Launching their own soft drinks businesses helped Hannah Fisher and Craig Strachan to spot gaps in the market not only for contract bottling but also for product development. Now, they’re joining forces to open The Start-Up Drinks Lab, which will help other entrepreneurs to follow in their footsteps.
Like all the best entrepreneurs’ ideas, the concept for The Start-Up Drinks Lab came from Hannah Fisher and Craig Strachan’s experiences of setting up their own businesses. Both had a passion for creating soft drinks, both had a desire to work for themselves – but both came up against the same challenges when it came to manufacturing.
Strachan launched Glasgow-based Foal Drinks in April 2016, picking an acronym of its first flavour – “fresh orange and lemonade” – as the name of his business. His products were initially manufactured by a contractor in London, but Strachan wasn’t pleased with the poor level of customer service and so switched to using a bottling line at a brewery near Birmingham.
Despite getting on well with the brewer, his ambition has always been to move at least part of his production to Scotland. Yet Strachan – who trained as a chartered accountant at PwC before cutting his teeth in business as a group and operational accountant at car dealer Arnold Clark – couldn’t find a contract manufacturer and bottler that could make the drinks in the right quantities to suit his business model.
Fisher encountered the same issues when she was beginning to set up Tongue in Peat in 2016. She came up with the concept for her products during her 11 years working in marketing and innovation within the drinks industry at brewer Tennent’s and distillers Morrison Bowmore and Beam Suntory.
“I wanted to produce my drinks in Scotland, but I soon realised there was no-one who could help me,” she explains. “I realised that I’d have to solve this more basic and wide-spread problem about a lack of contract bottling before I could launch my own range.”
And the key to solving that problem has been collaboration. Both Fisher and Strachan were participants in Entrepreneurial Spark’s business start-up programme at its incubation centre in Glasgow – or “chiclets” at its “hatchery” in E-Spark’s unique lingo.
They were each being mentored by Helen Glass, a well-known consultant in the Scottish food and drink industry. Glass encouraged many of the start-ups she was mentoring to consider working together and told them about the collaboration prize being offered by Cooperative Development Scotland (CDS), part of Scottish Enterprise, which was designed to encourage companies to team-up to tackle common obstacles.
Fisher and Strachan entered the contest with their concept for The Start-Up Drinks Lab, a business that could support clients at each stage of the process from coming up with the idea and ingredients for a soft drink all the way through to manufacturing the liquid and bottling it. They won one of six prizes of £5,000 in cash and £5,000 in business support from Scottish Enterprise.
“We won the prize in March 2017 and, since then, we’ve both been working full-time on the business to develop the idea and raise funding,” explains Strachan. “Winning the prize validated our idea.
“Scottish Enterprise had recognised the same gap in the market as us. We’re receiving around one inquiry a week, which proves what the formal market research told us about the demand for these services.”
Those services will begin in the company’s “product development kitchen”, the laboratory at the heart of the business. Customers with an idea for a soft drink will be able to use the firm’s library of ingredients and its specialist equipment to create their recipes, all under the watchful eye of a food scientist, who can also offer advice as and when needed.
Once the recipe is completed, the company will also manufacture the soda and bottle it for clients, storing small quantities if needed too. The next step is distribution, with The Start-Up Drinks Lab offering services that cover the whole of Europe, as well as sales through its own website.
The company is also in discussion with partners in the on and off trade in the UK and abroad to help its clients reach a broader customer base. “We’re doing this at the right time because a lot of bars and restaurants realise that they are falling behind when it comes to craft soda compared to their offerings in craft beers, ciders and spirits,” Fisher says.
The Start-Up Drinks Lab has secured premises at Kelburn business park in Port Glasgow and is renting units from Riverside Inverclyde, the urban regeneration company created by Inverclyde Council and Scottish Enterprise and which has a partnership with port owner Peel Holdings to redevelop former industrial sites.
