Britvic plc – Annual report – 30 September 2022
Industry: food and drink
4. Key judgements and estimates (extract)
Judgements (extract)
Franchise rights
Franchise rights represent franchise agreements acquired as part of the Britvic Ireland business combination which provides long-term rights to distribute certain soft drinks. These agreements were allocated a 35-year useful economic life at the time of acquisition based on a third party assessment. As at 30 September 2022, these intangible assets have a remaining useful life of 20 years.
As at 30 September 2022, the franchise agreement itself had a remaining contract life of three years, which is less than the useful economic life. The useful economic life has been determined on the basis that the renewal of the franchise agreements, without significant cost, is highly probable. Evidence to support this conclusion is:
- significant emphasis on maintaining a strong relationship with Pepsi, strengthened through the addition of PepsiCo products to Britvic’s portfolio in recent years;
- lack of alternative suppliers; and
- high barriers to entry to the Irish soft drinks bottling market.
This is further supportable by Britvic having signed in the previous financial year, a new and exclusive 20-year franchise bottling agreement with Pepsi for the production, distribution, marketing and sales of its soft drink brands in GB, which provides access to a portfolio of global brands, including Pepsi MAX, 7UP and now Rockstar. The GB agreement runs to December 2040.
Accounts examples 