ABOUT THIS PROSPECTUS SUPPLEMENT
This
document is part of a registration statement that was filed with
the Securities and Exchange Commission, or the SEC, using a
“shelf” registration process and consists of two parts.
The first part is the prospectus supplement, including the
documents incorporated by reference herein, which describes the
specific terms of this offering. The second part, the accompanying
prospectus, including the documents incorporated by reference
therein, provides more general information. In general, when we
refer only to the prospectus, we are referring to both parts of
this document combined. Before you invest, you should carefully
read this prospectus supplement, the accompanying prospectus, all
information incorporated by reference herein and therein, as well
as the additional information described under the
heading “Where You Can Find More
Information.” These documents contain information you
should carefully consider when deciding whether to invest in our
common stock.
This
prospectus supplement may add, update or change information
contained in the accompanying prospectus. To the extent there is a
conflict between the information contained in this prospectus
supplement and the accompanying prospectus, you should rely on
information contained in this prospectus supplement, provided that
if any statement in, or incorporated by reference into, one of
these documents is inconsistent with a statement in another
document having a later date, the statement in the document having
the later date modifies or supersedes the earlier statement. Any
statement so modified will be deemed to constitute a part of this
prospectus only as so modified, and any statement so superseded
will be deemed not to constitute a part of this
prospectus.
You
should rely only on the information contained in this prospectus
supplement, the accompanying prospectus, any document incorporated
by reference herein or therein, or any free writing prospectuses we
may provide to you in connection with this offering. Neither we nor
the sales agent has authorized anyone to provide you with any
different information. We take no responsibility for, and can
provide no assurance as to the reliability of, any other
information that others may provide to you. The information
contained in this prospectus supplement, the accompanying
prospectus, and in the documents incorporated by reference herein
or therein is accurate only as of the date such information is
presented. Our business, financial condition, results of operations
and prospects may have changed since that date.
This
prospectus supplement and the accompanying prospectus do not
constitute an offer to sell or the solicitation of an offer to buy
any securities other than the shares of common stock to which it
relates, nor do this prospectus supplement and the accompanying
prospectus constitute an offer to sell or the solicitation of an
offer to buy securities in any jurisdiction to any person to whom
it is unlawful to make such offer or solicitation in such
jurisdiction.
Securities
offered pursuant to the registration statement to which this
prospectus supplement relates may only be offered and sold if not
more than three years have elapsed since October 16, 2017, the
initial effective date of the registration statement, subject to
the extension of this period in compliance with applicable SEC
rules.
We note
that the representations, warranties and covenants made by us in
any agreement that is filed as an exhibit to any document that is
incorporated by reference herein were made solely for the benefit
of the parties to such agreement, including, in some cases, for the
purpose of allocating risk among the parties to such agreement, and
should not be deemed to be a representation, warranty or covenant
to you. Moreover, such representations, warranties or covenants
were accurate only as of the date when made. Accordingly, such
representations, warranties and covenants should not be relied on
as accurately representing the current state of our
affairs.
Unless the context otherwise requires, references to
“we,” “our,” “us,” “New
Age Beverages” or the “Company” in this
prospectus mean New Age Beverages Corporation, a Washington
corporation, on a consolidated basis with its wholly-owned
subsidiaries, as applicable.
PROSPECTUS SUPPLEMENT SUMMARY
The following is a summary of selected information contained
elsewhere or incorporated by reference. It does not contain all of
the information that you should consider before buying our
securities. You should read this prospectus in its entirety,
including the information incorporated by reference herein and
therein.
Overview
We are
a Colorado-based healthy beverage company engaged in the
development and commercialization of a portfolio of organic,
natural and other better-for-you healthy beverages. We market a
full portfolio of Ready-to-Drink (
“
RTD
”
) better-for-you beverages including
competitive offerings in the kombucha, tea, coffee, functional
waters, relaxation drinks, energy drinks, rehydrating beverages,
and functional medical beverage segments. We differentiate our
brands through superior functional performance characteristics and
ingredients and offer products that are 100% organic and natural,
with no high-fructose corn syrup (
“
HFCS
”
), no-genetically modified organisms
(
“
GMOs
”
), no preservatives, and only
natural flavors, fruits, and ingredients. We rank as the 54th
largest non-alcoholic beverage company in the world and one of the
largest healthy beverage companies. Our goal is to become the
world
’
s leading healthy
beverage company, with leading brands for consumers, leading growth
for retailers and distributors, and leading return on investment
for shareholders. Our target market is health conscious consumers,
who are becoming more interested and better educated on what is
included in their diets, causing them to shift away from less
healthy options such as carbonated soft drinks or other high
caloric beverages and towards alternative beverages choices.
