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Fever-Tree Drinks Shifts Focus To Off-Trade, Posts 'Encouraging Performance'

Premium mixers brand Fever-Tree Drinks is seeing strong take-up in off-trade sales, despite continued market challenges, the company said in a statement ahead of its Annual General Meeting.

According to analyst Russ Mould at AJ Bell, the brand could even be considered a "lockdown winner, as consumer confinement may have prompted more people to try its products, and loyalty may have been strengthened among existing customers".

Changing Tactics

In its statement, the group said that on-trade sales continue to account for around 50% of its UK revenue, and that this has been 'severely impacted' by the continued closure of the HoReCa sector.

At the same time, however, sales in its off-trade division were up 24% in the first full month since lockdown measures were introduced, and it has seen 'continued positive momentum since', particularly in the convenience channel.

"While the on-trade remains fully or partially closed across many of our regions, the group's performance across the off-trade continues to be very encouraging,' commented Bill Ronald, the company's chairman.

"Management remain focused on delivering our long-term strategy and we are confident the group will be well placed once the current period of uncertainty ends."

Ronald added that the group's asset-light business model supports its "secure financial position, with a FY19 net cash position of £128 million, and we benefit from a strong brand portfolio with well-balanced revenue streams across regions, channels and customers".

At-Home Tipples

According to Mould, the group's solid performance indicates that many consumers have continued to enjoy their gin and tonics during lockdown.

"Strong sales of its tonic waters in convenience stores and supermarkets is welcome news for the business given how its growth trajectory had been under pressure prior to the coronavirus crisis," he said.

“This isn’t just a UK phenomenon; sales of Fever-Tree’s products in the US for home consumption have also done well very during lockdown. This is particularly important as the drinks company is still trying to crack the US market, so the sales boost effectively lays stronger foundations for the future."

On a broader scale, however, Mould suggested that Fever-Tree's earnings are still likely to suffer in the short term "because of a sharp decline in sales to hotels, pubs, restaurants and bars, most of whom are either shut or operating at low capacity.

"However, the company will still benefit from having its brand exposed to the consumer in shops and so it won’t have been forgotten once leisure outlets ramp up operations again.”

© 2020 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine

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