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Profits have declined at Fever-Tree as inflationary pressures squeezed margins and sales in the UK market shrank as consumers cut back spending to cope with the cost-of-living crisis.
Group revenues at the premium mixer brand jumped 11% to £344.3m in the year ended 31 December 2022 thanks to 18% growth across the US, Europe and the rest of the world, which now make up a combined 70% of the business.
However, in the domestic UK market, which remains the group’s single largest, sales declined 2% to £116.2m, with the off-trade category recording a fall of 11%, which the group blamed on lapping figures boosted by lockdowns in 2020 and 2021.
The brand held its volume share in the retail space and remained “by far” the largest premium mixer brand in the category, it argued.
Fever-Tree said it expected to return to growth in the UK in 2023.
Adjusted EBITDA fell 37% in 2022 to £39.7m, which was marginally ahead of expectations, with surging costs for glass and trans-Atlantic freight contributing to a fall in gross margins of 7.6 percentage points to 34.5%.
Pre-tax profits for the year declined 44.1% to £31m.
CEO and co-founder Tim Warrillow said the business had made “an encouraging start” to 2023 and was confident of maintaining momentum in the months ahead.
“The Fever-Tree brand, as shown by our highest ever combined market share in the UK, and leadership position across many markets, is stronger than it has ever been and we remain committed to investing for the long-term both within our core mixer category but also through our expansion into adjacent categories such as adult soft drinks and cocktail mixers,” he added.
“Whilst the group continues to operate in a challenging cost environment, we are resolutely focused on delivering a wide range of initiatives across the business that will optimise operational capabilities and underpin our confidence in driving margin improvement in 2024 and beyond.”
Fever-Tree reiterated 2023 revenue forecasts in the range of £390m to £405m, representing growth of 13-18%. The group also expected adjusted EBITDA in line with previous guidance of £36m to £42m.
Shares in the group surged 6.6% higher to 1,149p as markets opened this morning.
Morning update
Food price inflation has hit a 45-year high of 18% amid shortages of fruit and vegetable, according to the latest data out this morning.
The rise in food prices, alongside higher energy bills, contributed to a shock jump in the UK headline rate of inflation to 10.4% in the year to February, up from 10.1% a month earlier.
It is the first rise in UK inflation for four months and defied the expectations of the Bank of England for a fall back to 9.9%.
The Office for National Statistics reported food and non-alcoholic drinks prices rose at the fastest rate for 45 years to 18.2%, compared with 16.8% in January.
Vegetable prices were the main driver of the jump, rising 18% in the year to February, which is the higest rate since February 2009.
The ONS said the shortages of fruit and veg on supermarket shelves last month may have driven up prices.
Annual inflation rates for bread and cereals, chocolate and confectionery, other food products (principally ready-meals and sauces) and hot beverages were also each the highest since at least 2008.
Alcoholic beverages and tobacco inflation increased from 5.1% to 5.7%, with prices for alcohol in restaurants and pubs driving up costs for households.
Clothing costs also rose last month but fuel prices continued to fall.
ONS chief economist Grant Fitzner said: “Inflation ticked up in February, mainly driven by rising alcohol prices in pubs and restaurants following discounting in January.
“Food and non-alcoholic drink prices rose to their highest rate in over 45 years with particular increases for some salad and vegetable items as high energy costs and bad weather across parts of Europe led to shortages and rationing.
“These were partially offset by falls in the cost of motor fuel, where the annual inflation rate has eased for seven consecutive months.”
British Retail Consortium CEO Helen Dickinson said: ““While inflation is expected subside later this year, prices are likely to remain elevated as the higher costs throughout supply chains become baked in.
“Retailers are committed to doing everything they can to keep the price of essentials low through expanding value ranges and offering discounts for vulnerable groups. Against this backdrop, government must do more to limit one of the biggest drags to retail investment, which is oncoming regulatory burdens heading down the track, or risk a crash in business investment and further inflationary pressures.”
The FTSE 100 opened 0.1% lower to 7,527.09 this morning.
Other than Fever-Tree, M&S is among the risers, up 3.5% to 153.2p, with Nichols also up 1.4% to 1,070p.
Kerry Group is down 2.6% to €89.04, with Supermarket Income REIT down 2.5% to 87p, Wynnstay Group down 1.9% to 458.8p and DS Smith down 1.5% to 308.5p.
Yesterday in the City
The FTSE 100 rebounded strongly with its biggest rally so far in 2023 as fears over the Credit Suisse banking crisis eased. London’s blue-chip index climbed 1.8% to 7,536.22pts.
In food and drink, THG jumped 7.7% to 58.4p, Naked Wines also got a 5.8% boost to 94.2p, and Sainsbury’s increased 4.2% to 262.3p.
Fallers included Hotel Chocolat, Wynnstay and Kerry Group, down 1% to 190p, 2.7% to 461p and 2% to €90.26 respectively.
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