Offered by First Democracy VC
Time to Invest
Minimum Investment: $100
Offered by First Democracy VC
Time to Invest
Revenue up over 200% from 2014 through 2017
Existing private label deals with several celebrities and artists
CEO has more than a decade’s worth of experience in the spirits industry
Local Choice Spirits have collectively won more than 40 awards in the past five years
Security Type: Crowd Note
Round Size: Min: $50,000 Max: $1,070,000
Valuation Cap: $10 million
Conversion Provisions: In connection with equity financing of at least $1,000,000, the Company has the option to convert the Crowd Note into shares of non-voting preferred stock (Conversion Shares) at a price based on the lower of (A) a 20% discount to the price paid per share for Preferred Stock by investors in the Qualified Equity Financing or (B) the price paid per share paid on a $10 million valuation cap. Please refer to the Crowd Note for a complete description of the terms of the Crowd Note, including the conversion provisions.
The craft distilling industry has seen notable growth over the past several years. In 2016, sales were up 25% year over year.i Driving this growth has been an increase in consumer demand, a growing number of craft distilleries, and more favorable government laws and regulations regarding craft distilling. The spirits industry as a whole has also been on an upswing and has continually gained market share over beer for each of the past eight years.ii
Created in 2010 by “Pixie” Paula Dezzutti Hewlette, Local Choice Spirits (LCS) helps celebrities and entrepreneurs build brands by creating custom boutique spirits. Paula has an extensive background in the spirits industry and leverages her connections and experience in creating, promoting, and managing spirit brands. The company emphasizes partnerships with celebrities in order to create private-label brands; some notable partnerships include The Legendary Hatfield & McCoy™ Family Brand Whiskey, Dwight Eubanks and his Eubanks Gin Collection, and Boosie Badazz’s Boosie Juice Vodka.
LCS manages its own brands of spirits and enables clients to build their own private brand or private label (a.k.a. partnership brands) by coordinating distilling, bottling, distribution, and storage services on their behalf. Partners can develop their own exclusive formula for their brand, and LCS will custom design the bottle and packaging. LCS manages the entire production process and will work with the partners to promote the products and move them through distribution process and ideally into retail.
LCS Brand Spirits
LCS has created numerous company-branded, award-winning spirits since its inception. With a focus on creativity, LCS often combines unique spirit flavors.
Some of the LCS boutique spirits include:
LCS partners with celebrities and other entrepreneurial clients to develop their brands through custom-made craft spirits. LCS has partnered with musicians, television personalities, historic families, and behind-the-scenes producers.
Partnership brands owned by LCS include:
Through strong ties with its suppliers, LCS can leverage favorable pricing on product development. In the case of one large distiller ─ Terressentia Corporation ─ LCS has a unique supply agreement to utilize patented technology.
Terressentia’s patented distilling process is designed to:
Both LCS boutique brands and partner brands can be sold through the LCS website in addition to retail locations where the respective brands are distributed.
Over the last few years, LCS brands have won numerous awards including:
Sip & Share
The LCS “Sip & Share” program helps people give back to their communities with various events, galas, or silent auctions. When choosing to serve LCS spirits, the company will donate $2 per bottle sold to the featured cause in conjunction with the outlet that purchased its spirits. To date, LCS has participated in fundraisers for the Special Olympics, Folds of Honor, March of Dimes, Hootie and The Blowfish Foundation, Waterkeepers, Anita Zucker’s Oxygen Ball, and The Harbor Entrepreneur Club.
LCS intends to use the proceeds from this raise to increase production, expand its product line, and further solidify its balance sheet. If the minimum amount of $50,000 is raised, LCS will allocate 93% of the funds to campaign marketing and related reimbursements. If the maximum amount of $1,070,000 is raised, 37% will be allocated to increasing its inventory, 16% for campaign marketing and related reimbursements, 9% for working capital, 9% for future wages, and 5% for new brand production. The company has discretion to alter the use of proceeds mentioned based upon prevailing market conditions and board approval.
Proceeds from this offering would not go into one particular brand but would be utilized across multiple products through various stages of development, including:
LCS Boutique Brands
LCS sells its spirits through its online store and distribution network. The company has established wholesale distribution relationships in more than 30 states via several national distributors. The majority of retail stores that offer LCS products are located in South Carolina. Prices for LCS spirits on its website range from $19.95 to $32.95, with a median price of $29.95.
LCS Partnership Brands
For partnership brands, LCS offers a variety of services that include, at a minimum, managing the development process and regulatory compliance. Optional additional services include introductions to wholesale distributors, warehousing, and product promotion through the LCS e-commerce store and at events. These options are all offered through four tiered packages that determine entry pricing and equity positions held by LCS depending on the capital collected up front.
