Beeline Holdings, Inc. (BLNE) Q2 2020 Earnings Report, Transcript and Summary

Good afternoon, and welcome to the Eastside Distilling Reports Second Quarter Fiscal Year 2020 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Robert Blum with Lytham Partners. Please go ahead.

All right. Thank you so much. Good afternoon, everyone, and thank you for joining us today to discuss Eastside Distilling's Financial Results for the Second Quarter 2020, ended June 30, 2020. I'm Robert Blum of Lytham Partners. I'll be your moderator for today's call. Earlier, Eastside issued their second quarter 2020 financial results in a press release. Joining us on today's call to discuss these results are Mr. Paul Block, the company's Chief Executive Officer; and Mr. Geoffrey Gwin, Eastside's Chief Financial Officer. Following their remarks, we will open the call to your questions. Before we begin with prepared remarks, we submit, for the record, the following statement. Certain matters discussed on this conference call by the management of Eastside Distilling may be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended Section 21E of the Securities Exchange Act of 1934 as amended, and such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements describe future expectations, plans, results or strategies and are generally preceded by words such as may, future, plan or planned, will or should, expected, anticipates, draft, eventually or projected. Listeners are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause future circumstances, events or results to differ materially from those projected in the forward-looking statements. Such matters involve risks and uncertainties that may cause actual results to differ materially include, but are not limited to, the company's acceptance and the company's products in the market, success in obtaining new customers, success in product development, ability to execute the business model and strategic plans, success in integrating acquired entities and assets, ability to obtain capital, ability to continue its going concern, and all the risks and related information described from time to time in the company's filings with the Securities and Exchange Commission, including the financial statements and related information pertaining to the company's annual report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission. Now with that said, I'd like to turn the call over to Geoffrey Gwin. Geoffrey, please proceed.