Consumer awareness of the benefits of healthier lifestyles and the
availability of heathier beverages is rapidly accelerating
worldwide, and New Age is capitalizing on that shift.
Corporate History
New Age
Beverages Corporation was formed under the laws of the State of
Washington on April 26, 2010, under the name American Brewing
Company, Inc. (
“
American
Brewing
”
).
On
April 1, 2015, American Brewing acquired the assets of B&R
Liquid Adventure, which included the brand, B
ú
cha Live Kombucha. Prior to acquiring
the B
ú
cha Live Kombucha
brand and business, we were a craft brewery operation. In April
2016, new management assumed daily operation of the business, and
began the implementation of a new vision for the Company. In May
2016 we changed our name to B
ú
cha, Inc. (
“
B
ú
cha
”
), and then on June 30, 2016, we
acquired the combined assets of
“
Xing
”
including Xing Beverage, LLC, New
Age Beverages, LLC, Aspen Pure, LLC, and New Age Properties. We
then shut down all California operations where B
ú
cha was based, relocated the
Company
’
s operational
headquarters to Denver, Colorado, and changed our name to New Age
Beverages Corporation. On October 1, 2016, we then sold American
Brewing including their brewery, brewery assets and its related
liabilities to focus exclusively on the healthy beverages. We
recognized the sale of our brewery and brewery operations as a
discontinued operation beginning in the third quarter of 2016, and
ultimately concluded the transaction in February 2017. In February
2017, we uplisted onto The NASDAQ Capital Market. In March 2017, we
acquired the assets of Maverick Brands, including their brand
Coco-Libre. In June 2017, we acquired the assets of Premier
Micronutrient Corporation (
“
PMC
”
), and also completed the
acquisition of the Marley Beverage Company (
“
Marley
”
) including the brand licensing
rights to all Marley brand ready to drink beverages.
We have
three wholly-owned subsidiaries, NABC, Inc., NABC Properties, LLC
(NABC Properties
”
), and
New Age Health Sciences. NABC, Inc. is our Colorado-based operating
company that consolidates performance and financial results of our
divisions. NABC Properties incorporates all our buildings and
warehouses, and New Age Health Sciences includes all our patents,
and the operating performance in the medical and hospital
channels.
Principal products
Our
core business is to develop, market, sell and distribute healthy
ready-to-drink beverages. The non alcoholic beverage industry
comprises $1,023 trillion in annual revenue according to
Euromonitor and Booz & Company and is highly competitive with
three to four major multibillion dollar multinationals that
dominate the sector. We compete by differentiating our brands as
healthier and better-for-you alternatives that are natural,
organic, and/or have no artificial ingredients or sweeteners. Our
principal brands include Marley, B
ú
cha Live Kombucha, Xing, Coco-Libre,
Aspen Pure and
‘
n-Hanced,
all competing in the existing growth and newly emerging dynamic
growth segments of the beverage industry.
Xing
Xing
is
an all-natural, non-GMO, non-HFCS brand that encompasses XingTea,
XingEnergy, Xing Craft Brew Collection Tea, and Xing Craft
Collection Lemonades.
XingTea is an all-natural, non-GMO, non-HFCS, and
award winning, ready-to-drink tea. XingTea won first place in the
North American tea competition over 250 other brands, and recently
won bronze in the Global Tea Competition in 2017. Xing is made with
brewed green and black teas, and is further differentiated with
unique natural fruit flavors, with no preservatives, GMOs or HFCS.
Sweetened with only honey and pure cane sugar and significantly
lower in sugar and calories than other major competitors, XingTea
comes in a range of natural sweetened and unsweetened flavors in
23.5 oz cans, 16 oz Pet bottles, 12 oz cans and gallon jug
packages, and is produced in New Age
’
s network of manufacturers across
the United States.
XingTea
is sold in 50 states and 10 countries, but was predominately sold
in 7 Western states until recently. The brand gained its first
national retail distribution in late 2017 gaining placement in 7
Eleven, CVS, and other major retailers with plans to fully roll out
through these chains in the early 2018. The brand is now available
nationwide across multiple channels of distribution from
traditional grocery to health food and specialty outlets to
hypermarkets to club stores, to pharmacy and drug outlets, to gas
and convenience outlets. XingTea
competes in the RTD Tea category that
according to Euromonitor International exceeded $50 Billion in
annual revenue with a CAGR of 10.9% since 2012.
Xing Craft Brew Collection Tea
Xing
Craft Brew Collection Tea is a 100% organic, premium brewed line of
artisanal teas sold in 16 oz glass bottles with no added sugar and
no artificial flavors. Xing Craft Collection comes in five trending
flavor combinations including Hibiscus Honey Blossom, Ginger
Georgia Peach, Japanese Mountain Green, and Madagascar Vanilla
Chai.
