FQVTF (FQVTF) Q2 2026 Earnings Report, Transcript and Summary

Hello, everyone, and thank you for joining us for the Fever-Tree FY 2026 interim results. My name is Chach, and I will be listening to your call today. After the presentation, there will be a Q&A session. To register to ask a question, please press star followed by one on your telephone keypad. If you change your mind, please press star followed by two. I would now like to hand over to your host, Tim Warrillow, Co-Founder and CEO of Fever-Tree, to begin. Please go ahead.

Yeah. Thank you. Good morning, everyone, and thank you for joining us. I am joined today by Andy Branchflower, our CFO, and I am delighted to welcome back Ann, our Director of Investor Relations. I will start with the highlights from the first half before talking about the progress we are seeing in the U.S. and the broader opportunity we are creating as the Fever-Tree brand continues to evolve. Andy will then take you through the financial performance and outlook before we open up to questions. Turning to the results themselves. We have delivered a strong first half performance with growth across every one of our key regions. Brand revenue increased by 8% at constant currency, with the U.S. up 11%. A return to growth in the U.K., supported by a strong off-trade performance. Europe up 10% and good progress across the rest of the world. Importantly, that growth was supported by continued market share gains across our key regions, outperforming both the wider mixed category and our competitors. In terms of the financials, adjusted EBITDA margin improved by 20 basis points to 10.9%, while normalized EPS increased by 5%. Lastly, the strength of our balance sheet and cash generation also enabled us to extend the share buyback program by a further GBP 60 million this year. Looking at the first half in a little more detail, there are three things that I would like to highlight in particular. First, we are encouraged by the progress we are seeing in the U.S. The Molson Coors partnership is beginning to deliver the benefits we expected. Distribution is growing, visibility on the shelf is improving, and as a consequence, we saw momentum build through the first half. Second, our diversification strategy continues to gather pace. Whilst our core tonic range performed well, delivering growth of 3%, our wider portfolio increased by 13% in the half and now represents nearly half of group sales. We are seeing consumers embrace a broader range of Fever-Tree products than ever before, whether that is in mixed drinks, longer serves, or as a premium soft drinks in their own right. Third, our asset-light model continues to generate significant cash. That allows us to invest behind the long-term opportunity while continuing to return capital to shareholders through the buyback program. When we spoke at the full year results in March, we talked about three trends that continue to shape the drinks market. Firstly, premiumization. This is long established and forecast to continue, driven by consumers choosing to drink less but better, alongside operators and retailers who value the stronger margins premium products generate. Secondly, longer and lighter drinks. This is driven by consumers' desire to enjoy their spirit drinks mixed as opposed to straight, thus allowing spirit drinks to be lighter in alcohol strength and longer and more refreshing. Making these serves desirable across a wider range of occasions and different times of day, no longer the preserve of late nights. This trend is clearly not being lost on spirit producers, who are now pushing and promoting their spirits mixed to a greater extent than ever before. Finally, but equally as importantly for our growing opportunity, is moderation. This means that when people are not drinking alcohol, whether at home, eating out, or socializing with friends, they are still looking for great taste and a sophisticated drinking experience. All three of these trends are firmly in our favor and driving an ever greater opportunity for the Fever-Tree brand. Of those trends, moderation is the one I would like to spend a little more time on today. There is often an assumption that if people choose to drink less alcohol, they are somehow stepping away from those social occasions. That is not what we are seeing, and it is not what the data suggests. Across all our key markets, a significant proportion of adults say they intend to moderate their alcohol consumption. In the U.K. alone, that is around 25 million adults. However, when they are moderating, market analysis suggests that around 70% of occasions where consumers choose not to drink alcohol, they are seeking soft drinks and non-alcoholic alternatives. This represents a value pool of around GBP 700 million. To put that into perspective, that is larger than the entire U.K. mixed category today. Yet despite its size, much of this value pool remains underserved. Beyond non-alcoholic beer, there are still relatively few premium adult alternatives available. Meaning consumers often default into choosing water, tap water, or mainstream soft drinks. For retailers, pubs, and bars, that is a growing challenge, as consumers are still participating in occasion, but too often the spend attached to that occasion falls away when the choice becomes water or a standard soft drink. As a result, we are seeing increasing interest from both retailers and hospitality operators for premium adult soft drinks that can better meet consumer needs while helping them retain the value of the occasion, thus creating a significant opportunity for Fever-Tree. We have built a brand around quality taste and adult refreshment, and increasingly consumers are choosing our products beyond traditional mixed occasions. While moderation is often discussed as a headwind for the drinks industry, we see it as creating a significant adjacent growth opportunity. Now, identifying an opportunity is one thing, being able to capture it is another, and that is where we believe Fever-Tree is uniquely positioned. Over the past 20 years, we have built one of the strongest premium brands in drinks. Our products and flavors have been developed specifically for adult taste and adult drinking occasions, and we have strong distribution across both the on-trade and the off-trade in our major markets. Put that together, and we do not believe there is another brand better placed to capture this opportunity. Before I move on to the U.S., it is worth taking a step back and reminding ourselves what