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Contract Drinks Company Bottles Success
With sales linked to seasonality, Norbev Ltd. needed to think of other ways to increase year-round profitability, and find a bank willing to invest the capital
- Company turnover: £40 million
- Sector: Manufacturing
- Owner and Managing Director James Harkness sold a part of the original family soft drinks business in 1995, reinventing the company as Norbev, a contract bottler working for major brands.
- Having invested in a new production line in 2010 Norbev’s board wanted to focus on improving the management team and creating a growth plan but it struggled to find the right financial support.
- Santander got to know the business and the team, and offered a bespoke finance package that provided Norbev with the funding it needed to trade and grow.
- Santander wanted to provide a long-term solution and was determined to examine the company’s business drivers and cashflow situation.
- The Santander funding package has helped restore the company’s cashflow, smoothing out seasonal fluctuations. Norbev is now set to increase output as part of its growth plan.
Based in Ballymena, County Antrim, Norbev Ltd. is a contract bottling company devoted to soft drinks and mineral water. The business dates back to 1919, before it became the Braid Mineral Water Company, drew water from local aquifers and delivered its own range of drinks door-to-door. You can still see the original wells on site, but just about everything else about the company has changed, especially the business model. Today, Norbev works on a contractual basis for some of the biggest names in the food and drinks industry, bottling well-known brands including Lucozade and Ribena, while the company’s new management team is currently pressing ahead with plans to increase output and profitability.
A new direction
The company took a new direction in 1995. “The original door-to-door delivery model was no longer working, so I made the decision to sell it,” says owner and Managing Director James Harkness. The deal transferred ownership of the Braid Drinks range along with its customer-base, and left James with a factory. Seeking a new direction, James signed a deal with Coca-Cola to produce drinks in 500ml bottles and thus Norbev Ltd. was born.
The road ahead wasn’t entirely smooth. When Coca-Cola moved production in-house, Norbev filled the resulting gap by securing contracts from several other drinks manufacturers. Investment was needed to improve the bottling plant, but the required revenue suffered from seasonal fluctuations and a degree of customer churn. Management was another issue. “One thing I really wanted to do was build a strong management team around myself,” says James. “But that didn’t really work out. In the end it always seemed to be me making the decisions.”
Room for improvement
Despite a strong underlying business and orders from major drinks companies, Norbev still wasn’t fulfilling its potential. “We had the infrastructure but we needed to become profitable,” says James. He therefore set about revamping the board, appointing Alan McClure as Chairman and Ciaran Doherty as Managing Director. “I was blown away by what I saw at Norbev, but I also saw there was room for real improvement,” says Ciaran.
The new board soon agreed on a growth plan. It included measures to improve morale and motivation. As Alan McClure says, “Without good people you don’t have a good business.” Strategically, the company wanted to focus on profitable, long-term relationships, such as a deal with GSK to produce bottles for Ribena, a drink less affected by seasonal sales. Norbev also hoped to diversify through own-brand products, taking full advantage of an efficient automated factory with the capacity to produce 150 million bottles a year. But such ambitions faced a major obstacle.
Despite having credit facilities from four different lenders, Norbev was still struggling to find support. “Everyone seemed to be very negative,” says Managing Director James. Discussions then began with Santander, with a view to undertaking a partial refinancing. “Initially, we were talking about finance that would provide a quick fix,” recalls Santander Relationship Director Brendan Cunnane. “But we wanted to look to the longer term and therefore proposed a single bank solution.”
Clive Naylor, Santander's Regional Asset and Invoice Finance Director, Northern Ireland, Northern England and Scotland Region, believes the key to a successful resolution lies in Santander’s willingness to spend time appreciating and quantifying client businesses. “I think we asked questions that other banks didn’t ask,” he says. “The first thing we had to do was understand the management and what motivated them. Then we had to look at the business drivers and we had to fully understand the cash situation.”
This hands-on approach gave Santander the confidence to offer a bespoke £11.5million package that now provides Norbev with the working capital it needs to trade successfully, as well as enable the company to borrow against assets for investment purposes. The new funding has also done away with day-to-day worries about cashflow, allowing the company’s management to focus on growing the business.
It’s a flexible package that takes into account monthly variations in revenue, and provides a range of working solutions including invoice finance, asset finance, an overdraft, and a term loan for working finance. “The deal has given us the headroom we need to move forward,” says Managing Director James. “It’s a relationship,” adds Brendan from Santander. “We see ourselves working with Norbev in the longer term, helping them with the finance they need to grow.”
The greater good
The deal also potentially benefits other local businesses. Norbev remains a major employer in Ballymena, and James has always tried to use local hauliers and suppliers. The involvement in negotiations of the regional business development agency Invest Northern Ireland confirms the company’s importance within the local economy.
With the required finance in place, Norbev Ltd. now has the ability to deliver on plans for higher output and profits, and can finally look towards a future that matches the company’s history of success.
All lending is subject to status.