Zeffer

From humble beginnings selling small batches at the Matakana Farmers Market in 2009, Zeffer has grown to become a leading craft cider brand and the largest independent, dedicated cider producer in New Zealand.

Minimum investment: $5,000 NZD

$574,234
Offer live
$925,766 still available
Max target: $1,500,000 (10.88% equity) Equity offered: Ordinary Shares / Investment Class Shares
$574,234 Offer live
$1,500,000 Max. target (10.88% equity)
$925,766 Still available
Zeffer hero image

Further detailed information is contained in the Information Memorandum

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Executive Summary

Zeffer is New Zealand’s fastest growing cider brand with a strong distribution network across Australasia. We see significant long-term growth opportunities in the cider and 0% alcohol categories and are raising $1.5m to ensure that we are well positioned to accelerate growth as Covid disruptions normalise.

Over the last 2 years, Zeffer’s growth has been heavily impacted by Covid disruptions. These included a reduction in bar and restaurant demand, disrupted retail distribution and delays in the commissioning of our new production facility.

Despite these challenges, we have made strong underlying progress and improvements, positioning Zeffer well to capitalise on current market opportunities. These include:

  • A simplified range focused on opportunities in NZ and Australia.
  • Major production site upgrade, resulting in efficiency, capacity and gross margin improvements.
  • Our 0% alcohol cider is now our largest selling product and one of the top performing products in the rapidly growing non-alcohol category.
  • In NZ, Zeffer remains the fastest growing cider brand and we anticipate 48% growth in FY23.
  • In Australia, we have recently launched our 0% cider in Coles Supermarkets and have first-mover advantage in this category with a plan to unlock additional distribution opportunities.

Having weathered the perfect storm during Covid, we have emerged in a strong position to grow revenue and profit. We are conducting a capital raise to invest in immediate NZ and Australian growth opportunities.

In the next 3 years, Zeffer is forecasting to grow to $12.4m revenue with $1m EBITDA.

Zeffer - Home of NZ Cider

  • Recent site investment allows production to scale to over 6mL PA (from 1mL PA) and improve gross margin.
  • Multiformat bottle and can packaging capability on site with tunnel pasteuriser.
  • High level of beverage innovation capability with world class team.
  • Home of Zeffer, hugely popular taproom and bar on site, with large event capability.

Storyline

Since Covid

Like many other FMCG companies, our trading environment was heavily impacted by Covid disruptions over the past 2 years.

In FY22 alone, approximately $2m of our forecast sales revenue was affected by:

  • NZ bar and restaurant disruption.
  • NZ supply chain disruption into Supermarkets and Liquor Stores.
  • The temporary closure of our Taproom and Bar.
  • The liquidation of our largest contract manufacturing client on the back of Covid trading impacts.
  • Market and shipping disruption in Australia and China.

While these impacts were multi-channel and significant, we believe they are short term and largely the result of lockdowns and movement restrictions. 

Since these disruptions, we have refocused our growth strategy on key opportunities in NZ and Australia including:

  • Focused product offering in cider and 0% cider, categories where we know we can rapidly gain market share.
  • In NZ, increasing our supermarket and liquor store distribution and opening tap opportunities through our exclusive distribution with Lion NZ.
  • In Australia, capitalising on the launch of 0% cider into Coles Supermarkets.

As the impacts of Covid pass, we are already seeing positive signs of channels re-opening.

The commissioning of our site upgrades, coupled with the implementation of a LEAN manufacturing programme, is expected to deliver further gross margin and efficiency improvements.

We believe Zeffer is in a strong position to profitably execute key growth opportunities as we transition into a more normal post-covid trading environment.

