Post on 18-Jul-2015
TOPO’s Straight Wheat Whiskey
Sam Albert ∙ Nitin Goel ∙ Grant Shisler
Austin Stephens ∙ Vivian Wang
Leading the Modern Whiskey Revolution
TOPO should unveil its new Straight Wheat Whiskey as “Leading a Modern Whiskey Revolution”
2
TOPO’s Straight Wheat Whiskey could generate $750K+ in new profit over the next 5 years
Strategies
Impact
Rally Supporters Target men who consume the
most premium whiskey and are modern/adventurous
Spread the Revolution
Expand geographically from an epicenter in the South-Eastern U.S.
Brand as Pioneer
Package to position TOPO as a premium, modern whiskey
3
Rally Supporters Target men who consume the
most premium whiskey and are modern/adventurous
Spread the Revolution Expand geographically from an epicenter in the South-Eastern
U.S.
Brand as Pioneer
Package to position TOPO as a premium, modern whiskey
Brand Target Expand Impact & Risk
TOPO Whiskey can differentiate itself from competitors as a niche product with unique packaging
4 Brand 4
Unique Packaging
Niche Mainstream
Brand
Sources: Distiller websites; McKinsey Quarterly Basic Packaging
Brand Target Expand Impact & Risk
Premium and modern packaging can capture customer attention and induce them to buy
5
Leading a modern whiskey
revolution
TOPO Straight Wheat Whiskey is made from locally-sourced
organic ingredients. We ferment, distill, and fill every bottle in our Green+ certified distillery to ensure quality
from grain to glass. Sweet and smooth, there is no other spirit
like our hand-crafted wheat whiskey.
Pour yourself a glass and
join the whiskey revolution.
Side Side Top
61% of consumers that purchased dark spirits stated that packaging
appearance plays a significant role in their
purchasing decision
100% of alcohol producers noted that
redesigning their packaging increased
product sales
Sources: Mintel; The Drinks Report; McKinsey Quarterly
Brand
Brand Target Expand Impact & Risk
The whiskey revolution should emphasize local sourcing, organic ingredients, and sustainable production through its packaging
6
Source: Nielson, Datamonitor
Leveraging TOPO’s competitive advantages through its packaging can increase sales growth by 2%
19.3%
18.9%
18.7%
Vodka Other spirits Whiskey/Bourbon
Side of box % consumers that will pay more for
organically sourced spirits
Brand
TOPO Straight Wheat Whiskey is made from locally-sourced organic ingredients. We ferment, distill, and fill every bottle
in our Green+ certified distillery to ensure quality from grain to glass. Sweet and smooth, there is no other spirit like
our hand-crafted wheat whiskey.
Pour yourself a glass and join the whiskey revolution.
Brand Target Expand Impact & Risk
Entering the super premium whiskey category provides TOPO with a lucrative opportunity
7
Source: Datamonitor
-2%
0%
2%
4%
6%
8%
10%
12%
2011 2012 2013
YoY Whiskey Sales Volume Growth Super Premium
High End
Premium
Value
By selling bottles for approximately $50, TOPO can increase margins and enter a growing market segment
Brand
Aged
Young
$60 $30
8
Rally Supporters Target men who consume the
most premium whiskey and are modern/adventurous
Spread the Revolution
Expand geographically from an epicenter in the South-Eastern U.S.
Brand as Pioneer
Package to position TOPO as a premium, modern whiskey
Brand Target Expand Impact & Risk
Males ages 25-44 consume more high-quality whiskey than any other demographic
9
23
47
13
22
0
5
10
15
20
25
30
35
40
45
50
Shop for dark spirits with super-premium or premium pricing
Consumed whiskey in pastmonth
Pe
rce
nt
Men are more likely to drink whiskey frequently and buy higher
quality whiskey than women
Male
Female
0
5
10
15
20
25
30
22-24 25-34 35-44 45-54 55-64 65+P
erc
en
t W
illin
g to
Bu
y P
rem
ium
or
Su
pe
r-p
rem
ium
pri
ced
dar
k Li
qu
or
Those ages 25-44 are most likely to buy premium or super-premium priced whiskey
Millennial and young Gen-X men can provide significant potential for whiskey sales as a target market for TOPO’s straight whiskey
Target
Sources: Mintel
Brand Target Expand Impact & Risk
Ages 25 – 44 are most likely to purchase TOPO’s new whiskey at bars and liquor stores
Young- to middle-aged consumers drink at bars most often, are the least brand loyal, and spend the most on alcohol
10
401
478 511
458 454
248
0
100
200
300
400
500
600
<25 25-34 35-44 45-54 55-64 65+
Do
llars
pe
r Y
ear
(in
20
05
$)
Age Group (in years)
25 to 44 year olds spend the most on alcohol
Sources: Mintel, New Strategist (Bureau of Labor Statistics)
20 22 23 16 15
18 24
28 40
75
0
10
20
30
40
50
60
70
80
90
100
Young Mil.(20 - 28)
Older Mil.(29 - 37)
Gen X (38-49)
Boomers(50 - 68)
Swing Gen.(69 - 81)
Target market generations attend bars most and are least loyal to known alcohol brands
"I like to stickwith alcoholicbeverages theyknow"
"I have consumedalcohol at a bar inthe last month"
Target
11
Rally Supporters Target men who consume the
most premium whiskey and are modern/adventurous
Spread the Revolution
Expand geographically from an epicenter in the South-Eastern U.S.
