Fever-Tree surges on Molson Coors strategic partnership
By Michele Maatouk
Date: Thursday 30 Jan 2025
(Sharecast News) - Shares of Fever-Tree Drinks surged on Thursday as it announced that Coors Light maker Molson Coors will buy an 8.5% stake in the posh tonic maker for £71m in cash, with the proceeds set to be returned to shareholders via a share buyback programme.
The company, which first entered the US market in 2008, has entered into a long-term strategic partnership with Molson Coors for the exclusive sales, distribution and production of the Fever-Tree brand there.
Co-founder and chief executive Tim Warrillow said: "Today's announcement marks a transformational step for the Fever-Tree brand in the US. Thanks to the superb work of our US team, we have seen Fever-Tree become the number one brand in both the tonic and ginger beer categories, a remarkable achievement which has redefined the US mixer category amongst consumers and customers alike.
"But what is so exciting is that as the Fever-Tree brand has grown in the US, so has the opportunity ahead of us, reflecting the increasing number of categories and occasions that our products are relevant to.
"With a national network providing significant scale and muscle, alongside its proven track record, supply chain expertise and clearly stated strategic desire to drive the future of their business beyond beer, Molson Coors are the ideal long-term partner to take the Fever-Tree brand to the next level across the US. This partnership will be fuelled by a step change in marketing investment to take advantage of the highly compelling opportunity ahead."
At 0840 GMT, the shares were up 15% at 755p.
Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said: "Fever-Tree's well-known for its combinations, blending various ingredients into its soft drinks in the search for the next perfect pairing. But this combination's different, with Fever-Tree announcing it's teaming up with one of the world's largest beverage companies, Molson Coors, to help drive the next stage of growth in the US.
"Fever-Tree shareholders should see a near-immediate benefit from the partnership as the group plans to return the £71mn of cash to shareholders in the form of share buybacks, beginning in February. That's brought plenty of optimism with it, and Fever-Tree shares have bubbled 18% higher in early morning trading.
"Back to everyday operations, and strong growth in the US and the Rest of the World helped Fever-Tree increase revenue by 2% to £368mn in 2024. The US is already Fever-Tree's largest region by sales, but given the size of the market here, there's still a long runway of growth ahead. Performance on home soil has lost its fizz, with sales down 4% as bars and restaurants have struggled to entice consumers to spend as much of their hard-earned cash on mixers.
"Looking ahead, Fever-Tree's going to be doubling down on its US pivot with increased marketing in the region to help plant itself firmly in consumers' minds. That's likely to weigh on cash profits in 2025, but the group's expecting the investments to pay off in 2026, with both revenue and cash profits to grow at double-digit rates."
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