London-based Fever-Tree announced the strategic acquisition of U.S. craft cocktail mixer company Powell & Mahoney (P&M) in its first-half of year earnings on Tuesday. The tonic maker quietly bought the Salem, Massachusetts-based brand for $5.9 million in August in an effort to extend its footprint in North America and broaden its bottling capacity in non-carbonated mixers.
Fever-Tree leadership reported that the acquisition “comprises $0.7 million of cash and about $5.2 million in additional funding to settle existing debt.
“This category is significant. It’s growing and it’s premiumizing. The category value is larger than either Tonic Water or Ginger Beer and has grown by 24% since 2019,” Fever-Tree’s global strategy director and CEO of North America Charles Gibb said during the earnings call. “What makes this category even more compelling is that no brand as yet has a dominant share, and we believe that Fever-Tree with our brand conventionals, our proven track record in innovating, strong relationships within the trade, broad distribution is in an unrivaled position to take advantage of the opportunity.”
Founded in 2003 in the U.K., Fever-Tree expanded into mainland Europe and eventually launched Fever-Tree U.S. in 2007. It is now exported to over 50 countries. The company plans to leverage P&M’s existing retail distribution network to widen Fever-Tree’s portfolio into more non-carbonated mixers like Margarita, Bellini and Bloody Mary varieties.
Gibb said that P&M’s DNA is very similar to Fever-Tree, with about 10% to 15% of the tonic brand’s distribution. P&M will operate as an “accelerator” into the premium non-carbonated mixer category and the brand’s production facility in Chicago can operate as a “beachhead” for Fever Tree’s increased visibility in the U.S. market, he said.
Fever-Tree’s first-half 2022 presentation listed P&M’s “asset-light business model and proven track record of growth” as a good fit into the tonic brand’s existing distribution network.
“When you look at the Powell and Mahoney portfolio, they’ve got product offerings across the board in non-carbonated that really talk to the way Americans drink,” Gibb told BevNET. “So clearly, we should be playing in that space and finding a way to elevate that drinking occasion.”
At the moment, Fever-Tree doesn’t have plans to dramatically change the look or volume sizing of P&M’s current product lines. The key is to offer what consumers are looking for most when they walk the mixer aisle of the grocery store. For products like Margarita or Bloody Mary mix, the larger volume SKUs are what P&M does best, Gibb said.
“We love the footprint that they’ve got and we feel that we can actually take that brand and expand it from where it is today,” he continued. “We’re giving this business a much bigger engine for its growth going forward.”
Powell and Mahoney was launched in 2010 by beverage industry veterans Brian Powell and Mark Mahoney. The company currently has distribution in roughly 20,000 retailers in nearly all 50 states. In 2021, the company posted $5.1 million in net revenue, up 20% versus 2019.
The road to this point started over five years ago when P&M founder Mark Mahoney (who stepped away from the day-to-day leadership about four years ago but remains a stakeholder in the business) and CEO Chris Crandall began exploring possible options to grow the mixer company through a merger or sale to a larger company. Along with talking to Stonewall Kitchen, Mahoney and Crandall met with Gibb when he took over Fever-Tree’s U.S. operations.
Fever-Tree provides both the financial capital and the sales synergy that P&M needs to grow, Mahoney said. “Absolutely, this fills a big void in their portfolio and makes them a lot stickier to their existing customers.”
The acquisition was announced as Fever-Tree reported 14% revenue growth in H1 2022 compared to the same period last year. Yet, the mixer manufacturer conceded a 4% decline in gross profits in H1 2022 compared to 2021. The company chalked up some of that loss to logistics costs in the U.S. dragging down margins. Specifically, port congestion impacted getting glass to production facilities. This was paired with the inflated cost of transatlantic shipping, freight and labor shortages forcing Fever-Tree to put more resources into keeping up with demand.
Fever-Tree listed its continued success in the U.S. as a driving force for acquiring P&M and expanding its offerings in North America in both premium carbonated and still mixers.
Mahoney is confident that the sale is a great fit for both companies and is not sad to see a brand he helped build move on to new opportunities.
“I’m a serial entrepreneur and these things start off as children. You hope that they continue to be successful,” he said. “I think seeing the business succeed overall is more important to me than having my name on the bottle.”