Britvic and Fever-Tree warn over bubbling cost pressures

Drinks firms Britvic and Fever-Tree have warned of soaring cost pressures as supply chain problems and rising inflation take their toll.

Mixer maker Fever-Tree saw its shares slump 13% at one stage on Thursday after it said this year’s profit margins will be hit by rising costs.

The tonic firm said it is “now clear that cost headwinds in 2022 will be more significant than we anticipated”, which will leave margins broadly flat and see underlying earnings at between £69 million and £72 million.

The alert for the year ahead took the shine off a 2021 update which revealed that revenues jumped 23% to £311.1 million, with UK sales up 15%.

Revenues are expected to grow to between £355 million and £365 million in 2022, but this is not enough to offset the inflation hit.

Fever-Tree chief executive Tim Warrillow said: “The group continues to deliver impressive growth in every one of our key markets; however, I am of course mindful that short-term logistics challenges and cost pressures remain, along with on-trade restrictions, albeit at a much lower level than this time last year.”

Robinsons squash and J2O maker Britvic also flagged rising costs “across the business” as supply chain troubles push up ingredients and transport prices across the sector, combined with rocketing fuel and energy costs.

But Britvic gave assurances that it is working hard to mitigate the hit.

“We remain focused on minimising the impact on our business through a combination of revenue management, smart procurement and disciplined cost control,” it said.

The group’s first-quarter update showed revenues jumping 16.5% to £373.9 million in the three months to December 31 on a constant currency basis, and 12.8% higher versus two years ago before the pandemic struck.

The rise was driven by a strong performance in its Great Britain division, with revenues up 17.1% as sales in supermarkets and convenience stores remained strong.

It said UK and Ireland demand in the so-called out-of-home market was affected in December by the spread of the Omicron coronavirus variant and less socialising, but it hopes this will continue to recover back to 2019 levels as restrictions have since been eased.

The Britvic results came ahead of the company’s annual shareholder meeting, held on Thursday morning.

Investors were unimpressed with the pay packets being awarded to executives and showed their displeasure, with nearly a third of shareholders voting against the remuneration report.