Hydrate Drinks Group leaves shareholders angry and creditors £8.5m out of pocket

M&S and Lidl drinks supplier Hydrate Drinks Group owed creditors around £8.5m, including almost £3m to HMRC, when its directors bought the business in a pre-pack administration in December, a report into the collapse has revealed.

Hydrate had burnt through more than £19m across numerous funding rounds dating back to 2020, including significant sums from thousands of crowd investors on the Republic (previously Seedrs) platform.

But the assets, which included a Rolls-Royce Spectre, were sold for £180k on 11 December to Hydrate founder Ian Minton and chairman David Salkeld after they set up a newly incorporated company, Sky Drinks Group, in November 2025. Recovery firm Begbies Traynor had been appointed as administrator of Hydrate a few days earlier.

Crowdfunding investors have since raised a raft of concerns in a letter – signed by 121 shareholders representing £1.1m investment – sent to Begbies, highlighting an alleged lack of transparency in the years leading up to the administration. They also requested more information on the adequacy of a marketing process run to explore a potential pre-pack deal and questioned the valuation of the assets sold to Sky Drinks.

The administrators’ proposals documents revealed a breakdown of the £180k paid in the pre-pack sale, with the majority going towards the licence fee to occupy the trading premises in Liverpool. Of the rest, £40k was for goodwill and IP, £20k for office and computer equipment, £1 for supply contracts to the likes of M&S, Asda, Lidl and Aldi and £1 for the right to acquire a Rolls-Royce Spectre belonging to the business.

Prices for the luxury vehicle typically start at £330k, with Hydrate entering a finance agreement with Haydock Finance to purchase the Rolls-Royce as an asset.

According to Begbies, the car had a book value of £317k and Haydock Finance, which is listed as an unsecured creditor, is still owed £324k.

Minton told The Grocer he personally funded the vehicle and guaranteed the financing with the initial deposit paid from his own funds and the monthly finance payment coming out of his wages via a salary sacrifice arrangement.

“The vehicle is in negative equity, and I remain personally liable to the finance company,” Minton said. “At no stage did Hydrate Drinks Group bear any cash cost or ongoing financial burden in relation to the vehicle. As the outstanding finance exceeded the vehicle’s value, there was no recoverable value for the estate, which is why the administrators had no commercial interest in it as part of the pre-pack process.”

Hydrate’s Skinny origin story

Hydrate was originally launched by Minton and business partner Steve Wilkinson as Skinny Tonic in 2018, claiming at the time to be the first tonic water in the UK without sugar or calories. It also made branded and own-label sodas, clean energy drinks, sugar-free children’s drinks, and naturally sweetened flavoured waters.

Skinny initially raised £1.8m at a £5.7m valuation in early 2020 on the Seedrs crowdfunding platform. Two more rounds followed in late 2020 and early 2021, bringing in another £3.9m from a mix of private and crowd investors.

The company changed its name to Happy Drinks Group ahead of its biggest funding round in April 2022 to support a major upgrade to its factory in Liverpool. It raised £5.4m, including from 899 backers on Seedrs, at a valuation of £48m. The founders told The Times ahead of the raise they aimed to float the business on the stock market within 18 months.

An investment deck sent out in late 2021 to support the raise forecast group revenues would reach £32m in 2022 before catapulting to £102.8m in 2023 and £188m in 2024, with a net profit of £68.5m in the final year.

However, sales in 2024 totalled just £7.1m, according to company accounts.

In its report, Begbies said the business experienced periods of strong revenue growth but profitability was inconsistent due to manufacturing inefficiencies, equipment reliability issues, high fixed costs and delays and under-delivery penalties. It added losses were funded by increased director loans, extended creditor terms, asset finance and equity rounds.

Undisclosed shareholder loans

Happy Drinks raised more money in early 2023, agreeing loans of £2.4m with US-based Peter Carter and Simon Kirkby (£1.2m each) on 10 April 2023.

However, the group failed to disclose the loans to its crowd shareholders and did not officially register the lending at Companies House for another 14 months.

In the interim, Happy Drinks kicked off yet another funding round with Seedrs in September 2023, raising £3.4m at a £64m valuation. It did not inform either potential investors or current backers of the loans from Carter and Kirkby. In the campaign, the business said it had one outstanding loan of £1.6m from Close Brothers in the form of a hire purchase agreement to fund a canning line.

Minton acknowledged shareholder concerns regarding financial transparency and accountability in a July 2024 post on the Republic (which had rebranded that year from Seedrs following a takeover deal finalised in 2022) message board. He said the loans were not disclosed because of delays with professional advisors. “This was not an attempt to conceal information but an oversight in timing,” he wrote.

Minton told The Grocer: “Hydrate Drinks Group relied on external professional advisors and an internal finance team, comprising multiple finance employees over time, for the preparation and filing of its statutory accounts and for the documentation and registration of the shareholder loan.

“The shareholder loan provided in April 2023 was used to fund the acquisition of a bottling line when the business did not meet the criteria for third-party asset finance. This loan has not been repaid and no interest or charges were paid. As directors, we accept collective responsibility for the outcome, but these issues arose from reliance on professional processes.”

Republic told its crowd investors, in an October 2024 update, that it had not been aware of the existence of the loans at the time of the 2023 investment campaign. The platform’s due diligence charter states it does not verify information about a company’s debt against any third-party sources and relies on the company itself to provide the information.

In late 2024, part of the loans were converted to equity through a rights issue, raising a further £4.5m from existing shareholders, with crowd backers given a chance to participate to avoid dilution.

