March 25, 2023

Fevertree cautions energy costs will swell production expenses by £20m as swank tonic maker eyes United States development

  • About 80% of the premium tonic maker’s items are offered in glass bottles 
  • The group projections changed revenues of in between £36m and £42m in 2023
  • Fever-Tree stated the current UK rail strikes had a ‘significant effect’ on joyful trade  

Fevertree has warned soaring energy prices will directly contribute an extra £20million in estimated glass-making costs this year.

About 80 per cent of the premium tonic maker’s products are sold in glass bottles, which have become more expensive to manufacture as gas prices have skyrocketed following Russia’s invasion of Ukraine.

Though energy prices have eased from their peak, the London-listed firm told investors on Thursday they remain at least three times above their 2021 levels when Covid-19 restrictions depressed gas and electricity usage.

Production costs: About 80 per cent of Fever-Tree’s products are sold in glass bottles, which have become more expensive to manufacture as gas prices have skyrocketed

Fevertree is also experiencing double-digit percentage increases across several significant input costs, such as ingredients, packaging and filling fees.

Due to these impacts, the group forecasts adjusted earnings of between £36million and £42million in 2023, compared to approximately £39million last year and much lower than market expectations.

Fevertree Drinks shares slumped by 5.55 per cent to £10.55 on Thursday morning, meaning they have each lost about 57 per cent of their value in the past 12 months.

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However, the firm is predicting annual turnover will expand by 13 to 18 per cent this year, with growth heavily driven by a rebound in domestic trade and the  market.

Chief executive Tim Warrillow said: ‘2022 has seen the Fever-Tree brand continue to gain traction and prominence across the globe resulting in double-digit revenue growth and profits in line with expectations.

‘Furthermore, the brand continues to increase its clear global market leadership position and remains the primary driver of this increasingly prominent international drinks category.’

The group’s US sales overcame serious port congestion and the delayed build-up of production on the country’s east coast to surge by nearly a quarter in 2022.

Impressive growth was also reported across Europe, particularly in southern states, as tourism picked up again on the removal of Covid-related restrictions. 

This offset declining trade in the UK, which was coming off a strong comparative performance the previous year when the enforced closure of pubs, bars and restaurants produced a surge in supermarket purchases as consumers shifted to making homemade cocktails.

Rail strikes had a ‘notable impact’ on demand during the festive season, according to the group, a critical trading period for thehospitality sector.

Nonetheless, the business noted it continues to be Britain’s leading mixer brand and was making ‘significant progress’ penetrating the adult soft drink segment.

It is also the biggest premium tonic water brand by market share in the US, having overtaken the longstanding brand Schweppes just three years after setting up operations in the territory, where it is sold by drinks conglomerate Dr Pepper Keurig.

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