Fever-Tree profits fizz as Britain’s thirst for gin continues

Fever-Tree Drinks has reported a 34% jump in pre-tax profits for 2018, bolstered by the World Cup, royal wedding and long, hot summer.

The premium tonic water maker has notched up double-digit growth in recent years as high-end gin increasingly continued to be coupled with premium tonic water.

Fever-Tree, named after the colloquial term for the cinchona tree – the bark of which produces the tonic water ingredient quinine, said more gin was sold during the three months of the summer in 2018 than the summers of 2014 and 2015 combined.

The company has been pushing into the US and had recently launched a variety of ginger ale that mixes with alcohol such as whisky, rum and brandy in a market that predominantly consumes dark spirits.

Fever-Tree said it expected results for 2019 to be in line with its forecasts. “Last year was a significant one for Fever-Tree,” said Tim Warrillow, the co-founder and chief executive. “In the UK, we strengthened our position as the leading mixer brand in the off -trade.

“In the US, we successfully established our own operations and the business made real progress in deepening and widening its presence in multiple European regions.”

Pre-tax profits rose 34% to £75.6m from £56.4m in 2017. Revenue rose 40% to £237.4m.

Gross margin declined year on year from 53.8% to 51.8%, which Fever-Tree attributed to the introduction of the UK soft drinks industry levy from April 2018. This adds up to 24p per litre of a drink depending on its sugar content and applies to all Fever-Tree products apart from its Refreshingly Light range.

The company said it had passed the extra cost on to consumers and as a result the levy had no impact on gross profits.

Fever-Tree’s share price fell by 6% in early trading on concerns about the impact of the sugar tax, before recovering. Its shares were up about 4% at £26.46 by mid-afternoon on Wednesday.