Fever-Tree, the maker of premium mixers, said today that Russia’s invasion of Ukraine has caused “significant uncertainty” for short term costs, adding to inflationary pressures already being felt by the business.
The fast-growing firm had been employing a range of mitigating actions before the war but highlighted that commodity prices had increased dramatically in recent weeks because of the terrible events unfolding in Ukraine. As a result, Fever-Tree today lowered its EBITDA forecast for 2022 from the £69m to £72m range issued in January to between £63m and £66m.
With the on-trade market expected to continue to recover this year, Fever-Tree kept its forecast for group revenues to grow around 14%-17% to £355m and £365m. However, this is not likely to be enough to offset the inflation hit to margins.
Tim Warrillow, co-founder and CEO of Fever-Tree, remained upbeat on the company’s prospects, saying: “The long-term global opportunity for Fever-Tree remains substantial and we are as confident as ever in the brand’s ability to capitalise on this.
“We are excited by the growing interest in the long-mixed drink category from retailers, spirits brands and consumers, especially given the increasing focus on premium segments, which places Fever-Tree, as the largest global premium mixer brand, at the centre of these trends.”
During the year to 31 December 2021, Fever-Tree’s total revenues grew 23% to £311.1m.
Adjusted EBITDA rose 11% to £63.0m, although margin was down 240bps to 20.2% due to the global supply chain disruption that impacted costs.
UK sales were up a better-than-expected 15% to £118.3m, aided by a recovery in the on-trade alongside continued raised demand for its mixers in the off-trade as people consumed more spirit-based drinks at home.
The brand’s momentum in the US continued, with sales up 33% to £77.9m. Just over three years after Fever-Tree set up operations in the country, it recently overtook Schweppes as America’s leading tonic water brand by value in retail.
Fever-Tree’s performance in Europe was also ahead of expectations, with sales increasing by 35% to £88.2m. This was driven by continued off-trade progress and the reopening of on-trade venues halfway through the year.
Patrick Higgins, equity analyst at Goodbody commented: “While Fever-Tree’s update has provided some encouragement for the sector, with sales continuing to recover in the on-trade following several Covid-19 lockdowns, the company is facing significant inflationary pressures. Global supply chain disruptions have also been further compounded by the spike in commodity prices due to the Russian invasion of Ukraine.
“Overall, although Fever-Tree will likely continue to deliver robust growth over the medium term given the structural growth opportunity in the premium long-mixed drinks category, today’s results demonstrate how the group is clearly facing significant near-term challenges on margins due to the backdrop of rising inflation. In addition, Fever-Tree will be impacted by the falling disposable incomes and confidence of consumers, particularly as a premium brand.”
