Deal to Watch: Beer that tastes as good as it is

Key Stats:

Summary

The Unity Vibration team has been selected as a “Deal To Watch” by KingsCrowd. This distinction is reserved for deals selected into the top 10-20% of our due diligence funnel. If you have questions regarding our deal diligence and selection methodology please reach out to hello@kingscrowd.com.

Problem

Today’s generation has seen incredible amounts of change, especially when it comes to health and wellness. More and more people today are looking for healthier options in their foods and beverages, increasingly aware of the adverse health effects of putting the wrong things into your body. 

In fact, a report from Kerry Group found that 65% of Americans seek out more functionality and benefits out of food and drinks now more than ever. 

It is no wonder that more Americans, and people worldwide, are making healthier choices, especially with the frequency of diabetes, gluten intolerance, and other food-related health issues. 

In the U.S. alone, a new case of diabetes is diagnosed every 30 seconds and those without diabetes are still plagued with about eight other health conditions at any given time. When it comes to gluten intolerance and celiac disease the statistics are even more shocking. About 3 million Americans now follow a gluten free diet and a whopping 72% of them are people who do not even suffer from celiac, but simply take it upon themselves to avoid gluten for health reasons.

With health issues becoming more prevalent, 7 in 10 consumers would be willing to give up familiar favorite products for ones without artificial ingredients. Even more interesting is the fact that 4 in 10 of those consumers would be willing to pay double for that more organic, natural product than they would initially. 

In fact, 23% of the U.S. population is Generation Z – a generation that is already flush with avid participants in health and wellness activities, foods, and beverages. The market for these kinds of products just continues to get more and more attractive with the numbers leaning in its favor and health-conscious consumers increasing exponentially.

Consumers aren’t just making better decisions when it comes to their food, but with their drinking habits as well. In the last decade beer has lost about 10% of its market share, not to mention the loss of sales from brands like Budweiser, Miller Light, and Coors Light. 

One of the main reasons people are turning away from beer has to do with wellness – seeking out lighter and lower-ABV brews. The legalization of recreational and medical marijuana across U.S. states has not helped beer’s case, with studies finding that since legalization alcohol sales dropped more than 12%.

While this proves incredibly problematic for producers of foods and beverages high in fat, sugar, and other detrimental ingredients as well as major alcohol producers and distributors, it does open the door for another type of beverage to make its mark.

Solution

Unity Vibration Kombucha is a brewery, beverage company, and lifestyle brand that seeks to solve all the current issues that seem to be plaguing the beverage industry. 

By taking advantage of the fact that consumers are seeking out healthier options but still appreciate the occasional light buzz, Unity Vibration has taken it upon themselves to brew their very own vegan, organic, gluten-free, probiotic kombucha beer with an ABV slightly above 1-1.5%. 

Their beer truly seems like the package deal for consumers right now, fit with all the health benefits for people looking for probiotics to those who are gluten intolerant to even the beer drinker seeking a better option. 

Bon Appétit estimates that the market for low-alcoholic beverages could grow by about a third in just the next three years. Not only is Unity Vibration’s entrance into the market well-timed, but it is almost impossible to not succeed. 

The global kombucha market size is currently valued at about 760 million expected to expand at a CAGR of 23%, reaching 66.03 billion by 2024. However, Unity Vibration is not just tapping into the exploding kombucha market, but the overall organic market in general that has totaled a record of $49.4 billion in sales in 2017. In the last decade alone, the U.S. organic market has more than doubled in size with high hopes for its continued success. 

When it comes to competition, Unity Vibration is at the top of the food chain with their biggest competition coming from brands like Boochcraft, Kombrewcha, and Kyla. 

Boochcraft, brewed and available only in San Diego has an ABV of about 7% that does not bode well for them considering their already apparent lack of accessibility and trends showing consumers drinking less. 

