Britannia Soft Drinks Ltd. (Britvic)

views updated

Britannia Soft Drinks Ltd. (Britvic)

Britvic House, Broomfield Road
Chelmsford, Essex CM1 1TU
United Kingdom
Telephone: +44-1245-261871
Fax: +44-1245-267147
Web site: http://www.britvic.co.uk

Private Company
Founded: Mid-1800s as British Vitamin Products Company
Sales: £600 million ($1.1 billion) (2004)
NAIC: 312111 Soft Drink Manufacturing

Britannia Soft Drinks Ltd. is the holding company for its more well-known business, Britvic, the number two-selling soft drinks company in the United Kingdom. Britvic commands a strong stable of brands, including the Britvic fruit juices and mixers lines. The company also holds the franchises for producing and bottling Pepsi Cola and 7Up in the United Kingdom. Other prominent national and regional brands include Robinsons, R Whites lemonades, the youth-oriented Tango brand, and J20, targeting the 18- to 45-year-old segment. Britvic has been making acquisitions in the first half of the 2000s in order to boost its portfolio. In 2000, for example, the company acquired Orchard Drinks and Purdey's, followed by the purchase of Red Devil, an "energy" drink, in 2002. At the end of 2004, the company boosted its profile in the fast-growing bottled water market with the purchase of the Ben Shaws water division of soft drinks maker Birkby. Britvic itself is controlled by the Intercontinental Hotels Group, which owns 50 percent, as well as minority investors Allied Domecq and Whitbread, each holding 23.75 percent. PepsiCo Inc. owns the remainder of the company. Britvic called off its planned 2005 initial public offering, although the company was committed to launching a public offering before 2008. In 2004, Britvic's sales reached approximately £600 million ($1.1 billion).

Pharmacist Origins in the 19th Century

Britvic originated as a pharmacy side business in Chelmsford, in Essex, England, in the mid-19th century. The Victorian era, and a prevailing hostility toward alcoholic beverages, encouraged the development of a whole new range of so-called "soft drinks." Many of the new beverages used carbon dioxide injected into water, a method developed toward the end of the 18th century and popularized by Schweppes in London.

The rising popularity of "effervescent" drinks in the mid-19th century coincided with the development of new bottle-stopping technologies and early industrialized production techniques. At the same time, the appearance of early advertising methods enabled many beverages to achieve a certain degree of recognition, even on a national scale. A large number of drinks makers, many of them pharmacists with laboratory experience, began developing their own soft drink recipes, mixing fruit juices, sugar, and other ingredients. Pharmacists were especially drawn to the development of healthful beverages, such as tonics and other soft drinks. Although a few beverages managed to achieve a degree of recognition on a national level, many others became solid regional or local favorites.

The British Vitamin Products Company, as the Chelmsford business became known, developed a broad range of soft drinks through the end of the 19th century and into the 20th century. In addition to the highly popular lemonades, the company developed its own tonic recipes, and also produced nonalcoholic ales. The company also began bottling and selling mineral waters.

The company's transition to its modern form began toward the middle of the 20th century. By the 1930s, the British Vitamin Products Company had come under the leadership of Ralph Chapman. Recognizing that the Depression era had begun to take a toll on the health of his soft drink customers, Chapman conceived of a means of bottling fruit juices in order to supply much-needed vitamin C at affordable prices. In 1938, Chapman began packaging fruit juices in small bottles, using a method that enabled him to bottle juices without the need for preservatives.

Consumer response was immediately favorable, and Chapman began plans for a wider rollout of the bottled juice line. Yet the outbreak of World War II halted the company's plans. Restrictions were put into place not only on the sale of fruit juices, but, as part of the sugar rationing effort, on the soft drink industry in general. During the war, the government rationalized the soft drink industry, nationalizing the sector and establishing a narrow field of just six permitted "standard" drinks.

The restrictions on the soft drink industry were lifted after World War II. By 1949, the company was finally able to roll out the full-scale launch of its fruit juice line. The company became the first in England to bottle fruit juices, and the small-format bottles, marketed under the Britvic brand name, became a popular soft drink choice.

Soft Drink Boom in the 1950s

Soft drink consumption in general rose steadily in the United Kingdom through the 1950s. A number of factors contributed to the new success of the category, not the least of which was the appearance of television—keeping people at home and on their couches—and the concurrent appearance of new advertising possibilities. Britvic profited from the rising demand, and in the early 1950s built one of the largest fruit drink processing and bottling facilities in the world.

