Another first for Charlie's

Last updated 00:00 01/01/2009

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Juice and soft drinks company Charlie's Group had a very upbeat message for shareholders at its annual meeting last month in that it expects sales to double between now and 2010.

The company, which listed in July 2005 through the shell of former unsuccessful mining prospector-cum-dot.com wreck Spectrum Resources, failed to meet its forecast of a $1 million profit for the year ended June.

But the reason for that is obvious: the company also grew much faster than forecast too. Rather than the forecast $16.2 million sales for the year, it reported $24.1 million in sales.

The $33,000 net profit it reported has the distinction of being the first annual net profit in the company's long history in its various guises since its 1983 float.

Charlie's doesn't seem to be wasting any time about driving growth. It has recently paid $A681,230 ($776,773) for Australian manufacturing assets and a longterm fruit supply agreement. Expanding the manufacturing plant will take the total cost to about $A2 million.

While the company was debt-free at balance date, chairman Ted van Arkel told the meeting the company is using only $3.4 million of a $6.9 million banking facility, suggesting the company has further acquisitions in mind.

Managing director Stefan Lepionka, co-founder with former All Black Marc Ellis, will only say that the company is always looking at opportunities but most of them aren't suitable.

"Acquisitions have to make absolute sense. We've looked at a lot that don't make sense."

Lepionka says the Australian purchase is "a transformational acquisition" for the company.

Previously, manufacturing of the Charlie's brand had been done in Melbourne. When it bought the Phoenix Organics business for $10 million in late 2005, the company acquired its own bottling plant in Henderson and it started extending its capacity and moving bottling of the Charlie's brand in-house.

The Australian bottling plant now allows it to launch the Charlie's brand in Australia Lepionka says that having third-party contract bottlers had been an obstacle to innovation in both product and packaging which this purchase overcomes. Doing its own bottling also means higher profit margins the company estimates it will achieve a 10% improvement in its gross margin.

The company is also upping its marketing spend from $1 million to $3 million this year.

The company refers to its brands as being fashion items as well as emphasising their natural ingredients through the Charlie's slogan "not from concentrate" and the Phoenix claim of being 100% organic. "Don't drink science you don't know where it's been," says one of its advertising posters.

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The company has also been busy launching new product ranges. It launched its Charlie's Old Fashioned Quenchers, fruit-based softdrinks, in May and followed by a new Phoenix sparkling range in lemongrass, lime blossom and elderflower flavours, and extended its Phoenix Chai range to three new flavours, lemon toddy, berry well and coco love. The Chai products are concentrates used by baristas in cafes to make hot Chai beverages.

In a market dominated by multinationals Coca-Cola Amatil and the Danone-owned Frucor, Charlie's is claiming impressive gains. Lepionka says it had a 9% value share of juices sold in supermarkets at June 30 compared to the 16.6% of Coca-Cola's juice brands.

Lepionka claims that while Charlie's market share is growing strongly, Coca-Cola's is in decline, though Coca-Cola disputes that.

So, are the big boys just lying down and letting Charlie's take market share from them?

"They're absolutely not!" Lepionka says, complaining about underhand skulduggery including changing its Keri labelling in September to copy the Charlie's label and Coca-Cola reps removing price labels from Charlie's products on supermarket shelves.

Because it takes about two weeks to replace those price labels, "we miss out on two weeks of sales because these guys are playing dirty tricks," he says.

Coca-Cola Amatil's New Zealand managing director George Adams dismisses such allegations.

"At Coca-Cola Amatil we take our responsibility to trade fairly very seriously and we would have been happy to look into the alleged incident should we have been made aware of it through the appropriate channels," Adams says.

Lepionka declined to provide details, saying that getting down to that level of detail is petty.

Adams also denies copying the Charlie's label.

 

  • Jenny Ruth is a freelance financial journalist and a columnist for the Independent Financial Review.

- Sunday Star Times

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