Angel’s Share will apply to alcohol related investments not just distiller’s barrels. 4% to 10% of unfinished bourbon in the barrel evaporates away. This is known as the angel’s share.
$1.25 billion has been invested in alcohol related startups up to October 31st, 2021. Why would I suggest that these investments may not perform as expected or hoped?
Let’s take a look at some details.
Online alcohol sales jumped 234 percent year over year in the early weeks of the pandemic, global data analytics company Nielsen Corp. reported in 2020. Months later, many Americans said they were imbibing 14 percent more often during the pandemic—some much more than that—according to researchers from RAND Corp. and Indiana University. via https://news.crunchbase.com/news/vc-funding-online-alcohol-sales-startups-wine-craft-cocktails/
This phenom is the driver in alcohol related investments.
I’m a skeptic on the midterm and longterm investment in most of these startup brands. Why? These are three reasons related to why 90% of beverage startups eventually fail. This list is common knowledge but it’s a worthy share from Adomas Pranevičius, the co-founder and former CEO of MyDrink Beverages.
“Lack of knowledge in distribution. Do you have any knowledge about retail sales? Do you have experience in it? We are beverage development company, however, entrepreneurs are asking us to distribute their product. Try to get some knowledge about retail, distribution, margins etc. .
No marketing money. One of the most popular problems! A lot of entrepreneurs are thinking that the main problem is to bottle the drink. No, no, no! Do not think that the main challenge is to put your drink on the retail shelve. The main problem is to prove to the consumer that your product is worth buying.
Lack of financing. You should never start a beverage business without a financial support. There are several scenarios for lack of financing:
Not enough capital to bottle the drink
Not enough capital to put the product on the shelves
Not enough capital to advertise the product
Not enough capital to produce another truck of your drink”
Angel’s Share will apply to alcohol related investments not just distiller’s barrels. It happens in this way. Most of the startups I see and hear about are not capitalized well enough to scale their product across the country or globe.
John Beaudette, founder and president of MHW, Ltd., is optimistic. I want to be. His company has seen significant increases in new brand launches and the TTB has approved over 21,000 spirit labels over the last 12 months ending July 2021. While this mirrors the explosion in investments being made, it’s not an indicator that these labels and the brands launched behind them are properly funded and lead by the right experts.
This is an important topic to Shared Spirits given we serve this industry and the startups seeking to gain shelf space and depletions.
So how would I make investment decisions related to alcohol? First, note, I’m not an investment advisor. I would identify the components of a successful recently launched brand, perhaps a well-funded celebrity owned brand or a well positioned niche brand. I would research how much money they had for production, operations, marketing, and distribution support. If the startup you’re interested in doesn’t have the money accounted for, I’d beg off for a bit. Include a significant player on the team that has supply chain experience as well.
I also see related investments to the space as viable. Non-alcohol brands, technology oriented solutions like ours, and other companies that sell picks and shovels to the industry are my favorites. True, they are not as sexy as saying you’re an owner of a distillery or vineyard. You wish to get richer or sexier. I’m way past the need to be sexier.
Shared Spirits is delivering a technology solution that creates a new category in alcohol marketing. We call it digital activation. Our solution is known as Sampling as a Service. Investment is being sought for our company. Our product is live, restaurants are coming on board and brands are being actively approached.
If you’re interested in taking part in category creation and being a part of something never before delivered to the spirits, wine, and beer industries, we’re interested in chatting with you.
Hit this link if you’d like to schedule a chat with our CEO, Sherman Mohr.