|1||Strong executive team with experience in brand management at Red Bull, and legal at Goldman Sachs.|
|2||Advisory board and investors include SVPs at Pernod Ricard, William Grant; President of Red Bull NA.|
|3||2019 Revenue of $1.3m. Lifetime revenue of $4.3m and 2013-2019 10x growth in revenue.|
|4||Internationally recognized products: Avuá Cachaca won Double Gold / Best in Category at SF Spirit.|
|5||With our second brand (Svol Aquavit), we did in 6 months what took us 2 years to achieve with Avua.|
|6||Craft spirits growing at a 24% CAGR and make up more than 5% of total spirits with lots more runway|
|7||Many recent exits in the craft sector at 10x multiples. Assuming this we would be valued at $13M+|
|8||Vision to build a portfolio of 10 spirits brands that would drive >$10M in revenue by 2025.|
We scour the world for historically relevant, uniquely crafted products for the modern bar. We use our strength in the on premise channel and key relationships with major national distributors and key bars, restaurant and hotels to build an efficient route to market.
In the rapidly growing craft spirit space we serve as the sales and marketing agency and route to market for Avuá Cachaça (our lead brand that has over $1.3MM in sales in 2019), Svol Aquavit (launch in June 2019 to much fanfare and over $150k in revenue in 2019) and this summer Gagliardo Bitter Radicale (a 5th generation Italian producer).
Cachaça has been Brazil's beloved spirit for over 500 years and is the third most consumed alcoholic spirit in the world. Avuá Cachaça is single-sourced and pot distilled at a 3 generation farm about 4 hours from Rio, and comes in both 84 proof unaged Prata and the unique South American indigenous Amburana wood aged expression.
Our mission is to challenge the perception of the cachaça category as a one-trick caipirinha pony to an artisanal product that expresses the 500 years of traditional production in Brasil. The brand has $1,369,000 in rolling Total Sales March 1, 2019 to March 1, 2020.
Svol is taking a thoughtful gin-inspired approach to a centuries-old Scandinavian spirit. We worked with Gunnar Gislasson chef/owner of Dill in Iceland and Jonas Andersen of Agern & Great Northern Food Hall on botanicals, souring and blending. Allen Katz and the NY Distilling team is our production partner with their great expertise in botanical distillation. We are excited to share with you our first two marks inspired by the traditions of Denmark and Sweden.
Svol sold $153,000 in revenues in only a half year of launch (contributing $38k to Drifter in sales margin) - ahead of initial sales for Avuá in a category that bartenders are rapidly growing more interested in. Our aim is to be the leader in the category as it grows in the US and Europe with great cocktail placements in key bars, restaurants and hotels around the world.
The Gagliardo range will launch this summer with a liqueur range from a 5th Generation grappa distiller who re-discovered old family recipes. The range includes:
• A Campari fighter in the Bitter Radicale with a long and strong bitter taste and aftertaste using the least sugar quantity as possible.
• Italian Orange liqueur is the only of its kind in the market
• Fernet Radicale which is a lighter more round version of the style
Planned launch in Q3 of 2020 in key markets in the US – already approved by our two biggest distributors for launch.
We will be growing our portfolio to 8-10 solid brands over the next 5 years that will generate an estimated $10MM in revenue and deliver $2MM in net income, of which a large portion will be released as dividends. We will enter other categories such as tequila, gin, and vermouth over time with the right partners and our consistent on premise, brand building focused approach.
Drifter Spirits has financial statements ending December 31 2019. Our cash in hand is $7,171, as of March 2020. Over the three months prior, revenues averaged $63,000/month, cost of goods sold has averaged $28,332/month, and operational expenses have averaged $100,000/month.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes and other financial information included elsewhere in this offering. Some of the information contained in this discussion and analysis, including information regarding the strategy and plans for our business, includes forward-looking statements that involve risks and uncertainties. You should review the "Risk Factors" section for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
We produce, market and sell craft spirits across 42 states in the US and 7 countries in Europe. The portfolio includes Avuá Cachaça (Brazilian sugar cane spirit) launched in 2013, Svöl Aquavit (Scandinavian botanical spirit) launched in 2019, and soon Gagliardo Bitter Radicale (Italian liqueur range).
The market for craft spirits, a $189B market has been rapidly growing. As a nimble supplier with the dominant player in niche categories, we hope to use our route to market to build to a mid-sized spirits supplier with a portfolio of 8-10 quality brands that we will scale to >$10MM in revenue top-line and >$2MM in net income.
Avua Corporation was incorporated in the State of Delaware in March 2011.
Avua Corporation (the “Company”) was incorporated in the State of Delaware on March 3, 2011. The Company was originally formed as Washington Square Brands Corporation, which merged with WN Holdings, LLC, a New York limited liability company on October 27, 2011, with Washing Square Brands Corporation being the surviving entity. Washington Square Brands Corporation changed its name to Avua Corporation on January 11, 2013. The Company imports, markets and distributes the Brazilian spirit cachaça under the brand Avua Cachaça in the United States and certain western European nations. The company uses the DBA Drifter and intends to eventually move additional spirits under the Avua Corp. umbrella.
