By Scott Wright

THE collapse of sales to the hospitality trade during lockdown has resulted in soft drinks giant AG Barr wiping £10 million from the value of its Strathmore water brand and cutting staff at its Forfar manufacturing site.

The Irn-Bru owner has removed 13 staff from the payroll in the Angus town after seeing sales to hospitality customers tumble by around 65 per cent during the six months ended July 25. Group sales to the hospitality market had collapsed by as much as 95% at the height of the lockdown, Barr said yesterday.

Six roles have also removed from the Cumbernauld-based company’s Funkin cocktail mixer business, which was also hit by the downturn.

The £10m write-down on the brand and assets of Strathmore contributed to first-half profits at Barr plunging by 62.2% to £5.1m. An impairment of £1.5m was also booked in respect of a “business re-engineering programme” to rationalise its internal supply chain and reduce the complexity of its portfolio and routes to market. The costs are primarily associated with redundancy payments linked to the programme, which is now due to complete in January.

Barr reported that revenue had fallen by 7.6% to £113.2m amid the disruption caused by the pandemic. Despite the fall in profits and sales, investors responded positively as Barr said it remained on track to meet its revised guidance for the full year issued in July. Shares closed up nearly 12% at 415.81p, having climbed more than 18% during the day.

Barr said in July that, barring a further significant period of lockdown, revenue for the full year would be down 12 to 15% on last year, with a “modest reduction in operating profit”. Last year the company made an operating profit of £38.1m on revenue of £255.7m.

Chief executive Roger White said yesterday that the job cuts at Strathmore affect a “sizeable proportion of the operating workforce”, noting that the reductions will see the plant move from a two-shift to a one-shift operation. “It is a function of the demand for the product that they produce,” Mr White told The Herald.

Asked if he was worried about the prospects for the hospitality industry, which now faces a further tightening of restrictions to halt the spread of Covid-19, Mr White said he is “very concerned for our customers who operate in that zone.” He added: “[For] anybody whose business is entirely made up of hospitality, in whatever guise that may be, this is all extremely tough for them after a very, very tough six months that they have had already. Our hearts go out to all those operators.”

Mr White emphasised that, although sales to that market account for just over 10% of the overall business, the hospitality industry was “important” to the company. He added: “We want to do what we can to support the operators in that sector.”

Barr noted that it had operated continuously throughout the pandemic, while observing social distancing, safety and hygiene protocols, and has now brought its use of the furlough scheme to a close. The two parts of the business where full workforces were not brought back were Strathmore and Funkin. Barr said Funkin had seen sales drop by 34% amid the challenges facing hospitality, though within that sales in the retail sector and online increased by more than 170%.

Flagship brand Irn-Bru grew revenue by 1% over the first half compared with the same period last year. The period saw the brand return to television advertising, which included the airing of some of the most popular Irn-Bru ads.

“If ever there was a time for Irn-Bru to get you through this was the time for us to do it,” Mr White said. “We felt very strongly that we wanted to give people a bit of cheer.”

Mr White said the second half would also be tough, in part because its franchise deal to manufacture, sell and distribute the Rockstar energy drink will come to a close in November.