Modern Times Beer made news two years ago when it announced a plan to vest long-term employees with a piece of the company, and this week it announced a plan to further spread its ownership around: this time with its fans.
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The juggernaut Point Loma brewer has established an equity crowdfunding campaign through website WeFunder that went live on April 22. Valuing shares at $252.20 apiece, the campaign is initially expected to sell 4242 shares to raise a capped limit of $1.07 million, per SEC regulation. Don’t expect an angel investor to snatch up the whole lot, either. Modern Times spokesman Dan Reed notes, “Only an accredited investor who meets high SEC criteria could go in for more than around $2K. It’s also worth noting that we have total discretion over which investments we accept.”
Though not unprecedented in the local craft beer market, the move places Modern Times as an exemplar for craft breweries seeking to maintain independent ownership. In a video produced for the campaign, founder Jacob McKean states, “We have tried really hard to stay independent during a very competitive time in the industry,” citing equity crowdfunding as an alternative to taking on private equity investment, or strategic partnerships with other brewing businesses, adding, “Those are kind of the easy way out.”
More illuminating than the campaign itself are the financial disclosures accompanying it which offer insights into just how successful Modern Times has been as it approaches its sixth anniversary. For starters, the campaign reveals $264 million valuation for the business, which now operates three breweries and five tasting rooms and has plans to open new locations in Santa Barbara, Anaheim, and Oakland later this year. These properties include three restaurants and a coffee roastery, which will support a recently announced East Village coffee shop operated by local hospitality group, Consortium Holdings.
In the video, McKean reminds us that “In the first twelve months, Modern Times blew away my fifth year projections in our business plan.” The company’s documentation reveals that it’s on pace to achieve 1000 percent growth over its first year. In beer production terms, it produced over 68,000 barrels in 2018, more than eight times the 8213 barrels McKean originally predicted for year five. As a result of explosive growth, it accounted for $30.5 million in revenue for 2018 — a stunning 59 percent increase over 2017, compared to 4 percent growth in the overall craft beer segment. With new locations coming online, Modern Times anticipates $37 million revenue in 2019 (a 21 percent increase).
Despite its constant expansion in retail locations, the design-savvy brand currently shows a 60 percent growth in revenue from wholesale distribution, currently shipping to seven western states. Retailers include Trader Joe’s, Whole Foods, and shops at Disneyland. Over the counter retail accounts for 33-percent, with the final 7-percent from online sales. Reed says 3 percent of retail revenue may be attributed to sales of the brand’s merchandise. An interesting tidbit from the disclosures is that those online sales strategically promote tasting room visits. Modern Times offers online sales for 8 to 10 special release beers each month, requiring in-person pick up, which “means guaranteed foot traffic in the weeks thereafter with consumers picking up beer.”
The company hopes to reach a 50/50 split between wholesale and retail revenue moving forward, as new locations hit their stride. For example, in the first quarter of 2019, Modern Times notes the Los Angeles brewpub opened early last year took in more cash than it did in all of 2018. The company expects additional retail growth to be driven by the strength of special release sales. Second to its brewing prowess, the company counts its “greatest strength is the ability to brew these beers on a scale that makes them commercially available.”
To that end, the company announced a $6 million expansion of its Point Loma brewery to increase capacity, which some of the crowdfunding equity is earmarked to support. The shares being offered publicly are a tiny fraction of the company — McKean retains a 50.5 percent majority by keeping 528,582 shares of common stock. A trust set aside for employee vestment constitutes 30 percent, at 314,292 shares. Modern Times suggests this capitalization will help buy back additional shares for employees, and Reed explains that, “The remaining percentage is owned by shareholders who the [trust] has not yet bought out.”
Modern Times employs 250 souls, and Reed adds that hundreds are on the path to be vested shareholders in 2022.