Charlie's Group received a cash takeover offer from Asahi in 2011. But since 2014, the company has never made a profit. Photo / Screenshot
Charlie's Group received a cash takeover offer from Asahi in 2011. But since 2014, the company has never made a profit. Photo / Screenshot
Asahi’s non-alcohol New Zealand business arm, which includes Charlie’s juices and Phoenix Organics, continues to lose money and remains dependent on its Japanese parent for financial support.
The Better Drinks Co (TBDC), which also owns Allpress Espresso and the distribution licence for Lipton Iced Tea in New Zealand, recentlyrecorded a net loss of $7.18 million for the 2024 financial year, following a $5.17m loss in 2023.
The company has bled red ink almost every year since the Japanese brewing giant bought the NZX-listed Charlie’s Group back in 2011 in a takeover that valued the business at $129m.
Over the past 10 years, TBDC has racked up accumulated losses of $104.2m. Despite various capital injections from Asahi, the company’s total equity has evaporated from a positive $49m in 2013 to negative $7.9m in 2024.
A note in the most recent accounts under the Going Concern heading said Asahi has provided a letter stating it had agreed to provide financial support if and when required for a period of at least 12 months after the financial statements were approved.
TBDC’s latest result would have been worse were it not for a $2.77m income tax benefit. The operating loss was $15.26m.
Total revenue was recorded at $25.9m for 2024, down 5.8% from $27.5m the previous year, and around half of what Charlie’s Group generated in its final year as a listed company in 2011.
The bulk of the company’s $42.4m of liabilities were attributed to balances outstanding to related parties – some $39.2m worth of trade and other debts.
A spokesperson for TBDC said that cost-of-living pressures impacting discretionary consumer spending has continued to impact New Zealand’s food and beverages industry.
“As juice is a global commodity, New Zealand’s juice category has felt these pressures even more acutely,” the spokesperson said.
“TBDC has been investing in its portfolio of brands to lift sales, having recently undertaken a rebranding of Phoenix Organic drinks.”
The Herald asked what the company was doing to arrest declining revenue and how it might get back to profitability, but did not receive a response.
General manager Paul Fitzgerald did not respond to further requests for comment.
Industry downturn
Charlie’s Juices former owner and co-founder Stefan Lepionka said that he feels for the team leading the brand currently, but knows too well how hard it will be to navigate its way out of the red.
“Basically what’s happened post-Covid is that inflation has been the killer. All costs have gone up on every expense line, recovery through price and pack reduction only goes so far,” Lepionka said.
“The problem is that when you accumulate all these extra costs, there’s no way to pass it on 100% into price without volume dropping off materially.
“When I was CEO the margins were so razor thin anyway in a stable and balanced environment. I call this a very high inflationary, unbalanced environment, not just for Asahi, but for the whole industry in terms of beverage.”
Stefan Lepionka, co-founder and former chief executive of Charlie's Juices, said he understands how the current team is feeling.
Lepionka explained that the leaders at Asahi will be weighing up the benefits of maintaining a diverse beverage range in the market, although the level of investment required will certainly be on their minds.
“From Asahi’s point of view, this might be a bleed, but it might be a strategy to hold footprint in those outlets so they can sell other products and look for innovative ways to recover over time. They’ve got to keep the volume going, probably in a loss-making situation with some lines just to get enough through the system so they can at least pay 80-90% of their bills.”
“You’d have to absorb those losses and having a strong balance sheet to be able to fund it is the only way through. We couldn’t do it if we were in the driving seat today, I feel for them.”
Lepionka said that if he was running the business today, he wouldn’t know where to turn unless all parties, including material suppliers and supermarkets, came to the table to find an innovative way to share the pain of increasing costs and profits for all.
“Otherwise supermarkets will run out of a competitive supplier landscape and consumers miss out on innovation and choice.”
He referenced the closure of Simply Squeezed by its Japanese parent company Frucor Suntory back in 2022 after operating for more than 30 years.
As to whether Asahi could pull the plug on TBDC’s operations, Lepionka said he couldn’t speculate but acknowledged the question needed to be asked.
Asahi takeover
Asahi Group bought Charlie’s Group during an acquisition spree back in 2011 and established The Better Drinks Co.
That same year, Asahi also agreed to buy Independent Liquor Group for $1.5 billion from shareholders including buyout firms Pacific Equity Partners, Unitas Capital and the widow of company founder Michael Erceg.
Asahi ended up getting a $209m settlement after suing the vendors of Independent, claiming its performance had been inflated.
In 2016 the Better Drinks Co took a $42.3m impairment to write off all of its goodwill on brands that include Charlie’s, Phoenix, Juicy Lucy Ti Tonics, Real Iced Tea and Stash Tea.
In 2018 the company’s share capital increased from $49m to $96.3m, with the additional $47.3m coming in the form of new shares issued to Asahi.
At the same time related party debt shrunk from $51.6m in 2017 to $5.89m. A note to the accounts back then said this was due to loan and interest repayments via equity.
Tom Raynel is a multimedia business journalist for the Herald, covering small business, retail and tourism.