Brand as Pioneer
Package to position TOPO as a premium, modern whiskey
Brand Target Expand Impact & Risk
Factors to consider when selecting states for distribution
12
Secondary Factors
Spread of Carolina Alumni
Ease of Distribution
Number of Competitors
Frequency of Whiskey
Consumption
Level of State Control
Target Market per Liquor Store and
Bar
Key Factors
2012 Spirit Sales
Growth of Spirit Sales
Target Market Size
Incremental 5-Yr. Projected Demand
Source: Team Analysis
Expand
Brand Target Expand Impact & Risk
Phase 1: Leverage current distribution channels
Key Factors
2012 Spirit Sales:
$110M
Growth of Spirit Sales:
3%
Target Market Size:
8.7M People
Incremental 5-Yr. Projected Demand:
33,826 Bottles Not In: Phase 1:
Source: Simply Maps, Census Data / Team Analysis
Expand 13
Brand Target Expand Impact & Risk
Phase 2: Expand into states with the highest demand potential
Key Factors
2012 Spirit Sales:
$154M
Growth of Spirit Sales:
6.8%
Target Market Size:
14M People
Incremental 5-Yr. Projected Demand:
34,885 Bottles Not In: Phase 1: Phase 2:
Source: Simply Maps, Census Data / Team Analysis
Expand 14
Brand Target Expand Impact & Risk
Phase 3: Continue to grow in states with high demand
Not In: Phase 1: Phase 2: Phase 3:
Key Factors
2012 Spirit Sales:
$110M
Growth of Spirit Sales:
3%
Target Market Size:
9.9M People
Incremental 5-Yr. Projected Demand:
8,531 Bottles
Source: Simply Maps, Census Data / Team Analysis
Expand 15
Brand Target Expand Impact & Risk
Launch product: July 1st, 2015
Months Winter 2014 Spring 2015 July 2015 Fall 2015 Summer
2016
Summer
2017
BRAND
• Design and source packaging
• Emphasize organic and high quality
distilling process
TARGET
• Negotiate with distributors
• Moderate existing social media
• Educate strategically through blogs
EXPAND
• Leverage bar and restaurant networks
• Phase 1 Expansion
• Phase 2 Expansion
• Phase 3 Expansion
Pre-Launch Release Increase Distribution
TOPO should introduce their straight wheat whiskey with a 3-year rolling launch
Expand 16
Source: PewResearch, EuroMonitor, Nielsen, eMarketer, Inc.
17
TOPO’s Straight Wheat Whiskey could generate $750K+ in new profit over the next 5 years
Rally Supporters Target men who consume the
most premium whiskey and are modern/adventurous
Spread the Revolution
Expand geographically from an epicenter in the South-Eastern U.S.
Brand as Pioneer
Package to position TOPO as a premium, modern whiskey
Impact
Brand Target Expand Impact & Risk
TOPO’s Straight Wheat Whiskey can yield a positive NPV and $750K+ profit over the next 5 years
18 Impact & Risk
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
0
100
200
300
400
500
600
Conservative Expected Optimistic
Pe
rpe
tuit
y N
PV
of
Stra
igh
t W
he
at W
his
key
Pro
ject
($
M)
5-y
ear
Dis
cre
te N
PV
of
Stra
igh
t W
he
at W
his
key
Pro
ject
($
k)
0
50
100
150
200
250
300
350
400
1 2 3 4 5
Ne
t P
rofi
t ($
k)
Years
5 year Discrete and Perpetuity Net Present Values (with sensitivity analysis)
Optimistic
Expected
Conservative
Profitability Projections and Sensitivity Analysis for the Next 5 Years
Brand Target Expand Impact & Risk
The market launch strategy faces several risks that should be considered
19
Risk Rating Risk Mitigation Strategy
The high-end, wooden box cannot be sourced locally for a reasonable price
Source the box from a supplier in another area that manufactures using sustainable methods
The Straight Wheat Whiskey is priced too high for the target market
Re-Emphasize the differentiating product features and direct price sensitive consumers to
the cheaper Eight Oak Whiskey
The Straight Wheat Whiskey cannibalizes the Eight Oak sales
Produce less Eight Oak whiskey and age it for 2 years to sell as the higher-end Straight Wheat
because it has a higher profit margin
The TOPO brand is not (well) known outside the UNC-CH region / NC
Re-Emphasize the differentiating product features using the product labels and box
The demand for the product exceeds TOPO’s production capacity in the
next year
Consider 1) producing less of other TOPO’s products with a lower margin, and 2) expanding production facilities, to accommodate demand.
Source: Team Analysis
Impact
Probability
X
X
X
X
X
Impact & Risk
TOPO should unveil its new Straight Wheat Whiskey as “Leading a Modern Whiskey Revolution”
20
TOPO’s Straight Wheat Whiskey could generate $750K+ in new profit over the next 5 years
Strategies
Impact
Rally Supporters Target men who consume the
most premium whiskey and are modern/adventurous
Spread the Revolution
Expand geographically from an epicenter in the South-Eastern U.S.
