Fever-Tree targets lack enough fizz for investors

The pandemic has boosted demand for affordable drinking at home, prompting Fever-Tree to spend heavily in an effort to tap that demand with new drinks and packaging.

Tonic water maker Fever-Tree has forecast a 2021 sales rebound, driven by at-home drinking and a gradual easing of pandemic-led curbs on bars and restaurants, but its revenue and earnings forecasts still fell short of market expectations.

The maker of premium tonics and drink mixers said it expected 2021 sales to grow by 12%-16%, with margins around 2020 levels.

Both forecasts fell short of a company-compiled analyst consensus, driving the London-listed shares down by more than 10% and wiping out the stock’s gains so far this year.

The pandemic has boosted demand for affordable drinking at home, prompting Fever-Tree to spend heavily in an effort to tap that demand with new drinks and packaging.

The London-based company said sales for home consumption remained “very positive” in the first months of this year and it expected sales to drinking venues to regain momentum gradually.

Fever-Tree reported a 3% drop in sales last year, confirming preliminary figures released in January that showed retail sales nearly offset a loss of business with pubs and restaurants.

The company also reported a 22.6% drop in earnings. While 2020 sales and earnings were in line with expectations, analysts were predicting a nearly 17% rise in sales this year and a marked improvement in profit margins.

• Reuters