The MHW Mark Podcast
Welcome to the MHW podcast, bringing you conversations with experts and leaders in the alcoholic beverage industry. Covering topics ranging from selling alcohol online, creating a new brand from scratch, and what you need to know when you start doing business internationally. Hosted by Jimmy Moreland and a rotating cast of cohosts from the folks at MHW.
The MHW Mark Podcast
M&A in Beverage Alcohol Mini-Series Part 3 - Wine
Join us as we wrap up our three-part journey into the world of M&A - Mergers and Acquisitions. We conclude our tour of categories with wine, and host Jimmy Moreland welcomes double the guest hosts to guide us along: MHW's MaryAnn Pisani and Brigid McCabe join for a great conversation with the founder of the Growth Beverage collective of brands (Sprout Beverage, InvestBev, BevStrat, Algoma Capital) Brian Rosen.
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Welcome to the MHW Mark podcast, where we take deep dives into various aspects of the alcohol industry. My name is Jimmy Moreland. Mhw is a US and EU beverage alcohol importer, distributor and service provider. With me today, we have double the brainpower to work through part three of our three-part mergers and acquisition series. Helping us along in our discussion are two of MHW's experts. Welcome to the show Marianne Pisani and Bridget McCabe.
Speaker 2:Good to be here. Thanks, Jimmy. Thank you Jimmy.
Speaker 1:Now for the last two installments of our three-part series. Here we looked at M&A in beer and in spirits, and we looked deep into legal and financial aspects. What are we doing today on part three?
Speaker 2:Yeah, jimmy, this episode we're gonna cover M&A in the wine space. We've had a long list of wine and champagne clients who have given or received financial investment. Ace of Spades Jay-Z's brand is a great example of that. We've also seen several of our large wine portfolios merger or acquire wineries across Europe and the US in order to fill the geographic white spaces in their portfolio. From a back office standpoint, mhw is built to support this kind of growth, such as our longtime client, hb Wine Merchants, who imports hundreds of wines from many different regions. Navigating the compliance, logistics and transitions in-house would be so challenging and expensive for any large wine portfolio who regularly acquires products or wineries, but MHW simplifies these complexities significantly. Wineries but MHW simplifies these complexities significantly. Due to the environment right now, with US wine consumption and sales, it makes sense that investment is needed. Mergers and acquisition activity is happening primarily from the investors or brand houses who have strong marketing and sales backgrounds. So our guest today is going to really clear up a lot of this for us in terms of M&A for wine.
Speaker 1:Very good. Well, without further ado, let's jump into that discussion with our guest. Our guest today is the founder of the Growth Beverage Collective of Brands, which includes Sprout Beverage, investbev, bevstrat and Algoma Capital. Welcome to the show, brian Rosen. Welcome.
Speaker 4:Thank you for having me. I'm happy to be here. Let's talk about beverages.
Speaker 1:Let's get into it. Can you give us a little bit more, just a little bit of background on yourself? I know that we've got a big old bio here, but I don't want to bore the listeners by reading it myself. I'd rather hear it from the man himself.
Speaker 4:Sure, I'm happy to bore them with my own voice. I'm a lifelong beverage guy. My family was the very first liquor license in Chicago. After prohibition we turned that into America's number one retailer in Chicago called Sam's Liquors. Um, I sold that to a private equity firm. From there I went to White House Cooper's and created the adult beverage practice for PWC and from there came back to Chicago. I founded a company in 2015 called Bevstrat and InvestBev. At the time I was fortunate enough to grow Bevstrat to be a pretty sizable company. I sold that in 2019. And now I'm left with and I shouldn't say left with, because they're all great companies, but I'm left with Bevstrat, investbev, algoma Capital and Sprout Beverage all part of the Growth Beverage Group. Together, it roughly is about half a billion dollars of assets under management.
Speaker 2:Certainly, I've enjoyed the opportunity to work with you over the years, brian, and it's great to have you here on the podcast. So, to kick it off, what inspired you to launch InvestBev?
