November 19, 2024 • 38 mins
Join us as we wrap up our three-part journey into the world of M&A - Mergers and Acquisitions. We conclude our tour of categories with wine, and host Jimmy Moreland welcomes double the guest hosts to guide us along: MHW's MaryAnn Pisani and Brigid McCabe join for a great conversation with the founder of the Growth Beverage collective of brands (Sprout Beverage, InvestBev, BevStrat, Algoma Capital) Brian Rosen.
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Episode Transcript
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Speaker 1 (00:06):
Welcome to the MHW Mark podcast, where we take deep
dives into various aspects ofthe alcohol industry.
My name is Jimmy Moreland.
Mhw is a US and EU beveragealcohol importer, distributor
and service provider.
With me today, we have doublethe brainpower to work through
part three of our three-partmergers and acquisition series.
(00:27):
Helping us along in ourdiscussion are two of MHW's
experts.
Welcome to the show MariannePisani and Bridget McCabe.
Speaker 2 (00:35):
Good to be here.
Thanks, Jimmy.
Thank you Jimmy.
Speaker 1 (00:38):
Now for the last two installments of our three-part
series.
Here we looked at M&A in beerand in spirits, and we looked
deep into legal and financialaspects.
What are we doing today on partthree?
Speaker 2 (00:51):
Yeah, jimmy, this episode we're gonna cover M&A in
the wine space.
We've had a long list of wineand champagne clients who have
given or received financialinvestment.
Ace of Spades Jay-Z's brand isa great example of that.
We've also seen several of ourlarge wine portfolios merger or
acquire wineries across Europeand the US in order to fill the
(01:14):
geographic white spaces in theirportfolio.
From a back office standpoint,mhw is built to support this
kind of growth, such as ourlongtime client, hb Wine
Merchants, who imports hundredsof wines from many different
regions.
Navigating the compliance,logistics and transitions
in-house would be so challengingand expensive for any large
(01:36):
wine portfolio who regularlyacquires products or wineries,
but MHW simplifies thesecomplexities significantly.
Wineries but MHW simplifiesthese complexities significantly
.
Due to the environment rightnow, with US wine consumption
and sales, it makes sense thatinvestment is needed.
Mergers and acquisitionactivity is happening primarily
from the investors or brandhouses who have strong marketing
(01:58):
and sales backgrounds.
So our guest today is going toreally clear up a lot of this
for us in terms of M&A for wine.
Speaker 1 (02:07):
Very good.
Well, without further ado,let's jump into that discussion
with our guest.
Our guest today is the founderof the Growth Beverage
Collective of Brands, whichincludes Sprout Beverage,
investbev, bevstrat and AlgomaCapital.
Welcome to the show, brianRosen.
Welcome.
Speaker 4 (02:24):
Thank you for having me.
I'm happy to be here.
Let's talk about beverages.
Speaker 1 (02:27):
Let's get into it.
Can you give us a little bitmore, just a little bit of
background on yourself?
I know that we've got a big oldbio here, but I don't want to
bore the listeners by reading itmyself.
I'd rather hear it from the manhimself.
Speaker 4 (02:37):
Sure, I'm happy to bore them with my own voice.
I'm a lifelong beverage guy.
My family was the very firstliquor license in Chicago.
After prohibition we turnedthat into America's number one
retailer in Chicago called Sam'sLiquors.
Um, I sold that to a privateequity firm.
From there I went to WhiteHouse Cooper's and created the
(02:59):
adult beverage practice for PWCand from there came back to
Chicago.
I founded a company in 2015called Bevstrat and InvestBev.
At the time I was fortunateenough to grow Bevstrat to be a
pretty sizable company.
I sold that in 2019.
And now I'm left with and Ishouldn't say left with, because
they're all great companies,but I'm left with Bevstrat,
(03:21):
investbev, algoma Capital andSprout Beverage all part of the
Growth Beverage Group.
Together, it roughly is abouthalf a billion dollars of assets
under management.
Speaker 2 (03:32):
Certainly, I've enjoyed the opportunity to work
with you over the years, brian,and it's great to have you here
on the podcast.
So, to kick it off, whatinspired you to launch InvestBev
?
Speaker 4 (03:43):
Well, thank you, marianne.
I've enjoyed working with youand the team at MHW for many
years.
Invespev was a naturalevolution for me.
Having been in the business mywhole entire life, having sold
two companies to private equity,what I really realized was that
what the industry needs is aprivate equity advocate, is a
financial advocate.
(04:03):
All the brands that we workwith at MHW, at InvestBev and
elsewhere those brands arestarving of capital.
They're starving ofintellectual support, experience
, support, someone to be ontheir team that says I've done
this before, type of thing.
And so InvestBev fills anatural void in there.
(04:25):
And then when I went into thegeneral market to raise capital,
it was natural.
There the investors saw that95% of brands struggle, 5% make
it, but the 5% that make itreturn 14, 15 multiple on
revenue.
So big numbers and people talkabout and your listeners, I'm
(04:47):
sure, know this People talkabout Aviation Gin selling for
six hundred million dollars orCasa Amigos selling for one
point one billion.
But the reality is those arebig, sexy, popular brands.
But the reality is there aresales that happen every single
week at 40 and 50 and 60 milliondollars that no one talks about
because they're not sexy.
So we play in that role oftaking a brand from 10,000 cases
(05:11):
to 20,000 cases and thenshopping them for exit, and it's
a needed, what I would callwhat we call in the office,
frankly, the farm league.
It's a great farm league beforeyou get to the pros and no one
is there doing that.
So Invespev fits a void that'screated by just the massive
exits that occur in the business.
Speaker 3 (05:30):
How does Invespev scout its investments?
What type of partnership modeldo you provide and what is the
general criteria and process forbrands that are interested in
entering this process?
Speaker 4 (05:42):
Sure, bridget, all good questions for sure, and the
first thing I look for isfounder.
Is the founder real deal?
There are a lot of people thatwe come across in our universe
where the founder is, oh, thisis my night job, this is my
hobby, or say, hey, I made thisdrink at home and everyone said,
why don't you sell this Right?
(06:02):
And then it becomes a brand.
That's not the founder that wegenerally back.
We back brands that are inmultiple states with MHW and
traditional distribution.
We back brands that arecapitalized to a point they
don't have to be making money.
They have to have 12 monthsreverse revenue of a million
dollars, ttm of a milliondollars, and they have to have
strong and active founders.
(06:22):
We have to have founders thatthis is their life and if it
fails that's bad for their life,and not people that are doing
this as a side hustle, as a gig,on a dare.
Those are not the founders wewant to be a part of.
And then when we get involved,we really get involved with FP&A
, which is financial assistance,with investment, with help them
(06:44):
fundraise, help them writepitch decks.
This is a very, verychallenging business and, as you
know, this business is one ofthose businesses where is one of
those businesses, specifically?
Where you have to spend three,four, $500,000 sometimes before
you sell your first bottle.
You have to go into production,you have to go into label and
cola, you have to go intoformulation.
(07:05):
You have to make 500 casesbefore you sell a single thing.
And then you've got a pricepost and you've got to get a
sales team and you've got tofind a distributor.
Then you've got to go to shows.
You're a half million dollarsin the hole before someone takes
a sip of your brand.
So you've got to do all ofthese things correctly to sell
one bottle, let alone a thousandcases.
So we get involved with thefounder first.
(07:28):
That's the most critical thingfor us the founder Brand second.
So is it a growing brand?
Is it an emerging brand?
Is it a brand that has legs?
I don't have a ton of interestin a Italian limoncello made
from grape leaves by a one-armedwinemaker that is left-footed.
Those know those intricaciesdon't have an audience.
What we always say here is thatif you make a brand for yourself
(07:52):
, you have an audience for one.
If you make a brand foreveryone, you have an audience
of everyone, and so that's thekind of brands we look at.
But it starts with founder.
That's important to know.
And a realistic founder.
You can't give me a pitch deckand use Casa Amigos or Aviation
(08:14):
Gin or Empathy Wines or any BillFoley deal.
You can't bring those thingsand say this is what the
universe is available to us ifwe get big, because that's 1% of
the total makers globally.
That's not realistic.
So you've got to be realisticin your expectations.
And all those things togetherwe put them in a pot and we get
the perfect investmentopportunity.
Speaker 2 (08:33):
So much of that sounds familiar.
Brian, I know one of the thingsthat we do often at MHW is set
expectations right, Because sooften the person sitting across
the table from us does thinkthey've got an exit strategy.
To be Casamigos.
Speaker 4 (08:47):
Yeah.
Speaker 2 (08:48):
And you know one, they're going to do 100,000
cases, you know like.
Take a couple of zeros off ofthat and you'll have a very
successful first year launch.
