Fevertree Drinks : Preliminary Results Presentation 2019

FEVERTREE DRINKS PLC

PRELIMINARY RESULTS 2019

AGENDA

1	Update on COVID-19

2	FY19 Summary & Highlights

3	FY19 Financial Review

4	FY19 Regional Review

5Summary

UPDATE ON COVID-19

COVID-19

Current situation

• Lockdown has severely impacted on-traderevenues across most of our regions
• Very strong initial sales in off-trade
• • Positive 'stockpiling' effect entering into lockdown
  • Sales have remained robust
  • Potential moderation as no in-home entertaining occurs
  • More people switching to online shopping
• Continue to work closely with our bottling and canning partners to maintain production, and with our logistic partners to ensure finished goods stock is held in separate locations
• Determined to support all employees. Focus on redeployment of staff to maintain efficiency across the business, rather than using furlough schemes

Actions to safeguard and mitigate

• Increased levels of contingency stock and raw materials

Operations

during the early stages of the outbreak

• Supporting our bottling, canning and logistic partners as they enact contingency plans, such as segregated shift patterns
• Optimising channels and formats

Off-trade	‒	Increased distribution to convenience
	‒	New larger pack format
	‒	Upweighting our online presence
•	Adjusting promotional plans
• Working with our accounts to support them through the
On-trade	extended period without revenue

• Maintaining good relationships with spirit partners (e.g. joint provision 'bundles' mailed to consumers)
• Putting in place attractive deals for wholesalers and on- trade accounts ready for on-tradere-opening

COVID-19: FY20 SCENARIOS

FY20 impact uncertain

•	Too early to quantify financial impact on full year
•	Key uncertainties

Key data points

Revenue breakdown by region, channel, and quarter

‒ Length of time governments impose restrictions

‒ How restrictions are relaxed (gradual opening of the on-trade

likely)

‒ Consumer behaviour changes as restrictions are relaxed

‒ Structural impact to the on-trade

‒ Global economic impact

• On-trade revenue loss: assume zero for the duration of

lockdown in each region

Region	% Group	On-	Off-
	revenue FY19	trade	trade
UK	51%	50%	50%
US	18%	30%	70%
Europe	25%	45%	55%
ROW	6%	45%	55%

Gross margin and Opex

	% Group
	revenue FY19
Q1	20%
Q2	25%
Q3	25%
Q4	30%

• Initial strong performance in off-trade
‒	Sales uplift as consumers increased their frequency of visits and
	basket sizes
‒	Consistently strong performance across regions

• Gross margin impact from FX movements, elevated inventory costs, changes to channel and regional mix
• High level of variable costs, mostly relating to A&P
• Short-termsavings from lower A&P spend, with the aim of reinvesting these savings later in the year (i.e. no change to level of spend over the year)

COVID-19: FEVER-TREEWELL-POSITIONED TO NAVIGATE UNCERTAINTIES

Diversified revenues

Strong balance sheet

Flexible business

model

Strong & diverse operating model

• Revenues generated from a diversified set of regions, channels and end customers
• All regions have a good mix between on- and off-trade
• • The US is particularly weighted to the off-trade
• Strong cash flows
• Debt free
• FY19 cash position £128m
• Asset light, outsourced model
• Low capital expenditure requirement and few fixed costs
• Ability to flex variable costs if needed
• International network of 5 bottlers and 2 canners means we are able to mitigate the impact of short-term disruption at specific sites
• Good levels of contingency stock and other key raw materials
• Numerous and diverse set of on-trade accounts

COVID-19: SUPPORTING OUR PEOPLE AND COMMUNITIES

Supporting our employees

Using our strength as a small, close-knit team

Continue to offer support and clarity to all our employees, with no intention to furlough

Focus on redeploying our on-trade team to different departments broadening their knowledge and skill set

Supporting our local communities

Donations to local charitable initiatives across our regions

Supporting key workers

Helping 'Salute the NHS' to provide one million meals to NHS frontline staff over the next three months, donating 60K drinks to be included in meal packs

Partnered with Treats Help in the US to distribute our drinks to hospitals. So far we have donated to 20+ hospitals across the US

Supporting our customers & suppliers

Piloting a scheme in UK called "Protect you Local" to support independent outlets, through a digital voucher-based

fund

Supporting the North American bartender community through donations to the Restaurant Workers' Community Foundation and offering bartenders digital seminars

