Troop Beverage’s current round has a valuation cap of $8 million. The company is projecting $1 million in revenue for 2021. These figures would yield a revenue multiple of eight times, which is only slightly higher than the alcohol beverage industry average of 5.3 times. Troop Beverage also has a 20% discount on its current deal, which further sweetens the deal for investors. Its current revenue growth at the half-year mark has exceeded that of the entire previous year. Therefore, the company has a fair valuation and receives an above average price rating.

Troop Beverage operates in the ready-to-drink cocktail market. In 2020, the ready-to-drink segment of the alcohol market grew by 52%, which is the second-fastest-growing segment after hard seltzers. The ready-to-drink cocktail market is expected to consistently grow by an average of 12.1% over the next seven years. 

But overall, Troop’s addressable market is limited. In 2020, the total addressable market for ready-to-drink cocktails in the US was $235 million, which is a small market compared to the entire spirits industry. Ready-to-drink cocktails account for only 0.3% of the $68 billion in US spirits sales. Overall, this small market gives Troop Beverage a below average market rating.

Troop Beverage co-founder and CEO Caroline DesRosiers and CFO/COO Reed DesRosiers founded the company in 2018. Caroline has a background in business strategy consulting and brand management at IBM. This experience is critical for directing Troop’s go-to-market strategies and building its brand image.  

Co-founder, CFO, and COO Reed DesRosiers has product management and data analysis experience in software companies. He oversees the company’s production, operation, and finances. While he has experience in product management and data analysis from other jobs, his experience does not directly translate to his current role at Troop Beverage. He also still works full time at a software company and is not fully dedicated to Troop. So it’s unclear how involved he is in Troop’s operations. Early-stage companies often require full commitment, especially in an emerging and relatively competitive market like ready-to-drink cocktails, so Reed’s lack of commitment is a strike against the team.  

The rest of the team consists of a sales manager and a community manager who both have experience in wine and restaurants. Their specific industry knowledge helps compensate for the founders’ lack of industry experience. The Troop team is also diverse in terms of ethnicity and gender. Diversity is often a sign of the positive culture that a company needs for growth. Weighing both pros and cons, Troop Beverage receives a slightly above average team rating.

In 2020, the best selling ready-to-drink cocktail brands were Jack Daniel’s Country Cocktail, Campari Soda, New Mix, and Jack Daniel’s & Cola. This information suggests that Troop Beverage faces strong competition  from both established spirit brands and brands focused on ready-to-drink beverages. Troop will need to distinguish its products in this crowded and relatively small market.

Troop’s main differentiator is that it uses real spirits and fresh ingredients. This differentiator does not seem to have a high defensibility, as it can be easily copied by competitors. Troop Beverage’s other differentiator is its diverse community of customers (known as Troopers). The community is also not defensible, as the company’s customer base is still quite small.  

Overall, Troop Beverage receives a low differentiation rating.

Troop Beverage is sold by more than 300 retailers, including Whole Foods Market, Total Wine & More, and Nugget Markets. The company is also sold via its direct-to-consumer website. A robust distribution channel contributed to its strong sales growth in 2021. Sales through June 2021 have more than doubled since 2020. Troop Beverage is projecting it will generate $1 million in revenue by the end of 2021. 

Troop beverage has a relatively low burn rate, which is a direct result of running a lean team. The company has also raised more than $500,000 in prior funding. This means the company is burning about as much as it is making, which is great for early stage companies. For these reasons, Troop Beverage receives a high performance rating.

Troop Beverage encounters major market share risk from direct competition. Established spirits brands recognize the growing potential in the ready-to-drink cocktail market and have started expanding their product lines to meet demand. An influx of brands focused on ready-to-drink cocktails is also eating up market share.

In addition to direct competitors, many alternative ready-to-drink options are also creating a growth risk for Troop Beverage. The fastest-growing ready-to-drink alcohol beverage type is hard seltzer, which grew 130% in 2020. No- and low-alcohol beer is also another emerging segment that’s expected to keep growing. And the US flavored beer market grew 10.4% in 2020. 

Troop Beverage is also facing financial risk. Currently in the US, ready-to-drink cocktails are taxed as spirits, even though only a portion of the beverage is alcoholic. Taxes on spirits — at $13.50 per gallon — are substantially higher than beer and wine taxes. This regulation directly limits Troop Beverage’s potential profitability, which creates a financial risk for investors.

The ready-to-drink cocktail market is currently small and full of competitors. Troop Beverage’s competitors are likely to present significant challenges that may prevent the company from maintaining its growth. Even if/when Troop Beverage becomes profitable, heavy taxes impose a substantial profit cut that could reduce investors’ returns. Both of Troop’s co-founders lack industry expertise and one is not fully dedicated to the company, which could make navigating the industry more difficult. The low defensibility of the product could also reduce the longevity of its popularity, since other companies could replicate Troop Beverage’s approach.

Troop Beverage has shown resilience in its financial performance. Its 220% year-over-year revenue growth at the half-year mark is respectable. Robust distribution channels from retailers like Whole Foods Market and Total Wine & More will continue to support its sales growth. The company’s female founder and CEO is building a great brand image. She has also demonstrated a fundraising ability, which is a positive signal for the company’s ability to scale down the road. Above all, Troop Beverage is fairly valued with favorable investment terms.

Troop Beverage is a ready-to-drink cocktail brand using real spirits and natural ingredients. Its goal is to build a community that enjoys premium ready-to-drink cocktails. The company has a fair valuation and favorable investment terms, and the ready-to-drink market has high growth potential. Founder and CEO Caroline DesRosiers has built a brand that yielded a respectable 220% revenue growth. 

However, Troop Beverage also faces many challenges. The ready-to-drink cocktail market is full of competitors who are eating into Troop Beverage’s market share, and low product differentiation makes the company less defensible. In addition, hefty alcohol taxes will likely cut into the company’s potential profit. For those reasons, Troop Beverage is rated a Neutral Deal by the KingsCrowd investment team. 

For questions regarding the KingsCrowd staff pick or ratings for this company, please reach out to support@kingscrowd.com.

Analysis written by Zee Zhong.