Expect to see more guava juice in Govan and lychee juice in Livingston after Irn-Bru maker AG Barr bought exotic fruit juice company Groupe Rubicon with the aim of promoting its products to a wider market.
Lanarkshire-based AG Barr announced yesterday it has paid £59.8m for the business, which was owned via Jersey-based companies, and spent another £1.25m on the freehold to its factory in Tredegar, Wales.
Rubicon's core business is in supplying corner shops in London and the south-east of England, although it also has contracts with larger retailers across the UK.
However, Barr chief executive Roger White signalled he would be expanding the company with a focus on areas such as Scotland where the company's juices are rarely seen.
"It is relatively sparse north of the border. But there are opportunities right the way through the UK," he said.
Brewin Dolphin analyst John Dickinson said: "AG Barr has a similar product distribution route to market with particular strength in the north (of England) and Scotland. This provides a good opportunity to launch the Rubicon brand through its channels in areas where the Rubicon brand currently has little presence."
White believes that exotic juices, of which Rubicon has a wide selection - from coconut water to pomegranate juice - are becoming increasingly popular outside their core ethnic minority consumer base.
Barr reports that Rubicon has been growing sales at around 16% for the last two years.
Rubicon's accounts for 2007 show that it made an operating profit of £2.2m on a turnover of £28.8m, although figures from Barr, adjusted to show the underlying performance of the business, show an operating profit of £4.7m from sales of £27.3m.
White believes the acquisition of the company, which has 97 employees, will allow it to make £1.5m of annual cost savings, mostly through improved distribution and purchasing arrangements. These savings will cost £2m to implement.
Naresh Negrecha and Vishram Vekaria, who founded Rubicon in 1981, will act as consultants for the business for the next two years, primarily providing advice on purchasing.
They have worked with Barr over the last 20 years as the Scottish company produced Rubicon's carbonated drinks which account for 30% of its sales.
Negrecha and Vekaria will retain the right to produce and sell Rubicon-branded drinks in most countries outside the European Union and Russia.
AG Barr is seeking shareholder backing due to the size of the deal which it is financed in part by £70m in acquisition funding and working capital facilities from Royal Bank of Scotland.
Altium analyst Greg Feehely said: "All told this looks like a strategically sensible deal for AG Barr, consolidating its position in a sector with long-term attractions and high levels of defensibility.
"This deal should further enhance Barr's position in the impulse channel, increase the scale of its branded business in the UK, diversify its brand portfolio further and importantly reinforce the company's focus on regional strength and ability to drive value though focused brands in core markets."
Barr shares were up 2p at 1147p.
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