Fever-Tree predicts drift to drinking at home will carry on even as pubs and bars reopen

Tonic water maker Fever-Tree has said it expects the growing trend to consume mixed drinks at home will remain in place even as restrictions on hospitality venues ease.

Bumper sales from supermarkets and essential retailers during the pandemic have helped offset a loss of trade in pubs and restaurants for the company, which said trading was in line with the board’s full-year expectations. 

Even though it earned a significant uplift from stockpiling in March 2020, ‘off-trade’ sales in the UK still grew 10.1 per cent in the 13 weeks to April 18 this year, while in the United States, they shot up 38.2 per cent in the first 12 weeks of 2021.

Toast to business: Fever-Tree’s year-on-year sales in the UK grew 10.1 per cent in the 13 weeks to April 18, while in the United States, they shot up 38.2 per cent in the first 12 weeks of 2021

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The group said ‘off-trade’ sales had also continued to be strong in Europe but warned that the rate of recovery in the continent’s hospitality sites was ‘likely to lag’ both the UK and US markets.

It also noted that in Australia, where it is the market leader in clear premium mixers, ‘on-trade’ demand rebounded well in suburban areas, yet sales in city centres are taking longer to recover.

Back home, the firm stated it was too early to predict how much business would improve in brick-and-mortar venues, although it expressed confidence that their recent reopening will translate into booming sales.

Nonetheless, Fever-Tree believes the growing trend to purchase its wares online or in retail stores will not be dramatically affected by the reopening of pubs and restaurants.

‘While we would expect some of this demand to switch to the On-Trade as restrictions ease further, it is clear that at-home consumption of long mixed drinks is becoming increasingly established, supported by both the retailers and spirit companies,’ it said.

The AIM-listed business estimates that around one-third of its UK outlets were allowed to restart at reduced capacity when the government permitted outdoor trading from April 12, before indoor trading started again on Monday.

Opening up: Fever-Tree estimates that around one-third of its UK outlets were allowed to restart at reduced capacity when the government permitted outdoor trading from April 12

These sites represented around half of the Fever-Tree’s UK revenues before the Covid-19 pandemic, which has caused mass closures across the wider hospitality sector.

‘Fever-Tree has no choice but to take the global recovery in socialising one step at a time,’ remarked Sophie Lund-Yates, an equity analyst at Hargreaves Lansdown.

‘The picture’s very much the same as before – supermarket sales are doing well, but in-venue trade is predictably tough. That’s especially true in Europe, while only about a third of UK venues are open and at reduced capacity.’

Though Fever-Tree said it could not predict how much on-trade sales will rebound this year, it thinks that its strong brand, distribution footprint and well-developed customer base puts them in an excellent position to benefit.

Lund-Yates added: ‘The group seems to think the pandemic’s triggered a longer-term shift in at-home consumption of its higher-end mixers. 

‘Given the tough job ahead of keeping sales moving at the heady rate expected by the market, this would certainly be a bonus.

‘But whether this turns out to be true remains to be seen, somehow we suspect this tailwind may blow a little more softly than expected when the reality of normal life resumes.’

Shares in Fever-Tree were up 3.7 per cent to £26.62 just after midday today.