AG Barr focuses on lower sugar drinks after tax plan
The Irn-Bru maker revealed its plans as it reported an increase of 7% in its annual pre-tax profits, despite a marginal decrease in turnover.
Pre-tax profits for the year to January 30, 2016, were £41.3M, compared with £38.6M the previous year.
Turnover was £258.6M, down by from £260.9M the previous year.
Chief executive Roger White said the company had achieved a credible market performance in difficult market conditions caused by general price deflation, poor summer weather and retail competition feeding through into the overall soft drinks category performance.
He also highlighted rapid changes in the market with consumers preferring lower sugar products, and the chancellor’s announcement of a tax on soft drinks containing higher levels of sugar.
‘Changes in our marketplace’
He said: “Although we recognised the changes in our marketplace some time ago, we have accelerated our actions over the last 12 months to ensure we are set to meet the challenges now and in the future.
“To ensure success in the UK market we are focusing our marketing efforts on our lower and no sugar products and are substantially reducing the sugar content of our portfolio to reflect consumers’ changing preferences.”
He claimed the average calorific content of the company’s drinks had been reduced by 8.8% in four years. This change would accelerate over the next year as AG Barr reduced its exposure to high sugar products, he said.
He added: “We remain convinced that our decisive actions, and the progress we have made to date, demonstrate that we are playing an important part in addressing the complex and very important UK consumer health issues.”
Minimise the financial impact
Although the details of the chancellor’s proposed soft drinks levy are yet to be consulted on, he said the company could minimise the financial impact by the time it is due to be implemented in April 2018.
“Based on the government’s currently proposed metrics, should a levy be introduced, we expect at least two thirds of our portfolio will be lower or no sugar, and would therefore be levy-free at that time,” said White.
“For the balance of our portfolio, which would attract a levy, we anticipate that brand loyalty and consumer preference will drive continued demand.
“We will, of course, play an active role in the consultation between the government and the soft drinks industry on the proposed levy, and are fully committed to working towards an outcome that benefits consumers, shareholders and other stakeholders.”
