Anno Distillers Limited
Anno Distillers was formed in 2011 as a new, luxury British distillery to create high quality spirits using innovative and natural ingredients. The founders, Dr Andy Reason and Dr Norman Lewis, both PhD Research and Development chemists, wanted to create artisanal spirits whose unique character was their quality and fine craftsmanship. Unlike so many craft gins that appear to be marketing projects with little thought for quality, Andy and Norman have put their scientific backgrounds to great use in creating Anno, a new British luxury brand.
Over the past three years, sales have increased 45% each year. The company has decided that the commercial proof of concept achieved coupled with the multiple industry awards and accolades justifies a funding round and sharing the future growth with new shareholders.
With additional funds to move Anno from a product-led to a sales and marketing-led company significant growth in turnover is targeted for 2018-2020.
U.K drinking habits have dramatically changed in the last five years with the premium gin market being one of the biggest winners. Domestic sales of gin exceeded £1bn in 2016, up 12% on 2015, and are set to reach £1.37bn by 2020. Exports of British gin also surged to record levels last year, reaching nearly £500m.
Younger customers are falling in love with new-style gins and are prepared to pay for quality and innovation and this is where craft distillers are uniquely placed to satisfy the growing need.
Anno has positioned itself as a luxury British product, full of refinement and technical precision. This not only serves to create a point of difference over other brands but also plays to the founder’s strengths as studious craftsmen. We believe that it will also be an ideal platform on which to travel the brand around the world where British craftsmanship has always been revered. We will continue to employ this approach but with more vigor and strength following a successful funding round.
Substantial accomplishments to date
• The business has been self-funded by the founders with no external debt (although there are shareholder loans outstanding - see Use of Proceeds for more details).
• Investment in plant and machinery includes a 300-litre German copper pot-still and premises in Kent.
• The distillery has over 3000sq ft of office and manufacturing space and hosts popular tour and tasting events.
• Anno has grown significantly over the past three and a half years achieving 45% annual growth per year with sales of £372,200 and profit of £39,700 recorded for calendar 2016.
• Five products have been released, starting with Anno Kent Dry Gin in 2013. This signature offering constitutes 67% of the revenues of all Anno products. Having won a Gold medal at the San Francisco World Spirits Awards, Kent Dry is a fabulous example of the quality and craft that the founders bring to their products.
• A Sloe Gin, Cranberry Gin, Elderflower Vodka and an over-proof 60 Squared gin complete the current Anno family of spirits.
• Year to date, eight staff have produced and marketed around 14,000 70cl bottles (of which a portion are white label brand) and 12,000 5cL miniatures of spirits per year.
The bulk of sales are through on-line stockists, retail outlets, and distributors such as: Nectar Imports; Mathew Clark; Page and Sons; HT White; LWC; Bookers and Blakemore Fine Foods. Anno is also stocked by Shepherd Neame tenanted estate pubs as well as sixteen Majestic Wines locations in the South East, plus English Heritage sites in Kent and Chatsworth House in Derbyshire.
Anno looks to generate revenue in the UK through a multi-pronged approach:
• We currently use four national distributors and number of regional distributors. These mainly supply on-trade retailers such as restaurants, pubs and clubs.
• Sales directly to retailers have been very good with boutique farm shops, delis, upmarket grocers and on-line retailers being quick to adopt the brand. The business with Majestic Wines is beginning very well, currently with 16 listings in the South-East region. Discussions are at a late stage with several of the top five multiple retailers in the UK and orders are anticipated from this sector in 2018.
• A new e-commerce website has recently gone live.
• Direct to customers via consumer shows and from the distillery have been very good and this remains an important part of building the brand in the UK.
• Sales from the distillery during tours and tastings deliver excellent retail gross margin.
From 2018 a number of international markets will be explored.
Use of proceeds
To date, the company has been ‘product led’, with the majority of both financial and human resource being directed toward the creation of perfect products. We see our very impressive sales growth as a direct result of this pursuit of perfection.
There are some recent developments on the sales side that make a stronger start to 2018 that were not include in the original plans, such as: supply of a bespoke gin for English Heritage, the first three pallets are expected to be delivered on 29th January; an increase in the number of Majestic Wine Warehouse outlets supplied to 17.