Speaker 4:Well, thank you, marianne. I've enjoyed working with you and the team at MHW for many years. Invespev was a natural evolution for me. Having been in the business my whole entire life, having sold two companies to private equity, what I really realized was that what the industry needs is a private equity advocate, is a financial advocate. All the brands that we work with at MHW, at InvestBev and elsewhere those brands are starving of capital. They're starving of intellectual support, experience, support, someone to be on their team that says I've done this before, type of thing. And so InvestBev fills a natural void in there. And then when I went into the general market to raise capital, it was natural. There the investors saw that 95% of brands struggle, 5% make it, but the 5% that make it return 14, 15 multiple on revenue.
Speaker 4:So big numbers and people talk about and your listeners, I'm sure, know this People talk about Aviation Gin selling for six hundred million dollars or Casa Amigos selling for one point one billion. But the reality is those are big, sexy, popular brands. But the reality is there are sales that happen every single week at 40 and 50 and 60 million dollars that no one talks about because they're not sexy. So we play in that role of taking a brand from 10,000 cases to 20,000 cases and then shopping them for exit, and it's a needed, what I would call what we call in the office, frankly, the farm league. It's a great farm league before you get to the pros and no one is there doing that. So Invespev fits a void that's created by just the massive exits that occur in the business.
Speaker 3:How does Invespev scout its investments? What type of partnership model do you provide and what is the general criteria and process for brands that are interested in entering this process?
Speaker 4:Sure, bridget, all good questions for sure, and the first thing I look for is founder. Is the founder real deal? There are a lot of people that we come across in our universe where the founder is, oh, this is my night job, this is my hobby, or say, hey, I made this drink at home and everyone said, why don't you sell this Right? And then it becomes a brand. That's not the founder that we generally back. We back brands that are in multiple states with MHW and traditional distribution. We back brands that are capitalized to a point they don't have to be making money.
Speaker 4:They have to have 12 months reverse revenue of a million dollars, ttm of a million dollars, and they have to have strong and active founders. We have to have founders that this is their life and if it fails that's bad for their life, and not people that are doing this as a side hustle, as a gig, on a dare. Those are not the founders we want to be a part of. And then when we get involved, we really get involved with FP&A, which is financial assistance, with investment, with help them fundraise, help them write pitch decks. This is a very, very challenging business and, as you know, this business is one of those businesses where is one of those businesses, specifically? Where you have to spend three, four, $500,000 sometimes before you sell your first bottle. You have to go into production, you have to go into label and cola, you have to go into formulation. You have to make 500 cases before you sell a single thing. And then you've got a price post and you've got to get a sales team and you've got to find a distributor. Then you've got to go to shows. You're a half million dollars in the hole before someone takes a sip of your brand. So you've got to do all of these things correctly to sell one bottle, let alone a thousand cases. So we get involved with the founder first. That's the most critical thing for us the founder Brand second. So is it a growing brand? Is it an emerging brand? Is it a brand that has legs? I don't have a ton of interest in a Italian limoncello made from grape leaves by a one-armed winemaker that is left-footed. Those know those intricacies don't have an audience.
Speaker 4:What we always say here is that if you make a brand for yourself, you have an audience for one. If you make a brand for everyone, you have an audience of everyone, and so that's the kind of brands we look at. But it starts with founder. That's important to know. And a realistic founder. You can't give me a pitch deck and use Casa Amigos or Aviation Gin or Empathy Wines or any Bill Foley deal. You can't bring those things and say this is what the universe is available to us if we get big, because that's 1% of the total makers globally. That's not realistic. So you've got to be realistic in your expectations. And all those things together we put them in a pot and we get the perfect investment opportunity.
Speaker 2:So much of that sounds familiar. Brian, I know one of the things that we do often at MHW is set expectations right, Because so often the person sitting across the table from us does think they've got an exit strategy. To be Casamigos.
