Fevertree Drinks PLC

Thank you and good morning everyone and thank you for joining us today. I am delighted to be here to share our results and some of the significant progress we've made over the first half of the year. I'm joined by Andy Branch-Flanner, our CFO, who you all know well, and also for the first time, Steve Nightingale. Steve has stepped in as our Interim Director of Investor Relations whilst Anne is away on maternity leave. and I'm sure you'll join me in wishing Anne all the very best at this very exciting time and welcoming Steve to the team. So, looking at the agenda for today, we'll begin with a summary of the first half and then some of the global trends shaping our category. I'll then take you through an update on our Molson Coors partnership before annual provider review of the financials. From there, I'll return to give you a broader business review and then we'll wrap up with a short summary before opening up to questions. So, turning the page. It's been an encouraging period for the group where we've combined a robust financial performance with real strategic progress. We remain the premium mixed category leader across all our major regions and our growing portfolio beyond tonics is broadening the brand into more occasions. but undoubtedly the most significant development in the first half was signing our transformational partnership with Molson Coors in January. The overall transition is progressing well and as we will come on to, it's very encouraging to see how the underlying brand momentum has been maintained in the US. Finally, our financial performance has been robust and the combination of strong cash flow and transaction inflows received from Molson Coors have driven a significant uplift in the group's cash positions The £100 million share buyback programme announced earlier this year is expected to run until the end of 2025. And today, I'm pleased to say we have announced an extension to the programme by a further £30 million to continue into 2026. A clear reflection of continued confidence, improved cash flow resulting from the Molson Coors partnership. So, against this backdrop of resilient performance and strategic process, it's important to step back and look at the consumer trends that are shaping our industry. These trends towards premiumization, moderation, and longer, lighter drinks are being seen across the array of adult socializing occasions and have been at the forefront of our strategy as we have deliberately evolved our portfolio in recent years. First, premiumization. Even in more challenging consumer environments, premium spirits continue to outperform as people choose quality over quantity. Consumers aren't trading down, they're trading up, and that behavior has been remarkably consistent across markets. Second, moderation. This is fundamentally reshaping how people socialize. It's not simply about drinking less, it's about having the choice. Whether you're drinking alcohol or not, there's now a clear expectation for sophisticated, high-quality alternatives. And third, the rise of longer, lighter, mixed serves. These serves sit at the intersection of premiumization and moderation, being lower in alcohol but crafted, flavorful, and designed for social extended occasions. And it is within these social occasions, whether that's a barbecue with friends, and night out at the bar, the sports event, or a meal together that the trends are being reflected in the way consumers are choosing to drink. In the same moment, you'll see classic long spirit mixes alongside crafted cocktails, lighter spritz-style serves, next to sophisticated premium sauce, and increasingly credible alcohol-free choices. And what's unique about Fevertree is that we have developed our portfolio to reflect these shifts and deliberately mirror the way people actually drink today. Our tonics anchor the classic long drink occasion where we lead the category. Cocktail mixers open up more complex serves, both at home and in the entree. Our sodas and gingers support longer, lighter highballs and spritz-style moments. will our growing premium soft range provide a sophisticated non-alcoholic choice without trading down on quality. And finally, our new non-alcoholic RTDs bring bar-quality flavor to zero ABV occasions. Because the brand carries credibility with and without alcohol, we are more relevant to more consumers more often, deepening loyalty while bringing new drinkers into the brand. The breadth of our range means we're not reliant on any single serve or trend. We're ideally positioned to benefit as adult socializing continues to evolve. But over the page, it's not just about having the right portfolio. It's also about having the ideal platform to execute against this growing opportunity. We are the clear global number one in premium mixers. with leadership across the UK, Europe, the US and beyond. And that leadership is reflected not only in share, but in household penetration, showing Fevertree has shifted from being a premium choice to a mainstay across many markets. We also lead the category in innovation, broadening occasions for consumers and being central to customers across the on and off trade who look to engage with us when they're developing their drinks and service strategies. And finally, We have deliberately established a bespoke route to market, with distribution that is deeply embedded across both the on and off trade