And talking about getting thatfirst bottle into someone's hand
, it's getting them tounderstand how important bottle
sales are.
Yeah, you're not looking tosell 50 cases at a pop in the
beginning.
You're looking to sell a fewbottles to a really good
(09:10):
on-premise who can feature youon the back bar and things like
that or put you on a cocktailmenu or a wine list.
Speaker 4 (09:17):
Yeah, and Marianne, I would add to that that it's not
the first sale that matters,it's the second.
Speaker 2 (09:21):
Exactly, it's the reorder.
Speaker 4 (09:25):
The first sale, the sale that happens when the maker
is not in front of the buyer.
That's the sale that matters.
I can come to you as a, as aretailer, on or off premise, hat
in hand, and I can say I'm afirst time founder, I put my
heart and sweat in this.
Please take a case for me.
And they will, because it's ahundred dollar investment and
big deal.
But when they're alone in themorning making a shelf list, or
(09:48):
on their iPad or whatever makinga shelf list, is this the brand
they're going to rebuy or theybuy it as a sympathy buy.
And so it's that second buythat matters and that comes with
on-premise tastings andactivations.
Off-prem working Thursdays,fridays, saturday, sunday,
(10:11):
behind a four foot table at someliquor store somewhere, selling
your soul.
That's how it.
That's how it goes.
And I've been in thoseboardrooms with you, marianne,
where, where the maker comes inand says I've got the next Casa
Amigos.
Yeah, and I would hate to quoteJesse Eisenberg from the social
network, but if you inventedFacebook, you would have
invented Facebook.
Right, exactly Right.
If you were Casa Amigos, youwould have been Casa Amigos, and
(10:31):
the world doesn't need anotherCasa Amigos, because Casa Amigos
came at the perfectintersection of the beginning of
celebrity brand and the boom ofconsumer tequila love, you know
, and it came together and thathas not happened since.
Speaker 2 (10:46):
Exactly so.
I'm looking forward toattending the Invespev pitch
week.
Can you tell us a little bitabout the purpose and the intent
of that week?
Speaker 4 (10:56):
Sure.
So Invespev was a creation thatcame out of brands coming to us
for capital, years and years ofcoming to capital, but having
no real training is the wrongword, but bootcamp is a better
word.
They come and they say well, wewant to start a brand, we want
to try this, we want to try that, but we're not familiar with
the industry.
(11:16):
But what do you think aboutthis?
So it turned into a sort of anincubator.
So so the InvestBev incubatoris a 90day program that meets
twice in person in Chicago,twice virtually, and then twice
at the end for pitch day inChicago.
Specifically, we have in ourcohorts about 14 brands and
(11:37):
they're vying for $100,000 fromus, $50,000 in cash and $50,000
in services, including our FP&Aprogram or sales or marketing or
HR.
What have you?
And they do Shark Tank style,in front of a room and we've got
judges, five judges that voteon does this brand come into the
portfolio and there's a winner.
(11:58):
And at this pitch day, whichyou guys will be at, it's not.
Losing is not losing, becauseif you don't get this prize
which is unfortunate, but youonly have one winner, so that's
life.
No participation trophies here,but in this case, in this case.
We flood the audience withinvestors, distributors, other
(12:19):
support service people.
So, for instance, in last pitchday we had a winner in Suyo
Pisco people.
So, for instance, in last pitchday we had a winner in Suyo
Pisco.
Now they won the prize, but thelosers or the second place
people one of them got adistribution deal from Allied on
the East Coast.
One of them got a privateinvestor to put in $100,000.
(12:39):
That was there.
So we flood the audience with40 or 50 people that love the
industry, love Adele, bev, likeit as an investment opportunity
or as a partnership opportunity.
And so not winning the bigprize doesn't mean you don't win
.
It just means not winning thebig prize.
And, as we all know, this is along, long tail game.
And so we created this friendlyenvironment where brands can A
(13:06):
hone their skills, b at leastlearn something like in a boot
camp style education from peoplefrom our universe, so taught by
Gustavo Aguilera, who is a headof innovation at Molson Coors,
who works for us.
I'm in there as a guestlecturer.
Giuseppe Infusino is our chiefinvestment officer and he will
talk to these brands about whatit takes to be invested in.
(13:28):
We bring in liquor lawyers fromMcDermott, will Emery.
We bring in label and bottledesigners from Scout A whole
bunch of different people.
We bring in Breakthrough, webring in Constellation Brands,
and they all are teaching thesepeople what they look for.
So instead of going ragged intothe universe as a brand, you
can get narrow focused and ifyou don't have success from us,
(13:49):
as far as the end of the day,there is someone in there that
could find value in your brand.
So it's a win-win for allparties.
Speaker 1 (13:56):
Now for folks who are curious listening to this, we
will drop links to the InvestBevpitch week in the show notes.
So if you are a brand, you canfollow up and see if your brand
is perhaps ready to participatein the next pitch week.
Or if you're an investor, youcan check that out and see if
there's anything that interestsyou there.
Now, brian on the podcast.
(14:16):
Here we are doing part three ofour three-part series on
mergers and acquisitions, andwe've already talked beer and
spirits in parts one and two.
Today we're looking at wine.
How does the M&A environment inthe wine world differ
specifically from the spiritsand beer categories?
Speaker 4 (14:34):
The wine world is having some challenges right now
.
Wine, however, carries thegreatest gross margin of all the
categories you mentioned beerand spirits so M&A activity
still is frothy around wine.
The consumer sentiment is downaround wine.
So investors like ourselveswe're still looking at wines to
invest in and we own quite a fewinside our portfolios, but the
(14:56):
drinking overall has gone down.
So when I look at wine I wouldlook at it in two categories
from an M&A standpoint.
One is a crossing or a comingtogether of wine and to-go, so
RTD type wine, wine in smallcans, things that people can
take wine on the road, on themove.
That's very hot right now.
It's a combination of the RTDsector, which is very hot, and a
(15:19):
combination of to-go ready todrink and to-go drinking on the
train, drinking in the park,drinking a sessionable activity.
And then, conversely, in ourFund 5, we have a non-alcoholic
wine, sushi which is the numberone wine in target stores
nationally.
So we like to think that thewine forward movement is going
(15:40):
to be non-alc.
The regular wine movement isnot going to change, but non-alc
is going to be the driver.
And so we like wine as M&AInvestors like wine because it
has a great gross margin, whichmeans it has a great multiple at
exit.
But it'll be a challenge sectorfor a bit until there's going
to be a shakeout.
And so, once the playing fieldlevels, all three investment
(16:04):
categories wine, beer and spiritwill still remain strong.
And, by the way, people love theindustry in general because
it's totally non-correlated.
This is a non-correlated assetclass, no matter who's president
, no matter what theunemployment rate is, no matter
what interest rates are, peopledrink, that is a fact.
It is a non-correlated assetclass and it's a safe place and
a stable place to put moneybecause it's a hard asset.
(16:25):
So, softness or not softness,the category remains vibrant.
Speaker 2 (16:30):
So, acknowledging the challenges that you know wine
is facing, and you know we'vegot the consumers you know,
especially the youngerdemographics, really turning
from wine, what advice do yougive a wine brand you know
looking to launch in the US withavailability, seeking
investment or acquisition?
What advice do you give them?
Speaker 4 (16:51):
I think that it's really do your research before
you spend your money.
There are a lot of people andwe know them all who will send
two containers of wine to the USand then try and figure out the
US.
They will send two containersMarianne's laughing because you
know it's correct.
And so you know they'll put abunch of containers at Western
and they will not have a salesteam here, they will not have a
(17:12):
marketing plan, they will notknow their audience.
Do your research here.
Research is free.
Mistakes are expensive.
Do your research here.
Research is free.
Mistakes are expensive.
Do your research.
Come here, walk the top 10liquor stores in New York City.
Talk to the buyers.
What are they missing in theirSKU set and what can you add
value there?
What is the price point thatsells the most?
Wine is an interesting thingfrom an investable standpoint,
(17:33):
because I know this from my daysin retail.
When a consumer goes to aretailer either a bar,
restaurant or liquor store thespirit side of that is a called
item.
I drink Dewars, I'm going to gobuy Dewars.
I drink Monkey 47, I'm going togo buy Monkey 47.
They're not as open toexperimentation.
The wine category is totallydifferent.
(17:54):
In the wine category.
They will go to theirshopkeeper or their bartender
and say what do you recommend?
What's on the wine list?
They will go to theirshopkeeper or their bartender
and say what do you recommend?
Speaker 3 (18:01):
What's on the wine list?
That is very true.
Speaker 4 (18:02):
I'm having chicken tonight.
What can I bring home for $20or less?
It becomes dealer choice.
It becomes a choice of theshopkeeper, the choice of the
bartender, If you make it on thedrink list, all of the wine
list, all of those things.
