Fever-Tree reports ‘encouraging’ off-trade sales

Mixer producer Fever-Tree has reported a strong off-trade performance during the Covid-19 crisis, however the company said it was difficult to predict how sales would evolve post-lockdown.

Leading tonic water producer Fever-Tree released a Covid-19 update today (4 June) ahead of its annual general meeting (AGM).

Bill Ronald, chairman of Fever-Tree, said in a statement: “As highlighted at the group’s preliminary results in April, although we have been impacted by the Covid-19 crisis, we are well positioned to manage our way through the current situation.

“We have a fantastic team across the globe who have been working incredibly hard alongside our key customers, suppliers and distribution partners.

“Our asset-light business model continues to support our secure financial position with a FY19 net cash position of £128 million [US$160m] and we benefit from a strong brand portfolio with well-balanced revenue streams across regions, channels and customers.

“While the on-trade remains fully or partially closed across many of our regions, the group’s performance across the off-trade continues to be very encouraging. Management remain focused on delivering our long-term strategy and we are confident the group will be well placed once the current period of uncertainty ends.”

Covid-19 impact on markets

In the UK, Fever-Tree’s on-trade sales represent 50% of the market’s revenue and continues to be “severely impacted” by the lockdown, which came into force on 23 March. Meanwhile, the company’s off-trade performance was “strong”. Sales in the first full month of lockdown (the four weeks ending 19 April) grew 24% year-on-year, IRI data showed, with “continued positive momentum” as a result of increased at-home drinking.

In the US, the off-trade, which usually contributes 70% of the group’s sales, has grown “extremely strongly” since lockdown measures began, which varies by state.

Nielsen data cited by Fever-Tree, which covers just under half of the group’s off-trade sales in the US, reported 98% year-on-year growth for the four weeks to 18 April and 96% in the four weeks to 16 May.

Fever-Tree said this performance was the result of incremental distribution and increased at-home consumption. It also points to the “growing strength” of the brand, boosted by the trend for premium, long drinks.

Looking across Europe, the impact of Covid-19 varies across countries. Northern Europe is “more robust” due to its dependency on the off-trade, while Southern Europe is “more reliant” on the on-trade channel. As a result, Southern Europe is “more significantly affected”, Fever-Tree said.

However, Fever-Tree said it remains confident in building momentum across the region “over the medium and long-term as premiumisation continues to gain traction”. It claims to be the only premium brand with scale across Europe.

In the rest of the world region, Fever-Tree also delivered “strong off-trade sales and continued distribution gains”, particularly in Australia and Canada.

FY 2020 outlook

In regards to its operations, Fever-Tree said it continued to maintain production and supply. In addition, the group has not furloughed any of its staff and is offering support to its on-trade partners across the world.

Fever-Tree said: “Given the uncertainty and dynamic nature of the situation, it continues to be hard to predict how sales will evolve both during and as we emerge from the lockdown period.

“The easing of restrictions and the pace at which the on-trade re-opens will vary between regions, but it is becoming increasingly likely that this process will be gradual and cautious, with social distancing measures remaining in place for some time.”

Fever-Tree also said Covid-19 will “have a material impact on FY20 trading, with headwinds on gross margin due to changes in channel and territory mix”.

However, the group said it will continue to “invest through this period of uncertainty as opportunities arise, particularly in marketing, enabled by the group’s strong balance sheet and conviction in our ability to deliver long-term sustainable growth”.

Go to Source
Author: Nicola Carruthers {authorlink}