Berenberg hikes target for Fever-Tree on Molson Coors partnership

(Sharecast News) - Berenberg has hiked its target price for tonic maker Fever-Tree on the back of the tonic maker's partnership with Molson Coors, which it said appears "highly attractive".

Fever-Tree announced last week that it had entered into a strategic partnership with Molson Coors to drive the next stage of growth in the US.

The deal, which will see the American brewing giant take an 8.5% stake in the business, includes the exclusive sales, distribution and production of the Fever-Tree brand in the US - a market where it has been operating since 2008.

Berenberg labelled the tie-up between the two companies "a strong match", given Molson Coors' highly aligned distribution network.

"The partnership will allow Fever-Tree's products to tap into a vast distribution network within the US, supported by increased marketing resources, which is to yield growth acceleration and margin expansion for Fever-Tree," the broker said.

"In addition, we are positive about the amount of cash that the partnership will free up for Fever-Tree, which we think will translate to shareholder returns or alternatively, be invested in the company's growth."

Nevertheless, Berenberg still decided to keep a 'hold' rating on the stock, citing "operational uncertainty and continued subdued demand in Fever-Tree's other key markets".

Fever-Tree shares were up 1.1% at 739.3p by 1031 GMT, and now stand 10% higher over the year-to-date following a positive reaction to last week's deal.