Okay, good afternoon, everyone. Welcome back to the first day of Sidoti's May Conference. My name is Daniel Harriman. I'm an analyst here at Sidoti. To close out our first day this afternoon, we're going to hear from Innovation Beverage Group, ticker IBG. We're lucky enough to hear from the company's CEO today, Sahil Berry, all the way from Sydney, Australia. We're going to give Sahil about 20 minutes to go through the presentation, after which time I'm going to open it up for 10 minutes of Q&A. If you do have any questions at all during the 20-minute presentation, please feel free to type those into the Q&A box, and time permitting, we'll get to as many as we can. Please join me in welcoming Innovation Beverage Group. With that, Sahil, I'll turn it over to you. Thank you for being here.
Thanks for the introduction, Daniel. Appreciate everyone's time. I want to quickly breeze through our presentation. As you can see on the first screen, we have a few product shots there. These products are our first core focus for the next few years. Australian Bitters Company is a flagship product for the company. We have BITTERTALES , followed by Twisted Shaker Cocktails and Drummer boy Non-Alcoholic Spirit. A bit about us and our mission. We're a developer, manufacturer, marketer of numerous alcoholic and non-alcoholic products. Currently have 70 formulations across 14 brands. Our main brands and our core focuses are Australian Bitters Company and BITTERTALES, Drummer boy Non-Alcoholic Spirits, Twisted Shaker Cocktails, and we can see some other brands we produce in-house. Our direct-to-consumer platforms include bevmart.com.au and drummerboy.com.
Our mission is to expand our portfolio of our brands into the North American market and our Bitters brand globally. That's going to be our core focus for 2025, 2026, and early 2027 as well. If you look at our investment highlights, you know our vision is to scale into the North American market. We have powerful brands. We have great brand partnerships. We partner with Coca-Cola Europe Pacific Partners in Australia, and we have some distribution with RNDC in the U.S. We have strong margins. We have roughly 82% gross margins when we're selling Australian Bitters Company to distributors such as Coca-Cola in Australia. We have an experienced team and a great C-suite helping grow the business. A bit about the Bitters global market. The global market for Bitters total was roughly $4 billion in 2020. This has increased unofficially to roughly $5 billion as of 2024.
Of this, cocktail bitters is approximately $800 million to $900 million, which is the category we're playing in. One of our biggest competitors and one of the global leaders in the space is Angostura with their aromatic bitters. Just a couple of graphics to show you the size of global bitters markets. The U.S. is the largest cocktail Bitters market globally, followed by Australia, and then Trinidad and Tobago. Australia's on the map because we have our national drink, which is the lemon-lime bitters. It's part Sprite, lime cordial, and six to eight dashes of Bitters. Our business, Australian Bitters Company, I'm going to say this quite a lot through this presentation, is our flagship product. We have a great market share in Australia. In 2020, it was 20%. As of 2024, officially, it's 45% market share. We have strong distribution relationships with Coca-Cola Europe Pacific Partners.
In the U.S., we're currently found in California, Hawaii, Alaska, Arizona, Oregon. We're working on another six or seven states to be opened up by the end of the year. BITTERTALES , we created as a more premium offering to Bitters. We really wanted to focus on the cocktail bartender and the big cocktail bars across the U.S. The other reason was so we could attack Angostura on two different fronts. Australian Bitters Company comes in as the value proposition, and BITTERTALES comes in as the more premium offering. To give you an example on price, Australian Bitters Company compared to Angostura would be at 95 CPI versus BITTERTALES, which is 110. Some of the medals we've won over the years, we've actually updated this. We've won Best in Show and Gold for our Aromatic Bitters at the LA Spirits competition in 2024, 2025, sorry.
The remaining bitters flavors, we had won Gold. BITTERTALES has won Gold and Platinum for 2025 as well. We just do not have the medal pictures yet. We will update this shortly. Drummer boy Non-Alcoholic Spirits. This is our first jump into the non-alcoholic spirit space. It is an expanding market. In 2021, this was roughly a $9.9 billion global market. Unofficially, as of 2024, it is closer to $30 billion. Beer and wine are driving that growth in that category. Spirits is still growing year on year, but not as large as beer and wine. The main reason we jumped into this category, into the non-alcoholic space, in the spirits category for non-alcoholic, there is not a lot of players. You have people like Seedlip, which is owned by Diageo, and you have another group out of Australia called Lyre's, probably one of the leaders in the space.
