10-Year old Mission Brewery is on the hunt for capital, and, in an effort to stay in business for another 24 months, the company has turned to the everyday craft beer drinker for help.
The San Diego-based craft brewery yesterday launched a crowdfunding campaign on WeFunder, an SEC-approved third-party portal that takes advantage of recent JOBS Act regulations that enable companies to sell $1 million worth of equity to non-accredited investors.
According to the investment deck, Mission Brewery — which expects to produce about 20,000 barrels of beer in 2017 — is looking to secure between $300,000 and $1 million, which it says will be used to double production, add key employees and build as many as six satellite tasting rooms at an estimated cost of $50,000 each.
Investors are being offered the chance to spend a minimum of $200 for shares that cost $4.32 each. Larger investments include “perks,” such as engraved planks that will be displayed in the brewery ($500), a complimentary round of beers for 10 guests ($1,000) and private parties for those that contribute $10,000 or more.
According to documents filed with the SEC, a total of 69,445 shares are currently for sale. Additional shares could be made available if Mission exceeds its minimum funding goal of $300,000. The filing also states that no securities will be sold if the company does not meet or exceed its target offering.
Also in its WeFunder deck, Mission said the company was worth $17 million, a discounted pre-money valuation determined by comping against previous craft brewery acquisitions, according to the San Diego Union-Tribune.
In order to raise funds from non-accredited investors, Mission Brewery was required to make its financial performance over the last two years public. In one document, which was bizarrely titled “HAHAH,” the company disclosed net losses of approximately $2.2 million on about $4.5 million in revenues for the fiscal year ending October 2016. It also recorded net losses of more than $685,000 on $4.6 million of revenues in 2015.
Additionally, the company disclosed that it had more than $6 million of long- and short-term debt in 2016, and more than $3.5 million of debt in 2015.
A second document showed the company had $113,000 of “cash on hand” as of September 2017. It also noted a burn rate of more $147,000 per month, on monthly revenues of approximately $404,000 and expenses totaling more than $551,000.
In an interview with Brewbound, brewery founder Dan Selis said those figures were the result of an intentional shift in strategy.
“This is a new game plan,” he said, noting that recent investments into upgraded brewing and packaging equipment, executive hires and a more robust sales infrastructure are what caused the company to spend more than it made in 2016.
“Three years ago, we had a $250,000 profit,” he added. “So when you see expenses that are greater than revenues, that is by design. We intentionally entered into this.”
Selis also argued that his company’s improved performance in 2017– sales of core products are up 53 percent overall and 80 percent in Southern California – was proof that the above-mentioned investments were paying off, and he even challenged Brewbound to quote the following:
“Put it in — ‘They had EBITDA profitability and they changed their plan, downshifted, stomped on the gas and [are] swinging for the fences … and it is working.’”
One thing that doesn’t appear to be working as well as it once had, however, is the company’s hard root beer product. Selis blamed sluggish sales on dwindling demand following the 2015 breakout success of Pabst Brewing’s Not Your Father’s Root Beer, which went national and quickly amassed more than $100 million in off-premise retail sales.
But consumers shifted away from hard root beers in 2016, in favor of hard seltzers, and that took a toll on Mission’s profitability.
“Root beer,” Selis said, taking a long pause, “threw us for a curve in terms of revenue.”
When hard root beer was in high-demand, Selis claimed the company had been selling $150,000 worth of its product monthly.
“Nobody could see it coming,” he said of the declines. “We dropped down to the point where, maybe, we are sending out $25,000 [worth of product]. That’s $1 million of revenue that got shaved off our budget.”
Despite the company’s financial woes, the decline of its hard root beer business, and the numerous challenges that it and other mid-sized craft breweries face as they look to grow in an increasingly more competitive craft beer marketplace, Selis said he expects Mission Brewery to expand production as well as distribution, and return to profitability by next May.
“We will charge forward to bring that profitability up as much as we can over time,” he said.
But the SEC documents paint a slightly different picture. In one filing, Mission states that a maximum raise of $1 million would only float the company for another two years.
“Should we hit our maximum funding target, our projected runway is 24 months before we need to raise further capital,” the document reads.
