The debut of my next big investment (opportunity) is right around the corner.
This startup will mark the 12th investment my investing group, The Boardroom has made this year.
It’s an alcoholic beverage company, and it’s on one of the fastest sales and expansion tracks I’ve seen.
It has 3 ready-to-drink (RTD) products right now; each positioned as a disruptor in its respective sub-category.
Their products are currently distributed across 24 states through 150 wholesale distribution partnerships.
There’s so much more I want to tell you…just stay with me.
I can tell you that their private round will open soon.
And I’ll be sure to invite you once it does.
Until then, let me share the ins and outs of their specific market –– the ready-to-drink (RTD) alcoholic beverage space.
Let’s look at how the larger beer and wine market is shifting and how these shifts can make for some huge exits and acquisitions.
The Adult Beverage Market is Changing
While the sales of many traditional alcoholic beverages have tapered off, new products have gained traction.
Startups that bring new products to market or use modern business tactics are quickly gaining a foothold. Meanwhile, the largest adult beverage companies in the world are acquiring startups at an impressive rate as they attempt to modernize and diversify their portfolios.
We are in the middle of a major shift in this market indeed.
One of the only adult beverage products to show any growth is the up-and-coming ready-to-drink (RTD) beverage.
From 2018 to 2019, this was the only alcoholic beverage that posted gains in terms of consumption, according to Mintel.
RTDs, hard seltzers, and CBD- and THC-infused drinks have become all the rage with young adult drinkers. Much of the innovation in the industry fueled towards Millennials in particular.
This huge chunk of consumers has different preferences. In general, they like to drink at home, consume less alcohol, care more about flavor, and want different types of products. By solving these problems, many startups are capturing up this type of customer and winning against big companies.
In the new adult beverage industry, the name of the game is RTDs, direct-to-consumer (DTC) models, and modern branding and marketing strategies.
The big guys were caught off guard. They were slow to invest in these new products and allowed startups to lead the way. But now, the industry-leading companies are jumping into the game full force, acquiring startups left and right to catch up.
A Great Time For Exits
Startups in this sector are particularly ripe for acquisitions.
The industry is dominated by several huge public companies like Anheuser-Busch InBev, Molson Coors, Diageo, Heineken, Boston Beer Co., and more. They have been steadily increasing their investment into modern products and practices for years. In particular, they are rushing to catch up and cash in on RTDs, DTC alcohol brands, CBD-infused drinks, and much more.
This is incredible for adult beverage startups. It gives them a read-made monetization track. They can go from inception to exit in a short time if they bring something new to the market. The largest companies are looking for young talent to bring aboard to aid them in this transition period.
For angel investors, this means an increased chance of an exit and a faster turnaround. This is why we are so excited to have found our next startup deal — an RTD startup that checks all the right boxes to head for a quick and valuable acquisition.
Our Next Startup Deal
The startup we are investing in is an innovative adult beverage company with a portfolio of successful ready-to-drink (RTD) products.
As of now, it has three disruptive products — wine-based party punch, canned seltzer cocktails, and canned wines. These products corner the fastest-growing part of the market with these highly in-demand products.
Mainly focused on Millennial customers, the company’s products, branding, and marketing speak to a young audience. For example, the party punch is single-serve and ready to drink, is low-calorie, comes in eco-friendly packaging, and sports bright and tasty names and packaging. This party punch is the most popular product in the company’s growing portfolio.
This startup in particular is attractive because it has a high chance of being acquired. The recent activity in the adult beverage space and the performance of RTDs have us excited. We know the large beer, wine, and spirits companies are acquiring startups to modernize and diversify, and we think this new startup is a perfect candidate.
I’ll be sharing more information about this specific startup soon, so keep an eye out.
Now, let’s see some recent acquisitions to better understand the movements in the adult beverage industry today.
Constellation Brands Buys Empathy Wines
Constellation Brands is a huge, publicly-traded company that owns over 100 brands of beer, wine, and spirits including Corona, Modelo Especial, and Svedka. It is the largest beer import company in the U.S. by sales.
Empathy Wines is a small and mostly unknown wine brand that was just launched at the beginning of 2019. Before the acquisition, Empathy Wines had only sold around 15,000 cases, around $3.6 million in revenue.
So, what makes Empathy so attractive to Constellation? It all comes down to the direct-to-consumer model.
Robert Hanson, president of Constellation’s wine and spirits division noted that DTC is a much smaller portion of the company’s portfolio than they would like it to be. Seeing the growing demand for DTC and e-commerce brands, Constellation began a quest to expand into this market.
In 2019, small wineries (ones that make between 5,000 and 50,000 cases per year) controlled 45% of all DTC wine sales. This segment has major value to larger brands that are just starting to turn their attention to DTC.
Small wineries can be purchased easily by a company like Constellation, and in the end, both parties win. Empathy co-founder, Gary Vaynerchuk, is happy to have Constellation’s winemaking, grape growing, and logistics expertise to scale the business and bring it to its full potential.
Boston Beer Company Buys Dogfish Head
Boston Beer Co. is the fourth largest brewery in the U.S. You may know its signature beer, Samuel Adams, or its hard cider, Angry Orchard.
Both companies make craft beer — a market that has been consolidating for years. Acquisition after acquisition has driven small craft brewers into the able arms of larger companies. Over the past few years we saw Constellation buy craft beer company Ballast Point, Heineken buy a 50% stake in Lagunitas, and now this.
Boston Beer Co. is the second-largest maker of craft beer in the U.S., Dogfish Head is the 13th. You can imagine that this union is a huge play that will be felt throughout the craft beer world. Working together, the two companies can now compete with global beer companies that have been creeping into their hoppy, craft beer territory.
Boston Beer bought Dogfish for $300 million, one of the largest beer acquisitions in recent history.
Anheuser-Busch InBev acquires Cutwater Spirits
According to Euromonitor International, AB InBev had a 28% market share of global beer sales in 2017. This is the world’s largest brewer.
While the majority of its portfolio is in beer, AB InBev has recently been exchanging its scope to other drinks, in this case, spirits. Cutwater Spirits makes a variety of products like premium mixers, canned cocktails, whisky, vodka, rum, and gin.
By picking up a company like Cutwater, AB InBev is making its intentions crystal clear. It wants to move into other niches in the market, namely RTDs. This purchase comes after a series of diversifying and modernizing plays by the company such as acquiring organic energy drink Hiball and sparkling juice Alta Pall, buying the beer rating website RateBeer.com, and investing in the research of THC and CBD beverages.
If the biggest brewer in the world sees the potential in the RTDs and other emerging sections of the adult beverage market and is willing to invest billions to get in on it…
I think you too should be paying attention. I know I am!
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