The Business A cool $42.5 million: that's the retail value of 500,000 cases of the only known potato-based vodka made in North America -- this distillery's annual production capacity. State of Idaho liquor dispensaries first stocked the product in October 1992, and within two months the owners had cause to celebrate: Idaho sales soared to rank their premium vodka right behind Stolichnaya and Finlandia, and ahead of Absolut. The inventory includes enough processed alcohol to make 16,500 cases of vodka -- convertible to $1.4 million in revenues. One full-time plant manager lives on-site, in compliance with federal regulations. The sellers' finances are on the rocks.

depreciation, interest, taxes, and owner compensation

Financial Summary 1993 1994* 1995*
Gross revenues $2,972 $3,600 $850,000
Recast earnings before ($47,598) ($50,000) $86,000
*estimated

Price $2.5 million ($300,000 down)

Outlook Though vodka consumption was down to 32.4 million cases in 1993, the beverage's market share in the distilled-spirits category has increased, and 1993 retail sales rose to a heady $30.2 billion. To exploit its distinctive product and to expand beyond Idaho, this distillery needs to have $80,000 to $120,000 poured into repackaging and marketing. And you'll have to sink another $577,500 into production before revenue growth will go to your head. The 1995 estimate above is predicated on a sale of 10,000 cases. It's conservative according to industry observers, who consider 20,000 cases reasonable and project that 1996 and 1997 sales are easily expandable to 50,000 and 90,000 cases, respectively.

Price Rationale The sellers pumped in more than $2 million to convert the land and an ethanol facility that in 1989 had been appraised at $1.8 million. All permits are current, and the license from the Bureau of Alcohol, Tobacco, and Firearms, valued at $250,000 to $300,000, clears the way past a significant entry barrier. But don't ignore that red ink. The owners have yet to pay themselves a dime. There's plenty of promise, but you'd have to be tipsy to take this deal. Get the owner to separate the business assets from the real estate. Then lease the buildings and land. You could drink to that.

Pros Up-to-date permits. A unique product. The potential is intoxicating.

Cons The need for marketing expertise and capital could make this a very sobering experience. -- Robina A. Gangemi

Inc. has no stake in the sale of the business featured. The magazine cannot confirm the accuracy of financial or other information offered by the seller. Inquiries should be directed to Eureka Corporate Investment, 800-649-9975. n