Less than two years after Vimto maker Nichols signalled it was looking to buy, it has pulled the trigger.
The target, VitHit, is a smart play. Snapped up for a cash consideration of £64m, the functional wellness brand sits exactly where Vimto can’t reach.
“We were really looking for a brand that could play in health & wellness, because that’s where you see growth faster than the wider market over the next five to 10 years,” says Nichols CEO Andrew Milne.
“There are certain places you can stretch Vimto [as a brand], but I don’t think you can really take it into health and wellness.”
Speaking to The Grocer this afternoon, Milne explained the board’s logic: Nichols wanted a brand with strong growth potential, which was known to UK retailers and had the ability to springboard off high consumer demand for nutrition.
VitHit certainly hits those criteria. Averaging 9.5% annual growth over the past three years, VitHit’s vitamin and mineral-fortified fruity drinks have nearly doubled sales to €26.5m (£21.9m) since 2021.
The brand is already dominant in Ireland, with roughly 97% distribution coverage in the south of the nation, and listed with all major UK retailers.
“Our strength in distribution, particularly in the UK, means we should be able to accelerate that sales growth,” adds CFO Matthew Rothwell.
While 80% of revenues come from the UK and Ireland, the remaining 20% are spread across 13 nations, predominantly in western Europe, though with Australia among the largest.
Nichols’ own export experience – much of its recent growth has been thanks to a strong performance in west Africa – can only help.
The deal should immediately boost profits. Nichols’ strong balance sheet has allowed for an all-cash offer, and it has promised “strong cash generation” will rebuild reserves.
One-off transaction costs of around £2.5m should easily be covered by the brand’s €4.2m (£3.6m) operating profit (to 31 December 2025), which Nichols expects to grow further this year. It also anticipates synergies of more than €1m per year.
Like Nichols, VitHit operates an asset-light model, which should smooth the transition to Nichols’ control and help pump its profit margin from 16% to Nichols’ target of 20% within “probably only two years”, according to Rothwell.
“What was really important for us is that when we do an acquisition, we can demonstrate to our shareholders that it’s going to deliver a great return,” he adds.
The deal has landed well with analysts, coming on the back of a strong set of half-year results. Singer Capital Markets’ Sahill Shan called it “precisely the disciplined deal signposted at the November 2024 Capital Markets Day”, adding: “VitHit is asset-light, profitable, health-focused, and Nichols has the distribution to drive it.”
Berenberg’s Karl Burns was just as positive about the UK plc’s prospects post-acquisition, calling Nichols a “unique UK investment case of high growth, cash generation and dividends”.
But after VitHit, and Nichols’ licensing of the Myprotein water brand, is this the start of a new Nichols drinks empire?
“No,” says Milne, plainly. “We’ve been very purposeful: we wanted a brand in the UK to complement Vimto, and we’ve taken our time to find the right one. It’s about focus now.”
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