We first recommended Smart Soda in November 2020. The company makes healthy, vitamin-infused sodas that it sells through two business lines — ready-to-drink bottles and proprietary soda dispensing machines. And in the nearly two years since our recommendation, the company has achieved remarkable success. Smart Soda has grown into a 15 employee outfit operating out of a spacious office in Cleveland. The company has raised fresh financing, and CEO Lior Shafir told us that the company will be launching its ready-to-drink line later this year. We recently caught up with Lior to learn more about Smart Soda’s growth over the last two years.
Just two days ago, on August 2, Smart Soda announced a strategic partnership agreement with Refreshing USA. Refreshing USA is a vending machine company that services workplaces across the country. This new partnership resulted in a $3 million investment for Smart Soda and a distribution agreement to implement Smart Soda in all 44 branches of Refreshing USA. More importantly, the agreement gives Smart Soda access to Refreshing USA’s network of 22,000 beverage vending machines. This is a big opportunity for Smart Soda, highlighting the synergistic potential that Refreshing USA sees in the company.
When we first recommended Smart Soda, the company had distributed its machines to all four of Uber’s campuses and begun a small trial run with 7-Eleven. This trial went smoothly, and Smart Soda is now in the process of converting more 7-Eleven stores by either retrofitting existing machines or installing new Smart Soda machines. With 10,000 locations nationwide, 7-Eleven is another huge market opportunity for Smart Soda.
Additionally, Smart Soda has signed an agreement with Citibank to roll out machines to its campuses nationwide. Smart Soda is also in the process of signing an agreement with the University of Connecticut, where it could serve 35,000 students and make a notable breakthrough into the college space. The company is currently in touch with a few more universities as well. On the distribution side, Smart Soda continues to work with household names like Sysco, Bon Appétit and Aramark.
New Flavors and Products
Smart Soda hasn’t been solely focused on distribution progress. The company has also expanded its products. It now offers Smart Slushies and is gearing up for the launch of its nine-flavor ready-to-drink cans. This launch of individual cans puts Smart Soda in a unique position to begin exploring supply partnerships with current partners like Refreshing USA, Sysco, Bareburger, 7-Eleven and others.
In our 2020 recommendation, we mentioned Smart Soda’s plan to move into CBD (cannabidiol) beverages. Smart Soda is now taking tangible steps to turn this into reality. The company acquired 51% of a small distributor in Canada that will begin rolling out Smart Soda CBD into the Canadian market in the near future. Regulations are still finicky in the United States. But Smart Soda will be able to capitalize on the monumental surge in CBD-based products in the Canadian market as it waits for the United States regulatory situation to improve.
Finally, Smart Soda’s long-term vision is to eventually introduce beverage capsules (similar to K-cups) that can instantly provide access to Smart Soda’s suite of flavors for a fraction of the cost. Similar to the Keurig model, Smart Soda hopes to sell the machines for less than $1,000 and make huge margins off selling the capsules. While not quite on the horizon just yet, this is a clever and potentially profitable avenue that the company will begin exploring in the near future.
Strong Revenue Growth
When we recommended Smart Soda, the company had reported 2019 revenue of $334,034. The company reported 2020 sales of $806,344 and 2021 sales of $914,447. Despite the small slip in 2021 revenue growth, the company is hoping to clear more than $3 million in sales in 2022. Given the new partnerships and product rollouts happening this year, we’re confident the company will be able to hit this mark and continue to sustain rapid growth in the coming years.
New Fundraising Goals
Let’s review Smart Soda’s valuation timeline.
When we first recommended Smart Soda, the company was raising at a $10.7 million valuation cap and ended up raising more than $1.5 million during that seed round. The company then began gearing up for its Series B round and eventually connected with Refreshing USA. To everyone’s surprise, Refreshing USA agreed to fund the entire $3 million round at a $35 million pre-money valuation. Refreshing USA clearly believes in Smart Soda’s vision and saw major synergistic potential in working with Lior and his team. This is a huge vote of confidence and should excite you as an early investor in Smart Soda. The company’s next round will likely be a strategic or private equity investment. Lior expects the terms will be somewhere in the neighborhood of a $25 million raise at a $250 million post-money valuation.
In the meantime, Smart Soda has opened a family and friends round to existing shareholders at a $50 million valuation. The minimum check size is $25,000. If you invested in Smart Soda back in 2020, you are eligible to invest in this family and friends round. If interested, you can email email@example.com. The round has raised $800,000 in the first week and has another $726,000 available.
Smart Soda has made tremendous progress on all fronts since we recommended it. From revenue growth and fundraising success to product line enhancements and new partnerships, the company is poised to enter a new stage of hyper growth in the next 12 to 18 months. In a perfect scenario, the company will grow to $100 million or more in sales in the next three years and be ready for a public listing. To get there, the company will implement an aggressive mergers and acquisitions strategy to accelerate revenue and distribution. Smart Soda is already in talks with a few companies to jump-start this process. The company is also undergoing a huge rebranding effort to give Smart Soda a sleeker and more professional look.
Additionally, the company is in discussions with strategic partners in the Middle East, Mexico, Australia and Argentina to initiate global operation of Smart Soda. Lior hopes to finalize negotiations by the end of this year. The company has already hired PwC to help structure its international tax plans in support of this effort. Given its powerful partnerships and with more to come, Smart Soda’s future continues to look quite bright. We’ll be sure to keep you updated on any major developments.