Fever-Tree: UK On-Premise Market Share Loss

Disclaimer: This interview is for informational purposes only and should not be relied upon as a basis for investment decisions. In Practise is an independent publisher and all opinions expressed by guests are solely their own opinions and do not reflect the opinion of In Practise

I can give you a bit of background. I've been studying and following Fever-Tree since it was listed, around 2015 or 2016. I'm always curious about how the mixer category works, both on-premise and off-premise distribution. I've studied Fever-Tree in the US and globally, and I'm curious about the UK, where they haven't grown much in recent years. I'd like to know more about how you ended up in this space and your current role and relationships.

I joined the drinks industry straight out of university, starting with Majestic Wine on their graduate training scheme. I moved around to different postings with them. I'm originally from the Maidstone area in Kent.

I ended up managing a store there. You reach a point where you're essentially a retail manager within four walls all day. I wanted a change when I was around 23 or 24 and wanted to work abroad. My dad had worked abroad in various roles, so I fancied that. I got a job in Bahrain, spent two years there, a year in Trinidad and Tobago, and a year in Dubai, always working for drinks wholesalers. That's where I learned about the industry and how it all worked.

Early days in Dubai, that must have been interesting?

It was interesting back in 2008, 2009, around that time. Those were interesting times, and it's been onwards and upwards from there. I learned about the distribution of brands, who controls what, and how the market works. It's really interesting in the Middle East because only one company can sell a certain product. One company has the import and distribution rights, and that's it. The market is divided between a few companies.

State-owned, state-owned distribution.

All the money goes back into the same pockets in the end. MMI is part of the Emirates Group, and there's another company as well. They all have to be 51% locally owned or so. All the money goes back into the same pockets.

Is Fever-Tree distributed out there?

They are, yes.

I guess they come through those distributors then.

Exactly, yes. Those distributors have all the contacts and act like a composite wholesaler in the on-trade, and they run their own shops as well.

Are there many other premium mixers out there, do you know?

Yes, there definitely are. The premium mixer market has massive competition with brands everywhere. Fever-Tree effectively created the market and was well ahead of the game. Tim and Charles had great foresight and strategy, picking a place in the market. Now, every country has a variety of mixer brands, some premium, some not, but everyone is positioning themselves as a premium brand.

Can you explain a bit more about your role at Drink Warehouse currently?

I've been at Drink Warehouse since the start of September. The business turns over just under 30 million. Like many wholesalers, it started with a couple of guys as white van men with 10 grand on a credit card and a Citroen Berlingo, taking orders by day, buying stock, and delivering it. They've done really well. As is often the case, a couple of sharp salesmen built the business up to 30 million. They want to grow it to 60 million in the next five years and need some help doing it. They asked me to come down and help them. I'm looking at it from the top down, examining all the accounts and the full account base.

What's the mix of the accounts then, between spirits and mixers?

They're doing too much beer, basically. They're doing about 50% beer. The firm I was with previously, Venus, based in Tottenham, is doing 120 million now. They would be the opposite, doing at least 50% spirits. You send out a full truck of beer, you're lucky to make 10 grand on it. You send out a full truck of spirits, you'll be making 50 grand on it.

Do you mean gross profit or revenue?

Just turnover, just revenue. But obviously, you're dealing with exactly the same cost, in terms of your cost to deliver. Wholesalers work on very skinny margins. You're well into single digits by the time you get everything out. It's a very tight market. The team at Drink Warehouse needs a bit of experience in doubling in size. What are the pitfalls? We have to make sure we're still making money. I faced those challenges at Venus, where I joined in 2011 and spent 13 years, first as a buyer and then the last six years as commercial director.

How much of the revenue or volume is mixers, spirits, and beer today?

Mixers would be 10% of revenue, in that sort of category. That's the aim. A bottle of spirits can cost double the cost of a case of Fever-Tree, for example.

What mixers do you carry?

At Drink Warehouse, we have Fever-Tree, of course. Fever-Tree is stocked by every wholesaler due to demand; it's the market leader. You can't not have it. A wholesaler works like DHL or UPS, but with alcohol. A wholesaler is a logistics company. You buy and sell, don't you? A wholesaler doesn't go into a customer and say, "You want to be buying this, you want to be buying that." It's the brand owners, the brand companies that do that, and the wholesaler just delivers it.

