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Britvic (UK)

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British soft drinks company Britvic is the UK's #2 soft drinks company after Coca-Cola. It is the local licensee for Pepsi, managing all of that company's products under long-term contract, but also manufactures and markets a sizeable portfolio of of its own brands including Robinsons (the UK's #1 non-carbonated drinks brand), Tango and Drench. A key strength is Britvic's "on-trade" distribution network, which supplies pubs and restaurants. This is the legacy of its origins as a joint venture combining the soft drinks divisions of several large breweries. In fact, Britvic's development was hampered by many years by the conflicting interests of its shareholders Bass (now InterContinental Hotels Group), Whitbread and Allied Domecq as well as PepsiCo. Britvic finally issued an IPO in 2005 and has prospered since gaining its independence, until a serious stumble in the summer of 2012. That prompted an agreement to merge with smaller Scottish rival AG Barr, makers of Irn-Bru and Tizer. The deal was delayed by a referral to competition regulators, and by the time it was cleared in summer 2013, Britvic had regained its poise. The merger was called off soon afterwards.

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Competitors

The group's main competitors are Coca-Cola Enterprises and what is now Suntory Food & Beverages. See Soft Drinks Sector index for other companies

Brands & Activities

Britvic has a commanding presence in the UK soft drinks market, enhanced by its wide portfolio of different brands. However performance is underpinned by two main factors: the continuing strength of the Robinsons brand, and Britvic's long-standing strength in the on-trade sector, a legacy from the days when it was owned by the country's main brewery and pub groups. Aside from Robinsons, the group's own take-home brands have generally delivered only modest growth in recent years, with the decline of Tango, once a giant brand in the UK, a particular disappointment.

The group's complicated ownership structure didn't help. Britvic management had hoped that the company's independence would offer a fresh start, and that was indeed the case, with generally sound performance between 2006 and 2011. However the botched redesign of a new safety cap for Robinsons Fruit Shoot prompted an enormously expensive recall in 2012, and a plunge in the company's share price. This in turn led to a bid approach from smaller rival AG Barr, which proposed an all-share merger of the two businesses. Those talks reached agreement in November 2012, but completion was delayed by a decision to refer the merger to competition regulators. By the time clearance was granted in summer 2013, Britvic's financial troubles had been resolved, making the proposed merger - effectively a reverse takeover by the smaller company - far less attractive. Barr submitted an improved offer in July 2013, but it was declined, and the two sides agreed to abandon talks.

Britvic is the #2 soft drinks company in the UK behind Coca-Cola. The group sold over 2.1bn litres of soft drinks in 2015 in almost 400 different flavours, shapes and sizes. UK volumes were 1.58bn litres, more than 76% of which (or 1.2bn lites) was of carbonates. Britvic's combined retail sales in the take-home sector in 2014 were £877m (compared to £2.02bn for Coca-Cola Enterprises and £598m for for what is now Lucozade Ribena Suntory).

The group is the exclusive UK licensee for Pepsi (with a contract that runs until 2020). That brand is the country's #2 soft drink overall by sales. It was worth £423m in take-home sales in 2015 (according to Nielsen for The Grocer, slightly behind Lucozade as well as Coke), but around another £527m from the on-trade [see Pepsi profile for more]. Britvic also has the UK license for PepsiCo's 7-Up lemonade (Nielsen for The Grocer estimated local take-home sales of £43m ye Nov 2015), as well as sports drink Gatorade and Mountain Dew. It took over distribution of vitamin-enriched V Water in 2008 following its acquisition by PepsiCo, and began local production and distribution of Unilever/PepsiCo's Lipton Ice Tea during 2009. The company serves two distinct market sectors: take-home (in other words, sales of packaged products for home consumption), and the "on-trade" (which denotes licensed premises where drinks are sold for immediate consumption, such as in pubs and clubs).

