Fevertree warns energy prices will raise production costs by £20m as chic tonic maker targets US growth
- Around 80% of the premium tonic maker’s products are sold in glass bottles
- The group expects adjusted profit of between £36m and £42m in 2023
- Fever-Tree said recent UK rail strikes had a ‘noticeable impact’ on the festive trade
Fevertree warned that soaring energy prices will directly contribute an additional £20m to estimated glass-making costs this year.
About 80% of the high-end tonic maker’s products are sold in glass bottles, which have become more expensive to manufacture as gas prices soared after Russia invaded Ukraine.
Although energy prices have fallen from their peak, the London-listed company told investors on Thursday that they remained at least three times above their 2021 levels when Covid-19 restrictions pushed down gas and electricity consumption.
Production costs: About 80% of Fever-Tree’s products are sold in glass bottles, which have become more expensive to manufacture as gasoline prices have soared.
Fevertree is also seeing double-digit percentage increases for several important input costs, such as ingredients, packaging, and refill fees.
Due to these impacts, the group expects adjusted profit to be between £36m and £42m in 2023, down from around £39m last year and well below market expectations.
Shares of Fevertree Drinks fell 5.55% to £10.55 on Thursday morning, meaning they have each lost around 57% of their value in the past 12 months.
However, the company expects annual revenue to grow 13 to 18 percent this year, with growth strongly driven by a rebound in domestic trade and the market.
Chief Executive Tim Warrillow said: “2022 has seen the Fever-Tree brand continue to gain momentum and awareness across the globe, resulting in double-digit revenue and profit growth. conform to expectations.
“Furthermore, the brand continues to grow its leading position in the global market and remains the main driver of this increasingly important international beverage category.”
The group’s sales in the United States overcame severe port congestion and the delayed increase in production on the country’s east coast to increase by almost a quarter in 2022.
Impressive growth has also been reported across Europe, particularly in southern states, as tourism has picked up after the removal of Covid-related restrictions.
This offset the decline in trade in the UK, which had a strong comparative performance the previous year when the forced closure of pubs, bars and restaurants led to increased shopping in supermarkets as consumers turned to manufacturing homemade cocktails.
The rail strikes had a “noticeable impact” on demand during the holiday season, according to the group, a critical business period for the hospitality industry.
Nonetheless, the company noted that it continued to be Britain’s leading mixer brand and was making “significant progress” in entering the adult soft drink segment.
It is also the largest premium tonic water brand by market share in the United States, having overtaken the long-standing Schweppes brand just three years after entering the territory, where it is sold by the conglomerate. of Dr Pepper Keurig beverages.
