UK drinks makers bet on summer splurge after pandemic drought

FILE PHOTO: Products from the drinks company Fever Tree are displayed in London
FILE PHOTO: Products from the drinks company Fever Tree are displayed in London, Britain May 11, 2016. REUTERS/Neil Hall

July 20, 2021

By Yadarisa Shabong

(Reuters) – Three UK-listed drinks makers and sellers raised their financial targets on Tuesday betting on people stocking their fridges for the summer and soaring demand from bars and restaurants as they reopen after months of pandemic lockdowns.

Fevertree, which sells premium tonics and drink mixers, expects 2021 revenue to rise by as much as 21% compared to last year, while Irn-Bru maker A.G. Barr forecast profit for the year ending January 2022 to exceed pre-crisis levels.

Online wine retailer Virgin Wines, which was bought out from billionaire Richard Branson’s Virgin Group, also upgraded its revenue and core earnings targets following strong demand over the past two months.

“We have seen nothing but encouraging signs over recent months that the customers we have acquired are staying loyal,” its boss Jay Wright said.

Companies making and serving drinks are recouping some of their lost business from the past year when the health crisis shut down a major source of their income: the hospitality industry. That hit could not be fully offset by more people stocking up their bars at home with alcohol and mixers during lockdowns.

Virgin Wines UK shares climbed 4% and A.G. Barr was little changed by 0757 GMT, while Fevertree slumped 6% after a warning that margins would narrow to 44% from 46.2% last year due to supply chain issues and higher input costs.

“Whilst we anticipate some margin improvement next year, we believe logistic cost headwinds will continue alongside input cost increases on raw materials and product cost,” Fevertree said.

J.P.Morgan analysts said Fevertree’s caution may make some investors wary of the 2022 outlook.

Sales to retail outlets, or off-trade, were strong across all its markets even as tap rooms reopened, Fevertree said.

The company, whose tonic water comes in a range of flavours, lifted its revenue forecast for 2021 to between 295 million pounds ($402.91 million) and 304 million pounds. It reported 252.1 million pounds in revenue last year.

($1 = 0.7322 pounds)

(Reporting by Yadarisa Shabong in Bengaluru; editing by Uttaresh.V and Tomasz Janowski)