Acre Mezcal is offering equity at a $10 million valuation. This is a high price for a young food and beverage brand. The company only generated $98,680 in revenue for 2020, so its $10 million proposed valuation represents a 100x revenue multiple — far above standard for a consumer packaged goods (CPG) brand. Therefore, Acre Mezcal’s price rating is low.

The mezcal market is undoubtedly growing. The segment is expected to reach $722 million by 2027 at a CAGR of almost 14%. However, even with this meaningful growth, the mezcal market is still niche compared to the value of other segments within the alcohol industry. For instance, compare this market size to that of beer — despite recent declines, the beer market is still worth more than $115 billion, dwarfing the market for mezcal. 

Moreover, Acre Mezcal is targeting only high-end buyers interested in mezcal. The company’s cheapest bottle sells for $50, almost twice the price of standard bottom-shelf tequilas (against which many consumers are likely comparing the product). Its most expensive bottle retails for $140. Even within the relatively small audience of consumers interested in mezcal, Acre is a niche brand. Therefore, the company’s market rating is quite low.

Acre Mezcal seems to have been originally founded by Stuart McPherson and Cameron Watt, owners of the Acre Resort in Cabo San Lucas, Mexico. The Acre Mezcal spirits brand began as a resort amenity at that property before spinning off into a separate business. It does not appear that McPherson and Watt are involved in day-to-day operations of Acre Mezcal these days, though they are board directors. 

Instead, Acre Mezcal is led by Jordan Haddad, a former finance professional turned entrepreneur. Haddad graduated with a BBA in Finance from the Stephen M. Ross School of Business at the University of Michigan. He later joined Lazard as a financial analyst before transitioning to Oaktree Capital Management as a High Yield Bond Associate. Haddad reports that he found his career in finance unfulfilling and was looking for a change when he discovered the Acre Resort in Cabo and met McPherson and Watt. He’s run Acre Mezcal ever since (beginning in 2018). 

The Acre Mezcal team also includes Marijke Uleman and Erika Bautista, the company’s Head of Marketing and Strategy and Director of Advocacy respectively. Uleman and Bautista are co-founders of The MezGals, a “mezcal tasting and education group,” and are deeply passionate about the agave-based spirit. Both have many years’ experience in marketing, having worked with clients like Heineken, Nestle, and Clorox. 

The Acre Mezcal team is clearly passionate about their product and committed to the company’s mission of keeping mezcal production sustainable and beneficial to rural Mexican agave farmers. However, the team lacks formal experience as entrepreneurs or alcohol industry executives. Therefore, Acre Mezcal’s team score is its lowest across all five metrics. 

Acre Mezcal is certainly differentiated from mainstream alcohol producers in that the company produces small-batch, artisanal spirits deeply rooted in Mexican traditions of agave-growing. This DNA is markedly different from the Anheuser-Buschs of the world. However, it doesn’t actually distinguish Acre Mezcal much within the landscape of mezcal producers. Mezcal is an emerging category of liquor, and thus there are few major players within the space. The vast majority of mezcal is currently sold by small producers. 

As Acre Mezcal itself acknowledges in its raise materials, the mezcal space is very fractured with intense competition among a number of new, small brands. In the context of this space, Acre is not particularly well-differentiated. All in all, the company does have a distinct brand identity in the broader alcohol industry, but may struggle to stand out among a number of other small-batch mezcal makers. Therefore, Acre Mezcal’s differentiation rating is middle-of-the-road.

Acre Mezcal has only been in existence for two years, and only began U.S. distribution in 2020. Therefore, it’s impressive that the company’s revenues have grown meaningfully each year. Acre generated over $59,000 in revenue in 2019 — its first year of operations — then posted near-100% year-over-year growth as it grew to nearly $100,000 in revenue in 2020. In addition, Acre Mezcal was quite profitable in 2019 (more than $20,000 in net income compared to $59,000 in revenue). The company lost profitability in 2020, but still posted a net income of only -$14,000 last year despite COVID difficulties. The company’s financial performance has been strong in its short existence, and thus Acre Mezcal’s performance rating is very high.

While Acre Mezcal’s early growth has been promising, both the company and the mezcal industry more broadly are still very young. It’s difficult to predict whether or how Acre Mezcal will achieve differentiation from a large number of other artisanal mezcal brands. In highly competitive scenarios like these, operational excellence is often a deciding factor in a company’s success. The Acre Mezcal team does not include any proven entrepreneurs or operators, which could hamper the company’s growth. 

These potential risks are all the more concerning given Acre Mezcal’s extremely high valuation. The company will need to grow significantly to justify this valuation. Otherwise, investors might have a hard time reaping a return. 

Acre Mezcal has the chance to emerge as the leading artisanal mezcal brand just as mezcal hits mainstream in the U.S. and abroad. The company has already received impressive awards within the spirit industry — including a Double Gold medal at the 2020 San Francisco World Spirits Competition — and generated almost $100,000 in revenue last year after its launch in the U.S. market. While the company is still very young, these signals indicate that its product is distinctive among the landscape of mezcals. 

In addition, Acre Mezcal is approaching its growth plans with a unique focus on becoming a lifestyle brand, not just a liquor company. Drawn from the brand’s roots at a high-end resort in Mexico, Acre plans to open additional live tasting experiences and forge partnerships with personalities in music and entertainment to build valuable brand recognition. Growth that the company has already achieved, plus these promising opportunities, could yield a well-known and valuable brand in the near future.

Acre Mezcal is a small-batch, artisanal mezcal company with distribution in the U.S. and Mexico. In just two years of operations, the company has garnered several liquor industry awards, and generated almost $100,000 in revenue in 2020 despite COVID’s impact on the bar and restaurant industry. 

On the other hand, the mezcal space is relatively niche and very fractured. Acre’s products are quite expensive, meaning that their target audience is niche within a niche. It’s not clear whether Acre’s spirits are obviously differentiated from other artisan products, and it’s too soon to tell whether the company can emerge as a leader in this emerging market. Therefore, Acre Mezcal has been rated a Neutral Deal. 

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