Speaker 4:Yeah.
Speaker 2:And you know one, they're going to do 100,000 cases, you know like. Take a couple of zeros off of that and you'll have a very successful first year launch. And talking about getting that first bottle into someone's hand, it's getting them to understand how important bottle sales are. Yeah, you're not looking to sell 50 cases at a pop in the beginning. You're looking to sell a few bottles to a really good on-premise who can feature you on the back bar and things like that or put you on a cocktail menu or a wine list.
Speaker 4:Yeah, and Marianne, I would add to that that it's not the first sale that matters, it's the second.
Speaker 2:Exactly, it's the reorder.
Speaker 4:The first sale, the sale that happens when the maker is not in front of the buyer. That's the sale that matters. I can come to you as a, as a retailer, on or off premise, hat in hand, and I can say I'm a first time founder, I put my heart and sweat in this. Please take a case for me. And they will, because it's a hundred dollar investment and big deal. But when they're alone in the morning making a shelf list, or on their iPad or whatever making a shelf list, is this the brand they're going to rebuy or they buy it as a sympathy buy. And so it's that second buy that matters and that comes with on-premise tastings and activations. Off-prem working Thursdays, fridays, saturday, sunday, behind a four foot table at some liquor store somewhere, selling your soul. That's how it. That's how it goes.
Speaker 4:And I've been in those boardrooms with you, marianne, where, where the maker comes in and says I've got the next Casa Amigos. Yeah, and I would hate to quote Jesse Eisenberg from the social network, but if you invented Facebook, you would have invented Facebook. Right, exactly Right. If you were Casa Amigos, you would have been Casa Amigos, and the world doesn't need another Casa Amigos, because Casa Amigos came at the perfect intersection of the beginning of celebrity brand and the boom of consumer tequila love, you know, and it came together and that has not happened since.
Speaker 2:Exactly so. I'm looking forward to attending the Invespev pitch week. Can you tell us a little bit about the purpose and the intent of that week?
Speaker 4:Sure. So Invespev was a creation that came out of brands coming to us for capital, years and years of coming to capital, but having no real training is the wrong word, but bootcamp is a better word. They come and they say well, we want to start a brand, we want to try this, we want to try that, but we're not familiar with the industry. But what do you think about this? So it turned into a sort of an incubator. So so the InvestBev incubator is a 90day program that meets twice in person in Chicago, twice virtually, and then twice at the end for pitch day in Chicago. Specifically, we have in our cohorts about 14 brands and they're vying for $100,000 from us, $50,000 in cash and $50,000 in services, including our FP&A program or sales or marketing or HR. What have you? And they do Shark Tank style, in front of a room and we've got judges, five judges that vote on does this brand come into the portfolio and there's a winner. And at this pitch day, which you guys will be at, it's not. Losing is not losing, because if you don't get this prize which is unfortunate, but you only have one winner, so that's life. No participation trophies here, but in this case, in this case. We flood the audience with investors, distributors, other support service people. So, for instance, in last pitch day we had a winner in Suyo Pisco people. So, for instance, in last pitch day we had a winner in Suyo Pisco. Now they won the prize, but the losers or the second place people one of them got a distribution deal from Allied on the East Coast. One of them got a private investor to put in $100,000. That was there. So we flood the audience with 40 or 50 people that love the industry, love Adele, bev, like it as an investment opportunity or as a partnership opportunity. And so not winning the big prize doesn't mean you don't win. It just means not winning the big prize.
Speaker 4:And, as we all know, this is a long, long tail game. And so we created this friendly environment where brands can A hone their skills, b at least learn something like in a boot camp style education from people from our universe, so taught by Gustavo Aguilera, who is a head of innovation at Molson Coors, who works for us. I'm in there as a guest lecturer. Giuseppe Infusino is our chief investment officer and he will talk to these brands about what it takes to be invested in. We bring in liquor lawyers from McDermott, will Emery. We bring in label and bottle designers from Scout A whole bunch of different people. We bring in Breakthrough, we bring in Constellation Brands, and they all are teaching these people what they look for. So instead of going ragged into the universe as a brand, you can get narrow focused and if you don't have success from us, as far as the end of the day, there is someone in there that could find value in your brand. So it's a win-win for all parties.