Thanks, Robert. We have a lot of information to cover today, but I would like to begin my remarks very simply with 4 key points, which you should take away from this call. I'll then cover the highlights of the quarter and turn it over to Paul, who will describe the strategic direction of the company. And after his remarks, we will take your questions. First, our cash burn has significantly improved despite a quarter where a large part of our business was negatively impacted due to the COVID-19 pandemic. In the quarter, we reported an EBITDA loss of $951,000 compared to the first quarter loss of $1.86 million. Of that $951,000 loss, we had approximately $250,000 which were onetime charges associated with professional and consulting expenses. This onetime, this important metric will continue to improve in the quarters ahead. More on that in a moment. Also, we ended the quarter with a high cash balance, a higher cash balance than in the first quarter. Second, the quarter highlighted the potential we have to grow dramatically. In the Pacific Northwest, our Craft Canning business has a dominant market position, and it is the go-to provider of canning services for the craft brewer. Craft Canning has clearly benefited from consumer changes in the pandemic, which I will describe in more detail in a moment. We anticipate that this business has the potential to generate EBITDA margins in excess of 35% this coming quarter, with very low working capital or maintenance CapEx requirements. We will grow this business aggressively. Third, we have begun downsizing our overhead and have already made cuts reducing expenses by at least $2 million, and Paul will refer to that in a moment. I want to make sure this is clear. We will operate all spirits brands to maximize the return on invested capital without believing in a future windfall from a brand sale. Finally, we continue to optimize the business, which means we are continuing to evaluate all options, including selling a strategic asset, big or small. However, we have nothing to report today on that topic. As we have said publicly in the prior call this year, we are wrapping up our discussions with two different parties on outsourcing production opportunities, but we will pursue the most efficient production option whether it East-internal or external. Now let me get into some details on the quarter. First, we are very grateful to our employees who have managed through an extremely difficult environment as the pandemic unfolded, the company pivoted to remote, to a remote working environment and put in place guidelines to keep both our employees and customers safe. And, as I'm sure you all are aware, during April and May, the on-premise business was almost wholly shut down by the COVID-19 pandemic, which negatively impacted Azunia's results. Azunia's results, revenues were down 38% in the quarter compared to the prior year which was a period where we didn't own the brand. The same happened with Redneck. Redneck Riviera missed out on the demand for larger-sized bottles, such as the 1.75 litre SKUs in the off-premise channel due to our historic focus on the smaller 750 bottle size. And as a result, Redneck's gross revenues were down 30% year-over-year. But our other products fared much better. Portland Potato Vodka had an exceptional quarter with revenues up 18%, and Burnside held its own with revenues up 4%. But clearly, the standout performer for the company was Craft Canning, which reported revenue up 20% over the prior year, driven by Craft Canning's mobile canning business. Craft's customer list has grown faster than sales, up over 30% since March alone. Craft is clearly benefiting from the change in consumer trends in this postpandemic world. And the best way to describe why this is happening is in a quote that I heard from the founder of Craft, who spoke to this saying, before the pandemic, 50% of beer was being put in kegs, and then it wasn't. I would suggest this change has legs. Small Craft brewers are seeking mobile canning expertise as they have rapidly pushed their product down new channels of distribution in cans. This development had started before the pandemic, but the pickup has been dramatic, and we can see that in the second quarter as we hear talk of an industry-wide shortage of aluminum cans. Fortunately, the team at Craft has sourced can supply to meet the growth ahead for that business. So consolidated sales for the entire company increased 7%, up to $4.3 million, and this increase was driven by the addition of Azuñia, which we didn't own at this time last year. And it was also driven by the increase in Portland Potato Vodka and Craft Canning. Gross profit in the quarter increased to $1.6 million, up from $1.4 million in the prior year, and EBITDA in the quarter was, as I said, a $951,000 loss, that's a significant improvement. The business continues to improve, and you can see it in the sequential improvements in cash flow despite this extraordinarily difficult quarter. Finally, for the second quarter, net income was a $2.2 million loss, which equates to a loss of $0.22 a share, still an improvement from last year's loss of $0.32 a share. Now turning to the balance sheet. We ended the quarter with $1.9 million in cash versus $1.2 million in the first quarter. The increase was the result of the PPP loan, of which that was $1.4 million, strong cash flows from Craft, modest asset sales, offset by some operating losses in our Spirits business and cash restructuring expenses. So now let's turn to the outlook. We are taking additional restructuring actions in the third quarter, which will move the business closer to cash flow breakeven. Today, we don't intend to issue specific guidance as we have a lot of work to do in an uncertain environment. Yet, we are seeing encouraging signs in the market as Redneck and Azuñia are showing signs of improvement in July and picking up steam in August. Craft Canning continues to exceed our expectations. It's important for you to know that it's our intention to operate this business prudently with the philosophy of generating and consuming cash from internal operations as opposed to external sources. We intend to finish stabilizing the company and position it for rapid growth. The management team is excited about the near-term prospects of the company, and there are a lot more details in our 10-Q, which we filed today. And with that, I'll hand it over to Paul. Paul?