2019 REVIEW

FY19 SUMMARY & HIGHLIGHTS

1	Double digit Group revenue growth

2

3

4

5

Retained category leadership in the UK in both

on-trade and off-trade

Strong performance in the US with 33% revenue

growth and a stronger distribution network

European sales increased 16% as Fever-Tree

drives the growth in the premium mixer category

Continued to invest in the substantial global

opportunity

FINANCIAL REVIEW

FY 2019 HIGHLIGHTS

REVENUE

GROSS PROFIT

ADJUSTED EBITDA

£260.5M

10%

£131.5M 7 %

£77.0M

2%

GP MARGIN

EBITDA MARGIN

50.5%

29.6%

DILUTED EPS

NET CASH

TOTAL DIVIDEND

50.26p

£128.3M

15.08p

OPERATING PERFORMANCE

£m		FY 2019	FY 2018	Change
Revenue	260.5	237.4	10%
-	UK	132.7	134.1	(1)%
-	US	47.6	35.8	33%
-	Europe	64.4	55.5	16%
-	RoW	15.8	12.0	32%
Gross profit	131.5	122.9	7%
Gross margin	50.5%	51.8%	(130)bps
Operating expenses	(54.5)	(44.3)	23%
% of sales	20.9%	18.7%	220bps
EBITDA	77.0	78.6	(2)%
EBITDA margin	29.6%	33.1%	(350)Bps
Operating Profit	72.2	75.4	(4)%
Profit Before Tax	72.5	75.6	(4)%
Normalised EPS (pence per share)	51.08	53.40	(4)%

• Strong total revenue growth, with good progress in international regions
• • More challenging year in the UK offset by 24% growth across international markets
  • Acceleration in Europe and the US during H2
• Positive FX impact due to US dollar strengthening
• • Adjusting for FX, constant currency growth was
  • • 28% in the US
    • 17% in Europe
    • 9% for the Group
• Gross margin retraction was driven mainly by increased glass costs and the impact of storage costs from holding elevated inventory for periods during the year
• Operating expenditure increased ahead of revenue growth as we continued to invest for the future, where we see huge opportunity, especially in the US and Europe
• Total dividend up 4% year-on-year to 15.08 pence per share

Dividend (pence per share)	15.08	14.50	4%

STRONG CASH POSITION

£m		FY 2019	FY 2018
Working capital:	54.2	57.9
-	Inventories	20.8	28.3
- Trade and other receivables	60.8	62.9
-	Derivatives	0.1	(0.3)
- Trade and other payables	(27.5)	(33.0)
Working capital as % of LTM revenue		24.4%
20.8%

£m	FY 2019	FY 2018
EBITDA	77.0	78.6
Movement in working capital	3.0	(20.2)
Cash generated from operations	80.0	58.4
Operating cash flow conversion	104%	74%
All other movements		(25.7)
(41.4)
Net cash flow	38.6	32.7
Cash at beginning of period		57.0
89.7
Cash at end of period	128.3	89.7

• Working capital decreased primarily due to
• • Decreased in inventory levels at year end, reflecting improved operational efficiencies and elevated levels held at the previous year end
  • Improvement in collection of trade receivables
• Working capital improvements resulted in operating cash flow conversion of 103%
• This resulted in a strong FY19 net cash position of £128.3m, up 53% year-on-year

CAPITAL ALLOCATION

1	Invest in the global opportunity

• Hold sufficient cash to upweight investment and take advantage of opportunities to accelerate growth
• Retain ability to upweight marketing spend across growth regions at the appropriate stage

2	Assessment of M&A opportunities

• Remain vigilant to opportunities that would further assist with the delivery of our strategy

3 Consider additional distribution to shareholders

• Consider additional distribution to shareholders where the Board considers surplus cash is held

REGIONAL REVIEW

UK

UK 2019 HIGHLIGHTS

On-trade

• Good performance against tough 2018 comparators
• c.45,000 accounts with good regional growth
• Strong growth within national Groups
• Extended our leadership position in the mixer category

Off-trade

• Performed in-line with category, which lapped strong summer 2018 comparators and faced macro headwinds in H2
• Strong performance with extended Ginger range
• Positive co-promotional activities
• Maintained leadership position in the mixer category with 40% value share*

Revenue: £132.7m

*IRI Total UK Retail Mixer Market value share, 13 weeks to 19 Dec 2019

UK - STRATEGIC PROGRESS & OBJECTIVES

Portfolio management &

Innovation

• Leverage category leadership position
• Continue to grow our range of mixers to target new drink occasions
• Attract new consumers to the brand through various long mixed drink serves such as whisky & ginger
• 2020 launch of a premium soda range

Distribution

• Focus on both core range and secondary growth drivers
• Continue to gain distribution in on- trade, especially regionally
• Clear opportunities to gain further distribution

Marketing

• Focus on reaffirming our key points of difference
• Drive awareness and trial
• Develop point-of-sale presence across both the on-trade and off-trade

Supported through our strong partnerships with a range of spirits companies

USA

US 2019 HIGHLIGHTS

Strong overall performance:

Revenue +33% YoY

Deepening relationships with key customers and

partnerships with spirits brands

Significant distribution landed through the year across all

channels

Accounted for two-thirds* of premium mixer growth

Revenue: £47.6m

*Nielsen 2019

FEVER-TREE USA HAS BEEN UNDER TRANSITION:

