Premium tonic water as a category has boomed over the past 20 years and Fever-Tree, created in 2005, has been at the epicentre of the movement. Prior to the UK brand’s inception, the tonic water sector was dominated by Schweppes, but Fever-Tree forged the new pathway for a wave of premium tonic and mixer brands to emerge. In fact, Fever-Tree’s rise to the top of the premium market is so significant that it’s been a regular fixture atop the bestselling and top trending lists in Drinks International’s Brands Report. Yet, despite the seemingly picture-perfect trajectory, global events such as the pandemic and its subsequent recession, as well as supply chain issues caused by Russia’s invasion of Ukraine, have taken their toll.
In a report by European Supermarket Magazine, Fever-Tree co-founder Tim Warrilow, said: “Looking ahead to 2023, we remain very confident in delivering strong top line growth, most notably in the US. While the initiatives we are implementing would have driven margin improvement during the year, the energy-related cost increases, which are particularly acute across the glass industry, mean we expect to deliver absolute EBITDA in line with 2022.”
Another fast riser is The London Essence Company, which recently announced itself as the fastest-growing mixer brand in the UK, having increased its on-trade sales value by 64% year on year. The brand has been on the market since 2016 and, while things appear rosy financially, it too has had to react to such troublesome times in the market.
“We have a team dedicated to managing our raw materials, so we work with our suppliers to manage these on a long-term basis,” says Ounal Bailey, co-founder of The London Essence Company. “But like all businesses, we are also facing the challenges of inflation during this exceptional time. Inflation was already high coming out of Covid-19 and the Russian invasion of Ukraine has only exacerbated the issues, pushing fuel and energy costs higher still. As well as the direct impact on consumers, fuel and energy are used by suppliers of every product – so the indirect impact will continue to be felt at least during 2023.
“However, our progressive outlook means that we have been working on broader sustainability challenges over a much longer-term period, and this has also helped us to mitigate some of the challenges. We are also currently adjusting our promotional programmes and driving efficiencies where possible so we can optimise returns and minimise costs to protect business profitability, while continuing to offer great value to our shoppers.”
Bright horizons
Premium tonic brands on the whole, particularly those in the UK – which is less protected outside the EU – will have been hit harder by supply chain issues and inflation rates than most other categories given the amount of glass and cans required for production. Looking further afield however, the wider international markets appear to be thriving.
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Bailey adds: “While we have a strong and growing presence in GB as our home market, we have been steadily growing the international presence of London Essence over time. We have also found increased momentum in this part of the business since Covid. Our distribution, driven largely through the on-trade, has allowed us to provide our luxury mixers to markets as wide as Paris, Singapore, Hong Kong, New York and Sydney, to name a few. This has allowed us to be recognised as the second top trending mixer brand [in Drinks International’s Brands Report].”
Meanwhile over at Fever-Tree, which tops the Annual Brands Report, 70% of its revenue now comes from overseas, and Oliver Winters, global communications director for the brand, believes gin’s history is partly to play.
Winter says: “We’ve been in the US since 2007 so we’ve got longstanding foundations there, but parts of Europe are seeing very good growth. Italy and France for example as well as Spain, which was one of the company’s first big breaks overseas and remains one of the biggest markets for premium gin and tonics. We’ve generally done very well with our tonic in Commonwealth countries where there’s been a British influence and gin is already popular.
“Our Mediterranean tonic is the biggest seller in Europe because it’s got slightly less quinine and is therefore less bitter, which works well for the European palate. In Europe there doesn’t appear to be as much importance on calorie intake as the US and UK. When people choose to have a drink it’s seen as a treat and therefore they don’t feel the need to calorie count.”
On the contrary, Thomas Henry, based in Berlin, has seen an increased demand in lower-calorie offerings and recently launched its signature products in a zero-sugar format. Its flagship tonic, Wild Berry and Ginger Beer have all been recreated without sugar and speaking to About Drinks, managing director Sigrid Bachert says: “The demand for sugarfree drinks is growing steadily, but consumers want to do without sugar, but not taste. We took up this challenge during the development of the Zero range. All Zero products are designed for mixing long drinks and ensure a balanced taste in the drink even without sugar.”
Bespoke markets
While Fever-Tree’s flagship tonic remains the cornerstone of the brand, Winters told Drinks International that each market requires different styles and flavours. And given the nuances in palates and trends in different countries, it’s important to not only match a market with a product, but develop new ones specifically to thrive inside them.
Winters says: “We used to develop a new tonic in the UK and if it proved popular we would roll it out globally through our distribution network. However, now we look at a specific market anywhere in the world and create a product to suit that country, and if it works, then we start to roll it out in similar markets.
“The US has probably been our most innovative market over the past three years. For example, we launched our Pink Grapefruit soda to use in a Paloma cocktail after speaking with various tequila brands, which expressed their desire to get tequila consumed in more ways than just sipping or shots. But because it performed so well we’ve taken it to the UK where premium tequila is also thriving.”
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According to Winters, Ginger Beer is Fever-Tree’s biggest-selling product in the US, not just in the premium sector, but as a whole, as well as the biggest tonic brand.
“We also launched a Blood Orange Ginger Beer in the US, which we’ve done in collaboration with Maker’s Mark, and in Australia we’re looking to do similar things this year.”
The success of products outside tonic water has clearly sparked enthusiasm in the Fever-Tree boardroom, as the company has now entered the cocktail mixer category. In March it was announced that Fever-Tree had launched new products – Espresso Martini, Classic Mojito and Classic Margarita cocktail mixers – across the UK in a move to capitalise on the demand for simple, at-home serves.
Rose Cottingham, head of innovation for Fever-Tree, says: “We know our consumers love the idea of recreating an ‘at bar’ experience at home, but when it comes to cocktails they are often put off by feeling they don’t have the know-how or struggle to replicate the quality and taste of what is on offer in their favourite bar or pub. We have spent many months and countless hours refining our new cocktail range, ensuring we have arrived at three fantastic mixers that will give consumers the confidence to create enticing and sophisticated cocktails with ease.”
The idea of cocktail mixers for the off-trade is no new concept, but FeverTree’s brand presence and consumer loyalty could be the perfect recipe to see yet another product thrive under its portfolio. Of course, the ongoing struggles with supply chains and inflation won’t be
going away anytime soon, especially in Europe, but Fever-Tree’s new approach to product development is potentially another key to continued success and therefore another pathway for premium brands to follow.