So your first move in sellingis not the consumer.
Your first move in selling isnot the consumer.
Your first move in selling inthis market is going to be the
(18:22):
on and off-premise account.
You get that buttoned up andthen you can create the pull as
you push your brand down intothe market.
And so, to answer your questiona little less long-winded,
Marianne, what I would say is doyour research before you come
in, understand where the gap isin the market and then build or
create your brand going intothat gap.
Speaker 3 (18:43):
That's great, brian.
You answered a lot of thisquestion already.
But because so many wineriesproduce an excellent product,
you know it's not often thatthey need recipe formulation or
production support, anythinglike that, but they do require
that marketing and sales support, like you mentioned, to be able
to target the on and offpremise appropriately.
(19:05):
So could you tell us how you,as an investor and I would also
add to this as a, you know,experienced beverage salesperson
and marketer how would youapproach the marketing and sales
strategy for a winery that say,maybe they're not new to the US
, maybe they've been in the USfor two to five years, but they
need acceleration?
(19:25):
How would you look at whatthey're doing and how would you
bring that to the next level?
Speaker 4 (19:29):
Sure, the one thing I always think about is that any
brand that comes to market andwhether you're an established
player and at Befstrat we'veworked with or it's now
InvestBevSales, but we've workedwith very established brands,
global brands that funny enough,and I'll tell you an anecdotal
story, but funny enough havefive brands that are killing it
and one brand that isn't andcan't figure out why.
(19:50):
The interesting thing about theindustry is you can make a new
brand, but you don't make a newdrinker right?
The pie is only so big and it'scircular.
So for your brand to havetraction on the shelf or in the
market, you've got to kick theass of another brand and kick
them out.
The shelf is only 44 incheslong.
(20:11):
If you're on the 45th inch,there's no place for you on that
shelf.
Something's got to go.
So when I talk to brand owners,it's always what are you
replacing and how are youattacking that audience?
And from an anecdotalstandpoint, I will share with
you this.
I was on a plane and I wassitting next to a guy who was on
finished up his phone callbefore we took off and that guy
(20:33):
was coincidentally totalcoincidence in the wine business
and he was flying down toSouthern to meet the powers that
be at Southern Glazer.
And I said I hung up the phone.
I said what are you doing?
I'm in the wine business too.
What do you do?
What do I do?
He said I'm flying down to meetSouthern Glazer Wine and Spirit
because they are not payingattention to my brand, which is
(20:54):
a universal problem.
And I said that's funny, that'swhat we do at Bevstrat now in
Best Bev Sales.
How many cases did you selllast year?
And he said 100,000 cases.
So just think about the logic100,000 cases is a top 1% seller
globally, 100,000.
And he's still not getting theattention from his distributor.
(21:15):
And so how are you, small brandthat's making wine in some
cottage in Oregon?
How are you, small brand that'smaking wine in some cottage in
Oregon?
How are you?
That's like a stereotypical,like wine thing.
But how are you going to getshare of market?
What are you going to do?
So?
First, you're going to identifywho your competition is.
Second, you're going toidentify why the retailer needs
to carry you, why the bar needsto carry you, and all three
(21:39):
tiers of the three tiertiersystem have a different audience
.
Right, the distributor doesn'twant to get stuck with the brand
.
That's the first thing.
The retailer doesn't want toget stuck with the brand and be
able to sell the brand to paytheir bills in net 30 days.
The consumer wants to discoversomething different.
Tell their friends about Threedifferent marketing messages for
three different audiences.
(21:59):
So that's the challenge thatany winemaker has in coming into
market.
They think in Europespecifically, which a lot of our
customers collectively comefrom, you go right from the
vineyard to the kitchen table ofthe customer or from the
vineyard to the retailer or thebar In the US.
You go from Europe to theimporter, to the distributor, to
the retailer or the bar In theUS.
(22:20):
You go from Europe to theimporter, to the distributor, to
the retailer, to the consumer.
It's three, four audiences thatyou have to speak and they all
speak a different language.
I don't mean a vernacular orlinguistically.
They speak a different languagein terms of what's important to
them, right?
So how do they come to market?
What's my best practice?
You've got to speak all thesetongues, right.
(22:41):
So you've got.
So how do they come to market?
What's my best practice?
You've got to speak all thesetongues, right, all these
different linguistic gymnastics,because each audience has a
different thing that isimportant to them, and so you've
got to know that, you've got tounderstand that, you've got to
be able to tailor your marketingmessage.
Speaker 3 (22:55):
That makes a lot of sense, and I think that is
something that an investor wouldcertainly bring to the table in
terms of partnership support,not purely just financial.
I mean to be able to know howto program your distributors,
how to speak to the retailers.
Like you mentioned, it's alldifferent languages, so I think
that's that's a really key pieceof value that you're offering
(23:16):
there.
Speaker 4 (23:17):
Yeah, and no one understand that.
No one's going to do it.
But you, you know no one'sgoing to do it, but you, your
distributor, and no matter whothey are, distributor X.
At any end of the day, there'smore brands than distributors
and there's no.
There's more brands thandrinkers.
So how are you going to breakthrough?
Is it going to be depletionallowance?
Is it going to be marketing andsales?
Is it going to be supporting?
(23:38):
Ride with and support?
All of those things are on thetable, but to the consumer this
is important to the consumerthey only know 10 brands total
in their vernacular.
We collectively here on thescreen know a lot more because
we're in the business, but to aconsumer who never heard of
Santa Margarita, Pinot Grigio,that could be private label to
them, that could be a new brandto them.
(24:05):
The consumer knows 10 brands.
So you're uphill battling allthe time.
All the time.
If you're not Kendall Jacksonor Cambria or Estancia or Mouton
Rothschild, you are uphillbattling.
So there's a positive andnegative.
The positive is you can makeyour own way any day.
You can create your own brandstory, because no one knows of
your brand.
Two is you've got a big hill toclimb on the negative side, but
(24:27):
no one knows your brand anyway.
So it's really blue oceananytime you go into market and
it's up to the person who ownsthe brand to tell that brand
story in a way that's compellingfor every level of the three
tiers.
Speaker 2 (24:40):
Brian, operationally, wineries are very often, we
know, family-owned, long-timegenerational ownership and they
have had their productionprocess and their staff and the
way they pick the grape, the waythey, you know, whatever they
do, they've had their processesin place for years.
When investment companies comein, do they often restructure
(25:01):
that or create any efficienciesat that end of the fence or do
they focus on this side of thefence, just typically the brand
building in market?
Speaker 4 (25:11):
Yeah, it depends really what's in the portfolio
of the PE firm.
So, for instance, at our firmat Invespev we own bottling line
or canning lines, things likethat, so we can provide
efficiencies there.
But generally, if it ain'tbroke, don't fix it.
There's a reason we invest in awine company and it's not to
(25:31):
change the way they do businessor how they pick a grape.
That's not my area of expertise, that's a very select skill set
that I do not want to play in.
But if they need more efficientuse of capital, your private
equity partner can be that.
If you need a logistics partnerthat can get your wine from
Napa to New York more cheaply,we can do that as your partner.
(25:55):
But I don't have the ability northe desire to remake the pie,
because if I gave you $10million for your business,
that's our vote of confidencethat you're doing it right.
If I gave you the money andthen I started to go there for
crush and started to put my barefeet inside a tub of grapes,
(26:16):
you don't use me for that.
That's a bad use of capital.
That's a bad use of capital.
That's a bad use.
It's a bad use of yourinvesting partner.
Speaker 3 (26:23):
So, piggyback on that , how does provenance and, like
different varietals, play intoinvestment criteria?
So are there any regions andvarietals that you're seeing as
strong in the market, or doesthis really not even matter if
brand performance is strong?
And how do you also see some ofthe larger portfolios, not just
PE firms, thinking aboutaddressing this varietal white
(26:45):
space?
Speaker 4 (26:47):
Yeah, the important thing to understand is that, at
least as it relates to Invespevand other firms our size, we're
SEC-registered companies.
We're what's called registeredinvestment advisors.
We're monitored by theSecurities and Exchange
Commission.
We're what's called registeredinvestment advisors.
We're monitored by theSecurities and Exchange
Commission.
I'm a financial buyer.
My overall goal is to, if thewhole world drinks red wine and
you're making a white wine, I'mnot a white wine buyer, but
(27:10):
aside from that kind ofin-your-face data, it's about
gross margin, operating expense,revenue, net income and debt.
That's what it's about for meand if I can see a way towards
profitability and when I say I,I mean we have a whole robust
team in Chicago that really isthe ones kind of pouring through
(27:30):
.
That does the diligence.
But the reality is I had coffeeyesterday with a guy who owns
40 car washes in Miami.
Very unsexy business, you know,but it's a necessary business,
but unsexy.
