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Deutsch Spirits Stephen Lewin

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2 Deutsch Spirits Stephen Lewin
That was cold water and for an incredible cause – A Special Olympics fundraiser in New England Lets be clear about Deutsch Spirits - We are not dipping our toe in the water…We are diving in head first… Spirits is a New frontier at WJD – and it all makes sense and the Timing is Right Diversify Deutsch – add to our current wine business. Distribution network is strong – it’s a natural Revenue potential is huge – Spirits can be very profitab Peter and Tom asked me to lead the Spirits team in late February Jumped at the opportunity – Similar to VCP Size, # of people and Distributor leverage Opportunity to build the network and culture Build Brands for the long term If starting a spirits company today is not evidence of OFA, I don’t know what is?

3 Top Priority Growth Initiatives to Reach $650 Million by FY15
1. Focus on Highest Priority Brands (Biggest Bets) with increased A&P investment against those brands 2. Optimize Route to Market (Distributor Agreements & Investment) 3. Wine Innovation: New Brands and Alternative Packaging for Existing Brands 4. Secure Spirits brands, likely via Agency Agreements 5. Wine Acquisitions (brands or companies, JVs or alone) Lets Get Started Review the company’s Growth Initiatives Spirits Plays a major Role - # 4 on the hit parade # 1 &2 also very relevant to Spirits

4 Spirits - 5 Year Goals By 2015: Triple our volume Double our suppliers
Est. Case Vol. 220K 300K 400K 450K 600K Est # Suppliers 3 4 5 6 We are on the move READ BULLETS Water seems pretty cold at the moment We finished FY ’10 with 2 brands 30K cases

5 Spirits Strategy Objective: Scale: Sources: Segments: Resources:
Maximize profitability, $40 million in new revenue by FY15 Get to break-even by FY12 Scale: Add a few big cornerstone brands across key categories Max 1 “New To World” brand per year. 6 months between existing new additions Sources: 1) Primarily existing Agency 2) JV 3) Acquisition 4) Innovation Segments: Premium segment is our focus Open to consider Super Premium Unlikely we will add Value Brands Resources: Add resources commensurate with DBC growth, competitive reinvestment Lets look at our Strategy - Talk about a BHAG Read Bullets NTW – bottle one Competitive re-investment rates are high for Spirits – as a % of revenue. Just need to get profitable first

6 FY’11 Spirits P & L Snapshot
Revenue Depletions Gross Profit Luksusowa $15.2M 183K $3.4M Landy 3.2M 20K 900K Villa Massa 1.4M 17K 360K NTW (July) 1.0M 4K 300 TOTAL $20.8M 224K $5.0M Let’s Look at FY’11 numbers Lukso first cornerstone brand (read across)– gave us critical mass to operate as a separate division Landy - 20k cases from 8k LY VM – 17k from 12 k New To World in July – Cant tell you what it is yet. Really exciting – Will create a new category of Spirits. On premise focused to start and reason for small numbers 5M to run entire business (all in) Goal to be profitable in first year – covers all staff, brand spending and division overheads

7 The WJD Spirits Team Sheku Alieu Jean-Francois Bonneté Pablo Pelaez
Mid-Atlantic Mark Lowen Midwest Jean-Francois Bonneté VP Southern Region Pablo Pelaez Brittany Sales Co. With that I would like to Intro players – Please intro yourselves this week. READ NAMES and REGION This mission for team is BASIC BLOCKING AND TACKLING Distribution, Distribution, Distribution Working the streets Managing Wholesalers and holding them accountable Introduce yourselves to them this week and work side by side together in the markets Michael Keltsch West Eric Maldonado Director, Spirits Marketing Heather Sturm Southern CA Empire Position Open Broker network in selected markets across the U.S.

8 Shared WJD Resources Finance Public Relations Supply Chain Innovation
Marketing Services National Accts Finance Supply Chain Legal Compliance IT Analytics Fortunate to have access to these resources. Spirits group can Act like a big company Resources Provide leverage given our current start up size Utilize resources commensurate with our size – as we grow, we will have greater access to these functions

9 Spirits Category Overview
Category trends

10 Total Spirits Category Size
Total Case Vol. Sales - 185.5 Million 9-Liter cases As compared to Wine - 271MM cases Total $ Retail Sales $63 Billion Total Spirits is $63BB in retail sales in US - the total amount consumers paid for spirits at retail in 2008 On-Premise revenue and profits far surpass off premise in the spirits category even though 4 out of every 5 bottles are running through the stores Off Volume = 78% Source: MintelThe Beverage Information Group 2009

