Fever-Tree Drinks has raised prices of its tonics and mixers and is planning to increase production in the United States to cope with the soaring cost of glass bottles and glass shortages in Britain, it said on Wednesday 22 March, boosting its shares.
Details
Energy and commodity costs have surged since Russia invaded Ukraine last year, leading companies across the globe to hike prices and look for savings, while households struggle to manage their bills.
Fever-Tree, which sells most of its upmarket mixers in glass bottles, warned in January its profits this year would be hit by an estimated £20 million increase in glass production costs.
The London-based company, which supplies to about 85 countries, said it had already increased prices across its markets by about 5% in 2023.
From 2024, it also aims to produce all the bottles and cans it needs for the United States locally, chief financial officer Andrew Branchflower said during its earnings presentation.
"Markets have reacted well to news that it (Fevertree) plans to ramp up U.S. production and to pass on costs to its customers in order to protect margins," Mark Crouch, analyst at social investing network eToro said.
Fever-Tree shares, which rose as much as 12.2% on Wednesday 22 March, settled up 9.5% at 1,180 pence.
"Whilst the group continues to operate in a challenging cost environment, we are resolutely focused on delivering a wide range of initiatives across the business that will optimise operational capabilities and underpin our confidence in driving margin improvement in 2024 and beyond," CEO Tim Warrillow said.
Fevertree, founded in 2003, said it was working with glass suppliers to mitigate costs wherever possible.
The company's tonics currently retail at about £1.7 to £2 at supermarkets across Britain, while Coca-Cola-owned rival Schweppes sells at around £1.3.
Coca-Cola HBC AG, one of Coca-Cola's many bottlers worldwide, said in February it would also increase prices to tackle rising costs.
Fall In Adjusted Core Profit
Fever-Tree reported a 37% fall in adjusted core profit to £39.7 million for the year ended 31 December, in line with its guidance.
Read More: Fever-Tree Updates 2023 Profit Forecast
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