Cleveland Whiskey is officially launching its latest crowdfunding campaign, which it had intended to go live in thespring.
The new crowdfunding campaign, available online via Wefunder, is viewed as one component of what Tom Lix, founder and CEO of the craft distillery, aspires to be a broader $12 million fundraising effort. The additional capital is intended to help finance growth objectives, upgrade its newest manufacturing facility at the Flats South Bank — where the distillery settled into its significantly expanded headquarters last year — and strategically tap into an overseas market.
Lix said the launch was delayed by his focus on establishing a budding partnership with a startup in India to support product sales there.
“I think we have an incredible opportunity here with the exporting to India,” Lix said. “It’s probably going to change the nature of our business and certainly change the growth trajectory of the business, so I’m very excited about it.”
By law, the most a business can raise in a 12-month crowdfunding round is $5 million. In a perfect world, Lix would raise that amount and follow it up with a future $7 million fundraiser with other strategic partners and investors.
“I see this $5 million as the sort of predicate to that,” Lix previously told Crain’s. “We could increase valuation for investors, which I would like to do. I think we can become even bigger and more valuable before we do that.”
The company’s valuation with this latest campaign is $43.56 million.
Founded in 2009, Cleveland Whiskey has previously raised about $2.7 million over two prior crowdfunding campaigns — or a bit more than $3 million when including a portion of money raised through the sale of “whiskey bonds.”
According to U.S. Securities and Exchange Commission filings, the company has so far raised approximately $304,000 toward its maximum amount in this latest crowdfunding effort ahead of its hard launch, which is set for Tuesday, Oct. 28. However, there’s nothing stopping anyone from investing via Wefunder between now and then.
The fundraising comes as Lix plots out additional improvements and enhancements to his new manufacturing facility, located in a historic riverfront building that was home to The Consolidated Fruit Auction Co. more than 100 years ago. Operations relocated there last summer from a Manufacturing Advocacy and Growth Network (MAGNET) incubator space.
“Part of the money will go into expanding our production,” Lix said. “We are four times what we were in our old facility. I want to bring that up to about 20 times in this facility.”
Cleveland Whiskey has become known for its award-winning spirits that include varieties finished with woods like black cherry, maple and apple.
Those wood flavors and essences are imbued into its products through a proprietary pressure-aging method invented by Lix, which forces whiskey through wood pieces. This approach replicates the static barrel-aging method that gives whiskey its characteristic tastes and colors in a fraction of the time.
This is how Cleveland Whiskey can finish its products with woods other than oak, which is what barrels are most commonly made from. There are also other flavors in the product portfolio, like its Magic Rabbit peanut butter-flavored product.
Meanwhile, to tap into a new overseas market, Lix has formed a joint venture with a startup in Delhi, India, called Ella Spirits and Beverages, which will serve as Cleveland Whiskey’s “branch” there. Lix’s company owns 49% of Ella.
The goal of this partnership is to produce and ship Cleveland Whiskey flavor extracts overseas to Ella, which will, in turn, combine them with locally made neutral grain spirits to produce what is known as “foreign-made local liquor.”
This approach gives the distillery significant savings in shipping costs compared to sending over filled bottles.
It also minimizes the impact of Indian tariffs on American whiskey imports because the finished product is created in that market.
“Because we ship the extract and less alcohol, which is what is taxed, the buyer in India saves a considerable amount, and that makes for a competitive product," Lix said.
This is a big development for the small business, which had to pull back from its initial foray into international sales due to reciprocal tariffs imposed in 2018 during President Donald Trump's first term. Those taxes forced Lix to back out of the European market, destroying a small but budding international market for him at the time.
With this plan to sell into India, Lix said overseas sales could compose about 20% of his business by the end of next year. And in the "years that follow, I expect that will be a multimillion-dollar component of our business,” Lix said.
This is all the more important to Cleveland Whiskey as alcohol manufacturers grapple with declining sales, changing consumer habits — according to a recent Gallup poll, just 54% of U.S. adults say they consume alcohol, the lowest level in the 90 years it’s been tracking the stat — and tariffs.
Further complicating the landscape for producers of alcoholic beverages is the federal government shutdown.
As reported by Bloomberg, the U.S. Treasury’s Alcohol and Tobacco Tax and Trade Bureau is operating with a significantly diminished staff after furloughing more than 86% of its employees. That agency approves new products, recipes and labels.
Amid the shutdown, those approvals aren’t being made.
As a result, Cleveland Whiskey is delaying first runs of a new, creamy version of its Magic Rabbit product, which drinkers might use to perk up milkshakes and sundaes.
But that’s just one example. Overall, Lix said the release of nine new whiskeys is on hold, a delay that will likely cost the company hundreds of thousands of dollars in lost sales.
“That’s significant to our business, that’s the difference between hiring and not hiring people,” Lix told Bloomberg. “I can’t print labels, and I can’t bottle product until I have approvals.”
In SEC filings, Cleveland Whiskey reported a $2.19 million loss for its most recent fiscal year on sales of approximately $2.57 million.
In terms of the financials, Lix has noted that loss follows a year when the company relocated operations, which was a significant expense.