“We looked at locations within five council areas and Riverside Inverclyde was brilliant,” says Strachan. “The regeneration company wants to put Inverclyde on the map for food and drink companies. It’s offering a lot of support to people who want to set up their businesses here.
“We’ve been very fortunate in that we’ve received a lot of free-of-charge support, both from people working in the food and drink industry and in the wider business community. We probably have five or six advisors between us.”
Fisher and Strachan are due to move into their premises in April and aim to have the business open for orders by mid-summer. Initially, the company will employ a team of six, but its headcount is expected to rise to 11 within three years.
“Our client base has already grown to include larger companies as well as start-ups,” Fisher points out. “After we won the collaboration prize, we were contacted by larger businesses that had their own capacity to handle large quantities of liquid but weren’t able to bottle on a smaller scale for their craft products.
“We’ve had lots of inquiries from Scotland, but also from further afield. About 40% of our clients are based in London and we’ve even been approached by potential customers as far away as Belgium and Canada.
“We explained to the Canadian client that the transport costs would be high, but she said it would still likely be cheaper to have her drinks made here in Scotland in the smaller quantities she required, despite the shipping cost. She also liked our ethos – we’re a small business helping other small craft businesses.”
A typical bottling run at The Start-Up Drinks Lab will be around 500 litres, which will make the facility very attractive to craft drinks makers, which currently have to contend with 20,000-litre batches at other bottlers. That can equate to around 100,000 bottles of mixers, which – if it only has a 12-month shelf life – can be difficult for small companies to shift.
“Some of our customers will choose to opt-in to use us for the manufacturing and bottling parts of their production process,” she adds. “Others will approach us with an initial idea and then we can help them from start to finish through the process of creating the recipe and then making, bottling and distributing their drink.”
In the run-up to Christmas, Fisher and Strachan were busy speaking to five potential investors, including a number of syndicates and high-net-worth individuals. In the end, they decided to accept funding from a slightly more unusual source – convenience store chain Scotmid, or the “Scottish Midland Co-operative Society” to give the organisation its formal title.
Scotmid has invested a six-figure sum in the business. Chief executive John Brodie and chief financial officer John Dalley have offered advice to Fisher and Strachan. “They are happy for us to go to them with questions, but they feel strongly about ensuring Craig and I have the autonomy to run the company,” says Fisher. “Scotmid wants to expand their business into complementary areas that offer diversification from their existing operations.
“As a retailer with a wide drinks portfolio, this is a natural move for them. We may even develop and bottle some bespoke products for them.”
As well as working with Scotmid, Strachan and Fisher have moved into Strathclyde Entrepreneurial Network’s (SEN’s) incubator centre. SEN is one of the ways in which the University of Strathclyde helps students and graduates to develop their ideas for businesses.
Fisher studied marketing and finance at Strathclyde, while Strachan holds a degree in accounting and finance from the university. Both live in Glasgow and so were excited to find a suitable facility right on their doorstep in Inverclyde.
It’s not all work and no fun though – the two entrepreneurs are already looking for ways to diversify their new business. “We think the product development kitchen will be utilised about 20% of the time by clients, so that gives us opportunities to bring in other types of customers,” says Fisher.
“Lots of cruise ships dock at Greenock and then their passengers are bussed off to distilleries in other parts of Scotland. It would be great to keep some of those tourists in Inverclyde so that they can make their own soft drink in a day with us.
“We’re also looking at using the kitchen for corporate away days, team-building exercises and perhaps even alternative hen nights. There are lots of great opportunities for us.”
Although the focus is very firmly on craft soda, The Start-Up Drinks Lab has already been approached by distillers that want to create ready-to-drink (RTD) products by blending their spirits with mixers. “We’re not against alcohol – far from it,” laughs Strachan.
“Once the craft soda operation is up-and-running, we’ll be able to look at other opportunities too, whether that’s packaging RTD products or even bottling for craft breweries.”