Berenberg Cuts AG Barr to Hold on Slowing Volume Growth

Berenberg downgraded Scottish soft drinks maker AG Barr to "hold" from "buy" and slashed its price target from 800 pence to 625 pence, citing flat like-for-like sales and weaker underlying volumes in the first half of fiscal 2027.

Like-for-like volumes fell 2%-3% during the period as the company raised prices to offset rising operational costs, according to an Investing.com report. The downward revision reflects growing analyst concern over consumer elasticity and the limits of pricing power within the UK beverage market.

Supply Chain Disruption and Revenue Growth

A supply chain disruption during the second quarter reduced sales by approximately £10 million, an impact equivalent to roughly 400 basis points of growth. Despite the operational setback, AG Barr reported that first-half revenue rose 8.5% to £247.4 million compared to the prior year.

Adjusted operating profit increased 8.4% to £37.1 million, while adjusted earnings per share edged up 0.4% to 24.99 pence. The modest EPS growth despite higher operating profit highlights the friction of increased input costs and transitional logistics overhead.

Maintaining Fiscal 2027 Targets

Even with the volume headwinds and the broker downgrade, AG Barr maintained its broader fiscal 2027 performance targets. Management reiterated its guidance for 10% revenue growth, a 15% operating margin, and a 19% return on capital employed.

The ability of the maker of Irn-Bru to reach these margin and growth benchmarks will depend on resolving logistical bottlenecks and stabilizing volume demand without resorting to deeper price discounting as consumer budgets face sustained pressure.