Fever-Tree Drinks plc
FY21 Trading update
Fever-Tree, the world's leading supplier of premium carbonated mixers, announces a trading update for the year ending 31st December 2021, ahead of reporting its Preliminary Results on 16th March 2022.
Financial highlights
|
Revenue, £m |
FY21 |
FY20 |
Change |
|
UK |
118.3 |
103.3 |
15% |
|
US |
77.9 |
58.5 |
33% |
|
Europe (Fever-Tree brand revenue) |
78.8 |
59.0 |
34% |
|
Europe total revenue* |
88.2 |
65.3 |
35% |
|
ROW |
26.7 |
25.0 |
6% |
|
Total |
311.1 |
252.1 |
23% |
*includes GDP portfolio brand revenue
Fever-Tree delivered an excellent top line performance in 2021 with strong growth across all our key markets. We expect to deliver full year revenues of c.£311 million revenue, an increase of 23% year-on-year (26% at constant currency) and ahead of the guidance provided at our Interim Results in September.
This encouraging performance has been driven by continued strength in the Off-Trade channel, which remains well ahead of 2019 levels, as well as the return of the On-Trade during the second half of the year in most of our markets, and was achieved despite the emergence of new COVID variants towards the end of the year.
A highlight of the year, and a clear indication of the brand's continued international success, is that we became the number one Ginger Beer brand at retail in the US, as well as finishing the year as the number one Tonic brand at retail in the US, overtaking Schweppes for the first time in the four weeks to 1st January 2022[1].
UK
UK revenue grew by 15% during 2021, ahead of our expectations. This reflects the robust On-Trade recovery along with the continued strength of the brand in the Off-Trade, which is benefitting from the Group's persistent investment in marketing and new product innovation during the pandemic.
Our On-Trade sales increased by c.59%, highlighting the strong performance during the second half of the year as consumers sought out the brand as they returned to the On-Trade. Sales were growing back towards 2019 levels by November before the emergence of the Omicron variant which impacted the recovery in the final weeks of the year.
Fever-Tree remained the clear brand of choice in the On-Trade, extending our value share of the mixer category to 50.5%[2], an increase of 2.4% year-on-year. This not only reflects the close relationships we maintained with our customers throughout the pandemic, but also the investments we have made to keep the brand visible as the On-Trade re-opened, most notably across staycation hotspots, as well as at popular sporting events such as Royal Ascot, and at our large pop-up bar in Covent Garden, London.
Our Off-Trade performance remained very strong in 2021 with sales comparable to 2020 and c.20% ahead of 2019. Consequently, Fever-Tree finished the year as the clear market leader in the Off-Trade with a value share of 39.8%[3]. We believe that Off-Trade sales will remain ahead of pre-pandemic levels, underpinned by the increasing popularity of long mixed drinks and the well-established premiumisation trends, and we continue to work closely with our retail and spirits partners to capitalise on this opportunity.
US
Fever-Tree is building significant momentum in the US, delivering c.£77.9 million revenue in 2021, a 33% increase year-on-year (41% at constant currency). This result is particularly encouraging given the strong comparators from 2020 and is testament to the way our team has continued to grow the brand, build relationships with new and existing accounts, launch new products, and accelerate our On-Trade sales as restrictions eased during the year.
The pandemic has led to a growing and sustained interest in making long mixed drinks at home which, along with the continued shift to more premium drinks, has put Fever-Tree in an excellent position to continue to grow at pace. We intend to continue to take full advantage of this opportunity through material marketing and sales investment, focused innovation, and by strengthening our operations.
Our Off-Trade sales accelerated beyond the levels we saw in 2020 as Fever-Tree attracted more consumers to the brand, gained more visibility on shelf and increased our rate-of-sale, driving category growth. This was reflected in our overall Nielsen performance, with full year 2021 sales +24% vs 2020 and 97% ahead of 20191.
In addition, we are delighted to announce that in December 2021 we began work with our local production partner to commission our East Coast bottling line; our second production site in the US. We will be gradually ramping up production during the first half of 2022, with local bottling in the US providing increasing mitigation against elevated logistics costs, contributing to a less carbon intensive supply chain, and significantly reducing lead times, providing greater agility to respond to the growing demand in the US market.
Europe
Fever-Tree's performance in Europe was significantly ahead of our expectations, with total revenue increasing by 35% year-on-year to c.£88.2 million (40% at constant currency). This was driven by continued Off-Trade progress, the positive opening of the On-Trade from the end of the second quarter.
