Barr insists sugar will not drive deals
Boss of Irn-Bru maker declares controversial soft drinks levy is unnecessary
AG BARR boss Roger White has underlined the Scottish soft drinks giant’s capacity and appetite to make further acquisitions, but insisted its targets will not be driven by next year’s introduction of a sugar tax.
And Mr White, commenting after the Irn-Bru maker held a routine annual meeting in Glasgow, outlined his hope the company will at least replicate the “double digit” percentage growth it saw in export markets last year.
Barr has been a vocal critic of the soft drinks levy, under which two bands of tax will be applied to producers from April next year – one at 18p per litre for drinks with a sugar content of 5g and over per 100ml, and one at 24p per litre for those containing more than 8g of sugar per 100ml.
Mr White said he does not expect the legislation will change regardless of the outcome of next week’s General Election, noting that the company remains in dialogue with Treasury officials over the practical implementation of the tax.
But he insisted Barr’s future acquisition policy will not be governed by the levy.
Mr White said only acquisitions which have the potential to drive shareholder value will be considered. He signalled the company has “zero debt” and the “capacity and optionality” to act “decisively” when opportunities arise.
Asked whether sugar-free products are uppermost in mind when bosses are assessing deals, Mr White said: “I wouldn’t characterise it as a sector-specific strategy, it’s more about the growth potential [and] quality of the business and brand that we are looking at, and our ability to improve and develop it.
“Funkin (cocktail puree business) would be a prime example – it was the last brand business we bought and it’s outside of the direct soft drinks category, but it is very much a business that is increasing the number of occasions that we can participate in.”
He added: “It’s about the businesses themselves and the potential.”
Mr White declared that the sugar tax merely confirms in regulation the gradual shift towards sugar-free, water and fruit juice products that Barr has been making, stating that this change is reflected by an “accelerating trend” of consumers buying lower-sugar products in the last two years.
Highlighting its acquisition of water brand Strathmore, and the development of no-sugar products Irn-Bru Xtra and Rubicon Spring in the last 18 months, Mr White reiterated his view that the sugar tax is “unnecessary”.
“It is not doing any more than formalising, in terms of a change in government regulation, something that we are already doing, and have been doing for a very long time,” he said.
While original Irn-Bru brand remains the biggest-selling version of the brand, Mr White said launch of Irn-Bru Xtra is “bringing more people into the brand, as well as substituting people out of either sugar-free and/ or standard Irn-Bru.”
AG Barr imports packaging, commodities and ingredients for its products and Mr White said the weakness of sterling since the Brexit vote resulted in a cost impact of between £4 million and £5m last year. He said Barr has attempted to mitigate the effects by driving efficiencies, improving materials use and taking advantage of its hedging position on certain commodities while it can, but noted that higher costs were now a feature of conversations with its customers.
In normal circumstances the company would review its prices once a year. But Mr White conceded that, having worked in the grocery industry for the last 25 years, this frequency can increase at times of extreme cost rises.
While Barr has no plans to review its prices at present, he said if there was an “extreme” hike in costs he “wouldn’t discount the fact it is possible.”
Meanwhile, on exports, Mr White expressed his hope that the company will maintain its growth in overseas markets this year. Its biggest areas of focus are Russia, where it is now selling Rubicon alongside Irn-Bru, Scandinavia, where there is a big focus on Rubicon, Rockstar and Snappel, and mainland Europe, where the focus is on developing Rockstar, Snappel and Rubicon. “We had strong growth two years ago, we had strong growth last year and we would hope to replicate that as we roll forward across this year as well,” Mr White said.
All resolutions proposed at yesterday’s annual meeting were carried.