So he doesn't care if you'rewashing a Porsche or a Chevy.
I don't care what the varietalis, what at all.
(27:52):
What I care about is are you aprofitable business, are you
well run and is there anaudience for what you make and
create?
And all financial buyers arethe same.
Now, if I am part of the privateequity firm that, for instance,
just Jackson founded JacksonFamily, which is a multibillion
dollar they own 100 marks orBill Foley, another multibillion
(28:16):
dollar person, foley Estatesthose guys are buying for voids
in their own portfolio.
They're buying the missingpiece of their own pie.
And to add to the greater goodis very is a creative.
I'm not doing that.
We're financial buyers.
Be profitable, be a goodfounder, know that you need
(28:38):
support, take criticism well andhave a path to exit Right.
Those are what we look for.
I'm not so concerned withVarietal or Tarar or where in
the region you are.
Again, uzbekistan wineries arenot for me, but if it's
California, napa, southernHemisphere, old World, new World
(28:59):
, we'll take a look at it forsure.
Speaker 2 (29:01):
Brian, I know we touched on this a little bit
before the different packagingconcepts like canned wines and
RTV wine products, and we knowthey're popular right now and
they appeal to both wine andspirits consumers.
Do you see this lasting andwhat are other noteworthy trends
in the category right now?
Speaker 4 (29:21):
Great question.
And so you got to go back toCOVID and you have to look at,
everyone was cooped up for acouple of years.
But people want to be on themove.
So they want canned becausecanned is on the go.
They want all of these thingsin terms of taking your wine on
the go.
Now that also implies that theserving size is going to be
smaller, because you can't.
(29:41):
There's no biodegradable winebottle 750.
That's five to seven drinks.
That doesn't exist.
So what we see is from a trendforward is tetra packing the
packaging like the beat boxes in.
We like that as a go forward.
We like small eight ounce canslike Nomadica, one of our
portfolio brands.
Nomadica wines, small cans thatyou can.
You bring to a concert venue,you bring to a kid's soccer game
(30:04):
, you bring on the move.
And then we also like thistrend of resealable.
Resealable anything, right.
Because the days of forcing theconsumer to drink a bottle of
wine in one sitting, when peopleare drinking less, that's not a
thing.
You want to be able to put areseal back on your bottle of
wine and then put it somewhereor save it for later.
(30:26):
So those are three trends.
For sure I love thenon-alcoholic trend.
We are heavily invested, as Isaid, in Sashi and others and
from a non-alcoholic perspectiveand also note this, people want
to get together for sessionableactivities and assuming COVID
never, happened.
You want people to come togetherand enjoy, so label design
(30:46):
becomes critical.
If I look at a label likeNomadica or even and I forget
the name now Cameron Diaz has,she's got a great wine out there
that looks like cleaningredients on the label, the
way that RX bar did it.
That kind of packaging Peoplewant that.
There's a move towardslongevity.
There's a move towardshealthier living.
There's a move towards knowingwhat you put in your body and
(31:08):
then saving the planet.
And whether you're a minorityor majority in that the planet
game, you still want toparticipate in some good
activity like that.
So those are things that we seegoing forward and those are the
investments we're looking at.
You know, someone making a 1.5liter of a Sutter Home type wine
has no great investment.
(31:30):
Appeal to me.
Box wine is very popular.
Throw it away when you're done.
Save the landfills.
Those are not going away andwhile they're now, they're less
than 3% of the consumptionmarket.
They are increasing everysingle quarter as a generation.
That's under well, it'sBridget's generation, but it's
under.
It's undermined for sure.
They want to do better by theenvironment and those brands are
(31:51):
going to take hold.
Speaker 3 (31:52):
Yep, I would even say Gen Z is more into it now than
millennials, and that'ssomething that you know.
We just got our organiccertification across the board
for MHW, USA Wine West, USA WineImports and it was pretty
shocking, like how many clientswe have that you know fall into
that category, and even when I'mthinking about my own
(32:14):
consumption now, organic, theresealable, everything that you
mentioned is something that Ilook for, so certainly I agree
with your thought process there.
How do you evaluate successafter a winery merger or
acquisition and what does thattimeline look like?
That you're looking intodifferent metrics for success.
Speaker 4 (32:34):
Having gone through two exits myself, there's always
a step backwards before a stepforward.
You at MHW have gone through acouple of those.
You've got to step backwards.
There is an absorption of thecapital, there is new management
, there is a new board member,there is all sorts of things
that change post-acquisition,post-merger.
So I expect that right.
(32:56):
So I expect six months of flatsales, of confusion, of morale
issues, all of those things.
And then we call leadershiptogether and we say now let's
get on the gas.
And I know, marianne, this isprobably a playbook you've read
right, let's get on the gas andlet's go.
And so when I evaluate aninvestment, I don't evaluate it
(33:18):
immediately, I don't evaluate itin six months.
You need at least four quartersto absorb professional capital.
It is a new way of doingbusiness and Marianne said it at
the top of the show,professional money is serious,
right.
And when you invest inbusinesses and they're family
businesses, so they're not usedto the rigor that we have as
(33:42):
investor capital, right, thesewinery owners, these winery
owners, when you really thinkabout it, if you drill it down,
they're farmers, not in thetruest sense.
You know up with the crows, butthey are farmers and they farm
land.
So when you come in there andyou talk about EBITDA and you
talk about operational expenseand taxable income and
(34:03):
depreciation analysis and all ofthese things that are important
to an investor, all they wantto do is make great wine.
So you have to really have amiddle of where financial acumen
meets creativity and growth,and that takes about a year, and
then at the year, we sit downwith ownership and we say this
is what we've seen in the lastyear, this is what we think is
working, what we think is notworking, and we start to assert
(34:25):
ourselves a little more.
But any PE firm that gets in themiddle right away, it doesn't
work.
And it answers a question thatwas asked earlier.
I am not a farmer, I am not awine grower, I am not a terroir
expert.
I don't know which side of thehill gets the most sun.
What I know is how to read aP&L.
That's about it, right.
(34:46):
So and how to support founders,having been a founder multiple
times.
So that's what we look forAgain.
That's why picking the rightfounder going into a transaction
is not so you have someone goodto celebrate your closing
dinner with.
It's so when the shit hits, thefan down the road.
You've got a partner in thetrenches with you and not an
(35:06):
enemy, and that's what I lookfor in a year's time.
Speaker 1 (35:13):
All right Time for the fun question that we like to
ask all of our guests what isyour favorite alcoholic beverage
right now, or desert island?
Whatever you feel.
Speaker 4 (35:23):
It's hard to have this answer, being in this
business for three generations,but I am not a good candidate
for this question because Idon't really drink that much
anymore.
I have found that as I'vegotten older, I have consumed
less and less.
Now, that being said, in myhouse here where I sit, we have
(35:45):
a refrigerator full of CannC-A-N-N, which is a cannabis
beverage, which is a brand thatwe own.
That's the number one sellingcannabis beverage in the country
and I have some gin, someBombay, sapphire or Hendrix.
So that is what I'm.
That's the train that I'm on.
As you get older, it's harder tofeel better the next day, so I
(36:05):
want to be able to get up atfive o'clock am, get my workout
in and not be on the strugglebus.
So my favorite libation isprobably a cannabis beverage or
one or two gin drinks a week.
But I've really kind of cutback, and this speaks to what
the trend is in America is kindof slowing down.
This coincides with the uptickin the Better For you movement
(36:29):
or the Aptogen movement or thenon-alcoholic movement.
So I am not an outlier.
I am a consumer.
That is very representative ofmy age group.
Speaker 1 (36:38):
Brian Rosen and Gen Z are like this.
Speaker 2 (36:42):
He just gets younger by the day.
Speaker 4 (36:45):
Oh yeah.
Speaker 1 (36:48):
Thank you very much to our guest, brian Rosen, for
stopping by.
Investbevcom is the websitethat you can check out.
Listeners can check out furtherlinks in the show notes.
We'll have those for you, butfor now we have to say goodbye,
so thank you so much for sharingyour expertise with us, brian
Rosen.
Speaker 4 (37:05):
I tripped on memory lane and a pleasure and thank
you everyone for having me today.
Speaker 2 (37:08):
Great to see you Look forward to the end of the month
.
Speaker 1 (37:11):
Great to see you and thank you listeners for joining
us on the MHW Mark podcast, andthanks again to Marianne Pizzani
and Bridget McCabe for helpingme in hosting.
Speaker 2 (37:20):
Thanks a lot, Jimmy.
It was a great session.
It was great to hear from Brian.
Speaker 3 (37:24):
Thank you so much.
Speaker 1 (37:26):
This podcast is produced by me, Jimmy Moreland,
with booking and planningsupport by Cassidy Poe and
Bridget McCabe.
