Fever-Tree warns of soaring costs amid Ukraine crisis

The drinks maker said the war in Ukraine has pushed commodity prices up ‘dramatically’

FeverTree (Fever-Tree/PA)

Drinks mixer firm Fever-Tree has warned of “dramatic” cost increases due to a combination of rising inflation, the soaring price of gas and electricity, and the war in Ukraine.

The company, which sells a range of tonic waters, ginger mixers, sodas and lemonades, issued an alert over the impact of inflation on 2022 earnings in January, before Russia launched its full-scale invasion of Ukraine.

Fever-Tree lowered its profit guidance and said it now expects underlying earnings of between £63 million and £66 million this year.

It said: “There remains a global backdrop of inflationary pressures against which we are employing a range of mitigating actions.

“However, commodity prices have increased dramatically in recent weeks because of the terrible events unfolding in Ukraine, and this has created significant uncertainty in relation to input costs.”

Fever-Tree raised the prices of some of its products slightly in January - for example, Fever-Tree Refreshingly Light Aromatic Tonic Water 500ml, Ginger Beer 500ml and Indian Tonic Water 500ml rose by 8.3 per cent in Morrisons from £1.80 to £1.95.

However, the firm did not indicate that prices would rise further for customers as a result of the increased commodity prices.

Last year, the company’s profit margin came under pressure as global supply chain problems led to disruption and rising costs all over the world.

Lorry driver shortages, soaring transatlantic freight charges and US storage costs were some of the problems the company faced.

It has been taking action to reduce the impact by ramping up local production on the east coast of America, alongside a fully-functioning west coast production line, to help reduce shipping costs.

But this will offset only some of the ongoing cost pressures, according to the group.

The warning comes as Fever-Tree reported pre-tax profit rising to £55.6 million in 2021 from £51.6 million in 2020 as revenues jumped 23 per cent to £311.1 million.

Tim Warrillow, co-founder and chief executive of Fever-Tree, said: “Whilst the tragic situation in Ukraine has resulted in significant uncertainty in relation to our input costs in the short-term, the long-term global opportunity for Fever-Tree remains substantial and we are as confident as ever in the brand’s ability to capitalise on this.”

Additional reporting by PA