EAST: Opening up the National market with a premium tequila.

By Ian Gilson, PhD, CFA

NASDAQ:EAST

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Eastside Distilling (NASDAQ:EAST) has acquired Azunia Tequila from its owners, Intersect Beverage. The cost was one point two million shares depending on certain future revenue projections and capped at a value of $14.7 million. The shares will be issued eighteen months after the closing of the deal (issuance about the beginning of 2Q21)

Azunia produces four premium tequilas; Blanco Organic, Reposada Organic, Anejo and Azunia Black. Revenue for the L4Q ending June 30, 2019 was $3.5 million, up 37% Y/Y, on approximately 13,000 cases. This equates to $22.40 per 750 ml bottle. S. California retail prices are $60 for Anejo and $140 for Azunia Black.

Zacks revenue estimates for Azunia are $6 million in 2020 and $8 million in 2021. Profit margins should be much higher than the current company average.

Azunia’s primary sales channel are the on-premise (bars and restaurants) locations whereas Eastside’s is the off premise (grocery stores and liquor stores) market. The addition of major, and country wide, points of sale should allow Eastside to sell its Burnside slate of products on a national basis. Eastside, excluding RRW, is strong on a regional basis but needs nationwide distribution.

The premium spirits segment is growing faster than the overall market and premium (and luxury) tequila sectors are the fastest growers of all. This sector, based on Eastside Distilling’s published data, is currently close to 30 million 750 ml bottles at an average price of approximately $20 bottle and growing at over 10% a year.

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