Hana Makgeolli is offering common equity at a pre-money valuation of $3 million. This is an enticingly low valuation on its face for a startup in the restaurant/brewing space. The business has limited operating history, having opened in September 2020. Hana Makgeolli brought in just over $35,500 in revenue last year, resulting in a revenue multiple of around 85 times. Multiplying the business’s revenue in the last three months of 2020 by four results in a multiple of around 21 times, which is comparably reasonable. Such extrapolations cannot substitute for hard, long-term numbers, which are still unavailable. Still, an attractive valuation and a reasonable revenue multiple is enough to give Hana Makgeolli a moderate price score.

While alcohol on its own is a huge market in the US (hitting $252.82 billion in 2019), the market for rice wine is a small sliver of that size. The US rice wine market comes in at around $1.4 billion and is growing annually at a slow rate of 2.01%. Japanese sake is the highest presence in this market, but Korean makgeolli is growing in popularity. Most rice wine, including makgeolli, is imported from Asian countries, making Hana Makgeolli stand out as a domestic brewer. However, the limited market and slow growth result in a very low market score for the company.

Hana Makgeolli’s leadership team is committed to brewing Korean sool the traditional way. Brewer and founder Alice Jun made it herself for years before deciding to make a business out of it. Jun holds a bachelor’s degree in operations and management from NYU. She got her start in research and marketing internships during her college years, and a summer program at Deloitte translated to a full position after her graduation. She turned that opportunity into a senior consultant role with Deloitte while working on developing Hana Makgeolli. Once she launched the brewery in late 2020, she left her position at Deloitte and became fully committed to this startup.

Managing member John Limb joined Jun in 2017 to help bring Hana Makgeolli from concept to dedicated business enterprise. Limb holds a JD from the Boston University School of Law and is a certified sake specialist. He worked as a consultant with Price Waterhouse (before its merger with Coopers & Lybrand). Following his time there, he worked in associate roles with a number of New York City law firms. He ended up as the assistant division counsel for AIG, a leading insurance provider. Limb’s career path after leaving AIG in 2012 is somewhat unclear until he partnered with Jun. His own role with Hana Makgeolli is also unclear. Presumably, he brings his legal experience to clearing regulatory hurdles and his sake certification to produce development.

Finally, Operations and Sales Manager Bari Spanbock joined the team recently in October 2020. Spanbock holds a bachelor’s of applied science degree from the University of Vermont and specializes in digital marketing and communications. After a couple of years working with a brewing company in Vermont, she managed marketing and events for Mikkeller Brewing NYC until its closure in 2020 due to the pandemic. While relatively inexperienced, she has been working in this space for several years. 

Although Jun and Limb bring some personal expertise with sool and sake, no one on the Hana Makgeolli team has worked at a brewery or other alcohol company before. There is also a lack of supply chain skills, which will prove crucial as the business attempts to expand. For these reasons, Hana Makgeolli’s team score is below average.

Korean alcohol is somewhat difficult to find in the US, depending on the location. The majority of it is imported from Korea. Hana Makgeolli’s closest US competitor is Màkku, which also produces Korean rice wine brewed through traditional means. However, Hana Makgeolli has a head start on Màkku by having an established location.

As a traditional product, there is no patent protection to be found here. Hana Makgeolli is of higher quality than imported competition, using organic ingredients and rice grown in the US. These points tend to appeal to many US consumers, particularly those interested in foreign wines. In contrast to Màkku, Hana Makgeolli is sold by the bottle rather than the can. Product prices are comparable to competing offerings, with prices ranging from $24-$34 per bottle.

Due to its competitive pricing and higher quality product, Hana Makgeolli scores well in the differentiators metric.

While Hana Makgeolli has existed as a concept since 2015 and as an endeavor since 2017, the startup’s full business operations only began last year. As such, the business has limited operating history to evaluate. From launch in September until the end of 2020, the business took in $35,631 in revenue against $16,927 in COGS. The business claims, unaudited, to have taken in $80,000 in revenue in its first six months of operation. It has been operating at 60% of capacity and sold out of every product line, focusing on wholesale off-premise and direct-to-consumer sales.

Its early success has been buoyed by standout fundraising success as well. Prior to this raise, the business raised $550,000 of its $750,000 goal through private investment. Given such strong traction over a short operational period, Hana Makgeolli’s performance score is its highest across all five metrics.

An investment in Hana Makgeolli has a moderate risk profile. Investors should note that Hana Makgeolli’s target market is not a particularly large one and is growing quite slowly. That slow growth will limit the company’s ability to rapidly expand. That said, the most significant risk comes from the business’s team. The startup has only one founder, and that founder is highly inexperienced. Hana Makgeolli is her first startup. However, her years building up Hana Makgeolli to the point of being ready to launch do count for something.

On a final note, the business has experienced significant burn before even beginning operations. As such, it holds significant but not alarming liabilities: $160,206 in long-term debt and $37,900 in short-term debt. These expenses have severely drained the business’s cash reserves.

While Hana Makgeolli has taken a huge step forward in opening up full operations from its location in Brooklyn, it needs to work on next steps. Distribution is likely going to be key in the business’s long-term success. Ideally, it should expand to more locations in California, where nearly one third of America’s ethnic Korean population resides. However, no one on the Hana Makgeolli team has significant experience growing an alcohol company (or any other form of consumer product good company). A lack of supply chain skills paired with inexperience may make it difficult for this team to lead Hana Makgeolli to full nationwide success.

Finally, Hana Makgeolli’s recent operating history has been marked by a notable burn rate. It’s unusual for a business to have such high operating expenses early on, but perhaps this is due to the necessary construction costs of the brewery location. Regardless, Hana Makgeolli will need to increase its capital efficiency in order to continue operating and generate returns for investors.

Looking at Hana Makgeolli’s operating history since its launch is a bit like looking at the surface of a glacier. It ignores five years of preparation that have gone into building up the brand and consumer loyalty. Since beginning operations, the startup has sold out of its products and is ready to expand further. The business has also generated a significant social media presence, with nearly 6,800 followers on Instagram after a few months of operation. It has strong branding as a traditional and high-quality producer. Its operating history is limited, but in that time, the business has generated consistently strong traction.

An excellent valuation for investors is likely to generate some form of return, which is likely why fundraising has already been so successful. Hana Makgeolli appears well prepared to build itself into a dominant player.

Hana Makgeolli is brewing traditional Korean rice wine, or sool. Founded by Alice Jun, who has been brewing makgeolli since her childhood, the business is among few domestic producers. Since the launch of its taproom and brewery in late 2020, Hana Makgeolli has sold out of its product lines and generated significant traction while operating at 60% capacity.

The business is the US’s first domestic Korean artisanal rice wine producer, and its products are of high quality. Its narrative of respect for Korean tradition and a “made in USA” ethic have done well to inspire customer loyalty thus far. However, the founder has limited experience, and as the business looks to exploit its momentum to scale up, its team is lacking in supply chain expertise.

Still, with attractive investment terms and strong momentum, investment is a strong prospect for investors. This has already been demonstrated in Hana Makgeolli’s rapid approach to its raise goals. For these reasons, Hana Makgeolli 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.

Analysis written by Benjamin Potts.