    Organisational Chart

    Team Overview

    Photo of Tim Chrisp

    Tim Chrisp Director (Non-Executive)

    Tim joined the Zeffer board as a new director after the 2018 capital raise when Cedenco became a strategic investor in the business. Tim is the Managing Director of Cedenco Foods and brings a wealth of strategic and governance experience to the board. He currently holds directorships for a number of companies throughout New Zealand.
    Photo of Josh Townsend

    Josh Townsend Executive Director, Chief Executive Officer (Full-time)

    Josh’s entrepreneurial drive led to him joining Zeffer early in 2011 while playing professional rugby. Since joining, he has led the growth of the business from turnover of $77k in 2011 to where it is today. Josh manages all external aspects of the business including sales, exports, brand direction, marketing strategy and key business relationships. He is now focusing his time on driving the overall Zeffer growth strategy which is collectively formed by the Board of Directors and Senior Management team.
    Photo of Greg Small

    Greg Small Executive Director, Chief Financial Officer (Full-time)

    Greg has a finance career spanning 12 years, which started with PWC and becoming a Chartered Accountant in 2009. His interest in the growing worldwide cider industry was sparked during a stint working in the UK, where he worked for Magners Cider company. This led to his involvement with Zeffer upon returning to New Zealand in 2013. Greg oversees all financial and logistical aspects of the business.
    Photo of Hannah Bower

    Hannah Bower Executive Director/ Founder, Human Resources Manager (Part-time)

    Hannah founded Zeffer with partner Sam in 2009. She comes from an advertising and marketing background and led the development and launch of the Zeffer brand. She now oversees Human Resources and sits as an active member on the Board of Directors. She has a strong focus on the business staying true to its core values of quality, style and innovation, as well as the overall strategic direction of Zeffer.
    Photo of Simon Ansley

    Simon Ansley Director (Non-Executive)

    Simon is an Investment Director at New Zealand Trade & Enterprise. His teams have helped more than 500 companies successfully raise capital. Simon's background has primarily been in F&B, through a hospitality and coffee group he co-founded. Prior to joining the NZTE Investment team, Simon was a corporate and commercial lawyer in Auckland and London, where he worked in cross-jurisdictional mergers and acquisitions and fund-raising transactions, as well as commercial and intellectual property projects.

    Refreshed core range

    0% Cider

    The global non-alcohol category is growing rapidly.

    • Consumer habits are changing with a move to better-for-you products.
    • More consumers are wanting to moderate their alcohol consumption and avoid the affects of alcohol while enjoying the taste and social benefits of an alcoholic beverage.
    • Globally, no and low alcohol beverages have reached over US$10billion in value, with growth outperforming full alcohol products.1
    • In NZ, the non-alcohol category grew by 177% in 2021, following 100% growth in 2020.2

    Our Crisp Apple 0% has become our most successful ever product. Launched in 2020, it now accounts for 25% of our total production volume and is one of the top performing 0% alcohol products in New Zealand.

    We expect growth to continue as the better-for-you consumer trend develops, new distribution channels open, and retailers give the category more shelf space.

    We are continuing to build distribution of 0% Crisp Apple cider in NZ and Australia and are soon launching the second product in our 0% range – 0% Passionfruit Cider.

    This has had positive ranging indications from all key retail banners and will hit the NZ and Australian markets in June this year. We have further innovation in this category planned for 2023.

    Pillars of Growth

    We expect to deliver revenue of $12.4m with $1m of EBITDA by 2025. The key drives of this growth are:

    New Zealand

    Focused range of winning products

    • A recent re-brand and format review will roll-out mid 2022.
    • Innovation within the cider and 0% alcohol categories to continue momentum as New Zealand’s fastest growing cider brand.

    Lead 0% cider

    • We see big opportunities to grow market share amongst rapidly changing consumer trends and will be focusing marketing resource to build on the early success of this product.

    Driving volume through our Lion NZ agreement

    • We expect to grow New Zealand sales by 48% in FY23.
    • Putting dedicated sales reps in market to assist in unlocking the potential of this partnership. The first of which will begin in Auckland mid-2022.
    • Opening tap accounts within Lion NZ’s comprehensive on-premise accounts list. In FY23 we are forecasting this channel to grow by 110%.
    • Growing share of Supermarket and Liquor Store sales by building distribution footprint and rate of sale of Zeffer products within outlets. In FY23 we are forecasting these channels to grow by 36%.

