There was a fresh burst of life in Fevertree Drinks (AIM:FEVR) share price after Jefferies upgraded the premium mixer maker to 'buy' from 'hold', sending the shares up 4.5% to 822p.
The investment bank also raised its target price to £11, implying more than 35% upside, arguing that the company’s new partnership in the United States with Molson Coors marks a “transformational” moment.
Jefferies’ analysts think the deal gives Fevertree something it has long lacked: proper scale in America.
Molson Coors will take over the brand’s sales, marketing and distribution in the US, freeing Fevertree to focus on product development and brand-building.
It is also on course to start local manufacturing in 2027, cutting freight costs and smoothing out supply chain snags that have plagued it since the pandemic.
Molson Coors has every reason to make it work. The beer group has an 8.5% stake in Fevertree and, according to Jefferies, needs the partnership to succeed as it looks to expand “beyond beer” and premiumise its US portfolio.
The economics are appealing too: distributors can earn up to three times as much selling Fevertree as they can shifting mainstream lagers.
That gives Fevertree a powerful incentive network behind it. The US is already the company’s biggest growth driver and Jefferies reckons sales there could rise 25% in 2028, helping lift group revenue to more than £500 million. Margins, meanwhile, are expected to recover to about 18% by 2028 as marketing spend normalises and production moves closer to customers.
The shares have been stuck in the middle of the range for much of the year, but this upgrade suggests the narrative may be changing. Fevertree still trades on a punchy valuation, around 30 times next year’s earnings,yet the growth story now looks better grounded.
A US cocktail of better margins, stronger partners and more predictable profits has given investors reason to raise a glass.