SCOTMID, the convenience store operator, has revealed a six-figure investment in a soft drinks start-up which has been created to help small “craft soda” producer bring their products to market.
The Start-Up Drinks Lab was founded by Hannah Fisher and Craig Strachan last year and its production facility will open its doors in May in Port Glasgow.
John Brodie, chief executive of Scotmid Co-operative said complimentary diversification was a key element of the company’s growth plans.
“In Hannah and Craig we have found two young entrepreneurial business people who share many of our co-operative values and our vision of helping other businesses,” he said. “We are delighted to be able to offer both financial and business support. We look forward to working with them over the coming years and watching them grow and develop into another successful Scottish business.”
The business has set up five key services to help other producers create and distribute new products.
A trial kitchen will help fledging brands develop their products, while the facility will use semi-automated machinery to produce and bottle small batches. These can also be packaged and stored on-site. The company will also help a small number of its customers develop their brand including packaging, marketing and recipes.
The trial kitchen will have a second function in days when customers are not booked in. A ‘create your own craft soda’ experience will be aimed at tourists and can help, for example, couples make bespoke drinks for their wedding.
The business will also operate a distribution arm, which will target the on- and off-trade. This part of the business will also operate an online shop, which will sell imported rarities and products made by clients.
Ahead of launch the business has secured 12 customers based across Scotland, Wales, London, Belgium and Canada.
Ms Fisher and Mr Strachan came together after separately trying to launch their own soft drinks brands and not being able to find a production partner willing to producer fewer than 100,000 bottles per batch.
After meeting each other through networking events in Glasgow and realising their challenges were identical, they decided to join forces and create the solution themselves.
Mr Strachan is a chartered accountant, who left the industry after eight years to launch Foal Drinks. Ms Fisher has a marketing background, and most recently worked by whisky firm Morrison Bowmore. her drinks brand is called Tongue in Peat.
The Start-Up Drinks Lab first came to note in January 2017 when it won Scottish Enterprise’s Collaboration Prize.
Ms Fisher said the Scotmid funding was a “huge breakthrough” after pitching to potential investors since last May.
“We’d gone through the well-worn path of syndicates and high-net worth individuals,” she said. “Scotmid came out the blue for us through an introduction, and getting to know them better, we really warmed to them. In the end we had three offers on the table and we selected Scotmid”.
The deal, which saw Scotmid invest a six-figure sum for a “significant” equity stake in the business, has supplemented debt funding, grants and the personal savings of the founders.
Scotmid will not automatically stock Start-Up Drinks Lab customer products, but will look at them on a case-by-case basis.
Ms Fisher expects distribution to be driven mainly through the on-trade channel where trialling new products is more commonplace.
“Retailers and bars are looking for a ‘plug-and-play’ craft soda portfolio,” she said. “We’ve been approached by distributors home and abroad and they’ve all come because they have customers telling them that they are doing well in craft spirits and beers, but as more consumers come in not drinking, and want a decent soft drink, they are under-indexing in craft soda.
“Rather than source eight or nine different craft sodas they want to come to one place where they can get quirky, experimental drinks,” she added. “One in five people going to the pub don’t drink, but they don’t want to feel penalised for it, they want a decent soft drink offer, so our strength will be in our choice.”
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