    Increased marketing spend

    • Increased above and below the line spend to launch new products and build awareness of the Zeffer brand amongst all alcohol and non-alcohol consumers.

    Australia

    Lead 0% cider

    • Rapidly grow market share in the non-alcohol category through our new partnership with Coles Supermarkets.
    • Invest to support this launch as well as the multiple opportunities to grow this distribution footprint both within Coles and new retail partnerships.
    • Aim to be Australia’s number 1 non-alcohol cider by 2024.
    • Continue to compete in cider and ginger beer categories, but focusing our attention on the opportunities within the 0% category.

    Whilst focus is a key strategy of our market and product focus for the next 3 years, we will continue to explore and be open to new product, market and contract manufacturing opportunities to generate additional revenue.

    Forecasted Sales Growth by Channel

    *’Other’ includes contract manufacturing, online store, taproom and other export markets

    Risks and Mitigations

    Staff retention/key person risks

    Key staff hold equity in Zeffer. The senior management are committed and motivated to driving Zeffer long term to achieve the sales targets projected. That being said, no member of the team is irreplaceable, and there is a wide pool of talent in the New Zealand wine and beer industries we can draw from going forward.

    Competitor risks

    New Zealand has one of the most competitive alcoholic beverage industries in the world. We’ll work to ensure we maintain our premium product position through marketing and superior product offerings. We also aim to keep innovating to stay ahead of the competition, developing sought-after cider styles. Lastly, we’re focused on only working and maintaining a long-lasting and trusted relationship with New Zealand’s largest alcohol distributor, Lion Nathan.

    Scale-up risks

    We are conscious of the risks involved in scaling an FMCG business, particularly when we are looking to expand both domestic and international markets. The short production time, simpler fermentation equipment and significantly longer shelf life means cider has fewer scaling risks and capex requirements than beer. The equipment at our cidery allows us to scale the business well beyond forecasted volume growth over the next three years. Further, we don’t grow our own fruit and it’s easy for us to store large volumes of juice, meaning there are few scaling risks on the supply side.

    Market risks

    There is a risk that cider falls out of favour in our target markets, despite the cider category being well established throughout New Zealand and Australia. Close monitoring of market wide and Zeffer sales data and reacting to market trends is an important way to mitigate this risk, and the board will regularly review sales volumes with management so it can act quickly in implementing changes in strategy. As we know well, there is also a risk that sales channels are shut down or adversely affected by supply chain pressure and pandemic disruption. To mitigate this risk we are focusing on a multi-channel sales approach (off-premise, on-premise, online) and are developing two markets in parallel to reduce single market risk.

    Export risks

    As with any export company, there is a risk that offshore distribution agreements will break down. However, we have built trusted relationships with our key Australian partners and are in regular communication. As with any export market, regulatory and import rules can present a barrier to entry. We work closely with the Ministry of Primary Industries and New Zealand Trade and Enterprise to stay up to date with any regulatory changes and work with our import partners to ensure smooth importation.

    Food safety risks

    Recall of product due to contamination is an ongoing risk with any food business. We have a strict food safety program in place in order to meet export standards and have thorough quality control processes in place which are regularly reviewed internally and externally.

    Supply shortage risks

    Our primary ingredient is apples. Currently, there is an abundance of fruit supply in the Hawke’s Bay region, however a poor season or an industry-wide adverse event is a risk. To mitigate this, we’ve formed a long- term supply contract with one of New Zealand’s largest apple processors, Cedenco Foods Limited. Cedenco Foods are also a major shareholder in Zeffer. There are also supply risks for other ingredients and dry goods. To mitigate the current pressure on packaging supply chain we have increased our stock on hand and increased the length of our production forecasting period with contingency built in for delays.