Brand as Pioneer
Package to position TOPO as a premium, modern whiskey
APPENDIX
21
22
SPIRIT & WHISKEY MARKET • Spirit market as percentage of total alcohol sales • Rye whiskey volume sales growth • Whiskey sales growth CAGR • US whiskey sales volume, 2010 – 2013 TOPO COMPANY ANALYSIS • SWOT analysis • Current distribution • Competitive advantage • Sales capacity • Sales revenue COMPETITOR ANALYSIS • Wheat whiskey competitors • Wheat whiskey distillery locations • Differentiating factors – wheat whiskey • Differentiating factors – American whiskey • Rye whiskey growth history • Whiskey growth factors • Potential trend capitalization
PRODUCT • Competitor product packaging • Effectiveness of good packaging • Effectiveness of sustainability claim on packaging • Whiskey hot trend categories
PRICE • Manufacturer suggested retail price • Spirits benchmark pricing categories • Consumers likely to pay more for whiskey • Premium pricing command factors
TARGET MARKET • Ways target market learn about TOPO’s whiskey • Places target market purchase liquor • Reasons why target market would purchase TOPO whiskey DISTRIBUTION • Expansion – by phase/state
• Phase 1 • Phase 2 • Phase 3
• Factors considered for expansion plan • Expansion – by region • Expansion Model • Three tier distribution network system
• Distributor relationship management ROLLOUT PLAN • Expansion plan • Influencers of on-premise alcohol consumption • Bars connect new products to consumers • Bars spur increased liquor sales • Influence of bartenders on alcohol purchases • Effective advertisement channels:
• Festivals and Awards • Online reviews • Magazines and blogs • Digital Magazines
• Routes for consumers to try and purchase product
FINANCIALS • Bar-driven demand and sales • Word of mouth demand and sales • Point of sale demand and sales • Cost and pricing analysis • Cost and pricing assumptions • Excel Financial Model
Brand Target Expand Impact & Risk
SPIRIT & WHISKEY MARKET
23
Spirits’ Market Share as a Percent of Total Alcohol Sales
25
27
29
31
33
35
37
39
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: DISCUS Report 2013 24
Wheat whiskey could experience the same growth as Rye whiskey
125,000
195,000
275,000
368,500
2010 2011 2012 2013
Volume (cases) Rye Whiskey Sold in the United States
25 Source: Marketwatch, Impact Databank, DISCUS, Shanken Daily News
31% CAGR
Annual Whiskey Sales Growth (CAGR)
0
1
2
3
4
5
6
7
2000 2005 2010 2011 2012 2013
CAGR (%)
Source: DISCUS Report 2013 26
US whiskey sales volume, 2010 – 2013 (in 1,000 9 liter cases)
Sources: Discus; Statista 27
COMPANY ANALYSIS
28
Strengths
•Brand recognized by nearly all Chapel Hill Students/Alumni since 1990’s
•Previous spirits (gin, vodka, carolina whiskey) have led to brand awareness in liquor segment
•Only organic distillery in regeion
•Only Green+ certified distillery in the nation
Opportunities
•Can utilize existing spirit’s B2B distribution channels for new product launch
•Leverage the “uncommonness” of wheat whiskey in terms of taste, popoularity, and history
•No wheat whiskey distillers in southeastern region of U.S.
Threats
•Many emerging competitors in craft wheat whiskey market located around the nation
•Larger distillers beginning to offer craft/small batch variations
Weaknesses
•Limited distribution in brick and mortar stores
•Low costumer awareness of the small wheat whiskey market
•Minimal brand awareness outside of NC
S W
T O
SWOT ANALYSIS: primary factors
29 Source: Team Analysis
TOPO is currently selling in-store in 9 states with plans to expand to 11:
Currently Selling In:
1. North Carolina 2. South Carolina 3. Georgia 4. Mississippi 5. Missouri 6. Delaware 7. Maryland 8. Wisconsin 9. Washington DC Will Soon Be In:
1. Minnesota 2. Illinois
Key In: In Soon: Not In: Source: Team Analysis
30
TOPO’s Competitive Advantage:
Competitive Advantage Derived From…
Efficient removal of heads & tails = ↓ cost EQUIP./EMPLOYEE
↓ energy & water waste = ↓ cost EQUIP./PROCESSES
Premium distilling column yields efficient distillation (↓times=↑flavor) EQUIPMEMENT
Smaller aging barrels = ↑ surface area = same taste from ↓ time EQUIPMEMENT
Fewer marketing costs = ability to undercut the competition w/= quality LITTLE GUY
Demand ≤ Production Capacity = no need to mix low quality product in LITTLE GUY
Raw materials are local ORGANIC
Care about the environment ORGANIC
support small farming operations ORGANIC
sustainability ORGANIC
Use better products (wheat is 3x more expensive than corn) PREMIUM INPUT
Source: Team Analysis 31
TOPO’s Annual Production Capacity
TOPO Vodka
current volume: 1,000 cases
TOPO Gin
current volume: 500 cases
TOPO Carolina Whiskey Age Your Own Whiskey Kit current volume: 600 cases
TOPO 8 Oak Wheat Whiskey
current volume: TBD
TOPO Straight Wheat Whiskey
Max capacity: 5,000 cases
Production Capacity is 8,000 cases. Assuming 12 bottles in a case, production capacity is 96,000 bottles.
