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Fevertree buys sales agent

Revealed acquisition in the same breath as a first-half trading update
July 14, 2020

Shares in Fevertree Drinks (FEVR) lost a little of their fizz on Tuesday morning, after the group revealed that Covid-19 had knocked its ‘on-trade’ sales in southern Europe. This region is more reliant to the on-trade – pertaining to restaurants and bars – than the north, meaning that the move by some importers to de-stock in the last few months impacted overall European sales in the first half of the year. However, Fevetree believes that its “prevailing brand strength” will endure here as an engine for growth.

IC TIP: Hold at 2296p

As was to be expected, the widespread closure of drinking venues from March onwards spurred a divergence of fortunes for the group’s two main revenue streams. In the UK, spirits and mixers saw “good momentum” in the off-trade – supermarkets and retailers – during lockdown, with sales rising by more than a third over the 12 weeks to 14 June. Growth was even stronger across the Atlantic. Indeed, according to data from research house Nielsen – which covers almost half of Fevertree’s US off-trade sales – figures here rose by 89 per cent year-on-year for the three months to mid-June, in a reflection of more people imbibing at home.

Looking ahead, it is impossible to say how quickly restrictions on movement will ease by market and geography. Fevertree expects some of the off-trade demand to transition over to the on-trade, albeit at an unpredictable pace. Gross margin headwinds are anticipated as a consequence of the coronavirus pandemic’s impact on revenue mix – but the group is sticking to its spending plans, with a cost budget of £60m for the full year.