Richard Corbett runs the rule over Britvic and AG Barrs portfolios

Richard Corbett runs the rule over Britvic and AG Barr's portfolios

The biggest news to hit the soft drinks and bottle water categories in recent times is this month's announcement that AG Barr and Britvic are pondering a merger. Richard Corbett picks holes in the two company's portfolios, but not before he apologises.

Back in July, I suggested that the Britvic bottle was still half full and that the Fruit Shoot brand would put its problems behind it.

I know when I’ve been Tango’d.

The dampest UK summer in years, coupled with the Fruit Shoot recall debacle, appears to have forced Britvic towards the negotiating table. Britvic and AG Barr may not be in their pyjamas yet, but they are definitely dating. It looks a real possibility that the two UK soft drinks giants could be about to merge and create a company that would represent one of Europe’s biggest soft drinks players.

It would also change the dynamics of the UK marketplace.

According to beverage researchers Canadean, the new company would hold around a quarter of the total UK soft drinks market. Their combined brands would make up nearly three in every ten litres of CSDs sold in the country.

Although both bottlers operate nationally - and internationally - they undoubtedly have regional biases. Barr’s northern strongholds should complement Britvic’s southern heartlands to create a truly national soft drinks player. What will appeal to the cannily-run Scottish company will be the strength of Britvic in the on-trade, where it has a considerable share in the UK’s 50,000-or-so pubs and bars. Any agreement will significantly increase Barr's reach in the on-premise. Similarly, Barr’s strength in the independent off-trade channel should prove attractive to Britvic.

There are some that are speculating that PepsiCo, a 5% shareholder in Britvic, may be the deal maker in any agreement and may even make a counter offer. The merger should not prove to be a threat to Pepsi, more an opportunity, for all the geographical and distribution reasons mentioned. Barr does not have a sizeable cola or lemon & light brand presence, so PepsiCo's sparkling drink brands should slot comfortably into any new company’s portfolio and should increase its presence in the north.

It will be interesting to see what the prospective entity's brand portfolio would look like; one might expect that there may be some brands that will not be able to run parallel with each other.

In CSDs, there aren't any obvious examples of major crossovers; the Tango brand with all its variants may not be totally compatible with Barr’s flavour range, but it is likely that both would keep their regional identities. The brilliantly-marketed Irn Bru brand probably has a lot to gain - as will the colourful Tizer brand - by the extra exposure to southern markets. 

Barr scaled back its involvement in the squash market back in 1999, so Britvic's Robinson’s brand can remain the focus in this category. Of the juice drink brands, J20 will have no Barr rival to battle for attention with. Fruit Shoot - if it can ever sort its problems out - will also be untroubled and would remain the key children’s lunchbox brand.

The former marketing director at Britvic, Andrew Marsden, has suggested that Barr’s Rubicon will be the brand to really flourish as a result of the merger – so no problems there. Energy drink wise, Barr has Rockstar, which has a different audience to Britvic-distributed SoBe and Red Devil, so that should work.

Bottled water, however, is the only category where there could be some conflict. Barr’s Strathmore and Britvic’s Pennine are well-represented in the on-trade and could tread on each other’s toes. Ballygowan in Ireland and probably the off-trade brand Drench ought to be able to run alongside the other brands.

One can probably conclude, then, that, with the exception of water and a few other minor issues, there will be no problems merging the two bottlers' brand portfolios.

Beyond the UK, although AG Barr does have interests abroad, particularly in East Europe, Britvic's sizeable international aspirations were very much works-in-progress. As recently as last year, Britvic upped its presence in Ireland when it acquired the business of drinks wholesaler Quinn’s of Cookstown. The year before, the purchase of Fruité Enterprises SA gave Britvic a foothold in the French drinks market. A merger will enable them to pursue these international ambitions further but from a stronger financial footing.

Despite all this, it would be wrong to jump the gun and there remain plenty of other scenarios that could happen. But, should an agreement be facilitated, the ramifications will not just be felt in the UK. European soft drink players should be monitoring the situation.

To see just-drinks' full coverage of AG Barr and Britvic's proposed merger, click here.