The maker of Irn-Bru today said it would be cutting a tenth of its workforce in an efficiency drive as it attacked plans for a “punitive” tax on sugary soft drinks.
Cumbernauld-based AG Barr, which also produces Rubicon, Strathmore water and Funkin cocktail mixers, said the final phase of its three-year “fit for the future” strategy will lead to a business-wide overhaul aimed at improving its “service, efficiency and speed to market”.
We are the one area that’s been singled out for a specific tax
It said: “Our organisational restructure is likely to impact around 10 per cent of our total employee base, and as such around 90 job losses are possible across our commercial, supply chain and central functions. Subject to consultation, we expect that the majority of the changes will be implemented before the end of the current financial year.”
The shake-up will lead to one-off costs of about £4 million, but is expected to deliver ongoing annual savings of about £3m.
Chief executive Roger White told The Scotsman that the proposed job losses were still subject to a three-month consultation period and “nothing is set in stone”, but noted that about 60 per cent of the group’s 900-strong workforce is based in Scotland, with the remainder in the rest of the UK.
He added: “Over the three-year programme we’ve invested a huge amount of capital in our infrastructure, building new sites and refreshing existing ones and putting faster, bigger filling technology in. The second leg was a full business process redesign, and the final leg – once we had the assets, the infrastructure and systems and processes in place – was always going to be looking at the organisation.”
The planned cuts were announced as AG Barr said its pre-tax profits before one-off items came in at £17m for the six months to the end of July, against £16.9m for the same period last year.
Total revenues fell 3.6 per cent to £125.6m, down from £130.3m a year earlier, with like-for-like revenues – excluding its discontinued Orangina franchise – dipping 2.8 per cent.
White described the group’s performance as “solid” in the face of tough conditions for the soft drinks market, highlighting continued price deflation in the UK, a “challenging” environment for consumers and poor weather in the crucial early summer months.
But he said the firm had made good progress on a number of fronts, including the launch of a no-added sugar variant of “Scotland’s other national drink”, dubbed Irn-Bru XTRA.
White said: “It’s very early days but we’re delighted with the consumer response so far, particularly to the taste of the product, which seems to be going down very well.”
The launch of XTRA and no-added sugar Rubicon Spring come amid an increasing focus on the content of soft drinks, which intensified in March when former chancellor George Osborne announced his controversial “sugar tax”. The proposed levy, which is currently out for consultation, was described by AG Barr as a “punitive and unnecessary distortion to competition in the UK market which will be very complex, expensive and difficult to implement”.
White said: “All we’re highlighting is the relative level of balance between a can of Irn-Bru and a bar of chocolate. Our industry has been a leading light in reformulation, changing consumer behaviour and supporting the government’s drive to improve the health of the nation.
“I look across the rest of the food industry and I see very little activity, yet we are the one area that’s been singled out for a specific tax. Three per cent of the sugar consumed in the UK comes through soft drinks – that amount has fallen dramatically yet we’re still facing a tax which is only pointed towards soft drinks.”
AG Barr also announced an interim dividend of 3.53p a share, to be paid on 21 October, an increase of 5 per cent on last year’s payout.
It added: “We are beginning to see the benefits of our product development and innovation initiatives with both consumers and customers. Market conditions remain volatile and somewhat unpredictable however, assuming a strong trading performance in the key festive period, we remain on track to deliver profit before tax and exceptionals slightly ahead of last year.”