Source: Team Analysis / Scott Maitland *all numbers are estimates
32
TOPO Current Revenue
Sales Volume (cases) Sales Volume (Bottles) Revenue*
Vodka 1,000 12,000 $147,360
Moonshine 600 7,200 $88,416
Gin 500 6,000 $73,680
Total 2,100 25,200 $309,456
Whiskey Kits 250 1,000 $32,475
Total 250 26,200 $341,931
33 Source: Team Analysis, TOPO
*Assumed Revenue of 12.28/bottle 6.66 profit, 5.62 cost
COMPETITOR ANALYSIS
34
Wheat Whiskey Competitors
Product Distillery State
OYO Wheat Whiskey Middle West Spirits OH
Bernheim KY Straight Heaven Hill KY
WA Wheat Whiskey Dry Fly Distilling WA
Cedar Ridge Wheat Whiskey Cedar Ridge IA
77 Whiskey Breuckelen Distilling NY
Buggy Whip Wheat Whiskey Journeyman Distillery MI
Original Spring Wheat Whiskey Roughstock Distillery MT
Wheat Whiskey It’s 5 Distillery WA
Masterson’s Straight Wheat Whiskey 35 Maple Street Spirits CA
2nd Chance Wheat Whiskey Sonoma County Distilling CA
Westchester Wheat Whiskey StilltheOne Distillery NY
Bill’s Michigan Wheat Whiskey New Holland Brewing MI
Fearless Wheat Whiskey Catskill Distilling NY
John Myer Wheat Whiskey Myers Farm Distilling NY
35 Source: Respective distillery Websites
Wheat Whiskey Competitors (cont.)
Product Distillery State
Texas Wheat Whiskey Banner Distilling Co. TX
Organic White Wheat Whiskey Wigle Distillery PA
McKenzie Wheat Whiskey Finger Lakes Distilleries NY
Ottis Webber Oregon Wheat Whiskey Oregon Spirit Distillery OR
G.R. Low Gap California Whiskey American Craft Whiskey Distillery CA
Desert Durum Wheat Whiskey Arizona Distilling Co. AZ
Hopped Wheat Whiskey Copper Run Distillery MO
High Wheat Whiskey Coppercraft Distillery MI
Wheat Whiskey Spirit Works CA
Wheat Whiskey Seven Brothers OH
Wheat Whiskey Corsair Distillery TN
Wheat Whiskey Bully Boy Distillers MA
Wheat Whiskey Koval IL
Wheat Whiskey Northern Waters Distillery WI
36 Source: Respective distillery Websites
No wheat whiskey distillers operate within SE states
Source: Simply Map
Wheat Whiskey Distillery 37
BRAND Aging Price Packaging Product Branding
TOPO Straight
Wheat Whiskey 2 years $45 – 55
Round bottle
within Box
“Leading the modern whiskey rebellion:
smooth, sustainable, straight from the grain
to the glass”
OYO Wheat
Whiskey >1 year $51.99
Short, round
bottle
“Originally distilled” by “time tested distilling
traditions”, “all natural”
Dry Fly WA Wheat
Whiskey >1 year $49.99
Short, round
bottle
“Discover distilled difference”, “farm to
bottle approach”, “local and sustainable”
Bernheim Wheat
Whiskey 7 years $26.95 Flat bottle “Well worth the wheat”
Bill’s Michigan
Wheat Whiskey 1.2 years $56.99
Short, round
bottle
“Small barrel program with a focus on
Michigan agriculture”
TOPO can differentiate its Reserve Straight Whiskey from other prominent craft wheat whiskeys
Source: Respective distillery Websites 38
TOPO can differentiate its Reserve Wheat Whiskey from other American whiskeys
39
BRAND Aging Price (per
750 mL) Packaging Product Branding
TOPO Straight
Wheat Whiskey 2 years $45 - 55
Round bottle
within box
“Leading the modern whiskey rebellion:
smooth, straight from the grain to the
glass, sustainable”
Bulleit Small Batch
Bourbon 10 years $47.95
Flask-shaped
bottle
“Bulleit bourbon is distilled and aged in
small batches”, “spicy character with a
distinctively smooth, clean finish”
Russell’s Reserve
Small Batch 10 years $38.95
Short, round
bottle “only a handful of barrels are selected”
John J. Bowman
Single Barrel 10 years $49.95
Horseshoe
shaped bottle
“Experience the pioneering spirit of our
historic family-owned distillery
in…Virginia”
Woodford Reserve
Double Oaked ~ 8 years $54.95
Rounded square
bottle
“an innovative approach to twice-barreled
bourbon”, “uniquely matured”
Jefferson’s
Reserve Very Old
Straight Bourbon
“very old”
(formerly
15)
$52.95 Rounded square
bottle
“pushing the boundaries of the definition
of bourbon”, “big and bold”
Source: Respective distillery Websites
The growth of the Rye Whiskey market shows the potential for Wheat Whiskey
Large distillers realize the opportunity and create their own brands of Rye whiskey
Craft Distillers begin producing rye whiskey
Consumers become increasingly aware of Rye’s special qualities
In 1990’s bartenders rediscovered the use of Rye whiskey in cocktails
Most rye distilleries were closed by the 1970s
After Prohibition and World War 2 Rye Whiskey was unpopular
40 Source: Impact Databank
TOPO fits with majority of factors contributing to growth of whiskey sales in 2013
Growing middle classes with disposable income
Premiumization trend
Liquor as an affordable luxury
Consumer interest in unique products
Taste for American heritage
41 Source: DISCUS
Templeton has many similarities to TOPO and capitalized on the Rye whiskey trend
Source: Fox News Magazine 42
Templeton Rye soared
in popularity
Unique story in the whiskey
business
Began production in
2006 when Rye Whiskey market was small and
relatively unknown
Hidden Gem that people don't know
about until they try.