The next phase for Anno is to focus investment in sales and marketing and to develop a strong base for the Anno brand by:
• Making key appointments in the sales team to grow orders throughout 2018, 2019 and 2020.
• Increasing the marketing budget from £15K per annum to £100k in 2018 and grow this budget in 2019 and 2020.
• Attending more trade shows and advertising in Distributor’s magazines.
• Appointing a strong PR agent in London to build on the Anno story in national press, plus advertising in stockist’s mail order, such as Majestic Wines.
• Engage an export agent to initiate international expansion in 2018 and grow exports in 2019/20.
• Recruit events staff to support consumer shows.
Operations and production:
• Recruit an additional distillery apprentice to support increase in production levels.
• Contract out book keeping and payroll activities.
We will also actively seek grants towards capital equipment required to support increased production volumes as well as exploring alternative ways of working that offer capital and revenue sparing approaches.
Please note that the Company has directors' loans of £266,100 outstanding. The proceeds of this fundraise will not be used to repay these loans and the loan will not be repaid until the company is profitable.
The target market for Anno is the successful 25-50 age group who are attracted to quality and uniqueness in the lifestyle choices they make. They are highly social both at home and in bars and restaurants. Importantly, they are extremely brand conscious and are becoming more and more aware of craft brands and the point of difference to commercial brands.
Sale to target consumers is either direct or indirect.
Direct sales offer the highest margin and involve retailing from the distillery, our e-commerce web-site or at consumer shows.
However indirect sales, from the distillery to other businesses, account for the majority of revenue and we see this as offering the greatest potential for future growth. We have a network of distributors, wholesalers, on- and off-trade retailers and online retailers and will focus on developing sales with these and on developing new relationships.
Key to significant growth will be development of international sales guided by appointment at Anno Board level.
Characteristics of target market
UK gin sales exceeded £1bn in 2015 and are forecast to reach £1.3bn in 2020, over-taking sales of blended whisky. British gin exports also surged to record levels, reaching nearly £500m, up 32% over the past five years. America displayed the biggest thirst for the spirit, with Spain the largest importer in Europe, although Britain still remains the largest single market.
UK drinking habits have dramatically changed in the last five years with the premium gin market being one of the biggest winners. Customers seek new-style gins and are prepared to pay for quality and innovation and this is where craft distillers are uniquely placed to satisfy the growing need. Last year 45 new distilleries opened in the UK, taking the total openings in the past two years to almost 100, even including a fictional distillery illegally opened by Toby Fairbrother in The Archers! Successful craft gin distilleries have inevitably attracted acquisition by major players as happened to Sipsmith and Edinburgh Gin.
In the crowded UK gin market, we believe it has been a very successful marketing strategy for Anno to position itself as a luxury British product, full of refinement and technical precision. This not only serves to create a point of difference over other brands but also plays to the founder’s strengths as studious craftsmen.
We will to continue to employ this approach but with enhanced vigor post successful funding:
• Invest in key sales and marketing staff to increase the number of stockists, distributors and national retailers.
• Generate additional brand awareness through more trade and consumer shows, PR, social media, and print.
• Maximise sales and brand awareness through the recently updated e-commerce web-site and distillery tours.
• One market sector that has not been pursued to date is export. We believe that there remains huge potential and we intend to exhibit at two important international trade shows in 2018 to meet possible stockists and distributors. In 2019, we intend to expand this to four trade shows.
Sales of craft spirits are rapidly increasing as consumers move to small batch quality and innovation rather than mass produced mediocrity. However, the craft market is getting crowded.
What makes Anno spirits so much better than other craft gins and vodkas? Believing distilling to be both and art and a science, Andy and Norman have used their technical background in science and their love of quality spirits to create something very unique.
By positioning the distillery in the Garden of England they draw on the wide array of luscious botanicals on their doorstep including samphire, hops and exotic florals, crafting a super-smooth gin that has an utterly unique and complex flavor. Spending time with their 300-litre pot still, affectionately known as “Patience”, they experiment with a plethora of earthy and floral, fragrant notes, producing exciting new flavours. It is this handcrafted approach that has created a new British luxury classic, the beautifully presented Anno Kent Dry Gin.