Kombrewcha is only available in three states with only three flavors. Finally, Kyla seems to be Unity Vibration’s only serious competitor, available in 16 states and heavily marketing their gluten-free, 100 calorie, 4.5% ABV beer. Yet, Unity Vibration seems to have the upper hand simply through experience, offering, and differentiation.

Why We Like it

1. Success so far: Since their founding, Unity Vibration has already made $4.7M in lifetime revenue with gross margins of 43%. In the last quarter of 2018 alone they experienced a 30% increase in revenue and even though they are not making a profit as of yet, their consistent positive top line growth shows promise. 

Currently, their beer is available in 17 states and they are constantly expanding – making their name well known across the country. They were the only kombucha beer to make Draft Magazine’s top 25 best beer list and have been featured by countless other publications including The Washington Post, Food Network, and The Wall Street Journal. 

2. Management experience: Unity Vibration has already been in operation and brewing for over a decade. The two founders began by selling beer out of a van to school parents on Fridays after school, slowly growing revenue and earning more customers through word of mouth. Their experience in both brewing and selling has enabled them to become incredibly skilled at their craft.

3. Differentiated brewing process: Unlike many other beers, this kombucha beer has a very unique process. Unity Vibration brews their beer for 30 days and then pen-air-ferments it on oak before bottling. They also heavily advertise the fact that they put a lot of love and positive sound vibrations into the production of their beer – enticing beer lovers, spiritual consumers, and simply curious health conscious demographics alike.

4. Distribution: Not only is Unity Vibration found in many states throughout the United States, but their products are currently sold in 8 out of 12 regions of Whole Foods Markets, putting them within the reach of the perfect demographic and consumer base that would really enjoy their beer. 

Unity Vibration can also be found in mainstream grocery stores, liquor stores, and craft beer bars – making them even more visible to shoppers and easily accessible.

5. Plans for growth: Unity Vibration is constantly innovating and thinking of new ways to continue their growth and expansion. Right now, they are focused on diving into North and South California, Colorado, the Midwest region, and Florida. 

By stretching their reach, they plan to gain an even larger consumer base and even better reputation. Their growth does not just include geographical expansion, but also line extensions – thinking of experimenting with a cocktail line, spirits, and even a CBD infused beverage. This would be the perfect way for Unity Vibration to stay true to their mission and product while appealing to all kinds of consumers.

Founders

Unity Vibration is co-founded by Tarek and Rachel Kanaan. Other than the experience and skills they have built up together by brewing and selling their beer for about a decade, Rachel has prior experience as a founding member of Fermenta, a Michigan women’s craft collaborative, not to mention she is an award winning kombucha formulator. 

The Kanaan’s have quite a team supporting them – from Donn Stroud who is their brewery operations manager with decades of shipping and receiving, warehouse, and data management experience; Waynetta Yee who is the production supervisor with about 30 years in the food service industry; and Dylan Davis who is head brewer. Between their diversely capable team and their years or professional and field experience, the Unity Vibration team is incredibly well equipped to be producing and selling their beer.

Rating

Unity Vibration is a Deal To Watch. With years of experience, an offering that has a strong competitive position, and plans to continue to expand – there is a strong future in store. 

The company’s strategy to target gluten intolerant consumers, kombucha and health conscious buyers, and beer drinkers alike has worked well for them and their hopes to tap into cocktail and CBD markets provide nice upside especially at the reasonable $3.14M pre-money valuation, less than 5X current revenues. 

This is definitely an interesting acquisition target for larger alcohol manufacturers. However, they will first need to figure out how to continue to accelerate revenues as revenues stagnated in 2018. While not a major redflag yet, the team needs to show a doubling down on revenue growth and execution of that growth.

Acquisition opportunities likely won’t present until the team can reach $10-$20M+ in annual revenue. We think they have the distribution opportunities and market tailwinds to do so. The question is if this team can kick it up a notch from its current pace of growth. 

However, nice market timing and few legitimate competitors makes this a Deal to Watch with an intriguing entry point for investors. If interested, be sure to invest HERE!