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Earlier today, UK-based soft drinks group and Vimto brand owner Nichol reported its full-year results. Following the announcement, just-drinks spoke to CEO Marnie Millard, alongside CFO Tim Croston and the company's COO, Andrew Milne.

Nichols flagship Vimto soft drinks brand has been available in the Middle East for 90 years

Nichols' flagship Vimto soft drinks brand has been available in the Middle East for 90 years

just-drinks: Nichols posted a low double-digit rise in sales in the first half of 2019, yet the full-year came in at +3.5%. What happened in the second half of the year to pull on the top-line?

Nichols CFO Tim Croston: According to Nielsen data for the total UK soft drinks market, as we got to the half-year, the total market was growing around 7% per annum. As we got towards the end of year, there was a rapid drop to +0.8%. A lot of that was due to the good summer weather of 2018.

Another point to make is that a lot of the growth that's come from our business during 2019 came from our shipments to the Middle East. We sell in concentrate from the UK to our manufacturing partner (Aujan Coca-Cola) based in Saudi Arabia. They produce the finished product locally and then distribute throughout the Middle East.

Our concentrate sales can be quite lumpy in terms of shipment timings. We usually get the concentrate over for production ahead of the Ramadan season. So, we had a significant amount of growth in the Middle East in the first half of 2019 versus the prior year, and much less so in the second half. We're not really bothered about the timings of the shipments - the key barometer for us is the in-country performance of the brand, where last year we saw three-to-four percentage points of growth. In fact, during the Ramadan season, it was one of our best ever performances.

j-d: Saudi Arabia and the UAE introduced a new excise tax on juice-based drinks at the start of December. Did you see much by way of sell-in in the run-up?

TC: Not a great deal. Around 80% of our in-country sales take place during Ramadan (which last year ran from 5 May to 4 June). We need to bear with it until after Ramadan 2020. By June, we'll have a good insight into the consumer reaction and, more importantly, into the impact on our 2020 trading picture.

j-d: Can you make a prediction of how it's going to affect the first half of this year?

TC: Probably not. There is so much unknown. This tax is a 50% increase on the RSP, which is unprecedented in terms of potential consumer reaction. The impact (on profits) could be anywhere between GBP1.5m (US$1.95m) and GBP4m for this year.

j-d: What are you doing to try to minimise the impact?

TC: We'll be discounting the wholesale selling price to the trade, so not all of the 50% increase will be passed on. There will also be a lot of below-the-line activations in-store to attract to the consumer. Then, we'll be working alongside the trade on the amount of discounting they apply to the RSP.

99r8这是只有精品视频20Lastly, we're doing some work around new product innovation. The main Vimto product we sell in the Middle East is a premium cordial in glass. We're introducing an orange flavour as well as a no-added-sugar variant, which is sweetened entirely by juice. This will be outside of the tax.

On packaging sizes, our RTD alternatives, which are drunk mainly outside of Ramadan, will be reduced from 25cl to 20cl, while the RSP will be maintained.

j-d: Does Vimto have the brand recognition in the Middle East to be able to ride this through, or is it more recognition of the wider category?

TC: The Vimto brand's been out there for 90 years, is heavily associated with Ramadan, and is seen as a local brand rather than a UK brand. The brand equity is very strong.

j-d: You've highlighted today that your long-term strategy is to hit annual sales of GBP200m. What's your time-frame and how are you going to reach it?

COO Andrew Milne: We see this as a five-to-ten-year play. We have four growth pillars: 'More from the core', 'wherever whenever', which is about new channels, new geographies, 'thirst for new', which is innovation and acquisition, and the fourth is 'happier future'. All of them play a very important role.

99r8这是只有精品视频20We still believe we have headroom for our core products in the UK - Vimto, our frozen brands, and the relationships we have with Coke and Pepsi, where we sell their products. We also see new channels as important - we've gone into cinemas in the last couple of years, and we've got into coffee in a B2B capacity.

We're always looking at geographies as well: We launched in Tanzania last year. To get to that aspirational GBP200m, acquisitions would need to come into play. We're very proactive in acquisitions, both in the UK and internationally. Trying to find the right acquisition that is right for our business metric and that we can add value to is a challenge.

99r8这是只有精品视频20Hopefully, it's a combination of all these drivers that will contribute to getting us to that target.

j-d: Do you see CBD playing a role for Nichols in the future?

AM99r8这是只有精品视频20: That's a very difficult one to answer. The market around CBD is very dynamic at the moment. There seem to be a lot of legislation changes, not only in the UK but also abroad. We've always steered away from alcohol, for example, particularly with our Middle East business. You can never say never, but I personally feel like I don't see CBD playing a role in our business.

j-d: Is that related to the maturity and family status of Nichols, or do you see CBD as being a flash in the pan?

AM: It's a combination. We are absolutely not averse to newness and change. If you look at our business over the last ten years, there have been massive changes in terms of the categories we play in, as well as the geographies and the channels we're in. CBD could be a flash in the pan, it's very small at the moment, but that's not to say it won't grow.

Also, it can be quite polarising in terms of opinions. A lot of our consumers are teenagers and families. For us to be associated with something that can be quite polarising would need a lot of long, hard thought.

j-d: You don't have very much business within the European Union. Does that make Nichols Brexit-resistant?

CEO Marnie Millard99r8这是只有精品视频20: Only 2% of our overall group revenue is from Europe. Where we have sales in Europe, we also have supply. The main concern for us - as it has been since the 2016 referendum - is what the impact on Sterling may be, particularly if we end up with a 'hard' Brexit. We are fully prepared on the paperwork and import criteria with our suppliers.

Ultimately, the majority of our exports are to Africa and the Middle East, where we're quite used to WTO rules and everything that goes alongside. I don't think we can be complacent for incoming raw materials, but we'll do the same as we have been doing, which is increasing our stockholding on raw materials and packaging that comes from Europe, in case there are any hiccups in the supply chain.

j-d: The UK accounts for 80% of your top-line performance, a split that doesn't give Nichols much potential for any sizable growth. Is it part of the group's strategy to try to dial down the reliance on sales domestically?

We don't disclose our margins, but the margins from our Middle East concentrate sales are far more favourable than the UK. When we look at our bottom-line contribution, we're almost at 50:50, UK to international. That's a huge risk mitigation in terms of our focus on the UK.


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