Speaker 1:Now for folks who are curious listening to this, we will drop links to the InvestBev pitch week in the show notes. So if you are a brand, you can follow up and see if your brand is perhaps ready to participate in the next pitch week. Or if you're an investor, you can check that out and see if there's anything that interests you there. Now, brian on the podcast. Here we are doing part three of our three-part series on mergers and acquisitions, and we've already talked beer and spirits in parts one and two. Today we're looking at wine. How does the M&A environment in the wine world differ specifically from the spirits and beer categories?
Speaker 4:The wine world is having some challenges right now. Wine, however, carries the greatest gross margin of all the categories you mentioned beer and spirits so M&A activity still is frothy around wine. The consumer sentiment is down around wine. So investors like ourselves we're still looking at wines to invest in and we own quite a few inside our portfolios, but the drinking overall has gone down.
Speaker 4:So when I look at wine I would look at it in two categories from an M&A standpoint. One is a crossing or a coming together of wine and to-go, so RTD type wine, wine in small cans, things that people can take wine on the road, on the move. That's very hot right now. It's a combination of the RTD sector, which is very hot, and a combination of to-go ready to drink and to-go drinking on the train, drinking in the park, drinking a sessionable activity. And then, conversely, in our Fund 5, we have a non-alcoholic wine, sushi which is the number one wine in target stores nationally. So we like to think that the wine forward movement is going to be non-alc. The regular wine movement is not going to change, but non-alc is going to be the driver. And so we like wine as M&A Investors like wine because it has a great gross margin, which means it has a great multiple at exit. But it'll be a challenge sector for a bit until there's going to be a shakeout. And so, once the playing field levels, all three investment categories wine, beer and spirit will still remain strong.
Speaker 4:And, by the way, people love the industry in general because it's totally non-correlated. This is a non-correlated asset class, no matter who's president, no matter what the unemployment rate is, no matter what interest rates are, people drink, that is a fact. It is a non-correlated asset class and it's a safe place and a stable place to put money because it's a hard asset. So, softness or not softness, the category remains vibrant.
Speaker 2:So, acknowledging the challenges that you know wine is facing, and you know we've got the consumers you know, especially the younger demographics, really turning from wine, what advice do you give a wine brand you know looking to launch in the US with availability, seeking investment or acquisition? What advice do you give them?
Speaker 4:I think that it's really do your research before you spend your money. There are a lot of people and we know them all who will send two containers of wine to the US and then try and figure out the US. They will send two containers Marianne's laughing because you know it's correct. And so you know they'll put a bunch of containers at Western and they will not have a sales team here, they will not have a marketing plan, they will not know their audience. Do your research here. Research is free. Mistakes are expensive. Do your research here. Research is free. Mistakes are expensive. Do your research. Come here, walk the top 10 liquor stores in New York City. Talk to the buyers. What are they missing in their SKU set and what can you add value there? What is the price point that sells the most?
Speaker 4:Wine is an interesting thing from an investable standpoint, because I know this from my days in retail. When a consumer goes to a retailer either a bar, restaurant or liquor store the spirit side of that is a called item. I drink Dewars, I'm going to go buy Dewars. I drink Monkey 47, I'm going to go buy Monkey 47. They're not as open to experimentation. The wine category is totally different. In the wine category. They will go to their shopkeeper or their bartender and say what do you recommend? What's on the wine list? They will go to their shopkeeper or their bartender and say what do you recommend?
Speaker 3:What's on the wine list? That is very true.
