In a significant move to diversify its offerings, AG Barr, the producer of Irn-Bru, has acquired two notable soft drinks companies, Fentimans and Frobishers. This strategy aligns with the growing trend of consumers moving away from alcoholic beverages, positioning the company for broader market engagement.
AG Barr purchased Fentimans, renowned for its ginger beer since 1905, for approximately £38 million through a mix of cash and debt.
Fentimans has its origins in West Yorkshire, dating back to when Thomas Fentiman, an iron puddler from Cleckheaton, discovered a recipe for botanically brewed ginger beer. The company has since expanded its portfolio, offering drinks such as Rose Lemonade and Curiosity Cola.
Additionally, AG Barr acquired Frobishers, a premium fruit juice producer based in Devon, for £13 million. This acquisition is part of AG Barr’s strategy to enhance growth by “broadening the brand portfolio.”
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 these acquisitions, AG Barr’s shares increased by 33p, or 5 percent, to 683p.
Alongside the acquisitions, AG Barr projected a 4 percent revenue increase to £437 million for the year ending in January and plans to release its results in March. Analysts suggested this indicates a sales growth of 4.8 percent for the latter half of the year, compared to 3.1 percent in the first six months.
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The company noted that Irn-Bru experienced “modest growth” in the second half, fueled by marketing and distribution efforts. The strong performances of its Rubicon and Boost brands helped mitigate a decline in Funkin Cocktails. Adjusted profit margins are anticipated to rise to approximately 14.7 percent, up from 13.6 percent the previous year, due to efficiency initiatives and supply chain investments.
The Irn-Bru factory in Cumbernauld
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Analysts from Panmure Liberum indicated that AG Barr’s entry into the appealing adult soft drinks market will create significant cost synergies from in-sourcing production, while also reducing overheads and generating notable revenue synergies through broader distribution.
AG Barr, headquartered in Cumbernauld, North Lanarkshire, primarily generates sales within the UK. Its portfolio includes other well-known brands like Moma oat milk, Tizer, and Rio. Recently, the company made the decision to shut down the Strathmore bottled water brand, which had faced tough competition in recent years.
The company was founded by Robert Barr in Falkirk in 1875, initially selling “aerated waters,” a term used for soft drinks at that time. It was passed down through the Barr family, introducing Iron Brew — its flagship product — in 1901. The name was changed to Irn-Bru in 1946 to comply with food labeling regulations that mandated brand names be “totally true.”
Key Takeaways
- AG Barr has acquired Fentimans and Frobishers to expand its soft drink portfolio.
- The purchases were made for approximately £38 million and £13 million, respectively.
- Both brands will enhance AG Barr’s growth strategy amid a shift away from alcoholic beverages.
- AG Barr’s revenue is projected to see a 4% increase this fiscal year.
- The company anticipates improved profit margins due to operational efficiencies.
FAQ
What brands does AG Barr own?
AG Barr’s portfolio includes Irn-Bru, Moma oat milk, Tizer, and Rio, among others.
What is Fentimans known for?
Fentimans is recognized for its botanically brewed ginger beer and other unique soft drinks.
What was the reason behind acquiring Frobishers?
The acquisition of Frobishers aligns with AG Barr’s goal to broaden its brand portfolio and boost growth.
How will these acquisitions affect AG Barr’s profits?
AG Barr expects that these acquisitions will lead to significant cost and revenue synergies, positively impacting profitability.
Overall, AG Barr’s strategic acquisitions of Fentimans and Frobishers position the company to tap into the growing soft drink market and adapt to changing consumer preferences effectively. These efforts could yield both immediate and long-term benefits as the company seeks to enhance its brand presence.