The growing sales of soft drinks placed pressure on other parts of the U.K. beverage sector, namely the alcoholic beverage producers. This encouraged a number of the country's winemakers, distillers, and brewers to extend their operations to include soft drinks into the mid-1950s. Among them, Vine Products, a group involved in the wine trade and that also produced the sparkling drink Babycham, as well as a number of liquors and other alcoholic beverages, bought control of Britvic in 1954.

The 1960s saw an intensification of the consolidation of the British beverage sector. In 1961, Britvic became part of a larger operation when Vine Products merged with Showerings and Waterways to form Showerings, Vine Products & Waterways. Later in the decade, that company entered talks with brewing giant Allied Breweries. In 1968, Allied agreed to purchase Showerings, Vine Products & Waterways, for more than £100 million. Britvic then became the operating company for Allied's soft drinks division.

The link with a major brewer—and its vast, nationally operating network of "tied" pubs—became the signal for an extension of the Britvic brand into new product categories. In 1973, for example, the company launched a new line covering the "mixer" soft drinks category, producing its own tonic, bitter lemon, and dry ginger ale. Britvic's relationship to Allied gave it ready access to its parent company's pub network, ensuring strong sales.

Britvic also joined in the newly developing diet drink category, launching its first effort, Slimsta, in the early 1970s. By then, the company adopted its brand name as its own, becoming Britvic Limited in 1971. In another move to take advantage of Allied's pub network, Britvic also launched draught versions of its most popular soft drinks, starting in 1972.

Through the end of the 1970s and into the 1980s, Britvic continued to seek new brand formulas to attract the British soft drink consumer. In 1977, for example, the company launched an adult-oriented beverage, Britvic 55, which was available only in pubs.

Acquiring Scale for the New Century

In the meantime, Britain's soft drinks producers had been facing increasing pressure from a new type of competitor. Cola drinks had been introduced from the United States in the 1950s and, backed by strong marketing campaigns, had succeeded in capturing a major share of the U.K. market. The popularity of U.S. soft drinks, especially Coca-Cola and Pepsi (produced and bottled under license in the United Kingdom), led Britvic to seek its own U.S. brands to license. In 1982, the company launched its first licensed soft drink, Dr. Pepper. This launch also marked the U.S. brand's first appearance in the United Kingdom. The company backed up the launch with a marketing drive costing some £600,000.

In 1985, Allied Lyons sold 50 percent of Britvic to Australia's Castlemaine-Tooheys, part of Alan Bond's booming conglomerate in the 1980s, in a share swap deal. By 1986, Bond had turned Britvic around, selling it off to the Bass brewery, pubs, and beverages group. Bass then merged Britvic with its other soft drink holdings, including Britannia Soft Drinks and Canada Dry Rawlings, which also owned HD Rawlings, producer of the R. White soft drinks brand. The resulting company was renamed as Britvic Soft Drinks Limited.

The newly enlarged Britvic began acquiring new brands for its portfolio. In 1986, the company acquired the Tango soft drink brand, originally launched in the early 1950s. Under Britvic, Tango was successfully repositioned as an "edgy" youth brand.

In 1987, Britvic scored a major coup, when it acquired the U.K. production and bottling rights for the Pepsi brand, as well as for PepsiCo's recently acquired 7Up brand. Under Britvic, Pepsi, which had struggled to make headway against Coca-Cola's dominance in the United Kingdom, now rose to become one of the country's major brands.

Into the early 1990s, majority owner Bass, under pressure from the British Mergers and Monopolies Commission, appeared set to sell its 51 percent stake in Britvic to PepsiCo. Yet the deal, which would have included the 20 stakes held by both Allied-Lyons and Whitbread, ran into disagreements, and by 1994, the parties agreed to call off negotiations.

Instead, Britvic began seeking new expansion opportunities. In 1994, the company gained the license for launching Liptonice in the United Kingdom, another brand in the PepsiCo stable. In 1995, the company purchased rival U.K. soft drinks maker Robinsons. That company had been founded in the early 19th century as Robinson & Bellville, becoming famous for its Barley Water, and for its association with the Wimbledon tennis tournament, before becoming part of the Reckitt Coleman foods group. Backed by Britvic's marketing muscle, the Robinsons brand entered a new growth phase, and by 1998 had grown into the country's 11th largest seller in the supermarket and grocery channel.

