White Claw is the new, up-and-coming alcoholic seltzer brand drawing praise among younger generations and health conscious consumers. Can you buy stock in White Claw?
White Claw History
White Claw was formally introduced to market in 2016 by Anthony von Mandl, a Canadian serial entrepreneur. Mandl had a deep understanding of the wine industry and wanted to scale his knowledge.
Coming from humble beginnings, Anthony began his career selling wine out of the trunk of his car in the 1970’s to creating Mike’s Hard Lemonade in 1996. Certainly another successful alcoholic beverage!
Bloomberg wrote an excellent biographical piece on the founder in 2019, after White Claw made him a billionaire.
“It was the latest in a string of successes that includes Mike’s Hard Lemonade and has given von Mandl, 69, a net worth of about $3.4 billion, according to the Bloomberg Billionaires Index.
He has poured a good bit of that money back into his first love: wine.
Last year, von Mandl bought his fifth winery in British Columbia’s Okanagan Valley, where he’s spent millions attracting star winemakers and producing award-winning Chardonnays and Pinot Noirs.”
Mark Anthony Brands
“The Mark Anthony Group of Companies is one of North America’s most diversified and successful private beverage companies, focusing on the alcohol beverage sector.
Founded 1972, the Company grew organically from a one-man wine importing business to a producer and distributor of fine wine, premium beer and today is the largest RTD (ready to drink) Company in North America and the fourth largest in the world.
The Company’s portfolio of brands includes Mike’s Hard Lemonade, Mike’s Harder and Cayman Jack.”
Sales and Profitability
CNBC noted “Sales of White Claw are up roughly 250% in 2019 compared to the previous year, according to data from Nielsen.
The brand saying in October 2019 that White Claw had already seen retail sales of $638 million this year, and the brand now says it can top $1.5 billion in sales by the end of 2019.”
Due to White Claw being a private brand within Mark Anthony Brands, there are no publicly available financial statements. Bummer right?
However, we can always look to competitors’ margins for a rough shot analysis. Anheuser Busch’s gross margin has fallen in recent years, but it still hovers around 60%.
Gross margin is total sales, less cost of goods sold. It’s a tremendous identifier of brand pricing power. A higher gross margin is synonymous with more brand recognition.
This is why Apple can charge more for a phone than Samsung or Google. Consumers are willing to spend more on a product they recognize and trust.
Rise of Seltzer
The New York Times has a wonderful piece on the rise in seltzer demand, and it’s been nothing short of dramatic!
“The drink of summer 2019 complies with just about every diet, befits all age groups, can be found in grocery stores across the United States (as has been the case for decades) and won’t get you drunk — unless, of course, it will.
It’s water. More specifically sparkling water, an umbrella term that encompasses club soda and seltzer.
This beverage category is attracting millions of dollars in venture capital investment and changing the drinking habits of a people known for colonizing the world with corn-syrup-laden soda and watered-down beer.
Americans spent $389 million on hard seltzer, according to a Nielsen survey of supermarkets and other beverage retailers, an increase of 210 percent from 2018.”
Those are growth levels virtually unseen across any industry. Electric car demand is about the only thing growing faster than seltzers (thanks Tesla)!
It doesn’t matter whether you’re at a picnic, Saturday football tailgate, or bar, I personally guarantee someone will be drinking a White Claw!
Maybe it’s just anecdotal evidence, but I rarely see 21 year old’s drinking beer anymore; White Claw is the new Bud Light!
Health Conscious Consumers
Cardiovascular disease (CVD) remains the leading the cause of death in the United States, claiming the lives of 840,000 Americans in 2019.
It’s not just CVD; diabetes, hypertension, and obesity are secondary factors behind millions of annual deaths. This has led consumers to start taking their health more seriously.
While fast food, sugars, and processed foods provide the bulk of American’s caloric intake, alcohol consumption is another leading contributor.
Just take a look at the number of calories (per serving) in popular alcoholic beverages.
- Rum and Coke (130 calories)
- Budweiser (145 calories)
- Long Island Iced Tea (136 calories)
Beyond just calories, carbohydrates play a vital function in weight management. Thus, does it surprise anyone that a low calorie, low carbohydrate, enjoyable seltzer is snatching market share?
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Speaking from personal experience, White Claw is extremely popular in the running and fitness community. In fact, I have run multiple races where White Claw is the beverage of choice upon completion.
I essentially only drank White Claws while I was training for the Des Moines Marathon this past year. White Claw provided me a “healthy” alternative, so I could still socialize with friends at happy hour!
I expect that consumers will remain steadfast in their health conscious product choices moving forward. This would only be bullish for White Claw stock.
Tax Policy Gift
White Claw already had a great business model, but they get another gift from the almighty taxing authorities!
Due to White Claw being brewed like beer, it’s taxed like beer. This may seem trivial, but it is imperative in an extremely cost competitive alcohol market.
Beer is taxed in the U.S. at a much lower rate than spirits/hard liquor. Alcohol carries a “sin tax” in an attempt to persuade less alcohol consumption by artificially raising prices.
“If you made a product similar to White Claw by mixing vodka with seltzer and putting it in a can, a six-pack would be subject to almost $2 in additional taxes when sold in New York City.”
There haven’t been any studies (that I have seen) modeling the elasticity of demand, but I could use basic common sense to derive a massive decrease in demand if prices rose by $2 per six-pack.
That would be a Greek Tragedy for White Claw sales.
Estimated Brand Value
You might be asking, “What do you think is the enterprise value of White Claw if it were to go public or spun off by Mark Anthony?” The enterprise value is the sum of cash, debt, and the market value of equity.
White Claw generates almost 100% of its revenue from these three revenue streams.
- Alcohol Sales
- Drinking Merchandise (Koozies)
If I were performing a fundamental analysis on White Claw, I would start with their income statement, growth projections, and market multiples.
Unfortunately, because they’re a privately held business, I can’t get my hands on financial statements or growth projections.
Luckily though, we can still gather market multiples and observe precedent transactions.
The most common market multiple method is dividing the enterprise value of a competitor by earnings before interest, tax, depreciation, and amortization (EBITDA). This is called the “EBITDA Multiple”.
The current EBITDA multiple for Anheuser-Busch is approximately 14.9. So, if we had White Claw’s financial statements, I would multiply 14.9 by their EBITDA.
Lastly, precedent transactions look at recently completed sales, spin-offs, mergers, and acquisitions to gather a sense of what the fair market value might be.
It’s why realtors want to know what comparable homes in your neighborhood recently sold for. They can provide a gauge of how the market is pricing similar objects.
This is a little simplified, but the full scope of financial analysis is way beyond the density of this article!
Alternative Investment Vehicles
So, you can’t buy stock in White Claw, but you’re determined to buy equity in another up-and-coming seltzer beverage. What are some of your alternative options?
- Constellation Brands
Can You Buy Stock in White Claw?
It’s a great question to ask because the brand could be an enormously profitable investment decision. The product tastes great and offers a more healthy alternative for alcohol consumption.
Ultimately no, you cannot buy stock in White Claw, but you can buy their competitor Coca-Cola for $48. Mark Anthony Brands has no intention of spinning off White Claw or going public soon.
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