Speaker 4:I'm having chicken tonight. What can I bring home for $20 or less? It becomes dealer choice. It becomes a choice of the shopkeeper, the choice of the bartender, If you make it on the drink list, all of the wine list, all of those things. So your first move in selling is not the consumer. Your first move in selling is not the consumer. Your first move in selling in this market is going to be the on and off-premise account. You get that buttoned up and then you can create the pull as you push your brand down into the market. And so, to answer your question a little less long-winded, Marianne, what I would say is do your research before you come in, understand where the gap is in the market and then build or create your brand going into that gap.
Speaker 3:That's great, brian. You answered a lot of this question already. But because so many wineries produce an excellent product, you know it's not often that they need recipe formulation or production support, anything like that, but they do require that marketing and sales support, like you mentioned, to be able to target the on and off premise appropriately. So could you tell us how you, as an investor and I would also add to this as a, you know, experienced beverage salesperson and marketer how would you approach the marketing and sales strategy for a winery that say, maybe they're not new to the US, maybe they've been in the US for two to five years, but they need acceleration? How would you look at what they're doing and how would you bring that to the next level?
Speaker 4:Sure, the one thing I always think about is that any brand that comes to market and whether you're an established player and at Befstrat we've worked with or it's now InvestBevSales, but we've worked with very established brands, global brands that funny enough, and I'll tell you an anecdotal story, but funny enough have five brands that are killing it and one brand that isn't and can't figure out why. The interesting thing about the industry is you can make a new brand, but you don't make a new drinker right? The pie is only so big and it's circular. So for your brand to have traction on the shelf or in the market, you've got to kick the ass of another brand and kick them out. The shelf is only 44 inches long. If you're on the 45th inch, there's no place for you on that shelf. Something's got to go. So when I talk to brand owners, it's always what are you replacing and how are you attacking that audience? And from an anecdotal standpoint, I will share with you this.
Speaker 4:I was on a plane and I was sitting next to a guy who was on finished up his phone call before we took off and that guy was coincidentally total coincidence in the wine business and he was flying down to Southern to meet the powers that be at Southern Glazer. And I said I hung up the phone. I said what are you doing? I'm in the wine business too. What do you do? What do I do? He said I'm flying down to meet Southern Glazer Wine and Spirit because they are not paying attention to my brand, which is a universal problem. And I said that's funny, that's what we do at Bevstrat now in Best Bev Sales. How many cases did you sell last year? And he said 100,000 cases. So just think about the logic 100,000 cases is a top 1% seller globally, 100,000. And he's still not getting the attention from his distributor.
Speaker 4:And so how are you, small brand that's making wine in some cottage in Oregon? How are you, small brand that's making wine in some cottage in Oregon? How are you? That's like a stereotypical, like wine thing. But how are you going to get share of market? What are you going to do? So? First, you're going to identify who your competition is. Second, you're going to identify why the retailer needs to carry you, why the bar needs to carry you, and all three tiers of the three tiertier system have a different audience.
Speaker 4:Right, the distributor doesn't want to get stuck with the brand. That's the first thing. The retailer doesn't want to get stuck with the brand and be able to sell the brand to pay their bills in net 30 days. The consumer wants to discover something different. Tell their friends about Three different marketing messages for three different audiences. So that's the challenge that any winemaker has in coming into market.
Speaker 4:They think in Europe specifically, which a lot of our customers collectively come from, you go right from the vineyard to the kitchen table of the customer or from the vineyard to the retailer or the bar In the US. You go from Europe to the importer, to the distributor, to the retailer or the bar In the US. You go from Europe to the importer, to the distributor, to the retailer, to the consumer. It's three, four audiences that you have to speak and they all speak a different language. I don't mean a vernacular or linguistically. They speak a different language in terms of what's important to them, right? So how do they come to market? What's my best practice? You've got to speak all these tongues, right. So you've got. So how do they come to market? What's my best practice? You've got to speak all these tongues, right, all these different linguistic gymnastics, because each audience has a different thing that is important to them, and so you've got to know that, you've got to understand that, you've got to be able to tailor your marketing message.