The
premium brewed tea segment has emerged over the past two years
defined by brands from major competitors including Gold Peak, Pure
Leaf, Teavana and others in 16 oz packaging and priced at $1.89 to
$2.29 in major grocery and convenience retail. Unlike competitors
that have more than 21 grams of added sugar, Xing Craft
has no added sugar, and is an
artisanal brewed team made with single origin grown tea blends. The
sub segment is estimated to comprise more than $2 billion in
revenue according to Nielsen, Spins, and Markets and Markets, with
gross margins significantly more attractive than the more price
driven large format can tea segment.
Xing Craft Collection Lemonade
Xing
Craft
Collection Lemonade is a 100% organic, premium line of lemonades
with coconut water sold in 16 oz glass bottles with lower sugar and
no artificial flavors. Xing Craft Collection Lemonades comes in
both sparkling and still varieties in classic and trending flavor
profiles including Sparkling Strawberry Lemon, Sparkling Lemon
Passion, Lemon Guava Mango, Lemon Strawberry Kiwi and some
exclusive flavors for major retail partners in both sparkling and
regular lemonade, coconut water and exotic fruit
combinations.
The
premium lemonade segment has grown over the past five years to
become a year-round staple and has been defined by brands from
major competitors including Hubert
’
s, Santa Clara,
Calypso, and
others in 16-20 oz packaging and priced at $1.99 to $2.99 in major
grocery and convenience retail. Unlike competitors that have more
than 40 grams of added sugar, Xing Craft has significantly lower
sugar, and is made with all-natural fruits and flavors from some of
the most exotic locations on the planet. The segment of RTD
Lemonade is estimated to comprise more than $980 million in revenue
in the US, with 6.4% annual growth according to Hexa and the IBIS
world industry report
Aspen Pure PH and Aspen Pure Probiotic
Aspen
Pure PH is a naturally PH-balanced, artesian-well sourced water
from the Colorado Rocky Mountains, and Aspen Pure
Probiotic has more than 12 different
probiotic strains and more than 10 billion CFU
’
s (colony forming units
(probiotics)) in every serving with 2 years of
shelf-life.
Aspen
Pure has no added minerals or electrolytes and comes out of the
ground at a natural PH-balanced level of up to 7.0. Aspen Pure is
then purified and bottled at the source in New Age
’
s own manufacturing facilities.
Aspen Pure is commercialized primarily in a 5 state area in and
around the Company
’
s home
Colorado market. There are no current plans to expand or invest in
it beyond its current distribution as the premium bottled water
segment is a highly competitive, expensive, and broadly
undifferentiated segment in which to compete. Aspen Pure Probiotic
however is highly differentiated. As such, the product has expanded
to key regional retailers on both the East and West coasts, a major
convenience retailer in Canada, and a major national grocery
retailer in the United States. Aspen Pure competes in the premium
bottled water category. According to Transparency International,
global bottled water sales reached $198 Billion in 2017 and
experienced a compound annual growth rate 6.4%
Búcha Live Kombucha
B
ú
cha
Live Kombucha (
“
B
ú
cha
”
) is a certified-organic,
all-natural, non-GMO, non-HFCS, fermented Kombucha tea with more
than two billion CFU
’
s in
every serving.
B
ú
cha
is produced with a unique and proprietary manufacturing process
that eliminates the common vinegary aftertaste associated with many
other Kombucha
’
s and
provides the brand with an industry leading twelve-month shelf life
as compared to the typical 90-day shelf life of our
competitors
’
products.
The production process also leads to consistency and stability with
no risk of secondary fermentation, secondary alcohol production,
incremental sugar production or over-carbonation, and is one of the
world
’
s first
Kombucha
’
s that is
shelf-stable (no refrigeration required) with no degradation to
flavor or the probiotics organisms in every serving.
B
ú
cha
is made from black teas, proprietary kombucha culture and
probiotics, unique yeast strains and cultures, and all-natural
organic fruits and flavors. B
ú
cha comes in five flavors including
Raspberry Pomegranate, Blood Orange, Guava Mango, Grapefruit Sage,
and Yuzu Lemon packaged in 16 oz glass bottles. The brand is sold
at major grocery retail across the United States and Canada.
Because B
ú
cha is shelf
stable and has 12 months of shelf life, the brand has recently been
able to expand internationally and to major convenience retail. The
Kombucha category is the fastest growing segment in the beverage
industry with CAGR of 41% since 2012 and annual revenues of $1.48
Billion according to Zion Market Research and Beverage Industry
Magazine.
Coco-Libre
Coco-Libre
is
an organic, 100% coconut water produced at the source. The brand is
one of the top 5 brands in the coconut water category and the
leading brand in multi-serve sizes.
