18 Apr 2018 | 03.50 pm
Lavin Shows Bottle With Vit-Hit Rebrand
Interview with Vit-Hit founder Gary Lavin
18 Apr 2018 | 03.50 pm
Gary Lavin’s soft drinks company was down and nearly out a decade ago but found its second wind by rebranding as Vit-Hit
Vit-Hit founder Gary Lavin might have eschewed college but he’s a graduate of the school of hard knocks. The Rathfarnham entrepreneur turned to business in the mid-1990s when a serious knee injury kicked his burgeoning rugby career into touch. Lavin (46) regrouped by importing and reselling health supplements, before creating a range of low-sugar, fortified drinks in 2000.
The pivot to drinks was initially a disaster, and business had all but dried up by the time the 2008 recession arrived. However, through a combination of determination, a new business partner hire and a complete rebrand, Lavin turned the company’s fortunes around.
Vit-Hit drinks are now sold in 15 countries and the business had revenue of around €8m in 2017, and Lavin estimates that 15 million bottles of Vit-Hit will be sold globally this year. He adds that it has been a learning curve to get the venture where it is now. “One of my best strengths now is that I know my weaknesses. I also realise that failure is not such a bad thing – once you learn from it.”
Vit-Hit is a soft drink combination of water, fruit juice, tea extract and vitamins. The health angle is all the rage now, but it wasn’t when Lavin started out. The entrepreneurial spirit is in the DNA: his father David Lavin was a successful publican, owning the Orchard Inn in Rathfarnham and the Stillorgan Orchard. Mum Jackie Lavin is the well-known former model, entrepreneur and TV personality.
Lavin says he never had any intention of going to college after school. “I felt that I would not have pushed myself out into the real world if I went to college. Instead, I did a bit of travelling before ending up playing professional rugby.”
Lavin signed for Harlequins in England but a pre-season knee injury in 1995 put paid to the 24-year-old’s career before it even started. To make ends meet, he started buying health supplements and selling them to friends. “I was playing around with vitamin products, buying from the US and rebranding them,” he recalls. “But I could never swallow vitamin capsules myself, so that was one reason for shifting to vitamin drinks.
“I also noticed people in gyms exercising to lose weight and then drinking a bottle of high-sugar ‘sports’ drinks. I thought that there had to be a better way to deliver nutrition without the high sugar levels. That was a kind of ‘Aha!’ moment for me.”
Vitz Drinks Ltd was established in May 2000, shortly after Lavin turned 29. “Because my parents were entrepreneurs, it wasn’t a big decision for me to form a business. I never thought of barriers, I had done no research and I hadn’t worked for any large companies. In hindsight, that was probably a mistake. Done again, I would have worked for a large company and learned the system before going out on my own. But I was young and foolish and thought I could take on the world.”
Lavin researched some flavour combinations and turned to Shannon Minerals in Limerick to make his first drinks, branded as ‘Vitz’. Sales were slow and by July 2008 Vitz Drinks Ltd had accumulated losses of €790,000 and just €233 cash in hand. Keeping the wolf from the door was long-term loan funding of €620,000.
Lavin knew he’d have to completely overhaul the business, if not dismantle Vitz altogether. “I had presumed that people would understand that Vitz was short for vitamins, but research told us that consumers assumed the business was German. I lost a lot of money making a product that wasn’t moving off the shelf.”
Lavin turned to Ian O’Rourke for help. O’Rourke (39) had worked on international sales for Pat Cooney’s drinks distributor, Gleeson Group, and he joined Vitz Drinks as a director and shareholder in 2009. The pair agreed to remodel the brand and shift production from Limerick to the UK.
“Our brand back then looked like something produced on a bad computer,” Lavin admits. “I was trying to relay multiple messages on the bottle labels and people just didn’t get it. We were also using a stock bottle with a small mouth on it and the product didn’t have a premium feel.
“If your branding and distribution isn’t right, you’re dead in the water,” Lavin adds. “We still sell two flavours that were in the range when we launched as Vitz. They sell in their millions now but we couldn’t sell ten bottles a year when the packaging wasn’t right.”
