State of the Spirits Industry 2013

Transcription

1 State of the Spirits Industry 2013

2 Spirits Continues to Gain U.S. Market Share at the Expense of Beer Supplier $ Share (Billions) Beverage Alcohol Market Share CAGRs Wine: Spirits: Beer: $49.9 $ $52.2 $8.6 $54.9 $56.6 $57.0 $57.6 $59.2 $9.2 $9.4 $9.5 $9.8 $10.2 $16.0 $17.2 $18.2 $18.7 $18.7 $19.2 $19.9 Spirits 29% Wine Beer 55% Spirits 3 Wine 1 Beer 49% $25.6 $26.3 $27.5 $28.5 $28.8 $28.6 $ Beer Spirits Wine Servings (Billions) (1) Growth in Servings P CAGR: Absolute Growth: Beer: Spirits: Wine: 1.0% 4.0% % % % (1.) 15.0% 13.1% % 6.1% (1.8%) (1.8%) (0.9%) Beer Spirits Wine (3.1%) P P Beer Spirits Wine Source: Beer Marketer s Insights, DISCUS, IMPACT Spirits Databank. (1) Serving size: Beer 12 oz; Spirits 1.5 oz; Wine 5 oz. 2

3 Vodka and Whiskey are Large and Driving Spirits Industry Growth Spirits Industry Market Size (cases in millions) % % P 9 Liter Cases Consumed Growth % Brandy Tequila 5% Cordials & Liqueurs 1 Gin Rum 1 Varieties of Spirits P Cocktails & Mixed Drinks Vodka 28% Whiskey 25% Tequila Cordials & Liqueurs 10% Brandy Rum 1 Gin 5% Cocktails & Mixed Drinks Whiskey 2 Vodka 3 (cases in millions) Growth by Spirit Variety Average FOB by Spirit (2011 vs. 2010) P Vodka Whiskey Rum Cordials Tequila Brandy Gin Cocktails Source: IMPACT Spirits Databank. (1) Serving size: Beer 12 oz; Spirits 1.5 oz; Wine 5 oz P CAGR: % +2. (0.1%) +4. (0.) (0.) $97 $1.60 $133 $4.25 $108 $2.60 $118 $1.28 Vodka Whiskey Rum Cordials & Liqueurs $160 ($0.11) $140 $9.17 $96 $60 $0.88 $1.38 Tequila Brandy Gin Cocktails & Mixed Drinks 2011 Average FOB $ Increase from 2010

4 Vodka is the Fastest Growing Spirit ( 05 12P CAGR: +5.) Overview Vodka has grown at a faster rater since 2005 than any other spirit (+5.); 4 of the top 5 brands are gaining size The Vodka market is approximately 60% domestic and 40% imported Imported Vodka is pushing industry growth with a CAGR approaching 10% since 2005; Domestic Vodka is also growing strong at a CAGR 3 of top 5 Vodkas are imported, with Svedka growing over 10% Beam s Pinnacle will enter the top 10 in 2012 and is growing nearly 50% s Smirnoff is the industry s dominant brand, >2x the size of the 2 nd largest Vodka brand Top Producers (9L eqv. cases in millions) P CAGRs Imported: Domestic: 9.9% 3.0% % Vodka Market Size (Consumption) % % 5.1% P Domestic Imported Growth % Top Brands 4. 31% 25% Nolet Spirits Pernod Ricard 9% Constellation 5% Campari Bacardi Beam 8% Source: IMPACT Spirits Databank and IRI 52 Weeks Ending December 2,

5 Vodka SKU-Magedon Growth Driven by Flavor Expansion SKU Expansion Over Time Select Vodka Brands Flavor SKU-ing Over Time Citrus 1 (9L Cases in Thousands) Orange 30% Vanilla Citrus 5 38% Raspberry 1 Flavors: Depletions: 9,550 Non- 9 Non- 7 Raspberry 9% Apple Orange 10% Million 9L Cases Strawberry Grape 5% Vanilla 7.2 Million 9L Cases Cherry 9% Flavors: Depletions: 4,630 5% Non- 78% 9% Non- 7 Flavors: Depletions: 2,700 Non- 95% Non- 91% 30% 45% Flavors: Depletions: 1,800 Non- 70% Non- 55% Source: IMPACT Spirits Databank. 5

