British tonic maker Fevertree Drinks has reiterated its forecast for the year, ahead of the key summer trading period as more customers spend on cocktails like mojitos and margaritas.
The company said there was strong demand for its mixers for rum, vodka and other spirit drinks in the UK, while it continued to be the biggest contributor to growth in the carbonated mixer category in the United States.
In March, the company said it expected to double its core profit this year, delivering a profit margin of about 15%.
Fevertree's shares gained more than 3% in early trade.
Cost Increases
The London-based company, which sells most of its tonics and drink mixers in glass bottles, had earlier struggled with rising glass costs in Britain due to energy price hikes following the Russia-Ukraine conflict.
However, the gradual easing of these costs, combined with strong customer demand for its tonic mixers, helped Fevertree reiterate its annual forecasts.
The company witnessed strong growth in Italy, France and Denmark in Europe, and forecast further robust growth at its Australian subsidiary, supporting its global market expansion.
'Category Leading Position'
'In the UK, Fever-Tree has strengthened its category leading position, driven by the performance of our broad portfolio, including our innovation which caters to the growth of Rum, Vodka and other spirit categories, as well as our cocktail mixers, which are gaining popularity, led by our Mojito and Margarita serves,' the company said in a statement.
In Europe, meanwhile, the brand 'continues to grow ahead of the mixer category, with Ginger Beer performing well and Pink Grapefruit gaining good traction as we expand the portfolio to cater to popular serves, such as the Paloma,' it added.
Analyst Viewpoint
Commenting on Fever-Tree's performance, analyst Anubhav Malhotra of Liberum said, "Fever-Tree has maintained its full year guidance in the short AGM trading update release this morning, noting continued market share gains and sales growth YTD. Encouraging signs include further extension of Fever-Tree’s number one position in the Tonic and Ginger Beer categories in the US, and strengthening of its leadership position in the UK, where it noted that the new cocktail mixers are gaining in popularity.
"We note that the consumer demand environment remains weak across most of Fever-Tree’s key markets, and delivery of the top-line target would require good trading during the key summer period. We note comps get easier in the UK in 2H. While top-line concerns for 2024E are fair, margin performance should still be on track to meet or beat guidance."
Additional reporting by ESM
