Kicking the soft drink bottletop down the road proves costly

 
Marc Sidwell
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UPON nothing has so great and diligent ingenuity been brought to bear in all ages and in all countries, except the most uncivilised, as upon the invention of substitutes for water.” The great American cynic Ambrose Bierce wasn’t writing about Britvic’s Fruit Shoot brand, but he might as well have been. Since 2000, the fruit concentrate on its ingredient list has persuaded parents that it offers a healthy alternative to Adam’s ale, while its candy-coloured bottles and sugar/sweetener-laden contents have given their children no reason to disabuse them. In 2009, Hall and Partners found that a bottle of Fruit Shoot got swigged every 15 seconds.

Not any more. An initial UK recall of regular Fruit Shoots on 1 July was extended on 3 July to all brand variants featuring the new spill-proof “Magicap”. Yesterday, the soft drink company announced that it will be six months before full production is resumed.

Britvic isn’t exactly dependent on Fruit Shoot, with five other core brands in the UK. But the disappointing news was capped by a trading update that revealed the sogginess of the whole market. It’s a rare recovery in water’s popularity, in which both emptier consumer pockets and a washout of a summer may be playing a part. In such arid times for soft drinks, diversification into Pepsi, 7UP, Robinsons, Tango and J2O is little help. Predicted pre-tax losses from the cap fiasco are equivalent to 18 per cent of 2011 Ebitda, and poor trading will extend the losses ahead. Still, by the time the caps are fixed at least the summer won’t be an issue any more.

All of this goes to show that it’s not enough to build a business on serving an eternal human truth. Few of us like to take our water neat, but you can’t turn demand into profit without keeping on top of supply issues as well.

STUCK IN DEVELOPMENT HELL
The Glenstrata soap opera continues, with its will-they/won’t-they storyline beginning to seem a little hackneyed.

The authors of the Eurozone crisis surely ought to complain that their classic kicking-the-can-down-the-road motif is being borrowed without permission. The announcement yesterday that the big showdown has been rescheduled for 7 September may allow tempers to cool somewhat, but without further change to the offer on the table, it risks only delaying the inevitable.

The announcement was accompanied by detailed revisions to the management incentive awards, which respond to the widespread complaints that the pay deals had no connection to performance. As previously announced on 27 June, they will now be paid in shares rather than cash. This is, however, rather beside the point.

The pay controversy was always a subplot to the main storyline of the troubled merger, which centres on shareholders unhappy with the terms they are being offered. Notably Qatar Holding, with its 10.35 per cent shareholding in Xstrata, is holding out for a better exchange rate – it wants 3.25 new shares for old rather than 2.8. Any changes in Glencore’s script will have to be agreed two weeks before the vote, so look for a cliffhanger in late August.

Marc Sidwell is City A.M.’s managing editor