UK: AG Barr - A life less sweet as sugar prices bite
Growth of Irn-Bru Sugar-free is ahead of the standard version
AG Barr expects the soaring price of sugar to be the main “driver” in forcing up costs by around 4% to 5% in the year ahead, the company has warned.
The Irn-Bru producer said yesterday (March 26) that its costs in its last financial year rose by 5.5%, and that it expects this trend to continue in 2012, led by sugar. In a briefing to journalists, Alex Short, Barr's finance director, said that sugar currently accounts for a quarter of the company's costs.
“With the increase of sugar prices of 20% to 25%, our annual cost base will go up 4% to 5%, with the driver being sugar,” he said.
The cost of producing sugar is expected to surge by 85% over the next two decades, according to reports. Rubicon, one of Barr's star performer in the last financial year, contains 42.9g of sugar.
AG Barr chief executive Roger White, highlighted that sales of the sugar-free version of its flagship brand Irn-Bru grew ahead of the standard version and “remains an opportunity”.
Last November, the company said it was looking at natural sweetener stevia as a potential new product ingredient. Asked about the idea today, White said: “It's not high on our list of priorities, but still on the radar.”
On the international stage, the company posted an impressive 13.4% growth in sales, with Rubicon making a breakthrough in Scandinavia. However, asked about further international developments, White said: “Around 98% of sales are still in the UK ... and that remains the focus.”
White also ruled out launching back into the 'hot cold drink' market, having previously had the Lipton Ice Tea brand. “Selling cold tea in the UK is quite tough,” he said. “It's not on our horizon.”
On the period ahead, White said he expected “another challenging year” with increasing costs. But, he added: “We are confident we can grow and develop the business.”
Yesterday, Barr reported that its full-year net profits rose 25% in 2011, with sales up 6.6% year-on-year.
Shares were up 0.74% at GBP12.29 in afternoon trade on Monday.
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