Our Next Event: Alts Expo - Dec 13th
Green Coffee Company was a presenting partner at Alts Expo May 2023, a one-day virtual event hosted by WealthChannel. In this webinar, Josh Ziegelbaum presents a unique opportunity to invest in a fast-growing coffee company.
Interested In Learning More About This Opportunity?
Click here to visit the Green Coffee Company website.
- Intended use of proceeds from the company’s Series C round.
- History of the Green Coffee Company and targeted exit options.
- Overview of revenue and asset growth since inception.
- Summary of the Green Coffee Company management team, including a new strategic advisor.
- Green Coffee Company’s strategy for sustaining growth, including expansion into the vodka and spirits industry.
- Opportunities to invest in the local market and workforce in Colombia.
- Projected financials and exit valuation.
- Investment terms, including options for discounts.
- Live Q&A with webinar attendees.
Connect With Green Coffee Company
- Green Coffee Company – Official Website
- Green Coffee Company on LinkedIn
- Legacy Group – Official Website
- Legacy Group on LinkedIn
Jimmy: This next one actually is half-hour long. Legacy Group representing Green Coffee Company. They’re rounding out their Series C funding round for the number one coffee producer in Colombia. They are U.S. domesticated though.
Josh: So, let’s get started. Some of you may be familiar with this investment opportunity. I’ve been at Alts Expo for several years now. And we actually presented our Series C investment opportunity in the Green Coffee Company near the beginning of the funding round at the end of last year. We launched this $25 million equity round in September. Fast forward to where we are today, we’re in the final stage, final tranche of the Series C funding round, and we’re accepting final commitments from investors. So, I’m gonna be discussing that round, and earning a projected 11X return by investing in Colombia’s number one largest coffee producer, Green Coffee Company.
For those of you who don’t know me, my name is Josh Ziegelbaum. I am the director of investor relations at Legacy Group. We’re the asset manager for Green Coffee Company, and we target profitable investment opportunities with a strict focus on Latin America. I handle investor onboarding, reporting, ongoing communications, and I’m based in Fort Lauderdale, Florida.
Green Coffee Company is a U.S.-based investment opportunity. We’re issuing common equity in its U.S. parent. The equity being issued in the Series C round is $25 million, and we have a minimum investment amount of $100,000. The Series C funding round is focused on achieving a dominant market position in Colombia, further expanding our land holdings, going into roasted coffee channels, and growing our newest revenue channel, the sales of vodka, spirits, and other products from the byproducts of coffee production.
This $25 million equity round is being done concurrently with $75 million in debt financing to further enhance investor returns, of course, and the current valuation going into the raise, $67.5 million, base share price is $1,200, and we’re in the final tranche. We divided the equity raise into three equal tranches of $8.33 million, and as of today, we have less than $1 million remaining to be committed to by investors in our Series C funding round.
We have a 6% preferred return associated with our investment. So, for years in which we don’t have a dividend, that’ll accrue for our investors and, of course, be caught up at an exit. We’re gonna be talking more about the business plan and the exit opportunity, and how we expect investors to earn 11X on invested capital. But we’re currently forecasting 2026 as that target exit year.
So, the use of the proceeds is definitely an important one. Where are we gonna be deploying this $100 million? As you could see, more than half of the proceeds are earmarked towards farm acquisition payments, and the development of infrastructure, infrastructure being processing facilities for coffee such as wet mills, dry mills. Essentially what we wanna do is grow from where we are today, which is right about 9,000 acres, just over that of land holdings, to north of 15,000 acres by year-end 2023.
So, capital is, of course, needed in order to execute on that. When we launched this round in September, we actually had 6,600 acres just over, and now we’re at 9,000. So, some of these acquisitions have already been executed, of course. We’ve been reporting that to our investors, many of which are from Alts Expo, whether that’s from last year or previous years.
And then you can see besides the acquisition payments and the infrastructure, we expect to use $15 million on the construction of our U.S.-based roaster. This’ll allow us to go more vertical into roasted coffee, and sell it at higher margins to our end clients. And then the build-out of an alcohol distillation facility with $6.4 million, we expect to build a world-class distillation facility directly at our wet mill processing facility in Colombia.
