Beverage company Britvic Plc (LON:BVIC) said it is confident of meeting analysts’ full-year expectations after growing third-quarter revenue despite the impact of an industry-wide shortage of carbon dioxide.
The owner of Robinsons and J20 brands reported a 3.4% increase in revenue to £366.9mln for the quarter to July 8 as soft drink sales were boosted by the heat wave in Britain since the implementation of a sugar tax in April.
Britvic has responded to the UK’s sugar levy by introducing more sugar-free and low sugar alternatives. It expects the levy's full impact by the end of the year but said early indications were positive.
Some 94% of Britvic’s owned brands and 72% of its overall portfolio are exempt from the levy.
"Britvic has delivered a strong underlying performance in the third quarter, through continuing outstanding execution of no sugar carbonates and substantial growth from our stills brands,” said chief executive Simon Litherland.
“Whilst the industry-wide shortage of carbon dioxide held back our ability to fully capitalise on the exceptional weather in Great Britain and Ireland, we leveraged the breadth and strength of our portfolio to moderate the impact. Consequently, we remain confident of achieving market expectations for the full year."
Navigating CO2 shortage
To offset the impact of the carbon dioxide shortage, the group temporarily scaled back promotional activity and reallocated some of its secondary feature space to still drinks.
The company said supply has now normalised, allowing it to begin rebuilding stock levels and gradually reintroduce promotions.
In Britain, revenue rose 8% with strong sales of carbonated drinks such as Pepsi Max and stills beverages including Robinsons and J20.
Revenue in Ireland increased 11.3% while revenues in Brazil and the international segments edged up 10.2% and 8.7% respectively.
France, on the other hand, saw revenue drop 15% due to poor weather in June and a strong comparative last year.
In mid-morning trading, shares rose 2.7% to 800p.
Britvic shrugs off 'several negative factors at play'
“There are many different levers in action with Britvic at present and the end result is that trading should still hit market expectations, which is quite impressive given several negative factors at play," said Russ Mould, investment director at AJ Bell.
Mould said the company's shift to low or no sugar products would have required a period of monitoring how the public has responded to product recipe changes in normal market conditions but the warm weather has distorted the situation.
The heat wave means Britvic still hasn't seen how the sugar tax has affected consumer buying habits while the CO2 shortage has added another hurdle.
“The task for Britvic is to, therefore, try and milk the sunshine while it lasts, particular as the carbon dioxide issue now seems to be going away," he said. "The assessment of the sugar tax will have to be done at a later date.”