Independent Beverage Groupindependentbeveragegroup.com
Joe Thompson
2591 US Hwy. 17 S.Suite 302
Richmond Hill, GA 31324
843 384-0828
Todd Arnold
4370 Crestone Cir.Broomfield, CO 80023
303 410-7748
Jerry McNabb
VP, Shared Services8766 Charel Rd
Blaine, WA 98230
(o) 360-933-1440(p) 360-961-2164
Corporate Office
2591 US Hwy. 17 S.Suite 302
Richmond Hill, GA 31324
843 681-6333
Presentation available online at independentbeveragegroup.com
Volume• Moving Forward
• Industry volume will be down (-1.0% through 2020).• ABI and MC will each be down.
• All Others will be up.
2
2014 2015 2016 2017 2018 2019 20200.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0 148.5143.3
138.1132.6
127.1121.4
115.5
61.1 64.1 67.3 70.7 74.2 78.0 81.9
ABI / MC
3
Assumes overall industry will be down 1.0% during each of the forecast years.
ABI & MC vs. All Others Forecast
All Others
% of Absolute Alcohol
2001 2003 2005 2007 2009 2011 2013 2015 (est.)
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
59.6% 58.5% 57.0% 56.3% 55.2% 53.2% 52.0% 50.9%
27.6% 27.9% 29.0% 29.5% 30.4% 31.8% 32.5% 33.3%
12.8% 13.6% 14.0% 14.2% 14.4% 15.0% 15.5% 15.8%
4
Distilled Spirits Council
Beer
Spirits
Wine
Per Capita Consumption - BeerIn Gallons
5
2005 2007 2009 2011 201326.0
26.5
27.0
27.5
28.0
28.5
29.0
29.5
30.0
30.5
31.0
30.330.6
29.5
28.2
27.6
6
• IBG estimates:• 2010 – 950 = 90% of volume.• 2020 – 650 = 85% of industry volume.• Self distribution, sort drink, specialty = 1,000 – 2,500.
Distributors Declining – Craft Brewers Increasing
1970 1990 1995 2000 2005 2010 2013 20200
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,5004,000
2,9752,615
2,2671,905
950 900650
Brewers 2020???????????
42
3,200
Beer Brands by Segment -TUS Multi Outlet + Convenience
2011 2012 2013 YTD
57 60 63 63116 113 102 92
748 801 801 765
2669
3109
3451 3493
125 130 134 122215 220
231 216
101 144 193 197
Premium Sub Premium Import Craft Super Premium PAB Cider
As of mid-year, craft brands and cider brands have already surpassed their numbers in 2013 (based on brands selling more than 1 case).
Total Brands4,031
Total Brands4,577
Total Brands4,975
Total Brands4,948
Source: Bump Williams Consulting
7
Beer SKUs by Segment 2010-2013TUS Multi Outlet + Convenience + RMA Sum of Total Liquor Stores
Source: Bump Williams Consulting
2010 2011 2012 2013
469 499 528 551501 519 535 555
1523 16261781 1891
3229
3772
4421
5156
314 347 399 460264 365
447 519
116 128 176 315
Premium Sub Prem Import Craft Sup Prem PAB Cider
The net number of beer SKUs increased by 4,031 or 62.8% over these four years (based on SKUs selling more than 1 case).