makes the Fever-Tree model so attractive. We have built a premium global brand underpinned by an outsourced business model, allowing us to generate increasing amounts of cash while remaining relatively capital light. That gives us choices. First and foremost, we can continue investing behind the global opportunity for the brand, whether through marketing, innovation or, where it makes strategic sense, potential acquisitions. At the same time, we are able to maintain a strong balance sheet and return surplus cash to shareholders. Put simply, it is a model that allows us to invest the growth while continuing to deliver attractive shareholder returns. Turning now to the U.S., which remains our largest long-term growth opportunity. When we reported our full year results in March, we said that 2026 would be about moving into the execution phase. That is exactly what the team have focused on during the first half. We have seen strong engagement right across the Molson Coors system. We have launched our first national marketing campaign in the U.S., and we have achieved our highest ever retail value share in both tonic and ginger beer. Importantly, we have seen sales build through the period. As the chart shows, off-trade sales growth improved from 6% in Q1 to 11% in Q2, and then to 16% through July and August. It is still early days, but what we are seeing is consistent with our belief in the benefits this partnership can deliver. We spent quite a bit of time discussing the national marketing campaign at our full year results, so I will not go through all of the detail again today. The important point is that for the first time, we are supporting the brand in the U.S. with marketing investment at a significantly greater scale. The campaign remains rooted in what has always made Fever-Tree successful, our mixing credentials and our reputation for quality. Together with Molson Coors, we now have the ability to support the brand nationally in a way we simply could not before, giving us a much stronger platform from which to grow the brand. That support extends well beyond advertising. We are investing in experiential activity, gets the brand in consumers' hands while improving execution across both retail and the on-trade. What Molson Coors brings is scale and a significantly greater execution capability. For a brand like Fever-Tree, where rate of sale is already strong, improvements in availability can make a meaningful difference over time. As we have discussed before, there are three key drivers of growth, distribution breadth, distribution depth, and velocity. We are adding accounts, improving execution and visibility in store, and supporting the brand with significantly greater marketing investment. What is encouraging is that these drivers are beginning to reinforce one another. As execution improves, distribution expands. As distribution expands, awareness and trial increase. As rates of sale strengthen, retailers are willing to give the brand more space. Together, we are beginning to see that flywheel start to work. Let me turn now to our broader portfolio strategy. As we have discussed before, diversification has been part of the Fever-Tree strategy for many years. The starting point was to establish the brand's premium quality, taste, and flavor credentials through the sophisticated position of cocktails and mixing. That remains the foundation of the business today. The ambition was always to use those credentials to broaden the range of occasions in which consumers choose Fever-Tree. We have a broad portfolio serving different tastes, markets, and occasions. Within that portfolio, we are putting increased investment behind five key flavors where we see particularly attractive opportunities for global growth. These flavors already account for around half of group sales and contributed approximately 85% of our growth in the first half. Their strength is their versatility. They work across several major spirit categories, but they are also increasingly enjoyed as premium soft drinks in their own right. That gives them relevance across both alcoholic and non-alcoholic occasions. We are supporting that opportunity through focused marketing and innovation. Marketing helps us communicate the versatility of these products more effectively, while innovation enables us to respond to emerging consumer trends and specific opportunities in local markets. While the products and priorities may differ by market, the approach is consistent. We are building on the strength of our mixer business and creating more reasons for consumers to choose Fever-Tree. In terms of marketing, our latest campaign, Straight Up or Mixed, it’s a matter of taste, celebrates the versatility mentioned in the previous slide while remaining rooted in what matters most to the brands, great taste. In the U.K., it reached around 11.5 million adults and delivered a sales uplift of 22% for the featured flavors. We are now adapting that campaign for a number of our more mature international markets, including France, Canada, Belgium, and Australia. It's a good example of how we are evolving the way we talk about the brand and supporting our key growth flavors internationally. In terms of innovation, our approach is deliberately focused. In the U.K., our non-alcoholic ready-to-drink allow us to play a leading role in a fast-developing part of the market. They were developed in response to retailer demand for non-alcoholic drinks with the flavor, complexity, and quality consumers would expect from an alcoholic serve. We have been very pleased with how they are performing, having secured good distribution across the major grocers and are bringing new, younger shoppers into the non-alcoholic category. In Australia, the opportunity is different. Lemon, Lime & Bitters is already a well-established adult soft drink in that market. Our role is to bring Fever-Tree's quality, taste, and premium credentials to an occasion consumers already understand. The product has secured good distribution in Coles and Woolworths, supported by strong retail visibility, and we are encouraged by the early momentum. These are two very different products, but they reflect the same disciplined approach. In one market, we are helping shape an emerging category. In another, we are premiumizing an established local favorite. Both build naturally on Fever-Tree's strengths and create more reasons for consumers to choose the brand. With that, I will hand over to Andy to take you through the financial performance.