Who chooses whether to carry Fever-Tree?

I do. You have your buying team, your commercial team, working out whether you can carry it. You can't carry everything under the sun because of cost implications. You want to be as skinny in terms of product range as you can, while still offering a large enough portfolio to service your customers.

When you choose your mix of range, what variables are you focused on?

Number one is we don't do range reviews. We don't look at it and say, "What mixer ranges should we list?" The customer asks for it. If it's viable to list, if the volumes are big enough, then we bring it in. For example, if our biggest group tomorrow came to us and said they want Timbuktu mixers, then we import them.

How many mixers do you carry now, though?

We currently carry eight or nine brands, including Fever-Tree, Double Dutch, Franklin & Sons, London Essence, Artisan, Fentimans, Folkington's, and Frobishers.

And have all these brands been added due to customer demand?

Yes, it's all through customer demand. I'm not just looking at our portfolio and deciding to add something without that demand.

Sure, that makes sense.

Otherwise, what would be the point?

What's the minimum volume you require? It must cost you to carry and warehouse these products.

Yes, it varies by business, but for Drink Warehouse, for a mixer brand, ideally, we need to be moving a pallet a month. For Fever-Tree, that's about 112 cases per pallet, so we need to be selling at least 25 cases a week to make it viable. Ideally, you'd focus on four or five brands and channel everything through them, but in practice, it doesn't work that way.

I guess you also use mixers to satisfy client demands? If customers request a specific mixer, they might purchase more spirits or beer from you, so you feel obligated to stock it?

Exactly. One of my projects at Drink Warehouse involves analyzing customer purchases. If we're delivering all their soft drinks and mixers but they're not buying spirits from us, we have a problem. The account manager needs to address this by saying, "We're doing all the groundwork here; we need some of your spirit business too, or we'll have to raise your prices."

What's the mix of your accounts like in terms of on-premise versus off-premise, and what types of on-premise accounts do you have?

It's 99% on-trade.

And does that include bars, pubs, and restaurants?

Yes.

And what about the range of venues?

Drink Warehouse has a wide range because we deliver to Kent, Sussex, and London. We serve everything from working men's clubs to places like Claridge's. The sweet spot for a mixer brand is really a high-volume, trendy cocktail-style bar.

How have you seen the premium mixer category evolve over the last four or five years? You mentioned eight or nine brands—has there been a noticeable change?

In the last five years, the market has reached a saturation point with so many brands entering. You don't need an alcohol license to produce it. Anyone can go to a bottler and say, "I want this blend, here's a label," and put it in a bottle. It's not difficult to create a mixer brand, and the margins are quite substantial. Even with Fever-Tree, everyone used to rely on Schweppes and Britvic, which dominated 99% of the market. Then Fever-Tree emerged in the early to mid-2000s and gained significant traction around 2010. It became a must-have product for premium bars. By 2015, more brands appeared as people recognized the profit margins Fever-Tree was making. Once they were listed and became a city favorite, everyone invested and saw profits. Consequently, many started creating their brands. Over the last few years, some of these brands have closed due to a lack of investment.

How are these new brands going to market compared to Fever-Tree, considering its scale, TV marketing, and first-mover advantage? How are you seeing these new brands gain traction?

Typically, they work with a brand agency, of which there are hundreds now due to the number of brands. You could Google a few, like PROOF DRINKS, Cask Liquid Marketing, or Tortuga, Mangrove.

What do they do?

They have several brands in their portfolio. The brand pays them a certain amount per case sold, plus a retainer for marketing, and a storage and handling fee. Companies like Drink Warehouse or Venus prefer dealing with them because they can buy a basket of goods rather than dealing with 100 different companies. Wholesalers prefer this method. However, many companies don't like stocking mixer brands due to the volume and weight. Some brands, like Double Dutch, operate independently. They are two twins from Holland, as the name suggests.

How do they distribute their products?

They distribute themselves. They have the product made, warehouse it, and ship it out, often using a third-party warehouse.

