Brian Rosen doesn’t want to invest in your vodka flavored with sriracha or lemon peel and cumin. The lifelong beverage entrepreneur and advisor is channeling his experience into growing spirit brands that instead have wide appeal, and he’s adding strategic capital through InvestBev, an investment firm focused on adult-beverage brands, raw distillate, beverage technology and cannabis.
Rosen’s first job in the alcohol business was as a cashier— his family owned a big box liquor retailer, Sam’s Liquor, in Chicago. After growing up in the company, he and the family sold the $100 million business to private equity.
Later, Rosen was a partner at PricewaterhouseCoopers in adult beverage, and was lead consultant in trade marketing at Anheuser-Busch.
Rosen later sold his second company, BevStrat, a third party seller of adult beverages. Aware of the challenges facing beverage brands looking for large-scale growth, in 2015 he founded InvestBev.
“People think the liquor business is easy because everyone is drinking,” he said. “And that may be true, but there’s 50,000 brands in circulation right now in the country, and only 500 of them account for repetitive SKU velocity.”
So how do you make your company one of the couple hundred spirits that drinkers buy every day? Be a generalist, Rosen said. The firm seeks to invest in entrepreneurs who may have put their heart and soul into a product, but are still making something everyone else will enjoy.
“The question that we have to really ascertain is, is this brand’s audience 10 people or 10 million people?” he said.
Examples of spirit portfolio companies include Siempre Tequila, which aims to offer an antidote to celebrity brands, and the first mezcal RTD to enter the U.S. market, Elenita.
“We look for suppliers that understand that the way to make is to make generally, and that’s the way to make profit. And we’ll invest in that all day,” he said.
There’s other criteria too. Companies should have multi-state distribution, be cash flow positive or have a plan to get there, and sell near or more than 5,000 cases annually. They’re also looking for craft beverages that require more barriers to entry, such as tequila and brown spirits. They’re invested in technology businesses too, Reservebar and Fyllo, a compliance software tool. And while celebrity brands are all the rage, Rosen doesn’t want to risk betting on a celebrity whose status could fluctuate and kill a brand.
“I like brands that are built on better fundamentals. Celebrity comes and goes. A brand based on quality will stay,” he said.
Because the firm takes an active role in advising, it also looks for leadership that’s willing to take feedback. They take an advisory or board seat, and advise with anything from finance modeling, projections, opening new markets and connecting companies with an exit partner. They’re targeting a four-to-five-year path to exit, IPO, or acquisition.
Rosen is joined by a team of finance and beverage experts and chief investment officer, Giuseppe Infusino, who leads InvestBev’s investment sourcing, diligence, and structuring processes. Prior to joining InvestBev, Giuseppe was vice president at RVK, an investment consulting firm, where he managed several multi-billion-dollar private equity portfolios on behalf of large institutional investors.
Investment sizes range from $1 to $5 million, and the company just closed its third fund of about $80 million. In total, there is about $125 million devoted to the alcohol category, with $30 million invested in Kentucky bourbon casks to be held during their maturation process — an increasingly available and popular investment over the past couple years. Investors are a mix of family offices, institutions, high net worth investors, and fund to fund (a pooled investment fund that acts as an alternative to investing directly in securities such as stocks and bonds). They currently have three spirits term sheets pending and one for an e-commerce partner.
“Our goal is to monetize our investment, to have a good return on capital, to make our partners money and to make everyone money,” he said. “So we’d like to invest in brands that share that vision with us.”