throughout our regions, giving us the reach and agility to scale new formats quickly and extend the brand into new occasions without ever compromising on quality. All of this wasn't lost on Molson Coors, who approached us, recognizing, as they did, the unique position we've established to scale both our core mixing portfolio and new growth areas. As a reminder, our strategic partnership was announced in January, providing Molson Coors with exclusive rights for sales, distribution, and production in the U.S. And while we retain full control of our brand, vision, and product development, the rationale is clear. Strategic alignment. Both businesses share a vision to grow Fevertree across alcohol and non-alcoholic occasions, aligning with Molson Causes' Beyond Beer ambitions. Scale and Platform Their national network across on- and off-trade accelerates distribution, expands reach, and drives rate of sale through stronger customer contact. Marketing Investment Access to incremental funds, buying power, and execution strength will boost brand awareness and category growth. Local production. Over time, onshoring will cut freight costs, shorten lead times and deliver operational efficiencies. So together, this partnership transforms our largest growth market and builds an even stronger long-term foundation for Fevertree in the US. So having set out the rationale for the partnership, this slide shows how it translates into real revenue growth for Fevertree. Molson Calls gives us breadth. Their distribution platform covers 400 independent distributors, servicing half a million accounts and making 30,000 deliveries a day. That reach creates a huge opportunity to expand the number of accounts we're in, particularly given the white space that still exists in the Call Premium Mixer category. The second element is depth. By leveraging MolsonCourse's senior customer relationships in category and management expertise, we can increase the number of FibreTree products stocked per account, not just tonic but across our wider portfolio, which over time may also open up opportunities in adjacent categories such as non-alcoholic and ready-to-drink. And third, Velocity. Their ability to increase visit frequency, improve in-store execution, secure better placement, and grow off-shelf space is combined with a step change in marketing investment. Together, this will drive rate of sale per product and significantly raise brand awareness. So put simply, this partnership doesn't just give us scale, it multiplies the growth levers of breadth, depth, and velocity. So, as planned, our H1 results still largely reflect the legacy Fubertree standalone model. But the transition to Molson Coors is now well underway and progressing smoothly. The first stage was Molson Coors completing a full tendering process across their distributor network. Since June, the brand has successfully moved into around 400 regional distributors nationwide. The initial focus has been on the on-trading liquor channels. with the relevant retail customers being handed over during the second half. Organizationally, our former Fevertree US team is now fully integrated over Molson Cause's non-app division, while we've kept a small focus team in place to oversee the partnership. And whilst the second half will remain a transition period with plenty still to do to bring all distributors fully up to speed on the brand and portfolio, we've been delighted with the progress so far. The teams have worked incredibly well together. We're excited about the long-term growth platform we're building in the US. I will now hand over to Andy to take you through the financials.

Thank you, Tim, and good morning, everyone. The Fevertree brand delivered 2% constant currency growth in the first half and a 1% increase in EBITDA as we worked through the initial period of transition into the Molson Coors partnership in the US. Working capital, as expected, has improved significantly driving strong cash generation, and this morning we announced a further £30 million extension of the Share Buy Back programme, which will run into 2026. So, turning the page. In the US, we were pleased to deliver 6% constant currency growth. Brand momentum has remained strong across channels through the initial phase of transition that Tim has just talked through, and we increased share, extending our leadership position in the ginger beer and tonic categories. In the UK, whilst we've seen improved trading over the summer months, the first half result was softer than expected. Whilst progress in the off-trade was solid, with 1% growth at retail, conditions in the on-trade remain challenging. Outlets and groups facing ongoing inflationary cost pressures alongside business rates and national insurance increases have had little choice but to pass these costs through to the consumer. and the resulting pricing pressure is impacting the rate of sale of the spirits most known to be gin and mixer categories with Fevertree not immune to those wider headwinds however our UK innovation launched over recent years is performing well across both channels as we've diversified our product range with non-tonic products including our premium soft drinks and cocktail mixers growing at a 13% CAGR and now making up almost a third of our UK sales mix which alongside our clear leadership position in the category, strong brand awareness and broad household penetration provides