Great. Well, thank you, Geoff, and good afternoon, everyone. I'm very encouraged by the actions Geoff mentioned that further stabilized the cash burn, professionalize the company and also position Eastside Distilling for sustainable growth forward. I just wanted to add to Geoff's point and make the following comments. First of all, one of our top priorities will be to manage our brand portfolio to minimize the historic excessive cash burn rate that Geoff mentioned and to maximize the net brand contribution. We will not deficit spend at significant levels to achieve growth, especially the superficial growth from a push-only strategy. We will, however, detail brand margin by SKU and allocate appropriate discretionary spend that drives optimal lift based on each SKU contribution. We'll focus on those brands in our portfolio that provide the best ROI for Eastside. The second priority, and in line with some of the comments Geoff made, is to achieve the right ratios with SG&A. Currently, SG&A for the Spirits division is 55% of net sales, and the net sales revenue per employee is about $100,000. Now to achieve efficiency in SGA and to optimize our structure to achieve scale, we'll refocus scale sales and marketing resources while simultaneously decreasing overhead by $2 million net. These changes are complete, and the benefit will be partially realized in Q3 and fully realized in Q4 of 2020. The third priority, Geoff mentioned, is leveraging growth and cash generation from our Craft Canning division. This boom is not just a result of COVID, it's a fundamental shift in consumer preference. And we are positioned to participate and capitalize on this package momentum. We'll utilize the Craft cash to, first and foremost, fuel growth in Craft, and then the additional cash generation to reduce our cash burn rate and assist with growth in our Spirit brand portfolio. The investments in new Craft trucks and lines are accretive day 1 and paid back in less than 12 months, making this division extremely valuable. Geoff also mentioned the focus on outsourcing Eastside products to gain efficiency and reduced our cost of goods. A fourth company priority will be to rapidly optimize our supply chain, which may result in one or all of the following: Selling less, selling our idle assets and manufacturing to reduce our footprint and generate cash; increasing automation in our bottom line to immediately improve production efficiency; reducing unallocated overhead expensed in our P&L at about $80,000 per month; and finally, and one point that's been mentioned consistently, is considering outsourcing production if it has a net efficiency gain on the supply chain. And one final priority I want to mention is to balance our capital structure with our operating requirements to maximize shareholder value. To this end, we will bring a plan for our capital structure forward to our shareholders for their information and support. We will detail sources and uses and illustrate how we will build shareholder value with a sustainable growth plan. Now I'd like to turn to some of the macro strategic shifts that are taking place throughout Eastside Distilling to enable and support the priorities I mentioned. The first shift is evident in evolution of the company leadership from finance and fundraising capability to brands and beverage competency. If you recall, the last three site CEOs, over the past several years, have had exclusive experience in finance. The move to a new management team with experience in alcoholic products, brand building and beverage marketing is a significant shift and supports the company mission to be a premier Craft-inspired brand builder. This shift in leadership will result in a new strategy and focus. For example, East side will move from a customer-focused company, pushing product in off-premise chains to a consumer-centric company, pulling volume through loyal user preference in our national distributor network. The shift in strategy will build stronger brands and drive more sustainable growth. The second major shift is to move the company from an entrepreneurial to professional oriented environment. To this end, the company will focus on 3 critical areas of proficiency, sales and marketing, production and finance. And by proficient, I mean how can we be more efficient and more effective in these 3 areas? Firstly, in reference to sales and marketing, we will shift to a more focused and fiscal approach to brands, markets, programs and spend. This will require increased attention to brand positioning, market segmentation, distributor programming, defined spending and measured results. The end objective is to spend at an optimal and sustainable level, not to deplete all of our liquidity then to leverage up to fuel an unsustainable cash burn rate. It will be all about a balanced approach. Next, the theme of best practice in production will shift our approach and supply chain from independent, undisciplined function to an integrated supply chain driven by activity cost-based accounting. By building COGS as standard and managing variances, we can drive product efficiency without compromising product quality. The shift in our production practice will require the sale of less efficient production assets, automation of our bottling line, use of Craft for our production in canning and reduction of our current facility footprint. Where outsourcing is the most efficient option, we'll certainly will consider contract manufacturers. Internally, as I mentioned, we will have opportunity to decrease idle capacity, eliminate unallocated overhead and increase bottle production efficiency. Then best practice in finance will shift our approach from a control and report orientation to more planning and analysis integration. This shift will allow us to model and better analyze cash flow, S&OP, the activity based costing I mentioned, production efficiency, M&A opportunity, along with budgeting, planning and variance analysis. The third shift is to move from heart of the market focus with chain driven as premise distribution to a more Craft-inspired high-margin experiential brands that deliver high-quality artisan products, still utilizing our national distributor network. This shift will allow us to better utilize scarce resources, segment markets and build both on- and off-premise. Now to support this shift, we'll divide our marketing capability into brand building, and field marketing. Brand building will focus on building brand identity that connects with target consumers. In field marketing, we'll focus on distributor and account programs that will drive sales at the point of purchase. We believe this combination will create a strong approach for both organic as well as acquisition. The fourth shift is moving from milking Craft Canning, as Geoff said, to investing in Craft Canning. The current EBITDA margin from this business unit is well over 30% in 2020. We estimate the division can possibly reach $10 million in sales. Utilizing this tremendous momentum of the marketplace for can packaging, with minimal investment, we believe we can double or triple the business. Investment is accretive from day one and pays back in 12 months. While not the core focus of branded beverage, Craft is a meaningful vertically integrated part of our value chain, especially as we further build our RTD can business. A company of this nature typically is valued at 1.5 times sales or 6 times EBITDA. So a very exciting business division for Eastside. The fifth shift in our business is to move from highly dilutive fundraising and depletion of cash resources to sustainable organic growth and accretive bolt-on acquisitions. While this shift will allow us to manage organic growth in a sustainable manner, organic growth will not only account, will only account for modest advancement in top and bottom line. For exponential growth, we will really need to focus on more accretive bolt-on acquisition that will compress time lines and leverage scale. We look forward to further discuss our plans for capital structure and exponential growth with each of our sales, shareholders in the coming months. This concludes my formal comments. We thank you for your interest and investment in Eastside Distilling. We're very enthusiastic about the Eastside platform and our ability to create extraordinary value forward. I'll now open the call up for any questions.