Thank you, Tim, and good morning, everyone. We set out here the financial highlights with performance driven by the U.S. and the U.K. returning to growth, whilst EBITDA is growing ahead of revenue even after a step change in U.S. marketing investment. Cash conversion has remained strong with a GBP 60 million share buyback in progress, building on the GBP 100 million buyback from last year. Turning the page. U.S. revenue grew by 11% at constant currency, with the Molson Coors partnership starting to deliver real benefits, as just described by Tim. The U.K. delivered a return to growth, with revenue up 3% following our successful Straight Up or Mixed marketing campaign, which launched just ahead of the good summer weather. Whilst tonic sales are broadly flat in the U.K., growth is being driven by our beyond tonic products, which now represent almost a third of U.K. sales. Whilst wider challenges remain in the on-trade channel, we retain our market-leading distribution footprint and share there. Meanwhile, in the off-trade, we are performing well, growing strongly and extending our leadership position, gaining a further 2% value share. In Europe, whilst reported revenue growth benefited from positive shipment phasing, underlying growth was a solid 4% year-on-year, driven by strong ginger beer performance, where we are delivering more than half of the category's growth at retail and now hold almost 40% value share of the ginger beer category across Europe. Finally, in the rest of the world, reported revenue increased by 5%, with underlying growth marginally ahead of that at 6%. Whilst tonic remains in good growth, again, our diversification strategy is gaining traction. With beyond tonic over 40% of the sales mix and growing well. Turning to the segmental P&L view. In the U.S., we saw a reduction in EBITDA margin as expected, largely reflecting up-weighted marketing investment. As we previously presented, we anticipate step changes in U.S. profitability over the medium term as production is onshored and the incremental marketing investment moderates to more typical levels. With these step changes underwritten by our U.S. profit guarantee. Whilst on the ground, the journey begins in earnest with the onshoring of our cans business, with production trials beginning this autumn and ramping up from there. In the rest of the group segment, we have continued to deliver margin recovery, and this is after the impact of the GBP 2.6 million provision to cover the 2026 U.K. on-trade EPR levy. Whilst nothing has changed in our position here, the legal challenge has not progressed since March. We await the next steps and as such, the provision is required under accounting rules. Whilst the geopolitical backdrop remains volatile, the significant steps we have taken in recent years to improve supply chain resilience continue to hold us in good stead, and the team are doing a fantastic job. Whilst from a cost perspective, our bottles and cans are materially hedged for energy impacts across 2026, 2027, and 2028. Finally, central costs have reduced as a percentage of adjusted revenue as we leverage the technology investments implemented in recent years, providing a tailwind to group EBITDA margins as expected. On announcing the Molson Coors partnership last January, we pointed to the increasingly positive impact this would have on working capital and cash conversion. Here we look back at the 18-month period since that announcement, highlighting the strong cash generation, working capital improvement, and shareholder returns that we have delivered. On completion of the current buyback, we will have returned GBP 160 million to shareholders, and inclusive of the equity issue to Molson Coors, will have reduced the number of shares in issue by circa 7% over this period. Turning to outlook. We've continued to trade well over summer and remain confident of delivering in line with expectations. We expect U.S. revenue growth to accelerate as the year progresses, whilst in the rest of the group, we expect to deliver good underlying growth. Although reported revenue will be impacted in Europe as phasing benefits from the first half of the year unwind. From a profitability perspective, U.S. tariff refunds received in the second half will offset the full-year impact of the incremental GBP 2.6 million EPR provision, and we remain confident of delivering EBITDA in line with expectations. This year's working capital profile will be similar year-on-year and significantly below historic levels. Just as we set out last January when announcing the Molson Coors partnership, 2025 was a transition year, and in 2026 we're investing in the U.S. opportunity, both of which have dampened earnings in the short term. We are drawing closer now to 2027 and 2028, where we expect to see a step change in U.S., and therefore group profitability as the benefits of local U.S. production are felt, followed by a normalization in U.S. marketing investment. Consistent delivery this year provides a strong platform from which to deliver against consensus expectations of the circa 60% uplift in EBITDA over the next two years. With the quantum of that uplift materially underpinned by guaranteed U.S. profits. Not only this, but an improving working capital profile as U.S. production on shores means that the increase in profitability will be outstripped by further improvements in cash generation, with the expectation that the group will generate at least GBP 100 million of free cash flow across 2027 and 2028. Whilst that can be deployed to fuel further growth, excess cash will be returned to shareholders. Just as we've demonstrated through the GBP 160 million share buyback deployed over 2025 and 2026. With that, I'll pass back to Tim.