Coco-Libre
is distributed in more than 15,000
outlets throughout the United States and Canada, and has excellent
presence in the natural channel. The brand comes in 1 liter sizes,
330 ml tetra-pak, and 500 ml cans in both regular and natural fruit
flavored varieties.
In late
2017, we switched Coco-Libre from being produced from concentrate
in the US, to being produced at the source from 100% organic pure
coconut water. With this shift, we gained some significant benefits
including:
1) A
more preferred consumer proposition
“
not from concentrate
”
2)
Significantly improved flavor profile resulting from the young
coastal coconut base
3)
Lower cost of goods sold by more than 30%
4) New
more preferred consumer packaging options differentiated vs.
other
’
s
tetra-paks
Coco-Libre
competes in the approximately $2.5 billion coconut water category
that has experienced a compound annual growth rate of over 20% over
the past 5 years, and is the second fastest growth segment in the
non-alcoholic beverage category according to Beverage Business
Insights.
Coco-Libre Sparkling
Coco-Libre
Sparkling was launched in December 2017 and has already gained
6,897 points of distribution in 1,919 outlets. The product is
produced at the source, is made with only pure young coastal
coconut water and natural fruits, and contains no added sugar. The
brand has 30 to 40 calories total depending on the variety and
comes Coconut Lime, Coastal Coconut, Coconut Mangosteen Passion,
Coconut Watermelon, and Coconut Peach Pear flavor
combinations.
Coco-Libre
Sparkling sources revenue from other sparkling waters, which is a
large fast growing segment, and from other still coconut waters.
The brand has the lightness and crispness of a sparkling water, but
is produced from coconut water instead of municipal tap water like
other leading sparkling water brands.
Coco-Libre Protein
Coco-Libre
Protein competes in the meal replacement category, one of the fast
emerging segments in the non-alcoholic beverage category.
Coco-Libre Protein is being redeveloped to become a complete meal
replacement, vs. its historic coconut water with merely added
protein.
According
to Statista, the meal replacement segment is estimated to be $3.7
billion in annual revenue.
Marley
New Age
acquired the Marley RTD beverage franchise including the brands
Marley One Drop and Marley Mellow Mood in June of 2017, following
entry into a management agreement in October of 2016 to lead the
Sales, Marketing and Distribution of the Marley Beverage Company.
Following the acquisition, New Age owns the licensing rights in
perpetuity to the Marley Brand of RTD beverages and provides an
annual licensing fee as a percent of sales to the Marley family.
The Bob Marley franchise generally is a globally relevant lifestyle
brand with excellent social media presence, enjoying more than 72
million loyal Facebook followers and loyal Bob Marley
fans.
Marley yerba Mate
Organic
Marley Mate was launched in November 2017, exclusively with a major
convenience store chain initially across three of their divisions.
Marley Mate is a tea/coffee/natural energy drink hybrid that has
the taste of a tea, the uplifting benefits of coffee or an energy
drink, but without any crash and without any of the increasingly
negatively viewed ingredients in energy drinks. The brand is
organic, very clean label with only Marley Mate 30-40 calories, and
has quickly become the number two player nationally in the
category, despite being in limited distribution.
Marley
Mate comes in four flavors including Be Jammin Berry, One Love
Lemon, Jamaican Me Mango, and Ya Mon Mint. The brand has met with
excellent early success in its initial markets since launch,
outselling major competitors in each of its initial launch
markets.
Marley
Mate competes in the rapidly emerging yerba mate segment of the
tea/coffee/energy drink category.
Marley Cold Brew
Marley
Cold Brew was developed in late 2017, harmonized with the rest of
the new Marley branding family, gained commitment for national
distribution with a major convenience channel customer, and is
expanding in full launch in Q2 2018. The segment at retail is very
new with retailers still learning about pull through rates and
sustainable consumer demand. The segment however has been growing
at the expense of other high caloric Frappuccino-type beverages,
and differentiates with more real and less acidic or bitter taste
that a regular RTD coffee.
Cold
Brew as a segment is a part of the $55 billion global RTD coffee
market according to Mintel.
Marley One Drop
Marley
One Drop
is a RTD coffee
made with Premium Jamaican Blue Mountain Coffee, and unlike
competitive RTD coffees contains no artificial ingredients, no
HFCS, no preservatives, no GMO
’
s, and is kosher certified. The
brand comes in 11 oz slim cans and in four flavors including Mocha,
Vanilla, Swirl and Banana Split.
Marley
One Drop
coffee is
distributed in more than 5,000 outlets throughout the United States
and Canada, and has an initial presence in 7 international markets
in Western Europe, Latin America and the Caribbean.
Marley
One Drop
competes in the
approximately $55 billion Global RTD coffee market, which has
experienced a compound annual growth rate over the past five years
of just over 10%.