[Operator Instructions] And our first question will come from David Bain of ROTH Capital.

A lot of good information on this call, and congrats on the cost structure with the revenue ramp. Hopefully, that looks very nice. So my first question, maybe I'll stay with the unit, the gross profit margins exceeded our expectations. I know you said you didn't want to provide guidance, which we can completely understand in today's environment. But if I can just confirm the cost structure set up, so if EBITDA in the second quarter was a loss of $950,000 we saved another $500,000 per quarter by the fourth quarter. Does that infer that you really only need another $500,000 of revenue to breakeven or am I looking at that the wrong way?

David, it's Geoffrey here. There's a number of moving pieces on this one. As Paul mentioned, the Craft is going very, very quickly. And this is normally the seasonally strong period. Todd Garrett and the team over there at Craft has done an extraordinary job soaking up all the demand this quarter. But what we found is the shoulder season, going into the third quarter, hasn't tapered off. And so projecting this blended business, where you have a really high-margin and fast-growing because then look, sequentially in the press release, you can see it. Craft doubled from first quarter to second quarter. And I mentioned a 20% number for growth, that's more just the service side of the business and doesn't include the fact that they also sell materials. So we thought about how the third quarter will look but there's a lot of moving pieces, as I said. And the other thing I want to make sure that you're clear on is, we've taken some restructuring actions that are much bigger than what we did in the second quarter that will come in the third quarter. And rather than give you a number and add a lot of confusion, I'd rather, let's see how we end up in the third quarter. But our goal, and Paul has spoken to this, I think this is something that we're going to carry through the year, is to sequentially improve from here going forward. And you should be able to see the business improving quarterly moving forward. And then the second piece of that is, as Paul was mentioning, what do you expect from us beyond that? And that's the exciting part of how we make this a really exciting growth story.

Right. Okay. Great. And maybe, Paul, maybe if you could bullet point -- and you guys gave a lot of great information. But if you could just bullet point a strategic agenda for the major brands going forward? Is there like a strategic shift to the premium for Azuñia, less emphasis on national expansion for, say, Burnside? Or just give us a big picture vision on Redneck, Azuñia and Burnside as brands, individually? That would be really helpful.

Yes, sure. I think probably the biggest shift is the one I mentioned. As you said, there's a lot of information. So just to highlight it, is really our focus on profitable growth. So what we're not going to do is just expand rapidly. Although I will say, the team in the past has done a phenomenal job of gaining distribution, getting rapid growth on certain brands, specifically Redneck. So they've done a great job. What we're not going to do, though, is just expand to expand and grow to grow. We're going to be much more focus-segmented and look at profitable growth. So I would say that's the biggest strategic shift. What does that look like in action? All of our sales team now on the FOB, they know the COGS, it's standard, and they know the margin by SKU, and that's how they're programming. And we're also programming our spend rate based on the margin that each SKU generates. So they can look down the list now, and they can forecast their case sales, and they can immediately know what they can spend and where they can spend and what drives the most profit. So that is, first and foremost, the biggest shift. Secondly, just some overall guidance on strategy. Of course, Redneck and Azuñia will continue to be national. Redneck is concentrated more on the eastern part of the country, as you guys know, and Azuñia on the West, but both of those will be national platforms, and we'll continue to push nationally. Portland Potato Vodka is on fire in the Northwest, and we'll look to expand that down the West Coast. Burnside, we're going to try and focus more on the eastern side of the country. And Way-Way, we'll be more opportunistic. So those are just some general thoughts on what's going to change and how we're going to move forward.

