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US Drinks Conference 2010US Drinks Conference 2010US Drinks Conference 2010US Drinks Conference 2010
Brought to you by:
The U.S. Beverage Alcohol Industry:The U.S. Beverage Alcohol Industry:
Navigating Brand Entry & DistributionNavigating Brand Entry & Distribution
The U.S. Beverage Alcohol Industry:The U.S. Beverage Alcohol Industry:
Navigating Brand Entry & DistributionNavigating Brand Entry & Distribution
U.S. Drinks Conference 2010U.S. Drinks Conference 2010
•The US Beverage Alcohol Distribution System– Historical Perspective– “Three Tier System” & Distribution Outlets– Open verses Control States– Understanding the past and looking to the future
•Brand Approval-Federal / State Process, and Launch Time Line.
Navigating Brand Entry & DistributionNavigating Brand Entry & Distribution
22
• Price Structures For Wine, Spirits, and Beer
• New Brand Introduction Trends
• Brand / Industry Valuation Discussion
• Distribution Options / Partners / Approaches To Market Entry
• Summary
U.S. Drinks Conference 2010U.S. Drinks Conference 2010
Navigating Brand Entry & DistributionNavigating Brand Entry & Distribution
33
• To understand it today and to consider where its going tomorrow, history is important
• Direct Shipping, privatization of control states, HR 5034
• There is the potential for big changes over the next decade
U.S. Drinks Conference 2010U.S. Drinks Conference 2010
The US Beverage Alcohol Distribution SystemThe US Beverage Alcohol Distribution System
44
U.S. Drinks Conference 2010U.S. Drinks Conference 2010
History Of Beverage Alcohol In US History Of Beverage Alcohol In US
55
U.S. Drinks Conference 2010U.S. Drinks Conference 2010
History Of Beverage Alcohol In US History Of Beverage Alcohol In US
66
U.S. Drinks Conference 2010U.S. Drinks Conference 2010
History Of Beverage Alcohol In US History Of Beverage Alcohol In US
77
U.S. Drinks Conference 2010U.S. Drinks Conference 2010
History Of Beverage Alcohol In US History Of Beverage Alcohol In US
99
U.S. Drinks Conference 2010U.S. Drinks Conference 2010
U. S. Beverage Alcohol IndustryU. S. Beverage Alcohol Industry
1933 Repeal Of Prohibition And Enactment Of Twenty-First Amendment
– Protect Federal Tax Revenues
– Federal Regulations (BATF-Now TTB)
• Licensing qualified importers, manufacturers, wholesalers, warehouses, not retailers)
• Bans “tied-house”
• Prohibits consumer deception and ensures quality with standards of identity, labels and formula approval
• Bans false advertising
• Bans unfair inducements to retailers
History & overviewHistory & overview
1010
U.S. Drinks Conference 2010U.S. Drinks Conference 2010
U. S. Beverage Alcohol IndustryU. S. Beverage Alcohol Industry
1933 Repeal Of Prohibition And Enactment Of Twenty-First Amendment (Continued)
– States Given Power To Regulate Sale & Distribution Of Beverage Alcohol Within Their State
• 32 “Open States” (Private enterprises working through “Three Tier System”)
• 18 “Control States” and Montgomery Cty MD-State controls products entering and sold in the state (primarily for spirits, some wine)
History & overviewHistory & overview
1111
U.S. Drinks Conference 2010U.S. Drinks Conference 2010
Three Tier SystemThree Tier System
PRODUCER(Wineries, Brewers, Distilleries, Importers)
Wholesaler (Distributor)
Retailer
Consumer1212
Wholesalers and State Control (21st Amendment) verses suppliers and consumers that prefer a Federal approach consistent with other consumer products (Commerce Clause)
U.S. Drinks Conference 2010U.S. Drinks Conference 2010
NavigatingNavigating Brand Entry & Distribution Brand Entry & Distribution
HR 5034 - Beverage Alcohol and the Commerce ClauseHR 5034 - Beverage Alcohol and the Commerce Clause
1414
U.S. Drinks Conference 2010U.S. Drinks Conference 2010
Direct Shipment OverviewDirect Shipment Overview
Powered By SHIPCOMPLIANT
Reciprocity States
Limited Direct Shipping &
Permit States Allowance of
limited shipments
Direct Shipment
not possible
1515
Federal Certificate Of Label Approval (COLA)
– Submitted by licensed importer or domestic producer
– Approval process and timeline is dependant upon the product, category (wine, spirits or beer) and specific requirements of TTB
