Charbrew

Charbrew is a specialist hot beverage brand revolutionising the UK tea market.

EIS

Location: Warrington, United Kingdom

www.charbrew.com

Categories: Food & Beverage Non-Digital B2C

Investment sought:: £150,000

Equity offered:: 11.69%

Funded 2 Nov 2014

Investment amount:: £168,740

Valuation (pre-money):: £1,133,333

Idea

Introduction

Charbrew is a specialist hot beverage brand created to introduce and expose the everyday consumer to high-quality hot beverage products. We have introduced innovative fruit and herbal product offerings designed to bolster the profitability of the hot beverage category. Recently the brand has expanded into the soft drinks market with a range of ready-to-drink ice teas.

In the UK Charbrew is listed in 230 Tesco stores and 270 Holland & Barrett stores as well as supplying into well recognised venues such as Manchester United and The Lowry Hotel. Charbrew has a confirmed launch with Waitrose which will see four Charbrew products listed in 79 stores from October.

Internationally Charbrew is listed with the TJX group - one of the largest international home apparel and home fashion off-price department store chains in the world.

Intended impact

The Charbrew brand is at an early yet strong position. With limited new entrants into the supermarket tea aisles, we believe we have broken the mould and built traction with reputable retailers. The company requires funding to catalyse the already growing awareness and distribution of Charbrew products.

Charbrew has a clear defined strategy for growth, with a strong focus into the core beverage retail markets. This provides a platform and strategic opportunity for a strong structured brand build with significant value creation.

Substantial accomplishments to date

Our unaudited accounts show that year on year Charbrew has demonstrated a strong positive trajectory increasing in turnover and strengthening margin. In the last year alone (2013) Charbrew has reduced operating expenses by 29.2% (£148k to £104k) whilst increasing turnover by 36.27% (£144K to £226k) and reducing losses by 74.65% (£102k to £26K).

In the UK Charbrew is listed in 230 Tesco stores and 270 Holland and Barrett stores as well as supplying into well recognised venues such as Manchester United and The Lowry Hotel. Charbrew has a confirmed launch with Waitrose which will see four Charbrew products listed in 79 stores from October.

Internationally Charbrew is listed with the TJX group- the largest international home apparel and home fashion off-price department store chain in the world. Other notable international accounts include Ross Stores on the East Coast of America.

The company also has a planned October launch with Burlington Stores and is in negotiations with Walgreens.

Charbrew received investment from the North West Fund in 2011 and they remain supportive of the company.

Monetisation strategy

Over the past few years, Charbrew has successfully developed a business that has proven income streams in both the UK and International markets with retail listings including Tesco, Holland and Barrett, TJX and Ross Stores. In food-service Charbrew is available in Manchester United’s Old Trafford Stadium, the Lowry Hotel as well as nearly 20 hotels in and around London. The success of Charbrew is important in two ways; it is proof that there is scope outside of the traditional tea branding, and that the market is buoyant for the Charbrew brand.

The next stage of growth is focusing on increasing Charbrew’s sales and revenues with existing and new customers, developing the core customer base and leveraging Charbrew’s lean and cost effective structure delivering a ROI to shareholders. 80% of consumers of fruit, herbal and ice teas buy them at the supermarket which is why we intend to extend Charbrew products to more supermarket chains where the brand can develop traction and presence with the right on-shelf investment.

The short term view is to develop the main core of the business in the UK retail market, to build Charbrew as a recognized supermarket shelf brand. Through a combination of on-shelf promotions as well as ongoing sales efforts we aim to increase levels of distribution and will in turn build a strong loyal core customer base.

The mid-long term view is to develop Charbrew on an international retail basis targeting high per capita established tea drinking countries the main target being North America. This development phase is in motion targeting key distributors and multiples in these countries.

The Charbrew brand is at an early yet unique position with limited new entrants into the supermarket tea aisles we have broken the mould and built traction with reputable retailers. The company requires funding to catalyse the already growing awareness and distribution of Charbrew products.

Use of proceeds

1 Additional Business Development Executive
This business development Executive will be trained by Adam Soliman and will work alongside Robert Hunt the existing Development Executive helping support the UK sales development.

1 Marketing Executive
An in-house marketing executive will report directly to Adam Soliman and will enable the business to increase its customer engagement and brand message through social media and press relations.

Direct On Shelf Promotion and In Store Marketing Support
We have proven that on-shelf promotions are the key driver to building a core customer base before any form of advertising spend our aims are to increase the rates of sale and gain expansions to more estates in our current listing by driving consumer purchase.

International Sales Development
Our international sales development will focus on North American where the brand has had early stage success.

Working Capital of Stock.

Market

Target market

The UK’s total hot drinks market continues to remain strong, with approximately 165 million cups of tea and 70 million cups of coffee consumed per day. The herbal/fruit tea market in the UK is increasing year on year; according to a recent Euro-monitor report it has increased between 2009/2010 and 2013/14 by more than an third (34.6%) From £46.5m to £62.6m.

