Britvic Duration: 01:37:47 Paul Moody: Good afternoon everybody - PDF document

12 th March 2009 Britvic Duration: 01:37:47 Paul Moody: Good afternoon everybody and welcome to Britvic’s latest seminar for both investors and analysts. A couple of small housekeeping things before we start formally. The first one is, if you could switch off your mobile phones that would be very helpful. The second is, that there will be a full transcript of this afternoon available on the web, I think tomorrow. So if that helps you avoid furiously scribbling every word that is said, maybe that will enable you to focus on the key points. I guess, a formal introduction – I’m Paul Moody, I think I’ve met most people over the last two or three years and during the course of the afternoon you will see two or three other of my colleagues, who will be presenting. So let’s get underway with first of all looking at the Agenda for today. The Agenda will actually follow a theme that’s familiar to many of you. I’ll begin the session with the key headlines from the 2009 Britvic Soft Drinks Report, which was a document published today and in fact in this very room earlier this morning, we presented to the trade, press and media. Following me, John will then update you on our recent organisational changes, as we implement a Group structure and clearly that’s in the context of the acquisition of Britvic Ireland which we made some 18 months ago. As many of you may know, Andrew Richards, who is our Customer Management Director in Great Britain, is taking over as Managing Director of Britvic Ireland; and it seemed timely to update you on the progress we’re making in Ireland, plus to give you some real clarity on our recent restructuring and how this puts us in even better shape we believe, to outperform the market and drive real top line growth when more favourable conditions return. And indeed, Andrew will also give you some comment on the Irish market in totality and the soft drinks market itself, which I’m sure you will find interesting. Simon Stewart, who joined the business just over a year ago as our Marketing Director, will give you a breakdown of our innovation and product launch programme for the year. This is in fact a constant key driver of growth for Britvic, so we want to ensure full understanding of the exciting year that we have ahead. It is also appropriate today for Simon to 1

talk about our core and seed brand plans for 2009, in what, in our view, is one of the busiest years, not only for marketing activity, but also for brand re-packaging and pack architecture. Again, both of these elements have been key drivers of growth over the last 12 months, but we believe we will be taking them to a new level in 2009. We’ll end the formal presentations in around an hour and half, when John and I will be more than happy to answer any questions you may have. I hope afterwards, you then can join us for some refreshments; further sampling if you’ve not already done so, of our new products. Just generally, a chat around the business; because as I am sure you know, we are quite keen and passionate to talk around our business. So let me move now to the soft drinks report. Our Annual Review of how the soft drinks market performed, in this case in 2008. Now as always the report has been compiled using independent data and insight from leading market researchers – Nielsen. As a reminder, this report is GB specific and therefore, doesn’t give any real detail on the Irish market; but as I’ve mentioned, Andrew will cover some of this in this session. I will outline some of the key findings from the report, a copy of which you all had on your chair, with particular focus on the trends that have emerged as the economy has worsened and how they have impacted soft drinks. I would, however, point out that the report is based on the calendar year 2008 and in the fast changing environment that we are operating in, some of these trends are already moving on, so where appropriate I will comment on more recent developments. So first, let’s take a look at the total market in 2008. Now this time last year, in fact in probably the same room, I presented a slide with a similar headline ‘A resilient performance in a tough year’. That particular tough year having been driven by a very wet summer and in the on-licence part of the market, the impacts of the smoking ban. 2008 as we now know proved to be even tougher. Without sounding like a football manager, it was indeed a year of two halves and our early optimism was washed out by another atrocious summer, coupled with the onset of the economic downturn and the then, later formal recognition that we were in a recession. So while overall sales across the year held up relatively well, with value sales down just 1% against volumes down 2%, the real tend saw a reasonably strong performance in the first half, offset by a much poorer performance in the second half of the year. But as I said, overall a remarkably resilient performance and soft drinks remain a hugely important category in both the Take-home and licensed On-premise sectors. 2

Let me move on and now talk about Take-home in particular. Take-home sales, which account for almost three quarters of the UK soft drinks market volume, held up well, growing 1% in value despite a 2% volume decline. This growth in value was driven largely by glucose and stimulant drinks, or otherwise known as energy drinks and sports drinks; both of which offer consumers unique functional benefits that they are willing to pay a slight premium for. As economic conditions have worsened, traditional favourites such as cola, squash which indeed offers great value at about 6p a glass and juice drinks, have all benefited. Smoothies, which had for so long been a key driver of growth, had a particularly tough year, as consumers were clearly not willing to pay the price premium for what they saw as one of their Five- a-day. Indeed, bottled water also suffered, being particularly weather dependant, but also as the environmental debate heated up and as consumers tighten their purse strings and considered the role of bottled water at home, when tap was available at it were, free. It’s worth noting that we remain confident however in the future prospects of bottled water, when the economy improves, as our consumption levels in GB are still significantly behind other international markets. If we consider the broader Take-home market, the grocery multiples were the main engine of growth, with value up 2% but volume down 1%. The licensed On-premise market had a more difficult year than grocery retailers. Whilst soft drinks performed better than alcoholic drinks overall, both value and volume were down by 4% and 6% respectively. The economy was a clear contributor, as was the summer; and once again, a lack of key sports activity, with for example no UK team making it through to Euro 2008 Championships. The growing emphasis on food and family occasions, continue to favour soft drinks and fruit juice and juice drinks performed better, while traditional pub favourites, cola and lemonade remained just that – key staples. Energy drinks interestingly, saw their third year of decline and bottled water, in common with the Take-home experience, also suffered. However, in the broader On-premise context, the food service sector performed strongest, with 3% growth, driven primarily by workplace catering. This may well be a result of the economic downturn as works shun lunch time eating out and opt for the better value, canteen alternative. Now let’s look at the impact of the economic downturn in a bit more detail. In last year’s report, we highlighted three key trends. The ongoing trend towards health and well being; the growth of the more caring consumer 3