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Tonic Maker Fever-Tree's Profit Fizzles On High Glass Costs

By Reuters
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Tonic Maker Fever-Tree's Profit Fizzles On High Glass Costs

Tonic maker Fever-Tree has trimmed its annual profit forecast after first-half earnings halved on higher glass costs and a wet summer in the UK.

Fever-Tree has been grappling with spiralling costs and shortages of glass bottles in Britain, forcing it to implement price increases to protect margins and ramp up glass production in the US.

'Whilst we are experiencing significant margin dilution in the current year, most notably due to materially elevated glass costs, we are confident that we will see margin improvement in the second half,' the company said in a statement.

It said it expects a 2023 core profit of around £30 to £36 million (€34.9 - €52.4 million), down from an earlier forecast of £36-£42 million (€41.9 - €48.9 million), due to a wet summer in the UK and impact from inventory buyback in Australia.

Analysts had forecast a profit of about £38.4 million (€44.7 million), according to a company-compiled consensus.

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Shares in Fever-Tree pared losses to trade down about 1% at 1,290 pence at 08:17 GMT.

Other Highlights

The company posted a 54% fall in its adjusted core profit to £10.2 million (€11.9 million) on sales up 9% for the half year ended 30 June.

"Margins have taken a big hit from ballooning glass manufacturing costs, which the firm hasn’t fully been able to pass on through price increases," said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

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Consumer products giants including Unilever, Coca-Cola and Reckitt have shown they can pass on costs to customers to protect margins helped by brand power.

Founded in 2003, Fever-Tree has emerged as a strong contender to Coca-Cola's Schweppes in the tonic market.

Tim Warrillow, CEO of Fever-Tree, commented, "Whilst the vagaries of the British summer weather have impacted sales since period end, contributing to our revised guidance for the full year, the group still expects to deliver good growth in the reminder of 2023.

"Looking ahead to 2024, with a stronger global market position than ever before, a broader product portfolio and our confidence in delivering significant margin improvement, the group is well set up for strong, profitable growth going forward."  

Article by Reuters, additional reporting by ESM.

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