Fevertree customers enjoying lighter summer drinks after price hikes

Fevertree Drinks backed its full-year guidance today following a ‘good start’ to the year.

In an update ahead of its annual meeting, the posh tonic maker said trading had been in line with expectations set out in the FY22 results.

In the UK, the company recorded its highest-ever value share in the on-trade segment during a first quarter trading period, around 6 per cent higher than its share in the first quarter of 2020. 

Fevertree said it expects its off-trade sales to build momentum as the year progresses and that it is trading in line with expectations in the UK.

It expects total revenue to come in at around £390million to £405million for the year. 

The firm’s US arm enjoyed a strong star to the year in both on and off-trade, with good value and volume growth across all categories, and particularly strong growth in flavoured sparkling and club soda drinks.

Fevertree said that in Europe it continued to gain value share of the premium mixer category at retail, with encouraging growth in Italy and France. It said customers were enjoying the group’s ‘lighter summer drinks’ in this region.

In Rest of World, the group continues to make good sales and operational progress across regions.

‘We are confident that the brand will continue to deliver strong revenue growth as we start our key summer trading period and therefore reiterate our top-line guidance range as set out in March at £390million to £405million,’ it said.

The company added: ‘Whilst inflationary cost pressures remain elevated, the group continues to be focused on delivering initiatives to mitigate these costs and expects to drive margin improvements as we progress through the year, which means we’re on-track to deliver EBITDA in-line with our guidance range of £36million to £42million for 2023.’

Earlier this year, Fevertree unveiled plans to increase the price of its products due to high inflationary pressures and production costs.

Today, the group also revealed a change to the board, with Camelot co-chief executive Clare Swindell to join the board. Coline McConville will be stepping down.

Fevertree shares fell today and were down 0.84 per cent or 12.00p to 1,422.00p in late morning trading, having fallen over 9 per cent in the last year. 

Analysts at Liberum, said: ‘Encouraging signs include a strong UK On-Trade performance with value share in 1Q’23 6pts higher than 1Q’20, and a strong start in both On and Off-Trade in the US.

‘Cost pressures, particularly in glass, remain elevated for 2023 but should subside from 2024 onwards, with self-help initiatives like local US production. 

‘It remains to be seen how low glass and logistics costs end up which remains key to the pace of the margin recovery, but we see a return to historic levels of high 20 per cents/low 30 per cents EBITDA margin as unlikely.’

Liberum upped its price target on Fevertree to 1,500p from 1,000p.