But are they going to the end market, to these high-end accounts themselves?

No, that's the last thing they want to do.

Exactly, it's too much.

They would go to a Venus or a Drink Warehouse, sell their brand there, and then the customer would order from the wholesaler. The wholesaler wouldn't go door-to-door asking, "Do you want to buy Fever-Tree? Do you want to buy Double Dutch?" Those brands have their teams on the ground, door-knocking and promoting Double Dutch.

When a customer asks for Double Dutch, what is typically their reasoning or what do they usually say about it?

That's usually because someone from the Double Dutch team has approached them and either convinced them to buy the product or offered them a deal.

Do you know the difference in price or the kickback?

For example, the cost of a case of Fever-Tree tonic to a Drink Warehouse or Venus would be about £19.29.

£19.29 for a case?

Yes, for a case of 24 bottles, each 200 ml. The wholesaler has always been selling in that range.

These are bottles, right?

Yes. Most competitors are between £1 and £2 cheaper.

So around £17 to £18 for the same size, 200 ml.

Yes.

That's 20% cheaper?

Yes, about £1 to £2 cheaper. Some brands are more expensive than Fever-Tree, aiming at the ultra-premium market.

Who is more expensive?

I'm trying to think of brands that are ultra-expensive. Sorry, I can't think of them right now. They're very niche, but they target that end of the market.

Have you spoken to any accounts about why they switch? Let's say you work at Double Dutch, you go in, you're pitching the story. It's similar to Fever-Tree, just a different brand. You can charge more for it, and the bartender can earn more. Why would the bartender switch from Fever-Tree?

Yes, it's FMCG, isn't it? People get bored, especially in the drinks market. They don't want to drink what they were drinking yesterday. They like something new and more interesting. There's an element where they don't want to serve Fever-Tree because everyone else is serving it, so they want something different. They might have a relationship with a salesperson or the company. There could be a backhander involved, you know, all the different sales techniques. There might be a deal where they buy a certain volume and get an upfront listing fee, like £1,000 or a couple of grand, depending on the volume. If they hit a certain volume target, they'll get more money.

Fever-Tree has been attacked because originally the model was great. Everyone wanted the product, so they didn't have to go door knocking. It was a small team, and they didn't invest in many salespeople, which led to a scenario where people feel unloved. They've been stocking Fever-Tree for a long time without seeing a rep or being looked after. So, when someone else walks in, shows them attention, and wants to work with them, they're interested. Plus, they'll offer some sort of sweetener in the deal.

You mean at the bar?

When they're selling to the customer.

You mentioned they give them a couple of grand or a listing fee. How does that typically work? What have you heard that Double Dutch or other firms do? If I have a bar with Fever-Tree and a Double Dutch rep comes in, what's the typical structure to incentivize a switch?

They would play on the lack of attention from Fever-Tree, asking if they have regular communication. Nine times out of 10, the bartender or manager would say no, they're not in a contract with Fever-Tree. Then Double Dutch would express interest in their volumes and offer to put a contract together. There's no set route, but typically a listing fee based on volumes.

How would that work? If you buy 50 cases?

They might go to the wholesaler to verify volumes. The customer would allow Double Dutch to access their volumes. The wholesaler would confirm they're buying 1,000 cases of Fever-Tree a year. Double Dutch would calculate their profit margin and decide how much to invest. It's not massive money, but it could be a grand or a couple of grand. If you're doing 100,000 cases a year across a Stonegate, a Mitchells & Butler, then it increases.

Double Dutch and other brands are also distributed with Stonegate and others as well.

They are expanding into many different places. For example, Soho House in London is supplied by Double Dutch. The larger the chain, the more money and competition there is.

In your experience, what percentage of growth in new brands comes from people switching from Fever-Tree versus those adopting new premium mixers without having used Fever-Tree?

If an account is not currently using a previous brand, is it now switching from Schweppes?

Exactly, yes.

There's not much of that left in the market. Those still serving Schweppes and Britvic are doing so because it's the cheapest option, and customers don't mind. They just want to go for budget options. No premium cocktail bar is really using Schweppes now.