Its second-largest brand after Pepsi was fruit drink Robinsons, the country's best-selling non-carbonated soft drink. For 2015, retail sales of Robinsons rose to £263m, according to Nielsen. Traditionally packaged as a concentrate (or "squash") to be diluted at home, the brand is available in a wide range of flavours, and more recently moved very successfully into the ready-to-drink (RTD) segment with single-serve Fruit Shoot. In 2003 the group introduced two other spin-off lines, the juice-and-mineral water RTD Fruit Spring, aimed at adults, and Robinsons for Milk, a range of fruit dilutables to be mixed with milk. Neither did particularly well and they were both later discontinued, although the adult market was targeted with more success in 2010 with premium Robinsons Select. Other introductions have included a range of squashes made from naturally sourced fruit (Robinsons Be Natural) and 2011 launch Robinsons Double Concentrate in smaller, more environmentally friendly bottles. In 2011, a range of Robinsons and Fruit Shoot candy was launched under license in the UK by confectioner Monty Bojangles. The Robinsons and Fruit Shoot brands are also marketed by Britvic in some European markets, including Spain and the Netherlands. In Ireland the brand is known as MiWadi. In 2009 the company licensed the Fruit Shoot concept to one of PepsiCo's regional bottlers in the US. Distribution has gradually expanded and PepsiCo Beverages now markets Fruit Shoot in more than 30 states across the US. The brand launched in India in 2014 through a joint venture with local company Narang.

In summer 2012 the Fruit Shoot brand suffered a serious setback in the UK after the new spill-proof spout on one bottle came off in a child's mouth, causing him to choke. Britvic immediately launched a national recall of all bottles, effectively taking the product off-sale until a new design could be created and introduced. That was expected to delay normal sales of Fruit Shoot for as long as four months. Britvic estimated extraordinary costs of up to £25m for the whole process.

Another product, carbonated fruit drink Tango, was the company's star brand in the 1990s as a result of a bizarre marketing campaign by ad agency HHCL under the "You know when you've been Tango'ed" banner. However Tango has had a rough time since the end of that decade, overtaken by fast-growing rival Fanta. It now languishes far outside the Top 10, despite attempts to bolster its appeal with a range of variants including non-carbonated Tango Still and Tango Clear. Most of these have now been discontinued. Nielsen (for The Grocer) estimated sales of £31m for ye Nov 2015.

Britvic's other brands include a selection of more sophisticated soft drinks targeting an adult market, such as Ame, Aqua Libra and Purdey's, as well as Idris, a ginger beer from Wales, which traces its history back to the late 19th century. However, the best-known brand in this collection is J2O, a range of juice-based mixers. Take-home sales were £45m for ye Nov 2015. In 2002 the company acquired energy drink Red Devil, a rival to Red Bull, followed in 2006 by Really Wild Drinks, an unusual collection of blended fruit juices. In 2007, the group agreed to pay €249m for the soft drinks division of C&C Group of Ireland, which includes Irish rights to Pepsi and 7Up, as well as Club mixers and Ballygowan mineral water. Britvic's original presence in the UK bottled water sector came from Pennine Spring (acquired 2004), and premium-priced Drench (launched 2006). However both brands were phased out in early 2014 and replaced for national distribution by Ballygowan. Drench was later relaunched, but sales are still small (£15m ye Nov 2015).

Total revenues from Great Britain in the year ending 2015 were £887m, comprising £566m from carbonates and £322m from still beverages. Ireland added a further £120m.

In Spring 2010 the group acquired French soft drinks company Fruité for around €237m. Fruité has leading market positions in fruit syrups and ambient pure juice, with brands including Teisseire and Moulin de Valdonne, Fruité and Pressade. The Fruit Shoot brand was launched in France during 2011 under the Teisseire umbrella. Combined revenues were £240m in the year ending Sept 2015, and the group also generated an additional £52m from export of its UK products to other international markets. Towards the end of 2015, the group took its first steps in Brazil with the acquisition of local soft drinks marketer Ebba. Brands include Maguary and Dafruta. In early 2017 it also agreed to acquire juice company Bela Ischia for around $66m.

Britvic's most important market sector, however, is not take home but the on-trade, where it has for years held a substantial position. This covers not only pubs, bars and restaurants but also cinemas and other institutions. A one-time leader in this market, it has slipped back behind arch-rival Coca-Cola Enterprises in recent years. For 2014, Nielsen ScanTrack estimated combined sales of £1.6bn (compare to £1.8bn for CCE). The main Britvic brand is available in a wide variety of fruit juices, mixers and premium drinks, but has fallen behind the company's bottled juice brand J2O. Combined sales for the two were £213m in 2012, compared to £134m for CCE's Schweppes. The strength of the company's on-trade distribution network also makes Pepsi far more successful here than through take-home. In 2009, it actually overtook Coca-Cola for the first time in its history, and has retained that lead ever since [see Pepsi profile for more]. Similarly, despite the popularity of Coke's Sprite in the take home sector, Britvic-owned R Whites is by far the best-selling on-trade lemonade and the #3 brand behind the two cola giants.

