Shares in soft drinks group AG Barr (BAG) bubbled up 1.5% to 528p after the IRN-BRU maker announced a strategic investment in branded porridge-to-plant-based milk business MOMA Foods.
Though the investment won’t have a material impact on recently upgraded profits for the year to January 2022, the deal demonstrates AG Barr’s determination to tap into the consumer’s growing thirst for healthier drinks including vegan milk alternatives.
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Glasgow-based AG Barr, the company behind iconic Scottish fizzy drink IRN-BRU as well as the Rubicon and Funkin brands, has taken an initial 60% stake in MOMA Foods and agreed a path to full ownership over the next three years.
Founded in 2006 by Tom Mercer, MOMA quickly established itself as a challenger brand in the porridge market.
However most recently, MOMA has diversified into the rapidly-growing plant-based milk sector, where players include Sweden-based oatmilk maker Oatly, to become the UK’s third largest oat milk brand.
MOMA also produces a range of low sugar granola and bircher muesli branded products.
PREMIUM QUALITY PRODUCT
AG Barr’s CEO Roger White is delighted his charge is ‘venturing into healthy oat-based products with such a great brand and an experienced team, led by Tom.
‘Plant-based milk is a fast-growing category, in particular, and MOMA’s oat milk is a premium quality product with huge potential. This exciting investment is a positive indication of AG Barr’s growth ambitions.’
Shore Capital suggests MOMA is currently generating annual sales of around £5.5 million to £6 million and believes future growth will be ‘capital light in nature’, since all its products are manufactured by third parties.
The broker sees ‘much to like in the AG Barr investment case with a strong portfolio of brands supporting attractive margins (15.7% EBIT for full year 2022), strong and sustained cash generation and a balance sheet that provides considerable optionality as evidenced by today’s announcement.’
As we reported here, shares in AG Barr fizzed higher last week after the company upgraded its full-year expectations amid ongoing ‘strong’ performance in ‘on the go’ and hospitality sectors.
