Splash Beverage Group, Inc. (NYSE-AMERICAN: SBEV) may be under the radar to some. Still, you can bet that beverage industry competitors are taking notice, especially after SBEV inked a potentially transformative distribution deal in China earlier this month that added to six other significant agreements already in place. Already, the combined power of these agreements is enough to drive substantial growth in the back half of this year. However, with SBEV in a state of hyper-growth, expect much more. And that could be great news for shareholders.
In fact, a combination of positive events makes the investment proposition compelling. And milestones reached highlight that SBEV's current $3.93 share price and $119 million market cap may substantially undervalue both its assets and projected revenue growth.
Moreover, that disconnect is more pronounced factoring in that SBEV management may be one of the top teams in the sector, with some members responsible for helping take Red Bull energy drink from zero to billions in sales. Proof of their expertise is front and center, with the group closing several distribution deals, successfully uplisting the stock to the NYSE-American, raising $24 million since February, and eliminating all convertible debt from its balance sheet.
And while those events indeed put SBEV in its best operating position in history, no one at the company is shying away from having bullish ambitions. In fact, while its deal with China-based American Software Capital (ASC) alone opens up an estimated $69 billion market opportunity, its growth in the US markets is positioning the company to take advantage of the billions available here. Better still, SBEV isn't getting just one of its best-in-class products signed to distribution deals; they are getting all of them signed, bringing enormous revenue-generating potential from worldwide markets.
Its distribution with Great Bay distributors, one of Florida's largest Anheuser Busch (NYSE: BUD) distributors, is it's latest.
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Broadening Distribution Of Product Portfolio
Better still, inclusive of its recent deal with Great Bay, SBEV already has distribution deals in place with large companies like Golden Beverage Company, Anheuser Busch distributor, Bernie Little, Johnson Brothers, and divisions of Gulf Distributing Holdings, LLC. Further, SBEV announced a significant expansion into Walmart, Inc.(NYSE: WMT) owned Sam's Club, where its SALT Citrus flavored tequila is now available in 42 stores.
The better news is that the Sam's Club deal could lead to a potential national agreement with Walmart stores to distribute some of its products on a national scale. If that happens, valuations at SBEV will surge, especially with the industry applying roughly 5X revenue multiples for brand valuations. Chances of that happening? Extremely high.
Of course, it takes excellent products to maximize those distribution opportunities. And SBEV has that corner covered with a product lineup that features several of the most compelling brands in their respective sectors. Better still, the company could add several more in the coming quarters.
Keep in mind that growth in any (or all) of its brands will add to already exponential growth.
A 2058% Q1 Revenue Surge
In fact, SBEV posted a massive 2058% surge in comparative revenues last quarter, led by high-value brands Copa Di Vino wine, Pulpoloco Sangria, TapouT performance drink, and SALT Naturally Flavored Tequila. Better still, those revenues came with a momentum-generating tailwind that is expected to push Q2 revenues higher again. With several of its new distribution agreements coming at the end of its last quarter, that's likely.
That means that while the 2058% surge in revenues on a comparative Q1 basis is an excellent accomplishment, SBEV is better positioned to potentially deliver multiples of that number by year-end. And with the capital to manage growth and a willingness to add brands that can be immediately accretive to its business model, investors would be wise to consider the near and long-term value opportunity in play with SBEV stock. Better still, with only about 31 million shares outstanding, no convertible debt, and an improving global economy, there are few, if any, headwinds preventing the shares from running higher.
And keep in mind, SBEV is already expected to exceed expectations.
Premium Revenue-Generating Portfolio
Leading that growth is four brands that target billion-dollar markets- Copa Di Vino, Pulpoloco sangria, SALT flavored tequila, and hydration and recovery drink TapouT. All have substantial opportunities to earn national big-box distribution. Thus, while its regional deals are driving growth today, a contract with a national retailer would be a revenue-generating game-changer for the company.
