Irn Bru maker AG Barr (LSE: BAG) has released interim results today. They show that the company faces a challenging outlook, which means that fellow consumer goods company Unilever (LSE: ULVR) could prove to be a better long-term buy.

Barr’s top line declined from £130m in the first half of 2015 to £125m in the first half of 2016. This was due to continued price deflation in the UK market, which is showing little sign of abating. In fact, the outlook for UK consumers is relatively challenging due in part to the potential impact of Brexit. The company also struggled with unfavourable weather conditions in the important early summer months leading up to the end of the reporting period.

Despite its fall in sales, Barr was able to maintain its market share and also increase operating margins. This shows that its current strategy is working well given the difficult market conditions it faces. Therefore, pre-tax profit increased marginally versus the prior year to £17m.

Further improvements to the company’s business model are expected in future via the final stage of the Fit for the Future programme. Allied to this is further investment in new products, which should help to keep Barr on track to meet full year guidance.

Looking ahead, the firm is forecast to record a fall in earnings of 1% this year, followed by a rise of 4% next year. Neither of these figures is particularly appealing and the rate of growth is likely to be behind that of the wider index over the same period. Despite this, Barr still has a premium valuation. It trades on a price-to-earnings (P/E) ratio of 17.8, which equates to a price-to-earnings growth (PEG) ratio of 4.5.

Brighter prospects

By contrast, Unilever has much brighter growth prospects. It’s due to increase its earnings by 3% this year and by a further 9% next year. Its P/E is higher than that of Barr at 23.5, but its PEG ratio of 2.6 indicates that it offers far better value for money once its superior growth outlook is factored-in.

Unilever also offers a lower risk profile than Barr. Its huge product range is far more diversified and it operates in multiple regions across the world. This means that if one region or country experiences a slowdown in growth, other regions can pick up the slack. In Barr’s case, the UK economy is experiencing a challenging period that could get worse due to Brexit. For Unilever, 60% of its sales come from emerging economies and this means that it has much better long-term growth potential than Barr.

With Barr being more expensive than Unilever, having lower growth forecasts and a higher risk profile, Unilever looks set to outperform its consumer goods peer over the medium-to-long term.

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Peter Stephens owns shares of Unilever. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended AG Barr. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.