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Non-alcoholic beverages company Sans Drinks has become an object lesson in the benefits of voluntary administration, says Jirsch Sutherland.
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How a wobbly drinks brand dodged last orders
30 August 2023
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Non-alcoholic wine and spirit purveyor Sans Drinks has survived a near-death experience to become an object lesson in the benefits of voluntary administration, according to insolvency specialist Jirsch Sutherland.
The business, begun in 2020 by Nourished Life founder Irene Falcone, got off to a dream start with booming online demand for its non-alcoholic beverages, Jirsch Sutherland partner Andrew Spring said.
“Early-stage growth and market awareness of the business was strong, with the business generating over $6 million in sales revenue,” he said. “The business expanded into developing its own brands and also opened a physical retail store.”
But he said sales growth slowed this year as consumers dialled back discretionary spending and the business ran short of cash.
“The business of the company had been funded by the director and via non-traditional financing options,” Mr Spring said. “The capital cost of developing new products and brands, along with the setup costs of the physical retail store, had eroded the working capital of the business.”
“This exacerbated any other challenges the business was facing due to supply chain or logistical challenges. At the time of Jirsch Sutherland’s appointment, the financial position was dire and the business would have been unable to continue to trade without the financial support of the director.”
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After entering voluntary administration in July, Sans Drinks now has a second lease on life after being sold to online retailer Just Wines. Creditors agreed to a deed of company arrangement last week which will mean secured creditors and employees get paid in full while unsecured creditors receive about 48c in the dollar.
Mr Spring said it showed how voluntary administration could work to rescue a business.
“The voluntary administration process moves quickly, which enables administrators to focus on the best solution to preserve value for creditors,” he said.
“As an independent party, an administrator can come in and assess the business and determine the best path out. It takes the pressure off the directors and gives the business the best chance of survival.
“The business had a large online presence and the public nature of the voluntary administration process provided a platform for prospective trade purchasers to consider the opportunity. We sought to engage and accelerate negotiations with interested parties.”
“The deficiency estimated at the beginning of the VA – if the business had ceased to trade – showed that only priority creditors would be paid in full, with the secured creditor only receiving a small portion of the amount owed and unsecured creditors not being paid anything.”
“With Sans Drinks, the VA has resulted in the strengthening of the business through a trade sale and provided for a significantly improved outcome for all creditors, as opposed to if the business had been liquidated.”
Ms Falcone said the decision to enter voluntary administration was difficult but she was pleased with the result, which gave her an ongoing role in Sans Drinks marketing and strategy.
“I’m incredibly grateful to the team at Jirsch Sutherland, who really guided me every step of the way,” she said. “I’m thrilled that Sans Drinks is part of the Just Wines family and I’m looking forward to the next chapter.”
Mr Spring said buyers in an insolvency sale had limited opportunities for due diligence and this was reflected in the ultimate sale price. A purchaser had to be clear on the value of the opportunity and accept the lack of recourse post-completion.
Just Wines’ founder Nitesh Bhatia had no doubt Sans Drinks was an excellent addition to its platform.
“There are great synergies between the two brands and we’re looking forward to working with Irene to take Sans Drinks to the next level,” Mr Bhatia.
“This is a great fit: Irene has vast experience in marketing and promotion, and Just Wines has a strong track record in administration, operations, and managing the supply chain.
“And as the non-alcoholic sector is a real growth area, this will enable Sans Drinks, which is already the number one retailer in this segment, to grow at a much faster pace.”
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