The reason for this is important. Most of the coffee cherry is actually waste. About 80% of it is typically discarded. But it’s made up of pulp, skin, and sugars that are reusable substances that we can use to create other products. So, we’ve been doing extensive research and development. We already have our test distillery online, and we have our full distillery expected to be built out at the end of this year. And then the balance in the funding round is for working capital.
So, how did we become the largest coffee producer in just five years’ time? Our story is most certainly a special one. In 2017, we seized the moment to create the company. We wanted to challenge Colombia’s traditional methods in the coffee industry and build a business that could provide value for all stakeholders. The business, the industry, I should say, has been plagued by generations of underinvestment, particularly foreign investment, and heavy amounts of decentralization. It was really ready for a fresh perspective, and we’ve been executing upon our thesis since 2017 and our ambitions are growing.
We built the company into Colombia’s number one largest coffee producer. We increased revenue last year in 2022 to $10.1 million up from just $1.3 million the year prior. And we’ve deployed over $55 million of investment to date in Colombia through our international management team. We have decades of combined experience, and truly unprecedented sophistication in Colombian coffee production. It’s a high-quality coffee using market-leading technologies.
And a bit of our track record here on this slide, a bit more visual for you. Current acreage, north of 9,000. We have $11.5 million coffee trees planted, more than 400 full-time workers, more than 400 investors as well. And then we’re approaching $60 million of assets under management directly in Green Coffee Company.
The product itself on our farms, in our farms, have environmental certifications, Rainforest Alliance and C.A.F.E. Practices. We’re also a member of CEA Colombia, which is the Council of American Enterprises doing business in the country. And last year, we received an award from Colombian Congress and Colombia’s agricultural minister for best technological innovation in agriculture. We’re really proud of that and the team for making that happen last year.
And so, we’re leading the coffee industry in Colombia in several key metrics, including but not limited to full-time formal employment for our workers, employing single mothers in our greenhouses, many of which are heads of household, focusing on circular economy, so we could drive revenue with everything we have at our farms, and then increasing support for local farmers, paying fair prices for their cherries in order to supplement production from our own farms.
So, where are we going as a company? These timelines are in line with our business plan that I laid out for you. So, the scaling of our land holdings, and our processing capabilities through year-end 2023, we’re looking in, and already expanding into other regions in Colombia outside of our primary operating nexus, which is Salgar, Colombia. And we’re looking at another region, Quindío, and the Coffee Triangle, primarily because it has a heavy spring harvest in the area in which we are. It’s a heavy fall and Q4 harvest. So, the reason for expansion outside of that area is so we can control year-round production.
We want to replicate our capacity that we already have, which is 400,000 kilograms of coffee cherry capacity in our current facilities, and replicate that in another region through year-end. By the end of 2023, we also expect to launch our own vodka and spirit products made from coffee byproducts. I already mentioned the background on that on the amount of waste. And we have access to this waste essentially for free at an industrial capacity, and we expect to produce over 38,000 bottles of vodka per day at capacity from our distillery in Colombia. And we expect to open this in conjunction with our fall harvest this year.
The roasted coffee vertical, the build-out of that into B2B coffee sales channels is expected to be through year-end 2024. Moving into a roasted model allows us to sell at higher margins, and we’re expecting that use in Texas will be that market that we expand into in the coming months and year.
A bit about our management team. In the top left-hand corner is Boris Wullner. He’s the company president and CEO at Green Coffee Company. Boris has decades of experience in the Colombian agricultural space. He has strong working relationships with coffee distributors, officials, and logistics providers. Boris has done a great job driving forward innovation at the company, whether it’s our wet mills and all the technology he’s brought in, sensory equipment at the farms, really just driving forward different initiatives, and kind of seeing a step ahead of the competition in every way. We’ve been really proud to have Boris as a member of the team, and heading it up as the CEO in recent years.