Thanks, Andy. To summarize, the Molson Coors partnership is really beginning to deliver the benefits we expected with stronger execution, growing sales momentum, and increasing confidence in the long-term opportunity. Secondly, our diversification strategy continues to gain traction. A wider portfolio outside of our core tonic range now represent almost half of group sales, and we're increasingly broadening the occasions in which consumers choose Fever-Tree. Thirdly, our asset-light cash generative business model continues to provide us with significant flexibility. It allows us to invest behind future growth while continuing to deliver attractive returns to shareholders. With that, I'll open up to any questions.

Thank you. To ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. We will pause here briefly as questions are being registered. Our first question today comes from Anubhav Malhotra from Panmure Liberum. Your line is now open.

Hi, team. Thanks for taking my questions. Firstly, on the U.S. growth that you have achieved in the second quarter and the third quarter, maybe you could give us a bit of idea of breaking that down into growth and distribution in terms of number of outlets you are covering and then number of products in each outlet, rate of sales. I mean, you do not have to give exact numbers, but maybe some qualitative color on what is driving or all of them are driving. If you are already seeing some of the benefit of the advertising campaign on the rate of sales in your previous distribution, which is not newly added under Molson Coors. Secondly on the EPR impact, which this year has come in the first half, and last year, I think, was in the second half margin. Just looking at the underlying increase in the margin in the rest of group non-U.S. division, is that more like a 300 basis point underlying improvement in margin and not a 70 basis point if I exclude EPR? Just a confirmation on that. Thirdly, on the moderation trends. You mentioned the moderation trends, but in the U.S., you are primarily playing in the mixer category still there, which obviously does not play directly into those moderation trends, which are also happening in the U.S. market. I believe Molson Coors is proceeding with other partnerships in canned ready-to-drink cocktail, and I am sure in other non-alcoholic beverages as well. Do you think there is a risk to miss out on that part of the opportunity, or you think this is the right strategy? I do not know if you have any product innovation plans in that market that will play into those opportunities as well. Thank you.

