Tonic Water Has Been a Great Investment. Now Comes the ‘Peak Gin’ Warning

(Bloomberg) -- A proliferation of pink gins and other, more exotic flavors may be a warning sign for further gains in popularity for the alcoholic drink, according to Jefferies.

“We think the gin boom has peaked,” analyst Edward Mundy wrote in a note Friday, observing that an “explosion” in varieties ranging from lemon-drizzle cake to Yorkshire tea was reminiscent of a vodka boom in the U.S. that became over-reliant on flavored products. Peak gin doesn't mean that growth is over, Mundy said. The U.S. is also an untapped opportunity and could negate the “peak” theory, he added.

U.K. premium tonic maker Fevertree Drinks Plc, which has benefited from the popularity of gin in recent years, became the most-valuable company on the London Stock Exchange's AIM market this week. Bullish investors are counting on Fevertree's tonic and ginger ales making a bigger splash in the U.S., a country that accounted for about 15 percent of its revenue last year.

“Fevertree remains an attractive medium-term growth story,” Mundy wrote. “In the near term, we see the risk of a hiatus period as U.K. growth moderates before the future growth engine, the U.S., accelerates.”

To contact the reporter on this story: Lisa Pham in London at lpham14@bloomberg.net

To contact the editors responsible for this story: Beth Mellor at bmellor@bloomberg.net, John Viljoen, Paul Jarvis

©2019 Bloomberg L.P.