People were searching for
something different
After trial people
understand why it is special
PRODUCT
43
Competitor Packaging
Brand Makers Mark
Jim Beam
John Bowman
Woodford Reserve
Knob Creek
Russell’s Reserve
Brand Bulleit Dry Fly Bill’s
Michigan Wheat
Bernheim OYO Jefferson’s
Reserve
Image Sources: Distillery Websites
Effectiveness of good packaging for spirits
45 Sources: The Drinks Report; Datamonitor; Nancarrow, Wright and Brace; MarketingProfs; FoodBev Media
86% alcohol producers consider packaging design “very important” to their drinks brand. 100% of alcohol producers expressed that redesign of brand had increased their sales, in which 91% of them experienced remarkable increase in sales.
Sales
Most important decisions of redesign of brand are: 1) New design increases perceived value of product, 2) Keeping brand character by updating image, and 3) Creating differentiation on the shelf.
Design
Intricacy and artistic packaging seen with spirits attract attention, and it can also be seen as a display piece.Given the more competitive environment, products need to capture attention and communicate effectively with packaging designs and getting consumers to notice its messages
Attention
Business with strong attention to packaging show 30% increase in consumer interest. 32% consumers believe packaging influence the products that they buy. 25% of consumers have purchased products based on packaging.
Behavior
Promoting sustainability could convey multiple positive messages to consumers and command premium price
46
17%
26%
37%
38%
39%
43%
Do Not Consider Sustainability
Set a Good Example for Family
Believe Products are Healthier
Support Companies "doing theright thing"
Better Quality/Taste
Protect the Environment
Reasons Consumers Consider Sustainability When Making Food Purchase Decisions in US
Source: Statista, ORC International; Datamonitor
20% consumers would pay
premium for spirits made from organically sourced ingredients.
50% spirit drinkers look for
on-pack ethical/ sustainability logos occasionally. Spirit drinkers want to know how and where their drinks were made.
TOPO Whiskey embodies several “trendy” categories
47
61%
63%
64%
69%
70%
77%
Food liquor/cocktail pairings
'New-Make' whiskey
Regional signature cocktails
Culinary cocktails (savory, freshingredients)
Locally produced beer/wine/spirits
Micro-distilled/artisan spirits
U.S. bartenders' rating of spirits as 'hot trend' by category 2014
Source: Statista, National Restaurant Association
PRICE
48
MSRP should be $50 with TOPO’s mark-up of $9.60
49
Consumer
Liquor Store
Distribution Center
TOPO
$50
$26.04
$21.17
$11.47 (CGS)
Mark-up: $9.60
Party Purchase Price
Mark-up %
92%
23%
45%
----
Source: ABC; BizMiner
Benchmark Price Categories for Distilled Spirits
50
Category Retail Price Per Bottle*
Value <$12
Premium $12 - $18
High End $18 - $30
Super Premium $30+
*Category Price Range varies by spirit types *Market leaders were used to define segments Source: DISCUS
Consumers are more likely to pay a premium price for whiskey
51
% consumers willing to pay premium price
60%
61%
61%
62%
65%
Gin
Tequila
Vodka
Rum
Whiskey
Source: Datamonitor
TOPO Straight Wheat Whiskey has many qualities that command a premium price
11%
13%
13%
14%
15%
21%
22%
23%
33%
53%
59%
Produced Locally
Organically Sourced Ingrediants
Imported Product
Packaging
Craft/artisanal Production
Recommendation
Limited Edition Product
Natural Ingrediants
Pairs Well With food
Unique Taste
Better Taste
Factors that Enourage Consumers to Pay More for Spirits
Source: Datamonitor 52
TARGET MARKET
53
Target market is likely to learn about TOPO through our packaging and word-of-mouth
42%
59%
65%
70%
Online
Word of Mouth
Store Signs
Packaging
25-45 Year Old’s Method for Identifying Locally Produced Food/Drink Brands
54 Source: Mintel
Liquor store is most common place for 25-44 year olds to buy liquor
0
10
20
30
40
50
60
70
80
90
At a liquor store At a grocery store At a club store At a super center Through an onlineretailer
None of the these – I do not personally