Morning. Thanks for those. Look, I think I will take the first two. In terms of the kind of accelerating growth profile through the year, look, it is very much as Tim described. You are starting to see this combining benefit of more doors, some more shelf space that we have achieved, and some improvement rate of sale. Like we said, each month that is building. You can see that in the Circana data quite clearly. Obviously, Circana is not the entire picture, but it is a very good proxy for what is happening. Look, that is the reality of it. If we look at the on-trade, we are seeing last year was very much a year of transition and making sure we protected our existing footprint. This year has been about expansion and primarily focusing on, as we have spoken before, that second tier of more mainstream on-trade distribution, and that is exactly what the network is doing. That is why we continue to see it. I think in terms of the actual growth rate, obviously it was 11% in H1, and there is an implied quite significant acceleration in H2. One thing I would point to as well is the balance of the comparatives. Last year was the transition year, but the first five months of last year, really, to all intents and purposes, were business as usual. The peak transition impacts fell more in Q3 and in the second half. So that is what we are lapping. If you look at the shape of U.S. revenue split H1 to H2 this year, it is 45/55. All of that triangulates and combines to confidence in our ability to hit the expectations for the year this year. From an EPR perspective, yeah, look, you are right. In terms of the timing of making the provision, we did not make that till the back end of last year because of how things were progressing and the filing of the legal case. So the on-trade EPR provision was not in the first half comparative. If you strip that out, that does imply a really good, healthy underlying margin improvement in rest of group. Now, there is some phasing in that, so that does flatter some of that, but that is the story. We are continuing to deliver good growth, good cost control. We have benefited from hedging this year that we laid down clearly last year, as well as pricing actions around the group. But clearly, that has been slightly offset by that EPR provision in the first half. I think the good thing about taking that provision is the downside risk is covered now. Nothing has changed in terms of our confidence in our position. When we do have our day in court, so to speak, should we be successful, clearly there is risk to the upside now with a GBP 5.4 million provision sitting on the balance sheet relating to both 2025 and 2026. So we will watch this space.

Yeah, let me take your last question about the adult soft drink opportunity in the U.S. There's no question that we see opportunity for the Fever-Tree brand to participate in that growing category and growing opportunity. As do Molson Coors. When they originally approached us, this is one of the things that they cited as being a great opportunity for the Fever-Tree brand. They will also be very focused on that opportunity, and these are discussions we are already having with them. What we've agreed is there's so much white space to go after with our core mixer business for the next couple of years, that's where we want to focus their network for the next couple years and not distract them with other opportunities. This is very much in our discussions, very much in our planning, and certainly is a very significant opportunity that we see in the future. We are as excited about that as I know Molson Coors are.

That's very helpful. Thank you so much.

Thank you. The next question we have is from Edward Mundy from Jefferies. Your line is now open.

Morning, Tim. Morning, Andy. Three questions from me, please. Coming back to the U.S., I think you are highlighting strong momentum in the second half. Look, I appreciate the comps are a little bit easier in the second half than the first half, but consensus is modeling around 20% revenue growth in H2. That slows to about 16%, I think, in 2027, and then 14% in 2028. If you think about the flywheel that is starting to build and given more investment next year, without guiding explicitly on forecasts, do you think there is upside potential to consensus expectations on the U.S. is my first question. The second one is on onshoring of cans within the U.S., Andy. Could you talk to how this helps with both top line and bottom line delivery next year, in particular with the profit guarantee? Then third of all, coming back to the U.K., which was a really good result in the first half. I appreciate there was some good weather and some easier comps involved here, but the fact that trading has continued to be favorable into Q3, does that give you more confidence that the combination of more investment in the U.K. and this non-tonic acceleration gives you more confidence in the U.K. starting to grow from here?

Yeah. Morning, Ed. Yeah, look, I will take the first one in terms of, look, I think I have just spoken to the building blocks, if you like, and confidence and ability to hit this year's expectations, and that does imply the acceleration, which for sure there is an underlying element too, but there is also an element to the comparatives there that would give us the confidence to deliver that. When we look at consensus actually for next year, it is ahead of the 16% you referenced. That when we announced the deal back last January, we sort of anchored, if you like, on the 2026 number. But from there, we felt confident that we could deliver high teens, 20% growth in the U.S., and we would still absolutely be aiming to do that. I do think there is some upsides in the numbers, certainly you were referencing there, over the next couple of years. Just predicated on what we have been speaking to, there is a significant amount of distribution white space to go for both in the on-trade, the off-trade. Every month that goes by, the distribution network is getting their arms around the brand and driving it forward. Then from a consumer pool perspective, we have clearly made a significant investment in marketing this year, which we expect to continue to do over the medium term. So all of those we are confident will combine to drive really good growth over the next couple of years for us in the U.S. Now cans are an important component of that. The onshoring aspect, which is beginning imminently. I think much more, though, clearly from a cost perspective and from a working capital perspective, the onshoring, as we have spoken about, is a key component to driving U.S. profitability over the fullness of time. We are really pleased that Molson are beginning with that format. It is a fast growth format, and alongside some of the local glass production we already have in the U.S., that means over half of our U.S. products are going to be locally produced next year, which is fantastic. Now, there will be profitability benefits of that flowing into that partnership P&L. From Fever-Tree's perspective, we have this kind of guaranteed mechanism, which gives us a good degree of upside next year from that. We are very confident. We have talked about the top line trajectory. I would say we are very confident about the bottom line trajectory because when you look at the step changes in consensus EBITDA from 2026 to 2027 to 2028, that incremental amount, a very high proportion of that is covered off by our U.S. profit guarantee, which gives us obviously a great platform to deliver against those expectations.

