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Offered by First Democracy VC

Local Choice

Boutique spirits and private-label brand management

62%

Investors

60

Time to Invest

Security Offered

Convertible Debt

Minimum Investment: $100

  • 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


Terms

Security Type: Crowd Note

Round Size: Min: $50,000 Max: $1,070,000

Valuation Cap: $10 million

Discount: 20% 

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.

Overview

Opportunity

Hatfield & McCoy WhiskeyThe craft distilling industry has seen notable growth over the past several years. In 2016, sales were up 25% year over year.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



Pixie Paula

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.



Product

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.

Pixie Paula & Hatfield & McCoy Whiskey

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.

Local Choice Spirits

Some of the LCS boutique spirits include:

  • Local Choice Black Cherry Bourbon Whiskey – A deep black cherry aroma with an all-natural black cherry flavor. At 90 proof, it is stronger than most flavored whiskeys.
  • Local Choice Doppio Espresso Vodka – A bold roasted coffee aroma with natural espresso, vanilla, butterscotch, and chocolate flavors, complimented by light hints of cinnamon and hazelnut.
  • Local Choice Pixie Spiced Rum – A warm, autumnal rum with a dry, fruity medium body and light vanilla, caramel, and spice blend flavor.
  • Local Choice Lime Tequila – Bright, smooth, and slightly sweet tequila with a natural lime flavor.
  • Local Choice Mango Vodka Rum – A vodka/rum blend with an all-natural mango flavor infused with sweet rum and dry vodka.

Partnership Brands

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.

Local Choice Spirits Partner Brands

Partnership brands owned by LCS include:

  • The Legendary Hatfield & McCoy Family Brand Whiskey – A whiskey created by the descendants of the Hatfield and McCoy families. A medium-body whiskey with a smoky, light black pepper, dried apricot, and black walnut taste. It has a complex aroma with a clean, balanced caramel and butter finish.
  • Gold Star Vodka – Gold Star Vodka is a veteran-brand spirit that was founded to give back to the families who’ve lost family members during the War on Terror and to veterans who have come back with physical and emotional scars.
  • Gas Monkey Cinnamon Tequila – A 69-proof tequila made from blue agave, infused with natural cinnamon, and made in America. It was created by reality TV star Richard Rawlings from the “Fast N’ Loud” TV show on the Discovery Channel.
  • Eubanks Gin Collection – Collection of gin flavors created with Dwight Eubanks, a reality TV star from “The Real Housewives of Atlanta” and a fashion and lifestyle expert.
    • Classic: A gin with a fresh, floral aroma and a complex taste consisting of juniper, coriander, and angelica root with a fresh finish.
    • Pretty in Pink: A gin with juicy citrus aromas with bold, bright flavors of fresh pink grapefruit and botanicals with a crisp and clean finish.
    • Limelife: A gin made with Juicy limes carrying notes of a puckering citrus flavor at the start that evens out with a subtle sweet finish.
    • Jazzin’: A gin with smooth jasmine green tea and juniper flavor that ends with a floral aroma.
  • Kurt Thomas Moonshine – A blended moonshine with a pecan pie flavor. Created by country music singer Kurt Thomas.
  • Tiny’s Lime Light Tequila – A lime infused tequila with a sweet and bold flavor. Created by Tameka “Tiny” Harris, a member of the American R&B vocal group Xscape.
  • Gentry Bourbon Whiskey – A smooth and fruity bourbon, with underlying vanilla, stone fruit, and oak flavors. It has a soft aroma with caramel notes, hints of chocolate, and American Oak. Gentry Bourbon was featured on the Bravo TV show “Southern Charm.”
  • Prevé Vodka – A 100-proof vodka created by Atlanta music producers targeting young professionals.
  • Boosie Juice – An all-natural strawberry kiwi flavored vodka created by hip-hop artist Boosie Badazz. A new all-natural watermelon flavor has just been released in time for summer.
  • Kas’Tell Vodka – A 100% gluten-free and kosher-certified vodka in a red-frosted bottle.

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:

  • Reduce unwanted, harsh-tasting congeners that potentially contribute to hangovers.iii
  • For clear spirits, such as vodka and gin, the distilling process helps reduce alcoholic burn and creates a pleasant aroma.
  • For brown spirits, such as bourbon and whiskey, the rapid filtration system helps reduce the aging process from four to six years to four to six months;iv the reduction in time needed to age and mature the spirits allows clients to bring their products to market quicker and cheaper than some other standard distilling processes.

