Fever Tree: Sourcing, Bottling, & Demand Planning

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How involved is Tim in choosing and tasting liquids these days?

Tim is very involved and is ultimately the decision maker, but on the operational, financial and marketing side he is less involved. Signing off a liquid doesn't go without him; even if it's in a different pack, he wants to have ultimate control over the quality of the product.

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What was the biggest challenge with distributors?

It was a lot more stable before Brexit and Covid, so there was never good resource spent on planning because it was always fine. Many distributors have one finance person doing it two days a week, who after looking at stock, drops in a few numbers and sends an order form and doesn't look at it until the following month. That makes it harder to get good readings out of the market across the board, which is why we were trying to get the data from the market and do the analysis ourselves in certain markets. Australia and New Zealand were a struggle because the lead times of shipments meant they didn't coincide with a Woolworths launch date. There was always this squeeze of, I need you to produce it and put it on the water, but I might not need it, and it doesn't work that way. That was typically for the further away regions and particularly those in growth. The smaller ones were manageable but for those in growth, it's really challenging which is why you want to get to a market size big enough as quickly as possible, so you can set up local production and have more flexibility.

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Product costs as a percentage of revenue increased from 37% to 43% last year, and now it's 49%, so excluding US bottling problems, why could that be?

The breakdown in product costs is impacted by macroeconomic factors. I haven't seen the numbers, but I would argue that Coca-Cola and other players in the industry have faced similar pressures in their supply chains, but because they're bigger, they are better set up and have longer-term fixed-pricing contracts to protect them. There is a lack of glass and aluminum, so the prices have gone up significantly. As for the liquid costs, even though ingredients don't make up the biggest chunk, if you sell 80% Mediterranean tonic water versus 40% and you do 5% grapefruit, 5% mango and lime and 5% of this and that, those are more expensive liquids but you also make your portfolio more complex, which comes at a cost because you're less efficient. Outside of product costs, transportation is a different story.

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