Fever-Tree loses fizz after mass closure of bars and pubs
The mass closure of bars, pubs and restaurants hit tonic sales at mixer maker Fever-Tree, although it was boosted by rising demand for cocktails at home.
Shares in the soft drinks firm fell flat in early trading on Tuesday after it revealed that revenues fell by 11% to £104.2 million for the six months to June 30.
The company said that on-trade sales, which cover bar, restaurant and pub trade, were “severely impacted” and dived by 61% after most of its territories saw closures as a result of the coronavirus lockdown.
As customers stayed at home, Fever-Tree shifted its operations to focus more on the off-trade market, which covers supermarkets and retail stores.
It said these sales surpassed expectations over the first half of the year, with off-trade sales jumping by 24% in the UK as people continued to drink mixers at home.
The group said it has been encouraged by strong spirit sales and it is “very optimistic that the lockdown period has been a further catalyst to the long-term trend towards long mixed drinks”.
Fever-Tree told investors it expects to see a “very gradual recovery” in sales from bars and restaurants as restrictions continue to ease globally.
Chief executive Tim Warrillow said: “Our performance in the off-trade over the first half of the year has been very encouraging, with sales across our regions exceeding our expectations.
“People’s interest and excitement about mixing drinks at home has really taken hold over the lockdown period, attracting more households to the Fever-Tree brand than ever before.
“We have had an encouraging start to the second half of the year and, while we certainly aren’t immune to the ongoing challenges of Covid-19, our performance and our investments so far this year, coupled with the growing interest in long mixed drinks, gives me confidence that we will exit the crisis in an even stronger position than we entered it.”
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “It’s clear Fever-Tree wants to bottle the success of appealing to drinkers at home, by launching its first ever national television advertisement in the UK.
“This will add significantly to marketing spend but should help the company maintain and build on its sparkling number one premium brand position.
“However, it will be interesting to see if future advertising campaigns target other regions where there is more potential for growth.”