Karma Cola on track to turn record profit two years in a row

Karma Drinks founders Matt Morrison, Simon Coley, Chris Morrison. Photo / Supplied

Ethical drinks company Karma Cola is on track to double its revenue despite facing two years of disrupted supply chains, global inflation, and a depressed hospitality sector.

In the financial year ending March, Karma Cola increased its revenue by 53 per cent or $5 million, a significant bounceback following a 95 per cent drop in sales at the start of the pandemic.

The company was unable to disclose its earnings for the period, but said its export growth had also doubled in the year to March, overtaking pre-Covid revenue by 102 per cent.

Karma Cola added 1200 new hospitality venues to its supply network in New Zealand, while its grocery channel has grown from 5 per cent of domestic business to 20 per cent.

Simon Coley, co-founder of Karma Cola, told the Herald that it was a relief that the company had now "turned a corner", and that its success could be attributed to the efforts of its team and the business' sustainability practices resonating with consumers.

"Just over two years ago when I lived in the UK we encountered Covid and saw sales in hospitality which is our biggest sales channel internationally drop from being pretty healthy to losing - depending on the market - between 80 and 95 per cent of business," Coley recalls.

Karma set up its UK office and employed a new CEO two weeks before Covid hit and London went into lockdown in February 2020. It now has a team of six based there.

Coley puts the turnaround in earnings down to the team going above and beyond, and Karma's ethics of wanting to do good by the planet and people now resonating more than ever with consumers, alongside streamlining its operating model.

Over the past year Karma has pushed further into the grocery channel in New Zealand through the supermarkets. "That's been a big shift for us and something that help insure us against a lot of hospitality outlets being closed for a lot of the time.

"We've rationalised some of our production, we're now producing cans in New Zealand, and we've changed our format a little bit to enable us to produce more, and we've seen growth into new channels in the UK."

Leon, a national restaurant chain in the UK, now sells Karma Cola on tap in its bar and the drinks company has recently created a raspberry lemonade flavour drink, which was selling well. It had also been selling kombucha and juices in the Australasian market, said Coley.

"Talking to our friends in restaurant, cafes and casual dining, everyone has had a hammering. There are more shortages than just customers; ingredients, the recent challenge of finding CO2 for manufacturing, a number of things that have been complicated by supply chains being slower and not being able to get hold of materials, making business more complex than it used to be.

"But, given the focus we have had on simplifying the business even though we are producing more product, we have really been focusing on the things we are strongest at."

Coley said he believes the reason Karma Cola was able to make it through the downturn was due to the relationships its staff had with its hospitality customers. "Without that loyalty we could have easily been forgotten, and I think the reason they like us is because we are doing more than just taking their money and selling drinks. The way that comes across in the relationships our staff have with those people has also been incredibly helpful."

Simon Coley, co-founder of Karma Cola. Photo / Supplied

Karma Cola will in the next few months be certified as a B-Corp - an important measure of success for the company. Coley said the success for Karma was "more than the bottom and top line [earnings]" and more about its impact on the environment and its commitment to helping support the people in its supply chains.

In the year ending March, it eliminated 1.4 tonnes of plastic from its supply chain and continued to support its social welfare initiatives in Africa. One per cent of revenue from every Karma drink sold goes to its cola nut growers and their communities in Sierra Leone.

Karma Drinks was founded by Coley and brothers Matt and Chris Morrison who were determined to create a cola drink that was organic, sustainable and helped the growers who provided the raw ingredients, including the cola nut.

Coley said the business was working away to make its drinks more accessible and not just a drink available as a choice "to a few privileged people".

"We've seen other companies do well because they have a strong commitment to hold similar ethical and environmentally-friendly values and it is also being one of the criteria for a lot of the people we work with, and we'd like to see what we are doing become more mainstream. Hopefully we'll see more supermarkets make a commitment to bring a positive impact to their suppliers and growers. We've seen it in organic and we've seen it in fair trade, and we're enabling our whole supply chain to be visible in terms of our carbon liability too."

Karma Cola expects to increase its FY23 earnings by another $5 million, taking the company to yet another record profit in line with $20 million.