COMMENT: Health the key to AG Barr
AG Barr is to consolidate its distribution, administration and sales operations.
AG Barr's restructuring will see operations from six Scottish locations combined into an existing site in Cumbernauld to save £2.5m a year. The announcement comes at a time when the group's performance provides reason for optimism with core brands performing well. However, future prospects will undoubtedly be influenced by consumers' rising interest in healthy living.
The consolidation proposals come shortly after the firm disclosed a 13% increase in profits to £15.6m during the year to the end of January 2005. This was achieved in spite of difficult trading conditions caused by last year's poor weather. Furthermore, trading in the first eight weeks of the new financial year had been in line with expectations.
Barr remains confident that, despite a fall in sales volumes, the soft drinks market was will still show long-term growth. Equally importantly, core brands such as Irn-Bru and Tizer have performed well, with sales increasing by 3% on a like-for-like basis to £127.2m.
Irn-Bru sales were undoubtedly boosted by its biggest-ever marketing campaign in 2004, which primarily focused on the drink's taste. Barr is also about to continue its revitalization of the Tizer brand, with the addition of Tizer Blue in April. The drink is expected to have a berry taste and lines up alongside three flavors introduced last April - Tizer Green, Orange and Purple.
A key opportunity and potential threat to Barr is the influence that the health and wellness megatrend will have on the long-term performance of these established brands. Overall industry carbonate volume sales are down as consumers begin to look for healthier alternatives.
Barr has already successfully responded to demand for healthier drinks and changing consumer tastes with its Simply range of orange, apple, blackcurrant and peach drinks. Although it insists that the core part of the business is still fizzy drinks, Barr, like all soft drink players, must avoid complacency and ensure that both consumer and competitor activity is relentlessly monitored as health conscious consumers evolve from a niche to mass market.
Sectors: Soft drinks
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