Drinks giant Britvic’s shares today crashed as much as 16% as it warned the cost of the safety recall of kids’ drink Robinsons Fruit Shoot will be massively higher than it previously said.
Britvic admitted it will take a hit of £15 million to £25 million to pre-tax profits, a huge rise on the £1 million to £5 million estimate it first made.
City analysts took fright after it said: “It is difficult to be precise as to the full financial implications given the developing situation.” Broker Canaccord Genuity declared its fears of a “worst-case scenario” had been “realised”.
The shares have now plunged by almost a quarter since the drama began on July 3, wiping close to £200 million off the company’s stock market value, which is now around £615 million.
Britvic began the product recall because of a design flaw on the bottle cap, which affects Robinsons Fruit Shoot and Fruit Shoot Hydro packs.
Chief executive Paul Moody said a problem with the cap becoming detached had only occurred in a few instances but it was “the right decision” to make the recall. But in a sign that it is turning into a crisis, the company warned: “Despite our ongoing investigations, we have been unable to speedily resolve the issues regarding the new-design cap.”
The drinks firm, which is also behind brands such as Pepsi, Tango and 7up in the UK, will now re-supply retailers with bottles of Fruit Shoot with a “proven” existing cap.
However, it will take six weeks to change production and begin re-stocking and six months “to meet historic levels of demand”.
Moody told the Evening Standard: “It is very disappointing and not what we would have wanted. But at the core, we believe we acted responsibly. The fundamental concern was about consumer safety. It’s important for the consumer to understand, it is a package-cap issue and is not a product issue and not a brand issue,” added Moody, who promised a big marketing campaign to relaunch Fruit Shoot. However, this is not the only problem facing Moody and chairman Gerald Corbett, former boss of Railtrack.
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Britvic admitted poor weather and the weak UK economy have hit sales. Profits would be “at the bottom end of market expectations” even before the impact of the Fruit Shoot recall. Broker Panmure Gordon said: “Whilst Britvic cannot control the weather, we believe the issue surrounding the product recall was avoidable.”
Moody said that criticism “is made with no validation or justification” as Panmure “can’t possibly know the details” of the recall. Fruit Shoot is the top kids’ juice brand in the UK.
Although there is a perception it is high in sugar, Moody said 80% of Fruit Shoot drinks have no added sugar.
The shares were down by 45.8p to 254.4p.