Very good. Look, Ed, why do not I pick up on the U.K.? As you kindly say, it is great to see the U.K. performing the way it is. It is not a surprise to us. As I think you know, we have always been pretty confident that we will get the U.K. back into growth. Whilst there is no question that good weather has been a benefit, we must not forget we had some pretty good weather actually last summer, so some quite tough comps there. What has clearly also been driving it is the diversification of our range which we have been deliberately broadening over the last two years to make the most of these growing other occasions and other opportunities, and that is really showing up. As you will see, that range grew at 13% in the first half of the year, and we are optimistic that we can keep driving that kind of growth with that range going forward. On top of it, our confidence with that is what spurred our desire to spend more money than ever before marketing the versatility of our brand and range. The early feedback from that campaign is very positive in terms of getting people to reappraise us as not just a mixer drink, but also a soft drink business. Clearly, we are seeing the results in the growth of those products across the portfolio. So that gives us also confidence to continue to drive that style of investment. Yes, in answer to your question, we are optimistic that we can continue this momentum in the U.K. in the medium term. As I also tried to point out in the presentation, moderation, we think, creates an additional opportunity for the Fever-Tree brand that we are also going to be leaning into. So, we are delighted by the first half, and we think we can continue.

Great. Thank you.

Thank you. The next question is from Ashutosh Jain from Barclays. Your line is now open.

Morning, Tim and Andy. Again, my question pins down to the U.S. The first question is, could you just give us some color on pricing in the U.S., like what was last year? Because I believe, if I remember correctly, it was flattish last year. So any color on pricing for this year? The second question is, what gives you a high degree of confidence to deliver almost 2x of the growth in the second half? I am talking about FY 2026, to get to somewhere around GBP 150 million in the U.S. as per the consensus.

Yeah. Morning. I think in terms of pricing, look, there is certainly an expectation that over time in Molson, just as we have actually in the U.S., we look to take inflationary pricing. But as you would understand, we flipped into a new network halfway through last year. There was not a focus on taking price from 2025 into 2026, six months into that relationship. That is clearly going to be an aspect of future plans. In terms of confidence in 2026, I think I referred to this earlier. It is a combination of what we are seeing in terms of building incremental distribution and rate of sale month by month, which is coming through in the numbers, lapping some softer comparisons in the second half. Internally, we are very focused on every month what we need to hit against plan to deliver against those expectations, and we are very comfortable we are on plan and with the years to go, with everything in place that we can continue to deliver those numbers.

Okay. Thank you.

Thank you. The next question on the line is from Matthew Ford from BNP Paribas. Your line is now open. Please go ahead.

Thank you. Morning, all. My question is following up from what has been discussed already, just on the EBITDA margin expectation into 2027. There are a lot of different moving parts, I suppose. You have the tariff refund coming this year, which is a bit of a benefit to margin, which in theory will not be there again in 2027. You mentioned you are already very well hedged from an input cost perspective, but presumably that is at slightly higher rates. So I would expect an incrementally slightly tougher COGS impact into 2027. Conversely, you have obviously the U.S. localized production, which will help from a margin perspective, but clearly the marketing step up is still going to go through into 2027. If I look at consensus margins, I think the assumption is for 2027 EBITDA margins close to the mid-teens level, which is quite a big sequential step up. Just be interesting to get your thoughts on those various moving parts, both positively and negatively, and if you still think that the 15% in 2027 is a good level.

Yeah, sure. You are right. There are a number of different moving parts. In terms of inflationary cost pressures, we feel our hedging position puts us in good stead to manage the impact of that on the business next year. We will continue to focus, particularly I am talking here about rest of the group on taking pricing actions and other levers. So we are confident of an improvement in margin in that rest of group segment. We are confident that our central costs will continue to allow, there will be some operational gearing from that central cost, which will provide a tailwind. But the most significant step change in margin and getting us to that mid-teen circa 15% level will be the change in profitability of that U.S. segment. Now, from an underlying perspective, the tailwind to that, the improvement will be driven by local production. The headwind, if you like, to your point, will be continued and sustained incremental marketing investment. So that will offset some of that benefit. But still, notwithstanding that, we still feel comfortable that you are going to see this step, this movement from consensus EBITDA margin for this year is about 12.5% moving up to high 14%-15%. And the vast majority of that will be driven by U.S. segmental profitability, driven by local production. As I have said before, the fact we have the profit guarantee gives us great confidence in our ability as a group to deliver that step change in margin.