We have a great gross profit margin with it, roughly 80% in Australia. Because there's not a lot of players, it was a unique opportunity for us to jump into it. Twisted Shaker Cocktails, our first bottled cocktail product that we created. We currently have five different flavors across two bottle varieties, so we do a 200 ml and a 700 ml. This product is currently sold in ALDI, Australia, as a special buy. They buy it as a seasonal product five-six times a year. We're looking to expand that as a more ongoing offering. We're looking to expand to other retailers in Australia. This product for the U.S. market, we're looking to get co-packed towards the end of the year and have it produced in the U.S. for the U.S. market. Some of our direct-to-consumer channels.
We currently have bevmart.com.au and drummerboy.com. Drummerboy.com is more of an educational site that doubles as an e-commerce site, more to educate the end consumer about how to use the non-alcoholic spirits. Our spirit marketplace is Bev mart Australia. We launched this in May 2021, mainly to showcase what we produce in-house. There are a few areas we found it excelled really well in. One was to allow for quick testing of any new products, test the market for four to six months. Once it did, some of these products that did well on bevmart.com.au, once they had proven themselves, we knew we could put the marketing spend behind it and grow the product into retail. A great example of this is Twisted Shaker Cocktails. We launched this on Bev mart Australia first and it did really well. We rebranded the packaging and launched into retail.
The other area that we found the spirit marketplace as well in, there's a lot of American products that aren't available to us in Australia. A great example of this is Virginia Black in the background. This is Drake's whiskey, had for created in 2018, 2019. Numerous years, it wasn't available to us in Australia. We were the first people to launch with this in Australia. Launched on the website, it did extremely well. We're now at a stage where retailers are reaching out to us wanting to stock this product. Some of our brand partnerships over the years, working with Coca-Cola Europe Pacific Partners in Australia, and especially our national drink being lemon-lime bitters, Sprite and Australian Bitters Company was match made in heaven. Anywhere you see a Coca-Cola fountain or a Coca-Cola soda gun behind a bar, most likely we'll have Australian Bitters Company.
All these venues will have a lot of this point of sale throughout the venue. CCEP or Coca-Cola Europacific Partners in Australia also sell the Beam Suntory range here in the U.S., which allowed us to partner with Maker's Mark during Old Fashioned Week. We also do this as a gift pack a few times a year, I think Father's Day, Christmas, etc. Some of our distribution, retail, and on-premise partnerships, Coca-Cola are distributed in Australia. Liquorland, Dan Murphy's, BWS are large retailers in Australia. Rockpool is a large on-premise partner. We have ALDI, where we're selling Twisted Shaker through. RNDC is distributing this product in five states. Our distillery, it's the heart and soul of the company. We run this at the highest production standards, and we meet Coca-Cola's stringent requirements for production. Currently, our capacity is roughly 5,000 bottles a day.
We do have some CapEx coming in. We spent some CapEx. We have a new machine coming in. We should get this in the next two to three weeks. This will increase our capacity to roughly 10,000-15,000 bottles a day. All of this is on a single shift pattern. Yeah, all of this on a single shift pattern where we can easily add more shifts to double, triple capacity as well. We're fully licensed. We have all FDA certifications, kosher compliance, all the import-export permits that we require. I can't stress enough, we have Coca-Cola Europe Pacific Partners. We meet their requirements for production. We have all our licenses, especially in Australia. We have manufacturing, importation, exportation, underbond storage, and DTC licenses in Australia. In the U.S., we still do have our retail liquor license, but we are looking to sell this at the moment.
We have our import license for the U.S. as well. Our manufacturing agreement with Coca-Cola Europe Pacific Partners is to 2033. We still have another eight years on that contract. It is a bit about our business strategy. I will leave this up for a few minutes. I am sure there will be some questions about this. Our management team, myself, I am currently Interim CEO and have 10-plus years' experience in the beverage industry. Eric Yu is our CFO, over 15 years' experience with the Big Four. Our latest hire is Genevieve Jordan. She is currently our Chief Sales and Marketing Officer with over 28 years' experience in building brands and being in the liquor industry. She was the ex-CEO of Angostura Holdings. She spent 15 years at that company, starting in procurement, working her way up to export sales and marketing, and eventually being CEO.
She left the company in 2021 or left Angostura in 2021, took a bit of a break, and I think everything lined up, and she's joined us October last year. So a bit about our financials. As you can see, we had solid growth between 2019 and 2022. 2023, there's a bit of a dip, and 2024 is still growing. The dip is related to our initial attempt for the IPO was in 2022. Unfortunately, we didn't get the IPO done that year. Just the bankers couldn't complete it. Also, NASDAQ closed its books end of 2022 for approximately six months, which caused a lot of losses for us for that year. As you can see, losses from 2022 to 2023 have halved, and we're tracking in the right direction. That's pretty much everything from me. I'm sure I'll now open up Q&A.
