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US Drinks Conference 2010 Brought to you by: The U.S. Beverage Alcohol Industry: Navigating Brand Entry & Distribution The U.S. Beverage Alcohol Industry:

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Presentation on theme: "US Drinks Conference 2010 Brought to you by: The U.S. Beverage Alcohol Industry: Navigating Brand Entry & Distribution The U.S. Beverage Alcohol Industry:"— Presentation transcript:

1 US Drinks Conference 2010 Brought to you by: The U.S. Beverage Alcohol Industry: Navigating Brand Entry & Distribution The U.S. Beverage Alcohol Industry: Navigating Brand Entry & Distribution

2 U.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 & Distribution 2

3 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 2010 Navigating Brand Entry & Distribution 3

4 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 2010 The US Beverage Alcohol Distribution System 4

5 U.S. Drinks Conference 2010 History Of Beverage Alcohol In US 5

6 U.S. Drinks Conference 2010 History Of Beverage Alcohol In US 6

7 U.S. Drinks Conference 2010 History Of Beverage Alcohol In US 7

8 U.S. Drinks Conference

9 History Of Beverage Alcohol In US 9

10 U.S. Drinks Conference 2010 U. 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 & overview 10

11 U.S. Drinks Conference 2010 U. 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 & overview 11

12 U.S. Drinks Conference 2010 Three Tier System PRODUCER (Wineries, Brewers, Distilleries, Importers) Wholesaler (Distributor) Retailer Consumer 12

13 U.S. Drinks Conference 2010 Control States 13

14 Wholesalers and State Control (21 st Amendment) verses suppliers and consumers that prefer a Federal approach consistent with other consumer products (Commerce Clause) U.S. Drinks Conference 2010 Navigating Brand Entry & Distribution HR Beverage Alcohol and the Commerce Clause 14

15 U.S. Drinks Conference 2010 Direct Shipment Overview Powered By SHIPCOMPLIANT Reciprocity States Limited Direct Shipping & Permit States Allowance of limited shipments Direct Shipment not possible 15

16 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 2010 Navigating Brand Entry & Distribution Brand Entry - The Approval Process 16

17 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 2010 Navigating Brand Entry & Distribution Brand Entry - The Approval Process 17

18 U.S. Drinks Conference 2010 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 18

19 U.S. Drinks Conference 2010 States Have Unique Rules / Regulations Outlet Differences Supermarkets/ grocery stores/ drug stores, convenience stores, gas stations, Liquor Stores selling beer, wine, spirits 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) 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 Promotion & Merchandising Discounts, consumer refunds, sweepstakes, gift sets / combo packs 19

20 U.S. Drinks Conference 2010 Wine Brand Economics Example 750ML / 12 Bottle Case Imported $9.99 Retail Bottle Price 20

21 U.S. Drinks Conference 2010 Premium Spirit Brand Economics Example 750ML / 12 Bottle Case Imported $29.99 Retail Bottle Price (Generally sold in 6 Packs) 21

22 U.S. Drinks Conference 2010 Premium Beer Brand Economics Example 24 Bottle / 12 oz Case Imported $ Pack (Generally sold in 6 Packs) 22

23 U.S. Drinks Conference 2010 Three Tier System PRODUCER (Wineries, Brewers, Distilleries, Importers) Wholesaler (Distributor) Retailer Consumer 23

24 U.S. Drinks Conference 2010 Three Tiers Are Consolidating Increasing 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

25 U.S. Drinks Conference 2010 Top U.S. Wine And Spirits Wholesalers. DistributorMarkets Sales Revenue 2009E (Millions) 2010P Percent Change Market 2009E Share 2010P 1 Southern 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$ 8,7652.7%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, %8.6%9.8% 3 Charmer Sunbelt Group Alabama, Arizona, Colorado, Connecticut, Delaware, Florida, Maryland, Mississippi, New Jersey, New York, Pennsylvania, South Carolina, Virginia, Washington DC $ 3,765$ 3, %8.5%8.4% 4 Glazer´s Family of Companies Arizona, Arkansas, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Ohio, Oklahoma, Texas$ 2,550$ 2,7506.1%5.7%6.1% 5 Young´s Market Co Alaska, Arizona, California, Hawaii, Idaho, Montana, Oregon, Utah, Washington, Wyoming $ 1,835$ 1,8953.3%4.1%4.3% 25 Source: 2010 Impact Databank

26 U.S. Drinks Conference 2010 DistributorMarkets Sales Revenue 2009E (Millions) 2010P Percent Change Market 2009E Share 2010P 6 Wirtz Beverage Group Illinois, Iowa, Minnesota, Nevada, Wisconsin $ 1,455$ 1,5103.8%3.3%3.4% 7 Martignetti Companies Massachusetts, Maine, New Hampshire, Rhode Island, Vermont $ 950$ 1, %2.1%2.4% 8 Johnson Brothers Liquor Co Alabama, Arizona, Florida, Hawaii, Indiana, Iowa, Minnesota, Nebraska, Nevada, New York, North Carolina, North Dakota, Rhode Island, South Dakota, Wisconsin $ 860$ % 1.9%2.0% 9 Allied Beverage Group New Jersey $ 665$ %1.5%1.6% 10 Fedway Associates New Jersey $ 605$ %1.4% Total Top 10 $ 25,055$ 26,2454.7%56.4%59.0% Other Wholesalers $ 19,380$ 18, %43.6%41.0% Total U.S. Market $ 44,435$ 44,450 * 100% Top U.S. Wine And Spirits Wholesalers. * Less than 0.05%. Source: 2010 Impact Databank 26

27 Click 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 Club 79,521 Outlets On Premise 230,207 Outlets Dining 92,458 Outlets Lodging 12,719 Outlets Recreation 36,000 Outlets Catering 3,715 Outlets Liquor Stores / State Stores 35,913 Outlets Off Premise 110,161 Outlets Grocery 8,977 Outlets Warehouse Club 310 Outlets Convenience Stores 11,438 Outlets Source: TDLinx Other 5,794 Outlets Other 50,739 Outlets Military On/Off 1,666 Outlets – Under Reported Other Premise 2,371 Transportation 519 Outlets Other 186 Outlets Drug 2,784 Outlets Overview The U.S. Retailer Tier U.S. Drinks Conference Source: BIG 2010 Handbook

28 U.S. Drinks Conference 2010 New Wine Brand Introductions Source: The B.I.G Wine Handbook

29 U.S. Drinks Conference 2010 New Distilled Spirit Brand Introductions Majority Are Imports! 74% in ‘ Source: The B.I.G Spirits Handbook

30 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 2010 Brand Sales & Valuations 30

31 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 2010 Distribution Approaches For Foreign Suppliers 31

32 U.S. Drinks Conference 2010 Foreign Supplier Approaches To U.S. Wine Market 32

33 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. 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 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 2010 Entering The US Beverage Alcohol Market CHALLENGES ANSWERS 33

34 U.S. Drinks Conference 2010 Key References For Foreign Suppliers 34

35 THANK YOU John Beaudette President 272 Plandome Road Manhasset, NY U.S. Drinks Conference 2010


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