Vimto supplier Nichols is planning to expand further into licensed soft drinks as it looks to bolster the size of its UK packaged business.
Speaking to The Grocer after the supplier’s Capital Markets Day this week, Nichols CEO Andrew Milne said the business would look to add new licensed soft drinks every “two or three years” to bring “excitement and innovation” to its portfolio.
Existing licensing deals with Levi Roots and Slush Puppie had been a success for Nichols, Milne said. The supplier was now in discussions with “a number of people” about licensing their brands in soft drinks, Milne said.
“What we’ll do is bring licence products in and we’ll rotate them, and we’ll find those that are really relevant,” he said. “You might get two or three years out of it, and then you have another one waiting in the pipeline to come in.”
He insisted, however, that Vimto – which accounted for £120m of £128m UK retail sales value generated by the supplier in 2023 – would remain the focus of its efforts to expand in UK grocery.
“We don’t ever want to have a licensed business that’s at a certain scale because that can be a risk,” he said. “Our focus will always be on driving the Vimto brand, but I think the licensed products very much complement it by bringing some excitement and innovation.”
In a bid to extend the appeal of Vimto, Nichols has in recent years extended the brand into clean energy and vitamins. These extensions were “bringing incrementality”, to the brand, Milne said.
He admitted, however, that demand for healthier products with greater functional benefits meant the supplier was likely to need to look beyond Vimto in search of further growth.
“You can only take it so far with a brand like Vimto,” he said. “Some consumers are looking for total health, and some of them want zero calories as well.”
Nichols M&A plans
Pressed for an update on plans to participate in M&A to meet this demand, Milne said Nichols was looking to acquire “asset-light” brands to complement its existing portfolio and bring scale.
“We don’t want to take ourselves back into manufacturing, and we don’t have factories to fill,” he said. “We are looking for businesses that are asset light and in areas that complement Vimto – we don’t want to cannibalise that.
“We’re looking for slightly bigger,” he continued. “I don’t think we want really small brands that all the hard yards still have to be put in. We want something that’s more established, got a good presence in the market that we can take that to the next level.
“We don’t want someone that is doing £1m turnover. We want significantly over that, but we’re not going to go out and buy someone that’s doing £200m.”
In the medium term, Nichols’ goal is to grow turnover from the £164.9m it reported in FY2023 to £225m, while also increasing profit before tax from £27.2m to £45m.
The majority of revenue growth would come from increased sales of packaged goods in the UK and in international markets such as the Middle East, Africa and Asia, Milne said.
“There’s strong organic growth opportunities to build distribution in the categories, channels and the markets we’re already playing,” he said. “In the UK, we’ve launched a lot of innovation this year, and we will continue to do that.
“In the Middle East. We are broadening our portfolio through innovation, and we’d like to expand geographically too. The big focus for us at the moment is Malaysia, where we’ll be launching with our squash proposition later this month.”
Bottom line improvements, meanwhile, would be driven by Nichols’ internal “transformation programme”, and the rollout of a new £9m EPR system that would deliver £1.9m in business benefit per year, Milne added.
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