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Fever-Tree mixes revenue warning with US expansion cheer | Business

The drinks company Fever-Tree has said a slowdown in consumer spending has hit UK retail sales of its popular mixers.

The premium tonic water and mixer maker lowered its forecast of global sales this year to £266m to £268m, about 13% year-on-year growth. Analysts had been forecasting sales of about £272m to £275m.

Fever-Tree said that while sales through pubs, bars and restaurants in the UK had remained healthy, consumers were spending less in supermarkets and other retail outlets.

Tim Warrillow, its chief executive, said: “Our performance has been behind expectations in the second half [in the UK] as we lap very tough comparisons in July and August [compared with summer 2018] and a wider slowdown in consumer spending.”

Warrillow added that the company would not resort to heavy promotional discounting of its products to increase sales in the key trading period running up to Christmas.

“Supermarkets never change, they would have you promote every week if they got their way,” he said. “Broadly speaking [our strategy] is infrequent, light and shallow in terms of discounting. We are seeing a lot of premium competitors around us taking a different view. We are not being dragged into that fight.”

The company said it expected 2% growth overall in the UK this year and maintained its guidance of 5% growth for 2020. The UK is Fever-Tree’s biggest and most mature market.

The revenue warning initially spooked investors, sending the company’s share price down as much as 7% in early trading. But they recovered later, jumping more than 11% to just over £20 as the market switched its focus to positive news that the group’s aggressive expansion into the US was paying off.

Fever-Tree, which is also seeking growth in Australia, New Zealand and the rest of Europe, raised its full-year US revenue growth forecast from 30% to 34%.

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Russ Mould, an investment director at AJ Bell, said: “The investment case for Fever-Tree was originally centred upon the company enjoying rapid success in the UK. Now it is all about replicating this success in the US and so to its credit the company is living up to the hype.”

Fever-Tree’s share price hit a high of £37.50 in August 2018 as the success of the company attracted investors. That share price has declined 25% in the past 12 months because of concerns about increased competition and a slowdown in the gin market.

Warrillow said Fever-Tree’s growth was not being affected by increased competition in the premium mixer market from rivals including Schweppes.

“There are many me-too brands on the shelves,” he said. “We are weathering that competition and retaining our market position. We are seeing mixer brands pop up all around the world but none are springing out and starting to drive a market share position against us of any note.”

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