    Budget/Governance risks

    We will need to ensure that we continue to have appropriate governance controls in place. We’ve worked hard on improving the structure and efficacy of the Zeffer board over the past 3 years, and we’ll aim to keep at least one reputable, independent and/or non-executive director on the board going forward.

    Financial Performance

    Financial Forecast Summary

    The following statement of performance and projections reflects a robust business model through solid gross margins, a simple product range and rapidly accelerating domestic and export growth from front-loaded sales and marketing investment. All financial forecasts and projections included below are based on the company’s best assessment for future potential financial performance. The assumptions on which the forecasts and projections are made may prove to be incorrect, and actual results may differ significantly.

    Balance Sheet

    • Significant capital investment has been made to date into tank capacity and packaging machines.
    • No significant capital investment planned across site. Focus for the next three years is on business development and efficiently scaling our production.

    Key Assumptions

    Domestic growth assumptions

    Our domestic growth will be based on continuing to build our brand awareness and maintaining our strong rate of sale, while increasing the range of product in each store that stocks Zeffer cider and increasing the number of stores stocking our product across New Zealand. Specifically, we will focus on increasing store ranging through our key grocery channel. We assume an increase in store ranging from the current (nationwide) 35% to 63% over the next 3 years. Our ranging percentage is provided by IRI and is measured by the number of total grocery stores selling Zeffer, divided by the total number of grocery stores in New Zealand. Our New Zealand distribution is a long way from being saturated, and given the strong gains since signing on with our distributor Lion Nathan in March 2020, we believe we are yet to fully realise the domestic opportunity.

    We plan to continue increasing ranging through our traditional liquor partners (e.g. Liquorland, Super Liquor, Glengarry, etc.), which will be driven in large part by Lion Nathan. We also assume significant growth in our domestic keg volumes. This will be driven by working with Lion’s distribution network to put Zeffer on tap at more outlets throughout New Zealand. We are also employing a full-time Auckland sales resource to support this opportunity.

    Export growth assumptions

    Export growth assumptions include Australia performing strongly. We believe our forecasted growth in Australia is achievable, having signed one of the leading Supermarket Retailers in this market. Initial consumer feedback from this market has been very positive, and our distributors believe they can position Zeffer as the 0% cider of choice in Australia.

    Cost assumptions

    Gross margin – Our gross margin improves through growth due to savings made from improving site output and efficiency (made possible through the capacity and equipment of our site), which will offset the product mix shift towards larger packs and grocery.

    Overheads – The overhead structure is such that no significant increase in fixed overheads is required to reach our forecast targets. The majority of the increase falls within the marketing budget (to further build on the strength of the brand alongside distribution gains), Australian investment (sales and marketing support) and increase in production staff, as required (we are assuming 2 additional production FTEs by 2025).

    Conservatism of assumptions

    The forecast set out in this section, and the assumptions upon which they are based, reflect a position that the Board believes to be reasonably achievable. These do not reflect stretched goals, but they are also not highly conservative. It follows the Board’s best estimate of future performance and is based on current market opportunities (both domestic and international) and in line with our 3-year strategic plan. The strategic plan is based on the sales growth strategy outlined earlier in this IM of broader distribution across the New Zealand market through our key distribution partner, Lion Nathan, along with focusing resource into the current opportunities within the Australian market. Gross margins are forecast to remain strong through this growth, given scalability of our production site and reduction of fixed overheads as a proportion of our cider produced.

    The forecasts assume raising the maximum of $1.5m in this round. In the event of raising less than $1.5m, savings will be made through stretching working capital further, delaying any cidery upgrades, and phasing brand investment further. Every effort will be made to ensure these savings do not impact the forecasts as presented. There will be an upside to these forecasts if another export market (outside of our core focus) presents itself as a significant opportunity and if we secure greater contact manufacturing revenue than anticipated.