• Pre import approval, TTB lab and formula submissions, statement of method of manufacture and approvals, TTB flavor approvals etc
U.S. Drinks Conference 2010U.S. Drinks Conference 2010
Navigating Brand Entry & DistributionNavigating Brand Entry & Distribution
Brand Entry - The Approval ProcessBrand Entry - The Approval Process
1616
State Registration and Approval
– Most states require the out of state entity (shipper) to maintain certain state licenses and / or permits in order to sell products to wholesalers
– Most states require the Federal COLA as a requirement for brand approval
– Many states require paperwork submissions with fees and return a formal approval prior to shipping
– Be aware of franchise states
U.S. Drinks Conference 2010U.S. Drinks Conference 2010
Navigating Brand Entry & DistributionNavigating Brand Entry & Distribution
Brand Entry - The Approval ProcessBrand Entry - The Approval Process
1717
U.S. Drinks Conference 2010U.S. Drinks Conference 2010
Brand Approval / Launch Timeline Brand Approval / Launch Timeline
Federal Label (COLA) Approval• 1 to 8 weeks
depending on product and complexity
State Registration & Approval• 1 to 8 weeks
including price posting where required
Product Ships To Wholesaler
1818
U.S. Drinks Conference 2010U.S. Drinks Conference 2010
States Have Unique Rules / RegulationsStates Have Unique Rules / Regulations
Outlet Differences• Supermarkets/ grocery
stores/ drug stores, convenience stores, gas stations, Liquor Stores selling beer, wine , spirits
Off Premise Sale• Sunday sales (8 states still
prohibit)• In store tastings (12 states
prohibit)
Promotion & Merchandising• Discounts, consumer refunds,
sweepstakes, gift sets / combo packs
1919
U.S. Drinks Conference 2010U.S. Drinks Conference 2010
Wine Brand Economics ExampleWine Brand Economics Example
750ML / 12 Bottle Case Imported $9.99 Retail Bottle Price750ML / 12 Bottle Case Imported $9.99 Retail Bottle Price
Supplier FOB (Varies-Packaging etc.) $29.00 OceanFreight 4.50 Fed Tax/Duty (80 Proof) 3.30 PPU/BF/INS 1.40Importers Margin (28% Margin) 12.14Price to Distributor $50.34 State Tax 0.71 Freight 2.50Distributor Margin (50% Mark Up/33% Margin) 26.37Distrib. Price To Retail $79.92Retailer Margin (50% Mark Up/33%Margin) 39.96Retail Case Price $119.88Retail Bottle Price $9.99
2020
U.S. Drinks Conference 2010U.S. Drinks Conference 2010
Premium Spirit Brand Economics ExamplePremium Spirit Brand Economics Example
750ML / 12 Bottle Case Imported $29.99 Retail Bottle Price (Generally sold in 6 Packs)750ML / 12 Bottle Case Imported $29.99 Retail Bottle Price (Generally sold in 6 Packs)
Supplier FOB (Varies-Packaging etc.) $65.00 OceanFreight 4.50 Fed Tax/Duty (80 Proof) 26.00 PPU/BF/INS 1.40Importers Margin (40% to 50% Margin) 88.24Price to Distributor $185.14 State Tax 15.30 Freight 2.50Distributor Margin (33% Mark Up/25% Margin)67.65Distrib. Price To Retail $270.59Retailer Margin (33% Mark Up/25%Margin)89.29Retail Case Price $359.88Retail Bottle Price $29.99
2121
U.S. Drinks Conference 2010U.S. Drinks Conference 2010
Premium Beer Brand Economics ExamplePremium Beer Brand Economics Example
24 Bottle / 12 oz Case Imported $9.88 6 Pack (Generally sold in 6 Packs)24 Bottle / 12 oz Case Imported $9.88 6 Pack (Generally sold in 6 Packs)
Supplier FOB (Varies-Packaging etc.) $9.00Ocean Freight 2.00Fed Tax/Duty 1.30PPU/BF/INS 0.65Importers Margin (25% to 40% Margin) 7.05Price to Distributor $20.00State Tax 0.60Freight 1.75Distributor Margin (33% Mark Up/ 25% Margin) 7.38Distrib. Price To Retail (33% Mark Up/25% Margin) $29.73Retailer Margin (33% Mark Up/25%Margin) 9.81Retail Case Price $39.53Retail 6 pack price $9.88
2222
U.S. Drinks Conference 2010U.S. Drinks Conference 2010
Three Tier SystemThree Tier System
PRODUCER(Wineries, Brewers, Distilleries, Importers)
Wholesaler (Distributor)
Retailer
Consumer2323
U.S. Drinks Conference 2010U.S. Drinks Conference 2010
Three Tiers Are ConsolidatingThree Tiers Are Consolidating
Increasing Dominance Creates Worries For The Smaller PlayersIncreasing Dominance Creates Worries For The Smaller Players
Sources: Impact Newsletter; Beverage Marketing Group Handbooks; USDA (Food Marketing System Briefing Room) and Food Marketing Institute (May 2008.
