Fever-Tree: trumped up tonics or fledgling global powerhouse?

Fevertree Drinks (LON:FEVR) is a special brand. It’s not every day you see a single drink power the vast majority of growth in one category for the best part of a decade, but that is exactly what Fever-Tree has done for premium tonics. The group is now the world’s leading supplier of premium carbonated mixers, with distribution networks in 72 countries around the world. The group was launched in 2005 after its founders, Charles Rolls (formerly of Plymouth Gin) and Tim Warrillow, spied a gap in the mixers market. Rolls and Warrillow correctly surmised that if quality-conscious consumers are willing to splash out on premium gin, they are also likely to pay a little more for a decent tonic. From this simple insight came phenomenal growth. Today, with its £1bn+ market cap, Fever-Tree is almost a victim of its own success. It is now so dominant in the UK market that some wonder where growth will now come from and question how it can defend high market share and operating margins from copycat competitors. Fever-Tree’s asset-light business model makes for big profits, strong margins, high returns on capital, and lots of free cash flow. No surprise…