Written by: Dennis O'Neill, Executive Contributor
Executive Contributors at Brainz Magazine are handpicked and invited to contribute because of their knowledge and valuable insight within their area of expertise.
I’ve been in the finance game for over 30 years. I have seen just about everything, both good and bad. We are all looking for what we believe to be good investments. This is a great trick on a good day but requires even more expertise and wisdom when times are tumultuous or rough. We as Americans, have lived through some very turbulent economic times over the past decade or so. It all seems to have started with the 2008 implosion of the real estate market, due to the mortgage-backed security (MBS), “bubble” bursting. This event hurled the US into what has been called, “The Great Recession.” As a result of the US financial collapse, within a year, the crippled US economy had become the catalyst for major global recession, which ensued around 2009.
Investopedia cites two important takeaways from The Great Recession:
“The Great Recession was the most severe economic recession in the United States since the Great Depression of the 1930s.”
“In response to the Great Recession[3], unprecedented fiscal, monetary, and regulatory policy was unleashed by federal authorities, which some, but not all, credit with the subsequent recovery.”
Fast forward to January 2021, CDC confirms the first Corona virus case{1). US, and the world are locked down. Supply chain disruptions, many out of work, businesses and stocks suffered unprecedented losses. And then there is today. War in Ukraine, the breadbasket of the world. Oh, you didn’t know that? Yes, forty percent of the World Food Program’s wheat comes from Ukraine. Also 40% of the world’s sunflower oil comes from Ukraine[2]. As a result of the war, the price of wheat in Africa has risen by 45%[2]. We now have new Covid variants looming in lore, subtly threatening commerce, and the US is facing another recession which financial experts at BTC 2022 in Miami called “A mathematical certainty.” A longstanding hopeful for recession-proof assets was cryptocurrency. Unfortunately, the anticipated US recession, along with rising interest rates, inflation, war, and an endless campaign by the SEC against crypto, has caused a massive crypto winter. This seems to have temporarily negated crypto’s ability to be the hedge against inflation that it was intended to.
One thing we have learned about investing during these trying times is that there are always big winners, even when the overall market is not performing well. A couple of the markets that have fared well during good and hard times are, interestingly enough, Liquor and Sports drinks. It makes sense when you think about it. After doing a significant amount of research, I’ve decided to write my thoughts about a company called Splash Beverages Group. Splash Beverages is uniquely positioned in some of the largest and fastest growing global markets for Liquor and Sports Drinks. These markets have historically performed better than almost any other market sectors during good times and challenging times.
They offer a broad range of beverages, from wines to energy and sports drinks
Splash Beverage (NYSE: SBEV) owns and markets a growing portfolio of alcoholic and non-alcoholic beverage products. Through both organic development as well as mergers & acquisitions (M&A), the company currently produces and markets four beverage brands:
TapouT Performance Sports Drink
SALT Naturally Flavored Tequila
Copa di Vino single-serve wines
Pulpoloco Spanish sangria
The company’s strategies are to develop new, innovative brands and strategically acquire beverage companies which already have great market presence and trusted brand awareness and following.
Management believes this dual approach enables its products to stand out in, what is otherwise a relatively crowded beverage marketplace. Distinguishing oneself from your competition is a pro marketing strategy which helps define you as the market becomes more competitive.
US Tequila Growth Rates:
Since 2002, Tequila volumes have grown 180%, an average rate of 6.2% per year. The market value is slated to rise from USD 10.43 billion in 2022 to USD 15.57 billion by 2029, exhibiting a CAGR of 5.89% during the forecast period. Tequila is a distilled spirit from Mexico made from the juices of the Weber blue agave plant.
Global Wine Growth Rate:
The global wine market size was valued at USD 417.85 billion in 2020 and is expected to expand at a compound annual growth rate (CAGR) of 6.4% from 2021 to 2028. The rising adoption of wine among all age groups from the young generation to the old age population across the globe, is the key factor for market growth.
