In a notable shift in the beverage market, AG Barr, the maker of the iconic soft drink Irn-Bru, has expanded its portfolio by acquiring two renowned soft drink brands, Fentimans and Frobishers. This strategic move aims to leverage the growing trend of consumers moving away from alcoholic beverages.
Acquisition Details
AG Barr purchased Fentimans, a company celebrated for its ginger beer since 1905, for approximately £38 million, funded through a mix of cash and debt.
Fentimans originates from West Yorkshire, where Thomas Fentiman, an iron puddler from Cleckheaton, came across a recipe for botanically brewed ginger beer. The brand now offers a variety of soft drinks, including Rose Lemonade and Curiosity Cola.
Additionally, AG Barr has acquired Frobishers, a premium fruit juice manufacturer based in Devon, for £13 million, as part of its strategy to enhance growth by expanding its brand portfolio.
Market Impact
Euan Sutherland, the chief executive of AG Barr, remarked: “The synergies associated with these acquisitions are expected to drive meaningful accretion over the medium term.”
Following the acquisitions, AG Barr’s shares rose by 33p, equivalent to 5 percent, reaching 683p.
Alongside these purchases, AG Barr anticipates reporting a 4 percent rise in revenue, totaling £437 million for the fiscal year ending January, with results expected in March. Analysts project a sales growth of 4.8 percent in the second half, compared to 3.1 percent during the first half of the financial year.
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Product Performance
The company noted that Irn-Bru experienced “modest growth” in the second half of the year, attributed to effective marketing and distribution efforts. Positive performances from its Rubicon and Boost brands helped mitigate a downturn at Funkin Cocktails. Furthermore, adjusted profit margins are projected to rise to around 14.7 percent, up from 13.6 percent a year prior, fueled by efficiency initiatives and supply chain improvements.
The Irn-Bru factory in Cumbernauld
PRESS ASSOCIATION
Analysts at Panmure Liberum indicated that AG Barr’s foray into the appealing adult soft drinks segment will yield considerable cost savings from in-sourced production, reduced overhead costs, and notable revenue growth due to distribution expansion.
Based in Cumbernauld, North Lanarkshire, AG Barr generates most of its revenue from the UK market. The company’s portfolio also includes brands such as Moma oat milk, Tizer, and Rio. Recently, AG Barr announced the closure of its Strathmore bottled water brand, which faced stiff competition.
Established in 1875 by Robert Barr in Falkirk, the business initially offered “aerated waters,” as soft drinks were referred to at the time. It has remained in the Barr family for generations and introduced Iron Brew—the drink that solidified its reputation—in 1901. The product was renamed Irn-Bru in 1946 to adhere to food labeling regulations.
Key Takeaways
- AG Barr has acquired Fentimans for £38 million and Frobishers for £13 million.
- The acquisitions aim to strengthen the company’s brand portfolio amidst a decline in alcoholic beverage consumption.
- AG Barr expects a 4% revenue increase to £437 million by the end of January.
- Irn-Bru has delivered modest growth, supported by marketing and distribution initiatives.
- The company intends to enhance profit margins through efficiency initiatives in its operations.
- There are expected cost synergies from in-sourcing and distribution expansion.
FAQ
What motivated AG Barr to acquire Fentimans and Frobishers?
AG Barr aims to broaden its brand portfolio and capitalize on the growing demand for non-alcoholic beverages.
How much did AG Barr spend on these acquisitions?
AG Barr invested approximately £38 million in Fentimans and £13 million in Frobishers.
What is the current market position of AG Barr?
AG Barr primarily operates within the UK market and has a diverse range of brands in its portfolio.
How does AG Barr plan to increase revenue?
The company expects to enhance revenue by leveraging synergies from its recent acquisitions and expanding its distribution network.