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:

  • The Fifty Best
    • 2013 
      • Double Gold Medal – Local Choice Doppio Espresso Vodkav
      • Silver Medal – Local Choice Citrus Vodkavi
      • Silver Medal – Local Choice Pixie Spiced Rumvii
    • 2012
      • Gold Medal – Local Choice Strawberry Kiwi Vodkaviii
      • Gold Medal – Local Choice Doppio Espresso Vodkaix
      • Gold Medal – Local Choice Pepper Vodkax
      • Silver Medal – Local Choice Mango Vodkaxi
  • San Francisco World Spirits Competition
    • 2012
      • Silver Medal – Local Choice Black Cherry Bourbonxii
      • Silver Medal – Local Choice Doppio Espressoxiii
      • Bronze Medal – Local Choice Rumxiv
  • New York International Spirits Competition
    • 2012
      • Bronze Medal – Local Choice Pepper Tequilaxv
  • Beverage Tasting Institute
    • 2015
      • Silver Medal – Hatfield & McCoy Whiskeyxvi
    • 2014
      • Bronze Medal – Local Choice Black Cherry Bourbonxvii
      • Bronze Medal – Local Choice Pixie Peach Whiskeyxviii
      • Bronze Medal – Local Choice Bourbonxix
      • Bronze Medal – Local Choice Whiskeyxx
    • 2013
      • Silver Medal – Kas’Tell Vodkaxxi
      • Silver Medal – Local Choice Lime Tequilaxxii
      • Bronze Medal – Local Choice Honey Orange Tequilaxxiii
      • Bronze Medal – Local Choice Pixie Spiced Rumxxiv
  • Denver International Spirits Competition
    • 2013
      • Gold Medal – Local Choice Lime Tequilaxxv
      • Silver Medal – Local Choice Vodkaxxvi
      • Silver Medal – Tiny’s Tequila Orange Honeyxxvii
      • Bronze Medal – Local Choice Black Cherry Bourbonxxviii
      • Bronze Medal – Local Choice Whiskeyxxix
  • The SIP Awards: International Spirits Competition
    • 2013
      • Gold Medal – Local Choice Pixie Peach Whiskeyxxx
      • Silver Medal – Kas’Tell Vodkaxxxi
    • 2012
      • Best in Class Platinum – Local Choice Pixie Spiced Rumxxxii
      • Best in Class Platinum – Local Choice Rumxxxiii
      • Platinum Medal – Local Choice Doppio Espresso Vodkaxxxiv
      • Silver Medal – Local Choice Black Cherry Bourbonxxxv
      • Bronze Medal – Local Choice Bourbonxxxvi
  • Las Vegas Global Spirits Awardsxxxviii
    • 2017
      • Gold Medal – Local Choice Doppio Espresso Vodka
      • Silver Medal – Local Choice Black Cherry Bourbon
      • Silver Medal – Local Choice Easy Rider Bourbon Whiskey
      • Bronze Medal – Local Choice Boosie Juice
  • San Diego Spirits Festivalxxxviii
    • 2016
      • Double Gold – Local Choice Doppio Espresso Vodka
      • Double Gold – Local Choice Pixie Spiced Rum
      • Silver Medal – Local Choice Black Cherry Bourbon
      • Bronze Medal – Local Choice Hatfield & McCoy Whiskey
      • Bronze Medal – Dwight Eubanks Pink Grapefruit Gin
      • Bronze Medal – Local Choice Capone’s Private Reserve Rum
      • Bronze Medal – Local Choice Mango Flavor Rum

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.

Sip & Share


Use of Proceeds and Product Roadmap

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.

LCS Use of Proceeds

Proceeds from this offering would not go into one particular brand but would be utilized across multiple products through various stages of development, including:

  • Have alcoholic beverage formulas developed
  • Create alcoholic beverage brands either in-house or through celebrity partnerships
  • Have alcoholic beverage products distilled, bottled, and stored
  • Sell and ship alcoholic beverage brands to wholesalers
  • Market alcoholic beverage brands to retail and end customers
  • Manage regulatory compliance, accounting, and internal business operations


Business Model

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: 

Package Options

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.


Historical Financials

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%.

Total Revenue

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.

Total Expenses

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.

Net Income


Press

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  

All Hip Hop: Love and Hip-Hop ATL's Karlie Redd Inks Six Figure Deal with Local Choice Spirits

Industry

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

Production Distribution by Tier

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

Active Craft Distilleries by State

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

Case Volumes by Producer Size

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


Competitors

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


Team

Pixie Paula Dezzutti HewlettePaula 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 EkvallRyan 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 ChapmanRobyn 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 EkvallRandal 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 EkvallRemy 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 BelascoAddie 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 DezzuttiRachyl 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.

Endnotes

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