Slightly dated (circa 2017) but fascinating interview on the entrepreneurial journey of Charles Rolls, who is the co-founder of Fever-Tree. I really enjoy the company’s products and admire how well the founders executed on what, in retrospect, seems a rather obvious idea (i.e. observing this trend of premiumization within various spirit categories and realizing that, if your drink is 25% gin and 75% tonic, you probably don’t want to be mixing your expensive gin with Schweppes).

I have taken some notes from the interview (below) – these are just for personal reference only, so any mistakes in transcription are my own.

His career path: studied mining engineering at Imperial. Worked for 4 years, went to INSEAD for his MBA, then joined Bain. He has mostly been doing entrepreneurial things since leaving Bain, but the first thing of relevance was buying a stake in Plymouth Gin, which is England’s oldest working distillery. He remembers taking journalists, bartenders down there and showing the competitive set at the time – Beefeater, Tanqueray, Gordon’s, Bombay Sapphire. The botanicals in each of these were fundamentally different, so each of the gins smelled and tasted different. At the time, you could only mix them with Schweppes. But as soon as you mixed them with Schweppes, no one could taste which gin was which – he felt this fundamentally undermined the idea of creating a premium gin if everything is going to taste the same when you make a gin and tonic. That was the initial thought for Fever Tree, but he didn’t do anything about it until after he had sold Plymouth a few years later to Absolut Vodka.

Finding his co-founder: he got lucky, his current partner Tim Warrillow came to him wanting to launch a gin brand. They got on very well, Tim had all the qualities he was looking for and was 20 years younger than him, so had lots of energy. He told Tim he didn’t want to launch a gin, but that he had an idea. He knew if there had been a quality tonic water when he was running Plymouth, they would have used it. Back then, he had even advocated using Waitrose own label in preference to Schweppes – he didn’t particularly like it, but at least it was natural. If you were setting out to create a quality tonic, you wouldn’t use saccharin. It is the oldest, cheapest sweetener out there, ruins any gin and tonic. Started being used in tonic when food companies in the UK were doing cost cutting exercises back in the 60s and 70s – not just drinks, also foods and cakes, looking to take costs out. Schweppes had no competition in the tonic water category so could get away with it. Opportunity only came about when you had this resurgence in the appreciation for drinking quality spirits – so you had this growth in premium spirits but no one was providing a quality mixer until they came along. In hindsight, they had a big open goal to score.

Thoughts on competition: everyone from Coca Cola to Schweppes has since tried to compete with them (on trade and off trade). You also have other players such as Fentimans and Bottlegreen. Thinks they had a first mover advantage in the sense that they had an idea, delivered it well, so he thinks quite a lot of consumers will say you know what they were the ones who started this and there’s a loyalty to that. But they also try to keep things fresh – constantly innovating on the product, new launches. Focus on sourcing the best quality ingredients, they are the only company getting these kind of quality ingredients in the drinks industry (more comparable to the perfume space).

Advice to entrepreneurs: key to have an insider’s perspective / knowledge. When he was running Plymouth, that’s what gave him the insight – was desperate to have a decent tonic water. You can do research and that’s helpful, but only when you get really involved in an industry can you start to understand where the opportunities might be. The other thing is that only you as an entrepreneur really care about your business, no one else really cares. You have to give someone else part of the value chain; people will only start to care when you have breathed margin into the whole system so that other players can make some money. In their case, the whole value chain had been totally delated as there was only one player. Then they came along and, all of a sudden, there was a quality product that the consumer was willing to pay more for because they recognize it is good quality, and others in the value chain can also start to make money. 

Decision to outsource manufacturing: this was a straightforward idea – everyone has their skills, and it is important to know what yours are. His was not running a manufacturing plant. You can find good manufacturers if you look hard enough. Their partners became shareholders, symbiotic relationship. If you control the quality of the inputs and monitor the processes, you can get a great product.

Distribution in the F&B segment: this is key (as well as the decision about whether to do it yourself or to partner up). You may have a great product, but then the issue becomes how to get the consumer to know it, try it and buy it. They started at the top of the pyramid – top bars, hotels and restaurants, then filtered down. So people will find and experience the brand in the on trade and buy in the off trade. Brand and perception is extremely valuable in the drinks industry, but you should think twice about saying no to someone like Tesco – can give you reach, open up new markets. He thinks it is very difficult for own label to compete with Fever Tree. When you have people over for drinks, you don’t want to bring out Sainsbury’s own label, it just isn’t the real thing.

Raising money as a first-time vs second-time entrepreneur: if he contrasts his experience with Fever Tree to Plymouth, it was far easier to raise money, had credibility and a track record. But if you need to raise a lot of money to start a business, you need to rethink your business plan and figure out how you can you get it going with very little money, prove over the first year that you’ve got it moving. Then you have some credibility to take to investors. With Plymouth, he had a Bain background – helped in some ways, but consultants don’t make good entrepreneurs in general as they tend to analyze things far too much. Once you’ve made a decision, go for it. There will be roadblocks but you can’t let that stop you – your job is to figure out how to jump over, go under or around them.

Working on a brand with a long history vs. building a new brand: the Plymouth brand was established back in 1793, limited in a sense in terms of what he could do (“you can’t dress the queen in jeans”). Their eventual success came from respecting it was a heritage brand – documented as the original naval gin, known in the US as the original martini gin. So that’s where they played. With Fever Tree, they had a completely blank sheet of paper, was fantastic as they could create exactly what they wanted without constraints.

Thoughts on the modern temperance movement / other ESG considerations: there is a difficult side to alcohol which he understands. But if you look at the American temperance movement in the 20s/30s, it was a disaster, pushed everything underground, ended up getting worse quality. So it didn’t achieve what it set out to achieve. They promote their products as mixers quite deliberately, but they also have standalone products (e.g. ginger beer is drunk as a soft drink). On the sugar debate – they are tangentially affected, but thinks this is primarily about childhood obesity, drinking 4-5 sodas a day. This is not about spending 70 pence on a quality mixer to go with premium gin. They try to focus on creating a natural product. In terms of sourcing policies, they are very careful about where they source from (e.g. quinine from Congo, green ginger from Ivory Coast). Have been through two sets of PE sales, lots of due diligence to go through. As a public company now, they take this incredibly seriously.

Decision to go public: if he could wind back to when they started and if he could do it again, he would have funded the first bit entirely himself. He could have done that, but decided to have another investor for half the business. PE partner was great for the first 5 years, then they had the right to sell their shares, which they did. Process was painful, put a lot of burden on them in terms of the due diligence process. KPMG’s job was to get the highest price for the exiting shareholder and they did their job. But they had 24 firms come kick the tires. Took up a lot of time, couldn’t focus on the business, impacted growth. They never wanted to be in that situation again. By comparison, the public markets have been relatively good so far.