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When I read the news that Empathy Wines was acquired by Constellation Brands…the $35B giant of the alcohol industry…

I was blown away.

It wasn’t the acquisition itself that surprised me (that’s common in this space) –– it was how quickly they were snatched up.

You see, it was just last year that entrepreneur and internet personality Gary Vaynerchuk set out to disrupt the wine industry.

Empathy Wines used a direct-to-consumer model to bring high-quality wines direct from vineyards to the consumer for half the price.

At the time of acquisition this July, they’d only sold 15,000 cases with around $3.6 million in revenue.

To give you some perspective… 

The alcohol company we just invested in has already sold 200,000 cases of their flagship wine-based product.

My point with all this? 

Acquisitions can happen at record speed in the alcohol industry, especially when you have something of extreme value.

In this case, it was Empathy’s brand building know-how, their consumer data, and direct-to-consumer model –– all things Constellation was willing to pay big for.

Now let’s take a look at some other acquisitions in the alcohol space.

I think you’ll find the 3rd on the list (Seedlip) pretty interesting…

 

Alcohol Acquisitions

 

One of the best ways to judge the potential of an industry is to look at its exits. If you find an industry with many startups that have been recently acquired or gone public, you have found yourself a hot industry. 

Right now, the adult beverage industry is hot. Over the past few years, we have seen huge changes in the industry give way to numerous IPOs and loads of acquisitions.

In today’s market, there is a mad dash for new products that can connect to consumers on health, lifestyle, and marketing. Capturing the changing demand of younger, digitally-native drinkers has become an absolute priority for beverage companies. Even the most established brands are needing to pivot, often filling in portfolio gaps through acquisition.

You need to be watching this space. 

Investors who know just a bit about the happenings here can find outstanding opportunities.

Today, I’m going to show you some recent exits. These exits cast light upon the biggest trends within this diverse and active market.

 

Radiant Pig Beer Company

 

Radiant Pig is a craft beer company that has found success with its line of innovative beers that vibe with modern drinking culture. 

Colorful label designs and humorous beer names like “Save the Robots”, “It Ain’t Easy Double IPA”, and “TV Party,” catch the eye and make for a fun and engaging brand identity. Beauce of this, and its outstanding brews, Radiant Pig has become a force within the New York City craft beer scene. 

Newport Craft Brewing & Distilling Co. has brewed and built a portfolio of over 100 distinctive beers and spirits over the last 20 years. The Rhode Island-based company has a way of keeping things local. It found Radiant Pig to fit right in with their Northeastern, New England-style brand.

Newport Craft acquired Radiant Pig in June of 2020. This partnership bodes well for both parties, as Newport gains the trending momentum of Radiant Pig, Radiant Pig can now surmount numerous scaling hurdles that had kept them from meeting the ever-growing demand. 

One of the biggest changes in the alcohol industry has been the shift away from traditional domestic beers towards craft beers. In 2019, the only types of beer that saw any growth were craft and foreign beers. Even staple, flagship brands like Budweiser and Coors reported losses that year. 

Craft beer is the beer to look out for in the current market. Big-brand breweries are buying up craft startups like Radiant Pig to future-proof and balance out their beer portfolios.

 

Seedlip

 

Seedlip is a fascinating startup that makes a surprising product. This company makes the world’s first non-alcoholic spirit.

UK-based Seedlip draws inspiration and distilling methods from a 17th-century text, “The Art of Distillation” that explains how to distill herbal remedies using copper stills for medicinal purposes. 

Now, these arcane recipes are used to make sophisticated and complex alcohol-free spirits like Spice 94, Garden 108, and Grove 42 for the rapidly-growing market of consumers who choose not to drink.

In the UK, 22% of people aged 16 to 24 and 20% of people aged 65 and up abstain from drinking alcohol. And yet, these people still celebrate, eat at restaurants, and socialize at parties. Now they can take part in the ritual of sharing a glass with friends and family without harming their health or principles.

Health is one of the biggest selling points in the new adult beverage market, with many customers report a strong preference for low-calorie, natural, and low- or no-alcohol drinks.

As silly as this all may seem to some, the idea was good enough for the largest spirits company in the world, Diageo, to pull out its checkbook. 

On August 7, 2019, Diageo acquired Seedlip for an undisclosed amount. With just three products, Seedlip had built a presence in more than 25 countries. Being a pioneer of the no-alcohol spirit made Seedlip extremely attractive — with the purchase, Diageo essentially gained the entire worldwide customer-base for non-alcoholic spirits. 

 

BrewBilt Manufacturing

 

BrewBilt designs and manufactures specialty craft brewing systems. This is a company that serves the companies in the growing craft beer industry. 

BrewBilt satisfies all the needs of a budding craft brewery from consultation, manufacturing, and maintenance. After a meeting to discuss the specific needs of the brewer, BrewBilt builds a custom system using only American-made components made of high-grade American stainless steel. Finally, their technicians install the system and maintain it for up to six years. 

They do this not only in craft beer systems but cannabis and hemp processing systems too. 

In 2016, just two years after its founding, BrewBilt went public. After the IPO the company went live on the market selling at $1,770 per share, giving early investors a massive payday.

 

BNA Wine Group

 

BNA Wine Group is a startup that became famous for its unique California wine selection. BNA wines manage to be distinctive, premium, and on-trend without losing accessibility. This recipe helped them secure many retail partners across the country. Offerings like their Butternut, Volunteer, and Humble Pie wines quickly gained recognition, winning awards and converting loyal customers.

California wine empire, Miller Family Wine Company, saw what BNA had accomplished and wanted to bring it into their wine portfolio. Miller Family Wine is a multigenerational family-owned business and one of California’s premier wine-growing families.

On October 13, 2020, it was announced that Miller would acquire BNA in a spectacular Cali-winemaking union. Along with diversifying its wine portfolio, Miller stands to use BNA’s customer-favorite wines to deepen its presence in retail chains and to expand its DTC channels.

This acquisition again follows the industry-wide trend of large companies seeking out young premium and craft startups.

 

Cocktail Crate

 

Finally, we have Cocktail Crate. 

In 2012, 24-year old Alex Abbott Boyd quit his job to pursue his dream of creating craft cocktail mixes. Seeing the demand for authentic, natural mixers, he began formulating recipes to revolutionize the way people drink at home. With just $5,000 raised via crowdfunding, he set off and started Cocktail Crate. 

For as much as people love cocktails, not everyone loves making them. It’s difficult, time-consuming, and requires many ingredients. Cocktail Crate solves this problem.

Premium mixers for home and personal use come at the perfect time amid a long-running trend toward socializing and drinking at home, away from bars and restaurants. As of 2018, 55% of American consumers prefer drinking at home. Products, like the ones offered by Cocktail Crate, capitalize on this trend, allowing for enjoyable, premium cocktails right in your backyard.

Don’t let the humble beginnings fool you, Cocktail Crate quickly became incredibly popular, eventually garnering the attention of Michigan whisky icon Traverse City Whiskey Co. This craft distillery saw huge potential in selling non-alcoholic products like mixers alongside their whisky. 

On October 14, 2019, Traverse City acquired Cocktail Crate for an undisclosed amount. This acquisition shows the popularity of not only craft beverages and products, but also the shift towards at-home drinking we have seen recently.

 


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Author:
Chris Graebe

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