As private investors, we’re often looking for the next big thing. The next exciting growth story. But the reality is that steady, defensive performers like the FTSE 250 share I’m going to discuss today often outperform so-called story stocks over longer periods.
The company in question is soft drinks producer Britvic (LSE: BVIC). Founded in the 1930s, its brands include Robinsons, Fruit Shoot, and J2O – in addition to a range of PepsiCo brands produced under licence in the UK.
My sums suggest Britvic shares have delivered an average annualised return of almost 10% per year since the company’s listing in 2005, including dividends.
The long-term average return for the FTSE 100 is about 7%, so this defensive business has comfortably outperformed on a long-term view.
Update shows growth potential
Britvic probably hasn’t caused investors too many sleepless nights, either. Today’s trading update is a case in point.
The company says that sales rose by 8.1% during the three months to 31 December, compared to the same period one year earlier. This measure included some price increases, but also a 1.7% increase in volumes – the amount of drink sold.
Britvic’s core UK market delivered a steady 6.9% sales increase during the quarter, but sales from the faster-growing Brazilian market rose by a stonking 21% compared to the prior year.
Admittedly, this performance was helped by an acquisition. But the population of Brazil is roughly three times larger than that of the UK.
Britvic’s sales in Brazil currently account for less than 10% of the group total. I reckon the group could still have plenty of room to expand in this faster-growing market.
What could go wrong?
No investment is 100% safe, and that includes Britvic.
One longstanding niggle for me is that the group carries a little more debt than I’d really like to see. To be clear, I don’t expect it to be a problem. But I’d prefer to see the group rely less on borrowed cash.
My other concern with this group is that a big chunk of UK sales come from PepsiCo brands, which Britvic doesn’t own.
The company has worked with Pepsi for a long time, and I don’t expect them to fall out. But it’s always possible that Britvic could lose these brands at some point. That might be painful.
Britvic shares: my view today
I don’t own Britvic shares at the moment. But this is a business that’s been on my radar as a possible buy for some time now.
The firm’s latest update has strengthened my view that the investments made in recent years are starting to pay off and should support medium-term growth.
Chief executive Simon Litherland says he’s excited about the company’s plans for the year ahead. These include a number of new product launches and Pepsi’s first brand refresh for 14 years.
Broker forecasts suggest modest earnings growth this year, followed by a stronger performance in 2024/25.
I think now could be a good time to consider investing, ahead of what could be a significant new period of growth for Britvic.
The post Steady growth makes this a FTSE 250 stock for defensive investors to consider buying appeared first on The Motley Fool UK.
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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Britvic Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