Since then, we have:
Achieved revenues of $1,303,426 in 2019
On premise spirits sales experts that will grow into a $10MM company in 5 years with smart portfolio growth
Deep relationships top bars, restaurants and hotels as well as national accounts like MGM Resorts, Jose Andres and Nomad
Represents leading brands Avua Cachaca, Svol Aquavit and Gagliardo Bitter Radicale
New brands in the works for 2021 and beyond in broader categories like tequila and gin
Historical Results of Operations
Revenues & Gross Margin. For the period ended December 31, 2019, the Company had revenues of $1,303,427 compared to the year ended December 31, 2018, when the Company had revenues of $1,349,152. Our gross margin was 58.45% in fiscal year 2019, compared to 65.36% in 2018.
Assets. As of December 31, 2019, the Company had total assets of $655,165, including $37,434 in cash. As of December 31, 2018, the Company had $445,452 in total assets, including $10,913 in cash.
Net Loss. The Company has had net losses of $313,656 and net income of $49,289 for the fiscal years ended December 31, 2019 and December 31, 2018, respectively.
Liabilities. The Company's liabilities totaled $1,436,788 for the fiscal year ended December 31, 2019 and $1,021,419 for the fiscal year ended December 31, 2018.
Related Party Transaction
Refer to Question 26 of this Form C for disclosure of all related party transactions.
Liquidity & Capital Resources
To-date, the company has been financed with $661,851 in debt and $895,816 in convertibles.
After the conclusion of this Offering, should we hit our minimum funding target, our projected runway is 4 months before we need to raise further capital.
We plan to use the proceeds as set forth in this Form C under "Use of Funds". We don’t have any other sources of capital in the immediate future.
We will likely require additional financing in excess of the proceeds from the Offering in order to perform operations over the lifetime of the Company. We plan to raise capital in 12 months. Except as otherwise described in this Form C, we do not have additional sources of capital other than the proceeds from the offering. Because of the complexities and uncertainties in establishing a new business strategy, it is not possible to adequately project whether the proceeds of this offering will be sufficient to enable us to implement our strategy. This complexity and uncertainty will be increased if less than the maximum amount of securities offered in this offering is sold. The Company intends to raise additional capital in the future from investors. Although capital may be available for early-stage companies, there is no guarantee that the Company will receive any investments from investors.
Runway & Short/Mid Term Expenses
Avua Corporation cash in hand is $7,171, as of March 2020. Over the last three months, revenues have averaged $63,000/month, cost of goods sold has averaged $28,500/month, and operational expenses have averaged $71,500/month, for an average net loss of $37,500 per month. Although we cannot guarantee it, we hope to be profitable in 10 months.
The COVID-19 pandemic has affected our financials by legally mandating in many jurisdictions the temporary shutdown of our core market, which is bars and restaurants. We expect our revenues in March 2020 to be approximately $65k. That said, we believe this will be a temporary pause in operations due to this unusual occurrence.
We expect the business to be in hibernation for approximately three months. After this, we hope to re-start operations, and see revenues and expenses in line with what we were seeing for the first couple of months of 2020. Currently speaking, we anticipate potential support from the U.S. Federal government through the EIDL and PPP loan programs, as well as support from New York City. We have no other immediate sources of capital upon which to rely.
The premium spirits market, despite being an active and stable market, is exposed to macroeconomic risk, as consumers may choose to trade down to less premium cachaças if there is a macroeconomic downturn.
The growth of the spirits represented by Drifter Spirits, including Avuá Cachaça has, in large part, been linked to the growth of the “craft cocktail” movement in the on-premise. While this type of channel has been growing, there is no certainty about the rate that it will continue to grow and whether consumers will continue to shift towards niche spirits and craft cocktails. There exists some risk that the challenges of the COVID pandemic will diminish the medium term universe of points of distribution in craft cocktail-focused on premise establishments.
Drifter and Avuá’s growth is dependent upon its distributor partners. There has been significant consolidation in the U.S. distribution market, which may adversely affect the amount of attention smaller suppliers may receive from the distributor partners. European importers for smaller craft spirits remain underdeveloped and it is not certain that the trend of improved distribution solutions within the EU will continue.
In the market for spirits, the spirits that provider Drifter a competitive advantage, such as cachaça and aquavit, are an underdeveloped categories and, while there has been growth in these categories, these brands like Avua and Svol remain a pioneer in most global markets in which it operates and there can be no guarantee that the growth in the underlying market will continue.
Recent changes in the global political environment may add risk to the imported spirits market, as there is no certainty that the existing low tariffs for imported alcoholic beverages will continue. Certain of our trading partners are ending political relationships, such as the European Union and the U.K., which may adversely affect ease of trade between our European depot in Belgium and our U.K. importer. The uncertainty in tariff relationships may change the economics suddenly.
Brazil remains a volatile environment politically and the company may be exposed to changes in taxes and regulatory environment that could adversely affect our profit margins. We moreover benefit from a strong USD-real exchange rate, which could change over time.
Avua is moderately dependent upon the image of Brazil, which maintains challenges due to news reports of corruption and violence.
The current category competitive set is fairly weak. However, recent acquisitions, such as Leblon Cachaça by Bacardi, may add competitive headwinds to growth.
Our future success depends on the efforts of a small management team. The loss of services of the members of the management team may have an adverse effect on the company. There can be no assurance that we will be successful in attracting and retaining other personnel we require to successfully grow our business.
The COVID pandemic has caused the points of distribution which serve our spirits to be under substantial financial strain. There can be no certainty about the length of the COVID pandemic and its impact upon the vulnerable bar and restaurant segments which are our key long term clients.
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