Ballygowan – the Irish invasion part 2

Britvic’s 169m purchase of Irish beverage company C&C’s soft drinks business last week could spark a review of the UK giant’s mineral water brands.

BallygowanBritvic’s £169m purchase of Irish beverage company C&C’s soft drinks business last week could spark a review of the UK giant’s mineral water brands.

The deal – which leaves C&C free to concentrate on its alcohol brands such as the highly successful UK import Magners Cider – hands Britvic control of Ireland’s most successful premium mineral water brand Ballygowan.

Observers believe Britvic may spend heavily on launching Ballygowan in the UK and as a result could axe one of its existing water brands such as Drench. Along with Fruit Shoot H2O and Pennine Spring, Britvic has four mineral water brands.

Other brands it gains from the deal, such as Club Orange and Energize Sport, are not considered to be prime candidates for a UK launch.

The rationale behind the deal is that it gives Britvic crucial distribution rights across Ireland of PepsiCo brands Pepsi Cola and 7Up. This further cements its relationship with PepsiCo, a 5% owner. Some believe this could pave the way for Britvic to win distribution rights for Pepsi and 7Up in other markets across Europe.

Moreover, it has the opportunity to market its own brands, such as Robinson’s Squash, across C&C’s Irish distribution network. A Britvic spokesman says: “In Ireland the vast majority of pubs are independent, so there is a big opportunity to leverage our brands across the country.” 

The deal also signifies tacit approval by PepsiCo of Britvic’s management team and the company’s strategy. Sources say PepsiCo is not interested in working with private equity group Permira, which has a 14% stake in Britvic despite rumours that it could mount a takeover bid for the company.

Pension liabilities
Britvic has financed the deal with debt and taken on C&C’s pension liabilities, which will make it harder for Permira to raise financing for a full takeover.

But an added attraction of the deal is the opportunity to build on Ballygowan’s strong brand recognition in the UK, where bottled water consumption is growing. But observers, believe that Britvic would be wise to heed Ballygowan’s 20-year growth path in Ireland, where it has maintained its position as the country’s premier water brand through forward-thinking advertising.

Ad campaigns in the past have shifted from positioning Ballygowan as a sophisticated drink to playing on its Irish heritage. One observer says: “Ballygowan has always managed to stay ahead and anticipate consumer shifts in taste. Britvic will be wise to follow suit.” 

Huge potential
Britvic is non-committal on its plans for Ballygowan, though it admits that the brand has huge recognition and potential.

Some believe that the arrival of Ballygowan could mean the death knell of Drench, Britvic’s youth-focused water brand which insiders say has failed to hit sales targets. Drench was launched in 2006 and is being redesigned to boost flagging sales. A new advertising campaign is expected to follow.

One insider says: “My sense is that Drench has slightly disappointed, and four water brands may be too many. They just might get rid of one.” 

A Britvic spokesman says: “The water market is very fragmented and there are lots of roads to entry for water. There is no sense in axing brands after one year and we’re reinvesting in Drench. It was never intended to be a big grocery brand, but it works well in certain impulse markets.” 

Britvic has won plaudits from analysts for striking the deal. Ireland is a buoyant market of 4 million. Launching Ballygowan in the UK could prove to be the real deal. 

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