Total SKUs5,416
Total SKUs7,256
Total SKUs8,287
Total SKUs9,447
8
2008 2009 2010 2011 YTD 20120
100
200
300
400
500
600
700
800
900
217 228 239 254 271
113 115 117 120 12694 89 76 67 69
586647
693760 767
TOTAL U.S. FOOD TOTAL U.S. CONV TOTAL U.S. DRUG Sum of Total Liquor Stores
Avg Items Carried Per Store - 2008 – 2012 Time Series by Channel
Avg. Items Per Store 1,010
2008 – 2012 Increase In Avg Item Per Store 224 or
+22%
Avg. Items Per Store 1,080
Avg. Items Per Store 1,124
Avg. Items Per Store 1,202
Avg. Items Per Store 1,234
Source: Bump Williams Consulting
9
10
Volume• Distributors and retailers are very focused on above premium
category. • Industry is losing heavy beer drinkers due to aggressive pricing. Millennials
enjoy craft, FMB’s and cider and drink less than past consumers. • Is our industry spending enough time and attention on premium, premium
light and sub premiums?• Currently All Others sell 61M bbls while ABI and MC combined sell over
148M bbls.• Are you spending twice as much time on premium, premium light and sub
premium as you spend on All Others?• How many presales people did you have in 2008? How many do you have
now?• Is retail taking space from ABI / MC and giving it to specialty, craft, FMB’s,
etc.?
• We are not saying to diminish effort on All Others, only increase effort on premium, premium light and sub premiums.
11
Margin
• Margins will be up but will increase slower.• Return to normal at CPI– 2.5% to 3.0%.
12
Distributor Gross Profit Slowing
2005 2007 2009 2011 2013 2014 (est.)0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
1.1%
4.5%
5.9%
8.1%
4.5%
2.3%
13
Cost• Labor costs will increase.
• Number of people.• Particularly ABI/MC sales people.
• Wages per person.
• Capital expenditures will increase faster than before.• Many distributors have used up excess capacity.
• Size matters.• Mega distributors.
• 16% cost / 26% margin / $1.75 ++ profit per c/e.• 30 distributors = 30% of volume.
• Traditional distributors.• 21 % cost / 25% margin / less than $1.00 profit.• 920 = 60% of volume.
• “All Other” distributors will increase but will be more expensive to operate. • 1,000 to 2,500 = 10% of volume.
• Plenty of access to market.
14
Profitability
2005 2007 2009 2011 2013$3.25
$3.45
$3.65
$3.85
$4.05
$4.25
$4.45
$4.65
$4.85
$5.05
$3.55$3.71
$3.94
$4.25
$4.51
$3.55
$3.75
$4.15
$4.60
$4.91
NBWA Productivity Report IBG
15
Distributor Gross Profit Per Case
16
Distributor Operating Profit Per Case
2005 2007 2009 2011 2013$0.40
$0.50
$0.60
$0.70
$0.80
$0.90
$1.00
$1.10
$1.20
$1.30
$0.53$0.59
$0.67
$0.75$0.80
$0.60
$0.75
$1.00
$1.10
$1.25
17
Consolidation• Pace of consolidation will increase.
• Value will depend on location, portfolio depth and diversity, strategic potential, number of people interested.
• Access to market will be expanded.• Self distribution, Specialty Distributors, Wine / Spirits, Distributors, Soft Drink Bottlers.
• Industry will be less stable.• Legislative changes escalating. • On-going violations of 3-tier principles.
• Supplier self distribution.• Distributors with more diverse portfolios makes it harder to defend beer’s
protection.
• Mega distributors, supplier distribution and specialty distributors will grow while traditional distributors will get squeezed from both ends.
• Value of distributorships has grown significantly.• Less desirable markets will be difficult to sell.• Growth markets with good portfolios can name their price.
MT
WY
ID
WA
OR
NV
UT
CA
AZ
ND
SD
NE
CO
NMTX
OK
KS
AR
LA
MO
IA
MN
WI
IL IN
KY
TN
MS AL GA
FL
SC
NC
VAWV
OH
MI
NY
PA
MD
DE
NJ
CTRI
MA
ME
VT
NH
ABI
ABI Hensley
ABI
ABI Hand
ABI
Ben E. Keith
Nau
Lamantia
ABI Mega Distributors
ABI
ABI
Dobbs
Jefferies
18
Stokes
Keith & Don
DormityX
X
X
X
XX Hand
CoHo MT
WY
ID
WA
OR
NV
UT
CA
AZ
ND
SD
NE
CO
NM
TX
OK
KS
AR
LA
MO
IA
MN
WI
IL IN
KY
TN
MS AL GA
FL
SC
NC
VAWV
OH
MI
NY
PA
MD
DE
NJ
CTRI
MA
ME
VT
NH
Ingram
Reyes Goldring / Moffat
MC
Reyes
Keg 1
Andrews
Gold Coast
Goldring / Moffat
?
