Premium tonic maker Fever-Tree has cut its full-year revenue forecasts, blaming the weaker consumer spending in the UK.
The company has seen rapid growth in the last few years and is now the market leader in mixers having benefited from the surge in the popularity of gin. However, the group, which warned a few months ago that an exceptionally strong summer in 2018 would be tough to repeat this year, said today that it now expects to deliver annual growth of around 2% in its domestic market.
In a brief trading update statement, Fever-Tree highlighted that its performance in the UK Off-Trade had been behind its expectations in the second half of 2019 due to the recent slowdown in consumer spending caused by Brexit and political uncertainty.
However, it added: “Despite these short-term headwinds, Fever-Tree remains in a very strong position in the UK Off-Trade, maintaining our leadership position with 38% value share with little impact from the increasing number of premium competitors who collectively remain at under 5% value share.”
Meanwhile, its On-Trade business, which accounts for half of UK revenues, was said to have continued to perform well due to winning new accounts and good growth across existing national accounts. The group stated: “Whilst our tonic range still remains the key focus, we are seeing increasing opportunities and interest from our customers and consumers in our broader range of mixers as we look ahead to 2020.”
The sales slowdown in the UK was being partially offset by better-than-expected growth elsewhere, especially in the US where sales accelerated in the second half as a result of distribution expansion across its key Off-Trade accounts, as well as further distribution gains in the On-Trade channel. Fever-Tree now expects to deliver annual growth of 34% in the US, which is ahead of previous expectations.
The group revealed that it had also seen acceleration of growth in the second half in Europe and expects full year sales to be ahead by around 19%. The premium mixed drinks trend is also helping Fever-Tree in other markets with its Rest of World unit on track to deliver growth of around 35%.
Despite the strong growth overseas, the group warned that its annual revenues would fall short of analysts’ expectations of £275m. It now forecasts revenue of between £266m-£268m, representing year-on-year growth of 12-13%. The company added that margin expectations were unchanged.
CEO Tim Warrillow commented: “We continue to see growth across all four regions. Indeed, sales accelerated in our key growth markets of the US and Europe. Fever-Tree’s progress in the US is particularly encouraging and the signing of a US bottling partner is a further step in building our operations in this exciting market.”
He added: “Despite challenging comparators, our performance in the UK On-Trade underlines the strength of the brand and while the mixer category in the Off-Trade is moderating alongside the recent slowdown seen across the wider grocery channel, we continue to maintain our clear UK market leadership position.”
NAM Implications:
- From a competitors’ point-of-view, the market leader is still setting the pace…
- …with slowdowns in some sectors being offset elsewhere.
- Competitors need to take a longer view…
- …and identify and play in niche areas where appropriate…
- …rather than going head-to-head vs Fever-Tree until its real growth has slowed down.