Global Sports Drink Growth Rates:
The Global Sports Drink Market Size was valued at USD 24.44 billion in 2021 and is likely to reach USD 32.61 billion by 2027, garnering a CAGR of above 4% during the forecast period (2022-2027)
TapouT Isotonic Sports Drinks
TapouT Performance is a hydration and recovery isotonic sport drink that has significantly lower sugar levels and artificial flavors than most other sports beverage brands that currently dominate this category. The beverage sector is changing, as consumers respond to healthier lifestyle choices, and the shift in consumer preference for healthier beverages continues. The company is leveraging the growing propensity of consumers to reduce sugar and artificial ingredients. This trend can also be seen in declining sales of soda. IBIS World market research notes that:
“After peaking in the late 1990s, per capita soft drink consumption has fallen every year since.”
Splash Beverages believes this trend bodes well for the further growth of TapouT products. Splash has license rights to the TapouT brand for the United States and several other international markets. The company has cherry lemonade, orange, and citrus kick flavors, with additional brand extensions planned, including TapouT Elite and potentially TapouT Energy. For those of you who may exist in an “MMA free bubble” (Mixed Martial Arts, or “cage fighting”), TapouT is a world renowned, quality brand, loved by millions of exercise enthusiasts, cage fighters, martial artists, athletes, and men and women the world over. You would be hard pressed to attend any barbeque in America and not see a piece of TapouT merchandise being donned.
Brand association & growing reach
TapouT benefits from 23 years of brand awareness, and marketing associated with MMA and The UFC. Last month, Splash and Walmart agreed to distribute TapouT to Walmart locations in Florida. The company is expanding TapouT’s availability within Walmart’s roughly 341 store network in Florida.
SALT, Flavored Tequila
Through a Joint Venture (JV), Splash Beverages has SALT, Flavored Tequila. Salt, Flavored Tequila is a 100% agave, 80 proof line of flavored tequilas that Splash sells in citrus, berry and chocolate flavors (See photo below). SALT is currently being launched and distributed by several well-established beverage distributors, including RNDC and Young’s Market, a leading and fast-growing distributor that is leveraging its ability to distribute both beer and wines in a footprint that encompasses 37 states and expanding. Currently, SALT is available in six states and in Mexico, and continues to grow its footprint. To-date, the company has forged agreements with Total Wine, which has been in operation for 30+ years and is one of largest private wine & spirits chains in theU.S., as well as distribution agreements with retail giants, Sam’s Club and Wal-Mart Spirits.
Moreover, as direct-to-consumer delivery continues to gain traction, a core strategy forSplash is to launch direct-to-consumer online sales leveraging Qplash, a proprietary e-commerce platform. Splash anticipates several benefits from Qplash, including the ability to incubate and beta test new and emerging brands and to generate higher margin revenues. A sign of continued momentum for the future.
Copa di Vino
Copa di Vino, which was featured on Shark Tank, represents the company’s initial M&A transaction to complement organic growth. In December of 2020, Splash acquired the assets of Copa di Vino Corporation (CdV) for about $6.0 million. CdV is one of the leading producers of premium wine by the glass in the U.S., with seven wine varietals: Pinot Grigio, Riesling, Merlot, Chardonnay, White Zinfandel, Moscato, and Cabernet Sauvignon.
SBEV continues to expand distribution for CdV, with distribution to 13,000 retailers currently, primarily through 82 Anheuser Busch distributors. Management believes this enables it togain shelf space in a crowded marketplace.
Pulpoloco Sangria
CdV also produces Pulpoloco Sangria, which currently offers four sangria flavors. Interestingly, the sangria is packaged in an eco-friendly container that is made from paper and is 100% biodegradable. The name means “Crazy Octopus” in Spanish, which is really cool. There is a neat abstract art octopus on the label. SBEV has the exclusive rights to use this packaging in North America, according to management. Given growing awareness and concerns about the impact of plastic waste on the environment and marine wildlife, the company believes it might have an opportunity to use the packaging for additional products and brands at some point.
