Berenberg downgrades Fevertree to 'hold'

Berenberg stated that since it reinstated coverage on Fevertree last year, it had maintained that the group had "significant global revenue opportunities" and that it was underearning on margin.

While the analysts said their view was "largely unchanged", their confidence in Fevertree's near-term earnings profile had "diminished" due to two factors - increasing challenges in the UK on-trade and a lack of visibility on cost pressures.

The German bank highlighted that the UK on-trade was a core part of the Fevertree story but said it was under "increasing pressure", with energy bills putting significant pressures on operators, reducing discretionary spending weighing on footfall, and the emergence of novel offerings by competitors taking market share.

As far as margin visibility was concerned, Berenberg noted that one of the core attractions of Fevertree was its outsourced business model, which has allowed it to earn "market-leading" returns on capital. However, it also said this limits visibility in a time where "significant volatility" on input costs exists outside of the company's control.

"With these two factors at play, we think that there are limited positive catalysts in the near term," said Berenberg, which also lowered its target price on the stock from 1,100.0p to 1,000.0p.

Reporting by Iain Gilbert at Sharecast.com