Shares in AG Barr jumped almost 10% after the maker of Irn-Bru stuck to its annual profit forecast despite what it called a disappointing first half plagued by competition and weakening demand.
The firm is planning additions and improvements to some of its brands and is reversing price cuts made last year, a move its chief executive Roger White said would bring prices back into line with the wider market.
"We're going back to our well-trodden path associated with a value over volumes strategy," White told Reuters.
The Scottish soft drinks company, the 2018 sales of which benefited from the price cuts, has taken a hit so far this year after those reductions were reversed, pushing up costs for consumers at the till.
Soft drinks companies have also felt the brunt of a new sugar tax which forced AG Barr to change the recipe for its prized Irn-Bru, much to the ire of its many fans.
Stockpiling Ingredients
White added that the company is stockpiling ingredients ahead of Britain's exit from the European Union.
"We've got a number of raw materials and ingredients that come in from outside the UK and we've taken steps to ensure that we've got slightly larger stocks of these," he said.
Fighting Off Competition
A.G. Barr is fighting off competition from California-based Monster Energy, the largest investor of which is soft-drinks giant Coca-Cola Co.
Monster Beverage Corp reported an 8.7% rise in quarterly revenue to $1.10 billion last month.
"We've had some quite aggressive competitor activity targeting specifically some of the flavours that we have had a strong performance with over the years," White told Reuters.
The company is planning to launch three Rockstar products in the autumn, and will also improve the recipe for Rubicon along with redesigning the packaging, he said.
"It's particularly refreshing to hear AG Barr is being proactive in addressing the challenges being faced by a couple of the brands, namely Rockstar Energy and Rubicon juice drinks," said Hargreaves Lansdown equity analyst Sophie Lund-Yates.
Pre-Tax Profit Drop
For the six months that ended on July 27, AG Barr reported pre-tax profit of £13.5 million, down from £18.2 million last year.
"The weaker-than-expected start to the year reflects a combination of factors, including spring and summer weather in the core Scottish and north of England markets, [and] brand-specific issues at Rockstar and Rubicon," Shore Capital analysts said.
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