UK: Britvic to eye Northern Europe for acquisitions - analysts

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Soft drinks maker Britvic may target Northern Europe with its acquisition plans, according to analysts.

The UK's largest soft drinks firm said in November that it was eyeing acquisitions as it looks to build on strong sales and profits momentum in its most recent fiscal year.

A 23% rise in pre-tax profits, strong cashflow and healthy sales in the year to 27 September put Britvic in expansive mood, with finance director John Gibney telling analysts: “We know where we would like to go, but it depends on current incumbents to actually engage in the deal.”

He declined to comment on possible targets.


But, with the sales momentum carried into the first quarter of the group's new fiscal year, analysts believe a deal is still very much on the cards.

Evolution Securities analyst Andew Wood told just-drinks today (1 February) that the soft drinks maker is most likely looking at Northern Europe, particularly for Pepsi bottlers.

“The Pepsi bottler network around Northern Europe is quite fragmented,” Wood said.

“There are quite a lot of either small privately owned soft drinks companies that are a Pepsi bottler or, in some instances, bigger brewers who also do soft drinks bottling. The opportunity for Britvic is either to find a private company that just wants to knock it on the head, cash in its chips and sell out, or a brewer that has decided that soft drinks is not as core to its business as it might be someone else’s.”

Wood added that Carlsberg “leaps to mind”.

“For historic reasons, it is in the slightly unusual position of being both a Coke and a Pepsi bottler. And they are a Coke bottler in two Scandinavian markets and a Pepsi bottler in the other two. And that is something I would imagine Coke and Pepsi are not entirely happy about and typically you are either in one camp or the other.

"And Carlsberg themselves last year talked about throwing in their lot rather more with Coke, so you might imagine that Pepsi is less of a core business for them,” Wood said.

Altium Securities analyst Wayne Brown also believes Northern Europe will be a target area for the firm.

“Clearly they have been broadening out into Northern Europe, especially the Scandanavian countries and have been looking at even stretching into Germany, so definitely Northern European territories is where they’ve been aiming at.”

He added: “Clearly, what has made the European acquisition and M&A angle slightly more competitive has been the Suntory acquisition of Orangina Schweppes and they are the biggest Pepsi bottler outside the US for PepsiCo, so clearly there is some territorial advantage at play there.

"But I would say Scandinavia, where Fruitshoot and Robinsons has some sort of distribution, so I think they’re getting to know and understand their territories much better than the rest of Europe. That would probably be my first guess, but at the moment it’s all speculative.”

Britvic’s International division delivered 18.5% sales growth in 2009. The performance was driven by strong in-market activity in Holland, strong Robinsons squash activity in the Nordics, and the launch of Fruit Shoot in Sweden in August.

In the first quarter of the new fiscal year, to 20 December, Britvic net sales rose by 11% to GBP242.7m (US$392.4m).


Sectors: Soft drinks, Water

Companies: Coke, Carlsberg, Suntory, PepsiCo

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