Marley Mellow Mood
Marley
Mellow Mood
is a RTD
relaxation drink that sources revenue from the RTD Tea category.
Marley Mellow Mood is made with Valerian Root, Chamomile, and other
natural herbs and ingredients and unlike competitive RTD
Tea
’
s is all natural, has
no HFCS, no preservatives, no GMO
’
s, and is kosher certified. The
brand comes in 15.5 oz. cans in five flavors including Peach
Raspberry, Bartlett Pear, Raspberry Lemonade, and Honey Green Tea.
Marley Mellow Mood recently won silver in the 2017 Global Tea
Championships and capitalizes on consumer trends to lower sugar,
natural, and healthier alternatives.
Marley
Mellow Mood
relaxation
drinks compete in the approximately $50 billion Global RTD tea
market, which has experienced a compound annual growth rate over
the past five years of just under 10%.
Marley
Mellow Mood
®
relaxation drinks are
distributed in more than 10,000 outlets throughout the United
States and Canada, and has an initial presence in 7 international
markets in Western Europe, Latin America and the
Caribbean.
New Age Health Sciences Division
We
established our Health Sciences Division in the third quarter of
2017, as a separate standalone company and wholly-owned subsidiary
after the acquisition of the Premier Micronutrient Corporation. The
acquisition came with 11 patents that have since been added to, now
totaling 13, on which significant cooperative research studies and
human and animal trials have been completed. The patents and human
need states that are addressed by the technologies were all
developed in partnership with and partially funded by the U.S.
government. New Age now owns all the intellectual property,
significantly differentiating it from other beverage companies. Our
intention is to convert the patents into products, with direct
functionality in protection, treatment, or improvement of different
consumer need states.
We have
decided to pursue four main areas of focus where we believe we have
the most robust science and patent protection on which we intend to
commercialize products including Rehydration/Recovery, Radiation
protection, Neural Protection/Improvement, and Cardiovascular
health. We also intend to either license or outsource any patent we
do not intend to commercialize.
‘nHanced
‘
nHanced is our first product that was developed by
the medical and scientific team at New Age Health Sciences.
‘
nHanced delivers a first
of its kind, product which is specifically designed to improve
patient outcomes after surgery. It is an all-natural, clear
carbohydrate beverage for use up to two hours prior to surgery
patients and hospital systems adopting ERAS surgical protocols. The
product utilizes the same superior carbohydrate source that we use
in our Coco-libre coconut water, includes key vitamins and mineral
co-factors for immune support, and provides antioxidants, amino
acids and phytonutrients for improved metabolic
function.
New Age
has the insight that a preoperative carbohydrate dose with specific
fluid volume has multiple health benefits for a person undergoing
surgery. This insight, coupled our data on the positive benefits of
micronutrients, led to the formulation of
‘
nHanced to provide facilitate
recovery after surgery. with less inflammatory response, less
nausea, reduced gastric stress, increased GI motility, less insulin
resistance, improved wound healing and immune function, and overall
improved patient satisfaction.
Bio-Shield
“
Bio-Shield
”
is the current working brand name for our radiation protection
product. We believe that we own the patents to the only product in
the world proven to protect the body from the effects of ionizing
radiation, and have the trails and research studies validating the
efficacy of our product. Ionizing radiation, which comes from a
number of sources, including near proximity to sun, nuclear
facilities, medical X-rays or scans, affect the body by breaking
the double strands of DNA inside the body. New Age
’
s product has proven to protect
double-strand DNA from breaking from the impact of
radiation.
We
intend to launch
“
Bio-Shield
”
in Asia Pacific in 2018, and
thereafter expect to other markets and channels including both the
travel and medical channels.
‘
nHanced addresses a market segment size of more than
320 million surgeries a year, 25% of which are associated with
complications.
PediaAde
PediaAde
was developed in the fourth quarter of 2017 and tested in limited
distribution. Full expansion is expected in 2018 in key grocery and
pharmacy outlets in the U.S. We believe PediaAde delivers superior
rehydration to competitive rehydration products, due in part to
production using the same superior carbohydrate and electrolyte
source found in our Coco-Libre brand. PediaAde has only 25 total
calories, is all-natural, and has no harmful ingredients, like red
dye #40 and others found in competitors.
Competitive Strengths
New Age
has five components of differentiation that distinguishes it from
other companies competing in the beverage industry:
1)
|
New Age
has a unique business platform with its own Direct Store Delivery
("DSD") distribution. This platform enables the Company to have the
infrastructure and resources to operate a profitable beverage
business. Most if not all beverage companies under $100 million in
scale struggle because of the overhead and costs to operate in the
sector. New Age, with its cash generative DSD operation, can spread
its overhead across a much larger base, providing the resources to
allocate to brand building and expansion in a way few if any other
small cap beverage companies can.
