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Actively addressing sustainability challenges

Britvic 15 July 2021 QuickView
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Britvic

Actively addressing sustainability challenges

Consumer

ESG QuickView

ESG

  

15 July 2021

Price

984p

Market cap

£2,624m

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Share details

Code

BVIC

Listing

LSE

Shares in issue

266.7m

Business description

Britvic is a soft-drink beverage company with headquarters in the UK. The company participates in the marketing and manufacturing of popular brands including PepsiCo in Great Britain and Ireland. Britvic also has operations in France, Brazil and selected other EU markets.

Sustainability opportunities

Market leadership status (number one in branded still soft drinks, number two in branded carbonated soft drinks in Great Britain, number one in ready-to-drink juice in Brazil) creates an opportunity to influence the sector on social and environmental trends.

Committed to carbon reduction, targeting a 36% decline in carbon emissions (Scope 1, 2 and 3) by 2025 and becoming carbon neutral by 2050.

Transition to circular economy may create commercial opportunities.

Sustainability challenges

Negative consumer perception of plastic compared with other packaging materials.

Existing and upcoming regulations related to sustainability issues (eg sugar or plastic tax).

Transition to circular economy may require additional investments in technology and supply chain management.

Analysts

Anna Dziadkowiec

+44 (0)20 3077 5700

Sara Welford

+44 (0)20 3077 5700

ESG director

Kelly Perry

+44 (0) 7341 516 085

Britvic’s Healthier People, Healthier Planet strategy proactively addresses the key environmental, social and governance (ESG) issues it faces, including consumers’ health, packaging and waste, water usage, and supply chain management. Its sustainability targets for 2025 are the continuation of ongoing actions to meet stakeholders’ expectations and contribute to a more sustainable future. At the same time, management looks far beyond the targets and takes a broad ESG approach towards both business procedures and its staff.

Targeting 100% recycled PET in Great Britain by 2022

While Britvic achieved most of its aims across the Healthier Planet agenda in 2020, it missed the target for recycled polyethylene terephthalate (rPET) plastic in 2020 (ie increase rPET in its Great Britain and Ireland portfolio at 15%, with 100% recycled content for at least two brands), which it highlights was due to challenges posed by the COVID-19 pandemic. However, it moved Fruit Shoot Hydro and 500ml Ballygowan drinks into 100% rPET in 2020 and Ballygowan Mineral Water in Ireland in 2021. Additionally, in October 2020 Britvic announced its intention to ensure that all bottles in Great Britain are 100% rPET by 2022, which surpasses its previous target of 50% rPET in this country by 2025. Management hopes its focus on sustainable packaging will contribute to industry-wide environmental initiatives, including the Deposit Return Scheme, a legislation framework that will go live in 2022 in Scotland, and is in preparation in the UK and Ireland.

Fewer calories to meet expectations and challenges

Britvic’s focus on healthier drinks is in line with changing customer choices, with people looking for functional benefits in drinks (eg low calorie, added vitamin) and policies, aimed at solving health issues its consumers face (eg on high fat/sugar/salt food and drink). Britvic reduced the number of calories in its drinks to 25.5 per 250ml on average in 2020, down 27% since 2013, and it aims to maintain it at less than 30 by 2025. While this guidance looks relatively cautious, management highlights that this reflects its growth ambitions in Brazil, where calories per serving are declining, but remain above the group average. It adds that it is not only the number of calories that matters, but also the quality of ingredients in drinks and their nutritional value. The company invests in innovation in its low or no sugar products and has recently acquired Plenish, a plant-based drinks business. Britvic’s commitment to broad ESG management is reflected in its 2025 targets and the performance it has delivered so far (see next page).

Consensus estimates

Year
end

Revenue
(£m)

Adjusted
EBIT (£m)

EPS
(p)

DPS
(p)

P/E
(x)

Yield
(%)

09/19

1,545.0

214.1

59.2

30.0

16.6

3.0

09/20

1,412.4

165.8

43.0

21.6

22.9

2.2

09/21e

1,382.0

152.1

46.0

23.8

21.4

2.4

09/22e

1,479.0

186.2

57.6

28.6

17.1

2.9

Source: Refinitiv, company data

Britvic is a client of Edison Investment Research Limited

Britvic’s sustainability at a glance

Below, we present Britvic’s 2025 targets and selected historical KPIs. For management comments on Britvic’s approach to sustainability and a full list of its KPIs, please refer to the company’s annual report. We describe Britvic’s financials and recent developments in our equity research notes.

Britvic’s 2025 sustainability targets

Focus area

2025 target

Healthier People

 

Healthier consumer choices

Less than 30 calories per 250ml serving

Sustainable communities

Double employee community days (versus 2020 baseline)

Employee engagement

More than 85% employee engagement* (versus 2020 baseline)

Health, wellness and wellbeing

More than 83% employee wellbeing* (versus 2020 baseline)

Healthier Planet

 

Energy & carbon reduction (Scope 1, 2 and 3)

Reduce Scope 1 and 2 carbon emissions by 50% by 2025 (versus 2017 baseline)
Reduce Scope 3 carbon emissions by 35% by 2025 (versus 2017 baseline)

Packaging (circular economy)
– Recyclability programme Deposit Return Scheme
– Light-weighting and beyond-the-bottle solutions

Reduce packaging per serving by 20% (versus 2020 baseline)
Packaging 100% recyclable and all bottles in Great Britain to be made from 100% rPET by the end of 2022

Sustainable supply chain (including water efficiency, responsible sourcing, zero waste to landfill)

Reduce manufacturing water intensity ratio by 20% (versus 2020 baseline)

Britvic’s selected sustainability KPIs

Healthier consumer choices

Renewable energy

Carbon and water**

Sustainable supply chains***

Source: Britvic, Edison Investment Research. Note: Historical metrics shown in charts have been independently assured by Ernst & Young. *Employee engagement and wellbeing as measured in Britvic’s Heartbeat survey. **The Greenhouse Gas Protocol defines Scope 1 emissions as direct emissions from owned or controlled sources, Scope 2 as indirect emissions from the generation of purchased energy and Scope 3 as all indirect emissions (not included in Scope 2) that occur in the value chain of the reporting company, including both upstream and downstream emissions; tCO2e stands for tonnes of CO2 equivalent. ***Sedex is an ethical supply chain data platform; SMETA, Sedex Members Ethical Trade Audit.


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This report has been commissioned by SRI-CONNECT and prepared and issued by Edison, in consideration of a fee payable by SRI-CONNECT. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by SRI-CONNECT and prepared and issued by Edison, in consideration of a fee payable by SRI-CONNECT. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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