Incoming soft drinks sugar levy seen off by AG Barr-icades

Comment Martin Flanagan

Soft drinks maker AG Barr looks firmly on the front foot, increasing profits, sales and dividends in its last annual results, while shrugging off rising input costs and the new sugar levy coming in next month.

Admittedly, the whole sector has a defensive feel amid the economic headwinds. As AG Barr boss Roger White says, a can of Irn-bru or bottle of Tizer is a low-ticket purchase, with none of the risk or even hubris of home or car purchases in tough times.

Lots of people also seek little comforts in challenging backdrops – and soft drinks, alcohol, a coffee or bar of chocolate etc all fit snugly into that category.

It also helps, though, when a company has been ahead of the curve in terms of innovation as external pressures mount. Most notably, due to a strong push in the area no less than 99 per cent of AG Barr’s soft drinks portfolio, which also includes Rubicon and Tizer, now fall outside the ambit of the incoming “sugar” levy next month. White modestly denies any prescient second-guessing of Whitehall. He says that it was more a case of responding to customers’ desire to drink healthier even before the government’s moves.

Even so, it is difficult to see beyond the company’s latest annual results being a strong vindication of management’s strategy. The net cash position is strong, up to £15 million from £9.7m a year ago; investment in the business continues at decent levels; it is taken as a given in the City that the AG Barr divi rises seemingly irrevocably, alongside a share buyback programme. In short, the company demonstrably has fizz and pop.