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Annual turnover

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  • Mandate: 34912
  • Added: 21 Oct 2021
  • AFS
  • 289

Supplier of home brewing equipment and ingredients with huge growth potential

Gauteng, Johannesburg
289
Mandate 34912
Added 21 Oct 2021
R 750,000* ZAR
Stock: R 200,000
Assets: R 71,374
R 30,710 ZAR
Wynand Wolmarans
(PRINCIPAL)
Aldes Exceed
Gauteng, Sandton
Gauteng, Sandton
Summary

For the right entrepreneur this "poised to fly" business offers a rare and excellent opportunity to get a running start in the rapidly growing South African home brewing market.

SELLING PRICE AFS
R 750,000* ZAR
Stock: R200,000
Assets: R71,374
R 30,710 ZAR
Summary

For the right entrepreneur this "poised to fly" business offers a rare and excellent opportunity to get a running start in the rapidly growing South African home brewing market.

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Fully describe the business's activities?
This business is a hobby gone badly out of control. It was literally started in a garage, out of a desire to produce better products for the South African home brewer, home wine maker and home distiller. Since then, growth has been strong and consistent, both in terms of sales and in terms of product range. The business sells ingredients and brewing equipment used for home brewing of beer, wine and distilled spirits. As far as possible, they formulate their own ingredients under their own brand, therefore ensuring their brew ingredients are fresher, offer better value for money, and are tailor-made to the South African palate. The business is well-established and is not simply a retail business that buys wholesale and sells retail, but instead consists of several components, namely: - A walk-in shop that for the past 5+ years has been located at a beautiful and popular shopping centre with regular and loyal customers, many of whom travel across Gauteng to visit. - An online store with >1700 unique nation-wide customers in the database and >200 products online (July 2021). - A production/formulation section that has its own business registration, its own domain name (currently not used) and its own brand of over 50 proprietary product designs and formulations (June 2021), the quality of which is on par with or better than imported products and which are packaged professionally and properly (as opposed to the household-grade packaging generally employed elsewhere); - A botanicals offering that has its own business registration, its own domain name (currently not used) and that is capable of supplying many exotic and/or difficult-to-source herbs, spices and other botanicals for beverage production. All intellectual property has been meticulously documented and is ready to be handed over to any third party for production and/or a new owner. Lastly, the business has a suppliers database with >80 wholesalers and manufacturers (June 2021), both local and overseas, from which products are being obtained at competitive prices.

How long has the business been established?
One of the owners started trading as a sole proprietor under the business' current name during January 2014 and registered a company in May 2016 when the owner's spouse joined the business. It has been trading a a legal entity since 2016.

How long has the owner had the business?
Since January 2014.

How does the business operate on a daily basis?
Customer focus operation: - Home brewing products are retailed in store and online via their user friendly website for country-wide delivery. - Customer support is provided as necessary via phone and e-mail. Back-end operation: - Ready-to-sell products and raw materials are purchased on a wholesale basis from both local and overseas suppliers,to be formulated and packaged as retail quantities ready for sale. - New products are developed and prepared for retail. - Online orders are packed and prepared for delivery via courier services.

How are the clients attracted to the business?
The business mainly attracts customers through: - A popular website with between 2,500 and 8,000 unique visitors per month (January - July 2021), rich in subject-relevant content and background information, with a good search engine rankings and preferred over competing vendor websites by many customers. The website has excellent ratings and reviews on Google and Facebook; - A well established social media community with >1700 direct followers on Facebook and a post reach of up to 4000 unique views per month without using any paid services such as adverts or boosted posts (June 2021); - Word-of-mouth within the home brewing community. - Walk in store.

What Advertising/Marketing is carried out?
No specific advertising/marketing program is currently in effect. Printed A5 pamphlets are available in-store for handing out to prospective customers. Advertising online and in printed media has been tried in the past but achieved unfavorable results. Social media performs much better with negligible expenses.

What competition exists?
There are 4 other main home brewing suppliers in South Africa as well as a dozen or so smaller resellers country-wide, which have come and gone over the years and continue to do so. According to the owners, they rank somewhere in the middle of the top 5 brewing suppliers in South Africa.

What are the seasonal trends?
The winter months generally show a decline in the demand for beer brewing products, with July & August often being the quietest months. Wine making products are sold more often at harvest time than during the rest of the year. Recently these regular seasonal trends have been severely altered as a result of Covid-19 and the 2020/2021 alcohol bans. In a normalised economy the the September to December months are generally the busiest period in the year. The company generally closes from 1 January to 26 January each year (in store and online) and therefor only really trades for 11 months in a year.

How did the Covid-19 pandemic impact the business turnover / daily operations?
The first national Covid-19 lock-down was announced by the President from 26 March 2020 to 16 April 2020. The company applied for their "Essential services certificate" on 11 April 2020 and re-opened on 13 April 2020 for online orders only. The walk-in shop remained closed except for collections and couriers. The Covid-19 pandemic caused a general up-surge in the interest of home brewing, wine making and distilling followed by a resultant increased demand for products to make any alcoholic beverage at home. Turnover has been well above normal in the initial months that followed the hard lock-down while stocks lasted (April & May 2020). Most stock on-hand was sold out during this period. Severe difficulties to obtain stock as a result of import difficulties and suppliers not operating at full capacity. resulted in substantial lost sales in the second half of 2020. There was literally almost no stock on the shelves to sell from June 2020 to September 2020. These two periods have more or less cancelled each other out. Brewing kits that were ordered for the festive season specials only arrived in March 2021.

