The imperfect tonic: Fever-Tree to raise prices amid soaring cost inflation
Up market tonic maker Fever-Tree has revealed plans to hike its prices, as it continues to navigate a surge in production costs.
The company said made a loss in earnings for the year with revenues down 0.2 per cent to £116.2m from £118.3m the prior year.
The London-listed adult drinks company said it felt the financial strain of soaring costs in glass production and trans-Atlantic freight costs – which were fuelled by hikes in inflation and challenging political outlook.
According to reports in Sky News, Fever-Tree’s range, which is priced at the top end of the market, is understood to have already been raised in cost due to the pressures.
In Tesco, the price of Fever-Tree’s premium Indian tonic water currently sells for £2.10, while mid-market brand Schweppes trades for £1.75 and the stores own brand is prices at 75p.
“Supply chain difficulties have given competitors an advantage in offering lower-priced alternatives, meaning Fever-Tree has struggled to retain customers seeking budget-friendly options, Chris Daly, chief executive of the Chartered Institute of Marketing, told Sky News.
Nonetheless, the group said it remained confident about the outlook for the year, as it delivered total revenues of £344.3m, representing an increase of 11 per cent year-on-year.
“We have seen an encouraging start to 2023 in our key growth markets and are confident of maintaining the group’s momentum in the months ahead,” Tim Warrillow, co-founder and chief executive of Fever-Tree, said.
As a result, Fever-Tree said it expects to deliver EBITDA in line with previous guidance of between £36m – £42m.
Despite Fever-Tree noting “significant inflationary headwinds,” for the year ahead and and plans to introduce cost saving initiatives investor confidence in the group remains strong with its share price reaching 5.98 per cent this morning.
“The current economic environment has presented a mixed picture for Fever-Tree drinks going forward as high energy prices are causing glass production costs to spike, which the majority of the company’s products use, Dan Smith, head of the UK food and beverage sector at Gowling WLG, said.
He added: “The business is committed to innovation, having recently added an adult soft drinks range as well as mixers to add to spirits to create cocktails.
“Shareholders will be pleased with the growth experienced in the US and hoping this can offset the drinks producer’s narrowing margins as a result of rising inflation.”