Fever-Tree, the world's leading supplier of premium carbonated mixers, is holding its Annual General Meeting ("AGM") today at 11.30am BST.
At the AGM, Bill Ronald, Chairman of Fever-Tree, will make the following statement:
"As highlighted at the Group's preliminary results in April, although we have been impacted by the COVID-19 crisis, we are well positioned to manage our way through the current situation. We have a fantastic team across the globe who have been working incredibly hard alongside our key customers, suppliers and distribution partners. Our asset light business model continues to support our secure financial position with a FY19 net cash position of £128 million and we benefit from a strong brand portfolio with well-balanced revenue streams across regions, channels and customers.
While the On-Trade remains fully or partially closed across many of our regions, the Group's performance across the Off-Trade continues to be very encouraging. Management remain focused on delivering our long-term strategy and we are confident the Group will be well placed once the current period of uncertainty ends."
On-Trade sales typically represent 50% of UK revenue and continue to be severely impacted by the lockdown. Conversely, our Off-Trade performance has been strong. Sales in the first full month of lockdown were up 24%1 year-on-year and we have seen continued positive momentum since, reflecting increased at home consumption during the period. The core tonic range has performed particularly well, and there has also been notable growth in the convenience channel as consumers increasingly supplement or substitute their trips to large grocery stores.
The US market is naturally weighted to the Off-Trade, which typically contributes 70% to the Group's US revenue. Since the start of lockdown, while On-Trade sales have been severely impacted, Off-Trade sales have grown extremely strongly. Nielsen data, which covers just under half of Fever-Tree's Off-Trade sales in the US, reported 98%2 growth year-on-year for the four weeks to 18th April and 96%2 in the four weeks to the 16th May. Whilst this performance reflects the benefit of incremental distribution that was secured over the course of H2 2019, along with increased at-home consumption during lockdown, it also highlights the growing strength of the Fever-Tree brand, supported by the continued trend towards premium, long drinks. In addition, the Group's US pricing and format optimisation has been very well received by distributors and retailers, with implementation beginning to be seen on-shelf between March and June 2020.
The impacts from COVID-19 have varied across countries within Europe. While Northern Europe is naturally weighted to the Off-Trade and has therefore been more robust, Southern Europe is more reliant on the On-Trade, causing it to be more significantly affected. However, we remain confident in building our momentum in this region over the medium and long-term as premiumisation continues to gain traction. Fever-Tree is the only premium brand with scale across the entire region, with a category leading position in many markets.
While On-Trade challenges have also been evident across the ROW, we are delivering strong Off-Trade sales and continued distribution gains, most notably in Australia and Canada.
Operations and Employees
Our unique asset light, outsourced business model has provided the Group with the flexibility to react to the challenges that COVID-19 presents. We continue to work closely with our suppliers, partners and customers across our supply chain and although there have been some challenges, we continue to maintain continuity of production and supply, as well as the quality of our products.
Fever-Tree continues to support and provide job certainty to all our employees, as well as supporting key workers and the communities in which we operate. We have not furloughed any of our employees regardless of their role and the team remains focused on identifying opportunities that will put us in a strong position as we look to 2021 and beyond. We are also continuing to work closely with our On-Trade partners across our regions, offering support and assistance where relevant as they prepare to re-open.
Given the uncertainty and dynamic nature of the situation, it continues to be hard to predict how sales will evolve both during and as we emerge from the lockdown period. The easing of restrictions and the pace at which the On-Trade re-opens will vary between regions, but it is becoming increasingly likely that this process will be gradual and cautious, with social distancing measures remaining in place for some time.
As highlighted at the Group's preliminary results in April, COVID-19 will have a material impact on FY20 trading, with headwinds on gross margin due to changes in channel and territory mix. However, we remain committed to continuing to invest through this period of uncertainty as opportunities arise, particularly in marketing, enabled by the Group's strong balance sheet and conviction in our ability to deliver long-term sustainable growth.