Britvic

Britvic is one of the two leading soft drinks businesses in Great Britain and Ireland (in terms of both volume and retail sales value).

In 2007 Britvic produced 1.4 billion litres in GB and was the number one supplier of stills brands and number two supplier of branded carbonates (in terms of both volume and retail sales value).

Britvic's leading portfolio

Britvic has a diverse and balanced portfolio of stills and carbonates brands, many of which are either number one or number two within their respective sub-categories (in terms of volume and/or retail sales value) – see Our Brands below.

Stills

Brand	Key Strengths
	Number 1 stills brand in take-home Number 2 soft drinks in take-home 7th most valuable grocery brand
	Number 1 ready-to-drink kids' stills brand Fruit Shoot H2O launched in 2006
	Number 1 adult soft drinks brand Second largest bottled drink in the licensed on-trade (after Budweiser)
	Number 1 pure juice brand in the licensed on-trade Launched the ambient Pressed Apple and Squeezed Orange juice ranges in 2006
	Water brand launched in 2006 targeted at the "impulse" segment of the market
	Launched in 2006 achieving the position of number 1 UK water brand for children within 8 weeks of launch 90% of this volume was incremental to Fruit Shoot and 79% incremental to the kid’s water category
	Rebranded and relaunched in 2006
	One of the worlds leading sports drinks, targeted launch in GB in 2006

Carbonates

Brand	Key Strengths
	Number 1 cola in licensed on-trade Number 2 branded cola in take-home Number 2 global soft drinks brand
	Number 2 lemon/lime brand Number 2 global lemon/lime brand
	Number 1 lemonade brand in the licensed on-trade Third biggest licensed on-trade soft drinks brand
	Number 2 fruit flavoured carbonate brand by volume in take-home

Britvic also makes significant investments in the brands within its portfolio. In 2007 the Group’s advertising and promotional expenditure was 6.6% of turnover (which excludes PepsiCo’s share of the joint advertising and promotional expenditure under the PepsiCo arrangements). It is expected that total A&P spend will be maintained at circa 7% of revenue going forward to continue to support the Group’s long term brand building philosophy. According to industry market research, the effects of the promotional expenditure can be seen in the high levels of brand recognition for Britvic’s core brands including Robinsons, Pepsi and Tango.

In 2004 Britvic acquired the water business of Benjamin Shaw & Sons Limited, including the Pennine Spring brand. Since the acquisition, Britvic has invested significantly in the brand and its packaging, and has introduced Pennine Spring across licensed on-premise accounts. Pennine Spring is now the 3rd largest water brand and one of the fastest growing in the GB licenced channel. Britvic has also sunk a further bore hole to provide additional sources which now allow it to offer both spring and mineral water products. These water sources, from which Britvic has a licence to extract in excess of 350 million litres each year, provide Britvic with an opportunity to develop a large scale water offering across all major routes to market and to cater for a range of consumption occasions. In summer 2007, Britvic relaunched Drench, the premium water brand and in the spring of 2006 launched the Fruit Shoot H2O brand, a kids’ water offering that became the biggest-selling kids water brand in GB within 8 weeks of launch.

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Proven brand development and innovation

We believe innovation and brand development are among the key drivers of future organic growth for Britvic and for the GB soft drinks industry as a whole.

Britvic constantly seeks to develop its portfolio to meet evolving consumer preferences and to target key growth sub-categories, such as entries into water, plus the take-home pure juice range (fulfilled by the launch of Robinsons Smooth juice and Fruit Shoot 100% juice in summer 2007).

In order to do this, Britvic has made significant investment in both the facilities and processes utilised to deliver developments to, and support the marketing of, its brand portfolio. Central to Britvic’s strength in brand development and innovation is its detailed insight into consumers, their preferences and shopping behaviour. Britvic’s integrated team is responsible for the product development process, from identification of consumer trends and opportunities, through concept design, development and testing to product launch. This integrated approach has enabled Britvic to develop its core brands and successfully extend them into new subcategories.

Britvic’s product development team is based in Chelmsford and has at its disposal a purpose-built technical centre at the nearby Widford factory which we believe puts Britvic at the forefront of technical development in the GB soft drinks industry. Britvic has made significant investment to refine its development process and to improve project planning, management and execution with the aim of reducing time to market for new products, brand extensions and packaging formats (which we believe has reduced the time to market for a new product by approximately 30%). As part of this, the gathering and analysis of research has been standardised and benchmarking has been introduced to improve the quality of decision-making in the development cycle. Each new product is evaluated six months after its launch having regard to market, consumer, operational and financial factors and will be expected to break even within two years after launch.

