Yahoo Finance Fever-Tree profits more than double as gin craze boosts revenues
Premium drinks brand Fever-Tree has set its sights on expanding further into mixers for the thriving dark spirits market after enjoying another “exceptional” year of sales growth.
In its preliminary results for 2016, Fever-Tree said profits before tax had fizzed from £16.8m in 2015 to £34.3m last year, an increase of 105pc.
The upmarket tonic water maker, which was last year’s best performing stock on London’s junior Aim market, also enjoyed a revenue hike of 73pc from £59.3m in 2015 to £102.2m.
There was particular success in the UK market, where revenues increased by 118pc as the company’s fortunes were boosted by a spectacular growth in demand for gin, which has enjoyed a renaissance in recent years.
Gin sales surpassed £1bn for the first time last year, while bars, pubs and retailers sold the largest volume of gin on record, according to the Wine and Spirit Trade Association.
Meanwhile, research from Mintel shows that gin’s share of the global new spirit launches has soared from 7pc in 2012 to 12pc last year.
Tonics remain Fever-Tree’s best-selling and fastest-growing product in the UK, although chief executive Tim Warrillow said the company will be launching a range of new products this year. The company is looking to expand its presence in the dark spirits category, which includes brandy, rum and whiskies and accounts for about 60pc of the global spirits market.
In comparison, gin accounts for about 6pc of the global sales, according to Fever-Tree.
“There is a broader trend that is clearly helping to support our business and that is the move towards the premiumisation of spirits,” he said. “That is manifesting itself here in the UK with gin, as we are also seeing in Europe.
“In the US we are also seeing a real move towards the premiumisation of dark spirits, and we are seeing this in other regions as well.
“There is no question that the trend that inspired us to start this business right at the beginning, this move towards premium spirits, is just gathering pace.
“Alongside it now is this interest in having good quality mixer to go with your premium spirits. Those two trends are really establishing themselves on an international footing so that is what gives us great confidence as we look forward.”
A particular focus in the coming year is the US market, where the company will attempt to increase its foothold in the market with its dark spirit range.
“Our expansion is happening successfully in the US already,” Mr Warrillow said. “We are gaining a lot of new distribution points but as we are building out our dark spirit range we will absolutely start to focus next year on rolling that out in the US, because that is the biggest premium dark spirit market.”
He added that a growth in craft distilleries in the country makes it “very good timing” to target the US market.
“When we started Fever-Tree back in 2005 there were 50 craft distillers in the US,” he said. “At the end of this year there are predicted to be 1,500 craft distillers.
“The majority of those are going to be producing dark spirits first and foremost, so there is just a lot of energy, noise, product and marketing that is being focused on the premium end of the spirit category in the US.
“It is showing very similar patterns to what we saw with craft beer ten years ago in the US, so it is exciting times.”
He said he expects the US to overtake UK as the company’s most significant market in time, but pointed out that business in the UK is “proving hard to catch”.
Despite the impressive set of results, Fever-Tree’s share price dipped around 5pc in early trading, although analysts said shares were “perhaps due a slight correction” after rising about eight-and-a-half times since listing in 2014.
Trevor Green, the head of UK Equities at Aviva Investors, said: “The share price has gone up a very long way since IPO but, importantly, so have earnings as analysts struggle to keep their forecasts up with the pace of the business.
“Management have done an excellent job of exploiting the market opportunity in the premium carbonated mixer space and have been helped along the way by the tailwind of the renaissance of gin sales in the UK.
“Combined with a steady flow of new product launches they keep widening their audience, leaving them well positioned for future growth.”
The company also announced that co-founder Charles Rolls will be moving from his role as Fever-Tree’s executive deputy chairman to a non-executive position following the company’s annual general meeting in May.
In recent years the company has focused on increasing the size of its senior management team. As a result, Mr Warrillow said, Mr Rolls has been “standing back from the day-to-day and concentrating much more on the strategy of the business”.
He added: “This is formalising that move. He will remain very involved in the business - he is the largest shareholder and lives and breathes Fever-Tree.”