Until 2005, Britvic Soft Drinks was the sole operating business of Britannia Soft Drinks, a complicated joint venture between several different shareholders. Following a restructuring in 2004, InterContinental Hotel Group owned 47.5% of Britannia's equity, and had management control of the business. Pernod Ricard inherited a 23.75% shareholding with its acquisition of Allied Domecq in 2005; Whitbread also had a 23.75% stake, and the remaining 5% was owned by Pepsico. In Britvic's December 2005 IPO, Pernod and Whitbread both sold their entire shareholdings, while IHG reduced its stake to around 10%. Pepsi has kept hold of its own 5% holding.

Financials

Revenues for the year ending Sept 2013 rose 5% to £1.32bn. Net profits rose 9% to £62m, but that figure included £26m of charges relating to restructuring and the aborted merger with AG Barr. There was a further 2% rise in revenues for the year to 2014, to £1.34bn. Net profits jumped 45% to £90.0m.

For the year to 2015, revenues slipped back to £1.30bn, largely on currencies. However net profits jumped 16% to £104m as a result of rigorous cost reduction.

Management

Paul Moody stepped down as chief executive of Britvic in Feb 2013. He was succeeded by Simon Litherland, previously managing director, UK. Gerald Corbett is non-exec chairman.

Other senior officers of Britvic include Mathew Dunn (CFO), Paul Graham (managing director, GB), Kevin Donnelly (country director, Ireland), Jean-Luc Tivolle (managing director, France) and Hessel de Jong (managing director, international). PepsiCo handles marketing for its own beverage brands through its UK office. Britvic handles marketing for other products.

Former Diageo marketer Matt Barwell was appointed as chief marketing officer at the end of 2013. Other marketers include Ash Tailor (global brand & marketing director), Kevin McNair (marketing director, GB), Ounal Bailey (director of adult portfolio brands & new ventures), Jonathan Gatward (global category director), Helen Gorman (brand director, Robinsons), Kirsty Hunter (brand marketing director, Robinsons), Annabelle Cordelli (brand marketing director, adult, innovation & seed brands) and Ian Boak (shopper marketing director).

Background

The British Vitamin Products Company was founded in the mid-19th century in Chelmsford in Essex. The company was then little more than a home business run from a chemist's shop, but it was soon producing all kinds of concocted soft drinks, including lemonades, mineral waters, tonics and non-alcoholic ales. However the marketplace was already crowded. One of the most popular drinks of the time was already Robinson's Patent Barley Water, a powdered drink manufactured since the 1820s by Keen Robinson Bellville & Co, and widely consumed as a general health tonic. A few years later, in around 1845, Robert and Mary White began selling their own home brewed ginger beer and lemonade from a market stall in London.

The Whites' business, R White & Company, expanded rapidly. By 1869 they owned five manufacturing plants and sixteen distribution depots in the Midlands and the South East of England. That year the company was acquired by brewers Whitbread, although the business continued to be run by Robert White. In 1891, White merged with HD Rawlings, a firm producing a wide variety of drinks including Jubilee Lemonade, Pineapple Cider, Jubilee Tangerine, Champagne Cider, Soda Water, Orange Champagne and Seltzer Water. The export business of Rawlings in particular grew dramatically as a result of the growth of the British Empire, and the company was soon known around the world. In 1901 Robert White died, passing management of the business to his sons, Robert James White and John George White. At around the same time Keen Robinson Bellville & Co was acquired by J&J Colman of Norwich, better known at the time for its mustard. (One of Keen Robinson Bellville & Co's other major products was Keen's Mustard, which claimed to date back to the 1740s, and was the originator of the advertising slogan "Keen as mustard". Colman's of Norwich later became part of Reckitt & Colman and later still Reckitt Benckiser).

During the course of the century, the Robinsons and Rawlings brands continued to thrive. Robinsons became a sponsor of the Wimbledon Tennis Championships in the mid-1930s, a relationship that remains to this day. However even without the arrival of new colas from the US, the British soft drinks market was becoming ever more crowded. At the end of the 1930s British Vitamin Products had come under the control of Ralph Chapman, who added fruit juice to the range when it was discovered that the juice would stay fresh longer if packaged in glass bottles. The company was subsequently acquired by Vine Products, best-known for its Babycham sparkling pear cider. In 1954, another drinks manufacturer, Corona from Wales, was acquired by The Beecham Group (later to become part of GlaxoSmithKline) and was the platform for the introduction in 1957 of carbonated orange drink Tango. Meanwhile Whitbread's R Whites had become firmly established as the UK's favourite lemonade. In the early 1970s, the brand's Secret Lemonade Drinker ad proved a huge hit with television audiences.