Britvic's next major expansion effort came in 2000, when the company acquired Orchid Drinks. That company had been part of the Camerons Brewery, operated by the Brent Walker group, before being spun off in a management buyout in 1992. The addition of Orchid brought Britvic a number of new brands, including Amé, Purdey's, and Aqua Libra.

Company Perspectives:

Our vision is to be the UK's leading soft drinks company.

The rising sales of bottled waters led Britvic to enter this area as well in 2001, with the acquisition of the marketing rights for the Abbey Well brand in parts of the United Kingdom. The following year, Britvic bought Red Devil, an "energy" drink, in order to capture a share of the relatively young "stimulant drink" market.

Into the mid-2000s, Britvic's ownership once again appeared up in the air. In 2000, Bass announced its intention to split off its brewery operations as a separate company and transform itself into a new company, the hotels operator Six Continents, subsequently renamed as Intercontinental Hotels Group. As part of its transformation, the company let it be known that it was interested in selling off its majority stake in Britvic's parent company, Britannia Soft Drinks.

Britvic was put up for sale in 2001. Yet PepsiCo, which held some 10 percent of Britvic—and, more important, owned the Pepsi brand, which by then had become a major source of Britvic's sales and profits—balked at the sale. Among the reasons given for ending the offer was PepsiCo's reluctance to allow Britvic into the hands of private equity investment groups. A future sell-off of Britvic might open the possibility of PepsiCo's arch-rival Coca-Cola gaining control of its British bottler.

Britvic's other shareholders, however, continued to push for a means to reduce or sell off their stakes in the company. By the end of 2004, the companies had negotiated a new 15-year licensing agreement with PepsiCo, a move that served to nullify any threat of a takeover by Coca-Cola. As part of the agreement, PepsiCo agreed to the principle of a public offering by Britvic by 2008 at the latest. Britvic then announced its intention to list on the London Stock Exchange in early 2005.

Yet in January of that year, after poor weather in the summer season had depressed the company's net profits, Britvic's shareholders announced that they were suspending the plan for a public offering, citing fears that the company would not be fully valued. Regardless of its ownership structure, Britvic remained a key player in the British soft drinks industry in the new century.

Principal Subsidiaries

Britvic.

Principal Competitors

Procter & Gamble Company; PepsiCo Inc.; The Coca-Cola Company; Sara Lee Corporation; Groupe Danone; Cadbury Schweppes PLC; Interbrew SA-NV; SABMiller PLC; Mitchell and Butlers PLC; AG Barr PLC.

Key Dates:

1938:: British Vitamin Product Company (Britvic), originally founded in the mid-19th century to produce soft drinks, develops a method for bottling fruit juices without preservatives; production is suspended at the outbreak of World War II.
1945:: Britvic begins construction on a new processing and bottling facility, then the largest in the world.
1949:: The Britvic fruit juice brand is relaunched.
1954:: Vine Products, maker of Babycham, among other beverages, acquires Britvic; the company later becomes part of the Allied Breweries group in the late 1960s.
1971:: The company changes its name to Britvic Limited.
1972:: The company launches mixer soft drinks.
1973:: A draught version of the company's soft drinks is launched.
1977:: Britvic 55, a pub-only adult soft drink, is launched.
1982:: The company acquires the U.K. license for the Dr. Pepper brand.
1985:: Castlemaine Tooheys acquires 50 percent of Britvic.
1986:: Castlemaine Tooheys sells its stake in Britvic to Bass, which merges Britvic with its other soft drink holdings, including Britannia Soft Drinks and Canada Dry Rawlings, as Britvic Soft Drinks Limited; Britvic acquires the Tango soft drink brand.
1987:: Britvic acquires the U.K. license for Pepsi and 7Up.
1994:: Britvic acquires the U.K. license for Liptonice.
1995:: Britvic acquires Robinsons, maker of the Barley Water soft drink.
2000:: Britvic acquires Orchid Soft Drinks, maker of adult drinks Amé, Aqua Libra, and Purdey's.
2002:: Britvic acquires the Red Devil energy drink.
2004:: Britvic announces its plan to list on the London Stock Exchange in 2005.
2005:: Britvic announces its decision to suspend the public offering.