(Alliance News) - Fevertree Drinks PLC on Tuesday reported a solid start to its current financial year, after which the Covid-19 outbreak caused a widespread shutdown of On-Trade business, but Off-Trade sales boomed.
On-Trade means sales via restaurants, pubs and bars, while Off-Trade means sales via supermarkets and other stores.
The carbonated drinks firm also said that it has acquired Global Drinks Partnership, its current sales agent in Germany.
Fevertree will acquire GDP for EUR2.6 million in cash, plus up to a EUR5 million of historic balances owed to Fevertree by GDP. In addition, Fevertree has agreed to fund the repayment of EUR1.9 million of shareholder and other third-party loans owed by GDP.
Fevertree said the acquisition of GDP will allow it to accelerate the strength and depth of its presence in Germany, through the utilisation of GDP's established management, distribution relationships and sales channels.
"The completion of the GDP acquisition is an important step as we execute our growth plans in Germany, providing us with an ideal platform to take advantage of the opportunity within the German market and accelerate our growth," said Chief Executive Officer Tim Warrillow.
Fevertree said for the first two months of 2020, prior to the Covid-19 outbreak trading was solid; however from March onwards trading was affected by the pandemic.
In the UK, Off-Trade sales for the last 12 weeks to June 14 increased by 34% year-on-year, with positive momentum in both the spirits and mixer categories.
In addition, Off-Trade sales have grown in the US, with Nielsen data, which covers nearly half of Fevertree's US Off-Trade sales, reporting a sales increase of 89% year-on-year for the 12 weeks ended June 13.
However, in Continental Europe, although Off-Trade sales have remained robust, the effect of Covid-19 were more significant in the southern region, where On-Trade is more important.
In particular, increased uncertainty during the previous few months have caused some importers to destock, affecting Fevertree's European sales over the first half of 2020.
Looking ahead, Fevertree said its On-Trade business is gradually reopening across most of its regions, even though the easing of restrictions has been varied, leading to short-term uncertainty.
While Off-Trade continues to trade strongly, the group expects some of the demand to switch to the On-Trade as the gradual reopening continues.
Fevertree said it remains committed to its planned investments, particularly in marketing, and expects to maintain its budgeted GBP60 million of operational costs for 2020 as a whole.
Fevertree will publish its interim results on September 8.
Shares in Fevertree Drinks were down 5.1% at 2,296.00 pence on Tuesday in London.
By Dayo Laniyan; dayolaniyan@alliancenews.com
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