Copa Di Vino, its single-serve wine product that earned national attention from being the only product featured twice on the popular investment show Shark Tank, could be the first product to make that happen. However, it's important to note that ALL of its products share the same opportunity. Still, as the leader in packaging technology, quality, and brand recognition in the sector, Copa Di Vino could earn quick interest.
Even better, its state-of-the-art sealing technology could open additional revenue-generating opportunities through licensing agreements. Unlike competing shelved wine products, Copa Di Vino can remain fresh for up to a year. Other brands have a sell-by date in months, and sometimes only days. Better still, its packaging, branding, and wine quality make this brand stand out from the crowd, even earning the distinction as Oregon's Winery Of The Year.
While Copa is a standout product, other SBEV brands are compelling as well and would also fit nicely into a national big-box distribution program.
For instance, its Pulpoloco sangria, a made in Madrid, Spain product, is doing more than bringing authentic tasting and manufactured sangria to market. They are integrating what many call the most socially conscious and eco-friendly packaging in the markets- CartoCan. This innovative packaging technology is 30% more eco-friendly than aluminum or PET, uses 30% less total raw materials to create, and the raw materials used come entirely from renewable raw materials. Further, the packaging only uses wood fibers from forests managed in an exemplary fashion, giving CartoCan packages the exclusive right to bear the Forest Stewardship Council (FSC) label.
Best of all, CartoCan keeps Pulpoloco shelf-stable for at least a year, keeping the vibrant character of its taste profile well-protected during that time. However, it's unlikely that Pulpoloco will ever stay on the shelf that long, making CartoCan an extra luxury for the product.
Two other brands could also bring national distribution deals to the table- hydration and recovery brand TapouT Performance and SALT Naturally Flavored Tequila. Each has billion-dollar market potential. And while consumers may be familiar with global potential within the hydration, recovery, and energy drink markets, few recognize the potential of SALT flavored tequila. Growth in the tequila sector is surging. And SALT is perfectly positioned to capitalize on those emerging opportunities.
In fact, SALT is targeting a more than 14% surge in the tequila markets. Better still, the flavored spirits markets are outselling unflavored by a 10 to 1 margin. Thus, SALT is in the right market at the right time. Better still, marketing to an audience that craves flavor, variety, and life, SALT's lineup of naturally flavored citrus, berry, and salted-chocolate flavored tequilas offer the perfect hints of flavor, satisfies even the most distinguished cravings. Best of all, combining the double-digit percentage growth rate of annual tequila consumption in the US markets to the exploding numbers in the Chinese markets, SBEV could turn its SALT tequila brand into a revenue-generating juggernaut.
And with more distribution deals expected soon, that growth could come sooner rather than later.
Decidedly Bullish Sentiment For 2H 2021
Undoubtedly, the convergence of distribution deals combined with brand quality creates a perfect storm of revenue-generating opportunities. And with a history of taking brands from zero to billions, there's an excellent chance that they can deliver maximum value from planned initiatives. Keep in mind, SBEV has a running start, with each of its brands already well-known in the markets they serve. And with massive global markets in play as well and hoped-for national big-box deals in the discussion, they could make history repeat.
Better still, for investors, prices at current levels apparently are neglecting these enormous opportunities. Moreover, current valuations are not connecting management expertise to the equation, either. Thus, if there was ever a growth story that was not getting the attention deserved, SBEV could be it. In fact, the untapped value in just its four brands presents an opportunity for exponential growth. But, knowing the company would like to have 10-12 brands under management makes the long-term proposition a most compelling and lucrative investment opportunity.
The bottom line is simple: For investors attracted to 2058% revenue growth, top-tier management, compelling brands, and massive distribution deals already in place, SBEV delivers the entire package. Better still, while they are an excellent company today, with a business model that can drive global growth, the company a year from now could be quickly taking substantial shelf space from industry giants. And when that happens, well...that opens up an entirely new discussion that could be worth billions more.
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