Awesome. And then is there, I guess, my final one and, you did say that there's, just to confirm, July, it sounds like, outpaced 2Q, in general, I assume maybe even June, and August has started a little bit better than July. Is that, did I get that right? So the trend here is sequential growth in pretty much every bucket? Or is that, did I misunderstand?

Well, to respond to that...

[indiscernible]

Yes. What we saw happening is, as you know, Q2 was a tough quarter for the country because right around the end of Q1, starting in Q2, the real COVID virus hit hard, and everybody really receded. And talking to the sales team, they're saying it was tough to sell 50 cases. And now this, so the same buyer, they're selling 300 or 400 cases. So what I can tell you is we're seeing, as we speak, is fairly robust orders across all our brands. The distributors took an opportunity during COVID to destock. So they took their inventory down, and now we see them back, kind of moving back towards stocking back up to 30 to 40 and a target of 45 days. The other thing we're just seeing is buyers now more interested to talk to us in general, where in Q2, they just were like no. We're just shut down now. They're a bit more open. We're starting to do a lot of the programming with the chains and with other retailers for Q4, but really for Q1 and Q2 of next year. So the thing is, yes, what we're seeing today is a more robust market and more robust sales. In fact, a lot of the off-premise accounts are looking to increase their linear footage because of the shift from on-premise to off-premise, and we're taking advantage of that. We're also taking advantage of out-of-stocks by our competitors. Because things have shifted off-premise to specific SKUs and sizes, several of our competitors are out of stock. So I would say, the two brands really benefiting from that today are, Redneck Riviera is benefiting from what we can see, as we speak now, and Azunia is benefiting.

[Operator Instructions] And our next question will come from Harold Weber of Aegis Capital.

I'm glad to hear things are happening in the right direction. I have a couple of questions. One, in relation to the Canning situation, which you're doing for others, I talked a little bit a while back, for example, like putting the Way-Way rum in cans. What's the story with the potential with, going forward with that?

Yes. Well, first of all, just to speak to that category. It's not an area that I don't believe Eastside has really capitalized on. The RTD prepared cocktail. We do a few of them. We have Howdy Dew. We've got the Portland Mule. But there's, we still feel a big opportunity to participate at the top end, in terms of quality of product and higher price points. We really haven't started to fill our pipeline yet. Before we jump in, we want to have a more thoughtful process, where we analyze the consumer demand, and this is an analysis paralysis. But we do want to take a minute to think about these things. We want to analyze the feasibility, the margin, the go to market. And lastly, we want to make sure we have the resources because we don't want to just start launching products that require spend, while we're in the midst of kind of professionalizing and turning around the company. So we'll want to talk to you about that going forward, how we can improve the capital structure and invest. But Way-Way, we believe, has a significant opportunity in the RTD space. We also think that an organic of Margarita, both regular and skinny, could have a lot of opportunity. And then there's a number of other products. So we're going to be filling up the pipeline, evaluating these RTDs, and we've set up some test markets in Portland and Seattle, although, they are a little out of control these days with the protest. But those are the markets that once we're convinced internally and we develop the products, we'll bring them into market and see how they do. So we'll probably have more to report on that in Q3. Right now, we're just getting settled in. And in terms of stabilizing the enterprise and having a sustainable pathway. But you'll hear more about those in the near future.

Okay. And what about, you were talking about the Potato Vodka in the West Coast, what's the situation about bringing that to the East Coast?

