Australia’s very own take on an Italian tradition, beverage brand SOFI Spritz have created pre-batched wine cocktails with a modern twist.

Founder Tom Maclean formed SOFI on the back of traveling the world, finding inspiration in Italy’s love for Aperitivo (pre-meal drink).

Value proposition

Maclean’s spritz drinks are positioned to address the three main pillars associated with the alcohol industry; health, premiumisation and convenience. Targeted towards the female demographic, SOFI boats a respectable health standard, registering an alcohol content of 8% (wines are typically 12.5% – 14.5%) with no added sugar.

The beverage takes an Australian wine, effused with sparkling water, citrus and herbal extracts. Motivated by European flavours, Maclean claims this is a “real opportunity to create something different” , utilising distinct European and Australian ingredients to ensure the quality of the cocktail.

SOFI drinks are designed in a ‘ready to serve’ format such as cans, bottles and kegs, catering for venues and on-tap bars. Coming in three main flavours, the Italian styled cocktail is well situated to find a market in Australia.

Valuation

Having previously featured on the television series Shark Tank and with two successful crowdfunding raises under its belt, SOFI is returning to the crowdfunding scene again through PrimaryMarkets. SOFI is raising between $1 million and $2 million with a pre-money valuation of $4.5 million. The minimum investment is $50k.

The use of funds will be put towards sales growth and debt retirement.

Sales

Since starting in 2014, SOFI has secured some great retail contracts with national giants, Coles, BWS and Dan Murphy. Having written $1.7 million in revenue in FY2018, SOFI’s valuation represents 2.6x last year’s revenue.

Currently undergoing an airline trial, SOFI hopes to receive airline contracts in the near future. Maclean claims to have a pipeline of customers that will provide revenue of $2.5 million for FY2019 with potential to scale overseas.

Risk

Consumer preferences with ready-to-drink style beverages can be fickle and short-lived. (Remember Summerwine?)

The entry of new competitors is a constant threat and the intensity of competition from substitute products is dizzying with hundreds of young brands competing for consumer attention with the latest craft this an low-GI that.

Acclaimed product

SOFI has received number industry accolades including a silver medal in the 2015 Los Angeles International Wine competition, winning best in class – wine cocktails. Validation such as these are essential to keep excitement in the brand long enough to gain enough traction to become a regular feature in bars and bottle-o’s.

Industry consolidation

Whilst the alcohol industry is filled with competition, large players in the sector have a long record of brand acquisition where they buy up emerging brands, such as Bacardi acquiring 42 Below Vodka, Campari acquiring Wild Turkey and Bulldog Gin.

No doubt this has crossed Maclean’s mind while sipping on a cocktail, but this will be unlikely without first securing a noticeable market share.

Conclusion

A factor for any investor considering SOFI is whether the valuation is fair relative to SOFI’s revenues and compares to other crowd funding deals completed in the sector.

Whilst the established sales pipeline could be seen to de-risk the revenue in the short term, there is a lot of work still to be done to ensure that the wine-based cocktail doesn’t get left behind as simply another fashion trend.

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Former fund manager and finance academic, Dr Nigel Finch advises growing business on strategy execution, corporate governance and capital raisings. He has worked across all stages of the business cycle from start-ups to seasoned ASX-listed companies including many who have tackled Asia’s emerging markets. Authoring more than 5 books and 100 scholarly articles, Dr Finch has a thing or two to say about business.