the platform for an improved UK performance in the second half and beyond. While sales in Europe at the half year can be impacted by the phasing of orders to our distributors, underlying depletion growth in the region was positive at 2%. We continue to drive category growth across European retail and increased value share, with ginger beer remaining a notable growth driver, up 26% year-on-year. We've further extended our leadership position with now over 40% share of the ginger beer category across Europe. The rest of the world region is performing well. Revenue is up 17% on a constant currency basis, reflecting some benefit from all the phasing. But again, looking at underlying depletion growth, that was strong at 8%. driven by Australia, where our premium soft flavours and formats are delivering strong growth alongside good performance in Canada and Japan. As we flagged earlier in the year, the Molson Coors Partnership impacts the presentation of our financials. We've included detail on these changes in both this morning's statement and within an appendix to these slides. We present here the segmental view of performance to EBITDA level, which we'll be talking to going forward. In the US, we delivered adjusted EBITDA of £5 million. As expected, the move to the US partnership has initially impacted EBITDA margins, not only because we're working through a transition this year, but also because we're now in a partnership and so share US profits with Molson Coors. As we set out earlier this year, over the medium term, we expect to drive significant improvements in US EBITDA as the partnership P&L leverages Molson Coors scale. with a step change expected once U.S. production is onshore. And crucially, Molson Coors have agreed to guarantee an absolute level of Fevertree's U.S. profits over the period from 2026 to 2030, underlining their confidence in the opportunity. Over the initial years of the partnership, these underlying profitability improvements will be partially tempered by a significant increase in U.S. marketing spend, which will run through the partnership P&L. providing the catalyst to deliver strong US revenue growth in the years to come. In the rest of the group, we've continued to drive margin recovery, with the EBITDA margin improving to 23.8%, as we drove underlying operational improvements and lapped a prior year revaluation adjustment. Partially offsetting these improvements has been an increase in marketing spend and the impact of the UK EPR levy. Finally, central covers the cost of our central teams and senior management, alongside corporate expenditure, including IT, insurances, and PLC costs. These are marginally elevated compared to the first half of 2024. However, as phasing unwinds, these costs will reduce as a percentage of revenue as we progress through the second half, whilst we're focused on delivering further efficiencies going forward as we benefit from the investments we've made in improved technology and operational processes in recent years. We delivered a strong improvement in working capital year on year, reflecting a continuation of good underlying work from the second half of 2024. The improvement also reflects the impact of the US partnership with local working capital relating to US customer receivables and inventory now funded by Molson Coors. We still retain some US working capital on our balance sheet, which relates to UK produced inventory in transit to the US, as well as receivables from Molson Coors. However, this will further reduce over the medium term as US production is onshore. As a result, we've continued to drive strong cash generation, with the cash position up 67% year-on-year before we take into account movements relating to the Molson Coors equity issue and share buybacks. Turning to Outlook, we've seen an improved sales performance since period end, with year-to-date sales growth at the end of August increasing to 4% on a constant currency basis for the BeaverTree brand and 2% on a reported basis. As a result, the revenue guidance we gave at the start of the year remains unchanged, and we remain comfortable with market expectations. We're confident that we'll see an improvement in EBITDA margins as we progress through the year, particularly as we leverage central costs, and as such are comfortable with market expectations for EBITDA margin this year, which, as per our guidance, anticipates a year-on-year reduction due to the U.S. transition. As we look to the medium term and as we presented earlier in the year, we're confident that strong revenue growth driven by U.S. acceleration will convert to even stronger EBITDA growth driven by Molson Core's operational capabilities and economies of scale, all underpinned by guaranteed profit levels in the U.S. And that well-underpinned EBITDA growth then converts to even stronger cash generation as U.S. working capital requirements fall away for the group. And so the Molson Partnership highlights the underlying value of this business, whereby the Fevertree brand can combine with an asset-like business model to drive a virtuous circle from revenue growth to cash generation. And whilst we will retain sufficient funds to fuel global growth opportunities, excess cash generated over the medium term by this cash-compounding business model can be returned to shareholders, as demonstrated by the announcement today of a further £30 million extension Thanks Andy.