    We have good control over costs to ensure there is no overspending vs our plan. We also have robust tracking/ reporting of results vs budget, which the board reviews bimonthly with any variances acted upon. It is our aim to over-deliver on our forecast performance. We want to be able to communicate our success in these areas with shareholders in the near future.

    Supporting documents

    Offer Details

    Key offer details

    • Pre-money Valuation - $12,277,538
    • Maximum Funding Cap - $1,500,000
    • Maximum Equity Offered - 10.88% (or 1,071,428 shares)
    • Share Price - $1.40
    • Minimum Investment - $5,000 for new investors.
    • Duration of the Offer - Existing shareholders will have 10 working days from the offer opening to take up their pre-emptive rights. After this time the raise will be open to new investors.

    Type of shares on offer

    • Non-voting Investment Class Shares for investments less than 50,000 shares; and
    • Ordinary voting shares (Ordinary Shares) for investments of 50,000 shares or more.

    We are offering Investment Class Shares, as non-voting shares, to prevent the company from becoming a “Code Company” for the purposes of the Takeovers Code. In broad terms, a company becomes a Code Company when it has 50 or more (voting) shareholders and share parcels, and shareholders of Code Companies can be restricted in how and when they are able to transfer their shares. Due to the Zeffer’s size, our advisors and the board do not believe it is in the best interests of the company, its existing shareholders, or investors for Zeffer to become a Code Company and bear increased compliance costs.

    Investment Class Shares give the holders:

    • The right to an equal shares in dividends authorised by the board.
    • The right to an equal share in the distribution of surplus assets of Zeffer.
    • Pre-emptive rights, or anti-dilution rights, on certain shares issues, as set out specifically in the subscription and shareholders' agreement and constitution.

    The Investment Class Shares do not give the holder the right to vote in relation to any resolution of Zeffer, other than to vote on a proposal or resolution that affects the rights attaching to the Investment Class Shares.

    All Investment Class Shares automatically convert to Ordinary Shares upon certain events such as an initial public offering (share-market listing) or any other liquidity event set out in the subscription and shareholders’ agreement. In such an event, each Investment Class Share will convert one for one into an Ordinary Share, which shall rank equally with all other existing Ordinary Shares. This conversion is designed to give holders of Investment Class Shares the same economic benefits as holders of Ordinary Shares upon a liquidity event.

    The constitution and subscription and shareholders’ agreement set out other terms that will apply to any shareholding in Zeffer. You should read these documents before subscribing for any shares under this offer.


    Valuation

    The pre-money valuation agreed by the Zeffer Board is $12.27m (share price of $1.40). This reflects a flat share price since our fully subscribed capital raise in early 2020 of $1.59m. The company offers up to 10.88% equity, or 1,071,428 shares if $1.5m is raised at a valuation multiple of 2.92x revenue.

    The valuation has been determined having regard for:

    • Independent advice.
    • Comparable recent industry transactions and exit multiples.
    • The recent exceptional Covid trading environment which has impacted all of Zeffer's sales channels.
    • Zeffer's current market position as NZ’s fastest growing cider brand, along with the strength of the brand, performance in 0% category and current market opportunities.

    Use of Funds

    We are raising up to a maximum of $1.5m.

    Funding will be used towards:

    • Domestic growth 
    • A significant increase in sales and marketing investment, including recruiting an Auckland based sales resource and executing a large above-the-line marketing campaign in FY23 focused on our 0% range.

    • Australian growth
      Investing to support our Coles Supermarket 0% launch, including tasting and sampling programmes and tactical marketing support to reach Coles customer base (including Coles online and Flybuys promotions). As well as digital marketing initiatives to build brand awareness.
    • Working capital
      Working capital to facilitate growth and seasonal cashflow requirement.
    • CAPEX
      Minor capex requirements to improve site flow, wastewater management and increase our packaging table configuration to allow our canning volumes to increase.
    • Capital raise fees
      Snowball Effect fees and legal fees.

