NewAge Inc (fka NBEVQ) (NBEVQ)

[NewJerichoMan]

New Age Beverage = Midwest LA Libations?

What is the LA Libations? It's a West Coast-based company that serves as an "incubator" for new beverage products in emerging categories. LA Libations was founded by three former Coke guys that know all aspects of the beverage industry, and they look hip while doing it. They have their own DSD network in California. With that infrastructure in place, they can test and develop new product that they think has the billion dollar potential. Controlling that DSD network allows for vital feedback. They did the testing on ZICO coconut water. But not all the products are third-party. They developed, in house, Aloe Gloe, a plant-based drink. Bigger profits developing your own brands. Below is a their website link.

http://lalbev.com/LA_Libations/Home.html

New Age Beverage has a lot of similar characteristics. They have similar infrastructure (DSD network), except located in the Midwest. Got a former Coke guy on board, as well as the Xing boys - seasoned industry vets. They developed Xing and Aspen Pure in-house. We bought Bucha. We invited Marley in. Once they fully synergize into the DSD network, it'll give a better idea on "proof of concept", or if - and how far- these products can really scale. Most products won't, but the few that do pay for the misses. Ownership of the distribution network makes for fatter margins to help mitigate the misses, too.

Coke's VEB (venture equity brands) arm invested and took a minority position in LA Libations (2014), making LA Libations their de facto "talent scout" for the minor leagues.

LA Libation helped with SUJA. Coke recently take a 30% position in SUJA (privately held company) for $90M. SUJA had $42M in sales the prior year ("proof of concept" stage is $10M to $50M range). That equates to a P/S ratio of 7.14:1.00 (($90M / 30%) / $42M). While that's a big P/S ratio, it's a helluva lot cheaper to buy them while they're young than once they're established. Case in point, Coke paid $2.15B (with a B) for a 16.7% equity position in Monster, which at the time had $2.2B in annual sales. That equates to a P/S ratio of 5.85:1.00 (($2.15B / 16.7%) / $2.2B).

Less risk and more reward for Coke (or Pepsi) to buy equity positions in young products rather than established ones. And the Red and Blue have been reaching deeper and deeper into the "minor leagues" recently. All with the goal of finding tomorrow's big product.

One important differentiator from LA Libations and NBEV is location. NBEV is the Midwest. As the song lyric queried, "I wish they all could be California Girls"? But as we dramatically learned in this past Presidential election, their is a Midwest AND they don't think like those hippy dippy West Coasters or us East Coast elitests. It only makes sense that their be an "incubation system" in the Midwest to serve those needs and preferences of those folks. For a multi-national company, a wider "net" is always better. Eyes and ears on the ground in all marketplaces.