Drugs verdict adds some juice to share price

Marc Ellis, left, has left his mark on Charlie's which Stefan Lepionka, right, and company may find hard to shake off. Picture / Kenny Rodger

Shares in listed juice company Charlie's appeared to confound logic yesterday by moving up on the news that director and co-founder Marc Ellis had been convicted of drug possession.

The muted market reaction simply confirmed suspicions that most of the downside for the company had already been priced into the shares, analysts said.

Ellis' involvement in the celebrity drug scandal has been one of the worst-kept secrets in the country since his name was first mentioned in court on July 19.

Concerns about the degree to which the shares fell while Ellis' name was suppressed and the fairness of access to information have been raised with the NZX.

In a statement yesterday, NZX solicitor Damas Potoi said the obligation to disclose any information which was material to its share price lay with the listed company itself.

He would not comment on whether the NZX planned to take the matter any further.

Neither Charlie's managing director Stefan Lepionka nor chairman Roger Gower was returning calls last night.

Lepionka has a history of success in the juice industry.

He successfully created fresh juice company Stefan's, then sold it to Frucor in 1999.

Marketing experts yesterday expressed mixed opinions about the challenge Lepionka faces to maintain the reputation of the Charlie's brand.

Although Ellis has resigned as a director of Charlie's, he remains a cornerstone shareholder and his face and image remain closely associated with the brand.

"The brand's not stuffed," said one marketing specialist who declined to be named. However, he said, it did have "a big problem".

Even if the company immediately pulled Ellis from all advertising, its success in using him to promote the product was going to haunt Charlie's.

"Look at Toyota, people still associate them with Barry Crump and how long has he been dead?"

On the plus side, the brand did have other recognisable strengths such as its "not from concentrate" tag which had value and could be built upon.

But if Charlie's felt comfortable stepping outside of the family juice market there was potential to play on the "naughtiness" of the Ellis reputation, said an advertising executive.

Charlie's already had a slightly rebellious image, she said.

In 2003 the company stepped in to sponsor the Holmes show in the wake of Paul Holmes' infamous "cheeky darkie" comments.

Right now it would probably be doing some serious thinking about whether it wanted to be the juice on the family breakfast table or the kind of juice that adult drinkers wanted to mix with their vodka.

A lot would depend on the public reaction over the next few days and how well Ellis' celebrity status survived the scandal, the advertising executive said.

Whatever happens to the brand, yesterday's market reaction suggests many investors still have confidence in the company's future.

Charlie's shares closed at 10c yesterday, up 4c.

CHARLIE'S: THE HIGHS AND LOWS

* July 14: Debuts on the NZX - shares issued at 10c being traded at 15c.

* July 18: Strong demand sees shares close at a high of 18c.

* July 19: Marc Ellis' name is linked to drug charges brought in court. Although his name is suppressed, the shares start to fall.

* July 20: By the close of trading, they had shed 33 per cent.

* Yesterday: Shares rise 4c after the news that Ellis has been convicted. They close at the original issue price of 10c.