Britvic's ability to develop products

Brand	Key Strengths
	New varieties of Robinsons launched in FY2006 included Apple, Strawberry & Lychee High Juice; Apple & Pear Fruit and Barley; and Topical Fruit and Barley Launching a lower-cost PET Robinsons squash large pack format, reducing the price differential between Robinsons and own-label offerings in larger pack sizes
	Fruit Shoot H2O launched in 2006 as Britvic’s first "kids" flavoured water. Number one UK kids water brand within eight weeks of launch
	Launched Tango Clear in April 2005 as a "better for you" alternative in the fruit flavored carbonates sub-category New flavours launched in 2006 were Raspberry & White Cranberry; and Orange
	Orange and Pomegranate J2O limited edition, successfully launched in October 2006 Added availability in PET introduced in 2006 to access outlets unavailable to glass such as sport and concert venues
	PepsiMax developed and launched with Britvic’s assistance in Great Britain in 1993 and Great Britain has since become the largest PepsiMax market Launched Pepsi Max Cino in 2006
	Water brand targeted at the younger generation, launched in 2006
	Britvic Pressed Apple and Squeezed Orange juices were launched in 2006.
	Gatorade with orange and lemon flavours were fully launched in 2006.
	Range of 6 natural juice drinks with spring water Opportunity to utilise existing asset base of vending machines in schools (given recent legislation changes) Priced for kids

Innovation can help to generate growth for the business both from well- established brands and through the launch of entirely new products. In this regard, Britvic has historically generated growth in large scale brands such as Pepsi and Robinsons, such growth coming from brand extensions and relaunches of existing products.

Continued innovation is important as the percentage growth of new products will moderate over time as they become more mature. As products move through their development cycle varying levels of advertising and promotional expenditure may be necessary to drive volume growth. For example, at launch, expenditure may be relatively high compared to the value of the brand. In addition, an uplift in promotional expenditure may occur in relation to specific brand strategies (for example, brand extensions, packaging innovation and distribution opportunities), in anticipation of, or in response to, competitor activity or to support continued growth in a more mature product.

Britvic also has a proven track record of innovation at the point of sale. Britvic works closely with customers to increase soft drinks sales in their outlets applying its expertise in category management (including in-store merchandising, floor-ready displays, promotions focused on major sport and music events and active management of chiller space in both take-home and licensed on-premise outlets).

We believe that the Group’s growth will continue to be delivered by a combination of growth generated from its existing portfolio and through the launch of new brands, in each case driven by successful innovation around the relevant brands or products. Therefore, we believe that Britvic’s brand development expertise provides a key competitive advantage for the business.

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Relationship with PepsiCo

Britvic has a strong relationship with PepsiCo in both Great Britain and Ireland that provides both parties with significant opportunities to leverage their respective brands. The success of the relationship is reflected in the volume increase of Pepsi branded drinks supplied by Britvic in Great Britain. This volume has risen 3.7 times from 172 million litres in 1987 to 638 million litres in 2007, resulting in the Pepsi market share in Great Britain being the highest market share (by retail sales value and volume) of any country in Western Europe.

This relationship allows each party to benefit from the other’s brand strength, infrastructure, expertise and knowledge. For PepsiCo, the directors of Britvic believe that the arrangements with Britvic have provided PepsiCo with the benefit of a portfolio which includes Britvic’s category-leading brands, established customer network, brand development expertise, infrastructure and detailed knowledge of the GB and Irish soft drink industries. In return, Britvic has the exclusive right to package, sell and distribute in Great Britain and Ireland the global Pepsi and 7UP brands and the right of first refusal in respect of the British and Irish distribution of any new carbonated soft drink brands developed by PepsiCo or Seven-Up International. Britvic also has the right to service the major global leisure and catering customers of PepsiCo in Great Britain and Ireland (for example, the YUM supply arrangements). The PepsiCo relationship has also enabled Britvic to run joint promotions with other PepsiCo products (for example, with Walkers Crisps) and bring leading brands to the GB market. Britvic also has an agreement to continue into Great Britain the introduction of Gatorade, one of the world’s leading sports drinks and V Water.

The arrangements also mean that Britvic has available to it the PepsiCo Systems, whilst the volume of Pepsi and 7UP sold by Britvic provides significant scale to Britvic’s operations and underpins the efficiency of its supply chain.

The continuing strength of the relationship is evidenced by the fact that in March 2004 the parties signed new contracts to extend their relationship until 2018 with an extension to 2023 upon flotation on the London Stock Exchange in 2005, which provides a long-term planning and investment horizon for both parties.

PepsiCo is also a shareholder in Britvic and retained its 5% stake upon flotation.

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Extensive consumer reach

Britvic has established relationships across the three major channels to the British and Irish markets providing it with significant breadth of access to consumers. Britvic delivers to over 4,000 customers and approximately 25,000 points of distribution in Great Britain. In 2007, its top 10 customers, all of whom are based in Great Britain, accounted for 58% of the Group’s total sales volume, with its largest customer representing approximately 12%. The Group also has an international business which we believe offers an opportunity to drive further growth of its brands outside Great Britain and Ireland.

