a period of more normal conditions will now be required to bring the market back into growth.

“Despite the challenges of current market conditions and continued low consumer confidence, the business is performing in line with our expectations.”

The company added that its plans to build a new £20 million facility in Milton Keynes were also progressing well.

Barr are working with developers Gazeley UK Ltd on plans for a new production, canning and warehousing plant, which is expected to be in operation by the summer of next year.

Analyst Phil Carroll, from Shore Capital, said the Cumbernauld firm’s performance was better than anticipated.

“Barr has announced an interim management statement which we believe is surprisingly strong given the trading backdrop and tough comparative from the prior year period,” he said.

“We had anticipated a flat to slightly negative performance given the poor recent weather in particular.

“In addition, we believe that the performance was volume driven and not just price driven which we see as a further positive.”

Nicola Mallard of Investec Securities said the firm had produced robust sales figures in the f irst quarter despite a poor market backdrop.

She said: “We would expected Barr to continue to outperform the market. although a period of normal weather will be required to bring the market back into volume growth.”

Shares in Barr’s — which is valued at around £436m — were slightly lower in trading yesterday.

Picture: PA. Made in Scotland, and girders may be involved after all — Barr’s Irn-bru is showing its strength.