Well, again, I mean, we want to be thoughtful on our expansion. Because as I said, we want it to be segmented, and we want to be focused. And we want to use, what we call, impact stacking. So we want to take all of our resources and focus them on specific neighborhoods or specific geographic areas so that the scarce resources we have, we can stack up with multiple market mix elements and make the greatest impact. So what I don't want to do is just expand products across the country and then come back to you and tell you we can't get the pull and we've depleted our cash. And that's kind of the situation I think Eastside found itself in. So we're going to be more thoughtful. We want to start on the West. We want to see how the expansion works there. First, one of the things we're going to do to take advantage of the off-premise sales is, we're moving to California, and we're going to actually be able to offer online sales in Oregon and the Pacific Northwest. So we're undertaking a number of initiatives there. Once we see those are successful, we'll start to look at more concentric expansion.

Okay. That sounds great. And in regards to the, you were talking about expanding the Canning business. And are you expecting to rebuy more, I guess, truck, plants, vehicles to do that? Or is this something that you're looking to do? Or what's your -- sounds like that's something along those lines?

Harold, I'm sorry, Paul, go ahead.

No, no, go on.

Yes, we've got substantial investment in new trucks that are coming at the end of the third quarter or actually probably before the third quarter end. So yes, we're buying more trucks and, but we have ruled out doing an acquisition if we had the appropriate stock price to do it with. You should know that, as I mentioned in my script, Craft is down as a dominant player in the Pacific Northwest. And there's been one player on the East Coast that's rolled up a number of the mobile canning operators. And we don't see any reason why we can't potentially consider doing something similar.

Could you give me an idea of the size that you're talking about in the West, Pacific Northwest, guessing based on the beer, the beer guys and the wine guys and so forth. What would you say the size of that market is that you know now? And how much of it do we have presently?

That's a good question. I would say that it's hard to put a finger on it.

No, just a general idea.

Probably a 10% or 20% share right now. I mean, I think that market in general is, this is, I'm just taking it off the top of my head, we've had some peripheral conversations. We're going to do a detailed plan, which will include a competitive assessment, and we'll have the size of the prize. I'd say it's $80 million to $100 million in general. That's just the mobile can market. Some of the bigger guys are $30 million, $40 million, $50 million. So it could be in excess of $100 million. And we're a tracking around $10 million.

Okay. Also, Harold, you...

Are you a dominant player right now?

In the Pacific Northwest, yes, we are. But I was just going to throw, add to that, Paul, that Harold, if you think about this, if you, as you walk the grocery store aisle, as it is here on the East Coast, and you walk, in the freezer section, the cold section, the most expensive spot is not dominated by Anheuser-Busch or the major labels. It's a 4-pack, 16-ounce silver aluminum can with a sticky label on it. And it's small brewers that are dominating that area of the shelf. Now in the past, when you would walk the aisle, I mean, Todd Garrett, the CEO of Craft talked about this, when you walked the aisle in the past, you look at that can set up, and you think that's cheap, it's kind of thrown together, it's a shoestring operation. Now it's a batch of Craft's honor to be found there, present the product that way. And a lot of these small brewers are growing rapidly in that space. So the challenge with what you're asking us is changing very, very quickly. It's the mobile canning operation is changing. And the people that we are serving, don't have the resources, the volumes to put in their own canning lines initially. So when I mentioned the customer growth, that's a very strong number for us because young customers will stay with Craft Canning for a while, and we'll grow with them. And as they get bigger and if they're successful, and not all of them will be super successful, but it's the ones that do get bigger, and more volume than they'll churn out of the business. But right now, this is a business that's really hard to size.

Was it reasonable to, but you're saying that we have maybe 10% of the market or thereabouts. So there's lots and lots of room for us to grow share.

Yes.

Okay. That's important. That's why I'm just trying to get an idea. And this is something -- you said you're getting trucks delivered and you could start to scale them right away?

Yes.

Okay. So that means it should shortly start contributing additional revenue from these new portable plants, I guess, right?

That's correct.

Our next question comes from Nathaniel Hurst, a private investor.

I guess the last questioner got in here of a Craft before me, but just one last thing on Craft. Doing a quick search here, it says currently on the website that it's only Oregon, Washington and Colorado, I mean, obviously, you guys want to grow that. Is that still how that stands today, those particular states?

That's correct.

