Profits at Irn-Bru maker AG Barr rebounded last year as the soft drinks group recorded growth across all its core brands, with mixers performing particularly well as consumers drink cocktails in record numbers.
The improvements were despite “significant inflationary pressures” that last month led the group to announce price hikes across the board for its trade customers. Overall costs rose by 25 per cent during the year, and were particularly acute for energy and packaging materials.
Cumbernauld-based Barr, which also owns the Rubicon juice and Funkin cocktail brands, said revenues from the latter during the year to January 30 were up more than 90 per cent on pre-pandemic levels.
The number of UK consumers drinking cocktails out of the home has now reached 7.4 million, equivalent to 15% of the adult population. Meanwhile, cocktail consumption at home has also continued on an upward trend.
Along with the surge in Funkin sales, revenues from Rubicon and Irn-Bru increased by 26% and 6% respectively compared to the same period prior to Covid. Soft drinks account for about 85% of Barr’s sales and gross profits.
Despite inflationary and supply chain headwinds, chief executive Roger White said the company remains confident in its ability to deliver continued growth.
"We enter the new financial year with good momentum and exciting brand and sales plans,” Mr White said. “Trading in the early weeks of the new financial year has been well ahead of the prior year and in line with our expectations.
"Like most companies we are facing significant inflationary pressures, but we are well-placed as a group to deal with these and will continue to seek to manage our exposure proactively through mitigating actions across revenue management, pricing, procurement and cost control.”
Pre-tax profits jumped by more than 62% to £42.2 million on an 18% increase in revenues to £268.6m. The company has proposed a final dividend of 10p to take the total yearly pay-out to 12p, which comes on top of the one-off special 10p dividend paid in October of last year.
Julie Palmer, partner at Begbies Traynor, said there are several factors in Barr’s favour as it faces growing inflationary pressures.
READ MORE: AG Barr hikes Irn-Bru prices as inflation forces firm to cut costs
“Much of AG Barr’s sales are impulse buys or from promotional deals, which are less likely to be hit as consumers see their spending power eroded as they hunt out cheap pick-me-ups,” she said.
“The company’s highly automated production means rising wage bills will be less of a blow, and it has also been able to manage its exposure to aluminium price increases for the packaging for many of its products.”
Barr said a resurgence in out-of-home consumption helped drive volume gains across the core portfolio, as did the successful launch of Rubicon Raw Energy in February of last year. This helped partially mitigate the loss of the Rockstar energy drink distribution franchise, which ended in August 2020.
“The Irn-Bru brand grew volume, revenue and gross margin, benefitting from distribution gains in England as well as the reintroduction of Irn-Bru 1901 in Scotland,” the company said. “Particularly strong growth of single serve cans and smaller PET packs, along with optimisation of promotional mix and price, supported improved margins.”
The company’s 61.8% stake in porridge and oat milk maker MOMA Foods, acquired in December for £6.2m in cash, contributed £1.1m to revenues during the year but had an “immaterial” impact on profit.
Under the deal, Barr will be able to take full ownership of London-based MOMA by the end of the 2024/25 fiscal year. The move will allow the Scottish group to take advantage of the expanding market for vegan milk alternatives.
Shares in Barr closed yesterday’s trading 12p higher at 544p.
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