What steps / actions have been taken to combat the effect of Covid-19 pandemic?
The company shifted to locally-produced raw materials as well as the development of new products locally to replace unavailable imports and long lead times to meet demand for products no longer available from competitors who still rely on imports. During the entire time of lock-down the business was unable to sell starter Brewery Sets due to stock shortages of brewing equipment and brewing cans. The business came up with their first locally produced "Stove-Top-Brews" which was launched in October 2020 in order to continue offering starter brewery sets and brewing ingredients. This has subsequently spawned a whole new range of Stove-Top Brews under their own brand which have proven to be extremely popular with clients, many of whom now choose Stove-Top-Brews over the imported brew cans.

Is the business VAT Registered?
Yes.

What VAT documentation is on file?
All Vat documentation is available at the Seller's premises.

Are there up-to-date Management Accounts available?
This business is run very manually. No formal system or management accounts are kept. However, one of the owners has prepared a very detailed Excel sheet reflecting sales, cost of sales and expenses from April 2020 to date. These tie-back 100% to the bank statements. She also prepared detailed due-diligence file with all her bank statements, workings and statement of income and expenses. The revenue split is as follows: - In store sales paid with debit/credit cards - 32.0% - In store sales paid cash - 9.0% - Online sales paid Eft - 39.8% - Online sales paid credit/debit cards via payfast - 19.1% In store sales account for 41.1% of all sales whilst on-line sales account for 58.9% of sales. Overheads are very low and primarily comprise: - Courier fees; - Bank charges; - Owners drawings; - Stationery & packaging; - Rent; and - Telephone and internet Kindly note that the reported profit is for a 11 month trading period and the business is closed during January of each year. Sales, purchases and expenses are all inclusive of Vat because these figures have been compiled from the bank statements. The Vat was deducted as an expense to correct this.

What percentage of the business is cash/credit?
No products whatsoever are supplied on credit, 100% of sales must be paid in full before delivery takes place.

How could the profitability of the business be improved?
This business has huge opportunity to grow, including but not limited to: - Keeping the business open for 12 months a year and avoiding lost sales and customers in January of each year. This in itself should increase sales and profitability by around 9%. - Gross margins can be increased as the company did not increase there prices at all during 2021.Price increase generally occur on 1 February of each year. Historically the business absorbed all price increase from suppliers during the year. - The business has an export permit and can easily export to neighboring countries.They have received enquirers from Namibia, Mauritius, Reunion and Seychelles. - Wholesale of products to other retailers and resellers. - Focused marketing and advertising campaigns. - Relocating and/or opening additional stores in retail centers. - Offering training courses. - Offering on-line training or tutorials on a subscription basis. - Outsourced lead generation. - Attending markets and flea markets. - Hosting home brewing demonstrations. - Brewing and selling craft beer, wines and spirits (this would require a liquor license). This would, however, require more capital, more storage space, more product handling facility and more staff.

Is Seller finance available and for what amount?
No

What is the total staff complement?
The owners (a married couple) and one temporary staff member working (as and when needed).

Give a breakdown of staff/ functions/ length of service?
Owner 1 - product development, documentation, formulation/packaging, customer support, website development/maintenance, social media, walk-in shop sales. Involved since January 2014. Temporary staff member (owner's domestic worker) - assistance with packaging of products. Involved since January 2014. Owner 2 - handling of online orders, packing and sending orders, financial admin, procurement, walk-in shop sales. Involved since April 2016.

How involved is the Owner in running the business?
Both owners are involved full time in the business.

When does the current lease end?
28 February 2022.

Is there an option of renewal & what period?
A renewal option of 2 years is available (every 2 years).

What is the annual escalation %?
As per the rental contract: 8% per annum. The landlord assisted with COVID-19 relief in the form of rental discounts and a waiver of annual increases.

What are the trading hours?
Walk-in store: Tuesday - Friday 10.00-16.30; Saturday 09.00-13.00. Online sales: orders received 24/7, but only processed during walk-in store trading hours.

What is the square meters of the business?
Approximately 100 square meters made up of two adjacent shops.

Is a copy of the lease available?
Yes.

Do you require a licence?
No. The business supplies products to make alcoholic beverages, but does not sell or produce any alcohol, therefore the Liquor Act does not apply. However, a Certificate of Acceptability for Food Premises has been issued by the local Municipality, in order to prevent possible complications with the clearance of import shipments.

What lease deposit and/or other surety is required?
A key deposit of R5,209.14, with an escalation of 8% per annum, adjusted upon renewal of the lease every 2 years.

