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A-Brands

Fever-Tree Lowers Profit Forecast As Cost Pressures Increase

Tonic maker Fever-Tree lowered its annual profit forecast on Friday, as the British company faces worsening cost pressures and logistical issues.

Companies across the world have been battling a surge in prices hit by uncertainty over commodity supplies due to the Ukraine-Russia war and rising inflation.

The London-listed firm said it continues to be impacted by labour shortages mainly in the US east coast and is also facing higher glass costs due to limited availability.

'Solid Revenue Performance'

Tim Warrillow, CEO of Fever-Tree commented, "Fever-Tree has delivered a solid revenue performance in the first half of 2022, with a particularly strong performance in Europe and demand continuing to build in the US.

"Whilst we are seeing positive top line performance and expect to deliver good revenue growth for the full year, the challenging logistical and cost headwinds we highlighted previously have significantly worsened in recent months and we now expect them to notably impact our full year margins."

The company, which sells premium tonics and drink mixers, now expects full-year operating profit to be in the range of £37.5 million to £45 million (€44.2 million - €53.1 million), down from its earlier forecast of between £63 million (€74.2 million) and £66 million (€77.8 million).

Divisional Performance

In the first half, revenue in Europe grew 27% (31% at constant currency) to £41.3 million (€48.7 million), driven by the return of the on-trade channel and good performance in its key Southern European markets.

In the UK, Fever-Tree's revenue grew by 6% in this period, with on-trade channel seeing 73% year-on-year growth and off-trade sales declining by 21%.

In the US, revenue increased 11% year-on-year (9% at constant currency) amid port congestion and labour shortages, which resulted in inventory shortages. 

Read More: Fever-Tree's Chairman To Step Down After Nine Years

Warrillow stated, "The business is working on a large number of initiatives, and more closely than ever with suppliers throughout our supply chain, to mitigate the transitory headwinds and at the same time ensure we can satisfy the strong demand we are seeing in our growth regions."

"Despite the current challenges of the volatile logistical and cost environment, we continue to make good progress across our regions. The strong and growing consumer demand for the brand, our exciting pipeline of innovation, and the growing interest in long-mixed drinks, gives us more confidence than ever in the long-term opportunity," he added.

News by Reuters, additional reporting by ESM – your source for the latest A-Brands news. Click subscribe to sign up to ESM: European Supermarket Magazine.

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