Take-home

Britvic’s customers in take-home include all of the "Big 4" players in the GB retail sector (Tesco, J Sainsbury, Asda and Wm Morrison) together with a number of other large grocery retailers such as Somerfield, Waitrose and the Co-op. A number of Britvic’s brands such as Robinsons, Pepsi and Tango, reflecting their category leading positions, are considered by Britvic to be "household names" for these retailers. Britvic also has an extensive network of relationships with the retailers in the impulse channel where Britvic has positioned a large proportion of its chillers to achieve growth through the sale of its soft drinks in single serve format. As a result of these relationships, according to AC Nielsen, Britvic’s products are available (based on a sterling-weighted distribution) at over 96% of the points of sale for soft drinks in take-home. Its position in take-home is further enhanced by its relationships with the cash & carry wholesalers that supply smaller independent retailers.

Licensed on-premise

The Group is the number one soft drinks supplier to the licensed on-premise in both Great Britain and Ireland and has significant supply arrangements with a number of the key players in the pub sector (including Mitchells & Butlers PLC and the Spirit Group, two of the largest managed pub companies in the UK). Britvic supplies part or all of its portfolio to more than 9 out of 10 pubs in Great Britain. During the first half of FY08 Pepsi product and equipment technical innovation has helped deliver an excellent result for Britvic with the signing of a new four year contract with Mitchells & Butlers in dispense (three years in packaged) with incremental volume of 10m litres in a full year.

Leisure and Catering

In the leisure and catering channel, Britvic has supply arrangements across the channel and has a 6-year arrangement with YUM to supply Britvic products to all of the KFC and Pizza Hut restaurants in Great Britain. Britvic also has an agreement with McDonalds to supply Fruit Shoot to its outlets (Fruit Shoot being the first Britvic soft drink to be sold in McDonalds outlets in Great Britain)

Britvic has also made significant investment in its vending capability, mostly through the acquisition of glass fronted vending machines incorporating vending telemetry technology (which automatically informs the third party sales force of the requirement to re-stock or repair the machine). We believe that this investment coupled with its product offering gives the Group a competitive advantage in this channel.

International

Britvic has a small but growing international distribution capability through its subsidiary Britvic International. Britvic International is responsible for sales of Britvic-owned brands outside Great Britain and Ireland and for sales to international travel customers (for example, airline and passenger shipping customers). These markets together accounted for approximately 3.5% of Britvic’s turnover in 2007.

Britvic International has also sought to distribute its products in certain European markets where it sees potential for growth. Britvic International has a number of contracts with major retailers in the Netherlands, Denmark, Sweden and Finland.

Britvic International has developed an international distribution network without incurring significant capital expenditure. We will continue to look to expand its international operations as opportunities arise, including opportunities for acquisitive growth.

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Well-invested infrastructure

The Group has invested over £113 million in its supply chain over the last 5 years. Accordingly, it has the capability to produce and deliver products to its customers through:

• its flexible production facilities, which in 2007 produced over 1.4 billion litres of soft drinks;
• its now-outsourced large-scale distribution network, which according to AC Nielsen enabled it to make its products available to consumers at over 90% of the points of sale in the GB take-home and licensed on-premise channels in 2007 (on a sterling-weighted value basis);
• its investment of £54 million in commercial assets over the last 5 years, with over 39,000 dispensers, 20,000 vending machines and 26,000 chillers now installed in customers’ premises; and
• its now-outsourced field service teams, which, amongst other things, install and service the Group’s commercial assets and operate as a sales team for small independent retailers.

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Drive for efficiency

Britvic has made significant investment in the business with the aim of generating efficiencies across all parts of its business and has increased productivity by 32% over the last 10 years (based on cases produced per employee). Efficiency initiatives include:

• its investment in its IT systems through the Business Transformation Programme, taking £18m of cost out of the business between 2006 and 2008;
• vertical integration within its production line (see the paragraph entitled "Production and quality control" below);
• the process of "Product Value Optimisation" by which management seeks to reduce the unit cost of a product (for example, by adjusting juice content, the type of sweetener used and pack design), whilst maintaining the equity of the relevant brand; and
• outsourcing of parts of the supply chain, sales teams and central support functions, such as elements of Human Resources

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Leadership and culture

Britvic has an experienced, committed and motivated management team with a demonstrable record of delivering profitable growth led by product innovation. The six members of the executive team have a combined total of circa 110 years of FMCG experience, including circa 50 years’ experience within the Group.

Britvic aims to develop its employees through a range of career development programmes and to promote a work life balance through flexible working. Through its long-standing six pillars approach Britvic has sought to ensure that its employees understand and act in support of the strategy for the business.

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