2424
U.S. Drinks Conference 2010U.S. Drinks Conference 2010
Top U.S. Wine And Spirits Wholesalers.Top U.S. Wine And Spirits Wholesalers.
Distributor MarketsSales
Revenue2009E
(Millions) 2010P
Percent Change
Market2009E
Share2010P
1Southern
Wine & Spirits of America
Alabama, Alaska, Arizona, California, Colorado, Delaware, Florida, Hawaii, Idaho, Illinois, Kentucky,
Maine, Mississippi, Montana, Nevada, New Hampshire, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, Utah, Vermont, Virginia,
Washington, West Virginia, Wyoming
$ 8,535 $ 8,765 2.7% 19.2% 19.7%
2
Republic National
Distributing Co.
Alabama, Arizona, Colorado, Florida, Indiana, Kentucky , Louisiana, Maryland, Mississippi, Nebraska, North
Carolina, North Dakota, Ohio Oklahoma, South Carolina, South Dakota Texas , Virginia, Washington,
DC, West Virginia
$ 3,832 $ 4,365 13.8% 8.6% 9.8%
3Charmer Sunbelt Group
Alabama, Arizona, Colorado, Connecticut, Delaware, Florida, Maryland, Mississippi, New Jersey, New York, Pennsylvania, South Carolina, Virginia, Washington DC
$ 3,765 $ 3,755 -0.4% 8.5% 8.4%
4Glazer´s Family of
Companies
Arizona, Arkansas, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Ohio, Oklahoma, Texas $ 2,550 $ 2,750 6.1% 5.7% 6.1%
5Young´s
Market Co
Alaska, Arizona, California, Hawaii, Idaho, Montana, Oregon, Utah, Washington, Wyoming $ 1,835 $ 1,895 3.3% 4.1% 4.3%
2525
Source: 2010 Impact Databank
U.S. Drinks Conference 2010U.S. Drinks Conference 2010
Distributor MarketsSales
Revenue2009E
(Millions) 2010P
Percent Change
Market2009E
Share2010P
6Wirtz
Beverage Group
Illinois, Iowa, Minnesota, Nevada, Wisconsin$ 1,455 $ 1,510 3.8% 3.3% 3.4%
7Martignetti Companies
Massachusetts, Maine, New Hampshire, Rhode Island, Vermont
$ 950 $ 1,050 10.5% 2.1% 2.4%
8Johnson Brothers
Liquor Co
Alabama, Arizona, Florida, Hawaii, Indiana, Iowa, Minnesota, Nebraska, Nevada, New York, North Carolina, North Dakota, Rhode Island, South Dakota, Wisconsin
$ 860 $ 880 2.3% 1.9% 2.0%
9Allied
Beverage Group
New Jersey$ 665 $ 705 6.0% 1.5% 1.6%
10Fedway
AssociatesNew Jersey
$ 605 $ 615 1.7% 1.4% 1.4%
Total Top 10 $ 25,055 $ 26,245 4.7% 56.4% 59.0%
Other Wholesalers $ 19,380 $ 18,205 -6.1% 43.6% 41.0%
Total U.S. Market $ 44,435 $ 44,450 * 100% 100 %
Top U.S. Wine And Spirits Wholesalers.Top U.S. Wine And Spirits Wholesalers.