In the fruit and herbal tea sector Twinings represent a domestic market share of 52.9% in 2013/2014 up from 50,6% in 2009/2010, clearly the most dominant brand in the sector. Other brands in the marketplace had a comparatively small share with Pukka accounting for 9.3% of the market in 2013/2014, followed by private label at 6.8%. Other popular brands included Tetley, Sainsbury’s, Clipper, Tesco and Tick Tock, all of which held a similar market share ranging between 4.6% and 3.8% in 2013/2014.

The total UK hot beverage market is forecast to rise in value by 9.2% between 2014/2015 and 2018/2019 (years ending 1st February), from £1.74bn to £1.9bn. The fruit and herbal tea market is forecast to witness significant growth with an estimated rise expected in value of 19.5%, from £68.2m to £81.5, in 2018/2019. This market is expected to benefit significantly from the perceived health benefits of such tea, alongside the increasing number of major tea brands expanding their ranges in this area.

Ice Tea

At the end of 2012, it was decided that Charbrew should move into the Ice Tea market. The Britvic soft drinks report, based on Neilson and CGA data, found that the ‘’cold hot drink’’ category as a whole grew 43%. It is clear to us that ice tea is significantly outperforming the market average.

Characteristics of target market

The market is broken up into the several segments. Convenience and Department Stores which take around 13.5% of the tea sales in the UK combined. Independent’s which take around 2.3% and Other which take around 3.9%. My main target however is multiple high end retailers, these account for around 80.3% of tea-related sales. Charbrew's target market is multiple high end retailers. Herbal tea has a feminine, affluent and urban appeal. With just 15% of men drinking herbal tea as opposed to 27% of women. The appeal to male drinkers could be increased by a more masculine image, for example, through packaging innovation or profiling to target specific men’s health issues.

Utilising sales data we have been able to clearly define who Charbrew customers are:

Age range - 25-45 year old
Gender - Female
ACORN classification - Highly Affluent, Wealth Achievers and Urban prosperity
Behavioural Profile - Confident cooks and Health conscious.

Marketing strategy

Charbrew's main focus is on reaching the market through multiple high end retailers which account for 80.3% of tea related sales in the UK. Charbrew has already had early stage success with listings with Tesco, Holland and Barrett and TJX.

The next stage of growth is focusing on increasing Charbrew’s sales and revenues with existing and new customers, developing the core customer base and leveraging Charbrew’s lean and cost effective structure delivering a ROI to shareholders. With plans to extend Charbrew products to more multiple supermarket chains where over 80% of consumers pick up fruit and herbal tea and ice teas the brand will develop traction and presence with the right on-shelf investment.

The mid-term view is to develop Charbrew on an international retail basis targeting high per capita established tea drinking countries the main target being North America. This development phase is in motion targeting key distributors and multiples in these countries.

The Long term view is to fully evolve the brand into complementary products to the brand, examples of this being our Ice tea which successfully launched into 250 Holland and Barrett Stores in June 2014. The Charbrew brand is at an early yet unique position with limited new entrants into the supermarket tea aisles we have broken the mould and built traction with reputable retailers.

The company requires funding to catalyse the already growing awareness and distribution of Charbrew products.

Competition strategy

The more direct competition in the market place comes from Tetley’s through their wholly own subsidiary ‘Teapigs’. Teapigs is a direct competitor in terms of quality and product offering but due to the differences in blends, it is not a complete direct comparable range to Charbrew. Teapigs has, over the past few years, ventured into the supermarket aisles.
Teapigs initially built up its network of sales through a network of independents and smaller chains, this is reflected in its hefty retail unit price between £3.99 and £5.49 in store.

Twinings is the market leader in herbal teas and fruit infusions whilst also having a black tea range. Twinings is owned by Associated British Foods (ABF). ABF operates as a diversified food, ingredients and retail group with a presence in 47 countries the company is organised into five business lines – sugar, agriculture, retail, grocery and ingredients. Twinings in the last two years has developed a mesh teabag range however their focus has been on core teas such as breakfast tea, earl grey etc.

Also proving the buoyancy of the mesh tea pyramid and its success in the food service market channel, The London Tea Company (“LTC”) was set up in 2003 by two brothers, Dinuk and Mahin Dissanayake. LTC have positioned their brand focusing on high end premium teas & infusions marketed under the LTC brand and as a supplier of private label products. LTC’s main route to market is through the food service channel including work places, restaurants, hotels, visitor attractions, travel, universities. Their company strategy is ’to provide, for the discerning Foodservice supplier and caterer, a range of fine quality, ethically sourced teas and infusions, for front and back of house use, which leaves a lasting impression of highest quality and superior taste with the consumer.