Britvic says a combination of moving early on price increases, pack mix innovation and optimisation of promotional activity has helped it “successfully” navigate high inflation.
CEO Simon Litherland told investors today (16 May) the drinks business, which produces brands such as Robinsons and Tango, had “mitigated” the impact of inflationary pressures for the first six months of its financial year, which ended 31 March.
“It was clear coming into this year that the biggest challenge facing the industry will be finding ways to offset double-digit inflation,” he said
The management of its promotional activity has been improved using a tool developed by insights agency Kantar to better optimise promotional efforts, Britvic says.
In its “Great Britain” division, Britvic’s average revenue generated per litre of its products sold grew 11.2% year-over-year in the six months to the end of March. It attributed this growth to its tighter grasp of promotional activity in the period, as well as actions taken on product and price mix.
The company’s brands raised prices early, Litherland said, something which has boosted profits. It saw profit after tax rise 18.5% to £54.4m for the first half of its financial year.
Making brands available in different pack sizes to suit consumer needs has also been central to its successful offsetting of inflation, the company claimed. For example, for the Tango brand, Litherland said the company has “been able to leverage [its] supply chain flexibility, offering a wide variety of formats and pack sizes” to tap into consumer demand.
Being disciplined on cost was another action identified by the CEO as having helped the company get a grip on inflationary pressures. Some of this cost-saving comes from cutting down on packaging and in-housing production lines.
The company reduced marketing spend during the period. Marketing as a percentage of own-brand revenue decreased from 3.6% in the same period in the year prior to 2.7% this year.
This represents a “planned phasing” of marketing spend towards the second half, the company says, rather than a bid to reduce spend behind its brands as a whole. Britvic has pledged to “ultimately exceed” last year’s level of spending across this year.
Litherland stated the company has a “really strong” marketing agenda for the second half of the year, including an upcoming new ad campaign for the Robinsons brand and “family-centric” activations this summer, following the end of the brand’s sponsorship of Wimbledon last year.
The company’s CEO hailed an “excellent” start to the year for Britvic, facilitated by its actions to manage inflation. In the half-year period, the company’s revenue increased 7.9% to £794.0m
Consumers ‘still feeling the pinch’
While Britvic’s revenues were significantly up in the first half of the year, the company did see an overall volume decline of 0.8% in the period.
Litherland classed this decline as only “modest” and pointed to the fact it saw a 0.6% volume growth in the second quarter.
He also downplayed the impact private label competition was having, stating the company has retained consumers by offering “great quality, choice and value”
“We’ve seen limited switching to private label even under segments that are more exposed to own label competition,” he said.
In the company’s 2022 results in November, Litherland had predicted that Britvic’s biggest own-brand (as opposed to those licenced by PepsiCo) Robinsons would see its market share “challenged” by private label brands. Litherland had noted that in the squash category, its brands are “significantly higher priced” than private label competitors.
However, in the first half at least, this competition doesn’t seem to have overly affected the category, with Britvic’s concentrated brands growing revenue by 7.5% across Great Britain, Ireland and Brazil.
Elsewhere, Tango has continued to be a strong contributor to Britvic’s performance. It saw 39.7% revenue growth in the six-month period. Its brand retail sales value now stands at £84m, up £53m since 2019.
We’re going into the second half with a lot of confidence but let’s not get too excited yet.
Simon Litherland, Britvic
More recently acquired plant-based brand Plenish has also seen success. The brand has gone from number 12 in terms of share of the plant-based milk market when it was acquired in 2021, to number five.
On the flip side, Litherland acknowledged the “challenging” journey for Rockstar, Britvic’s energy drink brand, in the British market. The company will relaunch the brand in the second half of the year, with a simplified range, sugar-free options and bolstered marketing spend behind it.
For future growth opportunities, Britvic said it is looking to tap into the immediate consumption market where it “under-indexes” for its size. This category, which generally represents single-serve drinks which can be immediately drunk from its packaging, has a higher margin, Litherland stated. He acknowledged the energy drink market is “a big share” of immediate consumption, hence why the company is working to get Rockstar right.
While he was upbeat about resilient volumes, claiming that the volume increase in the second quarter provided Britvic with positive “momentum” going into the important summer period, Litherland was careful to temper expectations for the rest of the year.
While he was pleased with how the company has tackled inflation thus far, he wasn’t ready to call the battle over, stating “there’s still lots of uncertainty out there”.
“I think consumers are still feeling the pinch,” he said, adding that last year’s summer season saw strong results driven by hot weather, which the second half of the year would be lapping.
“We’re going into the second half with a lot of confidence but let’s not get too excited yet.”