    Disclosures

    Remuneration

    Executives are remunerated by Zeffer through fair and reasonable salaries using related industry comparisons. The key executives’ remuneration is based on performance KPIs being met from the previous year and is decided by the Chairman.

    The Company Chairman is remunerated in line with industry standards. Executive directors are not remunerated for being on the board. The board reserve the right to appoint other directors from time to time and, if deemed in the best interest of Zeffer, these directors or existing directors may be paid fair and reasonable fees.

    Related Party Disclosures

    The land on which the cidery is situated is owned by a group that includes Zeffer shareholders (Ronald Whitmore, Sam Whitmore, Hannah Bower and Elizabeth Bower). Ronald, Sam and Hannah are significant shareholders in Zeffer. The lease with these related parties was negotiated on an arms-length basis by senior members of the management team who are not related parties. The lease for the land is set at a market rate and is reviewed periodically.

    Pre-Offer Shareholding Structure

    Governance

    Zeffer Cider has five directors:

    • Tim Chrisp - Chairman
    • Josh Townsend - Executive Director
    • Greg Small - Executive Director
    • Hannah Bower - Non-Executive Director
    • Simon Ansley - Non-Executive Director

    Biographies for the directors can be found in the Overview section.

    Future Funding

    The Board has no plans to raise capital in the next 2 years, but may elect to raise capital in the future to accelerate our growth plans or for potential acquisitions to drive shareholder value.

    Share Registry Management

    We currently use Orchestra Registry Services to manage our share registry.

    Third Party Advisors

    • Accounting: PWC
    • Legal: Flacks & Wong
    • Banking: BNZ

    Shareholder Communication

    We intend to keep our investors updated through:

    • A quarterly business summary update (more frequently if circumstances warrant).
    • An annual update of the outlook of Zeffer, including financial statements and commentary approved by the board.
    • Participation in an Annual Shareholders Meeting.

    Disclaimer

    This information memorandum has been prepared by Zeffer Brewing Limited. The information contained in this information memorandum is confidential. This information memorandum has been compiled from information believed to be reliable as at the date of this document. The purpose of this document is solely for information purposes to assist recipients in making their own evaluation of whether they wish to invest in Zeffer Brewing Limited through its offer on Snowball Effect. Zeffer Brewing Limited’s offer is only capable of acceptance on Snowball Effect’s website. Snowball Effect is licensed and regulated by the Financial Markets Authority.

    This information memorandum has been prepared by Zeffer Brewing Limited. The information contained in this information memorandum is confidential. This information memorandum has been compiled from information believed to be reliable as at the date of this document.

    International investors

    The distribution of this offer outside of New Zealand may be restricted by law. This is not intended to, and does not, constitute an offer of securities in any place which, or to any person to whom, the making of such offer would not be lawful under the laws of any jurisdiction outside New Zealand. This includes, but is not in any way limited to, Australia and the United States. It is the responsibility of any Snowball Investor to ensure compliance with all laws of any country outside New Zealand relevant to their subscription, and any such Snowball Investor should consult their professional advisers as to whether any governmental or other consents are required, or other formalities need to be observed to enable them to apply for securities pursuant to each offer. The failure to comply with any applicable restrictions may constitute a violation of securities law in those jurisdictions. The securities in each offer have not been and will not be registered under the US Securities Act or the securities laws of any state of the United States.

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    Warning statement

    It's crucial for you to understand the characteristics and risks of this investment opportunity. New Zealand law normally requires people who offer financial products to provide in-depth information to investors before they invest. The usual rules do not apply to offers by companies through Snowball Effect. As a result, you may not be given all the information you need to make an informed decision. Investing is risky. Some of the key risks include loss of capital, illiquidity, lack of returns, dilution, loss of key people and customers, and lack of control. You should only invest money that you can afford to lose.