* Less than 0.05%.Source: 2010 Impact Databank
2626
Click to edit Master title styleClick to edit Master title style
There are over 340,000 Beverage Alcohol retailers divided into the on and on-premise channels with several sub-segments each
There Are 342,739 Retail Outlets That Sell Spirits
Bar/Night Club79,521 Outlets
On Premise230,207 Outlets
Dining92,458 Outlets
Lodging12,719 Outlets
Recreation36,000 Outlets
Catering3,715 Outlets
Liquor Stores / State Stores35,913 Outlets
Off Premise110,161 Outlets
Grocery8,977 Outlets
Warehouse Club310 Outlets
Convenience Stores11,438 Outlets
Source: TDLinx
Other5,794 Outlets
Other50,739 Outlets
Military On/Off1,666 Outlets – Under Reported
Other Premise2,371
Transportation519 Outlets
Other186 Outlets
Drug2,784 Outlets
Overview The U.S. Retailer Tier
U.S. Drinks Conference 2010U.S. Drinks Conference 2010 2727
Source: BIG 2010 Handbook
U.S. Drinks Conference 2010U.S. Drinks Conference 2010
New Wine Brand IntroductionsNew Wine Brand Introductions
0
20
40
60
80
100
120
2005 2006 2007 2008 2009
USI talyFranceAustraliaS. AfricaArgentinaSpainNew ZealChileOthers
Source: The B.I.G. 2010 Wine Handbook257269 260 152307
2828
U.S. Drinks Conference 2010U.S. Drinks Conference 2010
New Distilled Spirit Brand IntroductionsNew Distilled Spirit Brand Introductions
0
10
20
30
40
50
60
70
80
2005 2006 2007 2008 2009
VodkaRumTequilaCord& LiqOther
Majority Are Imports!
74% in ‘09200153 225 183186
2929
Source: The B.I.G. 2010 Spirits Handbook
• Spirit Brands Commanding Huge Prices– Grey Goose stretched the multiple
• Major Beverage Companies willing to pay big for growth brands caught in early stages of development
• All categories involved in the rush to market-intent to sell
• Discussion on brand valuations and brand sales
– Campari (Carolans, Frangelico, Irish Mist), Grey Goose, 42 Below, Hpnotiq, Wild Turkey, Chambord, Svedka, Absolut, Ketel One, Wines-Big House, Red Truck, Rex Goliath, many others
U.S. Drinks Conference 2010U.S. Drinks Conference 2010
Brand Sales & ValuationsBrand Sales & Valuations
3030
• Major US Importer And National Distributor
• Small / Medium Sized Importer
• National Import & Distribution Service Companies
• State Wholesalers With Import Licenses
• US Based Internet & Direct Mail Distribution Systems
• Establish US Based Import Operation
• Other
U.S. Drinks Conference 2010U.S. Drinks Conference 2010
Distribution Approaches For Foreign SuppliersDistribution Approaches For Foreign Suppliers
3131
U.S. Drinks Conference 2010U.S. Drinks Conference 2010
Foreign Supplier Approaches To U.S. Wine MarketForeign Supplier Approaches To U.S. Wine Market
3232
• Initial Market Research Is Critical
• Committed Approach To US Market Including Adequate Resources (Time!!)?
• Finding The Right Importer And Distribution Approach
– Test market where possible
• Monitoring Sales & Brand Activity (Keeping Sales Pressure Up & Understanding Market Conditions)
• You Must Be Active!!– Brand Ambassadors etc.
• Key Organizations And Memberships With Critical Contacts
• Key Trade Shows
• Industry Law Firms For TTB Licensing, Contracts etc.
• Industry Consulting And / Or Service Companies (Outsourcing Operations for Efficiencies etc.)
• Independent Sales & Marketing Agents / Brokers
• Key Industry Reference Material
U.S. Drinks Conference 2010U.S. Drinks Conference 2010
Entering The US Beverage Alcohol MarketEntering The US Beverage Alcohol Market
CHALLENGES ANSWERS
3333
U.S. Drinks Conference 2010U.S. Drinks Conference 2010
Key References For Foreign SuppliersKey References For Foreign Suppliers
3434
THANK YOU
John Beaudette
President
272 Plandome Road
Manhasset, NY 11030
516-869-9170
U.S. Drinks Conference 2010U.S. Drinks Conference 2010