Fevertree Loses Its Sparkle As Britons' Taste For Premium Tonic Sours

By Dave Simpson
Fevertree Loses Its Sparkle As Britons' Taste For Premium Tonic Sours

Drinks maker Fevertree has issued its second revenue warning in three months following disappointing Christmas sales.

The company said that its annual profit would be 5% lower than a year ago. Revenue for the calendar year 2020 was expected to rise 9.7% to £260.5 million, it said, but that was lower than its forecast in November for revenue of between £266 million and £268 million.

"The wider retail environment in the UK experienced a challenging Christmas with the mixer category not immune from the weak consumer confidence and corresponding slowdown in spending," the company said.

Once a market darling, Fevertree grew rapidly to become a strong competitor to Coca-Cola's Schweppes - the market leader in premium tonic waters in Britain - as UK sales of high-end gin surged in the past few years.

Fevertree shares have risen more than eleven-fold since the company listed in 2014, but since the start of 2020, they have plunged more than 30% as weakening consumer spending halted growth.


"Fevertree has confirmed the market's worst fears, namely that the UK operations are finding it hard to sustain previously high rates of sales growth," Russ Mould, investment director at investing platform AJ Bell, said.

"Competition has also been intensifying and one might even suggest that the gin craze which has helped Fevertree may have peaked," he said. Rum sales overtook gin sales in Britain in the third quarter of 2019 for the first time in five years, Mould said, citing the Whisky Exchange.

Fevertree said that it expects challenges in Britain to remain in the first half of 2020.

Jefferies analysts said that the company could now become a potential acquisition target, with big soda companies as prospective buyers.

Fevertree had 23.1% of the UK's tonic market last year, according to Euromonitor International, up from 12.6% in 2018. Coca-Cola has seen its share rise over the same period to 26.9% from 23.4%.


US Calling

Fevertree said that revenue growth this year would be driven by strong demand for mixers in the United States and continental Europe.

Britain sends more gin around the world than it does beef or beer, with gin sales overseas worth 28% more than beer sales in 2018, the Wine and Spirit Trade Association says.

Fevertree has been targeting growth in the United States - the largest importer of British gin - and said that it will be investing further in the brand over the course of 2020, and lowered its price point to premium from super premium.

The company did not disclose a price figure.

The US expansion is expected to result in a one-off impact on net revenue growth in 2020, Fevertree said, adding that it is revising its growth forecasts for the business to low double digit for the year ahead.

News by Reuters, edited by Hospitality Ireland. Click subscribe to sign up for the Hospitality Ireland print edition.