AG Barr, the renowned maker of Irn-Bru, has recently expanded its portfolio by acquiring the soft drink companies Fentimans and Frobishers. This strategic move aims to leverage the growing trend of consumers shifting away from alcoholic beverages.
Acquisition Details
AG Barr purchased Fentimans, a venerable producer of ginger beer established in 1905, for approximately £38 million using a mix of cash and debt financing.
Fentimans has its origins in West Yorkshire, where Thomas Fentiman, an iron puddler from Cleckheaton, came into possession of a recipe for botanically brewed ginger beer. The company also produces a variety of other soft drinks, including Rose Lemonade and Curiosity Cola.
In addition to Fentimans, AG Barr has acquired Frobishers, a premium fruit juice maker based in Devon, for £13 million. This acquisition aligns with the company’s goal to foster growth by “broadening the brand portfolio.”
Market Impact
Euan Sutherland, AG Barr’s chief executive, stated: “The synergies associated with these acquisitions are expected to drive meaningful accretion over the medium term.”
Following the announcement, AG Barr’s shares increased by 33p, or 5 percent, reaching a total of 683p.
Alongside these acquisitions, AG Barr anticipates a 4 percent increase in revenue to £437 million for the fiscal year ending in January, with results expected in March. Analysts project a sales growth of 4.8 percent in the latter half of the year, a rise from the 3.1 percent seen in the first half.
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The company reported that Irn-Bru exhibited “modest growth” in the second half of the year, credited to effective marketing and distribution strategies. Notably, robust performances from the Rubicon and Boost brands countered a decline in Funkin Cocktails. Adjusted profit margins are projected to rise to around 14.7 percent, up from 13.6 percent a year prior, driven by operational efficiencies and supply chain investments.
The Irn-Bru factory in Cumbernauld
PRESS ASSOCIATION
Analysts at Panmure Liberum noted that AG Barr’s entry into the adult soft drinks market could yield significant cost synergies through in-sourcing production, enhancing efficiency, and expanding distribution channels.
Based in Cumbernauld, North Lanarkshire, AG Barr primarily generates its sales within the UK. Their brand portfolio includes Moma oat milk, Tizer, and Rio. Recently, the company opted to discontinue the Strathmore bottled water brand, acknowledging its challenges in competing in the current market landscape.
Founded by Robert Barr in Falkirk in 1875, the business initially offered “aerated waters,” the term used for soft drinks at the time. Handed down through generations, it introduced Iron Brew in 1901, later rebranding to Irn-Bru in 1946 to comply with food labeling regulations.
Key Takeaways
- AG Barr has acquired Fentimans and Frobishers to expand its portfolio in the non-alcoholic beverage market.
- The acquisition of Fentimans cost approximately £38 million, while Frobishers was acquired for £13 million.
- AG Barr expects a 4 percent increase in revenue for the fiscal year.
- Market analysts predict significant synergies from production in-sourcing and distribution expansion.
- Irn-Bru has shown modest growth due to effective marketing strategies.
- The company has made the strategic decision to discontinue the Strathmore bottled water brand.
FAQ
What does AG Barr do?
AG Barr is a beverage manufacturer based in the UK, known for its soft drink brands including Irn-Bru.
Why did AG Barr acquire Fentimans and Frobishers?
The acquisitions aim to enhance AG Barr’s brand portfolio and capitalize on the growing demand for non-alcoholic drinks.
What are the projected financial outcomes from these acquisitions?
AG Barr anticipates revenue growth and operational efficiency improvements as a result of the acquisitions.
Is Irn-Bru still a popular drink?
Yes, Irn-Bru continues to perform well in the market, benefiting from recent marketing initiatives.
What other brands does AG Barr own?
Besides Irn-Bru, AG Barr also produces Moma oat milk, Tizer, and Rio among others.
In conclusion, AG Barr’s strategic acquisitions signal a commitment to innovation in the beverage sector, focusing on non-alcoholic options that resonate with current consumer preferences. As the industry evolves, AG Barr appears well-poised to adapt and thrive.
