Time to jump in: Deep Eddy Vodka – Ratti Report Time to jump in: Deep Eddy Vodka

Time to jump in: Deep Eddy Vodka

Deep Eddy RattiSteve’s breakdown: Three things:

1) Deep Eddy Vodka‘s company, DE Spirits is up for sale and having a spirits marketing team on their side could help big time

2) They’ve had huge growth but now they want to go after national restaurant accounts and the marketing they were doing is not going to cut it

3) Both of these developments are reason to pitch their account

AUSTIN, TX: Have a hankering for some sweet-tea-flavored vodka? Texas-based Deep Eddy Vodka, a maker of spirits infused with flavors like sweet tea, cranberry and lemon, is up for sale, according to people familiar with the matter.

The Deep Eddy brand, owned by DE Spirits LLC in Austin, Texas, is being sold by investment bank UBS AG, the people said. Deep Eddy, which bills itself as premium vodka, offers its alcohol in a variety of fruity flavors. The brand was founded in 2010 by entrepreneurs Clayton Christopher and Chad Auler. Mr. Christopher had founded a small iced-tea company in the late 1990s, and Mr. Auler created the SAVVY Vodka brand.

The Deep Eddy brand has been an outlier in the U.S. vodka market. Vodka’s year-over-year growth slowed to 1.6%, down from 6.1% annual growth in 2010, as U.S. consumers continue to choose whiskey over clear spirits, according to the Distilled Spirits Council of the U.S. But Deep Eddy posted a nearly 130% increase in volume to 330,000 nine-liter cases, according to industry tracker Impact Databank. The company said it expects volume to reach up to 700,000 cases this year.

Recent M&A deals for emerging spirits brands priced them on a per-case multiple. A vodka brand like Deep Eddy could fetch $500 to $1,000 per case, an analyst said. That would probably put the valuation of Deep Eddy somewhere between $165 million and more than $300 million. Vodka is less capital-intensive than whiskey because it isn’t aged before being bottled.

Deep Eddy is the second trendy vodka brand to come out of Austin. Tito’s Handmade Vodka sold about 2 million cases last year, up from 200,000 cases in 2007, according to Impact Databank. Tito’s, which costs about $19 for a 750-milliliter bottle, is priced slightly higher than Deep Eddy’s $16 bottles.

Such upstart brands have been cutting into sales of more established brands like Smirnoff and Absolut. Volumes of Diageo PLC-owned Smirnoff last year declined 1% to 9.7 million cases while Pernod Ricard SA’s Absolut brand fell 1.5% to 4.6 million cases, according to Impact Databank.

“Deep Eddy Vodka is a high growth brand that is getting a lot of attention within the spirits industry,” a company spokeswoman said. “However, we remain a privately held company operating autonomously.”


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