purchase dark spirits
Per
cen
t
Where dark spirits are purchased most frequently, by age group
25-34 35-44
55 Source: Mintel
Our target market is likely to purchase TOPO’s straight wheat whiskey
56 Source: Datamonitor
35 – 44 year old consumers are most likely to
buy at the premium end of the price range
22 – 34 year olds are most likely to experiment with
new brands when purchasing
spirits Target market of 35 – 44 year olds is likely
to buy TOPO’s premium straight
wheat whiskey
Men are 110% more likely to
consumer whiskey at least
once a week than women
DISTRIBUTION
57
Phases By State
Phase 1 States: Currently Selling In: 1. North Carolina 2. South Carolina 3. Georgia 4. Mississippi 5. Missouri 6. Delaware 7. Maryland 8. Wisconsin 9. Washington DC Will Soon Be In: 1. Minnesota 2. Illinois
Source: Team Analysis 58
Phase 3 States: 1. Alabama 2. Indiana 3. Michigan 4. New York 5. Ohio 6. Pennsylvania 7. Virginia
Phase 2 States: 1. Arkansas 2. California 3. Florida 4. Kentucky 5. Louisiana 6. Tennessee 7. Texas
Phase 1 States: Currently Selling In: 1. North Carolina 2. South Carolina 3. Georgia 4. Mississippi 5. Missouri 6. Delaware 7. Maryland 8. Wisconsin 9. Washington DC Will Soon Be In: 1. Minnesota 2. Illinois
Key Phase 1: Not In:
Phase 1: Leverage current distribution channels
Source: Team Analysis 59
Phase 2 States: 1. Arkansas 2. California 3. Florida 4. Kentucky 5. Louisiana 6. Tennessee 7. Texas
Key Phase 1: Phase 2: Not In:
Phase 2: Expand into states with the highest demand potential
Source: Team Analysis 60
Phase 3 States: 1. Alabama 2. Indiana 3. Michigan 4. New York 5. Ohio 6. Pennsylvania 7. Virginia
Key Phase 1: Phase 2: Phase 3: Not In:
Phase 3: Continue to grow in states with high demand
Source: Team Analysis 61
Factors to consider when selecting states for distribution
62
Factors
Size of Male
Population
Size of 25-44 Age
Distribution
Strictness of Laws
Size of Alumni
Network
Availability of Liquor
Amount of states taxes
Number of competitor distilleries
Source: Team Analysis
SE is a clear choice in where to expand first
Region 2012 Spirits
Sales
Sales Growth of Spirits
from 2011 to 2012
How Many States in the Region Use
Public Liquor Stores
Number of Wheat
Whiskey Competitors
Number of Males age 25 to 44 in the
Region
W
MW
S
SE
NE
63 Source: Team Analysis
SE is the clear choice in where to expand first (cont.)
Region 2012 Spirits’
Sales
Sales Growth of
Spirits from 2011 to
2012
How Many States in the Region Use
Public Liquor Stores
Number of Wheat
Whiskey Competitors
Number of Males age 25 to 44 in the Region
W 101,747,977 3.28 4/10 5 9,078,155
MW 115,340,018 4.07 4/13 8 8,737,238
S 59,508,326 2.82 2/6 2 6,328,160
SE 112,242,356 5.35 3/11 2 9,572,582
NE 105,887,819 1.74 4/11 7 8,016,376
64 Source: Team Analysis
Phase 1 Model: Leverage current distribution channels
Phase 2 Model: Expand into states with the highest demand potential
Phase 3 Model: Continue to grow in states with high demand
Phase 4 Model: What we believe is the next best option for expansion
Phase 5 Model: Further expansion options
Phase 6 Model: States with greatest risk
The Three-Tier System must be considered when selecting distributors
71
TIER 1 Producers
TIER 2 Wholesalers/ Distributors
TIER 3 Retailers and Bars
TOPO Distillery
Independent/Private State(or contracted)
control
Independent/Private Private State
Control
Bars
Consumers
Source: Team Analysis
Establishing relationships with distributors is key to getting the product to retailers
72
Getting product onto many store shelves often requires getting carried by a distributor
Bars and restaurants will usually only work with
only one or two
Liquor stores will frequently carry products from multiple distributors
Large distributors makes it easier for many bars to
order product
Small distributors can your product more time and
attention
Source: Inc.
ROLLOUT PLAN
73
Brand Target Expand Impact & Risk
TOPO should rollout their straight wheat whiskey following the expansion plan
74
Source: PewResearch, EuroMonitor, Nielsen, eMarketer, Inc.
