Once hailed as one of the most successful venues to ever grace the Dragons’ Den studio, The Craft Gin Club is now staring down the barrel of management, having warned its lenders that the business cannot continue without a sweeping financial restructuring that will deprive bondholders of the free cash they were promised.
The registered drinks specialist, which ships small-batch gins to homes the length and breadth of the country, has called on restructuring staff at Leonard Curtis to engineer a Company Voluntary Arrangement (CVA). Under the proposals, around £4.2 million of debt would be written off to replace 18.3 per cent of the company’s equity, according to documents distributed to lenders.
If the plan fails to garner support from 75 percent of voting creditors, directors have made it clear that administration is the most likely outcome, something that would leave bondholders empty-handed. The board, according to the documents, “came to the conclusion that the company is insolvent and unable to pay its debts on time”.
The conversion is a punitive approach to business that, just a few years ago, was raised as a child of Britain’s craft drinks revival. Founded in 2015 by Jon Hulme and John Burke, the Craft Gin Club has been riding a wave that has seen the number of UK distilleries multiply at an astonishing rate. The pair left the BBC show in 2016 for £75,000 from former Red Hot World Buffet boss Sarah Willingham for a 12.5 per cent stake.
What followed was a textbook case for a while. The pandemic has shown a certain benefit: as the country is confined to its sofas, the consumption of drinks has increased, and the Craft Gin Club has been among the most ardent beneficiaries. Plans for a stock market flotation were even made in 2021, before being quietly shelved.
The fundraising machine, however, never stopped churning. The 2019 round brought in £1.5 million, giving investors a choice between ordinary cash bonds carrying 8 per cent annual interest or the now infamous “gin bonds”, which entitle holders to regular interest free returns. A fee of £1,666 secured four boxes a year; £2,500 bought six; £5,000 generated monthly delivery; and those who part with more than £10,000 get a Black Card which promises VIP treatment, free delivery, double loyalty points and an annual bottle of premium gin. A second bond round in 2022 raised £3.1 million, and an equity crowdfunding push the following year added another £700,000 to the kitty.
It is those gin bonds that now sit at the heart of bondholder discontent. A CVA would suddenly freeze profits, leaving long-time supporters of the business with little equity in the company they financed expecting to receive a regular tipple. “I don’t really want equity. I’d rather keep my gin,” one bondholder told the Sunday Times, suggesting that the current payout does not do justice to those who put their money on the line and that directors should contribute more of their assets.
The statistics tell a sobering story. Accounts for the year to 31 January 2025 show that profits fell by 17 per cent to £15.8 million. Pre-tax losses narrowed, from £1.3 million to £698,730, but Hulme says the wider decline was due to a “challenging macroeconomic climate and a growing gin market”.
Compounding the trade winds was a long-running dispute with HM Revenue & Customs, which in 2023 issued a £5.2 million VAT assessment on the basis that subscription boxes containing items with mixed VAT rates had been incorrectly calculated. The Craft Gin Club eventually won the appeal, but the two-year suspension proved, in the company’s words, a “major obstacle” to obtaining new debt or equity, an obstacle where it appears the balance sheet has never been completely restored.
If the debt-equity swap is passed, management is considering a strategic pivot away from the spirits that make up the product, with the rum and ready-to-drink categories positioned as new growth engines. The directors said they were “confident that the Arts Group will be well positioned to achieve a return to sustainable growth” once it is freed from its debts.
The wide rear, however, will give few commercial reasons to be happy. Britons are drinking less than at any time on record, and the squeeze on living costs is having some effect on premium spirits, which is the category where the Craft Gin Club has put its colours. The growth that has raised the number of food processing facilities has been highlighted, in many parts, given a very sobering calculation method.
The Craft Gin Club, Sarah Willingham and Leonard Curtis have been contacted for comment.
