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Founders First Ltd (ASX:FFL") (Founders First" or the "Company"), founded in 2017, is an Australian based craft beverage ‘accelerator’ operated by a group of leading liquor industry professionals. The Company invests in select craft beverage businesses alongside their founders and accelerates their growth through the provision of capital, sales and marketing, supply chain and management expertise and the operation of venues.
In recognising that these businesses typically face sales and marketing, working capital and operational constraints as they attempt to scale, the business model was designed as a unique proposition for craft operators, providing a solution to capital constraints, brand awareness, market access, supply chain vulnerabilities, high cost bases and knowledge and skills gaps.
In under two years Founders First has successfully raised over $24 million and acquired a national portfolio with interests in eleven businesses including craft brand partners and hospitality concept venues. The Company had pro forma revenues of $7.6 million for FY2019.
The Company’s goal is to build a valuable portfolio of select craft beverage businesses. This will be achieved through investments in its existing partners and in other craft businesses where there is significant potential to accelerate the revenue and earnings profile with sales and marketing, back office and value-add services and distribution opportunities.
The management team is led by CEO Mark Haysman who has over 25 years’ experience in the beverages, retail and hospitality industries and was previously National Field Sales Director with Carlton & United Breweries.
Current investment portfolio
Founders First is looking to undertake an IPO on ASX to raise between $10.0 million and $17.5 million via the issue of between 20 million and 35 million shares at an offer price of $0.50 per share. The Company will have an indicative market capitalisation of $63.5 million at the maximum subscription.
The Company proposes to use the funds raised from the Offer to:
Selected products and brands
The Australian beer industry revenue totalled approximately $4.1 billion in 2018. It is a mature industry and is highly concentrated. The Australian distilled spirits industry is less concentrated than the Australian beer industry, but as with beer, foreign owned companies supply a majority of the market. Both sectors are characterised by their fragmented nature, with an estimated 637 craft brewers and 200 craft distillers in Australia.
Craft Beer Sector
The craft beer sector has developed since the late 1970s. In FY19 it was estimated that total Australian craft beer sector (including craft production by major brewers) revenue was $518 million, which equated to approximately 13% of total beer sales by value. Within this, independent craft was estimated at $223 million of total sales, which equated to approximately 6% by value. Between 2014 and 2019, total craft sales are estimated to have increased at a CAGR of 8.7% and independent craft beer sales at 12.3% in an overall beer market that has been relatively flat.
Estimated Craft Brewing Industry Revenue, Australia, 2014 to 2019
Craft Spirits Sector
Craft distilling in Australia started to develop in the 1990s in Tasmania with production of whisky, following the repeal of state legislation that had previously prohibited distillation. Subsequently, craft distilling of vodka, rum and gin has also developed in Australia.
Over the period 2014 to 2019, the revenue of the craft spirits sector in Australia was estimated to have increased at a CAGR of approximately 18%. A major factor behind future growth is expected to be the commencement of commercial sales by craft distilleries established in the past two-to-three years which are still ageing their first production batches.
Craft spirits estimated industry revenue, Australia, 2014 to 2019F
Founders First is an Australian based craft beverage ‘accelerator’, that invests in select craft beverage businesses alongside their founders and accelerates their growth through the provision of capital, sales and marketing, supply chain and management expertise and the operation of venues.
The Company was founded in 2017 by Stuart Morton and Daniel Wales, with the ambition to become the leading craft beverages accelerator in Australia, by partnering with ambitious early to mid-stage craft beverage operators. Founders First enables craft business founders to ‘think big, act with agility’ and retain their independence.
Founders First made its first Partner investment in Jetty Road in 2017 and has seen Jetty Road’s revenue grow from around $100,000 in FY17 to $3.3 million in FY19. On or shortly after Completion of the Offer, the Company expects to have interests ranging from 5% to 75% in nine Partners. It will also have interests between 50% to 100% in three venues in addition to indirect interests in nine venues operated by its Partners.
Founders First’s business model comprises three integrated pillars, being ‘partnership investments’, ‘commercial business acceleration’ and ‘venue and hospitality expansion’.
The Company’s goal is to build a valuable portfolio of select craft beverage businesses. This will be achieved through investments in its existing Partners and in other craft businesses where there is significant potential to accelerate the revenue and earnings profile with sales and marketing, back office and value-add services and distribution opportunities. The preference is to take a majority equity position in any Partner, however for strategic reasons, it may invest in minority positions in craft beverage businesses.