“We would like to apologise for the delay in updating investors about the loans and the debenture,” Republic said in the October 2024 update. “However, we would also like to clarify that investors who subscribed to their full pre-emption allocation will not be diluted by the conversion of the loans into shares. This motivated our decision to offer this pre-emption campaign to our investors, as, ultimately, we judged this was still in your best interests.”

Carter and Kirkby remain involved with the new business as sizeable shareholders in the newly-created Sky Drinks Group.

Sky Drinks has since kicked off a new fundraising campaign this year, The Grocer has also learned, in a bid to secure up to £1.1m in fresh investment at a valuation of £5.5m.

M&S cyberattack disruption?

Challenges at Happy Drinks ramped up in 2023 as it faced delays with the installation of its £5m new bottling line. Disruption continued in 2024 as the new line led to inefficiencies and supply constraints.

The group, which rebranded to Hydrate Drinks Group in March 2025, updated shareholders on its ongoing material operational and financial challenges in 2025.

In May, Minton posted a further update on the Republic forum, informing investors the recent cyberattack at M&S, the company’s biggest customer, had created a “profound and immediate impact” on Hydrate’s trading position.

Hydrate estimated the cyberattack would cause a short-term revenue loss of more than £1.5m.

“Despite the strength of our product portfolio and the momentum we have built over the past year, this unprecedented event has placed severe pressure on our liquidity, creating significant operational challenges at a crucial time for the business,” a letter attached to the post, headed ‘urgent action required’, said.

“The prolonged disruption to M&S’s supply chain has not only reduced our forecasted order volumes by in excess of 70%, but it has also created a substantial backlog of finished goods, tying up critical working capital and significantly limiting our ability to invest in new growth opportunities. This has placed severe pressure on our cash position at a time when we need to rapidly scale production to support new, high-margin contracts.”

The letter went on to outline new wins with Aldi for a host of launches, worth a potential £21m in annualised turnover, and set out plans to raise £2.5m in growth capital to offset the loss from the M&S hack and to buy raw materials to fulfil the new contracts.

Hydrate subsequently informed shareholders in August 2025 that it was launching a rights issue aimed at raising £3m to cover working‑capital requirements needed for the business to survive

An FY25 Q2 shareholder update, released at the same time, said the M&S disruption cost Hydrate £500k in lost revenue during the quarter and resulted in an EBITDA loss of £300k.

An M&S spokeswoman told The Grocer this week: “There was minimal short-term disruption to Hydrate Drinks receipting stock into our depot. We were very supportive of them as a supplier and there should have been no perceptible effect on their revenue as a result of the cyber incident.”

The beginning of the end

By autumn of 2025, Hydrate had failed to secure enough interest in the £3m raise and engaged PKF Littlejohn on 28 October to explore options and a pre-pack deal. The insolvency firm kicked off a marketing exercise to potential buyers just three days later. Hydrate then cancelled the rights issue on 4 November.

HMRC also filed a winding-up petition against Hydrate on 30 October, while the company’s utility provider issued a notice of an intention to disconnect its power supply.

In a January 2026 update, Republic told investors in Hydrate that it had become aware of the company’s difficult cash position at the end of November 2025, after which it cancelled the pre-emption campaign for the £3m round to existing crowd backers.

Minton told The Grocer he had direct communications with Republic during the relevant period, and spoke with two members of the team on a Zoom call on 4 November, “during which we discussed in detail the appointment of PKF as advisors and the company’s position”.

PKF secured two offers to buy the business and its assets; one from an unconnected party and one from the Hydrate directors.

However, River Capital Management, a financial agent acting on behalf of the Liverpool City Region Combined Authority (a secured creditor of Hydrate, see box below), filed a notice to appoint administrators with the court on 1 December 2025 and hired Begbies Traynor to handle the process.

Begbies took over from PKF but did not undertake its own marketing of the assets as the sale contract was already in draft form. The firm then negotiated a £180k pre-pack deal for the Hydrate assets with the connected directors. The deal completed on 11 December to the newly incorporated Sky Drinks Group.

In its report, Begbies put Hydrate’s failure down to issues with the core bottling line, an inability to generate sufficient cashflow to cover costs and lack of available rescue funding.

Begbies makes no mention of any issues caused by disruption from the M&S cyberattack, despite citing the incident in a press release sent to the media on 16 December about the pre-pack deal. The press release also failed to mention the buyer of the Hydrate assets was a connected party. It included quotes from unnamed directors of Sky Drinks Group.

“The press release, although not a requirement as part of the administrators’ statutory duties, was issued with agreement of the purchaser to announce the sale alone,” a spokesman for Begbies told The Grocer. “All statutory requirements were fulfilled via the reporting to creditors.”

Minton added: “In relation to the cyberattack on M&S, this did present challenges, which were reported to shareholders, but we worked closely with M&S, who were fantastically supportive, and we managed the situation. The cyberattack was not a cause of the business failing, which was due to the catastrophic failures in performance of the bottling line and gave rise to a £20m claim against the manufacturer and our insurers, which unfortunately we couldn’t afford to pursue.”

Republic Europe chairman Jeff Lynn told The Grocer: “Each time we hosted a campaign for Hydrate Drinks, the last of which was completed in 2024, we followed the due diligence process described in our DD charter. No amount of due diligence can ensure a business’s success – and it is always disappointing when a business fails – but we did ensure that the material information that was available to us at the time of the campaigns was provided to investors before they made their investments.”