What are the main assets of the business?
Tangible assets include: - Shop fittings; - Furniture; and - Production/packaging machines. Intangible assets include: - Considerable intellectual property (product formulations, designs and production methods); - A popular website that already has back-end features for wholesale orders from resellers; and - Domain names for the production and botanicals. A full asset list is available on file.

Are any items not included in the sale?
Computers and most peripherals are privately owned, as is one of the office desks. Some basic tools (electric drill, some hand tools) used in the production section are also privately owned.

What is their overall condition?
Production/packaging machines have been regularly serviced/maintained and are in excellent condition. Shop fittings show some signs of use but is perfectly functional.

Do any require repairing?
No.

How have they been valued ?
With the assistance of the owner.

Which assets are on lease/HP and with whom?
No.

Are they presently insured?
No part of the business is currently insured in any way.

Strengths?
- Low overheads. - Extensive contacts within the wine and craft beer industry as well as with suppliers creates access to products and raws with optimum value-for-money. - In-house product development results in popular locally-made retail products produced at minimum cost. - Consistently good customer support and service (both pre- and after sales) promotes customer loyalty and generates repeat business. The current owners have enormous knowledge and not to mention passion for home brewing. - Intellectual property has been minutely and extensively organized and documented, ready for outsourced production and hand-over to a Buyer.

Weaknesses?
Entirely owned and operated by only two middle-aged people (husband-and-wife team) which limits progress and growth to whatever can be achieved with two pairs of hands. No external or additional financing, which limits investments. All funds are generated by regular sales and therefore requires manual, labour-intensive and time-consuming production methods. Current owners have limited business experience and aptitude for the same. Retail store is not situated in a affluent area.

Opportunities?
Replacing the current husband-and-wife team with a party having more business experience, more working capital and more staff would remove current limitations to growth and would multiply both turnover and profits. Splitting off the production/formulation section would essentially create two companies, one of which will be able to supply home brew stores nation-wide with a brand of locally made products at a lower cost and better quality than imported alternatives. Outsourcing production/product formulation to specialized third party/ies would do away with labour-intensive and time-consuming manual production/formulation methods. While the walk-in shop has been located at the same address since 2016 and is known as the largest supplier in the area, it could be relocated or (better) turned into a franchise to expand it into a national brand and footprint. A proper marketing program with a heavy focus on paid exposure on Google, Facebook etc. would significantly increase customer awareness.

Threats?
Currently the availability of both owners/operators is vital for the business to operate, and disease, injury or death of either one would severely, perhaps fatally, harm business operations. The alcohol bans of 2020 and 2021 have caused a lot of "cowboys" to enter the market without proper knowledge, proper service or proper products, which may continue to tarnish the market and erode the potential customer base after novices have had bad experiences. Competing cheap Chinese imports of dubious quality may erode quality standards and sales prices.

What is the reason for the sale?
The business has reached the point where it is about to become a much larger company than the current owners are interested in running. In addition to this the owners want to scale down and go and run a family guest house on the south coast of KZN.

Why is this a good business?
For the right entrepreneur this "poised to fly" business offers a rare and excellent opportunity to get a running start in the rapidly growing South African home brewing market. In addition to the usual imported beer brewing ingredients (ie. beer kits, brew cans/pouches and brew blends/enhancers) it also includes a full range of beer kits and other products that are locally made, according to proprietary and well-documented formulations and methods, and sold under under a separate brand name. These products have already gained a loyal following, with many clients choosing them over imported alternatives. The production of these products is ready to be split off into a separate and relocatable production/formulation and wholesale business that can supply these products to retailers country-wide. While the business started with a focus on brewing beer, a number of products for distilling and wine making have also been added over the years. However, these markets have barely been exploited and considerable growth could be realized here by extending these offerings of the product range. This part of the business includes a small number of products that are locally made, according to proprietary and well-documented formulations and methods, which could also be supplied to other retailers country-wide. Furthermore, there is a botanicals offering selling brewing and distilling botanicals under yet a different brand name. In this area there is also potential for growth with respect to the importing of various botanicals currently not available anywhere in South Africa, such as the ingredients for making authentic root beers (many clients have requested these over the years), botanicals for brewing different and interesting beers such as gruit ales and rare ingredients for making liqueurs at home. The current owners are not able to realize the full growth potential of the business due to: - their limited business education/experience and work capacity; - no external financing or access to working capital; and - no marketing strategy other than a single Facebook page. The current owners received considerable interest from aspiring resellers on a regular basis over the years (documentation available). However, these have not been realized due to the aforementioned limitations. In the hands of the right entrepreneur, however, these limitations will cease to exist and the full growth potential of the business will be easily unlocked.

What is the ideal profile of the ideal buyer for this business?
The ideal buyer would: - have-, or employ someone with, a certain familiarity with home brewing, wine making and/or distilling; - have an affinity with the craft beer market; - have experience with importing goods directly; and - have the right entrepreneurial qualities and vision to realize the potential of this business and expand it into a country-wide brand.

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AGENCY DETAILS

Aldes Exceed

1 members
7 mandates
Gauteng , Sandton
53 Park Drive, Mulbarton Ext.3, Johannesburg, 2059
Sandton

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