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Fever-Tree shares slide by 25% as UK sales shrink
Popular premium mixer brand Fever-Tree saw the price of its shares slashed by a quarter on Monday after the company issued its second profit warning in three months.
Fever-Tree’s shares were trading at £15.05 on Monday, their lowest level since April 2017, after the company said it expected full-year profits to be around 5% lower in 2019 than in 2018.
Indicating that the upscale mixer market might be losing its fizz, Fever-Tree put the share price dip down to poor UK sales over the Christmas period and a general slowdown in consumer spending.
“The expected improvement in trading during this important period did not materialise with the macroeconomic uncertainty leading to a subdued end to the year across both the on and off-trade,” the company said in a statement.
“While we expect conditions to remain challenging in the first half of 2020, reflecting the current level of consumer confidence, our brand strength and distribution opportunities provides us with confidence in returning to growth during the year,” it added.
Fever-Tree was founded in 2004 by former managing director of Plymouth Gin, Charles Rolls, and advertising executive Tim Warrillow, filling a gap in the market for a premium tonic water brand made with natural ingredients, including quinine from the Congo.
The brand soon expanded its offering to include the likes of ginger beer, Sicilian lemonade, spiced orange ginger ale and Madagascan cola.
Having long dominated the premium mixer category, Fever-Tree is facing increased competition from new players as the ‘no and low’ category continues to grow and the demand for sophisticated soft drinks to be enjoyed without alcohol rises.
Fever-Tree grew its revenue by 10% last year 2019 to £260.5m, though the company performed below expectations in the UK due to tough trading conditions, which saw annual sales drop from £134.1m in 2018 to £132.6m last year.
The brand did however perform strongly in the US, where sales were up by 33%, and also in Europe, which saw a 16% rise in sales last year.
“Despite the subdued end to the year in the UK, we have delivered a strong performance across many of our regions in 2019, and begin 2020 with real momentum in a number of key growth markets.
“While the UK mixer category has not been immune from the consumer belt tightening seen in recent months, we remain the category leader and have a strong platform to return to growth during 2020 and beyond,” CEO Tim Warrilow said.
“However, this is a global opportunity which remains in its relative infancy in many markets. Our decision to increase our investment in the US reflects our belief and excitement in the long-term opportunity ahead for the group,” he added.
Fevertree was the first to enter the arena of “artisan” mixer at the beginning of the gin revolution, so they grew exponentially thanks to the gin growth. However, it did not take longer for other mixer makers to join in for a share of the market, Fevertree got a little too comfortable, lost their initial “artisan” appeal, together with a sales policy that included selling their products everywhere, including Lidl and Aldi, sales have not gone as the management hoped. Sales outside the UK are growing and can only go up, it is a new market for them, but they will eventually face competition and sales would stall, but this growth will never make up for the loss in the UK market which is their biggest market and the trend will not reverse unless there is a clear change of directions by the management.