Britvic shares bounce 7% on new 20-year bottling deal with PepsiCo

British soft drink producer, Britvic (LON:BVIC), saw its shares rally during Tuesday trading, as it announced a new two-decade-long bottling partnership with American giant, PepsiCo (NASDAQ:PEP).

The franchise bottling agreement covers the production, distribution, marketing and sales of PepsiCo carbonated soft drink brands – including Pepsi, 7UP and mountain Dew – in the UK.

The deal represents an extension of a pre-existing partnership, which began in 1987 and has now been extending until at least 2040, and will also include PepsiCo’s Rockstar energy brand, for which Britvic will take responsibility from November 1 this year.

The company also announced that it intends to make all of its UK plastic bottles out of recycled plastic by the end of 2022, which is three years earlier than initially planned. This change will cover the entire UK portfolio of Britvic and PepsiCo brands, and marks a notable step towards notable household names taking sustainability seriously, and adopting the circular economy.

Speaking on the announcement, Britvic CEO, Simon Litherland, said:

“I am delighted that we have formally extended our relationship with PepsiCo in Great Britain for a further 20 years. The powerful combination of the Britvic-owned and PepsiCo portfolio offers customers and consumers a broad range of great-tasting, trusted brands for any occasion. We are excited to add Rockstar to our offering and look forward to working together to grow the brand.”

“The announcement of our intent to move to 100% recycled PET in GB by 2022 is a significant moment for Britvic and our partnership with PepsiCo, demonstrating our joint commitment to protecting the planet today and for future generations. Both Britvic and PepsiCo have sustainability at the heart of their business strategies, and we will continue to work together to deliver on our shared ambition to protect the environment and offer healthier choices in the years ahead.”

The company added that better-than-expected trading across the peak summer period means that its full-year EBIT is predicted to be ‘slightly ahead’ of current market consensus, with trading benefitting from the reopening of UK hospitality since early July.

Following the update, Britvic shares rallied by 6.80% or 51.00p, to 801.50p a share 20/10/20 13:40 BST. This current price is below its consensus price target of 880.91p, and lower than its six-month high of 866.00p.

Analysts currently have a consensus ‘Buy’ rating on the stock, a 54.23% ‘Outperform’ rating from the Marketbeat community, and a p/e ratio of 12.55, below the consumer defensive average of 13.91.