Cole Shephard to his right is the founder of Green Coffee Company. He’s also a board member and partner at Legacy Group. Cole has a full background in corporate accounting. He was working at PwC for a number of years in different markets globally.
To his right is Adam Jason, who had a full career as a corporate lawyer in the U.S. representing companies through public and private debt and equity issuances. As I mentioned, he’s a GCC board member, and also a partner at Legacy Group.
Below them in the center is Leonardo Sanchez. I won’t touch on all of these. I just wanna point out a couple key members of the team. But Leo has a full career in multinational corporations in Latin America, most recently at Fox Corp.
And then in the bottom right-hand corner is Steve Oakland, our newest addition as Strategic advisor. Steve is the president and CEO of TreeHouse Foods, a publicly traded company in the U.S. under ticker THS. Prior to that, Steve was working at J.M. Smucker Company as the president of coffee and food service. And his experience speaks volumes about the value we expect from Steve opening up inroads and roasted coffee distribution relationships, and a whole host of other value add that he’s bringing to the company and its investors.
So, our execution strategy is built on creating value from three core pillars. Pillar one is our best-in-class farming practices. We’re already the largest coffee producer in Colombia, but we want to continue to grow, and we have goals of becoming the largest arabica coffee producer globally in the next several years.
We want to phase our base product, which is wholesale green coffee sales, into pillar two and pillar three. The reason being large-scale roasted coffee sales, as I mentioned, will allow us to sell at substantially higher margins. Selling coffee in a direct roasted manner, we see a path of doing over $200 million in revenue going into our exit year of 2026 from roasted coffee with the balance being from vodka and spirit sales. The background I mentioned already that we expect with the amount of vodka and spirits that we can produce at our distillery that we project that we could generate $49 million in revenue in 2026. So, the total expected revenue from the buildout of these three pillars from the Series C funding round is expected to produce $266 million in top-line revenue in our anticipated exit year.
This slide is a nice visual of pillar one, which shows you our farming practices. For those that are unfamiliar with coffee farming and how it all works, we plant our seedlings in our nurseries, you can see that in the top left-hand corner. Once the plants are ready, they go in different phases in the nursery, of course. Once they’re ready, they’re then brought out to our farms and planted.
They’re monitored by our agronomists until they’re ready and mature. And you see them in that red form. They’re essentially ready and ripe to be picked. Everything is handpicked at our farms and then brought to our world-class coffee processing facilities. Once processed, we go through quality control, and prepare the coffee to be delivered to our end clients.
This map here shows you our historical growth through acquisitions over time going into the Series C funding round. So, everything you see here represents just over 6,600 acres. We’ve done several acquisitions since launching the round in September, and have grown to over 9,000 acres. But I think this slide here gives a nice visual of how we’ve been growing over time.
You could see the first acquisitions we did, where in 2018, we acquired just over 600 acres from the proceeds of the seed funding round. And then kind of fast forwarding through the years, you could see we acquired 1700-plus acres in 2020, a large acquisition in 2021, another in 2022, and then beyond this, another at the tail end of ’22 and several in the beginning of this year. We expect by year-end 2023 we can grow up to 15,000 acres of land holdings in Colombia.
The center of the map here is the town of Salgar. We’re the largest employer in that town. It’s about two to three hours outside of Medellín by car, or 15 to 20 minutes by helicopter in which several of our investors have joined us in order to visit our farms and facilities.
So, this slide gives more of a visual to the margin expansion I mentioned on the roasted coffee sales. So, by getting to roasted, we believe it’ll drive future profitability for the business as we expand into the U.S. market. Constructing regional roasting operations and selling our coffee in bulk will allow us to make much more margin per pound.
You could see when we launched this round, the analysis that we ran, were margins of just about 30% on green coffee sales, and approaching 50% on roasted coffee sales. So, the benefits of selling roasted once again, higher-end pricing for our Colombian production, those U.S.-based operations will allow us to get more attractive financing opportunities, and this will all allow us to culminate that farm-to-consumer value add story that we could provide to our clients and our investors.