Sounds good.
Thank you so much, Sahil. As a reminder, if you do have any questions, we have some extra time now, so please go ahead and type those into the box, and we should be able to get to quite a few here. A few have come in already, but Sahil, I just wanted to start. You kind of had this slide up just for a minute, but if the next phase of growth for the company is to increase distribution in North America, what is your strategy to get that done as you make that a top priority for 2025?
For 2024, especially for the North American market, Genevieve's leading the charge there, and she's identified roughly 12-13 states in the U.S. that we believe are key states for the U.S. market.
Once we have these 12-13 states opened up, we have a huge marketing push, which is starting in July this year. We're actually doing, let's say, a soft launch, Tales of the Cocktail, which is a large cocktail convention in New Orleans, roughly 30,000-40,000 bartenders descend onto New Orleans for a week. We're doing a lot of tastings, etc. I think that I believe that will be a catalyst for the brand for the U.S. market. Once we have these states online and we have our marketing in place, we believe we'll get the, once we get these states online, we have our marketing in place, we increase sales, the plans to increase sales in those 12-13 states, which will trickle down for the remaining U.S. markets.
Perfect. Okay, thanks. And then just kind of a simple one here.
Can you kind of break down how much of your revenue comes from e-commerce versus otherwise?
E-commerce at the moment, Bev mart Australia probably contributes maybe 5-7% of our revenue. The bulk of our revenue does come from our own brands, especially bitters.
Yep. Are you looking to grow your e-commerce presence over time as well? Obviously, you've got quite a few things going on in 2025, but is that kind of a plan also to grow the e-commerce channel?
I think for the Australian market, yes, we're always striving to grow that e-commerce market here. In the U.S., we did have U.S. marketplaces that we are now currently divesting and moving on from because our core focus is going to be growing our own brands such as Australian Bitters Company, BITTERTALES, and Twisted Shaker .
Okay. Perfect.
Then when it comes to spending over the next year, do you guys have capital projections that you're going to what you need to spend on? Then along the same time, are you going to need to go to market, or how are you going to finance that growth?
For CapEx, capital expenditure for, let's say, equipment, plant equipment, I think what we've already purchased in the last six months will actually be enough to cover us until we see some really solid growth in the U.S. I think the next bit of expenditure will be around I think most of our expenditure will be around marketing while we're growing into key countries like the U.S. We're looking to grow into the U.K. and European markets as well.
In terms of requiring more funds, I think we'll be fine for 2025 unless we do have a couple of acquisition targets that we're exploring at the moment. On the back of that acquisition, if something does pass DD and audits, we'll go to the market to raise funds for that acquisition. Otherwise, I don't see us needing to raise too much money for 2025, maybe 2026 onwards.
Perfect. You kind of briefly mentioned this, and if you can't talk about it, that's completely fine. You mentioned interim CEO. Does the company have a path or a plan for either you to take over or somebody within the industry to take that seat in the near future?
Yeah, we are exploring. I've put out feelers and looking for the right candidate. I would like to have a full-time CEO in place.
For myself, I'm happy to go back to operations and product development and innovation while we have a CEO who has a really big growth mindset and has a lot more experience than I do for the public markets.
Do you think that's something that will happen this year?
I'm aiming to get it done second half of this year, most likely Q4. I need to find the right candidate. We need someone steering the ship, and I need to find the right person. If that extends into early 2026, then so be it.
Perfect. The hope is eventually you can get back into operations. It might just take a little bit longer than you'd like.
That's it. If I can get back to my lab and start getting back into NPD, that'd be great.
Yeah. A couple of finance questions if you can answer those for us.
At a high level, can you kind of break down what the margin profile of the alcoholic versus non-alcoholic drinks are?
Yeah, of course. Look, for alcoholic, bitters, while it's an alcoholic product, it's considered a non-alcoholic product in most markets. So there's no excise tax to be paid on Bitters. For Bitters, we roughly have 82%. Something like Twisted Shaker and some of our gin and vodka brands that we produce in-house in Australia, we're sitting close to maybe 40%. Drummer boy, non-alcoholic spirit has anywhere between 70-80% depending on which distributor and which avenue we're taking to sell that product.
Perfect. And then again, another kind of high level, if you could just give us an idea of how much revenue do you think you need to generate in the near term in order to kind of at least break even from an operating income level?
I think if we can achieve another ideal scenario, $1.4 million with the high-margin products like Bitters, $1.4 million will get us to break even, if not very close to break even. This is just some modeling that's been done by our CFO.
Do you think that becomes all the more possible if you succeed in distributing within North America with those 12 markets that you've identified?
