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How to make lots of money in F&B

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At GEORGE, we introduced Fever Tree mixers from England. This company was started by a manager of an old line UK gin company, Plymouth Gin, and an advertising executive. They both concluded that the major soft drinks producers had lost their way in making really good tonic water to accompany gin. They maintained that over time, the industry had gravitated toward using cheaper and cheaper ingredients until the original taste was ruined.

Last week the Financial Times reported that while Fever Tree was listed in 2014 and raised money at £1.34 per share, last week the company’s shares were selling at £22.11 giving the company a total market value of £2.5 billion. Astoundingly, its sales last year were only £100 million and the company had a bare 60 employees. An old rule of thumb for valuing such companies was to assert that a company was worth a dollar for every dollar of sales. The tech market shredded that old rule because tech sales are expected to grow exponentially. Although Fever Tree has grown quickly, it is hardly a tech company. Is this valuation conclusive evidence of a stock market bubble?

Before you rush to buy shares, note that the two principals have been selling down their holdings. Also the Financial Times reported that Coca Cola is planning to enter the premium tonic market with something called Schweppes 1783.