HS: How’s business been since Funkin was acquired by AG Barr?
AK: Business has been very strong. We’ve seen double-digit growth for many years now. Funkin was +27% year-on-year to the end of January 17. Our growth has not skipped a beat. Cocktails have grown in popularity, not just out of the high street bars but into casual dining, regional operations – there’s now consumer demand.
HS: How is the UK market performing? Is saturation point something you’re preparing for?
AK: We’re 16 years in but a long way from maturity. The UK is our top market – our core business. Cocktails are increasingly big among Millennials – they are a core part of their drinking out repertoires. We are still seeing very strong growth in the UK. There’s a large proportion of the market still to be converted and that’s a big opportunity. One of the challenges is how to cope with the growth of cocktails. Wet sales are growing faster than food sales - that’s for the first time in a few years – and only 6.3% of spirits sales are from cocktails. There’s a long way to go in the UK, a lot of unchartered territory particularly with food operators. Traditional pubs and bars are now making a feature of cocktails - 2-4 years ago they wouldn’t have thought about it. The range of cocktails will increase too. But the growth in venues making cocktails brings another challenge: the time it takes to make a cocktail, which is where Funkin comes in. At the top end, there’s continued innovation as a driver.
HS: You recently signed a distribution deal with De Kuyper in the Netherlands. Has international expansion accelerated in recent years?
AK: We’ve had penetration across Europe and in America. We’ve seen that [the trend is for] things to go east. We’ve recently employed our first person in Spain. The US and France are key markets and Greece and Poland are growing very strongly. Similarly in Scandinavia, where there is a premium spirit market. Also countries such as Poland and Bulgaria, where the economies are growing and there’s an affluent new consumer base. Some of our early advocates in export markets have trained in the UK, which helps us. We’d like to conquer the world country by country. Recently we’ve entered Bulgaria, Belgium and French Polynesia.
America is our most mature export market. Cocktails are in all areas of the consumer repertoire in spite of their licensing laws. You can walk into a supermarket and there are several bays of cocktail mixers. Diageo says 20% of spirits sales in the US are from cocktails. So that gives us a lot of optimism.
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HS: In mature markets where the craft cocktail movement has taken hold, are you struggling to maintain listings in high-end bars?
AK: It’s horses for courses. If you’re’ going to spend £12 on a cocktail, the bartender wants to be the Michelin chef - they won’t be talking about what they’re using. The ingredients quite possibly could be one of ours that they’ve twisted. Would we like the visibility? Yes, I’d like to have the visibility but we understand they want to achieve something different. We spend a lot of time, effort and money to deliver what they want. The problem is in the democratisation. When you are in a large proportion of bars and we are on a journey to more consumers and occasions. The rub for Funkin is that we are premium, but they can’t have our badge all over our bar. We’re not apologetic about that. It’s the price of popularity.
But we are in top bars often in different forms – often our small batch syrups and purees and we have launched a range of shrubs. The very high end is fertile for getting new ideas – we are working with great bartenders – which we can democratise and take to multiple operators. It’s complementary. If you take our small batch early grey tea – we solved a problem of consistency for bartenders.
HS: How are off-trade sales progressing?
AK: It’s 90% on-trade to 10% off-trade. What we know is that consumers are dinking cocktails at home – there’s an opportunity. Consumers in the UK see the downside of using lots of ingredients and not having the paraphernalia, which is very different from the US. People don’t have simple syrup. So we’ve developed a pack for the consumer - you add spirit and ice. What we’re trying to do is give the consumer a perfectly balanced cocktail. It’s a small part of the business but one we are focused on growing. We are constantly looking at the high end and working with bartenders, borrowing ideas, democratising them and making them more manageable.
