Business Interview: Paul Moody, Chief Executive, Britvic

Britvic may be losing its fizz, but there'll be no last Tango The soft-drinks plc has had to swallow a pretty bitter brew recently. But after two profit warnings, and talk of a hostile bid and a ban on sugary drinks in school vending machines, its boss is as effervescent as ever
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The Independent Online

Paul Moody, chief executive of the drinks group Britvic, appears to be the eternal optimist.

It's a good thing too. Last December, the company floated - with Moody moving from managing director to chief executive. Since then, he's issued two profit warnings after sales of its fizzy drinks, such as Tango, fell almost 10 per cent earlier in the year.

On Thursday, the company reported its maiden full-year results, showing flat profits and saying that it remained cautious on the outlook for fizzy drinks. Shares closed the week at 242p, compared to a float price of 230p - the FTSE 100 has since risen by 11 per cent, more than twice the Britvic rise. Surely Moody must be pleased that the year's almost over?

"I wouldn't say I'm glad it's over," he says, sipping a Pepsi - a drink Britvic bottles and distributes in the UK on behalf of the US beverage giant. "But it's certainly been a challenging and difficult year."

Shareholders in Britvic have not fared much better. In the company's flotation prospectus, it quoted research predicting that UK sales of fizzy drinks would be either flat or show a slight rise over the next two years.

Investors could be forgiven for giving Moody a hard time, not that the effervescent chief executive is prepared to admit as much.

"The shareholders have been great. They have asked some searching and challenging questions but I'd expect them to do that even if the business was showing double-digit growth."

Analysts estimate that Britvic's fizzy drinks (Tango, Pepsi, 7UP, the lemonade R Whites and sports drink Gatorade) currently make up around 58 per cent of total sales. "Stills" drinks - mainly Robinsons squash, Fruit Shoot and the bottled fruit drink J 20 - make up the rest. Because of the decline in popularity of most carbonated drinks in the UK, analysts expect that by the end of the decade, the category will make up half Britvic's sales, with stills accounting for the other half.

Moody insists that the company has observed this consumer trend of switching to healthier drinks from fizzy ones such as colas for some time. But he admits that the speed of the trend since last Christmas has taken everyone by surprise.

"There was clearly a much more pronounced decline in carbs [carbonated drinks] than anyone could have predicted."

New employees at the company are given Britvic dictionaries to explain all the acronyms and terminology. Moody, who has worked at Britvic for a decade, certainly uses lots of industry jargon to get his point across ("repertoire", "occasionality" and "provenance" are just a few) and the cabbie's son seems to have an answer for everything. But he is still genuinely puzzled about precisely why carbonated drinks have lost their fizz so quickly over the past 12 months.

"It's very difficult to call," he says. He adds that the media - and particularly programmes such as Jamie's School Dinners - encouraged the move away from fizzy drinks.

"The Jamie Oliver effect is well documented," he says. "It raised awareness of what kids are eating at school and brought the issue in a very populist way to lots of people watching on TV."

The Government has since taken up Jamie's cause with a vengeance and has introduced a raft of legislation to crack down on unhealthy food and drinks. The School Food Trust, which the Government set up last year with Oliver as a board member, has outlawed the selling of sweet fizzy drinks from school vending machines - a big source of revenue for Britvic. The media regulator, Ofcom, also last month proposed banning the advertising of unhealthy food and drink during programmes watched mostly by the under-16s.

Moody seems very sanguine about the impact of such radical changes on Britvic. "We've recognised that there will be changing frameworks. So we've prepared for it and are ready for it. We've always taken the view that we would adhere to and conform to the guidelines."

For example, his company now sells juice-based drinks in school vending machines rather than 7UP or Pepsi. Besides, he says that there will always be a demand for soft drinks in schools. Pointing out the obvious, he says: "Hydration is a key part of what soft drinks do."

But isn't that what drinking fountains are for? "Yes. But most kids would prefer something else," he adds.