11 Spirits average annual case volume growth 2.6% over past 10 years
190 180 170 160 150 140 130 120 110 100 1.4% 1.7% 2.4% 4.1% 2.7% 4.1% 3.8% 3.0% 1.0% 2.0% Lets look at Volume growth 10 straight years of case volume growth Arrow pointing in the right direction Further evidence of why we are getting into the spirits category Source: DISCUS MSDB

12 Spirits average annual revenue growth of 5.2% over past 10 years
66% revenue growth over past decade $18.7 $18.7 $18.2 $17.2 $16.0 $15.1 $13.9 $13.2 $12.2 $11.7 Supplier Gross Revenue (Bil.) Revenue Growth tells an interesting story Revenue is growing DOUBLE the rate of volume (5.2% vs 2.6); Due to the trade-up phenomenon over the past 10 years which came to a temporary halt in 2009. Look at ’08 vs 09 – no growth Like any investment you look at long term trend. This tells a good story. Source: DISCUS MSDB

13 Volume Growth by Price Segment
Value segment leading the growth, followed by Premium Most segments expected to improve as economy recovers - with Premium expected to lead the growth Volume in ’08 vs. ’09 – sign of the times Read Bullets on Screen High end and super premium segments – brands such as Absolut and Grey Goose - suffered in ‘09 Value segment - with brands like Popov - leading the growth, followed by Premium-Svedka Source: DISCUS MSDB; Mintel 2009

14 Volume & Revenue Share by Price Category - 2009
Value segment leads share of spirits volume Premium segment leads revenue Read Title and Bullets and then points below Premium will continue to grow as consumers reward themselves. The companies that invest in marketing and innovation during tough times will lead the growth The Deutsch Spirits brands live primarily within the Premium category We mentioned early on that our strategy was premium, here’s why - premium delivers financially Source: DISCUS MSDB

15 Off-Premise Driving Growth
Increase of at-home consumption Consumers Making cocktails at home Re-evaluating spending Tighter budgets and sticking to them The new normal Shifting trends towards off premise READ BULLETS WJD focus for FY’11 is primarily in the off-premise segment GO TO TAKE AWAY’S Source: DISCUS MSDB

16 Spirits Category Takeaways
Spirits category continues to grow Revenues have historically grown faster than case volume Premium segment is largest revenue segment and growing Off-Premise is driving majority of growth WJD is positioned for success in the Spirits category All Points to Opportunity

17 Introducing the Deutsch Spirits Portfolio
Now I’d like to introduce you to the Deutsch Spirits Portfolio Blocking and tackling – distribution, price integrity, display Build Brands for the long term – and create value Communicate and become relevant to the consumer

18 Landy Award-winning cognacs Competitively positioned
Cognac/Brandy represents 6% of total spirits category with new players coming in all the time F11 Goal: 20,000 cases 8000 cases LY Landy – This is where it all started for Deutsch Spirits -Equity Supplier with exciting news Cover bullets on screen Relationship and story with Ferrand and Alexandre Source: MintelThe Beverage Information Group 2009

19 Landy Brand Positioning
Landy is authentically smooth and priced right to be the confident cognac choice of those who want to enjoy the good times everyday. Read Brand Positioning and Landy & Snoop Snoop - just signed this week - Who better to be the face of the brand than Snoop Dogg successful business person who has done reality TV, voice-over on navigation systems, and can have a strong positive effect when he gets behind a brand. Very Visible – appeared on many talk shows recently SNOOP Activities in addition to his concerts After Parties hosted by Landy Social Media and On Line Opportunites Snoop trade appearances, Landy mentions in songs and other cool benefits.

20 The Opportunity in Cognac
Despite a challenging 2009, the cognac category has shown growth in 2010 Q1 (+16.2). The VS and VSOP segments are leading the growth, both up 12.4% and 13.2%, respectively. Segment % Chg vs. YAG TTL Cognac +16.2% VS +12.4% VSOP +13.2% XO -9.1% Playing in the right segment of the cognac category Source: Nielsen 13wk FDL to

21 Proper Price Positioning
FY11 Plan Quality Distribution Public Relations Proper Price Positioning Retail Merchandising Snoop Dogg Tour Smooth Confident Pedigree Dichotomy Good Times Dog Landy & Snoop Our mission is to merge the most compelling Landy attributes with those of brand Snoop. From this intersection comes the brand opportunity.