So the growth in new brands is mainly coming from Fever-Tree.

Yes, it's coming from their market share.

Who do you think is the biggest competitor to Fever-Tree?

I would say it's Double Dutch and Franklin & Sons. They are doing well and taking market share.

Where are they typically taking it from?

Major city accounts, standalone accounts, and small groups. They are taking it from big players like Soho House and Stonegate. It's tricky for Fever-Tree because they have to maintain a certain profit margin as they are listed. They can't just cut 10% of the margin next year.

What can they do to drive growth?

They are in a big brand scenario where they need to keep their marketing spend high to maintain their premium status and look for other markets. The US is their number one market now.

They need to look for other markets with growth potential. The problem is that other markets already have premium mixers. If Fever-Tree isn't there already, they probably are through some route, even if not managing it themselves in the country. There are competitors everywhere.

It's interesting because, from my understanding, the pitch to bartenders was originally that a quarter of the drink is the mixer, and by premiumizing the mixer, bartenders can charge more and earn more gross profit per drink by adopting Fever-Tree. Now, with cheaper premium mixers available, like Double Dutch, I imagine bartenders can still price the drink the same. Does the end customer really care whether it's Fever-Tree or Double Dutch?

I think the end customer does care a bit, but not to the extent that they would leave the bar to find Fever-Tree elsewhere. As long as the bartender can sell the story of the mixer they're using, it works.

I imagine if a bartender switches from Fever-Tree to Double Dutch, which is a cheaper mixer, they can still charge the same price for a gin and tonic and increase their gross profit.

Yes, and it's not perceived as a lesser quality product either.

No, it's still the same experience. It still looks good on the bar. How do you see Fever-Tree trying to stop the competition?

It's very hard for them to stop the competition. They can offer more support, but inevitably, they won't make as much profit as before.

How have you seen them change their prices over the last year or so?

They continue to increase prices at the same rate as everyone else. They maintain their margins with their costs. There's an element of being the most expensive and perceived as the best. They've looked at other markets and gone big in the on-trade. Their advertising and sponsorship of events like Queen's Tennis and Henley Regatta help maintain their premium image. Internationally, they're bigger than everyone else, so big hotel chains prefer them for consistency.

You mentioned they've hired more people in the on-trade team. What are they doing?

It's about showing people love and building relationships. The drinks industry is heavily based on relationships. It's like being a Moët Hennessy representative. Those guys are premium and can come across as arrogant. When you're from Moët Hennessy, people recognize you.

It's funny because he's from Moët Hennessy, isn't he, Charles.

Exactly. Part of the ethos of that company is that when their reps walk into a hotel, it's expected that their products are stocked because they're considered the best.

What sense do you get from the Fever-Tree sales reps compared to others? Do they have that same allure, like the champagne brands you mentioned?

Yes, to some extent. Everyone has different styles, but there's an expectation that you're stocking them because both parties are premium. However, they face questions like, "Why are you stocking Franklin & Sons instead?" It's often due to better deals. Fever-Tree's volumes in the UK have slightly declined. They're having to adjust.

Their revenues are down. They haven't fully recovered since 2018, 2019 and are still down by 10% after five years.

I can't see how they recover. Revenue might come back, but profit won't because they need to invest heavily to boost turnover. Every wholesaler in the country stocks Fever-Tree, so I'm competing with wholesalers, not brands. Fever-Tree becomes a commodity product, leading to price wars. We end up selling it cheaper to beat incumbents, making only about 10% or less, whereas with other brands, I can earn more.

What's your gross margin target for Fever-Tree versus Double Dutch?

I'd aim for 10% to 15% on Fever-Tree at most, if I'm lucky. On some of it, it's a fighting brand, sometimes going in at 5%, which is ridiculous.

What about when you're competing directly with Venus on an account?

We would go in and say, "Right, we'll just add a pound to a case," because we know it's going to be attractive to that customer due to their high tonic volume. That helps us win the account. We try to make up that money on some spirits elsewhere. With another brand, I'd go in quite a bit higher, genuinely making 15% to 20% on some of it. So it's more attractive for me to sell something else.

