Test for Fever-tree as claims of ‘gin fatigue’ bubble up
WHILE the country braces for a heatwave, Britons appear less likely to quench their thirst with one of Fevertree’s tonics amid warnings that drinkers are suffering from “gin fatigue”.
Its sales growth is expected to fall by more than half in results today.
Fever-tree has exploded onto the market in recent years, satisfying a growing demand for premium mixers.
Since last autumn, however, almost £2bn has been wiped off the value of its shares as questions have been raised whether a stock market rally has been overplayed.
Fever-tree remains one of the biggest companies on London’s Alternative Investment Market (Aim) with a valuation of £2.7bn. Last year it made £76m of pre-tax profit on £237m of revenue.
Shore Capital estimates a 14pc rise in half-year sales, considerably lower than the 40pc increase posted this time last year.
Analyst Alex Smith said this was not a result of increased competition as events such as the wedding of the Duke and Duchess of Sussex and the men’s football World Cup flattered 2018 returns. “We see the slowdown as a reflection of distribution maturing and weather or other one-offs,” he said. Founded by Charles Rolls and Tim Warrilow 15 years ago, Fever-tree has impressed investors since its debut on the Aim in 2014.
Shares, which had been 165p each when the company went public, flirted with the £40 barrier last summer. Its rise has also come on the back of a surge in the popularity of gin. Edward Mundy, an analyst with investment bank Jefferies, recently warned “gin fatigue [is] starting to creep into some markets” such Britain and Spain.
Meanwhile, RBC Capital said Fevertree could suffer in a similar way to Irn-bru maker AG Barr. The Scottish drinks producer recently warned of a sharp fall in sales, which it blamed on poor weather.
Despite concerns about falling growth, many analysts have stuck to a “buy” recommendation. “We are not dissuaded by the inevitable slowdown in the UK ... with the US and Europe emerging as growth engines with a larger end-game at stake,” said Shore’s Smith.
Constantin Hesse of Deutsche Bank wrote: “While competition should continue to intensify as a result of the category’s attractiveness and low barriers to entry, Fever-tree is in a strong position ... not least because it has built strong relationships with some of the world’s largest spirits companies.”