Island Brands

Take it Easy

Analytics

Raised to Date: Raised: $2,790,428

Aggregate Commitments $
Platform

StartEngine

Start Date

11/27/2020

Close Date

09/15/2021

Min. Goal

$9,996

Max. Goal

$3,230,000

Min. Investment

$250

Security Type

Equity - Preferred

Funding Type

RegCF

Series

Seed

Pre-Money Valuation

$65,727,003

Rolling Commitments $
Status

Active

Reporting Date

07/31/2021

Days Remaining

46

% of Min. Goal

27,915%

% of Max. Goal

86%

Likelihood of Max
likely
Avg. Daily Raise

$11,343

# of Investors

2,584

Momentum
hot
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Location

Charleston, South Carolina

Industry

Alcohol, Tobacco, & Recreational Drugs

Tech Sector

Non-Tech

Distribution Model

B2B2C

Margin

Medium

Capital Intensity

High

Business Type

Growth

Island Brands, with a pre-money valuation of $65.7 million, is raising funds on StartEngine. The company makes premium-quality beer as a competition to the major corporate brands. The beer of Island Brands is all-clean and brewed using only water, yeast, barley, and hops. The two flagship products of Island Brands are Island Coastal Lager and Island Active. Scott Hansen and Brandon Perry founded Island Brands in March 2019. The current crowdfunding campaign has a minimum raise of $9,996.17 and a maximum raise of $1,069,993, and the funds will be used to expand global distribution and grow its community of fans. Island Brands is the number one fastest-growing lager brand family in the Southeast and went up 95% in dollar sales.
Summary Profit and Loss Statement
Most Recent Year Prior Year

Revenue

$1,213,060

$715,741

COGS

$1,369,751

$590,605

Tax

$0

$0

 

 

Net Income

$-1,183,818

$-239,558

Summary Balance Sheet
Most Recent Year Prior Year

Cash

$159,855

$7,115

Accounts Receivable

$244,951

$69,352

Total Assets

$494,904

$364,979

Short-Term Debt

$254,514

$711,289

Long-Term Debt

$0

$25,000

Total Liabilities

$254,514

$736,289

Financials as of: 11/27/2020
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Ratings

Analyst Report

Synopsis

American consumers buy more than $119.3 billion worth of beer each year. The average American (older than 21) drinks almost 26 gallons of beer each year. Put simply, beer is extremely popular and represents a significant segment of the entire beverage market. Rapid innovation in the alcohol industry over the last several years has birthed a new generation of adult beverages. Hard seltzers like White Claw will compose a multi-billion beverage category in coming years. But while fruity seltzers and canned wines are buzzy, sales of this new generation of drinks still pale in comparison to the old American standby — beer. 

Island Brands is a beer company producing clean, refreshing beer in the Southeast United States. Island Brands believes that major beer brands include preservatives and other artificial ingredients that take away from the simple, fresh taste of a well-brewed beer. The company’s flagship lagers are made of just four ingredients. Beyond just beer, Island Brands is also a lifestyle company. It promotes carefree island living, marketing directly to fisherman, college students, and anyone else looking for a good time. Island is one of the fastest-growing beer companies in the Southeast and is available in Publix, Total Wine and More, Trader Joes, and other retailers across six states. 

Island Brands’ current StartEngine raise has been rated a Neutral Deal by the KingsCrowd investment team.

Price

Island’s StartEngine raise is an equity offering priced at $65.7 million with preferred shares. This is an enormous valuation. Island Brands only generated $1.2 million in revenue last year, so (pending 2020 figures), this valuation represents a roughly 55x multiple — many times above standard price for a CPG company. It’s no surprise that Island Brands’ price rating is extremely low as a result.

Market

The beer market in the U.S. is massive — around $102 billion with a 4.7% CAGR projected through 2024. That being said, the beer market is gripped firmly by major beverage brands Anheuser Busch and Molson Coors, which collectively hold more than 60% of the market. Downstream from the big conglomerates, the beer market is fragmented among hundreds of craft breweries, international brands, and other small players. Therefore, while the beer market is very large, Island Brands’ addressable market is much smaller when factoring in competition within the space. Consequently, Island Brands’ market rating is middle-of-the-road.

Team

Island Brands was founded by friends and entrepreneurs Scott Hansen and Brandon Perry, who serve as co-CEOs. Hansen — who is Island Brands’ Chief Revenue Officer in addition to co-CEO — graduated from The Citadel with a degree in Business Administration. He went on to serve in various management roles for companies like ADP and YES Healthcare. He also spent three years as a Vice President at Merrill Lynch before founding his own talent firm. Perry served as the founder and CEO of two companies before Island Brands, a contractor vetting firm and a consumer financing business. He holds a B.S. in Business from Towson University. 