The four packages include:
Prices of the partnership brand bottles on the LCS website range from $24.95 to $53.99, with a median price of $29.95. LCS also retains an average of 51% equity ownership in the resulting brands and spirits.
Note: 2014, 2015, and 2018 financials were not audited or subject to financial review
As of May, total revenue for 2018 was $435,000. In 2017, LCS generated $1.7 million in total revenue, a 48% year-over-year increase. Revenue in 2016 was $1.15 million, a 22% year-over-year decrease. Revenue in 2015 was $1.5 million but was partially inflated due to a one-off transaction facilitated by LCS on behalf of another broker who was unable to fulfill the order for its customer. From 2014 through 2017, revenue grew by about 202% with a compound annual growth rate (CAGR) of about 32%.
As of May, total expenses for the year were $472,000. The largest expense item for 2018 thus far has been costs of goods sold (COGS), representing 53% of the total expense amount. Total expenses in 2017 were about $1.6 million, a roughly 32% year-over-year increase. The majority of expenses were attributed to COGS, which totaled $870,000 or about 54% of total expenses. The rest of total expenses were largely attributed to general and administrative (G&A) costs of $500,000. In 2016, total expenses were $1.2 million, a 13% year-over-year decrease compared to 2015. The majority of the total expenses were attributed to COGS ($502,000), followed by G&A ($378,000) and bad debt expense ($250,000).
In 2015 and 2016, bad debt expense represented a significant portion of the total expenses. Bad debt expense has occurred for numerous reasons such as distributor insolvency, brand abandonment, and insufficient funds from the clients. In 2017, bad debt expense decreased substantially to $8,241 for the year. As of May 2018, LCS has not incurred any bad debt expense for the year.
As of May, LCS has generated a net loss for the year of $37,000. Net income for 2017 was $115,000, versus a net loss of $49,000 in 2016. The increase in net income was primarily attributable to a 99% decline in bad debt expense (~$246,000 decrease). As of June 1, 2018, LCS had $68,400 in cash assets.
The Post and Courier: Distilling Taste
Huffington Post: "Meet Renaissance Woman Paula "Pixie" Dezzutti Hewlette"
Distillery Trail: "Pixie Paula and Local Choice Spirits Launching Grizzly Adams Whiskey"
Today's Honoree: Local Choice Spirits and Founder Paula Dezzutti Hewlette
Distilled spirits gained market share relative to beer for the eighth consecutive year in 2017. In 2017, suppliers reported that distilled spirits sales rose by 4% year over year, with total sales worth $26.2 billion. Total volume rose 2.6% to 226 million cases, up 5.8 million cases from the prior year. Furthermore, the distilled spirits market has been primarily driven by growth in high-end premium and super premium products – bottles that retail for at least $20.xxxix
In 2017, vodka accounted for almost one-third of total spirits volume with 71.3 million cases sold. Total vodka sales generated $6.2 billion in revenue, up 3% year over year. Revenue from super premium vodka (bottles that retail for over $30) rose 15% to reach $1.6 billion. American whiskey volumes increased 6% to 23.2 million cases. Super premium American whiskey volumes increased 18% (to 2.4 million cases), while revenue jumped 18% year over year to $551 million.xl While overall volume for rum was down 0.4% year over year (to 24.6 million cases), super premium rum sales increased 10% in 2017 (to 546,000 cases) and generated $140 million. Similarly, in 2017, overall gin sales were down 0.6% year over year (to 9.9 million cases), but super premium gin sales increased 11% (to 159,000 cases) and generated $28 million.xli
Local distilleries have contributed to the overall growth in the distilled spirits market. In 2016, the craft spirits industry generated roughly $3 billion in retail sales, up 25% year over year. Overall volume reached nearly 6 million cases in 2016, up 19% from 2015. There were 1,589 active craft distillers in the U.S., as of August 2017, up 21% over the prior 12 months. The largest concentrations of distilleries were primarily in the West (mostly in California, Washington, and Colorado) and in the South (mostly in Texas). Investments in craft distillery expansion have also increased notably. As of August 2017, total year-to-date investment reached $593 million for craft distillery expansions, up 49% from the $398 million invested for all of 2016.xlii
As of 2016, 92% of craft distillers were defined as small producers. Yet, because small distilleries produce a limited quantity of spirits – usually single batches at a time – they accounted for just 13% of the craft spirit cases sold. For these small distillers, generating revenue on premise (at the distillery) is especially important, as on-site sales make up 34% of their revenue on average. Of small craft producers’ revenue, out-of-state sales account for less than 10% of total business sales.xliii