Our DSD distribution group in Colorado includes almost 40 unique
routes, with a >20 person sales team, and a >20 person
merchandising team, covering more than 6,000 outlets for more than
60 brands and more than 600 SKU’s. The DSD arm of our
business is a test bed for new products before national rollout,
provides an early indicator system for any new emerging competitive
brands or beverage segments, and gives the group near captive
control of the shelf space across the 6,000 outlets the group
services.
The scale that the DSD system represents, coupled with the
efficient cash conversion of the type of operation, provides the
resources and infrastructure base to facilitate expansion and
diversification to higher margin beverages sold globally in
traditional and new higher margin channels. The combination
provides the potential for superior free cash flow and net income
generation in a way that would be very difficult for other smaller
beverage companies to achieve.
|
2)
|
New Age
has a full brand portfolio competing in only the growth segments of
the industry, and as such is the only one-stop-shop supplier of
healthy beverages for retailers and distributors. These entities
are reticent to work with smaller, individual brand companies
without the resources and infrastructure to support
them.
New Age’s portfolio of healthy brands enables the Company to
pursue the strategic high ground of “world’s leading
healthy functional beverage company,” filling the void
created by the legacy leaders in the industry. Not only does the
Company enjoy the growth rate benefits of the segments in which it
competes, but by focusing exclusively on healthy alternatives, it
limits its distractions and required investments to maintain
businesses in declining segments like juice or carbonated soft
drinks for example that many of its competitors are forced to
continue.
|
3)
|
New Age
has a strong distribution in major key accounts across the US. We
have insights that this
“
distribution presence
”
supports development of
“
brand preference,
”
and provides a stable and
sustainable revenue platform. New Age has also recently structured
preferred partnerships with major distributors to penetrate new and
alternative channels, and believes it has first mover advantage
with them to take advantage of significant growth in these
segments.
The Company has spent the past 10 years developing a national
hybrid distribution network with other major DSD operators, natural
channel distributors, and direct to store wholesale distribution.
The Company’s national network represents a significant
competitive advantage and barrier to entry vs. many other smaller
beverage companies.
|
4)
|
The
Company has financial flexibility with a strong balance sheet, de
minimis debt, and access to the capital markets unlike many other
private or small public beverage entities.
New Age has historically enjoyed a low cost of capital relative to
its peer group by virtue of its line of credit at libor plus 2
established with US Bank in 2016. That line, coupled with its
ability to access the capital markets up to $100 million via its
S-3 facility established in October 2017 to facilitate major
acquisitions or provide capital for significant organic growth
opportunities, provides the firm with an unprecedented ability and
significant optionality to intelligently support its
growth.
|
5)
|
New Age
has the organizational capabilities and systems unlike other small
beverage companies., defined as having the people, processes,
systems, information, and culture/environment to drive superior,
sustainable, profitable growth,
New Age’s senior leadership team has collectively more than
100 years of beverage industry experience and experience working in
both major multinationals and smaller beverage companies. The
Company’s board of directors brings global strategic
leadership experience gleaned from running highly successful major
multinational companies in the beverage, retail, and other
industries. From a process standpoint, New Age has dedicated daily,
weekly, monthly and annual routines, by and through which it runs
the operation.
The Company recently employed Microsoft dynamics and Encompass ERP
systems, and has an internal target setting system whereby every
associate in the firm has specific metrics cascaded from the
Company’s annual business plan. New Age has also developed
its own proprietary dashboards to augment its access to syndicated
data and industry information, and employed a culture of ownership
and environment of accountability and that is metric driven and
performance oriented.
|
As a
result of the Company
’
s
strengths, three competitive advantages are emerging including an
ability to drive superior organic growth on its core portfolio, an
ability to profitably acquire and integrate new companies and
brands, and an ability to develop new breakthrough products
organically leveraging its R&D and scientific and medical
expertise.
Reliance on Third Party Suppliers and Distributors
We rely
on various suppliers for the raw and packaging materials,
production, sale and distribution of our products. Our third party
distribution providers are for certain areas of the country that
are outside of our owned DSD distribution network. The material
terms of these relationships are typically annually negotiated and
include pricing, quality standards, delivery times and conditions,
purchase orders, and payment terms. Payment terms are typically net
30, meaning that the total invoiced amount is expected to be paid
in full within 30 days from when the date on which the products or
services are provided. We believe that we have sufficient options
for each of our raw and packaging material needs, as well as our
third party distribution needs and also have long term
relationships with each of our suppliers and distributors,
resulting in consistency in quality and supply. We also believe
that we have sufficient breadth of retail relationships with
distribution in both large and small retailers and independents and
across multiple channels (mass, club, pharmacies, convenience, and
small and large format retailers) throughout the United
States.
