Gin craze and Fever-Tree mixers: never one without the other

“If three quarters of your drink is the mixer, mix with the best,” is the argument tonic water brand Fever-Tree wants you to believe. Because if you do, spending a small fortune on what is basically a soft drink by another name will not hurt you.

Ever since Fever-Tree’s mixers appeared on London’s bar scene in 2005, it has divided consumers into those who see it as a much-needed disruptor of the beverage market, and those who think it is a marketing con to convince us all to pay more for a staple we have been using for more than a century.

The premium soft drink company has enjoyed a meteoric rise thanks to persuading consumers to buy its more expensive tonic waters for their Gin&Tonic, rather than cheap mixers from traditional soft drink brands such as Schweppes.

In Australia, where Fever-Tree’s mixers are also all the rage, a four pack of Fever-Tree’s 200 ml glass bottles will set you back AUD 7.55 (USD 5.40), while a 1 litre plastic bottle of Schweppes tonic water costs AUD 2.15 (USD 1.50). Supermarkets like Woolworths and Coles offer 1 litre bottles of their own brand tonics for as little as AUD 0.90 (USD 0.65).

Fever-Tree’s UK co-founders Tim Warrillow and Charles Rolls started Fever- Tree in 2005 as a marketing company, having outsourced production. They took it from strength to strength before they listed the company on the London stock exchange in 2014, which netted them personally GBP 25 million (then USD 44 million), it was reported. Today Fever-Tree has a market capitalisation of over GBP 4.2 billion (USD 5.45 billion).

In the first half of 2018 Fever-Tree’s turnover rose 45 percent to GBP 104.2 million (USD 135 million), persuading management to upgrade their full year forecast.

In 2017 full year turnover was GBP 170 million (USD 220 million) and EBITDA stood at GBP 58.7 million (USD 76 million). Gross profit margin was above 50 percent.

Coca-Cola-owned Schweppes still has the largest market share in tonic water in the world, but Fever-Tree overtook Schweppes in off-premise sales in the UK back in January, when it accounted for 39 percent of all mixer sales by value. Schweppes had a 31 percent share.

Fever-Tree attributes its success to the “ginnaissance”, which gripped the UK over a decade ago and has since spread around the globe. What is more, Fever-Tree did not go Fair Trade or organic. Instead the founders decided to use only the best ingredients, like quinin sourced from the Democratic Republic of Congo. Tonic water gets its unique bitter, citrus flavour from quinin. Cane sugar and natural citrus flavour from tangerines and oranges are then added to carbonated spring water.

Fever-Tree believes it is quality ingredients that make its products taste better, which is why consumers keep buying it. The bottle is also important. Whereas a lot of traditional mixers come in large bottles, Fever-Tree tonic waters are mainly sold in single serve 200 ml glass bottles to prevent the cocktail from going flat.

Recently, however, the brand drew criticism for the amount of sugar in a single serving, which is around 14.2 grams. This led Fever-Tree to launch its “Refreshingly Light” range, which is a mid-calorie range that uses fructose rather than cane sugar.

There will never be a no-calorie version, though, as the company is committed to only using natural ingredients.

After the UK, Fever-Tree is finding success in continental Europe and Australia. Its global reach has already taken it to 74 countries.

The next market is the US, where Fever-Tree has launched a full-frontal attack with a 32-employee operation. As if this were not enough, Fever-Tree has entered into cooperation with SGWS, the largest US distributor of wine and spirits, in July.

In the US, gin is not yet as big as the premium craft market in bourbon, rum and tequila. Therefore, Fever-Tree has recently brought out three ginger ales, one ginger beer and a cola to complement whiskies.

Not tardy, in September, Fever-Tree teamed up with Bacardi’s Patron Tequila brand to create a citrus tonic mixer. The limited-edition beverage is designed to create a range of drinks using the tequila and tonic combination. It is already available in some bars and restaurants in London and other UK cities.

A year ago, Fever-Tree was thought to be a takeover target for drinks company Diageo. According to rumour, PepsiCo has been sniffing around it too. Like its mixers, the company will not come cheaply. Fever-Tree’s share price was GBP 3,600 in early October, up from GBP 2,200 in January.