Fever-Tree sales hit by ‘challenging’ UK market

Tonic water producer Fever-Tree’s 2019 UK sales are predicted to fall 1% as the market witnessed a “challenging Christmas” period with a slowdown in consumer spending.

The carbonated mixer producer has released its trading update for 2019 ahead of the group’s preliminary results on 24 March 2020. Fever-Tree expects full-year revenue for 2019 to increase by 10% to £260.5 million (US$339m) – a stark contrast to its 40% growth reported for 2018.

Fever-Tree’s revenue was boosted by “significant progress” across the group’s regions last year. However, the firm said it had performed below the board’s expectations, mainly due to the UK’s “subdued Christmas trading”.

In the UK, Fever-Tree forecasts sales to fall 1% to £132.6m (US$172.5m) for the 2019 full-year as the retail environment “experienced a challenging Christmas with the mixer category not immune from the weak consumer confidence and corresponding slowdown in spending”.

The firm said it has retained its category leadership position but 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”. Fever-Tree expects the category to “remain challenging” during the first half of 2020 as a result of the “current level of consumer confidence”.

The group also said it was “very well placed to return to growth” during the year due to “brand strength, operational improvements, distribution opportunities” and its “innovation pipeline”.

Tim Warrillow, CEO of Fever-Tree, said: “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.

“Whilst the UK mixer category has clearly not been immune from the consumer belt tightening seen in recent months, we remain the clear category leader and have a strong platform to return to growth during 2020 and beyond.

“However this is a global opportunity which remains in its relative infancy in many markets. The trend towards premium spirits and premium long mixed drinks continues to gather momentum around the world.

“Our decision to increase our investment in these regions and in particular in the US reflects our belief and excitement in the long-term opportunity ahead for the group.”

Investment in the US

In the group’s key growth markets, sales “accelerated” during the second half of 2019 in the US and Europe. For 2020, Fever-Tree said it expects this “good momentum” to continue across a number of regions.

In the US, Fever-Tree predicts 33% revenue growth to £47.6m (US$62m) for 2019 due to “significant progress” in expanding its distribution footprint.

As a result, the firm will invest further in the brand during 2020 to “drive significant long-term volume and profit growth in what is expected, over time, to become a very significant region”.

Its planned initiatives are forecast to “result in a one-off impact on net revenue growth” in 2020 with low double-digit growth in the US expected for the year ahead. Further details of these initiatives will be revealed in March.

Sales in Europe are expected to increase by 16% to £64.4m (US$83.7m) as the second half of 2019 witnessed a “good performance” across key territories. Fever-Tree said it is “outperforming its premium competitors and driving the growth of the category”.

When it comes to the rest of the world, Fever-Tree predicts a 32% revenue increase to £15.8m (US$20.5m). The group described the progress and momentum in regions such as Australia and Canada as “exciting” and said it will continue to “explore opportunities to invest for further growth in these markets”.

Fever-Tree expects full-year earnings to decline by 5% in 2019, compared with 2018.


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Author: Nicola Carruthers {authorlink}