It is very possible for those 12 markets. I think if we can get the U.S. 12 states up and running by the end of the year, we're exploring some markets in Europe with, sorry, in the U.K. and some markets in Asia. I think a combination of all three or four markets, it's fairly achievable for 2025.
That was going to be my next question, which is North America is a priority right now, but then, as you just mentioned, after that, it would be distribution within the U.K. and then also Asia.
That's correct.
Okay. Perfect. Okay. And then a couple of maybe difficult questions, but just any impact that you can recognize from the new global trade environment and tariffs in particular. And then, again, at a high level, what do you see as the biggest risk to achieving your 2025 targets of distribution within North America as well as some of the other things that we've discussed?
Look, I'll start with the tariffs question. That's been one question that's been asked plenty of times. At the moment, the only product that we see having some impact is bitters, but we're very fortunate enough here in Australia that our tariffs are only 10%.
It's a cost we can share between ourselves and the end consumer, so it can be spread out. It doesn't need to be just the end consumer who pays the full 10%. Any other products, things like Drummer boy and Twisted Shaker Cocktails, it makes sense for us to bottle that product in the U.S. market for the U.S. market so we can avoid tariffs there. Bitters is a product I don't think I'll ever have a co-packer make because it's our secret recipe. It's the first product that I created. I think it's best if we leave that production in-house in Australia. Risk-wise, look, I think some risks that are always going to be issues is procurement, shipping, etc. That's probably one of our biggest risks, especially post-COVID.
We've had some issues bringing in products or bringing in raw material into Australia to produce the bitters, especially dry herbs that we kind of import from all over the world.
Okay. Perfect. Then on one of the slides with the financials earlier, you talked about the difficulty that the company had in maybe late 2022 into 2023. You said that 2024 and now into 2025, things are trending in the right direction. Do you have updated financials for 2024 to kind of give us an idea of what it looks like, or has that not been made public yet?
They've been made public. We filed our 20F last week, Friday. They're all available online. The updated financials and the high level from my end, our revenue in 2023 was $3.1 million.
We are now at 2.9, but that's also divesting White Wine and the U.S., Bev mart USA completely. The e-commerce channels we're moving away from the U.S. market. Bitters has grown 2023 to 2024. There is growth there. Losses, look, on paper, there's a lot of high losses, but a lot of these are comprised of IPO expenditure and one-off expenses. The net losses are getting better year on year. I think for 2025, if we can achieve our revenue targets, I think we'll be closer to break even, if not at break even.
Perfect.
If you, let's say you get a CEO this year or in early 2026, and you get to put your operations hat back on from a mixology standpoint or doing what you like to do, what opportunities do you see for the company in terms of potential drinks in the future, different ways of operating that you might be excited about?
I think for 2025 and beyond, it depends on the trends. There are a few areas that I think are coming back into the scene. Whiskey's had its moment. As everyone's seen, gin had a huge explosion. There are other categories. I think the next one will be rum. That's my gut telling me. We just have to stay ahead of the curve and see what the trends are and just jump on them early on.
I think if I can do some work in rum, I think that could be the next exciting category that really booms.
In North America and in the U.S., and I do not have the specific numbers, but in recent years, we have seen the onslaught of non-alcoholic beer or non-alcoholic spirits really taking significant market share versus the alcoholic drinks. Are those similar patterns that you are seeing in Australia and maybe also in some of the other markets you are looking to go into?
Yeah, we definitely did. That is one of the reasons we jumped into the category. Non-alcoholic beer and wine have been growing significantly in the last two to three years. Spirits had the initial boom. It has tapered off a little bit, but it is still growing slowly. It is slower than something like the beer and wine. I think the next category, part of the spirits will be non-alcoholic cocktails.
When we have a great vehicle with Twisted Shaker , we could easily introduce a range, a non-alcoholic range for that. There are certain key markets where non-alcoholic does a lot better than other key markets. European markets are a bit more open to non-alcoholic. The U.S. market's growing rapidly. Non-alcoholic U.S. and probably European markets is where we're going to be focusing on.
Perfect. We're about up on time. I was going to ask you an R&D question, but we can save that for another time. On behalf of Sidoti and on behalf of everybody that attended, Sahil, thank you so much for sharing IBG's story and where your focus is going to be for 2025 and beyond. We hope that you're able to get somebody into that CEO seat so you can get back to doing what you like to do.
For all of you in the audience, thank you so much for your participation today and the questions. We were able to get to all of them, which is great. Sahil, thank you so much for your time today and sharing all your story. We really appreciate it.
Thank you for having me, Daniel, and thank you for Sidoti for organizing such a great conference.
Goodbye, everyone. Thank you so much.