Hitting The Road
The Vitz brand was dumped in favour of Vit-Hit. Lavin engaged David Fitz Design to fashion an appealing label, with a white background and minimalist aesthetic. Lavin had made all his sales reps redundant because he hadn’t paid himself for over a year. He hit the road and claims to have called to 3,500 stores around Ireland. “I was in the car 24/7 – it’s amazing how desperation can be a great sales driver. To this day I still prefer working from the car rather than being in the office.”
Mike Hogan, the celebrated magazine publisher, used to trumpet that ‘pioneers get shot and settlers make the money’. That was nearly the case with Vitz Drinks – it was simply ahead of his time. By the turn of the decade though, consumers were paying more attention to what they were drinking for refreshment.
Lavin and O’Rourke negotiated a distribution deal with Gleeson Group that landed the brand in Spar and other multiples. Pallas Foods took on Vit-Hit for its foodservice customers. With a solid toe-hold in the domestic market, Vitz Drinks could now look overseas.
In 2011 Lavin relocated to the UK to badger the multiples. Tesco listed Vit-Hit in 500 stores but it was dying a death on the dry shelves. So he drove around London on a moped, persuading Tesco Express store managers to stock the product in their fridges. That made all the difference – Vit-Hit was something shoppers picked up with their lunchtime sandwich. Boots took on Vit-Hit in 2015 and Sainsbury’s, Superdrug and WH Smith followed in 2016.
Vit-Hit began working with niche drinks distributor Richmond Marketing to target more overseas markets. “To be honest, we expanded on the basis of who would take us, but the brand is strong now so we can choose what distributors to work with,” says Lavin. “You have to do trade shows and overspend on your stand so that potential buyers see your product.”
For the moment, Vit-Hit has bypassed France and Germany, but the brand has gained traction in Scandinavia and Iceland, and has promising retail chain deals in Spain and South Africa. In 2017, Vitz Drinks agreed a distribution deal with Honickman Group in New Jersey. “You have to take each state in the US like a separate country,” Lavin observes. “We’re not in ‘the US’ as such – we’re in New Jersey, Washington and Virginia.”
In tandem with sales growth, the financials have improved. Vitz Drinks Ltd booked a net profit of €260,000 in the year to July 2016 and the two directors shared remuneration of €647,000. “I’d never tell anyone to start a company unless you can pay yourself a wage,” says Lavin. “I was literally living hand-to-mouth when I started Vitz and Ian didn’t take a wage for a year when he joined as director.”
Growth for Vit-Hit has not required much loan finance – bank debt halved to €33,000 in 2015/16 – yet Lavin is exercised about the lending landscape in Ireland. “It was terrible when I started the business and it still is. Our turnover this year will be about €10m but when I recently went to an Irish bank looking for a €200,000 stocking loan, I was turned down. What a joke. If an up-and-coming company like ours can’t source bank finance, I don’t know what chance younger entrepreneurs have – it’s a disgraceful situation.
Lavin and O’Rourke are fans of peer-to-peer lending and tapped Linked Finance for €50,000 in 2015. “Banks wouldn’t look at us, so we tried Linked Finance and raised the money in 36 hours,” Lavin recalls. “P2P lending is a viable alternative to bank funding now.”
No State Support
State agencies have also been of little help to Vitz Drinks, Lavin complains. “I got zero help from Enterprise Ireland. Bord Bia people are nice but their hands are tied – they can only support entrepreneurs who are manufacturing in Ireland. This has to change. We employ 11 people in Ireland and we are a food business, but the facilities are not available here for me to reliably manufacture our products.”
In Lavin’s view, the government should reduce taxation for startup entrepreneurs. “Give them a boost so that they pay less PAYE, PRSI etc. Lack of protection is also a big issue. If you are employed and lose your job you can draw the dole. If you work for yourself, you’re basically out on your ear if your company goes bust. There’s no safety net.”
Other issues on Lavin’s mind are the impending sugar tax and Brexit, and he sees business opportunities in both. “We’ve built our brand ethos on the back of being a low-sugar product. As for Brexit, it’s not a concern for us, as we can produce in any country we want to.
“We talked to our UK producer recently and told them that if Brexit happens we might have to move two-thirds of our production to Europe. They told me they would have to lay off eight people if that happened. We are a very small company in the context of Britain, but that shows you what’s at stake with Brexit.”