It's presented by MHW.
Find out more at mhwltdcom orconnect with MHW on LinkedIn.
Lend us a hand by subscribing,rating and reviewing this
podcast wherever you listen.
We'll be back in your feed intwo weeks.
We'll see you then, Cheers.
Welcome to the MHW Mark podcast, where we take deep
dives into various aspects ofthe alcohol industry.
My name is Jimmy Moreland.
Mhw is a US and EU beveragealcohol importer, distributor
and service provider.
With me today, we have doublethe brainpower to work through
part three of our three-partmergers and acquisition series.
(00:27):
Helping us along in ourdiscussion are two of MHW's
experts.
Welcome to the show MariannePisani and Bridget McCabe.
Speaker 2 (00:35):
Good to be here.
Thanks, Jimmy.
Thank you Jimmy.
Speaker 1 (00:38):
Now for the last two installments of our three-part
series.
Here we looked at M&A in beerand in spirits, and we looked
deep into legal and financialaspects.
What are we doing today on partthree?
Speaker 2 (00:51):
Yeah, jimmy, this episode we're gonna cover M&A in
the wine space.
We've had a long list of wineand champagne clients who have
given or received financialinvestment.
Ace of Spades Jay-Z's brand isa great example of that.
We've also seen several of ourlarge wine portfolios merger or
acquire wineries across Europeand the US in order to fill the
(01:14):
geographic white spaces in theirportfolio.
From a back office standpoint,mhw is built to support this
kind of growth, such as ourlongtime client, hb Wine
Merchants, who imports hundredsof wines from many different
regions.
Navigating the compliance,logistics and transitions
in-house would be so challengingand expensive for any large
(01:36):
wine portfolio who regularlyacquires products or wineries,
but MHW simplifies thesecomplexities significantly.
Wineries but MHW simplifiesthese complexities significantly
.
Due to the environment rightnow, with US wine consumption
and sales, it makes sense thatinvestment is needed.
Mergers and acquisitionactivity is happening primarily
from the investors or brandhouses who have strong marketing
(01:58):
and sales backgrounds.
So our guest today is going toreally clear up a lot of this
for us in terms of M&A for wine.
Speaker 1 (02:07):
Very good.
Well, without further ado,let's jump into that discussion
with our guest.
Our guest today is the founderof the Growth Beverage
Collective of Brands, whichincludes Sprout Beverage,
investbev, bevstrat and AlgomaCapital.
Welcome to the show, brianRosen.
Welcome.
Speaker 4 (02:24):
Thank you for having me.
I'm happy to be here.
Let's talk about beverages.
Speaker 1 (02:27):
Let's get into it.
Can you give us a little bitmore, just a little bit of
background on yourself?
I know that we've got a big oldbio here, but I don't want to
bore the listeners by reading itmyself.
I'd rather hear it from the manhimself.
Speaker 4 (02:37):
Sure, I'm happy to bore them with my own voice.
I'm a lifelong beverage guy.
My family was the very firstliquor license in Chicago.
After prohibition we turnedthat into America's number one
retailer in Chicago called Sam'sLiquors.
Um, I sold that to a privateequity firm.
From there I went to WhiteHouse Cooper's and created the
(02:59):
adult beverage practice for PWCand from there came back to
Chicago.
I founded a company in 2015called Bevstrat and InvestBev.
At the time I was fortunateenough to grow Bevstrat to be a
pretty sizable company.
I sold that in 2019.
And now I'm left with and Ishouldn't say left with, because
they're all great companies,but I'm left with Bevstrat,
(03:21):
investbev, algoma Capital andSprout Beverage all part of the
Growth Beverage Group.
Together, it roughly is abouthalf a billion dollars of assets
under management.
Speaker 2 (03:32):
Certainly, I've enjoyed the opportunity to work
with you over the years, brian,and it's great to have you here
on the podcast.
So, to kick it off, whatinspired you to launch InvestBev
?
Speaker 4 (03:43):
Well, thank you, marianne.
I've enjoyed working with youand the team at MHW for many
years.
Invespev was a naturalevolution for me.
Having been in the business mywhole entire life, having sold
two companies to private equity,what I really realized was that
what the industry needs is aprivate equity advocate, is a
financial advocate.
(04:03):
All the brands that we workwith at MHW, at InvestBev and
elsewhere those brands arestarving of capital.
They're starving ofintellectual support, experience
, support, someone to be ontheir team that says I've done
this before, type of thing.
And so InvestBev fills anatural void in there.
(04:25):
And then when I went into thegeneral market to raise capital,
it was natural.
There the investors saw that95% of brands struggle, 5% make
it, but the 5% that make itreturn 14, 15 multiple on
revenue.
So big numbers and people talkabout and your listeners, I'm
(04:47):
sure, know this People talkabout Aviation Gin selling for
six hundred million dollars orCasa Amigos selling for one
point one billion.
But the reality is those arebig, sexy, popular brands.
But the reality is there aresales that happen every single
week at 40 and 50 and 60 milliondollars that no one talks about
because they're not sexy.
So we play in that role oftaking a brand from 10,000 cases
(05:11):
to 20,000 cases and thenshopping them for exit, and it's
a needed, what I would callwhat we call in the office,
frankly, the farm league.
It's a great farm league beforeyou get to the pros and no one
is there doing that.
So Invespev fits a void that'screated by just the massive
exits that occur in the business.
Speaker 3 (05:30):
How does Invespev scout its investments?
What type of partnership modeldo you provide and what is the
general criteria and process forbrands that are interested in
entering this process?
Speaker 4 (05:42):
Sure, bridget, all good questions for sure, and the
first thing I look for isfounder.
Is the founder real deal?
There are a lot of people thatwe come across in our universe
where the founder is, oh, thisis my night job, this is my
hobby, or say, hey, I made thisdrink at home and everyone said,
why don't you sell this Right?
(06:02):
And then it becomes a brand.
That's not the founder that wegenerally back.
We back brands that are inmultiple states with MHW and
traditional distribution.
We back brands that arecapitalized to a point they
don't have to be making money.
They have to have 12 monthsreverse revenue of a million
dollars, ttm of a milliondollars, and they have to have
strong and active founders.
(06:22):
We have to have founders thatthis is their life and if it
fails that's bad for their life,and not people that are doing
this as a side hustle, as a gig,on a dare.
Those are not the founders wewant to be a part of.
And then when we get involved,we really get involved with FP&A
, which is financial assistance,with investment, with help them
(06:44):
fundraise, help them writepitch decks.
This is a very, verychallenging business and, as you
know, this business is one ofthose businesses where is one of
those businesses, specifically?
Where you have to spend three,four, $500,000 sometimes before
you sell your first bottle.
You have to go into production,you have to go into label and
cola, you have to go intoformulation.
(07:05):
You have to make 500 casesbefore you sell a single thing.
And then you've got a pricepost and you've got to get a
sales team and you've got tofind a distributor.
Then you've got to go to shows.
You're a half million dollarsin the hole before someone takes
a sip of your brand.
So you've got to do all ofthese things correctly to sell
one bottle, let alone a thousandcases.
So we get involved with thefounder first.
(07:28):
That's the most critical thingfor us the founder Brand second.
So is it a growing brand?
Is it an emerging brand?
Is it a brand that has legs?
I don't have a ton of interestin a Italian limoncello made
from grape leaves by a one-armedwinemaker that is left-footed.
Those know those intricaciesdon't have an audience.
What we always say here is thatif you make a brand for yourself
(07:52):
, you have an audience for one.
If you make a brand foreveryone, you have an audience
of everyone, and so that's thekind of brands we look at.
But it starts with founder.
That's important to know.
And a realistic founder.
You can't give me a pitch deckand use Casa Amigos or Aviation
(08:14):
Gin or Empathy Wines or any BillFoley deal.
You can't bring those thingsand say this is what the
universe is available to us ifwe get big, because that's 1% of
the total makers globally.
That's not realistic.
So you've got to be realisticin your expectations.
And all those things togetherwe put them in a pot and we get
the perfect investmentopportunity.
Speaker 2 (08:33):
So much of that sounds familiar.
Brian, I know one of the thingsthat we do often at MHW is set
expectations right, Because sooften the person sitting across
the table from us does thinkthey've got an exit strategy.
To be Casamigos.
Speaker 4 (08:47):
Yeah.
Speaker 2 (08:48):
And you know one, they're going to do 100,000
cases, you know like.
Take a couple of zeros off ofthat and you'll have a very
successful first year launch.
And talking about getting thatfirst bottle into someone's hand
, it's getting them tounderstand how important bottle
sales are.
Yeah, you're not looking tosell 50 cases at a pop in the
beginning.
You're looking to sell a fewbottles to a really good
(09:10):
on-premise who can feature youon the back bar and things like
that or put you on a cocktailmenu or a wine list.
