$2M capital raise
SOFI Spritz has recently announced that it is raising $2million from existing and new shareholders. SOFI Spritz is an award-winning Australian beverage brand which takes Australian wine and blends it with sparkling water, citrus & herbal extracts to create a range of pre-batched cocktails inspired by classic European recipes.
The Company has developed three core wine-based beverages inspired by the most popular cocktails in Italy and has also produced limited edition or seasonal offerings. It has proven market traction with an enthusiastic base of repeat consumers. Last year, SOFI was awarded “Best Innovation” at the Australian Drinks Award for SOFI Spritz Blood Orange & Bitters. The awards were based on a survey of over 6,000 Australian consumers.
The company is positioned to address three key trends:
- Health and Wellbeing. SOFI has reduced alcohol content (8 per cent ABV). It is a lighter refreshment due to its water component, consisting of only natural ingredients (with no added sugar).
- Convenience. Premixed formats include 250ml Piccolos (6×4 packs) and cans (6×4 packs), 500ml share size (12 bottle cartons), 750ml full size (12 bottle cartons), and 30 litre Kegs for Cocktails on Tap.
- Premiumisation/Indulgence. On-trend European recipes, boutique producer, hand-crafted product with packaging & brand aesthetics.
Demand and supply – a very good tail wind
What the founder and CEO, Tom Maclean has been successful at doing is to take a commodity, in this case; bulk wine, that is in a systemic oversupply, and craft it into a product that fits in the premium drinks market. First the supply of Australian wine is enormous, close to 1000 million litres of bulk wine is produced in Australia every year, that is 40 litres of wine per person. Over half of this is put into bulk containers and sold offshore. The average sale price in the last twelve months of bulk wine is $1.08. So, SOFI Sprtiz doesn’t have a problem with supply.
However, to make Sofi great, they need to and are doing create demand. First they have chosen a very huge potential market. Just domestically the Premixed beverages market is $2.3billion. The wine category runs at $4.3billion annually, ciders have sales of $500m. Even this new area of ‘good for you’, ‘healthy’ premix drinks is growing at $60 million per month. With this tail wind the company has shown the ability to create a real demand for the product, with a very strong youthful brand, a large marketing and social media presence. If you are as old as me, it is the new improved ‘West Coast Cooler’.
Part of the proceeds will be used to rollout a range of new products, including cans that will be used for airlines(Qantas and Virgin have already signed up) and events; concerts etc. The company has and continue to invests heavily in innovation and R&D so you would expect a range of new brands and product lines to be launched over the next coming twelve month. I understand that they are very close to launching a new sparkling rose product.
The supportive tax environment
The real kicker with SOFI Spritz is that essentially it is wine, and wine in Australia is taxed at 29 per cent (under the current wet tax regime). However, SOFI Spritz’s real advantage is that its finished products compete directly with spirit bases, like gins, vodkas etc, These are taxed at a substantial higher rate than 29 per cent, try three times higher. So much so it results in a tax cost advantage of 50 cents to $1 per standard drink.
Now, this allows such a product like this to exist, the extra margin allows for distribution costs. Distribution costs are typically what makes many of these small food and drink unique brands uncommercial, as it costs allot to get the product to the customer, and why Schweppes and Coca-Cola dominate this space. However, Sofi Spritz can compete given this unique tax environment.
The pricing at which SOFI Spritz is raising seems fair when compared to similar raisings over the past twelve months. The multiple of revenue at pre-money is 2.7 times historical, and forward should be around 2.2 times. The current average of similar companies is around 3.3 times. The market has purchased many similar fast-growing companies, as they are disrupting the traditional drinks market space. In the last few years the average multiple paid for these similar businesses is an amazing 11.4 times revenue. However, SOFI Spritz is still pre any real profits, they forecast to get to break even by 2020. So, really an investment in Sofi Spritz isn’t for the faint hearted but if Tom can keep Sofi Spritz growing at 50 per cent a year the returns available to investors are very real.
Wattle Partners is the financial advisor for SOFI Spritz’s current capital raise. It is holding investor briefings in Melbourne and Brisbane:
- Melbourne: November 7 at Beneath Driver Lane. Basement, 3 Driver Lane, 12md – 2pm
- Brisbane: November 14 at Thomson Geer Lawyers. Level 16, Waterfront Place, 1 Eagle Street, 4 pm – 5pm.
If you are interested in investing or learning more about this market, read more about the offer here or please contact Jamie Nemtsas on 0403 200 253