Fever-Tree PLC is considered the global leader of the premium mixer drinks category, with more than 200 million bottles and 27 million cans sold. The company was established in the UK in 2005 and now operates in over 50 countries, generating more than 50% of revenues from outside UK.
The company spotted a niche in the premium mixer category; using ingredients of the highest quality, taste, attractive packaging and a compelling story. The two founders, Charles Rolls and Tim Warrillow toured the world in search of the best products for their premium soft drinks, finding high quality suppliers of products like quinine, ginger, lemons, elderflower and thyme.
The market for premium mixers has grown strongly in recent years. The task of this assignment is to forecast future sales growth for the company for the next three years and also to estimate a medium and long term sales growth forecast.
1) Students will work in Groups of 5. As a group, students will define Fever Tree’s market and understand the routes to market. (300 words)
2) Each student will work individually, selecting one of Porter’s Five Forces and describing the forces impact on Fever Tree’s market. (1,000 words each)
3) Each student based on the research of Porter’s five forces, global economic conditions and market trends will estimate the growth rates for the four regional divisions for three years, a mid term growth rate Year 4 – Year 8 and a long term growth rate. The fifth student will estimate the overall growth rates for Fever Tree PLC. Give reasons for your assumptions. (500 words)
4) Assuming a fixed Free Cash Flow margin of 17.8% for all periods calculate the Discounted Free Cashflow of Fever Tree. Students should assume a Cost of Capital of 4%. 4.5%, 5%, 5.5% or 6%, a Cash balance £35,000,750 and the 115,240,900 shares outstanding. Students should use the estimated growth rates for the group. How does the cost of Capital impact the share valuation? (200 words)
5) Each student should produce an individual share price performance chart including the share price of a competitor and the market performance. The chart should be indexed so that all lines have the same start point. The charts should be based on 3-months, 6-months, 1-Year, 2-Years or 3-years and should describe the relative share performance.
6) Conclusion – As a group compare the valuation in section 4 with the current share price based on the group growth rates and a cost of capital of 5.25% and determine whether to buy or sell Fever Tree shares. (500 words)
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