Our On-Trade sales re-bounded quickly with a particularly encouraging end to the summer as many European markets were focused on capturing as much of the tourist season as possible. Despite the reintroduction of restrictions towards the end of the year in certain markets, we are confident that vaccine programmes mean the region is much better placed than this time last year.
Alongside our success in the On-Trade as it re-opened during the year, the Off-Trade continued to perform well, with strong sales and value share gains across all our key European markets. Fever-Tree remains the largest premium mixer brand in Europe and we continue to drive the category's growth1. This has been supported by increasing interest in the mixer category from both retailers and spirit partners, who are more positive than ever about the exciting trends surrounding long mixed drinks and premiumisation.
ROW
We have made good progress in our ROW region, with revenue growth of 6% to c.£26.7 million, which was slightly behind our guidance as we lapped a stock build by our importers in the second half of 2020. However, underlying sales growth in our key markets remained encouraging, at c.20% year-on-year, against very strong comparators from 2020.
Our two largest markets in the region are Australia and Canada, where we continued to drive category growth and increase our value share. In Canada, Fever-Tree delivered more incremental value in the Off-Trade Tonic category than any other brand to become the largest Tonic brand at retail1, as well as growing across all mixer categories, with new launches in the Soda & Sparkling segment driving premiumisation of the mixer category.
Australia benefitted from much more favourable conditions in the On-Trade during the first half of the year, enabling us to activate the brand through this important channel. And while restrictions were re-introduced during H2, we were able to focus on the Off-Trade and extend our position as the premium mixer category leader[4], increasing our share across both retail and liquor channels.
During 2021 the Group continued to extend its brand presence across the Rest of the World, entering three new countries and developing new and existing relationships with international and local hotel chains, retailers and spirit companies alike. This gives us a good platform to drive growth across a broad set of mixing occasions in an ever-increasing number of markets.
Financials
The Group performed well during 2021 against a backdrop of unprecedented macro uncertainty and supply chain disruption. Our EBITDA margin continued to be impacted in the second half as a result of these macro headwinds, but due to the strong revenue performance, absolute EBITDA and Earnings are expected to be in line with expectations.
The Group remains in a strong financial position, with a robust balance sheet and cash increasing by 16% to £166 million.
FY22 outlook
The momentum the Group has built in our key markets, our continued brand strength and the increasingly supportive consumer trends we are seeing, gives us confidence in the Group's position as we look ahead, despite the challenges that remain in the market.
The Off-Trade continues to perform well across our regions as at-home consumption and interest in premium long mixed drinks becomes increasingly established, supported by both retailers and spirits companies. We expect Off-Trade demand to remain at higher levels than pre-pandemic and are well placed to benefit from this sustained shift in consumer behaviour. We also remain confident that the On-Trade will continue to recover as we progress through the year. Consequently, we estimate that we will grow revenue to between £355 million and £365 million in FY22.
The Group retains its resolute focus on the long-term opportunity and is investing behind this, enabled by our strong balance sheet and conviction in our ability to deliver long-term sustainable growth. However, it is now clear that cost headwinds in 2022 will be more significant than we anticipated, and whilst we are employing a range of mitigating actions, margins are expected to remain broadly flat in 2022, resulting in an EBITDA range of between £69 million and £72 million.
Tim Warrillow, CEO of Fever-Tree commented:
“I am very pleased with the performance of the brand this year. Our fantastic team have worked incredibly hard through another year of uncertainty and disruption to produce an outstanding set of results, taking the brand's strength and breadth around the world to new heights. Most notably we finished the year as the No.1 Tonic Water brand by value at US retail, which is a significant achievement, matching an accolade that we have held in the UK for a number of years. In addition, the continued resilience of the On-Trade and our close relationships with our customers has enabled this channel to recover strongly across all of our key markets.
Over the last two years we have seen an acceleration in supportive consumer trends, such as the growing interest in long mixed drinks, especially at home, as well as the premiumisation of both the spirit and mixer categories. Retailers, spirits brands and consumers are all getting behind these trends and Fever-Tree, as the World's “Number one best-selling mixer”[5], “Number one top trending mixer”5 and the largest premium mixer brand, is incredibly well-placed to continue to take advantage of this significant and long-term trend.
The Group continues to deliver impressive growth in every one of our key markets, however, I am of course mindful that short-term logistics challenges and cost pressures remain, along with On-Trade restrictions, albeit at a much lower level than this time last year. Despite this, Fever-Tree's strong growth and track record against the competition, alongside supportive global trends, gives us confidence in our ability to capitalise on the substantial global opportunity.”