6 Whiskey is Large and Steadily Growing ( 05 12P CAGR: +0.5%) Overview Whiskey has grown at a CAGR of 0.5% since 2005; the top 3 brands are growing above the Whiskey average The Whiskey market is approximately 50% domestic and 50% imported Domestic Whiskey is growing at a P CAGR of 1.0% whereas Imported Whiskey is flat 3 of top 5 Whiskies are domestic, with the top 3 brands all growing above industry growth is the clear category leader with 2 of the top 5 brands and 2 market share Top Producers (9L eqv. cases in millions) P CAGRs Imported: Domestic: % Whiskey Market Size (1) (Consumption) 0.0% 1.0% 0.9% P CAGR: 0.5% 0. (0.) P 0. Domestic Imported Growth % Top Brands 0. Constellation Campari 11% Rank Brand Distiller / Importer Depletions (Thousands) Growth 1 Brown-Forman 4, % Heaven Hill 2 4, % Pernod Ricard 3 Beam 3, % Brown Forman 21% Beam 18% Source: IMPACT Spirits Databank and IRI 52 Weeks Ending December 2, (1) Domestic Whiskey includes Tennessee and Kentucky Whiskies, Bourbons, and Blends. Imported Whiskey includes Scotch, Canadian, Irish, Japanese, and other imported Whiskies ,390 (1.0%) 5 Constellation 1,780 (0.)

7 Whiskies Seeing Hyper-Growth and an Explosion of SKUs Overview IRI Growth of Select Brands Whiskey brands are SKU-ing into new flavors and un-aged to give current drinkers expanded offerings and new consumers a more mild Whiskey entry Both line extensions (Jim Beam Red Stag, Jack Daniels Tennessee Honey, etc.) as well as upstart brands (Ole Smoky Tennessee Moonshine, Cabin Fever Maple Honey, etc.) ($ in millions) $7.9 $10.5 Typically a combination of flagship Whiskey mixed with flavored liqueurs Line extensions generally priced a few dollars premium to the original product $0.5 $0.9 $1.7 $2.3 Un-aged Whiskey, also known as White Whiskey or Moonshine, easy to flavor, as well as attracting the Whiskey enthusiast, looking for a higher proof Whiskey Evan Williams Cinnamon Evan Williams Honey Jim Beam Red Stag Brown- Forman 80 Proof Beam 80 Proof 125 Proof Brown- Forman 70 Proof Campari 71 Proof 71 Proof Heaven Hill 70 Proof 80 Proof Beam 80 Proof Heaven Hill 70 Proof 71 Proof Ole Smoky 100 Proof Source: IRI 52 Weeks ending December 2,

8 New Investment Anchoring Whiskey Brands with a Sense of Place for Authenticity Jim Beam American Stillhouse (Beam) $30 million Jim Beam Visitor Center and Distillery opened October 2012 in Clermont, Kentucky Offers visitors first ever tour of adjacent production facility (expected to attract 200,000+ visitors yearly) Also will house new state-of-the-art Global Innovation Center Evan Williams Bourbon Experience (Heaven Hill) $10 million Evan Williams Visitor Center expected to open in September 2013 in downtown Louisville, Kentucky Artisanal distillery, immersive tourism experience, and retail location located in Heaven Hill s Bourbon Row Main Street location $4 million new Wild Turkey Visitor Center expected to open in April 2013 in Lawrenceburg, Kentucky Adjacent $40 million bottling and packaging operation also under construction (125,000 sq. ft.) Visitor Center 8x bigger than previous facility Wild Turkey (Campari) Independent Brand Visitor Centers Ole Smoky Tennessee Moonshine opened a retail / production facility in Gatlinburg, Tennessee in July 2010 Michter s Distillery opened a distillery, bottling operation, and Visitor Center ($8 million) in Louisville, Kentucky in July 2011 Four Roses Distillery completed 5,000 sq. ft. Visitor Center expansion ($2.4 million) in Lawrenceburg, Kentucky in September