Speaker 4 (09:17):
Yeah, and Marianne, I would add to that that it's not
the first sale that matters,it's the second.
Speaker 2 (09:21):
Exactly, it's the reorder.
Speaker 4 (09:25):
The first sale, the sale that happens when the maker
is not in front of the buyer.
That's the sale that matters.
I can come to you as a, as aretailer, on or off premise, hat
in hand, and I can say I'm afirst time founder, I put my
heart and sweat in this.
Please take a case for me.
And they will, because it's ahundred dollar investment and
big deal.
But when they're alone in themorning making a shelf list, or
(09:48):
on their iPad or whatever makinga shelf list, is this the brand
they're going to rebuy or theybuy it as a sympathy buy.
And so it's that second buythat matters and that comes with
on-premise tastings andactivations.
Off-prem working Thursdays,fridays, saturday, sunday,
(10:11):
behind a four foot table at someliquor store somewhere, selling
your soul.
That's how it.
That's how it goes.
And I've been in thoseboardrooms with you, marianne,
where, where the maker comes inand says I've got the next Casa
Amigos.
Yeah, and I would hate to quoteJesse Eisenberg from the social
network, but if you inventedFacebook, you would have
invented Facebook.
Right, exactly Right.
If you were Casa Amigos, youwould have been Casa Amigos, and
(10:31):
the world doesn't need anotherCasa Amigos, because Casa Amigos
came at the perfectintersection of the beginning of
celebrity brand and the boom ofconsumer tequila love, you know
, and it came together and thathas not happened since.
Speaker 2 (10:46):
Exactly so.
I'm looking forward toattending the Invespev pitch
week.
Can you tell us a little bitabout the purpose and the intent
of that week?
Speaker 4 (10:56):
Sure.
So Invespev was a creation thatcame out of brands coming to us
for capital, years and years ofcoming to capital, but having
no real training is the wrongword, but bootcamp is a better
word.
They come and they say well, wewant to start a brand, we want
to try this, we want to try that, but we're not familiar with
the industry.
(11:16):
But what do you think aboutthis?
So it turned into a sort of anincubator.
So so the InvestBev incubatoris a 90day program that meets
twice in person in Chicago,twice virtually, and then twice
at the end for pitch day inChicago.
Specifically, we have in ourcohorts about 14 brands and
(11:37):
they're vying for $100,000 fromus, $50,000 in cash and $50,000
in services, including our FP&Aprogram or sales or marketing or
HR.
What have you?
And they do Shark Tank style,in front of a room and we've got
judges, five judges that voteon does this brand come into the
portfolio and there's a winner.
(11:58):
And at this pitch day, whichyou guys will be at, it's not.
Losing is not losing, becauseif you don't get this prize
which is unfortunate, but youonly have one winner, so that's
life.
No participation trophies here,but in this case, in this case.
We flood the audience withinvestors, distributors, other
(12:19):
support service people.
So, for instance, in last pitchday we had a winner in Suyo
Pisco people.
So, for instance, in last pitchday we had a winner in Suyo
Pisco.
Now they won the prize, but thelosers or the second place
people one of them got adistribution deal from Allied on
the East Coast.
One of them got a privateinvestor to put in $100,000.
(12:39):
That was there.
So we flood the audience with40 or 50 people that love the
industry, love Adele, bev, likeit as an investment opportunity
or as a partnership opportunity.
And so not winning the bigprize doesn't mean you don't win
.
It just means not winning thebig prize.
And, as we all know, this is along, long tail game.
And so we created this friendlyenvironment where brands can A
(13:06):
hone their skills, b at leastlearn something like in a boot
camp style education from peoplefrom our universe, so taught by
Gustavo Aguilera, who is a headof innovation at Molson Coors,
who works for us.
I'm in there as a guestlecturer.
Giuseppe Infusino is our chiefinvestment officer and he will
talk to these brands about whatit takes to be invested in.
(13:28):
We bring in liquor lawyers fromMcDermott, will Emery.
We bring in label and bottledesigners from Scout A whole
bunch of different people.
We bring in Breakthrough, webring in Constellation Brands,
and they all are teaching thesepeople what they look for.
So instead of going ragged intothe universe as a brand, you
can get narrow focused and ifyou don't have success from us,
(13:49):
as far as the end of the day,there is someone in there that
could find value in your brand.
So it's a win-win for allparties.
Speaker 1 (13:56):
Now for folks who are curious listening to this, we
will drop links to the InvestBevpitch week in the show notes.
So if you are a brand, you canfollow up and see if your brand
is perhaps ready to participatein the next pitch week.
Or if you're an investor, youcan check that out and see if
there's anything that interestsyou there.
Now, brian on the podcast.
(14:16):
Here we are doing part three ofour three-part series on
mergers and acquisitions, andwe've already talked beer and
spirits in parts one and two.
Today we're looking at wine.
How does the M&A environment inthe wine world differ
specifically from the spiritsand beer categories?
Speaker 4 (14:34):
The wine world is having some challenges right now
.
Wine, however, carries thegreatest gross margin of all the
categories you mentioned beerand spirits so M&A activity
still is frothy around wine.
The consumer sentiment is downaround wine.
So investors like ourselveswe're still looking at wines to
invest in and we own quite a fewinside our portfolios, but the
(14:56):
drinking overall has gone down.
So when I look at wine I wouldlook at it in two categories
from an M&A standpoint.
One is a crossing or a comingtogether of wine and to-go, so
RTD type wine, wine in smallcans, things that people can
take wine on the road, on themove.
That's very hot right now.
It's a combination of the RTDsector, which is very hot, and a
(15:19):
combination of to-go ready todrink and to-go drinking on the
train, drinking in the park,drinking a sessionable activity.
And then, conversely, in ourFund 5, we have a non-alcoholic
wine, sushi which is the numberone wine in target stores
nationally.
So we like to think that thewine forward movement is going
(15:40):
to be non-alc.
The regular wine movement isnot going to change, but non-alc
is going to be the driver.
And so we like wine as M&AInvestors like wine because it
has a great gross margin, whichmeans it has a great multiple at
exit.
But it'll be a challenge sectorfor a bit until there's going
to be a shakeout.
And so, once the playing fieldlevels, all three investment
(16:04):
categories wine, beer and spiritwill still remain strong.
And, by the way, people love theindustry in general because
it's totally non-correlated.
This is a non-correlated assetclass, no matter who's president
, no matter what theunemployment rate is, no matter
what interest rates are, peopledrink, that is a fact.
It is a non-correlated assetclass and it's a safe place and
a stable place to put moneybecause it's a hard asset.
(16:25):
So, softness or not softness,the category remains vibrant.
Speaker 2 (16:30):
So, acknowledging the challenges that you know wine
is facing, and you know we'vegot the consumers you know,
especially the youngerdemographics, really turning
from wine, what advice do yougive a wine brand you know
looking to launch in the US withavailability, seeking
investment or acquisition?
What advice do you give them?
Speaker 4 (16:51):
I think that it's really do your research before
you spend your money.
There are a lot of people andwe know them all who will send
two containers of wine to the USand then try and figure out the
US.
They will send two containersMarianne's laughing because you
know it's correct.
And so you know they'll put abunch of containers at Western
and they will not have a salesteam here, they will not have a
(17:12):
marketing plan, they will notknow their audience.
Do your research here.
Research is free.
Mistakes are expensive.
Do your research here.
Research is free.
Mistakes are expensive.
Do your research.
Come here, walk the top 10liquor stores in New York City.
Talk to the buyers.
What are they missing in theirSKU set and what can you add
value there?
What is the price point thatsells the most?
Wine is an interesting thingfrom an investable standpoint,
(17:33):
because I know this from my daysin retail.
When a consumer goes to aretailer either a bar,
restaurant or liquor store thespirit side of that is a called
item.
I drink Dewars, I'm going to gobuy Dewars.
I drink Monkey 47, I'm going togo buy Monkey 47.
They're not as open toexperimentation.
The wine category is totallydifferent.
(17:54):
In the wine category.
They will go to theirshopkeeper or their bartender
and say what do you recommend?
What's on the wine list?
They will go to theirshopkeeper or their bartender
and say what do you recommend?
Speaker 3 (18:01):
What's on the wine list?
That is very true.
Speaker 4 (18:02):
I'm having chicken tonight.
What can I bring home for $20or less?
It becomes dealer choice.
It becomes a choice of theshopkeeper, the choice of the
bartender, If you make it on thedrink list, all of the wine
list, all of those things.
So your first move in sellingis not the consumer.
Your first move in selling isnot the consumer.
Your first move in selling inthis market is going to be the
(18:22):
on and off-premise account.
You get that buttoned up andthen you can create the pull as
you push your brand down intothe market.
