Either present continuous ("...are drinking...") or simple present ("...drink...") should be accepted here. German does not have a way of writing the present continuous verb tense, so a present tense sentence in German like this one can usually be translated into either form in English.
If the verb ends with ~en it means you got to use they. If the verb ends with (not always) ~t ut means you got to use she. If Sie is with a capital S it can mean it is "You" as a formal you. It doesn't have to be, for example this sentence: "Sie trinkt wasser" It can mean "She drinks water" but it can't mean They or (the formal) You, because their verb ends with ~en (both!) I hope it is clear! :)