Twenty-two years ago Charles Rolls was a regular working stiff. He was just turning 40, and had no great successes to his name. He’d been a mining engineer, and didn’t like it. “I was the world’s worst engineer,” he recalls. He’d tried to launch an exercise bike venture. It failed. He was now stuck working as a consultant in the commodities business — and hated it. “I couldn’t bear it any more,” he says. “I was absolutely miserable. This was not what I wanted to be doing with my life. I wanted to do something entrepreneurial.”
Today Rolls is worth about half a billion dollars. He’s shaken up a 100-year-old industry, and the London-based company he helped found is quickly becoming a household name: Fevertree Drinks, which makes those very high-end, and expensive, mixers you see in bars and supermarkets. A four -pack of its 6.8-ounce bottles of tonic sells for $5.99 at Target TGT, -0.48% . Competitor Canada Dry’s six-pack of 10-ounce bottles costs $4.29.
How well is Fevertree doing? Try this: Since the IPO in London, five years ago this November, Fevertree Drinks FEVR, -0.08% stock, measured in U.S. dollars, has outperformed every single U.S. large-cap stock in the S&P 500 SPY, -0.21% stock index. Actually it’s beaten every age, medium and small-sized U.S. company in the broad Standard & Poor’s 1500 index. Not just the index average. It’s beaten every single stock.
Rolls co-founded Fevertree in 2003. (The company is called Fevertree Drinks, but the consumer brand is Fever-Tree). But the story really begins when he was turning 40 and quit his consulting job for a mad, quixotic and seemingly doomed venture. He took all his life savings and, with some backers, bought a dying old gin company in England called Plymouth Gin.
“I knew very little about it,” he says. “I had no relevant experience. I had just this instinctive feeling. I just knew I could turn this thing around.”
A big gamble
It was a huge gamble. Rolls was newly married — usually a time when people start to think about playing it safer. Meanwhile the business he bought seemed headed for extinction. “It was very nearly dead,” he recalls of the company. “We had no money. Our marketing budget in the first year was 100,000 [British] pounds. [About $220,000 in today’s money] We were losing about 25,000 pounds [$55,000] a month.” The company, founded in 1793, was an aging relic. “I went down to Plymouth [in western England] on a train. It was a most beautiful building. But it was like Grimm’s Fairy Tales. I’m pushing open a door, and there were cobwebs. They had a giant copper pot. It was used for distilling twice a year.” He had, he says, about three months to turn it around.
He believes the parent company, a drinks conglomerate, sold Plymouth Gin to avoid the embarrassment of closing the historic business. Gin at the time was a deeply unfashionable drink, generally associated with retired colonels, golf club bores, and provincial hotels. Rolls bought the company for 500,000 British pounds (a little over $1 million in today’s money). “I picked up an absolute jewel of a brand that no one had done anything with since the 1950s,” Rolls recalls.
At this stage, the little Rolls knew about the drinks business came from one consulting project. He went into a major bookstore in London, pulled all the books off the shelves relating to the alcohol business, and sat on the floor reading them.
“Fortunately, I knew nothing,” says Rolls. “Sometimes it’s an advantage not to know anything about a business. I had no relevant experience.”
There was no money for a major relaunch, and almost no time. He cold-called supermarkets and unloaded the inventory. The cash raised bought a bit more time. He changed the bottle, made the gin stronger, and changed the flavor. He added more “botanicals” — herbs, spices and oils. Rolls had anticipated the rebirth of trendy, flavored liquors, especially gins, that has taken place over the past two decades.
Four years later, Plymouth Gin’s sales had risen 1,300%, and Rolls and his backers sold the company for 28 million pounds [$62 million].
Mediocre tonic defeated good gin
But the real story was only just beginning.
While running Plymouth, and experimenting with flavors, Rolls had encountered a major problem: No matter how good you made your gin, it was then being diluted with mediocre tonics. “You couldn’t work out which gin was which,” he recalls. “There were huge differences in the gins, but the tonic was killing them all.” That was in Britain. In April 2000 he did a taste test of the tonics on the market in the U.S. “They were even worse than the ones in the U.K.,” he remembers. “They were far too sweet, had far too little quinine, and they tasted of grapefruit.”
The lesson stuck with him. Following Plymouth, growing numbers of companies were experimenting with higher end and “artisanal” liquors. Yet the mixers — tonic, seltzer, ginger ale and so on — hadn’t changed. They were made by big manufacturers, whose main concern seemed to be cutting costs, so they weren’t undercut by supermarket’s “own label” mixers. In 2003 a young entrepreneur, Tim Warrilow, came to Rolls with the idea to launch a new drinks company. “He wanted to launch a gin. It was my suggestion to say, forget gin, let’s talk about tonic water. I knew all these markets. And I knew there wasn’t a decent tonic.”
And so the idea was born. It took two years, working with specialist flavor companies, to launch the first tonic water. Rolls says he was surprised that one of their hottest early markets was Spain — where a top chef put a “Fevertree” sorbet on his menu. But the product has caught on. There’s been a broader trend among consumers toward more expensive, more “natural” foods and drinks. And liquors have had a big resurgence, after decades of losing ground. Both factors have helped Fevertree.
Today they’re in 74 countries, and they say they sold 406 million of those little bottles last year. The product line now includes more than a dozen drinks, from “Cucumber Tonic Water” to “Sicilian Lemonade,” “Madagascar Cola” and “Smoky Ginger Ale.” They’re all made with premium natural ingredients. Fevertree even offers a “pairing guide” on its website, comparable to a fashionista’s color wheel, to work out which expensive mixer goes best with which expensive liquor.
(Among my discoveries during a tasting at the company’s west London headquarters: Why I much preferred “Ginger Beer,” an old-fashioned nonalcoholic drink that is now making a comeback, to “Ginger Ale.” Apparently they are made in very different ways, which is why the “beer” has a kick).
The “Light” tonic water is made with less sugar — but no artificial sweetener.
Rolls, now 62, has since stepped back to a nonexecutive role, though he remains deputy chairman. In the last few years he’s sold stock for about $280 million. His remaining stake is worth about $240 million at current prices.
The company reorganized its U.S. operations last year, which may have helped boost name recognition among U.S. shoppers. Meanwhile, it remains a surprisingly small company to U.S. eyes. Revenues last year were around $300 million (up 40%), and net income about $100 million (up 36%). The market value is $3.5 billion.
Meanwhile half the sales remain in the U.K. The U.S. accounts for just 15% of sales. And Fevertree’s sales are still tiny compared with the size of the industry, and behemoth rivals such as Coca-Cola KO, +0.41%, PepsiCo PEP, +0.47%, and Keurig Dr Pepper KDP, +0.81%. So there is plenty of room left to run.