Analysis - Falling volumes has forced Britvic cost-cutting plan

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Britvic's cost savings are “not a strategy, but a necessity”, an analyst has said.


Canaccord Genuity's Wayne Brown said in a note today (25 July) that businesses must cut costs when volumes are in decline, highlighting Britvic's volumes drops in all categories in today's YTD results. Brown was referring to Britvic CEO Simon Litherland's GBP30m a year cost-cutting plan, announced in May, that will close three UK facilities and cut up to 15% of staff.

Litherland has used the strategy as a rebuke to a planned merger with AG Barr and a reason for a change in Britvic's fortunes that has seen it post sales rises in two consecutive quarters.

In today's results, Britvic reported a 1.5% YTD sales increase and a 5.4% Q3 sales rise, but Brown said growth came from higher pricing at the expense of volumes. Brown has previously called Britvic's pricing strategy “unsustainable” and said the company is in need of a “significant cultural change”

Britvic's management has also not provided guidance on how it “intends to drive value in the core GB business”, the analyst noted. 

“The last point is critical to understand so as to ascertain how Britvic transforms into a business capable of sustainable long term revenue growth as opposed to the volatile performance we have seen over the last few years,” Brown said.

Meanwhile, Panmure analyst Damian McNeela said Britvic enjoyed a “solid” Q3 and was set for a good Q4 as good weather in the UK looks set to boost volumes. McNeela also said pricing will remain “robust”.

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