Fevertree Drinks Soars on Full-Year Growth Forecast

(Bloomberg) -- Fevertree Drinks Plc shares leaped on enthusiasm about the soft-drink company’s U.S. expansion, as drinkers spend more money on upscale tonic waters and colas.

“Given the strong performance in the first half of the year, the board anticipates that the outcome for the full year will be comfortably ahead of its expectations,” Chief Executive Officer Tim Warrillow said in a statement Tuesday.

The company’s shares rose as much as 15 percent, the most since January, to a record 3,987 pence in early London trading.

As of last month, the company has full control of its marketing initiatives in the U.S., where bar-goers are increasingly ordering spirits paired with Fever-Tree mixers instead of beer or wine amid growing demand for cocktails.

Fevertree Drinks also signed an agreement with Southern Glazer’s Wine & Spirits, North America’s largest liquor distributor, to drive sales in bars and nightclubs, the London-based company said in the statement.

Fevertree has appointed Charles Gibb, the former CEO of LVMH’s Belvedere vodka, to run its North American business. The value of its shares has almost doubled over the past 12 months as demand soars for the company’s products. The company now has 32 employees in the U.S. and there is much transition-related work to do in the second half of 2018, as the premium-mixer market there is at an early stage, according to the statement.

Fevertree sells carbonated mixers for alcoholic spirits as luxury products, starting with its first Indian tonic water, produced in 2005. The company launched a low-calorie product range ahead of the April introduction of a sugar tax in the U.K., chasing increased consumer interest in low-sugar drinks.

While the U.K. accounted for 58 percent of the company’s first-half revenue and the rest of Europe brought in just over a quarter, the U.S. generated only 15 percent, indicating room to grow in the world’s largest spirits market.

The company’s expansion into the U.S. “on trade” market -- restaurants and bars, as opposed to retail -- will depend on the market’s responsiveness to the introduction of bottled mixers, according to Berenberg analyst Ned Hammond. Unlike in the U.K., most bars in the U.S. use dispenser guns for mixers, and it is only in high-end restaurants that patrons would expect to have their mixer in a bottle.

“It will definitely be a challenge and it might be that the growth in the U.S. isn’t quite as smooth in accelerating,” Hammond said by phone. The brand being visible in bars will help proliferation, he said, as will co-promotions with premium spirit brands.

In the first six months of the year, revenue grew 45 percent to 104 million pounds ($136 million). Strong growth will likely continue into the second half, and the benefits from this year will start to slow down by the second half of 2019, according to Hammond.

To contact the reporters on this story: Elizabeth Howcroft in London at ehowcroft@bloomberg.net;Thomas Buckley in London at tbuckley25@bloomberg.net

To contact the editors responsible for this story: Tom Contiliano at tcontiliano@bloomberg.net, John J. Edwards III, Marthe Fourcade

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