Growing & Protecting Value - PowerPoint Presentation

342 views
Uploaded On 2022-08-03

Growing & Protecting Value - PPT Presentation

In a rapidly changing world 1 2016 Spring Conference 2 Joe Thompson 8433840828 JoeIBG1987com Bobby Jarrell 7704870277 2591 US Hwy 17 S Suite 302 Richmond Hill GA 31324 BobbyIBG1987com ID: 933746

industry distributors distributor beer distributors industry beer distributor abi brewers profit volume brands 2015 brand growth price amp equity

Link:

Copy

Embed:

<iframe width="560" height="315" src="https://www.docslides.com/embed/933746" frameborder="0" allowfullscreen></iframe>

Download Presentation from below link

Download Presentation The PPT/PDF document "Growing & Protecting Value" is the property of its rightful owner. Permission is granted to download and print the materials on this web site for personal, non-commercial use only, and to display it on your personal computer provided you do not modify the materials and that you retain all copyright notices contained in the materials. By downloading content from our website, you accept the terms of this agreement.

Presentation Transcript

Slide1

Growing & Protecting ValueIn a rapidly changing world

2016 Spring Conference

Slide2

Joe Thompson

843-384-0828

Joe@IBG1987.com

Bobby Jarrell

770-487-0277

2591 US Hwy 17 S, Suite 302, Richmond Hill, GA 31324

Bobby@IBG1987.com

Tera Fisher

770-487-0277

2591 US Hwy 17 S, Suite 302, Richmond Hill, GA 31324Tera@IBG1987.com

Independent Beverage Group

Slide3

3Past

Change

Slide4

Present

Change happens

Slide5

FUTURE

Change happens – Like it or Not!

Slide6

6Todays Discussion:

History

Consolidation

Industry Numbers

Distributor NumbersSummary

Conclusion

Slide7

Beer Marketers InsightsBrewers

Association - Bart Watson

Bump Williams Consulting

Greg Owsley - The Storied Brand

Marc E. Sorini

- MWE LLP

Michael Homeyer - Wells FargoMike

MazzoniNBWA - Lester

JonesNeilsenPints LLC - Kimberly ClementsSeveral BreweriesSeveral DistributorsUS Bureau of Labor StatisticsWe’d Like to Thank the Following:7

Slide8

8Introduction:

IBG is passionate about the 3 tier

system:The best method of getting

a beverage product to the total

marketBest system to grow brand

equity

Today’s environment offers a great opportunity for the 3 tier system to prosper

Slide9

History 9

Slide10

Beer Industry in the 1970’sSingle Brewer distributors meant

they needed Franchise protection.

Television Advertising began to impact sales of beer in 1976

Price increase started being originated by the brewers at a 2/3 to 1/3 split. Previously 50/50 originated by distributors.

Distributor margins were 23%. Distributors had

basic push/pull responsibility

Distributors in fear of Brewery

Termination Stop every week at every account, service on premise and community involvement were key

Very loyal

consumersA few National and several Regional Brewers (50-100 Brewers)10

Slide11

Beer industry in the 1980’sA

/B beginning to dominate, several brewers

fail, Coors Expands (non-exclusive)Many Distributors had cash flow issues. Several distributors went

bankrupt

In 1988 IBG managed our first consolidation project with

Origlio

BevTelevision influencing beer drinkers at

Brewers expenseRetail chains coming into their own

Suppliers assume National Account responsibility at their expenseDistributor Value begins to increaseLoyal Consumers creating Equity Value11

Slide12

Beer Industry in the 1990’sLoyal

consumers but beginning of “acceptable set of brands

”AB Still dominates, but Bud began declining1992 Federal tax

increase hurts volumeService model beginning to change – replaced driver-sell and installed presell, tell sell

AB and Miller push exclusivity but consolidation grows

1 + 1 = 3 starting to be

understood by non-AB distributors

Boston Beer emerging, and AB notices

“Pleasure /Pain Concept introduced”Distributor Value Increases but slowly

AB and “all other” distributor attitude completely different12

Slide13

Pleasure and Pain;

With Beer Distributors, it takes both.

Emotions are as important as Economics.

Pleasure

Frustration/Pleasure

Pain

IBG Change Meter

No Profit, No Pressure, No Problem!

10-14%

4-7%(-1) – 1%

Slide14

Millenial generation less brand loyal

Price

war erupted in 2005, driving A/B Distributors to $0.55 profit per case equivalent

“Triangle of Terror” – consolidation process was terrible for

buyers and brewers

IBG (at Insights Conference): “distributors must reduce costs to

15% of sales from current 22% in order to compete with

Costco/WalMart at 12

– 15%. AB Management agreedNorm Adami

told large audience not to “do business with IBG” because Miller didn’t want Coors in its distributorsIn 2006, Interest rates dropped and stayed down2008 ABI and MC emergeBeer industry in the 2000’s14

Slide15

Maris litigation removes fear of termination from DistributorsA

fter 2006 the craft category, brands and SKU’s exploded

Distributors margins improving. Developing change in attitude and focus. Taking on new product entries, e.g.- craft, non-alcs,

W/S

Distributors view Brewery role as providing all pull while Distributors provide logistic - Push/Pull debate heated up

