Fever-Tree shows ‘subdued’ results but still sees growth in the US
Shareholders in upmarket mixers maker Fever-Tree Drinks will be cheering the company’s strategy in forging links with US brewer Molson Coors which paves the way for extra production capacity in America. Ron Emler reports.
Despite its latest results showing a sales downturn in the UK home market and a squeeze on margins in the US, the joint venture with Molson Coors seems set to herald the group avoiding President Trump’s tariffs on imports and aluminium cans in what has rapidly become its biggest market.
Strategy
Most of Fever-Tree’s products sold in the US are still produced in Britain because it wound down a US bottling arrangement ahead of its partnership with Molson Coors, which has a stake in the UK company in return for the exclusive right to sell, distribute and produce the brand in America.
As that link develops and the proportion of imports falls, so will the impact of Trump’s imposts.
Fever Tree saw a 5% drop in its first-half pre-tax profit, as UK demand was “subdued”, leading to sales falling by 6% to £48.1m compared with the same period last year.
But overseas business meant that revenues were 2% higher at £172.2m, with sales in the US growing by 6% and in the rest of world sales by 17%.
The company said it was facing a “challenging backdrop” in the UK on-trade where “higher duty, wages and business rates” severely impacted its scope on pricing.
Partner Content
Fever-Tree said: “While this [the switch to Molson Coors] has exposed the partnership P&L to a tariff impact, we are jointly working hard to mitigate this impact ahead of the prospective onshoring of US production in the medium term.”
As part of the deal FeverTree and Molson Coors are equally splitting the costs of the 10% tariffs on UK imports.
It believes that improvements in its global supply chain and procurement processes alongside the prospective increase of US output over the medium term would allow for margin recovery over time.
‘Progressing well’
Chief executive Tim Warrillow said: “The transition of the business to Molson Coors is progressing well despite the complexity of such a transition. In the UK, the wider on-trade category continues to face challenges, but our off-trade performance has remained robust.”
He said that in the off-trade more customers were buying products from across the portfolio, and that the proportion of sales from tonics was down to 45% of total revenue.
He added: “The group has made a good start to the second half of the year across our regions and we remain comfortable with full year market expectations.”
As an indication of its confidence, Fever-Tree plans to increase its share buyback programme by a further £30m next year.
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