Business

Fevertree loses its fizz as shares dive after 'subdued' Christmas

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Shares in fizzy drink maker Fevertree fell more than 20% after it said Christmas trading was "subdued."

The company now estimates that 2019 sales rose 10% to £260.5m, lower than expected due to a weaker festive season.

Mixers like its tonic water and ginger beer have "not been immune from the consumer belt tightening," it said.

Fevertree added that the "expected improvement in trading during this important period did not materialise".

Its share price dropped by 435.5p to £15.59 - the lowest since April 2017.

While its UK sales shrank 1% to £132.6m, sales in the US grew 33% and Europe provided 16% growth.

Gin boom

The firm was started by Plymouth Gin boss Charles Rolls and advertising executive Tim Warrillow.

The pair decided to become business partners after meeting for the first time in 2003 and launched the company in 2005.

Mr Warrillow initially wanted to start a gin distillery, but the pair decided there was a gap in the market for gin mixers made with natural ingredients rather than the artificial sweeteners that dominated the competition.

The company is named after the colloquial term for the cinchona tree, from whose bark the natural anti-malarial drug and core tonic water ingredient, quinine, is produced.

"Fevertree's full year trading update made for ugly reading," said Nicholas Hyett, equity analyst at Hargreaves Lansdown.

"Falling sales in the UK will inevitably spark fears the gin boom has turned to bust, while guidance for weaker sales in the US and lower margins undermine Fevertree's long-term pitch that it can replicate its success across the pond."

He said the company has a good business model and strong brand. "The question is whether it's premium mixers can continue to justify a premium rating," he said.

The total value of Fevertree is 28 times it profits - suggesting investors expect a lot from the company's growth.

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