StockBeat: Fevertree Fizzes as Home-Schooling Parents Are Driven to Drink

By Geoffrey Smith

Investing.com -- The bad news for Fevertree (LON:FEVR) investors is that its tonic waters won’t cure the coronavirus. The good news is that it doesn’t need to, given what weeks of home-schooling will do to middle-class parents’ demand for gin.

“While the On-Trade sector is facing an extremely challenging period, we have seen strong sales in the Off-Trade in many of our markets both from the initial buying ahead of lockdown but also in recent weeks as at home consumption has remained robust,” CEO Tim Warrilow said as the company presented its 2019 results on Wednesday. The release was consistent with other sales updates of spirits makers such as Diageo (LON:DGE) that have testified to the determination of drinkers not to let the closure of bars disrupt their favorite habit.

Fevertree had also enjoyed a strong start to the year, helped by better pricing in the U.S. As a result, it joined the select band of companies confident enough in its future to not only keep paying a dividend, but to increase it. The final dividend of 9.88 pence a share raises the full-year payout to 15.08p.

Even so, the U.K.-listed maker of mixers had had a rough 2019, as signs of the hipster gin boom peaking shone a harsh light on its astronomical valuation. From its peak in September 2018 to its trough at the worst of last month’s panic, the stock lost over three-quarters of its value.

It has made an impressive comeback in the last month, a 4.7% rise on Wednesday taking its monthly gains to over 50%.

It’s been helped not least by one of the weirder pieces of pseudoscientific disinformation generated by the pandemic – alas, one that seems destined not to last.

A video by a Missouri chiropractor Eric Napute which claimed that the quinine present in tonic water (he actually quoted rival Britvic’s Schweppes brand) combined with a 100mg zinc tablet could cure the coronavirus got over 21 million views before it was deleted last week.

Napute’s claims dovetailed with claims by President Donald Trump that the anti-malarial drug hydroxychloroquine – which is based on the chemical composition of quinine - could be an effective treatment against the virus (when combined with the antibiotic azithromycin), despite the absence of any reliable supporting evidence. Trump personally pressed federal health officials to make malaria drugs available to treat the coronavirus in March.

“Hopefully, they will both be put in use…IMMEDIATELY,” Trump tweeted on March 21.

The U.S. National Institute of Health formally recommended against the hydroxychloroquine/azithromycin combination on Tuesday, citing the risk of ‘toxicities’ and saying that it increased the risk of cardiac arrest.

Fevertree’s was already resigned to the fact that its Trump Bump in sales was going to be short-lived.

“Anti-malaria drugs contain a significantly higher amount of quinine than tonic water so we would not advise using our tonic water for anything other than making a delicious drink to keep your spirits up during this difficult time,” it said in blog post on Friday.

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