• Thu. Aug 18th, 2022

Blender Maker Fever-Tree Says Soaring Glass Prices Will Hit Profits | Food industry

ByRandall B. Phelps

Jul 15, 2022

Soft drinks company Fever-Tree has warned that soaring cost of glass for its bottles amid shortages, along with higher transport costs, means its profits will be nearly a third below expectations .

The London-based toner and blender maker said it was experiencing an “exceptionally difficult environment” with drink prices up more than 10%.

Fever-Tree added that the availability of glass was also “severely restricted”, which limited “the possibility of increasing revenue despite high demand”.

Meanwhile, a labor shortage in the US had forced it to manufacture and ship more drinks from the UK amid rising freight costs and delays at ports.

The company continues to expect sales of up to £365m for the full year, but profit margins would be lower, resulting in underlying profits of no more than £45m for the year to December, up from £66m previously forecast.

Tim Warrillow, Managing Director of the beverage manufacturer, said: “Fever-Tree delivered a strong revenue performance in the first half of 2022, with particularly strong performance in Europe and demand continuing to grow in the United States. United.

“While we are seeing positive performance and expecting good revenue growth for the full year, the challenging logistics and cost headwinds we highlighted earlier have worsened significantly in recent months and we are now expect them to have a noticeable impact on our margins for the full year.”

Fever-Tree shares fell more than a quarter on Friday after the announcement. The fall came despite news of a 14% rise in sales to £161million in the six months to June 30.

In the UK, sales increased by 6%, a 73% increase in sales in pubs, bars and cafes resulting from the end of Covid restrictions was offset by a 21% drop in retail sales.

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Emma Letheren, analyst at Royal Bank of Canada, said:While the production delays are specific to Fever-Tree, the glass and logistics pressures are industry-wide. As we’ve known them for many months, we’re somewhat surprised that they required such a significant reduction in orientation.

We take some comfort in maintaining the revenue guidance but, given the magnitude of the earnings warning, it raises big questions about both the brand’s pricing power and profit potential. long-term.

However, UK trade body Glass disputed Fever-Tree’s claims of shortages, insisting there was ‘more than enough glass to meet demand’ in the UK, despite the rise cost caused by rising energy prices during the war in Ukraine.

Dave Dalton, Managing Director of British Glass, said: “British Glass has no concerns about bottle supply in the UK. This has been confirmed by our members and does not support stories that suggest a looming shortage. It is true that there is a strong demand for bottles across Europe, which could have a ripple effect, but it does not appear that there will be a shortage of bottles produced in the UK based of current demand.

Fever-Tree’s difficulties come after a series of profit warnings and cost-cutting measures from consumer goods companies, including Unilever, which have been hit by rising costs.

Food and drink brands are also battling with supermarkets over who takes the profits due to rising costs, with Tesco recently embroiled in public rows with ketchup maker Heinz and Mars, which owns the brands. Whiskas and Pedigree pet food.