Expected product portfolio expansion
Splash intends to continue expanding its product portfolio, primarily through acquisitions and JVs. Splash’s preference is to work with brands that are, as noted:
Already have some level of preexisting brand awareness where Splash can leverage its marketing and distribution know-how to expand the product’s regional presence, particularly when there has been some product innovation (SALT Naturally Flavored Tequila, which management believes is the first 100% agave, 80 Proof tequila brand, is an example).
Are in a growing and underdeveloped category.
Distribution:
AB One, owned by Anheuser-Busch InBev SA, signed with Splash in November 2021 to extend distribution of the TapouT, Copa di Vino, and Pulpoloco brands into major markets such as Los Angeles, New York City, and Boston.
As of Jan. 11, Walmart Inc. allows the sale of the TapouT product in 47 of its stores across Florida with expectations the number will increase.
Ralph’s Grocery agreed to sell Splash’s Pulpoloco brand in 187 stores in Southern California. Ralph’s, owned by Kroger Co., already sells Splash Copa di Vino line.
Under a Jan. 25 agreement, Arkansas-based Central Distributors will distribute the company’s TapouT brands throughout the state. Central already distributes the company’s Copa di Vino and Pulpoloco brands.
Splash signed an agreement on Jan. 27 with New York-based D. Bertoline & Sons to distribute all its company brands in two major metropolitan counties in the Hudson Valley area.
Splash announced February 8th with California based Anheuser-Busch Distributor Heimark Distributing TapouT, Copa Di Vino and Pulpoloco.
Splash announced June 28th Save A Lot is one the nation’s largest grocery store chains, with more than 850 stores supplied by 13 distribution centers in 32 states
Splash Announced Mexcor International, the third largest alcohol distributor in Texas. The distribution of Pulpoloco, Copa di Vino and SALT Tequila brands throughout the state of Texas.
Splash Beverages Management’s Experience
Splash management has extensive experience developing, launching, and expanding several successful brand introductions, including brands such as Gallo, Red Bull, Bacardi, DIAGEO, Sparkling Ice, Jones Soda, FUZE Beverage, NOS Energy, SoBe Beverages, Muscle Milk, and Marley Beverages, to name a few.
For instance, CEO Robert Nistico has more than 28 years of beverage industry experience. Prior to Splash, he founded and led the Marley Beverage Company from startup to $44+million in annual revenue and before that, as SVP and General Manager, led Red Bull from $0 revenue in North and Central America and the Caribbean to $1.6 billion in annual revenues.
Wrapping it up
Well, everyone, I hope that this information gives you all some investing fodder to consider. Other recession “resistant” stocks for 2022 are, as follows:
(These picks are from Analytics Insight)
Synopsys Inc. (SNPS) Synopsys Inc is one of the fastest-growing stocks this year. ...
Lowe's Cos. Inc. (LOW) Lowe's is another company that keeps outperforming competitors during recessions. ...
Walmart Inc. (WMT) ...
Amazon.com, Inc. (AMZN) ...
Please note that while I am a financial expert, I am not a financial advisor. Never risk more than you are willing to lose, and do your own research or contact a licensed financial advisor for assistance with your portfolio.
Take care and invest well.
Dennis O'Neill, Executive Contributor Brainz Magazine
Dennis O'Neill is currently the President and board member of Biomedican, Bio-Kai and ActinexRX . He has over 30 years experience as an Investment Banker. He helped start two of the largest regional Investments banks in Chicago then went on to Managing Director for Softbank Investments/ E2Capital office in Chicago and raised over 2 billion dollars in capital for early stage companies to date. Mr. O'Neill has a significant amount of experience and success in Sales, Marketing, Financial Media, Business Development and Institutional Capital Raises. He is an expert and thought leader on Venture Capital, Private Equity, Biotech, Cannabis Therapeutics, Blockchain and Smallcap stocks and has spoken at over 75 conferences around the world.
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