Soft drinks manufacturer AG Barr is scrapping its Strathmore brand later this year which could lead to the closure of its manufacturing site in Forfar.

The decision, which affects 23 workers, came alongside figures showing the Cumbernauld-based company had delivered another year of growth.

AG Barr acquired Strathmore in 2006 from the US company Constellation.

In a statement, it said: “The Strathmore brand has struggled to compete in recent years, and we believe we have now reached a point where the Forfar site is no longer sustainable.

“The proposals are subject to consultation, and we intend to fully support our employees through this period of change.”

The move follows an announcement by bottled water market leader Highland Spring that it aims to grow its sales to £200 million by the end of the decade, compared with £130.6 million in 2023.

AG Barr said group revenue in the year to 25 January increased by 5.1%, driven by a 6.4% growth in value in Soft Drinks despite a softening in growth across the sector to 2.6% from 8.3% in the previous year which was driven by higher inflation. AG Barr saw a 4.6% growth in soft drinks volume .

As reported in the recent trading update, there was a standout performance from Rubicon and continued strong growth from Irn-Bru.

Adjusted profit before tax came in 15.8% higher at £58.5m, representing growth of 15.8% while profit before tax ar £53.2m, is a 3.7% increase of £1.9m. Statutory profit before tax was £53.2m after £5.3m of one-off costs.

The plan to rebuild operating margin is ahead of plan, said the company, up 130 bps to 13.6%.

The board is recommending a final dividend of 13.76p, bringing the proposed total dividend for the full year to 16.86p which is 12% higher than last year’s 15.05p.

The company said its outlook for the year is unchanged and takes into account the fact that 2025/26 is a 53 week year, the proposed discontinuation of Strathmore and the additional regulatory compliance costs related to Extended Producer Responsibility fees and the increased NIC burden.

Euan Sutherland, chief executive, said: “2024/25 was a successful year for the Company. I would like to take the opportunity to thank my colleagues across the business who delivered these excellent financial results.   

“Looking forward, we have a refreshed strategy centred on growth and are committed to our long-term financial targets.  I am confident that successful execution of our plans will see another year of positive progress towards our long-term goals.” 

Shares in the company rose 13p to 633p in early trade before closing 10p lower at 610p.

Market reaction

Zoe Gillespie, investment manager at RBC Brewin Dolphin, said: “AG Barr continues to pop, with another strong set of results.

“Revenues and profits are on the rise, despite a challenging economic backdrop, and many of its brands are growing ahead of the market.

“The discontinuation of the Strathmore water brand is unlikely to have a material impact on the company and, with plenty of cash in the bank and an appetite for acquisitions, it seems that another strategic move could be in the offing in the not-too-distant future.

“AG Barr has a lot of qualities as a business and continues to invest in its operations – while the drinks market is highly competitive, the company should remain in a strong position when others may struggle.”

AJ Bell investment director Russ Mould, said: “The last decade has thrown a lot at AG Barr, in the form of new regulations on sugar content, Covid-19, carbon dioxide shortages and input cost inflation (and they are all before the usual issues of competition and changing trends in consumers’ tastes), but the Scottish firm’s latest full-year results suggest it is coping well. 

“Sales are up, profit margins are expanding, and cash flow remains strong, but management is not taking anything for granted, given plans to discontinue the Strathmore water brand and integrate the FUNKIN operations, acquired a decade ago, into those of the wider group to create a more streamlined operation.

“Such an efficiency drive may seem odd to some, when the company is reporting record annual profits and is forecast to deliver a higher number again in the financial year to January 2026.

“However, profit margins are still some way below prior peaks after a torrid series of challenges and cost pressures over the past five years.

“The good news is that the company continues to adapt to changes in consumer tastes and trends, in terms of both product and its route to market, and drive cost efficiencies.

“Investment in capacity and supply chains should bring further cost benefits, too, and chief executive Euan Sutherland expects profits to grow faster than sales in the coming year as profit margins expand once again, even if 2018’s pre-Covid zenith of a 17.1% return on sales remains some way off.

“That may explain why the shares still sit around a third below their pre-Covid all-time peak, even after their strong run of the past three years, although the annual dividend is now reaching new highs.”