Fevertree Drinks (AIM:FEVR), the tonic company, will likely echo much of the industry woes that led to its share price sliding by over 30% in the last six months when it reports a pre-close trading update on Thursday.
Being a tonic producer lends the company to experience much of the head and tailwinds felt by the spirits industry.
As it stands the spirits industry is facing more trouble than good.
Earlier this week, Deutsche Bank provided a warning for leading spirits company Diageo, which it rates a ‘sell’.
“Industry data and peer read across suggest that Spirits demand has continued to deteriorate following Diageo’s 10 November 2023 profit warning,” said the bank.
“With scope for demand to deteriorate further, we see the material second half 2024 acceleration implied by consensus estimates as unlikely.
“Given recent performance Diageo replaces Pernod as our least preferred name in European Beverages,” it added.
However, some analysts reckon the premium tonic manufacturer is well-positioned to grow in the longer term, once the headwinds plaguing the industry begin to reduce.
“Now is the time considering the low average daily volume of 265k… We argue valuation now is at an appropriate premium to European spirits peers, and earnings upgrades will be the key driver of share price,” Liberum said.
Britvic – a more diverse option?
Britvic PLC (LSE:BVIC), the soft drinks producer, might be diversified enough to avoid the spirit industry headwinds, with brands such as Robinsons, J20, Lipton’s Ice Tea and Tango.
Although the group’s namesake brand produces mixers, the overall company has experienced a robust twelve months, in which its shares lifted close to 9%.
The London-listed company will provide a first-quarter update on Thursday.
At the end of November 2023, Britvic said it saw a jump in revenue for the full year aided by an increase in the price of its drinks.
It added it is confident of continued growth in 2024, but investors will be interested to see whether it has continued to rely on price hikes.