Britvic optimistic despite sugar tax and CO2 challenges
The UK’s Soft Drinks Industry Levy was introduced in April this year, taxing beverages with more than 5g sugar per 100ml, with a similar tax also introduced in Ireland. Meanwhile, the carbonated soft drink and beer industries in Europe have suffered from the shortage of CO2.
Britvic (whose brands include Robinsons, Tango and J2O) today reported Q3 revenue of £366.9m ($481.4m), an increase of 3.4% on a strong comparative prior year number (+4.5%). Revenue excluding the Soft Drinks Industry Levy (SDIL) decreased 0.6% over the third quarter. Year-to-date reported revenue increased 4.2% (2.8% ex-SDIL) to £1.1bn ($1.4bn).
Simon Litherland, chief executive officer, said: “Britvic has delivered a strong underlying performance in the third quarter, through continuing outstanding execution of no sugar carbonates and substantial growth from our stills brands.
“Whilst the industry-wide shortage of carbon dioxide held back our ability to fully capitalise on the exceptional weather in GB and Ireland, we leveraged the breadth and strength of our portfolio to moderate the impact.
"Consequently, we remain confident of achieving market expectations for the full year.”
Sugar tax: ‘early indications remain positive for the category’
While the CO2 shortage – caused in part by the shutdown of some European CO2 plants – hit a number of food and beverage categories, Britvic says supplies are now stabilizing.
“There was a well-documented disruption to the supply of carbon dioxide into the UK and Ireland within the [Q3] period, which impacted the wider food and drink industry, including carbonated soft drinks.
"To ensure continuity of supply across all trading channels, we temporarily scaled back our promotional activity and reallocated some of our secondary feature space to stills. Supply has now normalised, enabling us to start rebuilding stock levels and gradually reintroduce promotions.
Britvic believes it is 'well-placed' to deal with sugar taxes in the UK and Ireland: two of its key markets.
Around 72% of its total portfolio and 94% of its owned brands fall below the threshold where the Soft Drinks Industry Levy kicks in Great Britain. In Ireland, around 69% of its total portfolio and 79% of its owned brands escape the levy. It says it is helping consumers make healthier choices in three ways: reformulation, innovation and responsible marketing.
The UK has enjoyed a warm spring and summer, which makes it more difficult to ascertain the impact of the challenges, says Britvic.
“Since the introduction of the SDIL in April, the soft drinks category has benefited from a prolonged period of unusually warm weather. This, when coupled with the carbon dioxide shortage, makes it difficult to disaggregate the effect of the Levy, and we anticipate having a more informed view of the impact at the end of the year.
"Early indications remain positive for the category and Britvic, with the shift from full sugar to low or no sugar products accelerating.”
Britvic is the largest supplier of branded still soft drinks in Great Britain and the number two supplier of branded carbonated soft drinks. It combines its portfolio which includes Fruit Shoot, Robinsons, Tango, J2O, Teisseire and MiWadi with PepsiCo brands such as Pepsi, 7UP and Mountain Dew Energy, which Britvic produces and sells in GB and Ireland under exclusive PepsiCo agreements.