A small drinks company was tracking along nicely selling its drinks to subscribers until it piqued the fancy of a global beverage firm. With ink to paper the business is now set to increase the scale of its operations by 20 times.
Auckland subscription drinks company No Ugly has signed a deal with The Better Drinks Co owned by Japanese brewing giant Asahi.
The distribution deal will see No Ugly become part of the Better Drinks Co's portfolio and increase the size of the operation by 20 times, taking the Freemans Bay-based firm's stockist numbers from around 150 to 3000.
No Ugly co-founder Aaron Taylor, an advertising professional who 18 months ago decided to pack it in and start the firm with his wife, says the deal would see the company, which creates "wellness tonics", increase its production volumes from 7800 bottles, or 650 cases, each month to 72,000 - the equivalent of 8000 cases a month.
The Better Drinks Co, formerly known as Charlie's Group, approached Taylor about the deal in November.
The Better Drinks Co has been struggling with debt amid another year of financial loss. Last year it received a capital injection from parent company Asahi in an apparent debt for equity swap.
Financial statements posted to the Companies Office show the company made total revenue of $28 million in the year to December 31, down from $31m recorded a year earlier. Its net loss was $5.1m following a $4m loss in 2017.
The Better Drinks Co's share capital increased from $49m to $96.3m, with the additional $47.3m coming in the form of new shares issued to Asahi in December.
At the same time related party debt shrunk from $51.6m in 2017 to $5.89m. A note to the accounts said this was due to loan and interest repayments via equity. The new capital has boosted total equity to $20.8m, having dropped to negative $21.3m in December.
Asahi has big plans for No Ugly to expand into Australia and appears to be taking a bet on the brand to refresh its portfolio and drive growth locally and across the ditch.
"We're looking at expanding quite quickly, we have grand plans to expand into Australia, and Asahi ... is very interested in taking it over there as well," Taylor says.
"The Better Drinks Co have got good distribution, they've got their own assets in terms of fridges all around the country and they wanted to bolster their portfolio.
"From what they told me, they generally innovate but in this case they saw an opportunity to partner with us."
Before expanding into Australia, No Ugly will launch in California in August.
"In our horizon plan we've always had California as a key market because wellness brands there are quite savvy ... and they love brands, and then it makes sense to get our distribution footprint sorted in what I call 'home markets' New Zealand and Australia.
"We've signed the contract for here but [Asahi] are really interested in getting us into Australia - we're just entering the discussions and negotiations around whether we do that and it is looking very positive."
Five people make up the team at No Ugly, the company works on a subscription model and delivers crates of its drinks weekly and fortnightly. It collects the glass bottles afterwards and reuses them.
The global health and wellness drinks category is fast-growing and worth an estimated US$100 billion ($152b). It has an annual growth rate of around 6 per cent - opportunity that Taylor wanted to tap in to.
"There was no 42 Below with a lifestyle wellness x-factor that resonates with people, particularly with a Kiwi heritage, so we thought we could exercise our skills in that space."
James Connelly, head of The Better Drinks Co, said the company would apply some of No Ugly's practices to other drinks brands in its portfolio.
"From launching the brand with a unique distribution and recycling processes to developing a new and really delicious range of functional beverages, No Ugly have been innovative in their approach from day one," Connelly said.
"We can't wait to roll up our sleeves and apply some of the practices No Ugly have developed to our brands while at the same time using our networks and relationships to increase the availability of No Ugly in New Zealand and our offshore markets."
No Ugly had a turnover of $500,000 in the last financial year.