Recent legislation in South Carolina has been favorable to craft distillers. In 2017, legislators voted to let distilleries use mixers in their tasting rooms to create cocktails that highlight their spirits. Lawmakers also raised the amount of spirits a visitor can consume in a day at a distillery from 1.5 ounces to 3 ounces. Additionally, a regulation that limited distillers to selling only three 750-milliliter bottles to a consumer per day was removed in favor of legislation that now allows distillers to sell smaller bottles in addition to the three 750-milliliter bottle limit per person.xliv An additional change in South Carolina is a bill that was passed in March 2017, allowing the transfer and donation of spirits from a distillery to a non-profit directly without having to go through a wholesaler and retailer.xlv
Sprits Consulting Group: Founded in 2010, Spirits Consulting Group (SCG) provides consulting services for spirits, wine, and beer businesses. The company focuses on early-stage brands with services that include product and brand development, market entry strategy and financial planning, market launch, sales, marketing, and operations. SCG has a sales presence in 13 states across the U.S. with four different office locations.xlvi
International Spirits & Beverage Group: Founded in 2001, International Spirits & Beverage Group (ISBG) is a producer and marketer of global wine and spirits brands. ISBG helps brands throughout each phase of development, from concept creation to product development, brand positioning, sales, and marketing. Additionally, ISBG will assist clients with logistics, warehousing, shipping, and regulatory and receivables management. ISBG currently has two brands in its portfolio, Besado Tequila and Dziaq Liqueur.xlvii
4 Corners Spirits Company: Founded in 2014, 4 Corner Spirts Company is a brand development company that specializes in the development, representation, distribution, and commercialization of new and emerging craft spirits. The company’s services include idea generation, liquid formulation, production, bottling, branding, marketing, sales, and distribution. It currently has one brand in its portfolio, Hill Billy Bourbon.xlviii
Southwest Spirits & Wine: Southwest Spirits & Wine is a consumer brand development company that specializes in the wine and spirits industry. It is a joint venture formed between Prairie Creek Beverages and Southwest Distillery. Services include distillation, formulation, blending, production, packaging, compliance, distributor management, and marketing. Its portfolio includes 11 brands, and the company also provides services to an additional 11 brands.xlix
Paula Dezzutti Hewlette, Founder and CEO: Paula founded LCS at the end of 2010 after more than a decade of experience in the spirits industry. In addition to her role at LCS, Paula also serves on the Board of Directors for Terressentia Corporation, a company that creates customized spirits for large retail customers, individual brand owners, and other distilleries and brokers. Over the last several years, Paula has been featured in The Huffington Post, Yahoo Finance, Dow Jones Market Watch, Proof 66, Wine and Country Magazine, Whiskey Passion Magazine, and Entrepreneur Mind World. Paula has a background in business management and financial planning and graduated from The University of Connecticut.
Ryan Ekvall, Chief Operating Officer (COO): Ryan joined LCS in 2014 to develop marketing content and a public relations strategy. Soon after his arrival, he was promoted to Director of Sales where he was responsible for launching Boosie Juice Vodka. He has since been promoted to COO, where he is now responsible for managing relationships with wholesale distributors and brand managers. Prior to joining LCS, Ryan served as a journalist for the Wisconsin Reporter, reporting on state and local government. Ryan has a BSc in Business Administration and Management, Financial Services from Columbia College.
Robyn Chapman, Marketing Director: Robyn joined LCS as Marketing Director after working for global companies like The Guardian News & Media and has a background in marketing, sales, and advertising. At LCS, Robyn is responsible for developing the website and promotional opportunities.
Randal Ekvall, Executive Brand Manager: Randal joined LCS as an Executive Brand Manager in 2015, where he is responsible for the planning and development of new brands. He is also responsible for getting brands certified, putting the finished packaging together, and helping bring a brand from inception to completion.
Remy Ekvall, Operations and Logistics Manager: Remy joined LCS in 2014 as Sales Manager after working at Terressentia Corporation as a sales representative. In 2015, he was promoted to Operations and Logistics Manager. In his current role, Remy is responsible for all aspects of logistics, including managing shipments, negotiating transportation pricing, and preparing the delivery of samples for special events. He is also responsible for overseeing the warehouse and all duties related to inventory control.
Addie Belasco, Executive Assistant: Addie works as an Executive Assistant at LCS, where she works on a variety of tasks that include administrative and clerical assistance. Her duties include scheduling meetings and events, making travel arrangements, and organizing daily calendars.
Rachyl Dezzutti, Social Media Director: Rachyl is in charge of managing the LCS social media platforms. She graduated from the University of Connecticut with a bachelor’s degree in Human Development and Family Studies and a Minor in Psychology.
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