Expand
Brand • Design informative and attractive packaging
• Identify local and recycled materials
• Publish appealing pamphlet that will communicate our story to distribute to bartenders5
• Sustain premium brand image
Target • Negotiate incentive structure with distributors to push into bars (56%)2
• Leverage existing social media to introduce product
• Educate bartenders on blogs (80%)4
• Interact with online opinion leaders through organic publicity3
• Interact with online opinion leaders through organic publicity3
Expand • Leverage existing bar networks
• Phase 1 • Phase 2 (2016)
• Phase 3 (2017)
Launch product: July 1st, 2015
Winter 2014
Word of mouth and suggestions are influential in the alcohol consumption choice of consumers
17%
18%
19%
[VALUE]
22%
Drink Specials
Bartender Suggestion
House Specialty
Recommendation of Friend/Family
Drink listed on Beverage Menu
Top Influencers on On-Premise Alcohol Consumption
75 Source: Nightclub.com
Bars provide an ideal location to connect product with consumers who are open to trying new drinks
76
71%
59%
38%
On-premise consumers who did not know what type of drink/alcohol they would order in advance
On-premise consumers tried a new drink in past 90 days
Would upgrade drink if recommended by their server
16% Have NOT tried a new drink in past year
Source: Nightclub.com
Bars act as a location for consumers to sample the product and could spur increased sales
Average cumulative first repeat purchase rose*:
11% for product
6% for the brand franchise
77 Source: PromoWorks and Knowledge Networks-PDI R.I.S.E Study
*Over a 20 week period
Average cumulative new buyers rose: 85% for product 23% for the brand franchise
Bartenders play a critical role in educating and informing customers
78 Source: Imbibe Magazine, New York Times
Many customers come for a whiskey education 3
“All the big brands have to pay attention to the bartenders now; Bartenders make the sale for you.” 5
“Bartenders are reaching a level of influence that they had pre-Prohibition” 4
Educates customers about unique qualities of whiskeys 1
"Bartenders are the gatekeepers to consumers” 2
B A R S
1-Jackson Cannon, bar manager at Eastern Standard in Boston 2 Scott Goldman, importer 3 Mike Miller, owner of Delilah’s, a bar in Chicago 4 Giles R. Woodyer, the brand managing director for Bacardi USA. 5 Renowned London barman Nick Strangeway
Advertisement channels that cause consumers to take action
45%
51%
56%
60%
65%
79%
Billboards
Ads on Radio
Ads In Magazines
Consumer Opinions Posted Online
Ads on TV
Recommendations
Source: Nielson
Festivals and Awards can increase brand and product awareness and generate sales
A Rittenhouse whiskey won “North American
Whiskey of the Year” at the San Francisco World
Spirits Competition
The Whiskey became a top seller at influential New York bars, such as Pegu Club and Milk &
Honey.
Company receives daily e-mails from people
around the country, who are searching to find the
popular spirit.
80 Source: Imbibe Magazine
Target Market seeks out product information and trusts online reviews
Source: Pew Research, Statista, Adobe Systems eMarketer, AYTM
• Consumers indicated that user product reviews are the best source of truth in advertising
67%
• US internet user have trust in online reviews 79.7%
• 18-49, male, affluent demographic research products online >75%
Target Market could be reached partially through magazines and blogs
Source: Ipsos
24.1% read magazines
31.4% blog activity online
56.7% research product information
Affluent American Households
Digital magazines can spur consumers to research and consider product
18%
20%
20%
70%
Visited Product Website
Considered Purchasing Product
Looked for More Information
Take Any Action
Action Taken After Seeing Ad in Digital Magazine
Source: Statista, MPA
Consumers have two primary routes to try and purchase the product
84
Bars
Liquor Store
Interest
No Interest
Purchase
No Purchase
Recommended
Not Recommended
Liked
Disliked
Goal: for target market to purchase TOPO whiskey at liquor stores
Source: Team analysis
FINANCIALS
85
Bar-Driven Demand and Sales
YEAR 1 DATA SOURCE: Simply Map
U.S. Census Data (FactFinder)
2011 County Business Patterns, US Census Bureau Assumption
Simply Map; MRI Consumer Survey
Col. 5 * Col. 6* Col. 3 * Col. 310
Assumption (based on estimated "push" technique reach and effectiveness) Col. 7 * Col. 8
www.nightclub.com
Years Present in State State
Population of males ages 25-44
% of households with over $75k in annual income
Number of bars in the state
% of bars in state offering TOPO spirits
% Households Participating - Leisure Activities: Go to bars/night clubs: Participated in last 12 months, 2013
Gross # of target market attending bars serving TOPO spirits at least once in last 12 months
% of patrons receiving whiskey recommendation from bartenders
