Overview
Raised: $119,217
Total Commitments ($USD)
Republic
01/23/2023
10/15/2023
$500
SAFE
Series A
RegCF
$125,000,000
0%
Rolling Commitments ($USD)
10/31/2023
$450
86
2020
Food, Beverage, & Restaurants
Non-Tech
B2B/B2C
Medium
Low
Summary Profit and Loss Statement
| FY 2022 | FY 2021 | |
|---|---|---|
|
Revenue |
$30,854,767 |
$30,607,926 |
|
COGS |
$14,959,475 |
$15,363,495 |
|
Tax |
$30,261 |
$26,159 |
| ||
| ||
|
Net Income |
$-2,123,315 |
$-3,882,610 |
Summary Balance Sheet
| FY 2022 | FY 2021 | |
|---|---|---|
|
Cash |
$1,194,106 |
$2,369,342 |
|
Accounts Receivable |
$2,103,558 |
$1,854,571 |
|
Total Assets |
$20,058,409 |
$10,846,163 |
|
Short-Term Debt |
$4,430,907 |
$2,675,901 |
|
Long-Term Debt |
$21,385,526 |
$12,650,406 |
|
Total Liabilities |
$25,816,433 |
$15,326,307 |
Raise History
| Offering Name | Close Date | Platform | Valuation/Cap | Total Raised | Security Type | Status | Reg Type |
|---|---|---|---|---|---|---|---|
| Sugarfina | 10/15/2023 | Republic | $125,000,000 | $119,217 | SAFE | Funded | RegCF |
| Sugarfina | 09/30/2022 | Republic | $125,000,000 | $2,997,567 | Equity - Common | Funded | RegA+ |
| Sugarfina | 06/30/2022 | StartEngine | $125,000,000 | $1,308,324 | Equity - Common | Funded | RegA+ |
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Synopsis
Sugarfina is a company that sells confectionary products specifically geared toward adults. The company’s signature product is champagne bears, which are gummy bears infused with Dom Pérignon champagne. Beyond that, the company has a wide array of alcohol-infused sweets. The company stands alone in the high-end adult candy marketplace as the main brand. Most high-end sweets companies are chocolate-based, so Sugarfina has been able to capitalize on a hole in the high-end candy market.
I tried the candy myself, and it was phenomenal. I mean, it’s a sugary sweet, so how bad could it ever really be? But even more impressive was the packaging used for all the different types of candy boxes. It gives the impression of a high-end product and clearly makes for fantastic gifts.
KingsCrowd has rated Sugarfina a Deal to Watch.
Price
Sugarfina is valued at $125 million. While this may initially seem very high, investors must look at it in the context of the company’s revenue. The company is valued at just 4x 2021 revenues, so this is actually a good entrance point. The company has clearly created a strong brand and is continually growing revenues year over year. Because of this, it represents a de-risked growth equity type of investment. Therefore, getting less than a 10x return is reasonable given the decreased risk.
Market
The U.S. confectionary market is valued at about $63.4 billion. Of course, this includes chocolate in addition to the type of candy that Sugarfina specializes in. This market is not going anywhere and will continue to grow in low single digits for the foreseeable future.
In order to continue growing its presence in the overall confectionary market, Sugarfina plans to acquire a luxury-positioned chocolate brand and bring it under the Sugarfina umbrella. This will position Sugarfina as the one-stop-shop for all luxury confectionaries.
Team
Sugarfina is run by Scott LaPorta, who bought the business back in 2019. He is a veteran in the capital markets, having co-led more than $10 billion in mergers and acquisitions (M&A) activity and held various C-suite positions for multiple different companies. He led the restructuring of Levi Strauss and has led companies to exit. He has clearly done a great job of growing Sugarfina into a category-leading business with steady growth. Additionally, Sugarfina has a strong sales force and is continuing to invest in new marketing initiatives that will continue to grow the brand.
Differentiators
Sugarfina’s differentiation is in the brand awareness it has built in the high-end confectionary market. There is no other player in the space that is focused on high-end candy. This uniquely positions Sugarfina to continue dominating this market and potentially get market share in the high-end chocolate space through strategic acquisitions in the future. Additionally, the company has a very strong mix of wholesale, retail, and online sales that already make it a strong acquisition candidate.
Performance
Sugarfina has performed very well in the past few years. The company recorded revenue of $30.6 million in 2021, up 22.5% year over year from 2020. The company sells its products through five main distribution channels:
- 45% to wholesalers like Nordstrom and Bloomingdales
- 20% directly to customers in 25 retail boutiques spread across the country (there’s one near me, and it’s beautiful!)
- 20% through e-commerce
- 10% via custom corporate products made to order
- 5% through international sales in Hong Kong, Australia, South Korea, and Japan.
Sugarfina’s revenue mix is phenomenal and well-diversified, which will be important in the future should any type of economic downturns occur.
Bearish Outlook
While the company is valued at just 4.1x revenue, Sugarfina’s valuation is still huge at $125 million. A 10x return on this investment round is essentially out of the question. At $100 million in revenue, the company will likely exit for between $300 million and $500 million, which is quite a small return for investors. However, Sugarfina is significantly further along than most startups we see raising in the Regulation Crowdfunding markets.
Additionally, Sugarfina is operating at a $3.8 million loss. However, this is an improvement from the company’s 2020 $4.7 million loss, and CEO Scott LaPorta told me that the company is fully focused on driving to profitability as quickly as possible.
Bullish Outlook
Sugarfina has established a true brand name product in the candy-gifting market. The company’s packaging stands alone for elegant gifting options. No other company that I can find offers such a robust array of beautiful, high-quality products that are really perfect for any occasion. The company has had undeniable traction with richly diversified distribution channels.
I spoke to CEO Scott LaPorta about Sugarfina’s past and future prospects. He has deep experience in M&A and restructuring, with his most notable role being chief financial officer at Levi Strauss. He purchased Sugarfina in 2019 and has done a phenomenal job of turning the company around and getting it on a path to profitability. The company hopes to hit $100 million in sales in the next two to five years, at which point an exit will be more than likely.
Executive Summary
Sugarfina represents a de-risked consumer packaged goods investment at a very attractive valuation-to-revenue multiple (4x). However, given how far along Sugarfina is, the investment will simply not give you a 10x return. But it will add a nice de-risked play that can lower the overall risk profile of your portfolio.
Report written by KingsCrowd Investment Analyst Teddy Lyons on March 30, 2023.