ii view: Fevertree recovery continues after maintaining guidance

AGM trading update

• Continues to expect full-year currency adjusted revenue growth at a low single digit – similar to 2024’s 3% growth
• Continues to expect a full-year adjusted (EBITDA) profit margin of around 12% versus 13.7% in 2024

ii round-up:

Launched in 2005, Fevertree Drinks (LSE:FEVR) is today a beverage maker whose products are distributed in over 85 countries. 

Its carbonated drinks, regularly used as mixers with alcoholic spirits, are supplied to customers including hotels, restaurants, bars and cafes or on-trade outlets, as well as supermarkets and off-licenses or off-trade retailers. 

Fever-Tree drinks include tonic waters, sodas, gingers, lemonades, rosé spritz and other soft drinks. 

For a round-up of this latest trading update announced on 5 June, please click here.

ii view:

Coming to the UK stock market in 2014, Fevertree employs around 380 people. Geographically, the USA generated its biggest slug of sales in 2024 at 35%, followed by the UK at 30%, Europe 26%, and the Rest of the World the balance of 9%. 

• Invest with ii: Open a Stocks & Shares ISA | Top ISA Funds | ISA Offers & Cashback

For investors, exports to the US are now subject to a 10% tariff following Donald Trump's proposals and a trade deal between the UK and US. UK sales fell 3% in 2024, hindered by pressured consumer spending. The weather and its impact on demand cannot be overlooked, while costs such as those for glass bottles and freight charges remain variable. 

• Sign up to our free newsletter for investment ideas, latest news and award-winning analysis
• Time to be bullish or bearish? Five pros give their take
• Fund managers’ favourite UK smaller companies

On the upside, a partnership deal with Molson Coors Beverage Co Shs -B- Non-Voting (NYSE:TAP) is expected to assist growth for the US business. Molson Coors has cemented its relationship via an 8.5% shareholding in Fevertree, with the US company also sharing the impact of added tariff costs. Product innovation is fuelling non-tonic sales, with total global sales of 45% in 2024 up from 25% in 2019. Scope for further geographical expansion persists, while cash generation underpins ongoing share buybacks and a forecast dividend yield of around 2%.   

In all, mixed regional sales and tough outlook for consumer spending offer caution. That said, the benefits of Molson’s distribution network and other potential overseas expansion opportunities are likely to attract interest in this UK beverage company.  

Positives: 

• Diversified geographical sales
• Net cash held as of 2024 year-end

Negatives:

• Pressured consumer spending
• Potential currency headwinds

The average rating of stock market analysts:

Hold