Shares in Fever-Tree fell nearly 5% yesterday after the premium tonic maker posted a trading update that highlighted how the pandemic was impacting its business.
Ahead of its interim results due in September, the British firm confirmed that trading had been “dominated” by the impacts of coronavirus from March onwards and the subsequent widespread closure of the on-trade.
Fever-Tree gave no figures for its on-trade division, although it revealed that off-trade sales in the UK had surged up 34% year-on-year in the three months to 14 June. The firm highlighted that long mixed drinks as an affordable treat continued to resonate with consumers.
Off-Trade sales also grew “very strongly” in the US. However, while off-trade sales were “robust” across continental Europe, Fever-Tree said the impacts of the outbreak had been more significant in the South which is more reliant on the on-trade relative to Northern Europe. It stated that increased uncertainty during the last few months had led some of its importers to de-stock, which has impacted its European sales over the first half of the year.
With bars and restaurants gradually re-opening, Fever-Tree expects some of the off-trade demand to switch to the on-trade in the weeks ahead. However, the firm highlighted that the pace at which this will occur is likely to be gradual as consumers remain cautious and venues operate with lower capacities.
Fever-Tree said it expects “gross margin headwinds” during the financial year as a result of the pandemic. However, the group noted that it remains committed to planned investments, particularly in marketing. Fever-Tree will maintain its budget of up to £60m of operational costs for the full year.
Meanwhile, Fever-Tree used the update to announce that it had acquired German drinks distributor and sales agent, Global Drinks Partnership (GDP), in a deal valued at €9.5m.
The acquisition follows a seven-year partnership between the two companies. During this time, GDP has reportedly enabled Fever-Tree to establish a growing brand presence in the German on-trade and a strong footprint across national and regional retailers in the off-trade.
Based in Munich, GDP is a sales agent and importer of premium drinks. With its acquisition, Fever-Tree will gain access to established management, distribution relationships and sales channels. The British firm claimed that this will further strengthen its presence in Germany and at a much faster rate than could have been achieved from scratch.
Fever-Tree noted that the German market represents a considerable opportunity for the group as it is one of the largest mixer markets in Europe and is underpinned by emerging premiumisation trends.
GDP also distributes a portfolio of complementary premium beer and spirits brands, which generated €10m of sales in 2019. Fever-Tree said it looked forward to continuing to work with these brands in the future.
Tim Warrillow, CEO of Fever-Tree, said: “The completion of the GDP acquisition is an important step as we execute our growth plans in Germany, providing us with an ideal platform to take advantage of the opportunity within the German market and accelerate our growth.”
