Quenching Thirst or Drowning in Debt? Liquid Death’s $700 Million Valuation Puts It to the Test

Quenching Thirst or Drowning in Debt? Liquid Death's $700 Million Valuation Puts It to the Test

In a world where water is the essence of life, one company, Liquid Death, is striving to make it the essence of profit. However, despite a valuation of $700 million, the company may need more than just a splash of luck to turn into liquid gold.

Liquid Death, a water brand known for its edgy marketing and gothic-themed aluminum cans, has been making waves in the beverage industry. The company, led by former adman Mike Cessario, has been a top Amazon seller and has grown rapidly, but it has also been grappling with out-of-control costs that threatened to sink the business.

In a bold move to cut costs and steer the company towards profitability, Cessario has shifted the company’s production to the U.S. This decision was met with surprise by investors who had recently injected $70 million into the company at a valuation of $700 million. The move to U.S. production is expected to cut a quarter of the company’s expenses, which were previously inflated due to freight costs from Europe.

Despite the challenges, Liquid Death has a cult-like following, with 240 fans even tattooing the brand’s logo on their bodies. The company’s unique branding and marketing strategy have been key to its success. However, the company’s financials reveal a different story. Last year, the company was unprofitable with slim gross profits of roughly 12%, compared to a typical beverage company’s targeted 50%.

The company’s valuation, roughly seven times sales, is significantly higher than Pepsi’s three times sales, although it trails energy drink Monster’s valuation of nearly nine times sales. Cessario, who likely owns an estimated 10% of the company, is worth $70 million.

The company’s future hinges on its ability to become profitable. Investors, which include beverage industry veterans and celebrities such as Swedish House Mafia, Machine Gun Kelly, Tony Hawk, and Whitney Cummings, are banking on Cessario’s ability to turn the tide.

However, the road to profitability is fraught with challenges. Rising inflation and fuel costs, fierce competition, and the need for a significant exit are just a few of the hurdles Liquid Death will need to overcome.

Despite these challenges, Cessario remains undeterred. He believes that the brand has plenty of room to grow and is launching new kinds of beverages, including sparkling waters and a line of iced teas with names like Rest In Peach and Grim Leafer.

In the end, whether Liquid Death will become liquid gold or simply evaporate into thin air remains to be seen. One thing is certain, though: the company’s journey is a testament to the power of branding and the challenges of turning a cool concept into a profitable business.

Source: Forbes


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