Fever-Tree sales stagnate as bad weather reduces demand for tonic

Fevertree Drinks sales stagnated in the first half of 2024 as bad weather hit trading in Britain and Europe.

The tonic-mixing company reported turnover of £172.9m for the six months to June, compared with £175.9m for the same period last year.

UK revenue fell 6 per cent to £50.8m after the country endured heavy rain in the spring and a cooler-than-average start to the summer.

Domestic trade was further affected by lower gin sales in outlets such as bars, pubs and restaurants, although Fevertree remained the UK’s largest mixer brand by market share.

Meanwhile, the company’s European revenue fell 10 percent in constant currency to 60.3 million pounds as the impact of bad weather was compounded by the timing of some shipments and lower consumer confidence.

In comparison, US sales rose by the same percentage thanks to the growing popularity of its 150ml can among retail customers and new contracts with companies such as Hilton and Marriott Hotels.

Fevertree Drinks shares fell 9.9 percent to 7.77 pounds after its trading update, bringing its losses over the past 12 months to about 40 percent.

But although its turnover did not rise, the company enjoyed increasing profitability: adjusted pre-loss profits rose 79 per cent to £18.2m and pre-tax profits increased more than ninefold, from £1.4m to £13.2m.

Over the past two years, Fever-Tree’s bottom line has been hit by rising shipping costs and energy prices, which have made glass bottle manufacturing more expensive.

In response, it raised prices in key markets, re-tendered glass bottle supplies in the UK and Europe, and agreed contracts with transatlantic freight rates.

Tim Warrillow, chief executive and co-founder of Fever-Tree, said the company had “performed well in a difficult market environment.”

He added that despite recent problems in the UK and Europe, there has been “strong improvement in these regions as summer arrives late.”

The group therefore expects its sales to increase by 7 to 10 percent in the second half of 2024, which will translate into full-year revenue growth of 4 to 5 percent.

Founded in 2004 by Warrillow and Charles Rolls, Fever-Tree is the world’s largest supplier of premium carbonated mixers, sold to at least 75 countries.

Although it has traditionally sold tonic water, non-tonic products now account for about 40 percent of the company’s revenue, supported by high demand for ginger beer and cocktail mixes such as Margaritas and Bloody Marys.

Russ Mould, investment director at AJ Bell, said: ‘The company’s strategy of moving out of the tonic category is paying off, given that Americans do not have a huge appetite for gin.

More generally, Fevertree is expanding its soft drinks range to take into account lower alcohol consumption among young people.