Selis also told Brewbound that he expects Mission to outgrow its current production facility over the next three years, at which point the company will look to spend between $15 and $20 million on a “much larger” brewery. That expansion could be financed through a combination of bank debt as well as equity, he added.
Investments in the company aren’t without inherent risk, and that’s something Mission addresses in its deck. The company laid out a number of factors that could prove difficult to overcome, including “substantial competition,” and an “inability to compete effectively.” Among other hurdles, Mission said the future success of the business hinges on its ability to expand distribution throughout the U.S., into areas that “may be dominated by one or more regional or local craft breweries.”
As of press time, Mission Brewery had secured more than $42,000 from 71 investors.
Earlier this year, Hopsters, a hybrid brew on-premise, brewpub and commercially available craft beer brand, raised $1.3 million from 715 investors on the WeFunder platform. In 2016, Texas’ Hops & Grain Brewing also raised $1 million from 555 investors via WeFunder.
A press release with additional information is included below.
Mission Brewery Announces Rare Investment Opportunity in Company
The first opportunity of its kind in San Diego to be a part of San Diego beer history
SAN DIEGO (October 3, 2017) – Mission Brewery, one of San Diego’s most historic breweries located inEast Village, is launching a stock purchase campaign unlike any other in San Diego. In honor of its 10th Anniversary, the community has the opportunity to invest in Mission Brewery through an online application, WeFunder. This platform connects investors to publicly and privately held companies, giving the unaccredited public the opportunity to purchase shares in the company during a two-month window. This is the first time this is being done by a brewery in San Diego and it’s the only opportunity for unaccredited investors in San Diego, the brewing capital of America.
“Investing in Mission Brewery doesn’t just help the brewery but it gives San Diegans the chance to become a part of the local San Diego beer scene as more than just a consumer or home brewer,” said Dan Selis, Mission Brewery president, founder and CEO. “Most beer lovers dream of opening a brewery—I was homebrewing for about 25 years before I started Mission Brewery. Now people can have the chance to make becoming part of a brewery a reality and own a piece of Mission Brewery.”
Previous investor rules only allowed accredited investors with a certain income and net worth to participate in these types of lucrative investments. But thanks to the “JOBS Act,” Title III, grants regulation crowdfunding and Title IV grants non-accredited investors (someone who does not meet the net worth requirements under the Securities & Exchange Commission’s regulations) the ability to participate in alternative investments. Virtually anyone can invest in Mission Brewery throughWeFunder.
The WeFunder platform is easy to use and calculates how much unaccredited investors can invest annually based on net worth and income. If community members are eligible and decide to invest inMission Brewery, they can select the green button “Invest” and sign the contract all online. The minimum investment is $200 and the opportunity to invest is open online for two months only. Once the investment goal of $1 million is reached, the opportunity will be closed and hopeful investors will be put on a waiting list.
“As one of the top craft beer brands in San Diego, our goal is to bring Mission Brewery into households nation-wide and open more tasting rooms for our local San Diegans to come in and enjoy,” said Selis.“With increasing sale and bottling capacity, the already established Mission Brewery is on the rise. Now is the time to join us in investing in the company and becoming part of the local craft beer family and officially own a piece of San Diego’s beer history. This is an opportunity to own your craft.”
For more information about Mission Brewery or how to get involved please visit,www.missionbrewery.com or www.wefunder.com/missionbrewery. For more information about theWeFunder process, please see the FAQ page. To get involved #JoinOurMission and #OwnYourCraft by sharing social media and following Mission Brewery on Facebook, Twitter and Instagram.
To read more about the new rules and regulations for unaccredited investors please see this CrowdfundBeat article here.
About Mission Brewery
Mission Brewery, originally established in 1913, is one of the top San Diego craft breweries located inSan Diego. The historic brewery is located in the old Wonder Bread Factory built in 1894 and is a staple in the community. After going out of business during the prohibition, it was reopened in 2007 by Dan and Sarah Selis and is celebrating its 10th Anniversary this year. Mission Brewery functions as a tasting room, and hosts private events, tours and weddings. All beer is brewed, bottled and canned in this location as the only functioning packaging brewery in Downtown San Diego and is the winner of neatly53 National and International brewing awards.