Fever-Tree share price rises as it looks to new markets after an "exceptional" year

Courtney Goldsmith
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Fever-Tree made its fortune on mixers for clear spirits, but now it's branching out
Fever-Tree made its fortune on mixers for clear spirits, but now it's branching out (Source: Fever-Tree Drinks)

Fever-Tree will target the dark spirits market as it looks to expand growth further after an "exceptional" year.

The figures

For the year to the end of December 2016, the posh tonic maker said revenue increased 73 per cent to £102.2m from £59.3m in 2015.

The premium brand's gross profit margin grew 55.2 per cent. Meanwhile, adjusted earnings before interest, tax, depreciation and amortisation jumped 97 per cent to £35.8m from £18.2m the previous year.

Fever-Tree recommended a total dividend of 6.25p per share compared with 3.08p per share in 2015.

The firm's longest established market, the UK, had a particularly strong performance this year with sales growth of 118 per cent. Fever-Tree holds a 24 per cent market share, which it said far exceeds the 16.5 per cent proposed as the target value share at maturity for the premium segment of the mixer category.

The Aim-listed firm's share price dropped as much as six per cent at the market open, but by late afternoon trading shares were up nearly five per cent.

Why it's interesting

Despite the growing popularity of gin, Fever-Tree chief executive Tim Warriliow told City A.M the business will work to extend its focus to dark spirits in 2017 as the company sees it as a huge opportunity for growth.

"We’re conscious we started the business on white spirits. We’re also aware if you take the gin category, that only accounts for six per cent of global spirits, whereas dark spirits account for ten times that, 60 per cent."

Fever-Tree will release a smoky ginger ale and spiced orange ginger ale in high end hotels and restaurants this summer and in retail spaces at the end of the year. The drink maker is also looking at a number of new distributors which Warrillow said it cannot yet reveal.

In the firm's twelfth year of UK trading, the leading mixer maker said despite some noise from new entrants in the market, its estimated 95 per cent share on the premium market hasn't changed over the last few years. As the premiumisation trend grows in more markets around the world, Fever-Tree said it's "incredibly well positioned".

Read more: Fever-Tree is branching out as it finds more room to grow

What Fever-Tree said

Warrillow said

2016 has been another exceptional year of growth for Fever-Tree, with strong results achieved across all regions, channels and flavours, emphasising the global appeal of the Fever-Tree brand.

We have had an encouraging start to 2017 and remain confident that we are increasingly well positioned to deliver further growth across the business.

What analysts said

Phil Carroll, analyst at Shore Capital reiterated a "buy" recommendation, saying:

Looking ahead, 2017 is going to be another challenge as a result of the high base from 2016. However, we still believe Fever-Tree is capable of delivering further upgrades as we progress through the year given its excellent brand and product proposition and a lack of effective competition.

We highlight that distribution wins can be lumpy and therefore, have an impact on the timing of potential for upgrades. Should there be a ‘weaker’ period of growth that disappoints the market, we would see this as an opportunity to acquire the stock.

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