22 Villa Massa Brand Positioning
For sophisticated, goodtime seekers who love interesting food & drink  Villa Massa is the authentic & premium limoncello that brightens any meal with the sunny & refreshing flavors of the Amalfi Coast It’s made only from Oval lemons from Sorrento and has been enjoyed by Italians for centuries ... the culture that has perfected the art of blending passion, romance & eating. Brand positioning (will not read) – Key Words and what VM is about. Authentic Premium Amalfi Coast Oval Lemons from Sorrento Passion, Romance and great food

23 The Opportunity in Limoncellos
Quality. Villa Massa is made with 100% natural ingredients and 100% PGI Sorrento Oval lemons. This is an appealing message to consumer. Versatility. Villa Massa mixes well to make fantastic cocktails such as The Villa Mossa (sparkling wine with Villa Massa) or The Surriento (tonic). On-premise accounts. Accounts are open to adding the best Limoncello to their portfolio to be included in their after dinner lists and in interesting cocktails. The “Brunch” occasion. Summer programs in place

24 FY11 Plan FY11 MARKETING PLAN Objectives
Grow the brand to 17,000 cases Grow distribution on and off-premise (combined) to 4,200 accounts (+30%) Strategies Drive distribution Increase brand velocity Build brand awareness Promote the brand outside the after-dinner occasion by communicatingits versatility. Expand distribution outside core markets of CA and PA Target non-Italian on-premise accounts Tactics Sampling Program Merchandising Holiday VAPs (750ml and 375ml) Gain menu listings at on-premise accounts Promote The Villa Mossa and The Surriento Summer Brunch Program Engage the media and garner national editorial coverage Enter brand in major spirit competitions Stefano Massa Tour

25 Luksusowa Cornerstone Brand – 180K cases in limited markets (50% in top 5 markets) Pernod Ricard – Agency Relationship (recent acquisition) Nearly 1 out of every 3 drinks is a vodka drink Off-premise focus - 70% 1.75L (Display Activity) Brand has a real following however a limited knowledge of the consumer base Cover Bullets Source: MintelThe Beverage Information Group 2009

26 Luksusowa Brand Positioning 94 Points BTI Mixologists Favorite
For vodka drinkers who are seeking quality and value, Luksusowa is the premium imported vodka that offers ultra premium rich taste at a reasonable price Authentic potato Vodka from Poland and uniquely triple distilled for purity 94 Points BTI Mixologists Favorite Research – Potato, Luxury, Authenticity, Poland, Tag Line Innovation – Label Design Cover Positioning and Bullets Positioning is a work in progress WJD Brand Positioning and Tag Line – WJD Work Priced just above Svedka and below Skyy

27 The Opportunity in Vodka
Segment % Chg vs. YAG TTL Vodka +4.8% Value +2.1% Premium +8.9% High-end +5.5% Super-Premium +4.9% Premium Segment is leading the growth at double the rate of the category-13 week. At 29% of volume at retail, the premium segment is leading in growth at almost double the category. Source: Nielsen 13wk FDL to

28 Luksusowa is: The #1 Potato vodka in the US and the World.
Priced right in the fastest growing vodka segment. Poised to benefit from national distribution. Great quality and has won many recent awards and accolades! The Luksusowa Martini – Finalist at the 2010 Ultimate Cocktail Challenge The Luksusowa Cosmopolitan- Finalist at the 2010 Ultimate Cocktail Challenge The Luksusowa Bloody Mary- Finalist at the 2010 Ultimate Cocktail Challenge 94 points 2009 Beverage Tasting Institute 94 Points and Gold Medal and 2009 International Review of Spirits Cover Bullets

29 FY11 Plan FY11 MARKETING PLAN Objectives
Grow the brand to 183,000 cases in depletions Increase brand awareness Strategies Increase velocity at retail in top markets Expand distribution outside historical key markets (PA, NY, FL, NC, VA) Engage in basic Public Relations communicating brad quality vs. affordability message and recent accolades Tactics Sampling Program Merchandising Coupons Neckers Press luncheons and relations 750 ml Holiday VAP

30 And coming soon… What happens when you combine… It’s time to shine…
A world-renowned chef The power of the media and entertainment industries A new spirits category grounded in the soul of America The power and people of WJD It’s time to shine… This new brand will blow you away. Cover bullets … you’ll be hearing more about it in the coming months We will roll out in limited markets in August and nationally in 18 moths

31 Spirits Summary Year 1 – A Year of Building
Contributor towards long term vitality and health of WJD Profit-Focused Brand Development and Value Creation Portfolio Expansion Establishing Deutsch Spirits in the Marketplace Cover Bullets

32 Open for Anything… WJD is now officially in the spirits business…
Further proof that we’re open for anything! Leave you with another Snoop hit…


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