Any substance to the recent fizz?

Now you might be thinking - aren't soft drinks are a bit passe given health concerns? However, Britvic has also just published its (potentially self-serving, I admit!) 2009 Britvic Soft Drinks report, which shows UK sales in 2008 were strong despite the recession and poor summer weather. http://www.caterersearch.com/Articles/2009/03/27/326890/soft-drinks-sales-increase-in-food-service-sector.html.

Sales were down just 1% in value and 2% in volume, with a 2008 total of £8.4 billion. The best-selling soft drinks of the year were energy and sports drinks, which also saw the fastest growth. Among the successful brands were Tropicana, Pepsi and Robinsons. However, Britvic smoothie sales declined dramatically in 2008.

Paul Moody, Britvic Chief Executive and President of the British Soft Drinks Association, said: “Soft drinks continue to be a staple purchase on which consumers are reluctant to compromise. In the downturn so far, it’s the big brands and traditionally popular sub-categories like cola, squash and juice drinks that consumers seem particularly unwilling to do without".

But he would, wouldn't he....?

Was Britvic ever under private equity ownership? I vaguely remember Permira taking a crack at it but can't remember what happened. Looking at the website, it seems independent and it was only listed in 2006 so I guess not.... Just wondering.

Without adding much to the above, I note that the three main UK-listed beverage companies are trading at 5 year highs - they being Britvic (BVIC), AG Barr (BAG) and Nichols (NICL).

There's a little talk about consolidation in the sector, with PepsiCo publicly stating it will "look at making small "tuck in" acquisitions and alliances to expand globally and to ramp up sales in its nutrition business", whilst CocaCola has indicated it will look abroad for growth and "plans to invest billions more in its international markets in order to keep pace with growing consumer interest".

Dr Pepper Snapple Group also recently licenced certain brands to PepsiCo for a one-off payment of $900m, so I wonder if this is a sector that is likely to bubble over in the near future?

SM

Britvic (LON:BVIC) upgraded by Morgan Stanley (per FT Alphaville):

We turn positive on the stock on increased visibility over earnings growth momentum and further M&A potential. Despite the recent strong run, we see more upside to the raised medium-term guidance. We expect mid- to high-teens earnings growth for the next two years and further rerating. The possibility of consolidation is also greater, offering further significant upside potential. We raise our forecasts for the company’s growth profile (+6% for FY10e to +25% for FY12e) and increase our price target to 520p, implying 14.5x Cal 2010 P/E.

We see further upside to company guidance. We expect Britvic to report sales and profit growth above its medium-term guidance in FY10 and FY11. This is on the back of strong distribution expansion potential in the impulse and Food services channels, and margin growth.  We now expect 19% EPS FY10e growth and 16% in FY11e, broadly in line with consensus, and are c.5% above consensus for FY11e onwards.

Increased acquisition potential offers upside, and downside now more limited. Following PepsiCo’s consolidation of its bottlers, the trend seems to be towards more consolidation. With PepsiCo likely to focus on the integration of PBG and PAS in the next 18 months, we see Britvic as more likely to be an acquirer than a target for now. We see limited downside risks to the shares given higher confidence on earnings growth.  We would use any weakness around a softer Q2 as a buying opportunity. Britvic guided to a softer Q210 (May 18) due to the unfavorable weather and stronger comps. Given strong longer-term prospects, we would buy into any weakness.

hi topclass....make good sence

Resurrecting the thread as Britvic (LON:BVIC) and A G Barr (LON:BAG) have announced this morning that they are considering a merger, in the ratio of 63:37 to be owned by BVIC & BAG shareholders respectively.

Britvic p.l.c. ("Britvic") and A.G. Barr p.l.c. ("A.G. Barr")

Statement regarding possible merger of Britvic and A.G. Barr

The Boards of Britvic and A.G. Barr note the recent press speculation and confirm that, following an approach by A.G. Barr to Britvic, they are in preliminary discussions which may or may not result in an all share merger of A.G. Barr and Britvic.

A merger would create one of the leading soft drinks companies in Europe, with a strong portfolio of market leading brands. The combination would have compelling industrial logic and represents an opportunity for both companies to enhance their industry position, and achieve significant synergies and shareholder value.

Discussions are at an early stage and, whilst there can be no certainty at this stage that such discussions will conclude successfully, agreement has been reached with respect to certain key aspects of the merger.

It is agreed that Britvic shareholders would own 63% and A.G. Barr shareholders 37% of the enlarged group's share capital.

Both shares strongly up today, as is soft drink rival Nichols (LON:NICL).