NOW POISED TO CAPITALIZE ON STRONG FOUNDATIONS

2018 H1

2018 H2		2019

Changing the Business

Model

• Open Fever-Tree USA
• Build a team across all functions to work alongside our global team

Strengthen Network

• Optimize route-to- market through national partnership with SGWS across the on-trade and off-trade

Building Out the Foundations

• Expanding distribution across channels - number of accounts and points of distribution per account
• Activate marketing agenda through brand activation events, awards, media articles and social media presence

Grew >20% over transition year as we		Accelerated growth and became the
established a leading position in the premium		#1 driver of growth in tonic and
mixer market		ginger beer overall categories

20

2020 - TAILORING OUR APPROACH TO THE US CONSUMER AND MARKET

LEVERAGE STRONG FOUNDATIONS & RELATIONSHIPS

OPTIMIZE PRICE		ALIGN INNOVATION & ACTIVATION		DRIVE TRIAL & AWARENESS
& FORMATS		WITH US HABITS

•	Ensure relevance for the US market based	•	Align the portfolio to 4 core drinking
	on consumer behavior trends key		occasions
•	Thorough testing and engaging	•	Strategy to drive growth in each occasion

• Implementation from 1st Feb 2020

• Continued in-store and in-bar activations
• New focus on the on-line space with Google and Amazon
• Effective targeting and instant results obtained

OPTIMISING PRICE

H2 2019		February 2020

Understanding Consumer Behaviors

Optimizing Fever-Tree Strategy

Key Stakeholder Engagement

Implementation

DETAILED PRICING ANALYSIS

Elasticity Assessment

Detailed elasticity analysis of weekly volume performance at price points across key retailers

Consumer Research

Bespoke consumer research with panel of ~10k online mixer consumers testing their willingness to purchase products at different price-points

Retailer Trials

Number of trials testing comparative velocities per

store at new price points across the US

Volume	Intention to
(Units/	purchase
week)

R² = 0.85

Price ($/Unit)

	Current	Suggested
	price		price
			Ginger Beer
			Tonic Water
			Club Soda
			Ginger Ale
High	Price	Low

• Velocity Increase at

New Pricing

Top 5 SKUs

24

OPTIMISING FORMATS

An affordable premium position has been achieved in the UK	New formats create opportunities
		• Different entry price points are enabled through the use of different
UK format evolution	formats, which can unlock significant volume uplift

					UK sales, £m
					45
					40
£2.99	£1.70	£4.00	$5.99 / $4.99	$2.99/ $2.49	35
					30
						500ML Glass
					25	8X150ML Cans
					20	4X200ML Glass
Mainstream					15
competitor
equivalent					10
	£1.19	£4.00	$4.29	$1.20	Q414	Q415	Q416	Q417	Q418

ALIGN INNOVATION TO US DRINKING HABITS

• On Trade Pricing enables "Four Drinks" strategy

• Targeting drinks occasions to ensuring we become the #1 mixer brand by value

• Grapefruit launch is tailored to the tequila mixer opportunity in the US

FEVER-TREE

CLASSIC

PALOMA

FEVER-TREE

GRAPEFRUIT

SPRITZ

EUROPE

EUROPE - 2019 HIGHLIGHTS

Good performance across key territories:

Revenue +16% YoY

Positive momentum in the premium gin category

Widening distribution in both on- and off-trade

Continued to evolve and strengthen route-to-market

sales and distribution partners

Revenue: £64.4m

EUROPE - STRATEGIC FOCUS

"Core Markets"		"Next Wave"
Leverage strength of the Brand		Broadening and deepening
and category leadership		penetration
• Multiple growth drivers remain		• Whitespace in on- and off-trade
• Range and format extensions		• Gin & Tonic in strong growth
• Growing focus on Ginger range		• Building relationships with key
		partners

"Earlier Stage"

Build distribution and route-to-

market

• Ensure right RTM by market
• Increase headcount where appropriate

Upweighted brand activation across the region

ROW

ROW - 2019 HIGHLIGHTS

Strong performance across key territories:

Revenue +32% YoY

Australia

Canada

Asia

Growth driven by increased RoS and further distribution wins in a strong growth market

Distribution gains with national retailers led to

a very strong off-trade performance

Successfully upweighted presence in the region

with a focus on key cities

Revenue: £15.8m

SUMMARY

SUMMARY

FEVER-TREE IS WELL POSITIONED

LEADERSHIP		TRACK RECORD		MULTIPLE GROWTH
	& FIRST MOVER		DRIVERS
Clear No.1 Global
	Proven category leader		Across categories &
Premium Mixer Brand
	across multiple markets		regions

RELATIONSHIPS		BUSINESS MODEL
Unrivalled Relationships		Outsourced, asset light,
& Partnerships		cash generative

Tel. [phone]

186-188 Shepherds Bush Road, London W6 7NL

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