Fevertree Drinks spreads its wings and Ocado inks another international deal

Tuesday, March 26, 2019 - 10:37

“UK investors sat on their hands on Tuesday with the FTSE 100 flat at 7,176. Asian stocks were livelier with Japan’s Nikkei 225 index jumping 2.15%, bouncing back from sharp falls at the start of the week.

“On the commodities front, Brent Crude oil and gold both nudged up 0.6% in value while natural gas prices slipped by 0.4%,” says Russ Mould, Investment Director at AJ Bell.

Fevertree Drinks

Fevertree Drinks is a real shining light in the world of business. Sales, profits and dividends continue to grow fast and rivals are trying to copy its success – imitation is the sincerest form of flattery, after all.

“Its latest results suggest it is business as usual for Fevertree although you could point to a few issues which are small negatives. For example, gross margins have weakened because of the UK soft drinks industry levy, albeit they still remain at healthy levels. And the downside of being a market leader in premium mixers sold in UK supermarkets and shops is that growth rates won’t always remain stellar.

“Having cracked the UK market, Fevertree is now trying its hand at success elsewhere in the world. The key focus is rolling out the brand across the US where it not only has to get its name in front of consumers, but also help develop the premium spirits mixer industry which is still relatively immature in the country.

“Interestingly, Fevertree is excelling at product innovation, launching limited edition flavours as well as branching out into book publishing with its cocktail book now being translated into different languages. Christmas crackers and advent calendars were also a hit last Christmas, suggesting that its brand has considerable legs to expand.”

Ocado

Ocado is looking appetising to the market right now as it signs up another global supermarket chain to use its technology platform.

“Deals like the one announced today with Australian firm Coles are what have been exciting people about the stock since a shift in strategy to focus on selling its Ocado Smart Platform or OSP for short.

“OSP is a combination of proprietary software and algorithms as well as robotic warehouses which effectively provides an out of the box online delivery service for global grocers.

“Previously agreements have been struck with Casino in France, Sobeys in Canada, ICA in Sweden and perhaps most notably of all Krogers in the US. And the company also recently agreed to launch Marks & Spencer’s delivery service in the UK.

“There is still very little clarity on what kind of returns the company will eventually derive from these tie-ups, which are likely to involve significant start-up costs, and how many more it can secure, but some investors are sufficiently excited about the potential to put to one side the fact the company is currently loss-making.

“Since Ocado signed up the first international client to its platform in June 2017 its shares have soared more than four-fold and taken a place in the FTSE 100.”

These articles are for information purposes only and are not a personal recommendation or advice.


The daily market update is written by Russ Mould, AJ Bell’s Investment Director and his team. The article highlights the movement in the main index, winners and losers on the day and any macro-economic announcements.