Fever-Tree's share price falls to a three-year low as the gin boom cools

Shares in drinks and mixers group Fever-Tree slid by a fifth early this week, says Joanna Bourke in the Evening Standard. Founder and CEO Tim Warrillow has blamed a “subdued end to the year in the UK” for a 1% fall in UK sales and has warned that Fever-Tree’s “much vaunted” expansion into the US will suffer “slower growth than before”. 

The warning has reduced the stock price to a three-year low. Fever-Tree’s market value has declined to £1.76bn, down from a peak of £4.5bn 18 months ago. While Fever-Tree’s management has attempted to cushion the blow with talk about “good momentum outside the UK” and has promised that home sales will “return to growth”, this is more than just a temporary blip, says Kate Burgess in the Financial Times. Competition from rival soft drinks firms is “hotting up” while the “craze” for gin and tonic “is turning”. What’s more, a “smallish British company” like Fever-Tree will find it harder than it thinks to break into the US market: building a brand is “challenging” and distribution is “tough”. Still, all is not lost . A buyer “with pockets deep enough to break the US” could snap it up. 

Don’t be so sure, says Andrea Felsted on Bloomberg. A potential acquirer will first want to see evidence “that the company is stabilising”. After all, Fever-Tree’s attraction to shareholders come from its “fast growth”, and while 10% revenue expansion “is still much better” than the pace seen in consumer goods or food retail, it’s hardly impressive by Fever-Tree’s recent standards.