The
contractual arrangements with all third parties, including
suppliers, manufacturers, distributors and retailers are typical of
the beverage industry with standard terms. We have no long-term
obligations with any of the third parties nor do any of them have
long-term obligations with us. The third party supplier,
manufacturing and distribution agreements were entered into in the
normal course of business within the guidelines of industry
practices and are not deemed material and definite.
Growth Strategies
Our
long-term objective is to become the leading healthy beverage
company. We believe that by focusing on our purpose, which is to
make a difference for consumers with healthier beverages, and by
flawlessly executing our business plan, that we can achieve that
objective. Based on available information, we believe we are one of
the top 20 healthy beverage companies worldwide today, and the 58th
largest non-alcoholic beverage company overall. We intend to
achieve our goal by driving organic growth behind our existing
portfolio of healthy functional beverages, in all relevant packages
and product formats, across all major retail channels, in all major
markets, through an aligned network of retailer and distributor
partners.
Our key
growth strategies include the following:
–
Build core brands with new products in emerging
growth segments
–
Drive key account distribution and in-store
merchandising
–
Penetrate new channels, markets and
segments
–
Expand gross and EBITDA margins
–
Build metric-driven, performance oriented, culture
of ownership and accountability
Sales and Marketing
We
currently have an in-house sales and merchandising team consisting
of approximately 75 individuals based in Colorado and throughout
the United States, whose compensation is highly variable and highly
performance-based. Each sales person has individual targets for
increasing
“
base
”
volume through distribution
expansion, and
“
incremental
”
volume through promotions and other
in-store merchandising and display activity. As distribution to new
major customers, new major channels, or new major markets
increases, we will expand the sales and marketing team on a
variable basis.
We
market our products using a range of marketing mediums including
in-store merchandising and promotions, experiential marketing,
events, and sponsorships, digital marketing and social media,
direct marketing, and traditional media including print, radio,
outdoor, and TV.
Distribution
Our products are currently distributed in 15 countries
internationally, and in 50 states domestically through a hybrid of
four routes to market including our own DSD system that reaches
more than 6,000 outlets, and to more than 35,000 outlets throughout
the United States directly through customer’s warehouses,
through our network of DSD partners, and through our network of
brokers and natural product distributors. Our products are sold
through multiple channels including major grocery retail, natural
food retail, specialty outlets, hypermarkets, club stores,
pharmacies, convenience stores and gas stations.
Our
sales strategy is to distribute our products worldwide through to
consumers in the most cost effect manner possible. We sell our
products direct to consumers through our own Ecommerce system and
other Ecommerce systems, through retail customers across grocery,
gas, convenience, pharmacy, mass, club and other channels, to major
foodservice customers, to alternative channel customers including
juice/smoothie shops, military, office, and health club, and
through hospitals, outpatient doctor offices, and other
channels.
The
diversification of our channels and distributors, similar to the
diversification of retail customer base, is expected to minimize
distributor and channel concentration and risk, but is also
expected have a very positive margin mix effect, and a very
positive incremental volume impact, with the combination of
International, Ecommerce, Foodservice, and Health Sciences expected
to exceed 10% of total revenue in 2018, from a negligible base in
2017.
Research and Development Activities
Our
research and development efforts are focused on two primary paths.
The first is to continually review our existing formulas and
production processes and structure to evaluate opportunities for
cost of goods sold improvements, without degrading the quality or
fundamentally changing the consumer appeal taste profile of our
existing products. The second major research and development effort
is in the development of fundamentally new and differentiated
products, based on consumer insights and trends and competitive
intensity in those segments. The Company
’
s mission to only provide healthy
functional beverages governs our development efforts.
The
Company
’
s new products
and R&D efforts in its Health Sciences Division, are
science-backed by the patents, cooperative research studies and
human and animal trails acquired from the Premier Micronutrient
Corporation. They are targeted toward to fundamental human needs
states, segments that do not yet exist in beverages, but do exist
in the pharmaceutical arena, and opportunities where New Age can
gain first mover advantage. The Company
’
s mission is to only provide healthy
functional beverages with real efficacy for consumers. That guiding
principle of
“
no
compromise
”
governs all
our development efforts.
Seasonality
We
experience some seasonality whereby the peak summer months show a
higher level of sales and consumption. However, the structure of
our business and range of products in our portfolio mitigate any
major fluctuations. Our revenue during the second and third
quarters of the year have historically been approximately 60% of
annual revenue, and this seasonality is expected to continue for
the foreseeable future.
Competition
The
beverage industry, specifically the healthy beverage industry, is
highly competitive. We face intense competition from very large,
international corporations, as well as from local and national
companies. In addition, we face competition from well-known
companies that have large market share.
