(Reuters) - Shares in A.G. Barr (BAG.L) jumped almost 10% on Tuesday 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, whose 2018 sales 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 A.G. Barr to change the recipe for its prized Irn-Bru, much to the ire of its many fans.
White added that the company was 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.
Shares in the company were up 6.3% at 621.1 pence at 0841 GMT, pushing the stock to the top of London's midcap index .FTMC.
A.G. Barr is fighting off competition from California-based Monster Energy (MNST.O), whose largest investor is soft-drinks giant Coca-Cola Co (KO.N). 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 A.G. 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.
For the six months ended July 27, A.G. Barr reported pretax profit of 13.5 million pounds, down from 18.2 million pounds 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.
Reporting by Tanishaa Nadkar and writing by Noor Zainab Hussain in Bengaluru; Editing by Sherry Jacob-Phillips and Jan Harvey