FEEL GOOD DRINKS Climate Positive 8

Nichols CEO Andrew Milne said any acquisitions would be in keeping with the group’s ESG credentials along the same lines as its Feel Good brand

Vimto owner Nichols is eyeing M&A targets to strengthen its portfolio of drinks as the group rethinks the out-of-home channel in the wake of the pandemic, bosses have told The Grocer.

It follows similar moves made by industry rivals last year to access fast-growing categories, with AG Barr striking a deal with oat drink brand Moma and Britvic acquiring plant-based milk supplier Plenish.

“We’re looking at categories Vimto can’t stretch into and where we predict are going to be the longer-term growth winners,” Nichols CEO Andrew Milne told The Grocer.

Any acquisition would need to fit with the group’s long-term ESG goals centred around sustainable packaging and building a closed loop system in the UK, he added, highlighting the Feel Good brand of sparkling water the group acquired in 2015.

Milne was speaking as Nichols unveiled financial results for 2021 to the London Stock Exchange.

The company fell into the red last year – with pre-tax losses of £17.7m – after writing down the value of its out-of-home division, booking a non-cash exceptional charge of £36.2m as a result.

Sales in the channel made a partial recovery in 2021, rising 77.4% as Covid restrictions eased. However, revenues remained 31.4% behind 2019 levels as hospitality trade recovered at a slower pace than expected and fixed costs weighed heavily on the overall financial performance.

Nichols’ out-of-home business operates in pubs, clubs, theme parks and trampoline parks and cinemas, selling soft drinks brands such as Coke, Pepsi and Irn-Bru dispensed from guns and slush products, alongside a small coffee offering in workplaces.

Milne said the business needed “transformational change”, with a full strategic review now underway. “[The review] gives us the chance to build this sector back, stronger and more profitably,” he added.

Nichols group revenues increased 21.6% to £144.3m in 2021, broadly in line with pre-pandemic levels, as the Vimto brand went from strength to strength in the UK and overseas.

For the first time in its 113-year history, Vimto achieved value sales worth in excess of £100m, which the group said was “a significant milestone”.

Milne said he was confident of continued revenue growth in 2022 and beyond, but added inflationary pressures were beginning to squeeze the business.

The Nichols chief said inflation was on a different level to anything he has seen in the past 20 years in the industry as a result of a combination of last year’s driver and labour shortages, CO2 issues, floods ruining crops of raspberries in York and global aluminium shortages.

The group has been forced to pass on price increases to retail customers in the range of 3-6% on average.

“In respect of pricing, conversations with the retailers are always very challenging and difficult,” Milne added.

“It is about getting the balance of what you pass on and what you can save through your own cost mitigation programmes and protecting the price elasticity – if you go too high, you will push consumers away.”