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Charbrew

Platform:
Crowdcube
Stage:
Expansion
Industry:
Food & Drink
Location:
UK - North West
Date Rated:
21/04/17
Raise:
£230,000
Equity:
11.92%
Valuation (Pre Money):
£1,699,530
Industry: Food & Drink
Location: UK - North West
Platform: Crowdcube
£230,000 Expansion
Valuation: £1,929,530
Date Rated: 19/04/17

MANAGEMENT

PRODUCT

INVESTMENT
Tax Status: EIS

Business Summary

Charbrew is a branded tea company based in the UK retailing an innovative range of cold and hot teas with ingredients sourced from around the world. Charbrew has recently incorporated the US and Australian subsidiaries and is already stocked in over 30 offices across London. This round of investment will be used to expand the product offering and sales and marketing to increase visibility.

Financial Overview

Date (y/e) Dec-16 Dec-17 Dec-18
Sales Dec-16£203,973 Dec-17£525,892 Dec-18£1,428,250
Gross Profit Dec-16£68,132 Dec-17£208,305 Dec-18£566,750
GP as % sales Dec-1633% Dec-1740% Dec-1840%
Overheads Dec-16£152,384 Dec-17£355,375 Dec-18£544,578
Operating Profit Dec-16-£85,532 Dec-17-£147,698 Dec-18£21,634
OP as % sales Dec-16-42% Dec-17-28% Dec-182%
Closing Cash Dec-16£635 Dec-17£98,762 Dec-18£100,025

Note: This financial information has been sourced from the company on 19/04/2017 or from public sources. Financial data is NOT verified by Wheatfromchaff Ltd.
55%
SKILLS:
EXPERIENCE:
COMMITMENT:
Although the management team is complete, the Founder has acquired his managerial expertise within this business alone and the product development has been outsourced.
The team has significant commercial and marketing experience. The Founder has gained relevant industry knowledge and engaged and experienced investors are supporting the business.
The Founder has spent significant time building the company and he has invested over £35k to date but his salary will now reduce his financial risk of failure.
61%
MARKET:
PRODUCT:
COMPETITION:
The global Ready to Drink tea was estimated to be worth over £40bn in 2015. The company is already addressing three main markets: the UK, the US and Australia.
After the transition from hot to cold teas, the business has built significant social traction and it is steadily increasing its distribution channels and number of retailers with listings.
The industry in the UK is led by one main competitor but similar products could be launched relatively easily, so the team is focussing on establishing beachheads in London-Sidney-NY.
45%
PROFITABILITY:
CASHFLOW:
RETURNS:
The Founder has established a lean business model but the company is dependent on several key outsourced supply contracts that may require renegotiation or replacement in time.
This round of investment provides enough working capital to achieve break-even but there is limited financial headroom so further funds could be needed within the next two years.
The Founder aims to achieve sales of £10m in an 8-10 year time frame, however this growth rate is unlikely to drive a strong exit multiple or deliver more than a modest ROI for investors.


Conclusion

Given the relatively low sales growth rate and profit margins, investors in this round should remain patient as an exit by trade sale is unlikely to happen within the next five years and they will need to pay close attention to ensure they avoid dilution if a next round arises to accelerate growth.

That said, the Founder expects to exceed £10m in turnover within an 8-10 year time-frame: if the team can also deliver a 10% profit margin, investors in this round could expect reasonable returns if an exit is then achieved. The ROI would be boosted if the company committed to paying some dividends once profitability is achieved.

Investors should note that Wild Invest have a liquidation preference on the first £262k of sale proceeds.

Related Links

Crowdcube Pitch

www.charbrew.com

 

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The Ratings we publish have been approved and issued at Financial Promotions in the United Kingdom by Wheatfromchaff in the United Kingdom who is Authorised and Regulated by the Financial Conduct Authority FRN: 751017. Wheatfromchaff Limited registered office is Kilver Court, Kilver Street, Shepton Mallet, Somerset, BA4 5NF and telephone number +44 (0) 1749 347 577. Telephone calls may be recorded. VAT No: 214 0196 49

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