Speaker 3:That makes a lot of sense, and I think that is something that an investor would certainly bring to the table in terms of partnership support, not purely just financial. I mean to be able to know how to program your distributors, how to speak to the retailers. Like you mentioned, it's all different languages, so I think that's that's a really key piece of value that you're offering there.
Speaker 4:Yeah, and no one understand that. No one's going to do it. But you, you know no one's going to do it, but you, your distributor, and no matter who they are, distributor X. At any end of the day, there's more brands than distributors and there's no. There's more brands than drinkers. So how are you going to break through? Is it going to be depletion allowance? Is it going to be marketing and sales? Is it going to be supporting? Ride with and support?
Speaker 4:All of those things are on the table, but to the consumer this is important to the consumer they only know 10 brands total in their vernacular. We collectively here on the screen know a lot more because we're in the business, but to a consumer who never heard of Santa Margarita, Pinot Grigio, that could be private label to them, that could be a new brand to them. The consumer knows 10 brands. So you're uphill battling all the time. All the time. If you're not Kendall Jackson or Cambria or Estancia or Mouton Rothschild, you are uphill battling. So there's a positive and negative. The positive is you can make your own way any day. You can create your own brand story, because no one knows of your brand. Two is you've got a big hill to climb on the negative side, but no one knows your brand anyway. So it's really blue ocean anytime you go into market and it's up to the person who owns the brand to tell that brand story in a way that's compelling for every level of the three tiers.
Speaker 2:Brian, operationally, wineries are very often, we know, family-owned, long-time generational ownership and they have had their production process and their staff and the way they pick the grape, the way they, you know, whatever they do, they've had their processes in place for years. When investment companies come in, do they often restructure that or create any efficiencies at that end of the fence or do they focus on this side of the fence, just typically the brand building in market?
Speaker 4:Yeah, it depends really what's in the portfolio of the PE firm. So, for instance, at our firm at Invespev we own bottling line or canning lines, things like that, so we can provide efficiencies there. But generally, if it ain't broke, don't fix it. There's a reason we invest in a wine company and it's not to change the way they do business or how they pick a grape. That's not my area of expertise, that's a very select skill set that I do not want to play in. But if they need more efficient use of capital, your private equity partner can be that. If you need a logistics partner that can get your wine from Napa to New York more cheaply, we can do that as your partner.
Speaker 4:But I don't have the ability nor the desire to remake the pie, because if I gave you $10 million for your business, that's our vote of confidence that you're doing it right. If I gave you the money and then I started to go there for crush and started to put my bare feet inside a tub of grapes, you don't use me for that. That's a bad use of capital. That's a bad use of capital. That's a bad use. It's a bad use of your investing partner.
Speaker 3:So, piggyback on that, how does provenance and, like different varietals, play into investment criteria? So are there any regions and varietals that you're seeing as strong in the market, or does this really not even matter if brand performance is strong? And how do you also see some of the larger portfolios, not just PE firms, thinking about addressing this varietal white space?
Speaker 4:Yeah, the important thing to understand is that, at least as it relates to Invespev and other firms our size, we're SEC-registered companies. We're what's called registered investment advisors. We're monitored by the Securities and Exchange Commission. We're what's called registered investment advisors. We're monitored by the Securities and Exchange Commission. I'm a financial buyer. My overall goal is to, if the whole world drinks red wine and you're making a white wine, I'm not a white wine buyer, but aside from that kind of in-your-face data, it's about gross margin, operating expense, revenue, net income and debt. That's what it's about for me and if I can see a way towards profitability and when I say I, I mean we have a whole robust team in Chicago that really is the ones kind of pouring through. That does the diligence. But the reality is I had coffee yesterday with a guy who owns 40 car washes in Miami. Very unsexy business, you know, but it's a necessary business, but unsexy. So he doesn't care if you're washing a Porsche or a Chevy. I don't care what the varietal is, what at all. What I care about is are you a profitable business, are you well run and is there an audience for what you make and create? And all financial buyers are the same.
