As previously communicated, 2018 was an unprecedented year for soft drinks with changing pricing and promotional dynamics in the market following the introduction of the Soft Drinks Industry Levy (SDIL) alongside CO2 shortages and a long, hot summer. Against this backdrop we placed an intentional short-term trading focus on volume which successfully boosted growth and, as updated in March, we have subsequently returned our Barr Soft Drinks business to its long-term value driven approach, increasing price positioning in the market.
While we anticipated that volume would be impacted by this return to our traditional pricing strategy, trading in the financial year to date has been below our expectations. This has been exacerbated by some specific brand challenges, particularly in Rockstar energy and Rubicon juice drinks, as well as disappointing spring and early summer weather, most notably in Scotland and the north of England, and compounded further as we approach the half year when the prior year comparative weather was at its peak.
We have taken action to address the specific brand related issues, including the planned launch of three new Rockstar products at the end of the summer, and recipe improvement activity for Rubicon juice drinks, however the benefit of these actions will not be felt until later in the second half of the financial year.
In a transitional pricing year for our core carbonates portfolio, led by IRN-BRU, we are seeing positive indications of acceptance of the new price positioning. Our innovation performance and pipeline remain strong with encouraging initial interest in our recently launched IRN-BRU Energy product.
Funkin continues to perform strongly and the recent launch of nitro-infused premium cocktails in cans is already exceeding expectations.
Outlook
Revenue for the 26 weeks to 27 July 2019 is estimated to be in the region of £123m, representing a c.10% decline on the prior year (2018: £136m).
Despite our strong second half plan it is not expected that we will recover fully from the volume impact in the first 5 months of this year and the current trading we are experiencing. As a result, we expect our profit performance for the full year to decline versus the prior year by up to 20%.
It is also anticipated that there will be some exceptional costs incurred in the current financial year as we take action to regain momentum. Further guidance will be provided at the interim results.
Roger White, Chief Executive Officer, commented:
“While the Funkin business goes from strength to strength, it has been a challenging start to the year for Barr Soft Drinks. Weather comparatives and trading, particularly in the impulse on-the-go market, have been even tougher than expected which, along with some brand specific challenges, have led to a short-term impact on our financial performance. We are focused on returning to growth and will continue to take the actions we believe necessary to succeed in the dynamic environment within which we operate”.