Britvic and Fever-Tree warn against rising cost pressure

Bottles of Britvic J2O soft drinks are displayed on the production line. Photo by Christopher Furlong/Getty Images

Drinks firms Britvic and Fever-Tree have warned of soaring cost pressures due to supply chain problems and rising inflation, stated recent reports.

Shares of Fever-Tree slump 13 per cent at one stage last week after it declared that 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 per cent to £311.1 million, with UK sales up 15 per cent, reports said.

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

“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,” The Independent quoted Fever-Tree chief executive Tim Warrillow as saying.

Meanwhile, Britvic has also flagged rising costs “across the business” as supply chain troubles push up ingredients and transport prices, combined with rocketing fuel and energy costs.

However, Britvic has assured 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 per cent to £373.9 million in the three months to December 31 on a constant currency basis, and 12.8 per cent 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 per cent as sales in supermarkets and convenience stores remained strong.