And so the additional trucks would be for growing share in the existing market or growing in new markets or both?

Well, actually, right now, we have 11 trucks. We just brought one new one on, I think, in the past couple of months. So that took us to 12. And we just ordered 2 new ones, which takes us to 14. Those 2 new ones, one will go in Washington and one will go in Portland because the backlog there is pretty extensive. So once we put those trucks on the street, the truck is aligned and the line goes in a truck and then they go off to the customer. Once we put them on the street, the ceiling of the management there is that they'll be fully utilized up to their capacity. Then after that, I think those were kind of easy because we just deploy them and they start creating revenue and profit day 1. But then I think we need to be a little bit more thoughtful in where we want to deploy. There are still other markets. Denver has been a good market. We can start to either creep to the southwest or to the Midwest, where we may be able to add a truck or 2 trucks. As we grow, it's not going to be as easy. So we'll have to do a little more marketing and be a little more creative and be more thoughtful in where we go. Simultaneously, we'll be looking at acquisition. There's probably about, I would say, 5 or 6 significant players in the mobile canning and bottling business, and there may be some that could be interesting. So we really, we've only Geoff and I have been here a few weeks. We want to get into the Craft Canning plan, we'll start doing our planning and budgeting at the end of the summer. And then we'll start to look at the competitive set, we'll look to the size of the prize, and we'll start to lay out our strategy and our operating plan. And we'll have more to report back in Q3.

And just one last thing on this. I mean, is there any additional market that jumps out at you guys currently?

Well, I mean, the East Coast is doing a tremendous amount of business. One of the biggest, mobile canning operations is on the East. So there's different ways to look at this. We can expand concentrically from the West. So we can jump over to the East and start to close in from East and West and into the Midwest. So we'll look at the entire picture, and we'll look at different scenarios, and we'll choose the one that's got the highest return. So least amount of resources for the highest amount of return. We don't have anything definitive right now.

And just one more, I, you touched on it a little bit here. But any additional info on your online platform and how online sales have been growing?

Yes. I mean, online has been robust. We haven't really focused there, at least I haven't in the short time I've been here, but online sales for wine and spirits, as you can imagine, are really increasing. And we're going to dig into that. We haven't yet, and again, we'll have more to report back there. The only thing I can report on now, that I know we're actively pursuing, is setting up Portland Potato Vodka so that it can be available on the West Coast online.

Our next question is a follow-up from David Bain of ROTH Capital.

I just, just based on the prepared remarks and now the additional color on the canning line, I just want to make sure that I understand the canning business, while synergistic, a nicely trending cash flow business, get all that. But the main business is still, what your main mandate is still to build Craft like the brands, the premium spirits and what have you, I just want to make sure that we're not changing from the overall premise of what we are, but I understand we're expanding that business line? And then the other was where you got the these businesses trade at 1.5 times revenue. Was that like a public market comp or just something you're seeing in the M&A market?

Yes. I mean, I can answer that. No. Our focus still on spirits. And then, of course, we talked about the potential to develop RTDs, that's our focus. I think we're just excited that we have this gem that can grow and provide cash flow.

No, it's fantastic. I just wanted to, yes, just because there was so much focus on it, I just wanted to make myself clear, I think. And then...

And then the next question was?

You mentioned in the prepared remarks that they trade or they sell for something 1.5 times revenue, 6 times EBITDA, I was trying to look up public company comps, but I'm having issues finding a pure-play there?

Well, it's got to be difficult. I'm talking about contract manufacturing. But something, so what I've seen in working with private equity is that these contract manufacturers under $100 million, usually range from 6 to 7 times. But with the boom in canning, it probably could be a lot more than that. And that is a multiple that I've seen from experience working in that sector.

This concludes our question-and-answer session. I would like to turn the conference back over to Paul Block for any closing remarks.

All right. Well, look, thank you, everyone, for your time today and your continued interest in Eastside. Geoff and I will get back to work and deliver the results, and we'll report back in Q3. We look forward to talking to you individually, but specifically on how we may build our capital structure and build an acquisition plan forward. So thanks again, and have a great day. Cheers.

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.