9 Majority of Growth Coming from 6 of the Top 10 Players Industry Growth by Supplier Largest Growing Spirits Brands in 2012 Over 55% of the Industry s dollar growth has been driven by the 6 of the Top 10 largest suppliers 20% 4 Beam 10% 9% Constellation Brands Pernod Ricard Brown Forman Source: IRI 52 Weeks Ending December 2,

10 Global Spirits Companies Acquiring Market Makers, Typically in Emerging Markets December 2011 February 2011 (Sichuan Swelfun) September 2012 March 2012 January 2013 June 2011 Pending August 2011 August

11 Within the U.S., Beam is the Intriguing M&A Target, Especially for Pernod & Bacardi (Market Share % / Portfolio Overview) Pernod Ricard Current (Market Share % / Portfolio Overview) Bacardi Current 2 2 Beam Pernod Ricard Bacardi Brown-Forman 10% 8% 8% Rum 1 Cocktails Vodka 3 Beam Pernod Ricard Bacardi Brown-Forman 10% 8% 8% Cordials Gin Tequila Campari Cordials 1 Campari Whiskey 9% Rum 50% Heaven Hill Heaven Hill Constellation Constellation William Grant & Sons Gin 1 Whiskey 2 William Grant & Sons Vodka 2 Pernod Ricard Pro Forma with Beam (Market Share % / Portfolio Overview) (Market Share % / Portfolio Overview) Bacardi Pro Forma with Beam 2 2 Pernod Ricard Bacardi Brown-Forman Campari Heaven Hill 8% 19% Tequila Gin Rum Cocktails 5% Whiskey 39% Bacardi Pernod Ricard Brown-Forman Campari Heaven Hill 8% 18% Tequila Cocktails 5% Cordials Gin 1% Whiskey 3 Constellation William Grant & Sons Moet Hennessey Source: IRI 52 Weeks ending December 2, Cordials 10% Vodka 2 Constellation William Grant & Sons Moet Hennessey Vodka 19% Rum 2 11

12 At the Same Time, Major Wineries Increasingly See Spirits as an Adjacency Company Select Brands Commentary (Producer) Continuing spirits legacy of E. & J. Brandy, Gallo launched New Amsterdam Gin in 2007 and New Amsterdam Vodka in 2011 Launched Family Camarena Tequila in 2010 Launched Shellback Caribbean Rum in 2012 (Producer) Launched Cupcake Vodka in 2011 and flipflop Rum and Big House Bourbon in 2012, extending successful Wine brands into Spirits Housed under Underdog Wine & Spirits, The Wine Group s Millennial-focused division (Producer) CRUZ Tequila in 2012 and developed Trinchero Family Estates Spirits division Signed agreement with Tres Agaves Tequila in 2012 to import, sell, and market Tequila and non-alcoholic mixes Formed separate Spirits division in 2009 Launched 2011 joint venture with Adult Beverage Company (Chocolate Milk, Limeade) with equity stake (Distributor) (Distributor) (Realized) 2011 core initiative to build Spirits division with focus on acquiring small amounts of equity in distributed Spirits brands Sold equity stake in Skinnygirl Margarita to Beam in

13 Demeter Group Recent Transactions (December ) $850 million Completed Transaction Value 15 Completed Transactions 6 Completed Transactions in Beverage Alcohol Private Placement 71% 3 Transactions Marketed to Fewer Than 5 Potential Buyers Transactions Marketed to 1 Buyer Has Joint Venture With 13

14 Demeter Group Recent Beverage Alcohol Transactions March 2011 May 2011 December 2010 July 2012 Beam Global Spirits & Wine Crimson Wine Group Fiji Water Constellation Brands September 2012 August 2012 June 2012 June 2012 May 2012 August 2011 E. & J. Gallo Winery E. & J. Gallo Winery Accolade Wines E. & J. Gallo Winery Precept Wines Fiji Water 14

15 Jeff Menashe Chief Executive Officer 220 Halleck Street, Suite 110 San Francisco, CA (415)