Irn Bru and Rubicon maker A.G. Barr bubbles up on back of sugar-free options

 
Alys Key
Follow Alys
Chief executive Roger White said low-sugar options have been created to respond to consumer demand (Source: AG Barr)

A.G. Barr, the maker of Irn Bru and Rubicon, grew revenues during the first half of the year through the popularity of no-sugar alternatives to its most popular drinks.

The figures

Revenue climbed 8.8 per cent to £136.6m. Profit before tax grew slower, increasing 2.9 per cent to £17.5m.

This was partly due to higher costs associated with currency fluctuation, which squeezed margins, but was also linked to the company's renewed investment in product innovation.

Free cash flow improved during the period, resulting in a net cash position of £7.9m compared to a debt of £6.6m this time last year.

A.G. Barr upped its dividend to 3.71p per share, up five per cent.

Read more: Irn Bru maker AG Barr announces plans to cut 10 per cent of workforce

Why it's interesting

A.G. Barr has put a reformulation plan into action, releasing new no-sugar Irn Bru Xtra and water-based Rubicon Spring. The company expects to meet a target of 90 per cent of its products being below the 5g of sugar per 100ml limit set out in the government's sugar tax, which is currently on track to raise less than expected due to companies adjusting their recipes.

However, chief executive Roger White told City A.M. that the firm's priority is not regulation but consumer demand. As sales of sugar-free Coke outstrip regular Coke, A.G. Barr has also seen rapid growth in low-sugar and water-based products.

The company is also expanding into the fast-growing cocktail ingredients market with its on-trade brand Funkin, a range of purees, mixers and syrups. White said this morning that he hoped this would in time become a packaged consumer brand as well as a product used by bartenders.

Analysts at N+1 Singer said that the results were mixed, noting that top-line figures benefited from comparison with softer trading last year. They added: "We note a touch of caution in the outlook statement with reference to mixed summer weather having a negative impact on the sector. Whilst not a huge surprise, given the significance of summer for the sector this is clearly a disappointment this morning."

Read more: Glass half empty: Sales at London's pubs and restaurants fell in August

What A.G. Barr said

"We'd like to see continued strong revenue growth, keep our costs under control and continue to focus on innovation," said Roger White of the company's plans for the future.

Having previously warned that sterling's weakness would increase the prices of its drinks, he added that the company was "trying to manage the risks associated" with Brexit "as best we can".

Read more: No sugar rush here: Soft drinks industry driven by low and no sugar drinks

Related articles