Low calorie tonic water sales help boost Fever-Tree profits

The popularity of its light tonic and ginger beer have boosted profits at drinks-maker Fever-Tree, but its shares fell on a less sparkling outlook for 2018.

The company has benefited from the gin craze, which has boosted sales of tonic water, in particular its low-calorie tonic whose sales more than doubled in the UK. Fever-Tree plans to launch more low-calorie mixers, which now account for just under a third of its tonic sales.

Fever-Tree tonic became the number one mixer brand in shops in Britain last year, and is also popular in North America, where people are consuming more long drinks. In Italy and Germany, the company’s non-alcoholic ginger beer brand, Moscow Mule, is selling well.

The firm said annual revenues rose 66% to £170m, propelling pretax profits 64% to £56m in 2017.

But the Aim-listed shares dropped 4% to £25.83, as investors were hoping for a better outlook.

Tim Warrilow, co-founder and chief executive, said: “We have had an encouraging start to 2018 and remain confident that we are increasingly well positioned to deliver further growth across the business.”

Neil Wilson, senior market analyst at ETX Capital, said: “The market has become rather accustomed to Fever-Tree beating expectations and upgrading guidance, so when results are just moderately ahead, things look a little flat.”

He added: “Fever-Tree will need to deliver on its promise to ‘reinvigorate the dark spirits category’ and do for this sector what it is done for gin over the last 10 years.”

Warrillow and Charles Rolls started Fever-Tree in 2005 and became millionaires within a decade, selling £25m of stock between them when they floated the company on the AIM market in 2014. The duo travelled around the world to scout for high-quality ingredients for its tonic. The company has branched out into a number of other drinks, such as Sicilian lemonade and ginger ale.