Premium tonic maker Fever-Tree expects its sales to bounce back this year and exceed pre-pandemic levels, buoyed by at-home drinking and the easing of restrictions in the on-trade.
The British firm made the prediction as it confirmed its previous preliminary sales numbers and unveiled profit figures.
Over the 12 months to 31 December, the group’s sales were down 3% to £252.1m. However, this was not as bad as expected after a weak performance in its core market of the UK was outweighed by growth in its overseas markets as off-trade and e-commerce channels grew to mitigate the damage of hospitality closures.
Fever-Tree’s UK revenues plummeted 22% to £103.3m, despite off-trade sales increasing by 20% as consumers opted for spirit-based mixed drinks as a treat at home. Its on-trade sales, which usually represent around 50% of the business, were heavily impacted by the periods of lockdown and restrictions, leading to a decline of 62% year-on-year.
However, a sustained shift to at-home consumption drove its sales in the US up by 23% to £58.5m. Revenue in its Europe division grew 1% to £65.3m, a robust performance given the on-trade exposure of its Southern European markets which have been heavily impacted by the pandemic.
Fever-Tree’s adjusted core profit fell 26% to £57m on the weaker revenues and increased investment in the brand.
Looking ahead, the company expects to deliver revenue growth of between 12% to 16% in 2021, with margins consistent with last year. It said: “Whilst there remains continuing uncertainty relating to Covid-19, especially regarding the pace of both vaccine deployment globally and the lifting of restrictions that continue to impact the on-trade across our regions, we believe it is appropriate to reintroduce guidance for 2021.”
Fever-Tree revealed that the first months of this year had seen a continuation of positive trading in the off-trade across all its regions. It expects some of this demand to switch to the on-trade as it begins to re-open, but also sees the off-trade remaining strong.
Chief Executive Tim Warrillow said: “Although 2020 presented many unforeseen challenges, our resilient performance highlights the strength of the business and the Fever-Tree brand which is testament to the proactive and entrepreneurial way our team and our partners responded.
“Our performance in the Off-Trade was especially strong, exceeding our expectations across all our regions. Numerous periods of lockdown during the year encouraged increased consumer interest in premium spirits and stimulated excitement about mixing drinks at home, attracting more households and new consumers to the Fever-Tree brand than ever before.
“Consequently, we have increased our penetration in the UK, driven value share gains in the US, and Europe, and gained real traction in Canada and Australia.”
He added: “Our confidence in the future is underpinned by the long-term trend towards premium spirits and long mixed drinks which accelerated during 2020 and a trend that Fever-Tree, with our category leadership position, range and relationships, remains uniquely placed to continue to benefit from.”
NAM Implications:
- Issues have to be the extent to which increased home consumption will continue post-lockdown (unlikely at the same rate but off-trade prices still a driver)
- And also the possibility of a full return to on-trade (unlikely, pragmatists will budget for 70%, maximum)
- Time for a reassessment of relative competitive appeal in all channels, post-lockdown?