Great. Thank you.

Thank you. As a reminder, if you would like to ask a question, please press star followed by one on your telephone keypad now. Our next question is from Richard Withagen from Kepler Cheuvreux. Your line is now open.

Yeah. Good morning, Tim, Andy, and Ann. Three questions from me, please. First of all, it looks like the U.S. on-trade is growing ahead of the off-trade for Fever-Tree. So if you look one level deeper, where is the portfolio gaining most traction? What kind of outlets? What kind of stores, et cetera? Second question is on working capital. How should we think about working capital in the second half of the year? Will there be any working capital impacts already this year from the planned onshoring of production in the U.S.? Then the last question is about perhaps taking a step back. Beverage companies in mature markets are facing challenging market conditions. There is some portfolio diversification going on to improve growth. Is there an opportunity for Fever-Tree to accelerate distribution deals? I do not mean the big ones like the Molson Coors one, but smaller country-sized or regional deals, and how material could that be?

Yeah. Look, thanks for your questions. Let me take the first about U.S. on-trade. Yeah, no, look, we are making good progress in the U.S. on-trade, no question. But what is so exciting is the size of the opportunity that lies ahead, particularly now with Molson Coors. One of the attractions of the Molson Coors network is their scale and their breadth, particularly into the sort of tier two, as we would describe them, of the on-trade. We spent a lot of time in the U.S. building and developing our business in the tier one on-trade, where we have a fantastic foothold. When I say the tier one, these are the top hotels, bars, and restaurants. Our ambition has always been to move then from there into the tier beyond. That is where the Molson Coors network is at its strongest. That is the progress we have started to make with them. But it is still very early days because there is such an opportunity ahead. I always look at the U.K. as a good reference point because where our business in the on-trade really started to step change was when we built, just as we have done in the U.S., that distribution in the top end of the trade, and then moved from there to the pub groups. That is what we have done incredibly successfully here in the U.K., which has meant we now have 45% market share. That is the journey we are starting to be on in the U.S. There is no question that there is enormous amount of opportunity to go after. But it takes time. These are hundreds of thousands of accounts and call points that need to be made, sales calls that need to be made. So it takes time, but there is no question with this extraordinarily powerful network who are very well established in that tier, and they are making good progress. So lots to go after, but exciting progress.

I will take the working capital question. Well, look, if we go back to, say, 2024, our working capital was around 20%. We saw a step change as we went into the Molson partnership. Last year, that dropped obviously to sort of 16.6%. We anticipate staying at broadly that level this year because the next stimulus, as you say, will be local production. For obvious reasons, that will start to reduce our working capital, because at the moment, the majority of our U.S.-related working capital relates to products with either on the water to the U.S. or the invoice we have raised to Molson to pay for that U.K.-produced stock. As the on-shoring ramps up, our U.S. working capital reduces to very low levels. We don't anticipate a major change at December, because with production trials beginning and then ramping up, the sales cut over won't really be till spring next year. So it'll be 2027 where you'll start to see that improvement again in working capital into 2028 as that on-shoring level continues to increase, if that's helpful.

Your final question is an interesting one. As you rightly say, the beer companies are looking increasingly beyond beer for their growth, i.e., into softs. The spirit companies are looking beyond spirit, also into softs. And then the soft companies are also looking at the premium end, where the more attractive margins are. So we find ourselves at the confluence of all of those interests. And so as a result, are getting more approaches than ever before. And we will, of course, consider each and every one as they come. But as I think these results have demonstrated, we're growing very well with the distributors we currently have. So we're in no rush to make any changes, and we will only make the changes if we see a real strategic benefit. We certainly find ourselves in an attractive position as far as the trends in the market are concerned.

Thanks.

Thank you. These are all the questions we have time for today. We will now conclude the conference call. Thank you for your time and participation. We appreciate you joining us today. You may now disconnect, and we wish you a pleasant rest of your day.