Fevertree warns energy prices will swell annual glass production costs
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Fevertree warns energy prices will push production costs by £20m as posh tonic maker sees growth in US
- About 80% of the premium tonic maker’s products are sold in glass bottles
- The group forecasts adjusted revenues of between £36m and £42m in 2023
- Fever-Tree said recent UK rail strikes had a ‘significant impact’ on festive trade
Fevertree has warned that rising energy prices this year will directly add £20 million to the estimated cost of making glass.
About 80 percent of the premium tonic maker’s products are sold in glass bottles, which have become more expensive to produce as gas prices skyrocketed after the Russian invasion of Ukraine.
While energy prices have fallen since their peak, the London-listed company told investors on Thursday they remain at least three times above 2021 levels as Covid-19 restrictions squeezed gas and electricity consumption.
Production costs: About 80 percent of Fever-Tree’s products are sold in glass bottles, which have become more expensive to produce as gas prices have skyrocketed
Fevertree is also experiencing double-digit percentage increases for several key input costs, such as ingredients, packaging and filling costs.
Due to these effects, the group forecasts an adjusted profit of between £36m and £42m in 2023, compared to around £39m last year and well below market expectations.
Fevertree Drinks Stocks were down 4.9 per cent to £10.62 early Thursday afternoon, meaning they have each lost about 57 per cent of their value over the past 12 months.
However, the company forecasts annual revenue growth of 13 to 18 percent this year, with growth strongly driven by a rebound in domestic trade and the market.
Chief executive Tim Warrillow said, “In 2022, the Fever-Tree brand has continued to gain traction and exposure around the world, resulting in double-digit sales and earnings growth in line with expectations.
“In addition, the brand continues to expand its clear global market leadership position and remains the key driver of this increasingly prominent international beverage category.”
The group’s sales in the US overcame severe port congestion and delayed production build-up on the country’s east coast increased by nearly a quarter in 2022.
Impressive growth was also reported across Europe, particularly in the southern states, as tourism picked up again following the lifting of Covid-related restrictions.
This offset falling trade in the UK, which had a strong comparative performance in the previous year, as the forced closure of pubs, bars and restaurants triggered a surge in supermarket purchases as consumers turned to making homemade cocktails.
Railway strikes had a “significant impact” on demand during the holiday season, a critical trading period for the hospitality industry, according to the group.
Nevertheless, the company noted that it is still Britain’s leading mixer brand and is making “significant progress” in the adult soft drinks segment.
It is also the largest premium tonic water brand in the US by market share, overtaking the longstanding Schweppes brand just three years after establishing operations in the area, where it is sold by beverage conglomerate Dr Pepper Keurig.