But ultimately, it comes down to the customer telling you what they really want.

Yes, exactly.

You're not pitching and telling them how to pour drinks and make cocktails then?

No, I'm like DHL. I'm just delivering cases.

So what's the type of accounts you handle? What's your mix between pubs, bars, and restaurants? What's the average account you go to at Drink Warehouse?

We are much more focused on a pub-style operator. So that mix would be about 50% of the accounts.

And Venus was what?

Venus was much lower. With Venus, we did as little keg as possible, about 20% pubs.

And high-end bars?

Yes, high-end bars would make up 50% of the customer base with Venus, followed by nightclubs, hotels, etc.

How do you see high-end bars and hotels treating Fever-Tree versus Double Dutch?

Fever-Tree would still be their number one preference as long as Fever-Tree matches the price across other brands. But they're not currently matching it on all, only where they really want to keep the business and consider it a flagship. They don't mind using other mixers. It's a bit old hat, and since everyone else uses it, they're happy to try something new and be a point of difference.

Do you have certain targets and get a kickback or rebate for selling Fever-Tree?

The best I usually get with Fever-Tree is some marketing money for running adverts in a brochure. Other companies are more inclined to give growth retros. I'm doing a lot of work now at Drink Warehouse. Brands will say, "For every new customer you open with my brands, I'll give you 50p a case, retro. Bill me monthly, send me your sales data." Fever-Tree would never do that. All the other guys are eager to do that.

What does Double Dutch provide as a kickback or retroactive payment?

50 pence for every case for non-contracted business. So, I can't just take a customer from another wholesaler if they already have a contract in place.

It' has to be a new account, basically, if you're going to win a Fever-Tree or a new account.

Yes, full of brands rather than just one.

Double Dutch will check if they're distributing to that account. If not, they'll give you 50 pence.

Yes, even if they were distributing but had no visibility of it, they'd still pay me.

Yes, which is like a 2.5% kickback on a case, roughly. Maybe a bit more.

And I'm also making more margins selling that other brand to them.

Why is that?

I can make a better margin on other brands than Fever-Tree because Fever-Tree is so competitive and like a commodity product.

How does that work then? Why is it competitive?

Usually, an account would just have one distributor, so you're competing to get one wholesaler.

Why do you have to discount? Why is it competitive?

Because they're using a lot of it. If Fever-Tree is in an account, tonics are used a lot, so it's a high-volume product. When quoting their products, I go from top to bottom on volumes. The highest volume products are important for them and make a real difference to their gross profit.

What's at the top?

It's going to be house vodka or whatever your pouring brand is. If you have a deal with Diageo, it's Smirnoff. With Pernod, it's similar. Wholesalers quote tightly on those products, around 5%, because it makes a big difference in winning the customer.

Then beer would be second, I imagine? Spirits then beer?

Yes, depending on the outlet. Again, because Fever-Tree has been there for so long, it's been quoted down and down over time.

Can you explain the UK on-premise distribution? What's the distribution like in wholesalers for on-premise mixer distribution and in spirits? Who are the major distributors for spirits and mixers?

Do you want the brand owner or the name of the wholesaler?

The wholesaler, yes.

So, the wholesaler. You've got Matthew Clark, owned by a company called C&C in Ireland. Then there's LWC, based in the north but with depots everywhere. If you check their website, they have a depots page with about 15 plus depots. They've expanded a lot in recent years by acquiring other regional wholesalers. Matthew Clark has been the largest for a long time but faced problems. They were turning over 800 million plus a few years back and nearly went bust due to skinny margins and mismanagement. C&C bought them via a funding loan from AB InBev, Budweiser Brewing Group. I think they lent them about 100 million to buy C&C because none of the big firms, particularly the brewers, have their own distribution or wheels to deliver their kegs. So they need wholesalers for that.

What about the spirits companies?

Spirits companies don't want to deliver anything themselves either; it's not cost-effective. Even Diageo, at the start of this year, refused to deal with wholesalers buying less than £2 million worth of product per year. They only wanted to deal with about 10 on-trade wholesalers and let those distribute to the rest of the market. Matthew Clark and LWC control a lion's share of the market and national chains.