Gradually, the market had began to consolidate. Brewers had begun to develop an interest in soft drinks companies in order to supplement the range of products served in the "tied" pubs through which they sold their beer. The British Vitamin Company had become part of Allied Breweries in the late 1960s, and expanded its range to include mixers for spirits, adopting the Britvic name for the first time in 1971. In 1980, Whitbread's R Whites Rawlings and the soft drinks arm of brewer Bass, which held the UK license for Canada Dry mixers, merged to form Canada Dry Rawlings. Six years later this company merged again with Britvic to form Britvic Soft Drinks. In 1987, Beecham took the decision to quit soft drinks, selling its Corona, Tango and Quosh brands to Britvic. That same year the company won the UK license from PepsiCo to manufacture Pepsi and 7-Up in the UK. As a result the business was restructured, with the three British companies grouping their respective interests as Britannia Soft Drinks, which in turn became the major shareholder in Britvic Soft Drinks. Finally in 1995, the last piece of the jigsaw was assembled with the acquisition of Robinsons from Reckitt & Colman.

By now however the fortunes of the brands within the combined portfolio had changed more than a little. Despite a revival of the Secret Lemonade Drinker campaign in the early 1990s, R Whites was in steep decline within the take-home market, overtaken first by stablemate 7-Up, and then by arch-rival Sprite. However the surprise hit of the decade turned out to be Tango. In 1992, a series of bizarre and memorable commercials from ad agency HHCL introduced the "You've Been Tango'ed" catchphrase. Tango sales rocketed. By 1994, following the introduction of Apple Tango, the brand was selling more than nine cans every second, and had become one of the country's top five carbonated soft drinks. Tango Blackcurrant was introduced a year later. Supported by another bizarre ad, featuring "Tango spokesman Ray Gardner" who gradually strips down to his underwear while marching to the white cliffs of Dover, the new variant broke all sales forecasts, with more than 1.8m cans ordered in the first week of launch.

However Tango's popularity appeared to wane as fast as it had grown. With the ad campaign running out of steam by the late 1990s, the drink faced fierce competition from Fanta, aggressively relaunched by Coca-Cola in 1997. Britvic had two ads for Tango withdrawn after complaints from viewers, and the number of different formats appeared to work against the brand. A still variant was introduced in 1999 but later withdrawn following poor sales and product recalls. HHCL was finally dropped from the account in 2001. Meanwhile, Britvic was dealing with other developments. In 2000, the group acquired Orchid Drinks, manufacturers of an unusual range of sophisticated vitamin drinks, led by Purdey's and Aqua Libra. (A privately owned company, Orchid had been founded in 1992 to manufacture Ame, and acquired Purdey's, Aqua Libra and other soft drinks from Diageo's IDV in 1994).

At the same time, the company had become a pawn in a tug-of-war between Allied Domecq, Bass and Whitbread as they began overhauling their drinks manufacturing and retail interests. By early 2001, Britvic no longer fitted comfortably into any of its British shareholders' portfolios, and the business was put up for sale mid-year. It attracted a number of interested bidders. However all these deals were vetoed by key shareholder Pepsi. As a result, the business was taken off the market again at the end of the year. In 2002 the company was reported to be planning the launch of a new range of soft drinks under the brand name Freekin' Soda. Complaints from parents' groups that the name could be interpreted as an obscenity led to the brand name being changed to Freekee prior to launch. Mid-2003 it was changed again to Tango Strange Soda. The ill-fated brand was finally dropped in 2004 as a result of disappointing sales.

Meanwhile, as Bass continued its transformation into hotel group InterContinental, Britvic's place in the group looked ever more uncomfortable. Taking advantage of the buoyancy of the financial markets, an IPO was issued for Britvic at the end of 2005. However trading in the first half of 2006 was difficult, and rumours began to circulate mid-year of a private equity bid from investment manager Permira. An improvement in Britvic's performance during the summer led to that bid being shelved.

Last full revision 8th April 2016

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