Fever-Tree’s profits fell 15% in the first half of the year as it bedded in a new strategic partnership with Molson Coors in the US.
Molson Coors bought an 8.5% stake in Fever-Tree in January as part of a deal to produce, distribute and sell the carbonated drinks brand in North America.
This has led to some initial friction after Fever-Tree opted to wind down a US bottling arrangement ahead of the deal, meaning its drinks are currently being produced in the UK.
Although it plans to move production back across the Atlantic, this has left it subject to US tariffs of 10% in the meantime.
Overall, Fever-Tree has spent £4.1m so far this year on the transition to the Molson Coors partnership.
Fever-Tree’s US profits also fell due to a profit-sharing agreement with Molson Coors, which saw its margin decline from 14.8% to 8.1%.
As a result, the group’s pre-tax profits fell to £11.2m in the six months to 30 June, down from £13.2m a year before.
“The transition of the business to Molson Coors is progressing well and despite the complexity of such a transition, it has been particularly encouraging to see the underlying US momentum has been maintained,” said CEO Tim Warrillow.
Edward Mundy at Jefferies said the Molson Coors partnership should boost earnings with US margins much lower than the 23.8% across the rest of the group.
“There is a significant opportunity for margins to improve in the US given benefits of scale, on-shoring of local production (2027), broader efficiency benefits and as marketing spend normalises,” he added.
Sales in the US were up 4%, offsetting a 6% decline in the UK business. Total revenue rose 2% to £172.2m.
The group’s UK sales are struggling due to continued challenges in the on-trade and a widespread decline in gin consumption.
It is diversifying its non-tonic portfolio, however, with these now accounting for 45% of group sales, and 30% in the UK.
No comments yet