Speaker 4:Now, if I am part of the private equity firm that, for instance, just Jackson founded Jackson Family, which is a multibillion dollar they own 100 marks or Bill Foley, another multibillion dollar person, foley Estates those guys are buying for voids in their own portfolio. They're buying the missing piece of their own pie. And to add to the greater good is very is a creative. I'm not doing that. We're financial buyers. Be profitable, be a good founder, know that you need support, take criticism well and have a path to exit Right. Those are what we look for. I'm not so concerned with Varietal or Tarar or where in the region you are. Again, uzbekistan wineries are not for me, but if it's California, napa, southern Hemisphere, old World, new World, we'll take a look at it for sure.
Speaker 2:Brian, I know we touched on this a little bit before the different packaging concepts like canned wines and RTV wine products, and we know they're popular right now and they appeal to both wine and spirits consumers. Do you see this lasting and what are other noteworthy trends in the category right now?
Speaker 4:Great question. And so you got to go back to COVID and you have to look at, everyone was cooped up for a couple of years. But people want to be on the move. So they want canned because canned is on the go. They want all of these things in terms of taking your wine on the go. Now that also implies that the serving size is going to be smaller, because you can't. There's no biodegradable wine bottle 750. That's five to seven drinks. That doesn't exist.
Speaker 4:So what we see is from a trend forward is tetra packing the packaging like the beat boxes in. We like that as a go forward. We like small eight ounce cans like Nomadica, one of our portfolio brands. Nomadica wines, small cans that you can. You bring to a concert venue, you bring to a kid's soccer game, you bring on the move. And then we also like this trend of resealable. Resealable anything, right. Because the days of forcing the consumer to drink a bottle of wine in one sitting, when people are drinking less, that's not a thing. You want to be able to put a reseal back on your bottle of wine and then put it somewhere or save it for later. So those are three trends. For sure I love the non-alcoholic trend. We are heavily invested, as I said, in Sashi and others and from a non-alcoholic perspective and also note this, people want to get together for sessionable activities and assuming COVID never, happened.
Speaker 4:You want people to come together and enjoy, so label design becomes critical. If I look at a label like Nomadica or even and I forget the name now Cameron Diaz has, she's got a great wine out there that looks like clean ingredients on the label, the way that RX bar did it. That kind of packaging People want that. There's a move towards longevity. There's a move towards healthier living. There's a move towards knowing what you put in your body and then saving the planet. And whether you're a minority or majority in that the planet game, you still want to participate in some good activity like that. So those are things that we see going forward and those are the investments we're looking at.
Speaker 4:You know, someone making a 1.5 liter of a Sutter Home type wine has no great investment. Appeal to me. Box wine is very popular. Throw it away when you're done. Save the landfills. Those are not going away and while they're now, they're less than 3% of the consumption market. They are increasing every single quarter as a generation. That's under well, it's Bridget's generation, but it's under. It's undermined for sure. They want to do better by the environment and those brands are going to take hold.
Speaker 3:Yep, I would even say Gen Z is more into it now than millennials, and that's something that you know. We just got our organic certification across the board for MHW, USA Wine West, USA Wine Imports and it was pretty shocking, like how many clients we have that you know fall into that category, and even when I'm thinking about my own consumption now, organic, the resealable, everything that you mentioned is something that I look for, so certainly I agree with your thought process there. How do you evaluate success after a winery merger or acquisition and what does that timeline look like? That you're looking into different metrics for success.
Speaker 4:Having gone through two exits myself, there's always a step backwards before a step forward. You at MHW have gone through a couple of those. You've got to step backwards. There is an absorption of the capital, there is new management, there is a new board member, there is all sorts of things that change post-acquisition, post-merger. So I expect that right. So I expect six months of flat sales, of confusion, of morale issues, all of those things. And then we call leadership together and we say now let's get on the gas.
