In a strategic move to adapt to the changing beverage landscape, AG Barr, the renowned producer of Irn-Bru, has acquired two noteworthy soft drink companies: Fentimans and Frobishers. This acquisition aims to capitalize on the growing preference for non-alcoholic options among consumers.
AG Barr purchased Fentimans, a brand with a legacy of crafting ginger beer since 1905, for approximately £38 million, funded through a mix of cash and debt.
Fentimans originally hails from West Yorkshire, where Thomas Fentiman, an iron puddler from Cleckheaton, acquired a recipe for botanically brewed ginger beer. The brand has expanded its portfolio to include a variety of soft drinks, such as Rose Lemonade and Curiosity Cola.
Additionally, AG Barr has acquired Frobishers, a premium fruit juice producer based in Devon, for £13 million, as part of its strategy to enhance growth by diversifying its brand offerings.
Euan Sutherland, chief executive of AG Barr, remarked: “The synergies associated with these acquisitions are expected to drive meaningful accretion over the medium term.”
Following these acquisitions, AG Barr’s shares increased by 33p, or 5 percent, reaching 683p.
The company anticipates reporting a 4 percent rise in revenue to £437 million for the year ending in January, with results expected to be released in March. Analysts project a sales growth of 4.8 percent in the second half, compared to 3.1 percent in the first half of the fiscal year.
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The company reported “modest growth” for Irn-Bru in the second half of the year, attributed to effective marketing and distribution efforts. Strong performances from its Rubicon and Boost brands helped mitigate a decline in sales from Funkin Cocktails. Adjusted profit margins are projected to rise to approximately 14.7 percent, compared to 13.6 percent the previous year, driven by efficiency initiatives and investment in the supply chain.
The Irn-Bru factory in Cumbernauld
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Analysts from Panmure Liberum noted that AG Barr’s entry into the appealing adult soft drinks market is expected to yield considerable cost synergies from in-sourcing production and reduced overhead expenses, along with significant revenue opportunities from expanded distribution.
Headquartered in Cumbernauld, North Lanarkshire, AG Barr generates most of its sales in the UK. Other notable brands under its umbrella include Moma oat milk, Tizer, and Rio. Last year, the company made the decision to discontinue the Strathmore bottled water brand, which had faced challenges in recent years.
Founded by Robert Barr in Falkirk in 1875, the business initially sold “aerated waters,” the term used for soft drinks at that time. The company has passed through generations, introducing its iconic Iron Brew in 1901, which was rebranded as Irn-Bru in 1946 to comply with food labeling regulations.
Key Takeaways
- AG Barr has acquired Fentimans for £38 million and Frobishers for £13 million.
- The acquisitions are aimed at tapping into the growing market for non-alcoholic beverages.
- AG Barr expects revenue growth of 4 percent, with anticipated adjusted profit margins increasing to 14.7 percent.
- Analysts predict significant cost and revenue synergies from these strategic moves.
- The company has a diverse portfolio that includes several well-known brands.
FAQ
Why did AG Barr acquire Fentimans and Frobishers?
AG Barr aims to broaden its brand portfolio and capitalize on the shift toward non-alcoholic beverages.
What is the historical significance of Fentimans?
Fentimans has been producing ginger beer since 1905 and has a rich heritage originating in West Yorkshire.
How is AG Barr performing financially?
The company expects a revenue increase of 4 percent and a rise in profit margins, projecting robust growth moving forward.
Where is AG Barr headquartered?
AG Barr is based in Cumbernauld, North Lanarkshire, UK.
In summary, AG Barr’s recent acquisitions signal a strategic shift towards enhancing its brand offerings in the growing soft drink market. With strong expectations for revenue growth and improved profit margins, the company is well-positioned for the future of non-alcoholic beverages.
