Neil Kimberley's Bevnet Bevschool 101

Neil KimberleyBeverage Soothsayer

[email protected]@foodsfluidsbynd

My Past

$10,000

$5,400 $5,000

$4,100

$2,500 $1,700 $1,500

$1,100 $450 $375 $375 $237 $186 $104 $85 $80 $75 $50 $30 $28

Estimated Value Created From Beverage Enterprises = $33B

Your Opportunity

Seth Goldman, Honest Tea TEO

Run Away!

Agenda

BEVERAGE ABC’S

The Marketplace

Who Wins and Why

Your First Decisions…

What?

How?Who?

WHO – Consumers & Occasions

?

WHAT - Categories

Carbonated Soft Drinks

CSDs

Bottled Water

WHAT - CategoriesAlternative Beverages

Ready To Drink Tea

(RTD Tea)

Juices/ Juice Drinks

Lemon-ades

Energy Drinks

Enhanced Water

Sports Drinks

(Isotonics)

Coconut Water

WHAT - Packages

Single Serve

Multi Pack

Multi Serve

Immediate Consumption

Take Home

WHAT - Packages

Single Serve

Multi Pack

Multi Serve


Take Home

WHAT - Packages

Single Serve

Multi Pack

Multi Serve


Take Home

HOW - Retail Channels

Convenience Stores

Food Service

UDS


Low Volume/ High Profit

HOW - Channels

Convenience Stores

Food Service

UDS

Grocery

Mass

Club

Dollar


Take Home


High Volume/ Low Profit

HOW - Channels

Convenience Stores

Food Service

UDS (Mom and Pop)

Drug

Natural

Grocery

Mass

Club

Dollar


Take Home


High Volume/ Low Profit

Low Volume/ Low ProfitBoth

HOW - Route To Market (RTM)

Direct Store Delivery(DSD)

Collaborative Sales to RetailersDistribution System DeliversDistribution System Merchandises



Direct


Direct Selling to RetailersProduct Shipped to Retailers Distribution Centers Merchandized by Store Employees



Broker/Direct

Direct



Retail relationship with BrokerProduct Shipped to Retailers Distribution Centers Merchandized by Store Employees



Broker/Direct

Broker/Distributor

Direct



Retail relationship with BrokerProduct Shipped to Retailers Distribution Centers Merchandized by Store Employees

Retail Buyers relationship with BrokerProduct through multiproduct distributor Merchandized by Store Employees

The Strategy Decisions…

Who What How

Consumer

Category

Product

Package

Price

Profitability

RTM

Retailers

Organization

Marketing

Capitalization

The Runa Strategy…

The Runa Strategy…

Who What How

Consumer –

Young Urban Professionals Seeking A Healthier Energy Alternative

Category - Tea

Product – Guayusa

Package – Single Serve Glass

Price – Category Average

RTM - Natural Channel & DSD

Retailers – Natural/Urban UDS

Marketing – Sampling, PR, Word of Mouth

The Strategy Decisions…

Who What How

Consumer

Category

Product

Package

Price

(Profitability)

RTM

Retailers

Organization

Marketing

Capitalization

THESE DECISIONS ARE HARD TO CHANGE

Rules of Thumb – Margins

Grocery Retailers

Immediate Consumption Retailers

Mass Retailers

DSD Systems

Natural Channel Distributors

Brokers

~38%

~42%

~35%

~28%

10%- 20%

3%- 5% Of Gross

Rules of Thumb – Business

Trade Spend

Marketing Spend

Gross Margin

~15% of Gross Sales

~12% Of Net Sales

~45% Of Net Sales

Agenda

Beverage ABCs

The Marketplace

Who Wins and Why

The Squeeze

CARBONATEDSOFT

DRINKS

RTD Teas

Sports Drinks

HEALTH(IER)BEVERAGES

FUNCTIONALBEVERAGES

Energy DrinksEmerging Functions

Bottled Waters

Juices

LRB Retail Revenue ($B)


Source: Beverage Digest Annual Fact Book 2012

LRB Retail Revenue ($B)


Bottled Water

Alternative Beverages


LRB 8 oz Per Capita Comparison


2001 Total 1,062 2011 Total 1,173

LRB 8 oz Per Capita Comparison


2001 2011 Total 1,173 +111

CSD 691 (151)

Bottled Water 239 +154

Alt Bevs 243 +108

The Implication

Each Beverage Category Share point is worth $1.2B

Beverages Category is Growing 2 Pts/Year

CSDs are declining at 1.5 pts/Year

Every Year Consumers Are Spending ~$3B Incremental Outside CSDs

Alt Bevs $34B At Retail

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Juice/Juice Drink Sports Tea Dairy/Other Energy


Alternative Beverage All Channel Retail Sales 2001-2011

+38%

+9%

+8%

+7%

+6%

10 Yr CAGR


2011 Revenue By Brand ($M)

Venturing Groups

Pepsi Naked Brands Venturing

Group

Agenda

Beverage ABCs

The Marketplace

Who Wins and Why

5Traits OfSuccessful Beverage Brands

1MeaningfulProductDifferentiation

2Tenacious,Flexible, Multi-SkilledManagement

3 Effective Sales Strategy

Vitamin Water - Targeted Distribution

High Quality Execution

Consumer Events

Retailer Visibility

Distributor Confidence

45

Market Blitz 30+ People

Channels & Package Strategy

4Effective BrandActivation

Red Bull Street Activation

Activation Teams In Every Major City

Field Marketing Manager

On Premise Manage

r

Key Account Manage

r

Field Sales

Manager

Field Samplin

g Manage

r

Red Bull Activation Plans and executes

bar/club events

Executes Nationally Driven Off

Premise Retail Events

Create unpaid local exposure

• Coolers at radio stations• Coolers at local TV news• Locker rooms at local sports

teams

Plans and executes local sampling events

at retail and events

Links to Distributor• Maintains link between

microcell and distributor• Develops driver sales

people

48

5 Effective Capitalization

Investment Phases

Friends and Family•Product Development

•First Manufacture

•Minimal Staff

Angel Stage ~$3M•Regional Launch•Sampling & Trial•Staff Expansion•Supply Chain

Private Equity~$10M•Coastal Expansion

•Supply Systems•Trade Promotion Systems

•National Accounts

•Mass Channels•Marketing Investment

Strategic Acquisition~$50M + Up•National and International Expansion

•Portfolio Selling•Procurement Savings

•Mass Media

5 Hazards

1 Can’t ArticulateDifferentiation

2Saying “Yes” Too Often

3 Complexity

4Failing To Gather InsightOn Success

5UnderestimatingActivation

Strategic Acquirer Hot Buttons

Differentiated Growing Profitable

Business Fit

Incremental On Trend

What Will An Exit Look Like?

Dependent on Size, Profitability and Growth Potential

Profit is less important

Current multiples of revenue are around 2x to 3x

(Don’t use Vitamin Water as an example) Honest

Sweet Leaf

Izze

Fuze

Naked

Vitamin Water

0 2 4 6 8 10 12 14

2.3

2.4

2.5

2.6

3

11.7

Revenue Multiples at Exit

Neil KimberleyBeverage Soothsayer

[email protected]@foodsfluidsbynd