Some stats on the U.S.-based roaster. Expected to produce over 3 million pounds per month or 30 million pounds per year of roasted coffee. The vertical, as I mentioned, $217 million of revenue is forecasted in our 2026 exit year. And this is all for a capital cost of just $15 million. And the expected completion date is in 2024.
The vodka and spirit production, as I mentioned, has a capacity of 38,000 bottles per day, expected to produce $49 million of revenue going into 2026 for just a capital cost of only $6.4 million. And this is expected to be completed, as I mentioned earlier, in conjunction with our fall harvest at the end of 2023. We’re gonna first focus our sub-product efforts on distilling our cherries down to pure ethanol, and then plan beyond that to create branded vodka and other spirits with set ethanol.
We didn’t talk much about this in the presentation except some of the things that we’re doing in the greenhouses, but this is really an impact investment as its core. We drive value in every angle of the business. And the reason being is that, over the last decade, we’ve witnessed the global economy shift to recognize the importance of valuing all stakeholders in the business, not just focusing on profits.
Research comes out every day reinforcing this, and we want to be a part of the new generation of companies that are breaking the cycle of short-term thinking. So, operating the company under a ESG or impact lens allows the management team to identify opportunities that are overlooked by other companies. And some of those themes that we focus on are value creation, efficiency, having a positive image. And, of course, because sustainability sells, and it sells not just in terms of the product, the coffee to our clients that demand the sustainability, but also in the marketplace. As we approach an exit, whether it’s a sale or an IPO, the way in which you operate the company is very important in terms of driving value for investors on the backend.
So, some key impact initiatives that we focus on at the GCC, one being formal employment. One hundred percent of our employees are employed formally, 75% of them get pension plans. And just look at that compared to the sector average of 1%, just an astonishing difference. On healthcare coverage, even more dramatic, I think. One hundred percent of our employees are covered with healthcare, with the sector average being only 3% in the industry in Colombia. And then formal banking, we’re more than double the sector average as well.
We replant trees in different areas. We provide biodiversity. We reduce water and waste where we can. We provide equal opportunity for women, many of which are in leadership roles. And the sustainability development goals on the left-hand side are those set forth by the United Nations that we focus on at the Green Coffee Company. We actually have an entire presentation built around this. It’s called an Impact Strategy Presentation. So, for any of you who are interested in learning more about the impact specifically, get in touch with me after the presentation, I’d be more than happy to share the impact strategy deck with you.
So, how does that lead…how does all this lead to an exit, and what are the financial projections? I mentioned an 11X net return on invested capital is what we’re forecasting. So, how do we get there? So, as the company shows its ability to replicate its farming practices, grow into roasted coffee, build out its byproduct business, we believe it’ll be ready for a sale or IPO.
These options here are potential exit opportunities, first being a corporate buyout. This is likely the most simple and easiest method of exiting the company. There are many retail coffee chains, large roasters, potentially some large-scale Colombian coffee operators that would be interested in owning assets at origin, and coffee at scale for their own businesses.
There’s also a potential for a private equity buyout from a larger firm than ours. We believe that GCC has the ability to attract interest at scale from these types of buyers. But the IPO is most definitely our preferred exit strategy, and we believe that it will be an option for us based on market conditions. So, we modeled our exit based on the expected revenue in 2026 of $266 million. And then on that, we expect annual net income of $60 million.
So, we took the historical average of the S&P 500, which is 20 times earnings. We believe that’s conservative for a more early-stage company such as ours. But we applied that to our expected net income in 2026, which backed us into an expected market valuation of $1.2 billion that year. If you look at some of these comparables, some of which are unprofitable with incalculable PEs, others with high PEs, we believe with that standard PE average of the S&P, that was a more reasonable model to build out for our investors as opposed to using unprofitable comparables, and using revenue multiples, or using high flying PEs. We thought that this was a lot more conservative in terms of financial assumption, the more attainable for us as a company.
