Britvic a "good candidate" to participate in consolidation

Britvic a "good candidate" to participate in consolidation

UK soft drinks firm Britvic would benefit “strongly” from an acquisition in Europe, according to industry analysts.

In a note yesterday (19 April), Eveline Varin and Michael Steib of Morgan Stanley said they see “strong upside potential” coming from the improved fundamentals and from possible acquisition and expansion in Europe.
“We see Britvic as a good candidate to participate in the consolidation of European bottlers,” Varin and Steib said. “Given Britvic’s good track record in the UK with the Pepsi brands, its expertise in the extended soft drinks product category and its strong balance sheet, theoretically Britvic may be in a good position to acquire an independent bottler of Pepsi products in Europe, and roll out PepsiCo’s brand portfolio and its own.”

In February, analysts suggested Britvic may target Northern Europe with its acquisition plans after the company said in November that it was eyeing takeover targets.

Varin and Steib also said that they believe, however, that PepsiCo and The Coca-Cola Co’s moves to consolidate their bottlers could mark the start of a larger consolidation round.

“With PepsiCo and Coca-Cola Co’s announcements that they will consolidate their main bottling companies (PBG, PAS on one side and Coca-Cola Enterprises), the trend appears to be towards further consolidation amongst bottlers,” the analysts said.

"At PepsiCo’s analyst seminar, the company highlighted the strong growth potential in Europe, limited by the current high fragmentation of bottlers. With the acquisition …PepsiCo will own its bottlers in the majority of markets, allowing the company to focus on its clearly defined strategy to build Europe’s number one fruit and veggie business, strengthen its tea leadership and refresh the sparkling category.”

Britvic has increased Pepsi’s market share in the UK from 19% to 24% over the last three years, the analysts noted.

“This was due mainly to Britvic’s high investments in marketing and its strong relationship with PepsiCo.”

Commenting on Britvic’s upcoming full-year results, the analysts added that they expect the soft drinks maker to report sales and profit growth “above its medium-term guidance in FY10 and FY11”.