Get a Real Goal Then Force the Exit

"The idea was a slightly outrageous and somewhat counter-cultural one. New Zealand was known for great wines, and we’d increased our clout when it came to craft beers, but until SKYY emerged on the scene, other regions – namely Eastern Europe – had dominion over top-shelf spirits. Geoff figured that wine had already opened doors around the world as far as the market for Kiwi-made beverages went. Maybe he could piggyback on that with vodka? He also sensed that cocktail culture – which had thrived in the 1960s – was, by now, due a comeback. Some friends in Wellington had been making a tasty drink with vodka, cranberry, and grapefruit called a ‘Sea Breeze’; they, and many others in their crowd, were less content to just slum it with a pint. The rise of design and fashion was signalling a shift, and vodka could mix easily with almost any flavour, making it the ideal accessory. New Zealand was catching up with the rest of the world. When I met Geoff, he was lacking capital. He’d put a lot into his start-up already, but he needed investment to grow. After his explosive start, he’d found a guy with a chemistry degree and the right gear to make the vodka for him, but he still couldn’t do that to any sort of scale. He was selling just a few cases here and there to friends and the odd local bar. His move to Auckland was an attempt to increase the reach of 42 Below beyond Wellington. He wanted to be able to increase what he was making and improve his margins, but he didn’t yet have really grandiose dreams. ‘I think we could do five hundred cases a year,’ he told me with enthusiasm. It was then that I uttered a response that didn’t seem super significant at the time but would come to be a cornerstone sentiment of my journey from then on. I simply looked at him, a bit disdainfully, and said, ‘Why don’t you get a real goal?’ After most of my career had been spent surrounded by audacious thinkers, who both asked for and expected to see somewhat outrageous outcomes, I had started thinking much bigger too. While for Geoff it started as a passion project, for me it had to make a hell of a lot of money to be worth doing. ‘Are you serious?’ I went on to ask Geoff, not unkindly. ‘Why would we invest in something based on those numbers?’ It might have…"

"when I first outlined my future for 42 Below to Grant, he said I should get a ‘proper goal’. It was this proper goal in listing that took us to a successful exit for all investors, in just under three years from that point."

"In fact, the end of things as we knew them came sooner than we’d thought it would. In a classic case of the tail wagging the dog, we were selling more than our power supplier, Contact Energy, had anticipated and, in the process, becoming a bigger and bigger part of its business. To gain back more control, and add certainty to its revenue streams, Contact put in an offer to buy us. We went to an accounting firm and got the business valued, but inevitably, there was a gap between what we thought it was worth and what Contact believed the value to be. They offered us $26 million. We agreed, but with the addition of a three-year earn-out. We continued to run the company, but Contact owned it. The deal was that if we reached our forecast growth aspirations, then it’d top up the purchase price, paying us more based on how well we did. There were shifts happening in the market, and more money now to funnel into our growth efforts. In our period of peak performance, we were bringing on 1,000 customers a week. We’d built from the original 23 customers to over 150,000, which was close to 10 percent of the market. We exceeded our projected growth targets and achieved better than any of us thought possible."

"Grant then bought me the concept that we should list 42 Below on the New Zealand Stock Exchange (NZX). This was a crazy, audacious idea for such a small, loss-making business. But it was also something neither of us had done before and, in many ways, it was that process that brought us together. We outlined the vision for this little challenger brand from New Zealand so that people would back it. That created much-needed growth capital and the ability to enter offshore markets. There was no better example of ‘brand’ creating value. And there was certainly no better example of the bold vision Grant brings to business, which also creates value."