Sofi Spritz weighs up its funding options on private markets as sales growth continues to rise
Drinks company Sofi Spritz has established traction in the Australian market for pre-made cocktails.
But the company continues to tap private markets for funding as it looks to capitalise on rapid early sales growth.
And among the various funding sources available, CEO Tom Maclean says equity crowdfunding is an option on the table.
For now, the company is sticking with its pitch to private sophisticated investors — both new and existing — from whom it raised another $1 million into the end of last year via the Primary Markets platform.
Founded in 2014, Sofi’s core product is the Sofi Spritz, a pre-mixed wine cocktail that comes in three main flavours.
By 2016 it had reached commercial agreements with the Coles and Woolworths liquor chains and made an appearance on Shark Tank which resulted in a $130,000 investment. And by June last year, its distribution footprint had increased from 20 local outlets to around 1,500 stores nationally.
Sales growth rose from $450,000 in the 2016 financial year to $1.7 million in FY18, with the company’s latest funding round based on an indicative valuation of $4.5 million (2.6 times revenue).
Sofi’s product range has expanded to include canned drinks and the company is now targeting an on-site distribution strategy, having trialled an “on-tap” version of its wine mix for bars and clubs.
For the current raise, “we set a target of between $1-2 million, and we completed the first half of that into the end of last year”, Mr Maclean told Stockhead.
The round was largely pitched at Sofi’s network of sophisticated investors — some of whom already had an interest in the company.
Around a quarter of the $1 million was funded by existing investors who topped up, and the balance was raised from new investors.
The company still intends to raise additional capital towards the upper end of its $2 million range, but it has the luxury of assessing how best to raise that money.
“We haven’t pulled the trigger on that yet because we’re talking to strategic investors, who may come on board and offer additional networks and expertise to expand the business,” Mr Maclean said.
Another option on the table? Equity crowdfunding, which has gained traction in Australia since getting legislative approval in June 2018.
Sofi is actually no stranger to the model, having raised small amounts of capital via reward-based crowdfunding back in 2014/15, before the new laws were passed.
“There’s been some other beverage companies doing it, and it seems to be a model that fits well with consumer products,” Mr Maclean said.
“I think for consumers who are passionate about the products, it gives them an opportunity to become more engaged with product development and business direction,” Mr Maclean said.
He cited the example of earlier Sofi crowdfunding rounds, where investors where given the opportunity to vote on new flavours.
As to how the funds are deployed, Mr Maclean said most of the new capital will be devoted towards “ramping up our sales capability”.
In start-up terms, Sofi is a relatively mature business in that it has an established product with proven revenue streams.
In view of that, the primary aim of its latest funding round is to expand distribution channels and help maintain current growth rates.
“At the moment, sales are doubling year-on-year and we sold around one million Sofi Spritz products across all the packages,” Mr Maclean said.
To maintain that growth, a bigger sales team will be required to help drive the company’s on-site distribution strategy.
“One year ago it was only me, then I brought on another member of the sales team and he’s been great, so we’ll look to hire a few more sales people to drive that side of the business,” Mr Maclean said.
The company’s canned product is pitched at airlines (where trials are under way) and entertainment events, with projected sales in FY19 forecast to rise to $2.5 million.