At a valuation of $8 million, AVEC Drinks is undervalued with a valuation-to-revenue multiple of roughly 4x (based on current run rate). This type of bargain is rarely seen in startup investing and represents a great opportunity to gain exposure to a consumer packaged goods (CPG) company firing on all cylinders. For AVEC Drinks to be a 10x investment opportunity, the company will need to be sold for around $150 million (accounting for dilution). At a 5x revenue multiple (typical for CPG exits), this means that the company needs to hit $30 million in sales. Given the company’s impressive traction in both direct-to-consumer sales and retail sales, I certainly see this as being possible.

AVEC Drinks needs to hit roughly $30 million in revenue for investors in this round to comfortably see a 10x exit. The soda mixer market is worth roughly $1.7 billion in the U.S. However, AVEC Drinks sodas can also be enjoyed alone as a fairly healthy soda that still satisfies the sweet tooth of soda drinkers. The overall soft drink market in the U.S. is obviously much larger than the mixer market, somewhere in the neighborhood of half a trillion dollars. Given AVEC Drinks’ appeal to both markets, I certainly can see the company hitting $30 million in sales within the next five years. 

AVEC Drinks founder and CEO Alex Doman has done a great job getting his company off the ground and into millions of dollars in sales within just three years. Even more impressive is the 1,200 retail doors that AVEC Drinks has successfully entered. Although Doman doesn’t have previous experience in the consumer packaged goods (CPG) space or experience as an entrepreneur, he must be applauded for the success of AVEC Drinks so far. 

The AVEC Drinks sales team, on the other hand, has deep expertise in grocery and CPG products, and they are no doubt a big reason that AVEC Drinks has been so successful so far. Even so, the company will need to continue expanding its team as the company gets larger and logistics get more complicated. 

AVEC Drinks’ main competitors in this space are Schweppes, Canada Dry, and other large soda brands like Coca-Cola and Pepsi. These are legacy companies with massive market share. However, their products are absolutely packed with sugar and unhealthy ingredients, and the consumption of traditional soda products is declining drastically. 

AVEC Drinks is a premium beverage that is priced as such and therefore competing with other luxury soda companies. These include Fever-Tree ($344 million in worldwide sales) and quite a few other premium soda brands (see a list of them here). 

When it comes to consumer packaged goods companies, differentiation is difficult to achieve. Investors must simply analyze a company’s traction and execution in retail and direct-to-consumer sales to determine if it’s running a smooth operation. That’s certainly the case for AVEC Drinks. 

AVEC Drinks recorded 2022 revenue of around $913,000, up nearly 100% from 2021. And 2023 revenue is tracking around $2 million (roughly 120% year-over-year growth). Additionally, the company’s products are in 118 Wegmans stores, 380 Sprouts stores, and 153 Kroger stores. These are very well-known chains that have given AVEC Drinks clear indications that these products are exciting and interesting to these huge retailers. 

Additionally, the company has raised funding from Gather Ventures, XRC Ventures, Black Ambition, Seed Project, and Gaingels — and many are interested in investing follow-on capital. Successful fundraising is highly important to the growth of a startup, and AVEC Drinks has done a great job of this so far.

The soda market is dominated by legacy brands with deep pockets. This is a brutally competitive space, so it will take time and resources for AVEC Drinks to grow sustainably. Additionally, as is the case with many startups, there is always a risk associated with runway for unprofitable companies. AVEC Drinks assured KingsCrowd that the company has five to eight months of runway left. This means that the company will certainly be reliant on new funding to keep operations moving in the right direction. And while the company has great traction so far, there is no telling how the product will perform long term in retail stores. These large chains are quick and eager to rotate products in and out if they are not performing well. While AVEC Drinks’ products are initially performing well in retail, this is an additional part of the company’s risk profile as a consumer packaged goods company. 

When looking at AVEC Drinks holistically, the investment opportunity is very attractive. At just a 4x revenue multiple (based on projected 2023 revenue), the company is underpriced for the amount of traction it has generated thus far. In terms of establishing a strong brand, the market has spoken in its approval of AVEC Drinks’ beverages, and the company is well positioned to continue building its brand toward an exit. 

AVEC Drinks represents an opportunity to invest in a high-traction, undervalued consumer packaged goods company that has shown excellent growth in just three years of existence. If the company can continue on its current growth trajectory, I believe this can be a 10x investment within the next five years. 

Report written by KingsCrowd Senior Investment Analyst Teddy Lyons on June 21, 2023.