What is the regulatory framework around who can sell booze, spirits, or beer into bars and restaurants?

You need a license called the AWRS (Alcohol Wholesaler Registration Scheme) that came in around 2016 or 2017, driven by HMRC due to dodgy stock where duty wasn't being paid. They've policed it using the AWRS. You can't buy from a brand owner like Diageo, Pernod Ricard, or Bacardi unless you supply them with your AWRS certificate; they won't sell to you.

But Fever-Tree can sell directly to bigger hotels and accounts if they want?

Yes, they can do anything since it's a soft drink. They just need to pay the sugar tax on production. They can sell directly, but it's not cost-effective for them.

Do they only ship through distributors for on-premise in the UK?

I'm 99.9% sure they do. Do you know Brothers Cider? They are located in Shepton Mallet, Somerset. They handle a lot of the bottling for Fever-Tree, and much of the delivery comes from that distribution.

They're in Somerset, you said?

Yes, I'm sure Fever-Tree uses other partners as well to scale their operations.

That's their main relationship though, I believe.

Yes, that's the main one. It's a massive site, and as far as I know, they bottle Fever-Tree day and night. They must have some backup supply chain options, maybe for canning and other relationships in case the bottling lines go down. But yes, that's where they do a lot of it. It's just not cost-effective for them to send the number of cases of mixers that an outlet needs. In London, for example, with space constraints, they need mixers delivered two to three weeks from the wholesaler.

Is that how often you visit an average account, you know, twice a week?

As little as possible. For smaller customers, once a week, but as infrequently as you can manage.

A big part of Fever-Tree's history has been its relationship with spirits brands, like partnering with Bombay Gin or some whiskey brands. How do Fever-Tree's spirit partnerships impact the way you've sold the product compared to other brands?

The original idea with Fever-Tree was that Bombay was the premium gin of the time. The thought was, if Bombay is in an account, we should be there too. Spirit companies liked partnering with Fever-Tree because it gave them a premium feel. As a wholesaler, I only need to know if the customer wants it.

Yes, right. How have you seen the relationship with spirits brands influence the growth of Fever-Tree compared to Double Dutch, for example? In the US, distribution is very different with the three-tier system.

Yes.

The distributor does a lot of the merchandising. Partnering with Bombay or other spirits companies drives accounts to attach Fever-Tree to Bombay when purchasing. How much does that matter today in the UK when competing with Double Dutch?

It's easier for smaller brands to form partnerships. There are so many gins on the market, and Fever-Tree couldn't and didn't want to partner with all of them. This left many brands available for other mixer brands to partner with. When they partner, it's often through offers. For example, they might go to the wholesaler and say, "Buy two bottles of Tanqueray gin and get a free case of Double Dutch."

Have they been doing that?

Yes, that's a regular occurrence.

Which brands do that?

Basically, all of the mixer brands do something like that. It's common to make a deal. They don't even need the brand's permission. If I want to offer "Buy six bottles of Bombay Sapphire and get a free case of Double Dutch," and Double Dutch funds it, Bombay Sapphire can't stop me.

But do brands ever come to you and say, "We have a relationship with Double Dutch. Offer this as a bundle to customers"?

No, they don't usually come directly. If they do partner and promote, they do it with all wholesalers, so you'll see it happening.

Have you seen other brands doing this? How much of an advantage is Fever-Tree's history with spirit companies? Have you seen a big spirit brand come to you and say, "We're partnered with Double Dutch. Attach Double Dutch to this occasion"?

That would be during a specific promotional period rather than a regular occurrence. It's not a massive advantage. The only advantage is that, historically, they have good connections with some brands, so those brands might favor Fever-Tree. However, many brands switch based on margins and profits.

How did it work historically with spirit brands and co-marketing? Can you remember when you partnered with Venus and Fever-Tree? How would they partner then?