And so, to answer your questiona little less long-winded,
Marianne, what I would say is doyour research before you come
in, understand where the gap isin the market and then build or
create your brand going intothat gap.
Speaker 3 (18:43):
That's great, brian.
You answered a lot of thisquestion already.
But because so many wineriesproduce an excellent product,
you know it's not often thatthey need recipe formulation or
production support, anythinglike that, but they do require
that marketing and sales support, like you mentioned, to be able
to target the on and offpremise appropriately.
(19:05):
So could you tell us how you,as an investor and I would also
add to this as a, you know,experienced beverage salesperson
and marketer how would youapproach the marketing and sales
strategy for a winery that say,maybe they're not new to the US
, maybe they've been in the USfor two to five years, but they
need acceleration?
(19:25):
How would you look at whatthey're doing and how would you
bring that to the next level?
Speaker 4 (19:29):
Sure, the one thing I always think about is that any
brand that comes to market andwhether you're an established
player and at Befstrat we'veworked with or it's now
InvestBevSales, but we've workedwith very established brands,
global brands that funny enough,and I'll tell you an anecdotal
story, but funny enough havefive brands that are killing it
and one brand that isn't andcan't figure out why.
(19:50):
The interesting thing about theindustry is you can make a new
brand, but you don't make a newdrinker right?
The pie is only so big and it'scircular.
So for your brand to havetraction on the shelf or in the
market, you've got to kick theass of another brand and kick
them out.
The shelf is only 44 incheslong.
(20:11):
If you're on the 45th inch,there's no place for you on that
shelf.
Something's got to go.
So when I talk to brand owners,it's always what are you
replacing and how are youattacking that audience?
And from an anecdotalstandpoint, I will share with
you this.
I was on a plane and I wassitting next to a guy who was on
finished up his phone callbefore we took off and that guy
(20:33):
was coincidentally totalcoincidence in the wine business
and he was flying down toSouthern to meet the powers that
be at Southern Glazer.
And I said I hung up the phone.
I said what are you doing?
I'm in the wine business too.
What do you do?
What do I do?
He said I'm flying down to meetSouthern Glazer Wine and Spirit
because they are not payingattention to my brand, which is
(20:54):
a universal problem.
And I said that's funny, that'swhat we do at Bevstrat now in
Best Bev Sales.
How many cases did you selllast year?
And he said 100,000 cases.
So just think about the logic100,000 cases is a top 1% seller
globally, 100,000.
And he's still not getting theattention from his distributor.
(21:15):
And so how are you, small brandthat's making wine in some
cottage in Oregon?
How are you, small brand that'smaking wine in some cottage in
Oregon?
How are you?
That's like a stereotypical,like wine thing.
But how are you going to getshare of market?
What are you going to do?
So?
First, you're going to identifywho your competition is.
Second, you're going toidentify why the retailer needs
to carry you, why the bar needsto carry you, and all three
(21:39):
tiers of the three tiertiersystem have a different audience
.
Right, the distributor doesn'twant to get stuck with the brand
.
That's the first thing.
The retailer doesn't want toget stuck with the brand and be
able to sell the brand to paytheir bills in net 30 days.
The consumer wants to discoversomething different.
Tell their friends about Threedifferent marketing messages for
three different audiences.
(21:59):
So that's the challenge thatany winemaker has in coming into
market.
They think in Europespecifically, which a lot of our
customers collectively comefrom, you go right from the
vineyard to the kitchen table ofthe customer or from the
vineyard to the retailer or thebar In the US.
You go from Europe to theimporter, to the distributor, to
the retailer or the bar In theUS.
(22:20):
You go from Europe to theimporter, to the distributor, to
the retailer, to the consumer.
It's three, four audiences thatyou have to speak and they all
speak a different language.
I don't mean a vernacular orlinguistically.
They speak a different languagein terms of what's important to
them, right?
So how do they come to market?
What's my best practice?
You've got to speak all thesetongues, right.
(22:41):
So you've got.
So how do they come to market?
What's my best practice?
You've got to speak all thesetongues, right, all these
different linguistic gymnastics,because each audience has a
different thing that isimportant to them, and so you've
got to know that, you've got tounderstand that, you've got to
be able to tailor your marketingmessage.
Speaker 3 (22:55):
That makes a lot of sense, and I think that is
something that an investor wouldcertainly bring to the table in
terms of partnership support,not purely just financial.
I mean to be able to know howto program your distributors,
how to speak to the retailers.
Like you mentioned, it's alldifferent languages, so I think
that's that's a really key pieceof value that you're offering
(23:16):
there.
Speaker 4 (23:17):
Yeah, and no one understand that.
No one's going to do it.
But you, you know no one'sgoing to do it, but you, your
distributor, and no matter whothey are, distributor X.
At any end of the day, there'smore brands than distributors
and there's no.
There's more brands thandrinkers.
So how are you going to breakthrough?
Is it going to be depletionallowance?
Is it going to be marketing andsales?
Is it going to be supporting?
(23:38):
Ride with and support?
All of those things are on thetable, but to the consumer this
is important to the consumerthey only know 10 brands total
in their vernacular.
We collectively here on thescreen know a lot more because
we're in the business, but to aconsumer who never heard of
Santa Margarita, Pinot Grigio,that could be private label to
them, that could be a new brandto them.
(24:05):
The consumer knows 10 brands.
So you're uphill battling allthe time.
All the time.
If you're not Kendall Jacksonor Cambria or Estancia or Mouton
Rothschild, you are uphillbattling.
So there's a positive andnegative.
The positive is you can makeyour own way any day.
You can create your own brandstory, because no one knows of
your brand.
Two is you've got a big hill toclimb on the negative side, but
(24:27):
no one knows your brand anyway.
So it's really blue oceananytime you go into market and
it's up to the person who ownsthe brand to tell that brand
story in a way that's compellingfor every level of the three
tiers.
Speaker 2 (24:40):
Brian, operationally, wineries are very often, we
know, family-owned, long-timegenerational ownership and they
have had their productionprocess and their staff and the
way they pick the grape, the waythey, you know, whatever they
do, they've had their processesin place for years.
When investment companies comein, do they often restructure
(25:01):
that or create any efficienciesat that end of the fence or do
they focus on this side of thefence, just typically the brand
building in market?
Speaker 4 (25:11):
Yeah, it depends really what's in the portfolio
of the PE firm.
So, for instance, at our firmat Invespev we own bottling line
or canning lines, things likethat, so we can provide
efficiencies there.
But generally, if it ain'tbroke, don't fix it.
There's a reason we invest in awine company and it's not to
(25:31):
change the way they do businessor how they pick a grape.
That's not my area of expertise, that's a very select skill set
that I do not want to play in.
But if they need more efficientuse of capital, your private
equity partner can be that.
If you need a logistics partnerthat can get your wine from
Napa to New York more cheaply,we can do that as your partner.
(25:55):
But I don't have the ability northe desire to remake the pie,
because if I gave you $10million for your business,
that's our vote of confidencethat you're doing it right.
If I gave you the money andthen I started to go there for
crush and started to put my barefeet inside a tub of grapes,
(26:16):
you don't use me for that.
That's a bad use of capital.
That's a bad use of capital.
That's a bad use.
It's a bad use of yourinvesting partner.
Speaker 3 (26:23):
So, piggyback on that , how does provenance and, like
different varietals, play intoinvestment criteria?
So are there any regions andvarietals that you're seeing as
strong in the market, or doesthis really not even matter if
brand performance is strong?
And how do you also see some ofthe larger portfolios, not just
PE firms, thinking aboutaddressing this varietal white
(26:45):
space?
Speaker 4 (26:47):
Yeah, the important thing to understand is that, at
least as it relates to Invespevand other firms our size, we're
SEC-registered companies.
We're what's called registeredinvestment advisors.
We're monitored by theSecurities and Exchange
Commission.
We're what's called registeredinvestment advisors.
We're monitored by theSecurities and Exchange
Commission.
I'm a financial buyer.
My overall goal is to, if thewhole world drinks red wine and
you're making a white wine, I'mnot a white wine buyer, but
(27:10):
aside from that kind ofin-your-face data, it's about
gross margin, operating expense,revenue, net income and debt.
That's what it's about for meand if I can see a way towards
profitability and when I say I,I mean we have a whole robust
team in Chicago that really isthe ones kind of pouring through
(27:30):
.
That does the diligence.
But the reality is I had coffeeyesterday with a guy who owns
40 car washes in Miami.
Very unsexy business, you know,but it's a necessary business,
but unsexy.
So he doesn't care if you'rewashing a Porsche or a Chevy.
I don't care what the varietalis, what at all.
(27:52):
What I care about is are you aprofitable business, are you
well run and is there anaudience for what you make and
create?
And all financial buyers arethe same.