So, this, of course, all flows into our proforma and our financial summary. I’d like to draw your attention to the basic income statement line. You could see in 2022, the bulk of sales was from green coffee sales. But as we move through 2023 through ’24, ‘5 and ‘6, we’re gonna be phasing that entirely into roasted coffee sales and byproduct sales. So, come 2026, all of our revenue is expected to be driven by those two verticals.
And you can see in the right column here, under income statement, roasted coffee sales expected to be $216 million with byproduct sales at $49 million, all that being, of course, $266 million approximately, EBITDA of 86, net income of 60, we apply a 20 multiple to that, and you can see the enterprise value of just over $1.2 billion in the bottom right-hand corner of the financial summary. And then in terms of investor returns, net of all fees, 11X net return forecasted in the Series C funding round for our investors.
So, there’s definitely limited availability. I mentioned, in the beginning, we’re in the final stages of the Series C round. We’re about to wrap this up. We have under $1 million remaining to be committed to by investors. There’s a base share price of $1,200. However, investments of $250,000 or more are eligible for a 3.5% share price discount. At this point, I’d like to turn it over for Q&A. I see some questions down in the chat box, which I’m sure Jimmy will go through, and we’ll address for you here live. But if anyone wants to get in touch with me after the presentation, I would absolutely welcome that. You can contact me with the information here on this slide, firstname.lastname@example.org. With that, I’ll turn it over to Q&A.
Jimmy: Fantastic. Thanks, Josh. We got a lot of time for questions. We got another, like, about seven, eight minutes or so. This first question came in before you went through the IPO options and all the different exit options. This person asked if you were likely to go into IPO and if yes, when? It looks like you’re planning an exit maybe around 2026. I don’t know if you had anything else to add to that. I think you just went over that in some detail there.
Josh: Sure. I’m happy to kind of go through that again, Jimmy, because that’s very important to our investors, of course. So, the company is, of course, private today. It’s an alternative investment in private markets. And we believe with the value that we’re creating, that it’ll be IPO ready by 2026. The verticals that I mentioned are expected to produce north of $250 million in revenue that year. And we believe even in market conditions today, it’s attainable.
So, our goal is to grow this company through the buildout of roasted coffee, byproducts, and scaling more farms to be in a position to do a public offering in U.S. capital markets. As you mentioned in the very beginning, this is a U.S.-based investment opportunity. We have several years of audited financial statements under our belt, and we’re packaging it to be ready for that IPO by 2026.
Jimmy: Alan asks, how are you mitigating against two things? He wants to know about one, the local anti-capitalist political trends in the country of Colombia, I’m guessing, and two, the re-emerging Guerrilla factions around the country.
Josh: Sure. So, we have great relationships with the government in Colombia, both on a local level and on a national level. As I mentioned, we’re the largest employer in the town of Salgar. We have great working relationships with the chief of police and the local government there. And then when we had our inauguration event last year at our second wet mill in Colombia, we had members of Congress there, we had the opening address prepared by the governor. That video is on our YouTube page. So, we have tremendous support from local and national government. And I already mentioned we were recognized by Colombian Congress for best innovation in agriculture.
So, yes, there are some trends in the U.S. as well, kind of I’d say on the left-leaning side of the spectrum. But we believe doing things in a sustainable manner, lifting up the employees that we employ, reducing waste, driving value for other local farmers, bringing investment into the country. Really bodes well for the local…for the administration there.
In terms of the President, on his campaign trail, he spoke very highly of investment into Colombia, making the company…or the country more of a producer and less of an importer. We definitely check all those boxes, and we’re abreast of what’s going on in the country, and we’re navigating it very well. We’ve been driving revenue up in the current climate. I mentioned we did over $10 million last year up from $1.3 million the year prior. So, we’ve proven our ability to navigate that environment.
In terms of the second part of the question on any sort of Guerrilla activity, I could tell you where we are in Salgar, and in that region, it’s very safe. We haven’t had any run-ins or issues with any of our employees or any of our investors. I personally go out there several times a year, and I visit the operations. We bring investors out there. So, I think what you see in the media, and what you see in real life when you’re down there are very different from one another. So, I’ll leave it at that for that question, and happy to jump into the next.
