Deal to Watch: Craft Liquor from Washington State

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The Copperworks Distilling Company 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


A common phrase in the world of nutrition is that “every body” is different, and just as every body is different, so too is every palate. Different tastes lead to different preferences. This fact can make it challenging to find food and beverage options that have staying power in the market. However, if companies can demonstrate this ability, the upside can be significant. This push for innovation and excitement creates a market that welcomes newcomers who bring high enthusiasm and good ideas. Plenty of companies are rising from obscurity, each one looking to be a real player in the industry. One interesting candidate for this is Copperworks Distilling Company.


The team at Copperworks Distilling Company believes that it has the right mix to become a major player in the distilling market. Since its founding, the firm has grown into a sizable competitor in its home market of Washington state. In 2019, the company boasted over 30,000 visitors to its distillery, but it also has regular sales outside the distillery. It sells whiskey, vodka, and gin to no fewer than 340 bars and restaurants, and it also has accounts with more than 130 retailers. In 2018, the company earned the coveted Distillery of the Year award from the American Distillery Institute.


The company’s presence is already impressive, and with that presence comes something vital: sales. Currently, official filings are only available through 2018. According to Copperworks, revenue for 2018 was $857,329, which is up 11.7% from the $767,457 the company generated a year earlier. Furthermore, the company generated a net loss in 2018 of $17,886. Operating cash flow, meanwhile, was $9,953. Both these numbers show improvement over 2017, where the company saw net loss of $30,084 and cash outflow of $135,319. Unofficial sales figures were provided for 2019, and management said that revenue for the year was $915,953. This figure shows an increase of 6.8% over 2018’s results, indicating that the company is continuing to grow.


Based on the size of the company’s accounts list, it’s evident that a large portion of its sales come from third-party contracts. Although no specific breakdown was provided, it’s likely that it’s far more than half. Copperworks also generates revenue through direct-to-consumer sales on its website and the tasting room in its distillery.

An Expanding Market

While the broader beer market has suffered as of late, the market for craft brewed spirits has never been better. According to one source, the global market today for the drinks Copperworks makes is around $19.04 billion, and it’s expanding at a rapid pace. That same source estimates that the global market is increasing at a rate of 33.4% per annum, which should continue for the next few years. In the US, growth is only marginally slower. Between 2018 and 2023, it’s believed that the craft brewed spirits market will grow at a rate of 32% per annum, implying a value today of $8.70 billion. By 2023, the market will have grown to $20 billion in size.


Long-term, this presents attractive prospects for Copperworks and its shareholders. Today, though, the company’s focus is more local. The market it operates in is crowded, but the industry data we have seen suggests that there’s still room to grow there. Of the 1,580 craft distilling firms across the US in 2018 (up 5.3% from 2017), 106 of them were located in the state of Washington. That comes out to about 6.7% of all the operators in the industry, and only New York (at 123 distilleries) and California (at 148) have more distilleries than Washington does. Another way to look at it is through the lens of per capita figures. There are 71,094 people for each distillery in Washington. In New York, this figure is 158,862, while in California it’s a whopping 267,297. While it is evident that Washington is heavily-stocked with distilleries, there could also be plenty of room for future growth.

Given the timing of this article, we should address the elephant in the room: the coronavirus. As of this writing, Washington is second only to New York in terms of the number of cases it has. Seattle is particularly hard-hit. This outbreak could cause some pain for Copperworks in the short-term. However, from a long-term perspective, the company should be fine.

Terms of the Deal

The transaction sought by the management team at Copperworks is about as simple as it gets. The company is issuing common shares in the business. Anybody can invest in the business, but the firm does require a minimum commitment per participant of $500. The goal is to raise between $250,000 and $1.07 million at a pre-money valuation of $7.85 million. As of this writing, the company has $239,238 committed to its raise, so the probability of reaching that minimum looks quite high.

An Eye on Management

While the company does have extensive operations, there are three individuals who stand out as the leaders of the firm. The first of these is Jason Parker. He’s a co-founder of the firm, as well as its President. In addition to spending more than 8 years at Copperworks, he has over 9 years of experience with the Washington Distillers Guild. Prior to his foray into this space, he served as a Technical Analyst at the Bill and Melinda Gates Foundation. 


Next behind him is Micah Nutt, the firm’s co-founder and its current Vice President. He has experience in software engineering. He also served as Copperworks’ runner of distilling operations for the first five years of the firm’s life. He retired from an active role in June of 2019. 


The final individual that should be mentioned is Jeffrey Kanof. He is listed as a co-owner as opposed to a co-founder of the firm. He is also a current Vice President of the business. Prior to joining Copperworks, he was an Assistant Distiller at Letterpress Distilling LLC.


Copperworks has been rated by our team as a Deal to Watch. In all, the valuation of the business at $7.85 million on a pre-money basis appears pretty fair, which is especially true after taking into consideration its recent growth and its gradual movement towards profitability. Its business relationship with restaurants, bars, and retailers is also encouraging, as is its award from 2018. Add in trends in the industry today and the prospect of further growth, and it’s clearly a company worth consideration.


This does not mean that there are no risks though. Short-term, the biggest risk is clearly all that is transpiring with the coronavirus. The impact there, when you consider that Copperworks is a Washington company, could be material for the foreseeable future. High levels of competition could also become an issue, particularly during these difficult times. Add in the fact that the company is not yet profitable, and it’s clear that while it’s an appealing prospect, it’s in no way a sure bet. 


Altogether, the potential for growth and the well-established relationships of Copperworks Distilling Company balances with the possibility of competition and the lack of current profits to make this a Deal to Watch.

About: Daniel Jones

Daniel Jones is a graduate of Case Western University with a degree in Economics. He has spent several years as an equity analyst writer for The Motley Fool where he focuses primarily on the Consumer Goods sector but also likes to dive in on interesting topics involving energy, industrials, and macroeconomics, in addition to contributing equity research to publications such as Seeking Alpha.

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