AG Barr has continued an acquisition spree which is reducing the company’s reliance on its renowned IRN BRU brand with a deal worth more than £10m.

The company is paying £12.3m to buy the Rio fruit drinks brand from the Hall and Woodhouse pubs and brewing business.

The deal underlines the potential that Cumbernauld-based AG Barr sees in Rio. It comes ten months after AG Barr acquired distribution rights for Rio through the acquisition of the Boost energy drinks business for up to £32m.

AG Barr’s chief executive Roger White said the company had moved quickly to secure the long-term position of the Rio brand within its wider portfolio.

He said the deal allowed AG Barr to realise the benefits of full brand ownership and support Rio's continued growth, adding: “This acquisition is a further positive indication of our strategic ambitions."

The strategy involves extending AG Barr’s portfolio to increase its exposure to markets that directors reckon have long term growth potential. This will reduce the company’s reliance on the core IRN BRU brand.

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Boost markets what it describes as “high performance, great-tasting functional drinks”. These include the Boost Energy brand.

In December 2021 AG Barr moved into the oat milk business by acquiring a controlling stake in MOMA Foods for £6.2m. A year later it bought out minority shareholders for £3.4m.

The moves to increase investment in the businesses acquired through the Boost and MOMA Foods deals suggests AG Barr was pleased with the performance of the brands concerned.

The company can use its marketing and distribution muscle to help build sales of brands it acquires. It could move production of drinks that are added to its portfolio to existing group facilities.

AG Barr posted strong first half results last month in which it noted the benefits of the Boost and MOMA Foods acquisitions.

The company grew revenues by 33% in the 26 weeks to July 30, to £210m from £158m. Profit before tax increased 13% to £28m from £25m.

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AG Barr said the Boost acquisition offset the impact of unsettled weather in July. The brand made excellent volume progress driven by significant distribution gains.

The company said oat milk was powering growth in the dairy alternative market with sales up 12%. MOMA's oat milk sales grew twice as fast as the oat milk category as a whole.

Cash generated from operations in the first half increased to £15m from £11m, leaving the company with £47.3m of cash and cash equivalents at the period end.

In the interim results announcement Mr White said the company was confident in delivering a full year profit performance in line with market expectations and was well positioned to deliver strong shareholder returns for the long-term.
Its portfolio also includes Rubicon fruit drinks and Funkin cocktails.

Matthew Webb, analyst at AG Barr’s joint house broker Investec, said the Rio acquisition was “another sensible use of cash and a reminder of the advantages of a net cash position when target valuations have become more reasonable”.

He added: “The Boost acquisition, now supported and supplemented by the acquisition of Rio, looks set to generate very attractive returns as the synergies of in-sourcing production are realised.”

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AG Barr shares closed up 7p at 513p yesterday.

They fell from 561p in February to 451p in July.

The shares plunged in March after AG Barr said it expected to face pressure on margins resulting from the investment it was making to capitalise on strategic growth opportunities, ongoing inflationary cost pressures, and the initial dilutive impact from the Boost acquisition.

The shares have recovered ground since August when AG Barr issued a trading update in which the company said it had enjoyed a strong first half, despite ongoing macro cost challenges.

The company noted then: “The Scottish deposit return scheme delay provides us with a more stable and certain consumer environment and enables the accelerated execution of our innovation plans.”