Moody does not say whether he is for or against these new rules, but there is not much Britvic can do about them once they are law.

However, the crackdown against unhealthy sugar-rich drinks could go too far, Moody says: "It's right to raise awareness. But take fizzy drinks. They're absolutely fine. It's about moderation. It's the same with anything. If you consume too much water you get ill. It's about moderation, choice and awareness."

With Britvic plc just one year old, Moody says he is still getting used to dealing with analysts, shareholders and the media. "It's been a great experience. Although I can't say that the half year [results] was the most pleasurable experience," he says.

He jokes that he hasn't become a cynical veteran interviewee like more seasoned chief executives of plcs - yet. But he still will not be drawn on the controversial aspects of the debate over healthy food and drink. Asked about the Conservative higher education spokesman Boris Johnson's well-publicised comments supporting mothers sneaking chips and burgers through school railings to junk-food starved children, Moody cryptically answers: "There is a strong argument around choice and availability of choice."

He says that UK consumers are becoming more aware of the benefits of healthy living relative to their counterparts in countries such as France, Italy and Spain. But the British self-evident obsession with sugar casts doubt on his assertion.

After all, the British are fatter than nearly all their European neighbours.

"People's repertoire is growing," is Moody's vague answer.

Britvic also sells its own bottled water, Pennine Spring, launched earlier this year. Moody does not answer whether he knows the difference between Britvic's bottled water and similar products such as Volvic and Evian.

He adds, however: "Quite a lot of people could tell [the difference]." It's not about the taste, apparently, but the "provenance" of the brand (where it comes from to you and me). "With water you have provenance of the brand and then you have the branding, the packaging and its occasionality [when it's drunk]."

Marketing and branding - essential in the drinks industry - are no more important for bottled water than for fizzy drinks, he says, even if most water tastes the same.

But surely some Evian or Perrier water has accidentally passed his lips at some point? "Absolutely not. Never knowingly drink someone else's brand," he intones in jest.

Over the past six months, takeover speculation has surrounded Britvic. Private equity firm Permira was rumoured to be planning a bid in October, but nothing firm materialised.

"Speculation is a distraction and is unhelpful but it's not what I'm focused on," says Moody. "My answer is that I'm very clear that the business has a very successful future in front of it."

Analysts say that Pepsi acts as a "poison pill" defence against a takeover because Britvic has an exclusive - and highly lucrative - agreement running up to 2023 to distribute and bottle its cola in the UK.

Pepsi, which also owns 5 per cent of its shares, can terminate the contract if Britvic is acquired. It's not clear whether this would happen in the event of a takeover, and Moody would not be drawn over whether another company could take on the Pepsi contract instead. "We have worked with Pepsi for 20 years. Another 20 years to go. We have a great relationship with them," he says.

But it is impossible not to get the impression that Moody sees Pepsi as an ally in the event of a hostile bid for Britvic.

As part of his vision for the future for his company, early next year, Britvic plans to launch two new juice and flavoured-water based drinks in response to the healthy-living trend.

He agrees that sometimes the City can be too short-termist in its approach. "Innovation doesn't happen in a month," he says. Britvic sales have been flat - in both senses of the word - over the past year, yet Moody appears to be bullish about the future.

But Britvic shareholders shouldn't crack open the Pennine Spring water just yet.

BIOGRAPHY

BORN: 27 June 1957

EDUCATION: Central Foundation Grammar School, Shoreditch, east London

CAREER:

1975-77: assistant to company secretary, John Blundell (chain selling general merchandise)

1977-82: assistant company secretary, Chef & Brewer (pub division of Grand Metropolitan, now part of drinks company Diageo)

1982-87: personnel and training manager, Eden Vale (chilled dairy products company)

1987-95: national sales training manager, Pedigree Petfoods

1995-96: commercial director, Golden Wonder

1996 to now: sales director, then managing director and finally (since December 2005) chief executive, Britvic

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