Taylor
MC Mega Distributors
Andrews
Reyes
GlazerReyes
ReyesGlazer
Taylor
MonarchClay
Clay
Clay
19
X
X
X X
X X
X
North Coast
X
MT
WY
ID
WA
OR
NV
UT
CA
AZ
ND
SD
NE
CO
NM
TX
OK
KS
AR
LA
MO
IA
MN
WI
IL IN
KY
TN
MS AL GA
FL
SC
NC
VAWV
OH
MI
NY
PA
MD
DE
NJ
CTRI
MA
ME
VT
NH
Craft Mega Distributors
20
Sheehan
Sheehan
Sheehan
Sheehan
Sheehan
Sheehan
Sheehan
X
Click
Saccani
Brown
Ben E. KeithLamantia
NackardClement
X
XX
XSW&S
SW&S
Young
Self
Wirtz
Major Brands
Maletis
Stone
X – W/S with significant beer.
Rucker
Positives• Craft category’s creativity, intellect and entrepreneurial spirit
creates excitement in industry.• Beer distributors retail penetration is superior to wine and
spirits / specialty and self-distribution (structural advantage).• Soft drink?
• ABI distributors Monster performance vs. Coke Bottlers.
• Marketing potential.• Import / craft marketing is fabulous. • Major brewers marketing potential.
• Growing Hispanic demographic.• Potential to expand consumer base with sweeter, flavored
products to women and young adults.• Increasing competition.
• Gold system (Crown) is a 3rd competitor to ABI / MC.
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Major Points• IBG believes volume will be negative for several years.• We get a new generation of consumers in 2020 to 2025.• Wine and spirits will try to take share of stomach and will
not stop until someone stops them.• Beer distributors will become beverage distributors.
• Beer distributors make less per case but sell more cases and could make more money.
• Beer distributors will have less franchise protection in some states.
• Beer Distributors will need to allocate more resources to mega brands.• Mega brands will not continue to pay the freight for others.
22
INDEPENDENT BEVERAGE GROUP
MODEL 2020
24
Model - 2020
• Challenge:• How to add complexity, contain costs and provide “brand building” benefits.
25
Model – 2020• “Gigantic” attitude adjustment.
• ABI’s Impact Selling System was fantastic push system.
• Distributors need to focus on marketing to consumers at retail (pull, not push).
• Do you believe beer distributors can significantly influence consumer purchase at retail?
• Account managers should be responsible for creating a dynamic purchase environment that emphasizes brand development – “pull” marketing.
• More time to sell at store level.• More presales people.• More E-commerce.• Transition replenishment from presales person to retailers through
technology.• More inside selling in a professional manner.
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Model - 2020
• Volume.• Need to be beverage / DSD distributors.• Will have a larger geographical footprint.• Will have different territorial descriptions for different
categories.• Will have unique accounts.
• Operating Costs.• 12% - 30% average Operating Cost as a % of sales depending on
scale and performance requirements.• Mega – 12%, traditional – 18%, others – 30%.• ABI / MC and many distributors have recently cut costs and raised
prices but have been ineffective at marketing.• Many brewers are slowly taking margin from distributors and we expect this to
escalate.
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Model - 2020
• Margin.• 18% to 35%.• Average will tend to be lower than today.
• Profit.• More total profitability but less per case.
INDEPENDENT BEVERAGE GROUP
3 THINGS TO REMEMBER
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3 Things To Remember
• Distribution system needs to focus more time, people and money at improving retail performance (pull, not push).
• Distribution system will be more complex and less protected in the future.
• Consolidation will be much more difficult and time consuming due to the number of suppliers and categories involved.
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