So as we start the business review, it's important to highlight the ongoing strength of the Fevertree brand. We are firmly established as the global leader in premium mixes, holding the number one position across all our major markets. And as we referenced over the years, we've seen hundreds of Me Too copycats come and increasingly go in that time as we've continued to strengthen our leadership position. And this isn't just about market share. Our position is underpinned by repeated recognition from the industry with multiple awards naming Fevertree the world's best-selling and top-trending mixer brand. So that combination of market leadership, household penetration, and brand equity makes Foodtree not only the clear category leader today, but also gives us a powerful foundation as we continue to broaden our portfolio beyond Tonic and navigate shifts in the wider spirits landscape. As we've already touched on, one of the biggest drivers of our growth has been diversification, expanding well beyond Tonic into a much broader portfolio that is delivering strong growth across categories and regions. Over the past three years, this part of the business has grown at a 16% CAGR and now represents 45% of group revenues, a clear reflection of both evolving consumer trends I covered earlier and the strength of our innovation globally. And whilst we've seen a modest 2% decline globally in tonic over that period, this has been driven largely by the UK, where the overall gin category has come off its previous highs. And naturally, as the clear category leader, our performance in this market has mirrored those wider dynamics. However, it's important to remember that gin remains a very large and significant category in the UK, and the gin is an incredibly important and well-established popular drink. And while the on-trade has undeniably been affected by the wider category headwinds and pricing pressures, the future of the clear number one Sonic brand by significant distance and we continue to invest buying the GMT and tonic portfolio will remain a highly profitable part of our business. But stepping back to a global perspective, the picture is more encouraging. The GM cash growth is seeing growth internationally year on year and over time we still see headroom for our tonic business across many of our major markets, not least in the US, where premium tonics are still in their relative infancy. So this gives us a strong platform to capture future and further shares internationally, even as the UK adjusts. But while Tonic continues to anchor our business, diversification is already emerging as a key pillar of future growth. What makes us particularly exciting is the breadth of the opportunity across our broader portfolio. As I illustrated earlier, Futur is uniquely positioned to straddle all adult socialising occasions, meaning we're driving greater consumer relevance, frequency and loyalty. Take the UK as an example. Half of the 3.6 million households that buy foodtree now purchase from our border range beyond our tonics. And as shown by this graph, our wider portfolio is gaining significant scale and driving meaningful growth across our whole group. And if you want one product that really brings this to life, Fevertree is now the biggest global ginger beer brand by value, and most importantly, we still believe has a significant growth opportunity ahead. Its success is being driven by the fact that it straddles both alcoholic and non-alcoholic occasions. It's brilliant in a classic long mix serve and cocktail, but it's equally as delicious as a sophisticated premium non-alcoholic drink. That dual opportunity is what underpins our ginger beer innovation and marketing plans, creating more specific formats for both mixing and non-alcoholic occasions, opening up new retail channels to drive the non-alcoholic distribution. And furthermore, we continue to develop our marketing messaging to ensure people consider us for both occasions The results are clear. Sales have doubled over the last five years. Our three-year global CAGR is 14%, and Ginger Beer is now our second largest product after Tonic. Geographically, we're seeing outstanding traction. We lead the category in the US, and we're building strong momentum across Europe, notably in France, where we're investing behind a sizable ginger opportunity. In short, Ginger Beer is the blueprint for how we look at our broadening portfolio. Premium, versatile and relevant, whether you're choosing a mixed drink or going alcohol free, whether you're in the on trade or the off trade. The versatility of our range is also being supported by marketing investment across our markets. Tonic remains a core focus, but alongside it we've been highlighting the increasing relevance of our range. As an example, in the UK, our premium sauce has been featured in premium dining deals and broader entertaining occasions. At retail, we're opening up more channels and store-facing in different non-alcoholic parts of the store. And in Europe, we're seeing new opportunities emerge in new on-the-go channels. and in the US, as already mentioned, our Molson Coors partnership provides significant incremental marketing funds which will begin to deploy once the distributor transition is fully bedded in. So, to wrap up, our key messages are clear. First, product diversification is driving growth across many regions and strengthening FeeTree's position as the global leader in premium mixers. Second, Our US partnership in Molson Coors represents a step change in our biggest market with the transition progressing well. And third, our strong cash generation and financial discipline give us the resource to invest, deliver returns and build for the long term. And then finally, the guidance we gave at the start of the year remains unchanged and we remain comfortable with market expectations. So thank you for your time. and we will now open the call to any questions.