Gross # of bar patrons who are recommended TOPO whiskey by bartender
% purchasing TOPO whiskey at bar after recommendation
Column1 Column2 Column3 Column310 Column4 Column5 Column6 Column7 Column8 Column9 Column10
1 DC 113,535 66.0% 109 15% 16.61% 1900 15% 285 18%
1 Delaware 107,513 65.6% 59 15% 18.01% 1900 15% 285 18%
1 Georgia 1,376,626 51.3% 450 15% 16.99% 18000 15% 2700 18%
1 Illinois 1,739,305 63.3% 2795 15% 16.87% 27900 15% 4185 18%
1 Maryland 768,740 78.3% 575 15% 17.07% 15400 15% 2310 18%
Assumption (TOPO whiskey is one of 40 menu items, equal chance of ordering each) www.nightclub.com
Col. 12 + (Col.9 - Col. 12) * Col. 10
Assumption (product quality perception estimation) Col. 13 * Col. 14 Assumption Col. 15 * Col. 16
Assumption (product quality perception estimation) Assumption
Col. 17 * Col. 18* Col. 19
Col. 17 * Col. 20
% of patrons ordering TOPO whiskey off of menu without receiving any recommendation
Gross # of patrons ordering TOPO whiskey based on the menu
Gross # purchasing drink containing TOPO whiskey while at a bar
% enjoyed TOPO enough to buy again
Gross # willing to buy bottle
% following through with purchase at liquor store
Gross # driven to buy bottle at liquor store
% Buying another bottle in the same year
Average annual repeat purchaes
Total repeat sales (# of bottles)
Total sales driven by bars (# of bottles)
Column11 Column12 Column13 Column14 Column15 Column16 Column17 Column18 Column19 Column20 Column202
2.5% 47 89 30% 26 40% 10 20% 2 4 14
2.5% 47 89 30% 26 40% 10 20% 2 4 14
2.5% 450 855 30% 256 40% 102 20% 2 40 142
2.5% 697 1324 30% 397 40% 158 20% 2 63 221
2.5% 385 731 30% 219 40% 87 20% 2 34 121
Word of Mouth Driven Demand and Sales
Col. 15 + Col. 46 Assumption Col. 22 * Col. 23
Assum-ption
Col. 24 * Col. 25
www.nightclub.com Col. 25 * Col. 26
Assum-ption Assumption
Col. 27 * Col. 28 * Col. 29
Total # of people who have tried TOPO whiskey and enjoyed it
% recommending product to others
Gross # recommending product
Average recs. given
Gross # recommended TOPO whiskey
% purchasing based off of recommendation
Total bottles purchased based off of recommendations
% Buying another bottle in the same year
Average # of repeat bottles purchased annually
Total repeat sales (in bottles)
Column22 Column23 Column24 Column25 Column26 Column27 Column28 Column29 Column30 Column31
30 20% 10 2 20 20% 4 20% 2 1
32 20% 10 2 20 20% 4 20% 2 1
319 20% 60 2 120 20% 24 20% 2 9
493 20% 100 2 200 20% 40 20% 2 16
260 20% 50 2 100 20% 20 20% 2 8
Point of Sale Demand and Sales
SimplyMap DISCUS Report
Calculated using data from DISCUS and SimplyMap
(Col. 33 * Col. 34) / Col. 35
Assumption (based on distribution)
Assumption (based on packaging uniqueness)
Col. 36 * Col. 41 * Col. 37 Assumption
Col. 38 * Col. 39 Assumption
Col. 40 * Col. 45
Gross whiskey sales ($)
% of whiskey sold that is super-premium
Average price of super premium bottle of whiskey ($)
Gross # of super-premium whiskey bottles purchased
% of liquor stores carrying TOPO whiskey
% whose attention and interest are grabbed by TOPO whiskey's package
Gross # looking at TOPO whiskey
% choosing TOPO whiskey
Gross # buying TOPO whiskey
% enjoyed TOPO enough to buy again
Gross # who enjoyed TOPO wheat whiskey
Column33 Column34 Column35 Column36 Column41 Column37 Column38 Column39 Column40 Column45 Column46
2934500 18.3% 46.65 11511 10% 25% 288 5% 14 30% 4
4707800 18.3% 46.65 18467 10% 25% 462 5% 23 30% 6
43046600 18.3% 46.65 168864 10% 25% 4222 5% 211 30% 63
65897400 18.3% 46.65 258504 10% 25% 6463 5% 323 30% 96
28093900 18.3% 46.65 110207 10% 25% 2755 5% 137 30% 41
Cost and Pricing Analysis for TOPO Straight Wheat Whiskey
STRAIGHT WHISKEY GIN/VODKA/EIGHT OAK
Direct Materials $6.76 $3.57
Bottle $1.62 $1.62
Wheat $1.03 $1.03
Cork $0.30 $0.30
Label $0.23 $0.23
Water $0.17 $0.17
Cardboard Box $0.11 $0.11
Neck Strap $0.05 $0.05
Wood box, glass lid, box labels $3.00 $-
Barrel $0.25 $-
Energy $0.06 $0.06
Tax $2.25 $2.25
TOTAL $9.01 $5.82
Sale price to distributor: $20.71 $12.48
Sale price to liquor store: $25.48 $15.60
Sale price to final consumer: $48.99 $29.95
PROFIT (Per Bottle) $11.71 $6.66
(Red boxes Boxes represent assumptions)
Cost and Pricing Assumptions for TOPO Straight Wheat Whiskey
Line Item Assumption Value
Pricing Assumption Source
Price of recommended wooden box: $3.00 Ali Baba (www.alibaba.com), www.woodpak.com, www.stellarwineproducts.com, www.woodthings.com
Barrel Price, per bottle $0.25 $265 dollar for 55 gallon barrel (www.gotmead.com), assuming whiskey is barrelled at 125 proof then bottled at 92 proof
Annual Energy Cost $60,000.00 BizMiner (small distillery common-sized statement)
Markup
Distributor Markup Over Cost 30.0% BizMiner (liquor wholesaling gross margin)
ABC Store Markup 92.2% ABC store regulations (http://abc.nc.gov/Pricing/Breakdown)