Q-Mixers vs Fever Tree: On-Premise Channel | In Practise

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Q-Mixers vs Fever Tree: On-Premise Channel

Former VP of Sales at Q-Mixers

Fever Tree

Why is this company interesting?

Fever Tree is a founder-led beverage business that sells premium mixers such as tonics, ginger ale, and club soda.

Over the last decade, two tailwinds have fuelled FEVR's ~50% revenue CAGR: premiumisation and spirits winning share from beer and wine. The company defined the UK premium mixer category which accounted for 43% of all mixers in H121. In the US, the premium segment is only 10% but is growing at ~3x the total mixer market.

In 2018, the company launched a national distribution agreement with Southern Glazers, the largest spirits distributor in the US. Fever Tree focused on building the brand equity with premium spirits companies in the on-premise channel and has the longest and deepest relationships with companies like Diageo and Pernod.

Fever Tree is a beverage company that operates closer to a premium spirits business with 30%+ ROE, deep distribution agreements and high brand equity in both channels that provide high barriers to entry for competitors.


Executive Bio

Shelley Turner

Former VP of Sales at Q-Mixers

Shelley has over 20 years in the spirits and beverage industry and is the Former VP of Sales at Q-Mixers, one of the largest premium mixers in the US and formidable competitor to Fever Tree, the London-listed mixer company. Shelley was hired in 2016 to launch Q’s Western US on-premise channel to compete directly with Fever Tree. She managed new relationships with distributors Breakthru and RNDC and also opened some larger on-premise accounts. Prior to Q-Mixers, Shelley enjoyed nearly 10-years at Moet Hennessy before joining Stoli Group in California.Read more

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Interview Transcript

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.

Shelley, can you share some context to when you first joined Q, in terms of the size of the business and where the business was at?

I joined back in 2016 and I was approached by a headhunter because of my experience with premium brands in the industry. The big piece was that I had a lot of experience in growing smaller brands to very large brands and being a disruptor. Brand building is in my wheelhouse and they needed someone with fast-paced growth experience, the ability to wear multiple hats and see the forest for the trees.

What drew me to them at that point was that they were heavy grocery and they had that channel pretty wrapped up. They had national placements in places such as Target, Safeway, Kroger and all the big hitters. But where they really didn’t have much visibility was in the on-premise sector. That is something that I have a lot of experience with, in terms of driving restaurants, bars, nightclubs and hotels. They just didn’t know how to progress there. They were a very small team and, as I said, very heavy on the chain grocery part of the channel.

Why did Q Mixers originally go-to-market in off-prem versus on-prem?

It’s a fascinating story and I think this really goes to the brand’s DNA and the tremendous business acumen of Jordan Silbert, one of the founders. He was very smart in the way that he first created the brand, with a little bit of awareness, in Brooklyn, New York, where he was based. He understood the importance of influencers, so he did an event in New York and he specifically sought out some media people that he wanted to get in front of. He put the brand in danger of being sold and put it in front of this media guru of the New York Times. She interviewed him, published an article and felt it was the best tasting mixer.

The world started calling, but Jordan realized that the quickest route to market was the grocery channel and it was Whole Foods that aligned tremendously with his brand; non-GMO, local, hand-crafted and it had a great story behind it. He was given an opportunity to prove himself and the brand, so he went to Austin, Texas, where they’re based and they did a wet demo in the store and they sold a pallet in one weekend. The rest was history.

It was an opportunity that came to him, but it was completely brand aligned. Jordan knew who this person was, sought out this person at the event, to make sure that his brand got in front of her, to have the article written. There is nothing more powerful than the right press and creating consumer awareness. When you get the consumer awareness, that will drive distribution and demand.

How do you think that history of building brand in the off-premise channel defines the DNA and the philosophy of a company?

Going to that channel first was more about creating a package and a size that made sense for retail first. In on-premise, the outer package is less important and, in retail, it was about single-serving size to the individual consumer who was making their own cocktail at home. It wasn’t about volume, in the sense that the bartender wanted to use multiple pours out of one package. It had to be very colorful to stand out on the shelf. At that time, the competitor was Fever-Tree and their package was very monochromatic. Jordan realized, very quickly, that if he had something colorful, lively and a point of differentiation, he could stand out.

He went with yellow because of Schweppes who, at that time, was the leader of the category; it still is, in terms of volume brands or value price brands. Fever-Tree didn’t do that; they used muted grays, browns and greens. The consumer’s subliminal buying pattern is yellow for tonic, green for ginger beer, blue for club soda. Jordan was really smart and intuitive to think about the color cues.

How is the price positioning, versus Schweppes, in the off-prem, different?

It was big trade up. Price was certainly a premium and, in some instances, depending on the stores, more premium priced than Fever-Tree. As we discovered at the time, for people who shop at Whole Foods, it’s not about the price; it’s about convenience, selection and about the brands being authenticated and validated by their buying team that these are non-GMO, highly sustainable and localized. Whatever they are buying is a great product for that home.

That was the mindset, so price as a premium wasn’t an obstacle. Premium pricing was always his mantra; and not a lot of discounting.

Are there any limitations for Fever-Tree, shifting from on-prem to off-prem?

Because Fever-Tree is a publicly traded company we are very lucky in that we could gain all the information about what was going on. Early on, Jordan discovered that they spent about 60% of their business in on-premise, whereas when I joined the company, only 10% of our business was on-premise. They were leading that space and they were the only ones having a conversation in that space. It was Fever-Tree or it was mixers on the gun.

There wasn’t much competition; there was no one controlling the conversation. Fever-Tree was the only alternative available. When Jordan looked at that data and realized he was dominating in the grocery space, doing very well in terms of indexing, velocity and dollars per store, he thought that if he took the same winning style, structure and product to on-premise, we could have a competitive advantage there. The consumer was already purchasing and buying it in retail.

It’s really interesting because spirits launch and build their brands in on-premise, they build that consumer awareness and then the consumers go to the store and ask for it. Whereas Jordan did the reverse. The consumer is already aware of the brand because they were purchasing and buying it. We had a story to tell on-premise before we even got there and were able to show them the statistics on IRR data and ACV. Your consumer is already choosing Q versus Fever-Tree in the on-premise environment.

Do you think it is easier to go from off-prem to on-prem or the reverse?

It’s harder to go to off-premise first. What I’ve discovered, during Covid, is that most retailers – especially independent retailers – make their choices based on what people are demanding; those people who walk into a store, looking for a brand that they saw at a bar or restaurant, an ad billboard or they heard about it on social media. They are already looking for a converted customer. It’s hard to convert when you are on the shelf because, at the end of the day, most retailers aren’t working the shelves like a bartender would. They don’t say, oh my goodness, you must try this spirit, this mixer because they craft a beautiful cocktail and presenting it to the consumer in the bar or restaurant.

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Q-Mixers vs Fever Tree: On-Premise Channel

September 28, 2021

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