British soft drinks maker AG Barr, which manufactures Scottish fizzy drink Irn-Bru, has warned that profits will fall by as much as 20% this year as higher prices and a cooler spring and summer than last year hit sales.
Britain's soft drinks makers were hit by the introduction of a sugar tax last year. Unlike some rivals, AG Barr cut prices while also reducing the level of sugar in its drinks.
This year, however, the firm, which has been selling soft drinks since 1875, returned to higher prices, and said this has had a bigger impact on volumes than expected.
Sales And Trading Challenges
Sales were down about 10% in the first five months of the year, it said, adding that there were also trading "challenges" around its Rockstar energy and Rubicon juice drinks.
"A nasty little profits warning this morning," said Markets.com analyst Neil Wilson.
He added, "Not so little in fact...There is an element of strategy shift – from the heavy focus on volume last year and back to value now. But this only explains some of the trouble."
Revised Profit Forecast
Investec analysts cut their profit forecast for the year that will end on January 30, 2020, to £36 million from £46.6 million. Profit before tax and exceptional items was £45.2 million in the year ended January 2019.
As well as the sugar tax, Britain's soft drinks makers have been grappling with declining soda sales in developed markets as consumers become more health conscious.
New Product Plans
AG Barr said that it plans to launch three new Rockstar products at the end of the summer, and was improving the recipe for Rubicon, but would not see the benefits until later in the second half of the financial year.
The company stated, "Despite our strong second half plan, it is not expected that we will recover fully from the volume impact in the first five months of this year and the current trading we are experiencing.
"As a result, we expect our profit performance for the full year to decline versus the prior year by up to 20%."
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