Exactly, that same sort of thing. I don't know the exact details of the contract or the financial exchanges. However, a spirit brand like Bombay might provide Fever-Tree with a customer list, indicating where they sell their products. They would obtain this information from a wholesaler. Fever-Tree would then target those customers in some way. In reality, Fever-Tree didn't really need to do that. The product and timing were genius. They could launch a national marketing campaign or release a gin and tonic in a can featuring Bombay and Fever-Tree. That would suffice to connect them with the brand and give them a premium feel. More often, brands would approach Fever-Tree, suggesting a partnership for a promotion and asking if Fever-Tree would help co-fund it.

What have you observed over the last year regarding the impact of spirit companies on driving mixer volume? Have you noticed any strategies?

Very little. The more interesting aspect now is the change in category trends. Gin is declining, while tequila and rum are gaining popularity. It's more about what people are buying rather than how they are buying.

What are they buying? What's changing?

Tequila is certainly massive. It has been huge for a good year now.

How much is that growing for you?

For us, tequila is growing by 15% to 20% year on year.

What about rum?

Rum is also popular, though to a lesser extent. There's a lot of buzz about rum, but the actual increase is probably around 10%. Gin, on the other hand, is down significantly, by about 15% to 20%. Gin was on such a high base. Vodka is starting to regain some market share, with probably a 5% increase.

Which mixers are most popular if tequila is leading?

The Paloma, with grapefruit tonic or pink grapefruit. A company called Three Cents has really capitalized on pink grapefruit. Fever-Tree was slow to catch on. Fever-Tree is premium, but not as trendy. In contrast, Three Cents is a group of bartenders with a backstory, aiming to create the perfect accompaniment for a Paloma.

How does Three Cents compare to Fever-Tree in terms of pricing?

I think they're about the same price. There's not much difference; it's very similar pricing.

Does Three Cents have the largest market share for grapefruit soda?

No, it wouldn't. That would still be split across the other brands, mainly because Drink Warehouse isn't quite as premium. It would have a much better share with someone like Venus, who is doing a lot more with independent cocktail bars.

To change tack a little bit, you have London Essence, which is owned by Britvic. When Britvic was losing market share, they decided to create London Essence to offer a premium option. They're now trying to premiumize the gun tonic on tap. They've installed fonts on bars where you can insert different cartridges for various tonic flavors, and they're trying to champion that. We've moved from it looking cheap and being disliked to people now appreciating it for its sustainability.

How are you seeing that change?

It's minute, so far. It's still new, but you can see companies like BLUwater doing it on a larger scale with water filtration on the bar. They deliver bottled water to the table as a filtered product, which is gaining traction. Wholesalers love it because they sell a few cartridges at around £100 each instead of delivering numerous cases of mixers.

When I was at Venus, we were trying to get our sales team to mention BLUwater or give them leads for where they could install their water filtration systems. On the surface, we'd lose sales because we used to deliver that water, but it's more cost-effective for us not to deliver it at all.

I haven't heard of BLUwater.

It's like a water aid-style company that does a lot of charity work. They're doing a lot with water filtration. People, even in high-end venues, are happy with something coming from a filtration system at the bar because they are more sustainably minded these days.

Last question. What should I watch out for in the premium mixer market in the UK over the next few years for Fever-Tree's growth?

I think Fever-Tree's growth will only come by the infighting of some of these smaller brands, some of which may go bust and be taken off the market. The brewers are experts at this. When a brand starts taking some of their market share, they go out and buy it. Look at the craft lager scene that has come up. Brands like Camden and Beavertown, for example, are now owned by Budweiser and Heineken. They either buy them and integrate them into their portfolio or buy them and mothball them.

AB InBev paid 85 million for Camden. The founder started it in the cellar of his chain of pubs, and within five years, he received 85 million for it.

That's so crazy.

Yes, and really, it's about that cannibalization. Take a brand called Lixir, a soft drinks brand. It did well initially, got distribution with Coors, and partnered with them a bit. But now it's been mothballed because it was costing too much to reach the volumes needed to be profitable. So, in my opinion, it's not a great time to invest in Fever-Tree if it's purely based on the UK market. They need to look at other markets for expansion and growth. The UK market is saturated. If some competitors get mothballed and go out of business, they might retain more market share. However, maintaining their current position will cost them more money, making it impossible to achieve the margins they had in 2015. Those conditions just don't exist anymore.