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Fevertree loses fizz on margin warning

by LLB Editor
20th Jul 21 9:50 am

Any trading momentum fizz at premium mixers firm Fevertree has gone flat thanks to the increased costs the company is facing.

However, management can’t be blamed for the hit to margins from increased logistics costs any more than they could be taken to task for a change in the weather.

The increasing costs of shipping goods globally is something many businesses are facing at the moment and it is sobering to see Fevertree suggest this could be a problem for the medium term at least.

“From the perspective of Fevertree itself the big growth it is seeing in the US is encouraging and probably more significant to the company’s long-term prospects,” said AJ Bell’s Russ Mould.

“Growth in the UK market is slowing, implying that after years of rapid expansion the company is reaching saturation point in its domestic market.

“However, its rapid growth in the US and Germany suggests there are still untapped opportunities for Fevertree to exploit.

“The US is a huge market and the company’s progression from its traditional focus on tonic water, lemonades and soda water for the white spirits mixer market into ginger ales, ginger beer and cola for the dark spirits market in recent times should help in the States given American’s preference for whisky and rum.

“The company is also seeing some benefit from reopening as on-trade sales return and encouragingly it is still enjoying higher off-trade sales than it saw pre-Covid.

“Fevertree benefits from an asset-light, outsourced model which means it has greater flexibility to respond to changes in demand.

“It also means it has less money tied up in its operations so a higher percentage of sales convert directly to cash.”

 

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