Founders First investment model
Commercial Business Acceleration
Founders First aims to accelerate growth in its portfolio of Partner brands by securing market access and growing distribution points, addressing supply chain constraints and demonstrating independent craft category leadership. To support this objective, Founders First is building the Indie Craft Collective, which is a highly experienced sales and marketing team focused on commercialising its Partners’ products and helping them to win in market.
The Company has Services Agreements with each of Jetty Road, Foghorn, Ballistic, SauceCo, Sparkke, Slipstream and Brogan’s Way for services delivered by the Indie Craft Collective.
Venue and Hospitability Expansion
The venue and hospitality expansion pillar is an important part of the overall business model. It provides ongoing revenue and earnings, promotes Partner brands and enhances their value by driving trial and adoption, increasing sales at full margin and supporting brand expansion into new markets.
Founders First aims to build a National portfolio of craft concept venues.
Founders First derives revenue and shareholder value in a number of ways, including:
Founders First has investments in nine independent craft beverage operators across four states. The Company believes that this makes it one of the largest investors (by number of investments) in independent craft beverage companies in Australia. Founders First continues to see complementary opportunities to grow this number over time.
The Company has also identified a pipeline of potential partnership investment opportunities across Australia and intend to assess these opportunities in due course.
Current portfolio of investments
Robin Levison – Chairman and Non-Executive Director
Robin has more than 15 years’ experience in small to mid-cap corporate finance and restructure. He is currently Executive Chairman of PPK Group and previously was the Managing Director and CEO of Industrea Limited.
John Hood – Non-Executive Director
John has significant experience in accounting and finance and currently holds a number of directorships including Flinders University, Intersect and Foodbank (SA) and was previously a director of Port Adelaide Football Club and held senior roles with PwC and was a Partner at Deloitte.
Stuart Morton – Founder, Investment and Business Development Director
Stuart is the co-founder of AIM-listed Empresaria Group plc which developed a similar investment model to the Company and has extensive experience within the property industry. He is currently the Chairman of Founders First Investees, Jetty Road and Foghorn.
Daniel Wales – Founder, Category and Marketing Director
Daniel has over 20 years’ experience in senior sales, marketing and strategy roles with the largest Global Fast-Moving Consumer Goods food and beverage multinationals and was the former Sales Category and Strategy Director at Lion. Daniel was also previously the Head of Category and Strategy for Treasury Wines Estates.
Mark Haysman – CEO and Managing Director
Mark has over 25 years’ experience in the beverages, retail and hospitality industries and was previously the National Field Sales Director with Carlton & United Breweries (AB InBev) and former CEO of the Port Adelaide Football Club. Mark has also held various positions with Deloitte.
You are encouraged to read the Prospectus carefully as it contains detailed information about the Company and the Offer. Like all investments, an investment in Founders First Limited carries risk. As set out in Section 4 of the prospectus, Founders First Limited is subject to a range of risks, including but not limited to failure to implement the investments, reliance on key personnel, sales and marketing success, limited operating history, failure to scale up and dilution.
Section 734(6) disclosure: The issuer of the securities is Founders First Limited ACN 622 810 897. The securities to be issued are ordinary shares. The disclosure document for the offer can be obtained by clicking on the link above. The offers of the securities are made in, or accompanied by, a copy of the disclosure document. Investors should consider the disclosure document in deciding whether to acquire the securities. Anyone who wants to acquire the securities will need to complete the application form that will be in or will accompany the disclosure document (which can be done via the electronic application form which will become available by clicking the bid button above).
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Update: CUB's acquisition of Balter for up to $200m supports the value potential of quality craft brewers. More here
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Founders First Ltd (ASX: FFL) is an Australian based craft beverage ‘accelerator’ operated by a group of leading liquor industry professionals. The company invests in select craft beverage businesses alongside their founders and accelerates their growth through the provision of capital, sales and marketing, supply chain and management expertise and the operation of venues. With investments in nine independent craft operators in four states, shareholders will have a direct interest in a portfolio of craft beverage businesses that are poised to capitalise on this large and profitable market opportunity. FFL generated pro forma revenues of $7.6 million for FY2019.
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