All of the big craft beer players are preparing for the brave new beer world. Up next: Ballast Point Brewing & Spirits, which just filed with the SEC for an initial public offering to raise up to $173 million. Goldman Sachs and Morgan Stanley are the joint bookrunner. Ballast Point booked $84 million in sales for the 12 months ended June 30, 2015. Be sure to look for them on the NASDAQ under the symbol “PINT.”
That’s all there is to the news, but we thought it’d be interesting to share some of the tidbits from Ballast Point’s full investor pitch. Maybe the most interesting section for a craft beer owner to review is the risk factors they identified:
• Our recent growth rates may not be sustainable or indicative of our future growth, and we may not be able to manage increased demand for our products as a result of continued growth;
• We face substantial competition and our inability to compete effectively could adversely affect our sales and results of operations;
• We are dependent on third-party suppliers for key raw materials, packaging materials and production inputs;
• Our product sales are heavily concentrated in Sculpin IPA and further concentrated geographically in California;
• We are heavily dependent on our third-party distributors for the distribution of our products;
• Unexpected events at our company-owned breweries, the inability to expand brewing operations and product safety and quality concerns could have a material adverse effect on our sales and results of operations;
• We have been growing rapidly and failure to manage our expected future growth could adversely affect our business and results of operations;
• We are subject to governmental regulations affecting our breweries and tasting rooms; and
• Our founder controls a majority of the voting power of our common stock, which may prevent other stockholders from influencing corporate decisions and may result in conflicts of interest that cause the price of our Class A common stock to decline.
They also identified the strengths of their business model:
• In 2012, we distributed to 19 states and four countries internationally and have since expanded to over 30 states and 10 countries.
• We have grown the total annual number of barrels of beer sold as reported on a taxable basis from 37,161 in 2012 to 122,890 in 2014, representing a CAGR of 81.8%.
• Our annual net revenue increased from $14.0 million in 2012 to $48.9 million in 2014, representing a CAGR of 86.6%.
• Our annual net income attributable to Home Brew Mart, Inc. increased from $1.1 million in 2012 to $4.5 million in 2014, representing a CAGR of 100.4%.
For the six month period ended June 30, 2015, Ballast Point’s top five states accounted for an estimated 70% of total distribution. Within these five states, revenue grew 130% over the prior year period. As part of the company’s growth strategy going forward, new markets and increased awareness of the Ballast Point brand are keys.
“We believe we have an opportunity to significantly increase awareness of the Ballast Point brand through our continued participation in beer and spirits competitions, as well as through the continued use of our tasting rooms and kitchens, social media, strategic community outreach and charity programs. Historically, we have primarily used our personalized, grassroots “Feet on the Street” strategy, rather than relying on more traditional and costly marketing programs. We view beer and spirits competitions as opportunities to connect and build affinity with beer and spirits enthusiasts and future brand ambassadors, while achieving international recognition for our products. We also plan to selectively evaluate additional retail opportunities in new markets to showcase our product offerings and connect with new local customers. We believe our focus on brewing great-tasting beer and delivering outstanding experiences to our customers will lead to continued growth in awareness and enthusiasm for our brand.”
Being a craft brewer, Ballast Point is driven by innovation. Beyond all of the new beers they have brought along recently that first achieved success in the tasting room, the company is eyeing more diversity in their spirits segment.
Additionally, we are investing in the growth of our spirits subsidiary, which we believe represents a promising long-term opportunity. The introduction of RTD canned cocktails, such as our Bloody Mary, Gin & Tonic, Rum & Cola and Rum & Ginger, also exemplifies our commitment to innovation.
Obviously all of these expansion plans will mean increasing production:
For our existing production facilities, we have invested in additional equipment and infrastructure to allow us to expand our capacity, which we believe will be sufficient to meet the growing demand for our products for the next few years. As part of our long-term strategic planning, we periodically assess potential opportunities to increase our production capacity as well as enhance the reach and efficiency of our distribution.
If you found this as riveting as we did, definitely head over to the SEC to read the full presentation.