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Fever-Tree profits fall 20%
Mixer maker Fever-Tree’s gross profits were 20% lower in the first half of the year after bars and restaurants closed in March.
However, the company also reported a 24% rise in supermarket revenues, which helped to offset the worst of lockdown. Fever-Tree started selling packs of its tonic waters and ginger beers in larger formats to cash in on consumers spending more on shopping trips stock up for the week, as well as running discounting promotions.
Fever-Tree launched a new premium soda range in the UK to cater to the influx of people mixing drinks at home, and a sparkling pink grapefruit mixer in the US, which capitalised on the country’s rising Tequila sales this spring.
Although retail sales are promising, the company said in its interim results statement that the on-trade, which made up around 45% of its business before lockdown, offers higher margins, so it may take some time for profits to fully recover while consumers are still showing reluctance to go out.
Pre-tax profits fell 37.9% per cent to £21.7 million in the first half of the year, while revenues dropped 11.2% to £104.2 million. Chief executive Tim Warrillow had a cautious outlook for the rest of the year, expecting full-year revenues of between £235 and £243 million, down from £261 million last year.
While the company stated its recovery would be slow, Warrillow, who co-founded the company with Sipsmith Gin’s former managing director Charles Rolls in 2005, said the figures were “very encouraging”. The company was able to gain market share against newer challenger brands that have emerged over the past few years.
Fever-Tree did not cut costs to the same extent as other drinks companies, sticking to a target of £60 million for operating expenses. The company joined other brands such as English sparkling wine maker Hattingley Valley in launching its first TV advert during lockdown to target at-home drinkers, and also said it has “significant” marketing activity planned for the rest of the year.
His statement comes after spirits groups such as Diageo, which makes Gordon’s gin, lost close to half of their profits thanks to the widespread closure of bars and restaurants.
“We have increased our penetration in the UK, consolidated our number one position, and driven value share gains in the US, Europe, and as far afield as Canada and Australia.”
Well, if Fever Tree’s profits are down, maybe they should have someone else besides Southern Glazers represent them in the US. I manage a retail business in Maryland and the trouble began with the roll out of their Pink Grapefruit Tonic. We were creating a special section of Tequila cocktails – Southern has not, and does not have the product in stock. My local distributor has only had six skews available. So, are their sales down because of restaurants, are they down because of product shortage, or is the buyer at Southern asleep at the wheel?