Jimmy: And you do have a security team on hand on the ground there, right?
Josh: Of course.
Jimmy: Good. If we wanna invest now, what is the minimum investment amount?
Josh: Sure. The minimum investment is $100,000. It’s, of course, open to accredited investors. And I did mention we have a share price discount available at the $250,000 threshold.
Jimmy: How is the alcohol industry…excuse me, regulated? Are there any risks associated with that either in the U.S. or in Colombia?
Josh: So, surprisingly, the alcohol industry is often less regulated than other consumer product industries like things that are used on your skin and on your body. So, one of the reasons we are focusing on alcohol production first, ethanol, is that it has less regulation than other industries.
And then ethanol can be used for multiple different types of products, not just vodka and drinkable spirits. It can be industrial grade, it could be sold as fuel. So, there’s a lot of different options in terms of that. But we are looking at some potential acquisition opportunities where we could buy liquor distributors either in Colombia or in the U.S. so that we can pick up their client base and whatever licenses they might have. So, it’s something that we’re navigating and we’re exploring, but our team is comfortable achieving that on behalf of the investors, of course.
Jimmy: Excellent. Another question here from Chinasa who asks, how can you get buy-in from Starbucks, so that they can buy your product? Or maybe more broadly, who are your customers typically? What’s your customer base look like?
Josh: Yeah. As of today, we sell wholesale green coffee. So, we sell B2B unroasted coffee to our global clients. We sell it in Colombia in domestic sale channels to the Colombian collective buying groups, and then we sell it internationally. So, our largest clients are Sucafina, SKN. We also sell to Louis Dreyfus among others. And that’s on the green coffee side, which is really high-quality commodity coffee.
And then as we get into roasted, there’ll be different sales channels, of course. So, the addition of Steve Oakland, with his former experience at J.M. Smucker heading up Folgers brands and Dunkin’s brands, he’s making relationships for us on the roasted side. With respect to Starbucks, the product is C.A.F.E. Practices certified, which means that it could be sold to an end buyer such as Starbucks on the end. So, it’s quite possible that they’re buying our coffee in certain capacities. But we have good relationships with Starbucks. We know several members of the management team. I won’t dive into anything else specifically, but we’ll leave that one there.
Jimmy: Got it. Another question here from Stefano who wants to know, is there any other large, well-known, or institutional/private equity investor that you can share with us just for us to build great comfort with this opportunity in Colombia given the currency exposure and the geopolitical risk?
Josh: Yeah. Good question, Stefano. So, we have…first off, we have audited financial statements for investors, and that’s done in the U.S. Okay? And then at Legacy Group, we have a U.S. management team. So, we’re on the ground in Colombia, but we’re headed up, the two partners, one is a former CPA, the other is a former corporate attorney. And they’ve been down in Colombia for over 10 years combined.
In terms of investors, institutional or PE, we service specifically high net-worth individuals. So, we have 430 investors who have deployed just about $60 million with us. It’s made up of individual investors such as myself and the others. And then I’d say large well-known people, I will say that Steve Oakland, who’s the CEO and president of TreeHouse Foods, he’s an investor with us. He’s also on our advisory board. So, him coming down, visiting the farms, coming on board with us, hope that alleviates some of the…what you’re asking for in this type of question.
But the currency exposure, we’re actually seeing opportunity with the currency fluctuations. So, with the devaluation of the Colombian peso over recent years, all else equal, our investment is coming in in dollars. So, we’re able to buy assets cheaper essentially, and then we’re selling the product on the back end in dollars because coffee is a commodity that’s globally traded in dollars. So, those are my comments there on that final question.
Jimmy: Fantastic. And with that, we have run out of time. But, Josh, great opportunity here. Always love hearing what you guys got going on at Legacy Group, and always good getting the update on Green Coffee Company. Pretty cool story you have there. So, I wanna thank you for joining us today once again on Alts Expo. Thanks so much, Josh.
Josh: Thanks, Jimmy.