UPDATE: Parrotdog plans $1.4M capital raise through crowdfunding platform PledgeMe
(Updates to include details of geographic sales strategy in paragraphs 5 + 6, clarifies raise closing date in paragraph 2, adds cost of capital raising in paragraph 7)
By Sophie Boot
Nov. 21 (BusinessDesk) - Parrotdog, the Wellington-based brewing company, wants to raise up to $1.4 million in its second round of equity crowdfunding through PledgeMe.
The pre-sale for existing shareholders will open tomorrow, while the offer will open to the public on Thursday afternoon, and will close at 5pm on Dec. 22 or when fully subscribed. The shares will sell for $1.40, with a minimum investment of 500 shares. At most, it will sell 1 million shares or 7.75 percent of the company. In August 2016, Parrotdog raised $2 million in two days at $1 per share to fund its Lyall Bay brewery.
The funding will be used to develop its sales network and expand the business faster, Parrotdog said. The company discontinued its sales and distribution partnership with a third party earlier this month, as it didn't see the growth it believed it was able to given its increased production capacity, it said.
"Our plan is to establish sufficient coverage of the nation from the outset, by investing heavily into a sales network that'll create the accessibility for Parrotdog that we've always envisioned," it said. "While developing a sales and distribution network in-house will likely increase operating gross profit and total sales volume for the company, our aim is to also mitigate the cash flow concerns high-growth companies often experience by viewing this sales strategy as a 12-month project to be supported by capital investment."
Parrotdog plans to employ four sales representatives, with one based in Auckland and one in Christchurch, and in future another to cover the top of the North Island, to add to its existing representative in Wellington. The company will also hire a support sales person based in the brewery in Wellington.
"The next priority would be a second sales person in the top of the North Island - how we cut that up yet we haven't quite determined but the first Auckland sales rep will be an area from Taupo north, which is quite a huge area for one person to cover," director Matt Stevens told BusinessDesk.
In the 2017 financial year, Parrotdog nearly doubled its net loss to $306,000 from $156,000 a year earlier, despite revenue jumping 51 percent to $2.8 million. Cost of sales rose 50 percent to $1.6 million while operating expenses increased 43 percent to $1.3 million, and it incurred $130,000 in non-deductible expenses from the capital raising. Gross margin shrank to 43 percent from 45 percent a year earlier.
The company is projecting a $238,000 net loss on a 44 percent lift in revenue to $4 million in the 2018 financial year, and a $285,000 net profit in 2019 based on a further 69 percent gain in revenue to $6.8 million that year.
Parrotdog had previously forecast higher revenue in 2018 but said this had been deferred to 2019 due to delays in commissioning its Lyall Bay brewing facility and opening its cellar door. It expects 2019 growth to come from a full year of the bar trading, improved nationwide sales and beginning its canning export strategy.
The company said it has closer direct partnerships with supermarket giants Foodstuffs and Progressive Enterprises, and is in direct communication with liquor store head offices which will mean it can keep more control of its brand and product presentation.
Parrotdog wants to generate relationships with bars and pubs outside the Wellington CBD, but also plans to use the capital to expand the scope of its Lyall Bay cellar door to include a "New York style deli/sandwich bar" and set up the bar as a music venue.
The company also wants to start selling its products in cans, rather than solely bottles, and says that could help it export to Australia. Currently it sells bottles to Coles liquor chains but says a number of distributors "have continued to push for re-entering the market in cans only" and it has delayed entering new export markets until it can sell cans.
After its first capital raise, the board decided it would manage any trading of shares, but said it didn't anticipate the liquidity of the shares and a significant number were traded between September 2016 and October 2017. The company will now outsource management of its share register to ASX-listed Computershare, and share matching to ShareMart. It said it had no plans to list "in the short to medium term".
The company will consider another round of equity raising if needed in future, it said.