The
intensity of competition in the future is expected to increase and
no assurance can be provided that we can sustain our market
position or expand our business.
Many of
our current and potential competitors are well established and have
longer operating histories, significantly greater financial and
operational resources, and name recognition than we have. However,
we believe that with our diverse product line, consisting of
kombucha tea, green tea, water and energy beverages, it will give
us the ability to obtain a large market share, and continue to
generate sales and compete in the industry.
Patents and Trademarks
We hold
United States trademarks, Serial Numbers 86694956 and 85087186 for
B
ú
cha. We also hold United
States trademarks, Serial Numbers 85025636 and 76438612 for Aspen
Pure
®
, Serial Number
85347345 for Just Pure Water
®
, Serial Number 77312629 for
XingEnergy
®
, Serial Number
77050595 for XingTea
®
, all
of which were acquired in our acquisition of Xing. We hold the
United States trademarks, Serial Numbers 85243126 for Coco-Libre.
We hold the United States trademarks, Serial Numbers 85066981,
85767476, 86709724, and 86681878 for Marley. We hold the United
States trademarks, Serial Numbers for PediaAde
87599349.
We hold
the United States patents, patent numbers 6,849,613 for Multiple
Antioxidant Micronutrients, 7,399,755 for Formulations Comprising
Multiple Dietary and Endogenously Made Antioxidants and B-Vitamins,
and 7,449,451 for Use of Multiple Antioxidant Micronutrients as
Systemic Biological Radioprotective Agents Against Potential
Ionizing Radiation Risks. We hold the United States patents, patent
numbers 7,605,145 for Micronutrient Formulations for Treatment of
Diabetes Mellitus, 7,628,984 for Micronutrient Formulations for
Pulmonary and Heart Health, and 7,635,469 for Micronutrient
Formulations for Hearing Health. We hold the United States patents,
patent numbers 8,221,799 for Multiple Antioxidants for Optimal
Health, 8,592,392 for Multiple antioxidant micronutrients,
9,655,966 for Micronutrient Formulations for Radiation
Applications, and patents pending and continuations in progress for
Antioxidant Micronutrients used in Electronic Cigarettes, and
BioShield for Protection Against Environmental
Exposures.
Any
encroachment upon our proprietary information, including the
unauthorized use of our brand name, the use of similar products,
the use of a similar name by a competing company or a lawsuit
initiated either by us or against us for infringement upon
proprietary information or improper use of a trademark or patent,
may affect our ability to create brand name recognition, cause
customer confusion and/or have a detrimental effect on our business
due to the cost of defending any potential litigation related to
infringement. Litigation or proceedings before the U.S. or
International Patent and Trademark Offices may be necessary in the
future to enforce our intellectual property rights, to protect our
trade secrets and/or to determine the validity and scope of the
proprietary rights of others. Any such litigation or adverse
proceeding could result in substantial costs and diversion of
resources and could seriously harm our business operations and/or
results of operations.
Government and Industry Regulation
We are
subject to a variety of federal, state and local laws and
regulations in the U.S. These laws and regulations apply to many
aspects of our business including the manufacture, safety,
labeling, transportation, advertising and sale of our products.
Violations of these laws or regulations in the manufacture, safety,
labeling, transportation and advertising of our products could
damage our reputation and/or result in regulatory actions with
substantial penalties. For example, changes in recycling and bottle
deposit laws or special taxes on our beverages and our ingredients
could increase our costs. Regulatory focus on the health, safety
and marketing of beverage products is increasing. Certain federal
or state regulations or laws affecting the labeling of our
products, such as California
’
s
“
Prop 65,
”
which requires warnings on any
product with substances that the state lists as potentially causing
cancer or birth defects, are or could become applicable to our
products. At this time, our products do not require government
approval, but as federal or state laws change, the manufacture or
quality of our products may become subject to additional
regulation.
We are
also subject to the Securities Act, the Securities and Exchange Act
of 1934, as amended (the
“
Exchange Act
”
), and Washington and Colorado
Corporation Law. We will also be subject to common business and tax
rules and regulations pertaining to the operation of our business,
such as the United States Internal Revenue Tax Code and the
Washington and Colorado State Tax Codes, as well as international
tax codes and shipping tariffs. We will also be subject to
proprietary regulations such as United States Trademark and Patent
Law as it applies to the intellectual property of third parties. We
believe that the effects of existing or probable governmental
regulations will be additional responsibilities of management to
ensure that we are in compliance with securities regulations as
they apply to our products as well as ensuring that we do not
infringe on any proprietary rights of others with respect to our
products. We will also need to maintain accurate financial records
in order to remain compliant with securities regulations as well as
any corporate tax liability we incur.