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EAST: Leveraging MotherLode by addition of another canning client

By Ian Gilson, PhD, CFA


Eastside Distilling (NASDAQ:EAST) and Source Code Beverage will begin canning the full range of Backpack Wines for distribution.
New York based market research firm, Nielson, has highlighted the canned wine market as a key trend for 2018. With Y/Y dollar growth of close to 60% for the 52 weeks ending Sept. 30, 2017 the alternative packaging format was the fastest growing sector in the wine and spirits arena.
In 2016 Jim Doehring created Backpack Wine as a brand within Source Code Beverage, Oak Brook, Ill.. By the end of 2017 Backpack wine was available at beverage and grocery retailers  in 23 states and also on-line at Vino Shopper. Backpack produced about 20,000 cases of wine in 2017 and expects to grow in 2018.
Distribution has expanded to 30 states and Jim Doehring expects distribution in 40 states by the end of 2018, aided in part by an agreement with Southern Glazer's Wine & Spirits, as well as through its own web site Southern Glazers' is also a major distributor of spirits for Eastside Distilling.
Backpack expects to expand its product offerings by adding other varieties of wines next year. Current wines include Cheeky Rose, Snappy White and Rowdy Red. All are packaged in recyclable  250 ml cans and sold in 4-packs.
The MotherLode facility will have start-up costs for both Backpack and Dear Mom (previously announced). However, as more product and (hopefully) more companies use the facility the incremental margins will expand rapidly.


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