Now, if I am part of the privateequity firm that, for instance,
just Jackson founded JacksonFamily, which is a multibillion
dollar they own 100 marks orBill Foley, another multibillion
(28:16):
dollar person, foley Estatesthose guys are buying for voids
in their own portfolio.
They're buying the missingpiece of their own pie.
And to add to the greater goodis very is a creative.
I'm not doing that.
We're financial buyers.
Be profitable, be a goodfounder, know that you need
(28:38):
support, take criticism well andhave a path to exit Right.
Those are what we look for.
I'm not so concerned withVarietal or Tarar or where in
the region you are.
Again, uzbekistan wineries arenot for me, but if it's
California, napa, southernHemisphere, old World, new World
(28:59):
, we'll take a look at it forsure.
Speaker 2 (29:01):
Brian, I know we touched on this a little bit
before the different packagingconcepts like canned wines and
RTV wine products, and we knowthey're popular right now and
they appeal to both wine andspirits consumers.
Do you see this lasting andwhat are other noteworthy trends
in the category right now?
Speaker 4 (29:21):
Great question.
And so you got to go back toCOVID and you have to look at,
everyone was cooped up for acouple of years.
But people want to be on themove.
So they want canned becausecanned is on the go.
They want all of these thingsin terms of taking your wine on
the go.
Now that also implies that theserving size is going to be
smaller, because you can't.
(29:41):
There's no biodegradable winebottle 750.
That's five to seven drinks.
That doesn't exist.
So what we see is from a trendforward is tetra packing the
packaging like the beat boxes in.
We like that as a go forward.
We like small eight ounce canslike Nomadica, one of our
portfolio brands.
Nomadica wines, small cans thatyou can.
You bring to a concert venue,you bring to a kid's soccer game
(30:04):
, you bring on the move.
And then we also like thistrend of resealable.
Resealable anything, right.
Because the days of forcing theconsumer to drink a bottle of
wine in one sitting, when peopleare drinking less, that's not a
thing.
You want to be able to put areseal back on your bottle of
wine and then put it somewhereor save it for later.
(30:26):
So those are three trends.
For sure I love thenon-alcoholic trend.
We are heavily invested, as Isaid, in Sashi and others and
from a non-alcoholic perspectiveand also note this, people want
to get together for sessionableactivities and assuming COVID
never, happened.
You want people to come togetherand enjoy, so label design
(30:46):
becomes critical.
If I look at a label likeNomadica or even and I forget
the name now Cameron Diaz has,she's got a great wine out there
that looks like cleaningredients on the label, the
way that RX bar did it.
That kind of packaging Peoplewant that.
There's a move towardslongevity.
There's a move towardshealthier living.
There's a move towards knowingwhat you put in your body and
(31:08):
then saving the planet.
And whether you're a minorityor majority in that the planet
game, you still want toparticipate in some good
activity like that.
So those are things that we seegoing forward and those are the
investments we're looking at.
You know, someone making a 1.5liter of a Sutter Home type wine
has no great investment.
(31:30):
Appeal to me.
Box wine is very popular.
Throw it away when you're done.
Save the landfills.
Those are not going away andwhile they're now, they're less
than 3% of the consumptionmarket.
They are increasing everysingle quarter as a generation.
That's under well, it'sBridget's generation, but it's
under.
It's undermined for sure.
They want to do better by theenvironment and those brands are
(31:51):
going to take hold.
Speaker 3 (31:52):
Yep, I would even say Gen Z is more into it now than
millennials, and that'ssomething that you know.
We just got our organiccertification across the board
for MHW, USA Wine West, USA WineImports and it was pretty
shocking, like how many clientswe have that you know fall into
that category, and even when I'mthinking about my own
(32:14):
consumption now, organic, theresealable, everything that you
mentioned is something that Ilook for, so certainly I agree
with your thought process there.
How do you evaluate successafter a winery merger or
acquisition and what does thattimeline look like?
That you're looking intodifferent metrics for success.
Speaker 4 (32:34):
Having gone through two exits myself, there's always
a step backwards before a stepforward.
You at MHW have gone through acouple of those.
You've got to step backwards.
There is an absorption of thecapital, there is new management
, there is a new board member,there is all sorts of things
that change post-acquisition,post-merger.
So I expect that right.
(32:56):
So I expect six months of flatsales, of confusion, of morale
issues, all of those things.
And then we call leadershiptogether and we say now let's
get on the gas.
And I know, marianne, this isprobably a playbook you've read
right, let's get on the gas andlet's go.
And so when I evaluate aninvestment, I don't evaluate it
(33:18):
immediately, I don't evaluate itin six months.
You need at least four quartersto absorb professional capital.
It is a new way of doingbusiness and Marianne said it at
the top of the show,professional money is serious,
right.
And when you invest inbusinesses and they're family
businesses, so they're not usedto the rigor that we have as
(33:42):
investor capital, right, thesewinery owners, these winery
owners, when you really thinkabout it, if you drill it down,
they're farmers, not in thetruest sense.
You know up with the crows, butthey are farmers and they farm
land.
So when you come in there andyou talk about EBITDA and you
talk about operational expenseand taxable income and
(34:03):
depreciation analysis and all ofthese things that are important
to an investor, all they wantto do is make great wine.
So you have to really have amiddle of where financial acumen
meets creativity and growth,and that takes about a year, and
then at the year, we sit downwith ownership and we say this
is what we've seen in the lastyear, this is what we think is
working, what we think is notworking, and we start to assert
(34:25):
ourselves a little more.
But any PE firm that gets in themiddle right away, it doesn't
work.
And it answers a question thatwas asked earlier.
I am not a farmer, I am not awine grower, I am not a terroir
expert.
I don't know which side of thehill gets the most sun.
What I know is how to read aP&L.
That's about it, right.
(34:46):
So and how to support founders,having been a founder multiple
times.
So that's what we look forAgain.
That's why picking the rightfounder going into a transaction
is not so you have someone goodto celebrate your closing
dinner with.
It's so when the shit hits, thefan down the road.
You've got a partner in thetrenches with you and not an
(35:06):
enemy, and that's what I lookfor in a year's time.
Speaker 1 (35:13):
All right Time for the fun question that we like to
ask all of our guests what isyour favorite alcoholic beverage
right now, or desert island?
Whatever you feel.
Speaker 4 (35:23):
It's hard to have this answer, being in this
business for three generations,but I am not a good candidate
for this question because Idon't really drink that much
anymore.
I have found that as I'vegotten older, I have consumed
less and less.
Now, that being said, in myhouse here where I sit, we have
(35:45):
a refrigerator full of CannC-A-N-N, which is a cannabis
beverage, which is a brand thatwe own.
That's the number one sellingcannabis beverage in the country
and I have some gin, someBombay, sapphire or Hendrix.
So that is what I'm.
That's the train that I'm on.
As you get older, it's harder tofeel better the next day, so I
(36:05):
want to be able to get up atfive o'clock am, get my workout
in and not be on the strugglebus.
So my favorite libation isprobably a cannabis beverage or
one or two gin drinks a week.
But I've really kind of cutback, and this speaks to what
the trend is in America is kindof slowing down.
This coincides with the uptickin the Better For you movement
(36:29):
or the Aptogen movement or thenon-alcoholic movement.
So I am not an outlier.
I am a consumer.
That is very representative ofmy age group.
Speaker 1 (36:38):
Brian Rosen and Gen Z are like this.
Speaker 2 (36:42):
He just gets younger by the day.
Speaker 4 (36:45):
Oh yeah.
Speaker 1 (36:48):
Thank you very much to our guest, brian Rosen, for
stopping by.
Investbevcom is the websitethat you can check out.
Listeners can check out furtherlinks in the show notes.
We'll have those for you, butfor now we have to say goodbye,
so thank you so much for sharingyour expertise with us, brian
Rosen.
Speaker 4 (37:05):
I tripped on memory lane and a pleasure and thank
you everyone for having me today.
Speaker 2 (37:08):
Great to see you Look forward to the end of the month
.
Speaker 1 (37:11):
Great to see you and thank you listeners for joining
us on the MHW Mark podcast, andthanks again to Marianne Pizzani
and Bridget McCabe for helpingme in hosting.
Speaker 2 (37:20):
Thanks a lot, Jimmy.
It was a great session.
It was great to hear from Brian.
Speaker 3 (37:24):
Thank you so much.
Speaker 1 (37:26):
This podcast is produced by me, Jimmy Moreland,
with booking and planningsupport by Cassidy Poe and
Bridget McCabe.
It's presented by MHW.
Find out more at mhwltdcom orconnect with MHW on LinkedIn.
Lend us a hand by subscribing,rating and reviewing this
podcast wherever you listen.
We'll be back in your feed intwo weeks.
We'll see you then, Cheers.
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