Vimto brand owner Nichols has said it is exploring M&A opportunities as it looks to shape its portfolio to meet evolving trends in soft drinks.
Speaking to The Grocer after Nichols reported its half-year results on Wednesday (24 July), CEO Andrew Milne said the business was “focused on acquisitions” for its UK packaged goods division – currently comprising Vimto and the Levi Roots carbonated soft drink brand.
“We are quite open that part of our capital allocation strategy is around acquisition,” Milne said.
Asked if Nichols had the right propositions to meet growing demand for functional soft drinks – a segment that has swelled by 27.8% to reach £100m in retail sales value in the past year [North Star/Circana 52 w/e 15 June] – Milne said: “From an acquisition point of view, obviously you’re going to look at categories that are predicted to grow in the future.
“This one is predicted to, so from an acquisition point of view it would be sensible to look at these types of spaces.”
He added, however, the group’s existing propositions were also evolving to meet changing tastes.
“Over the last few years we’ve added vitamins to our squash portfolio,” he said. “Part of our focus and research will be how we continue to offer functional added benefits.”
Responding to demand for natural energy, Nichols launched a Vimto energy drink spinoff last year, and added a caffeinated Levi Roots extension earlier this year. Milne said the duo – made using natural caffeine from coffee beans – were performing in line with the group’s expectations.
“We launched the [Vimto] product as a slow build in the marketplace last year and we’re really pleased with the progress we are making,” he said. “We added Levi Roots Energy in Q1 this year in the discounters and wholesale and we’re also really pleased with that.”
Group revenues at Nichols in the six months to June fell by 1.8% to £84m as a decline in overseas sales and in the out-of-home division offset growth in the core UK packaged goods business.
UK packaged sales jumped 5.3% to £45.4m, while volumes rose by 4.9%.
Milne said product innovation, “good strong distribution gains” across the top four grocers and an increase in promotion frequency were behind the strong performance.
“In the last couple of years when inflation was very high, we had to manage quite carefully where we promoted,” he said. “What we’ve done in the first half is re-entered some of those promotions we had stepped away from.”
Despite its topline sliding, Nichols increased its interim dividend to 14.9p per share, and announced a special dividend of 54.8p a share, worth a total of £20m to shareholders.
Nichols CFO Richard Newman said the group had looked at its internal funding requirements and concluded “there was still surplus cash and it was right to give some of that back” to its shareholders.
He added, however, Nichols had retained “sufficient firepower” to participate in M&A “should the right sort of acquisition come along”.
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