Speaker 4:And I know, marianne, this is probably a playbook you've read right, let's get on the gas and let's go. And so when I evaluate an investment, I don't evaluate it immediately, I don't evaluate it in six months. You need at least four quarters to absorb professional capital. It is a new way of doing business and Marianne said it at the top of the show, professional money is serious, right. And when you invest in businesses and they're family businesses, so they're not used to the rigor that we have as investor capital, right, these winery owners, these winery owners, when you really think about it, if you drill it down, they're farmers, not in the truest sense. You know up with the crows, but they are farmers and they farm land. So when you come in there and you talk about EBITDA and you talk about operational expense and taxable income and depreciation analysis and all of these things that are important to an investor, all they want to do is make great wine. So you have to really have a middle of where financial acumen meets creativity and growth, and that takes about a year, and then at the year, we sit down with ownership and we say this is what we've seen in the last year, this is what we think is working, what we think is not working, and we start to assert ourselves a little more.
Speaker 4:But any PE firm that gets in the middle right away, it doesn't work. And it answers a question that was asked earlier. I am not a farmer, I am not a wine grower, I am not a terroir expert. I don't know which side of the hill gets the most sun. What I know is how to read a P&L. That's about it, right. So and how to support founders, having been a founder multiple times. So that's what we look for Again. That's why picking the right founder going into a transaction is not so you have someone good to celebrate your closing dinner with. It's so when the shit hits, the fan down the road. You've got a partner in the trenches with you and not an enemy, and that's what I look for in a year's time.
Speaker 1:All right Time for the fun question that we like to ask all of our guests what is your favorite alcoholic beverage right now, or desert island? Whatever you feel.
Speaker 4:It's hard to have this answer, being in this business for three generations, but I am not a good candidate for this question because I don't really drink that much anymore. I have found that as I've gotten older, I have consumed less and less. Now, that being said, in my house here where I sit, we have a refrigerator full of Cann C-A-N-N, which is a cannabis beverage, which is a brand that we own. That's the number one selling cannabis beverage in the country and I have some gin, some Bombay, sapphire or Hendrix. So that is what I'm. That's the train that I'm on.
Speaker 4:As you get older, it's harder to feel better the next day, so I want to be able to get up at five o'clock am, get my workout in and not be on the struggle bus. So my favorite libation is probably a cannabis beverage or one or two gin drinks a week. But I've really kind of cut back, and this speaks to what the trend is in America is kind of slowing down. This coincides with the uptick in the Better For you movement or the Aptogen movement or the non-alcoholic movement. So I am not an outlier. I am a consumer. That is very representative of my age group.
Speaker 1:Brian Rosen and Gen Z are like this.
Speaker 2:He just gets younger by the day.
Speaker 4:Oh yeah.
Speaker 1:Thank you very much to our guest, brian Rosen, for stopping by. Investbevcom is the website that you can check out. Listeners can check out further links in the show notes. We'll have those for you, but for now we have to say goodbye, so thank you so much for sharing your expertise with us, brian Rosen.
Speaker 4:I tripped on memory lane and a pleasure and thank you everyone for having me today.
Speaker 2:Great to see you Look forward to the end of the month.
Speaker 1:Great to see you and thank you listeners for joining us on the MHW Mark podcast, and thanks again to Marianne Pizzani and Bridget McCabe for helping me in hosting.
Speaker 2:Thanks a lot, Jimmy. It was a great session. It was great to hear from Brian.
Speaker 3:Thank you so much.
Speaker 1:This podcast is produced by me, Jimmy Moreland, with booking and planning support by Cassidy Poe and Bridget McCabe. It's presented by MHW. Find out more at mhwltdcom or connect with MHW on LinkedIn. Lend us a hand by subscribing, rating and reviewing this podcast wherever you listen. We'll be back in your feed in two weeks. We'll see you then, Cheers.