Both Island co-founders have roughly 20 years of experience in business and management. However, neither has a background in CPG, consumer branding, the alcohol industry, or high-growth startups in general. Therefore, the Island Brands team score is relatively low.

Differentiators

Island Brands states that its key differentiator is clean, simple ingredients, leaving behind the artificial junk contained in mainstream beers like Budweiser and Coors. However, there is some question as to whether mainstream beer brands actually use artificial ingredients. Budweiser disclosed that it uses only natural ingredients (water, malt, rice, yeast, and hops) after a food blogger alleged that the beer was full of preservatives. Whether major brands use artificial ingredients or not, it’s not clear that most consumers particularly care about the distinction. Many likely prioritize price or taste in beer selection. In that regard, it’s difficult to say for sure that Island lagers win out. 

Admittedly, Island Brands has crafted a distinctive brand that seems to hold unique appeal for the company’s target consumers in the Southeast. Multichannel marketing strategies, the use of brand ambassadors, custom-wrapped delivery vehicles, and the upcoming launch of branded bars do distinguish Island from other conglomerate beer brands. However, these steps will likely do little to unseat the firm grip of Anheuser Busch and its peers on the beer industry, particularly in the average consumer’s eyes. Therefore, Island’s differentiation rating is very low.

Performance

Island Brands lists few concrete financial figures on its raise page. The company touts various accolades like fastest-growing beer brand in the Southeast and variations on that theme, but those facts do little to inform the overall context around the company’s recent performance. Relying on 2018 and 2019 data, though, Island grew meaningfully year-over-year — from $715,000 in revenue for 2018 to $1.2 million in 2019. Despite the fact that Island’s cost of goods sold exceeded net revenue in 2019, the company appears to be growing steadily and making investments in long-term revenue channels, such as branded bars. Therefore, Island Brands’ performance rating is its highest. 

Bearish Outlook

Island Brands is undoubtedly a successful regional beer company in the Southeast. The company seems to have developed a distinctive lifestyle brand that caters specifically toward sailors, beach-going college students, and others living the romanticized year-round ocean lifestyle in states like South Carolina and Florida. However, it’s not yet clear that Island Brands has the potential to make a major play in the nationwide beer market. It is exceedingly difficult to compete against entrenched actors like Anheuser Busch in the American heartland, and high-income millennial consumers in urban centers seem to be drifting away from beer as a category. In a bearish scenario, Island Brands continues to carve out a Southeast niche, but cannot grow meaningfully to address a more significant chunk of the U.S. beer market. 

Bullish Outlook

Island Brands has successfully forged partnerships with the likes of Trader Joe’s, Total Wine and More, Publix, and other influential retailers in its target market. Moreover, Island lagers are sold fleetwide on Carnival cruise lines, an impressive partnership for a brand of Island’s size. The company has a firm foundation within these distribution channels, with significant potential to launch new channels and expand revenue within existing channels upon the launch of its line of fruity beers. 

In addition, Island is impressively well-branded. While the Island lifestyle caters specifically to consumers in the Southeast, the brand’s values (carefree adventure, sun-soaked gatherings with friends, etc.) are aspirational for consumers around the country. These values are certainly an effective differentiator between more indie, artisanal craft breweries in other parts of the U.S. Given Island’s solid track record of distribution success in six states, the company has the potential to continue expansion to the point of being noticed by a major beverage conglomerate for an eventual acquisition.

Executive Summary

Island Brands makes fresh, simple beer. The company’s bespoke, beach-focused brand holds a certain aspirational appeal. Expansion to additional product lines (including upcoming lemonade and peach-flavored brews) may welcome in additional segments of consumers who are recently exploring other flavored alcohol options. Island successfully posted year-over-year revenue growth in 2019 and seems as though it achieved the same success in 2020. 

On the other hand, the beer market is extremely crowded and competitive. Island is competing against Anheuser Busch and Molson Coors plus a tidal wave of new alcohol brands like White Claw and Truly, craft breweries, and even the growing sobriety movement. Investors can’t be sure that they’ll enjoy a significant return from an investment in Island, particularly given the company’s extremely high valuation. Therefore, Island Brands has been rated a Neutral Deal. 

For questions regarding the KingsCrowd staff pick or ratings for this company, please reach out to support@kingscrowd.com

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