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The global supply-chain crisis has taken its toll on one of the biggest corporate winners from Covid-19 lockdowns.
The global supply-chain crisis has taken its toll on one of the biggest corporate winners from Covid-19 lockdowns.
Image: Bloomberg

The global supply-chain crisis has taken its toll on one of the biggest corporate winners from Covid-19 lockdowns.

Shares of Fevertree Drinks, the maker of high-end spirit mixers such as lime and yuzu soda, crashed as much as 32% on Friday after warning that profit margins will be squeezed by shortages of glass and labour as well as soaring inflation.

That slump means the tonic producer has lost more than two-thirds of its market value since January. 

The British company had earlier been buoyed by a cocktails-at-home trend during lockdown which also benefited distillers of premium liquor such as Diageo and Pernod Ricard.

So far, the glass shortage has been contained to producers of small-batch mixers, beers and spirits rather than affecting the world’s largest brewers and spirits companies, whose supply contracts are usually prioritised, thanks to their scale.

Fevertree said the soaring costs and supply bottlenecks meant its earnings in the current fiscal year will come in at £37.5m (R759.6m) to £45m (R911.7m). It previously forecast £63m to £66m.

The company blamed the sharp downgrade on labour shortages in the US, where it was building up its East Coast production facility. This meant it had to ship more products from the UK, pushing up its freight rates, which have increased up to 50% since the start of the year on key routes. 

In addition to a glass shortage, Fevertree is facing other cost pressures at a time when many Western economies are struggling with the worst inflation in decades. Consumers are starting to rein in spending as they struggle to balance their monthly bills with fuel, food, and energy costs soaring. 

“In the past eight weeks we have seen rapid shifts in the operational and cost backdrop,” the company said on Friday.  

Fevertree maintained its guidance for revenue of £355-£365m for the full year.

Glass and logistics pressures have been experienced across the industry for many months, “so we are somewhat surprised that they have necessitated such a big guidance cut” at Fevertree, said Emma Letheren, an analyst at Royal Bank of Canada. 

“We take some small comfort from the maintenance of revenue guidance, but given the extent of the profit warning, this poses big questions over the brand’s pricing power and long-term profit potential,” she wrote in a note to clients.

More stories like this available at bloomberg.com
Bloomberg

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