Brewer and distributor values increase

dramatically from 2005-2015

Consolidation accelerates for everyone except AB distributorsAB Distribution system loses its execution advantage

2000’s continued……

Slide16

Consolidation 16

Slide17

States IBG Has Completed transactions in 44 of 50 states:

Open States:

Delaware

Vermont

Maine

Indiana

Kansas

North Dakota

Slide18

Retail Performance improved with ConsolidationIBG’s Retail Audit 1987-2003 “

Retailization”

In-Outlet Marketing of a consumer product1988 average retail performance was 61%. High share

wholesaler = 70%2002 average retail performance was 77%. High share wholesaler = 88%

2003 MBC’s Extensive Outside Survey Same Basic Results: A-B #1, MBC #2, CBC #3

Around 2002-2003, the retail performance gap begins to close

Currently, the Gold, ABI

and MC distribution systems have the resources necessary to compete effectively

Slide19

Example of Profit Per Case 2003

Slide20

Competitive Shifts 1996 - 2006

1996

Location

Miller

Coors

Others

AZ57.9

17.113.111.9

GA54.022.66.117.2FL54.721.75.018.6NM52.113.217.716.82006

LocationABMillerCoorsOthersAZ56.537.56.0GA53.042.05.0FL55.941.92.2NM

56.7

43.3

0.0

Slide21

Competitive Shifts 2006-2016

2006

Location

MillerCoors

Others

56.5

37.56.0

GA53.042.05.0FL55.941.92.2NM56.743.30.02016

LocationABMillerCoorsOthersAZ50.048.02.0GA50.048.02.0FL53.046.01.0NM

45.0

55.0

0.0

Slide22

Relative Values in Consolidation

Slide23

Gross Profit Multiples, All Transactions

These represent all types of transactions. EVERY transaction is unique

Slide24

IBG Buy/Sell Transactions 2003 v current

Suppliers

2003 GP Multiple

2015/16 GP Multiple

A-B

2.41

3.6

Miller

1.64

3.4

CBC

1.88

PBC

0.96

1.9

Crown

4.87

6.3

Heineken

3.29

5.0

NAB

2.13

2.5

Other Beer

1.56

4.8

N/A’s

0.82

1.0

Wines

1.13

1.2

Totals

2.14

3.85

1993 – 1.73

All

figures are after-the-fact calculations and include all types of transactions

Slide25

EBITDA’s remain highInterest rates stay low

Buyers are willing to share savings with Sellers

Franchise laws don’t change dramaticallyBrewers/Distributors work together to build more long-term equity value for brands

15 year depreciation of Distributor rights remains

Buyers continue strategy of utilizing excess EBITA to buy

Values will Remain at Current Levels as Long as:

Slide26

Industry Numbers26

Slide27

Brewers/Distributors leveraging equity

Overall

volume peaked in 2008ABI/MC lost 24M BBLs

Craft exploded

Lagers making a come back?

Beer

industry pricing above

CPI

Excess

capacity Brands and SKU’s explodingConsumption per caps decliningDemographics shift to fewer young adultsHousehold income decliningLosing consumer brand loyalty

Interest rate historyIndustry Information:27

Slide28

3-Tier Growth Strategies

Brewer

DistributorRetailer

1. Quality

1. Pick

Up New Brands

1. Improve Margins

2. Local Roots2. Expand Footprint/Territory2. Market Basket $

3. Strong Flagship3. Restructure Compensation

3. Shopper Loyalty4. Flanker Brands4. Identify Profitable Brands4. Differentiation5. Innovation5. Add New Categories5. Innovation6. Strong On Premise6. Focus on High Volume Accts6. Foot Traffic7. Pick Great Partners7. Reduce Service Levels7. Customer Service8. Share of Mind8. Invest in People8. Variety

9. Execution9. Invest in Training9. Local10. Deeper Distribution10. Invest in Specialty Team10. Eliminate OOS’s

Slide29

Brewers

and

Distributors

Reduce

costs, Raise

prices, trade consumer up

less effective marketing, less brand loyalty

Volume ---

Profits +++

Industry Harvesting Equity Value?

Profits

Volume

Slide30

Total Industry Volume Trends (in

Bbls

.)30

Slide31

AB and MC Lost 24 Mil Bbls in 7

yrs

}

bbls

lost

13 bbls lost

2008 2015 2008 2015

Slide32

Evolving Influence?

IBG estimates:

2010 – 950 = 90% of volume.

2020 – 650 = 85% of industry volume.

Self distribution, soft drink, specialty = 1,000 – 2,500

Legislative

influence is changing fast.

2020 Forecast:

MEGA: 50%Traditional: 35%Other: 15%

Slide33

Three tier principle of “Separation of Tiers” no longer existCarve out

laws

Growler sales

Self DistributionBrew Pubs

Debates in virtually every

state

Impact of Evolving Influence

Slide34

Beer Price

ncrease vs. CPI Increase

Beer consistently above CPI since 2007

Slide35

U.S Beer, Wine & Spirits Price at Home

BLS Consumer Price Index: 2007-2015

Slide36

% of Absolute Alcohol

Beer

SpiritsWine

W/S improving at

– Availability

Price

Marketing

36On an absolute alcohol basis, total per capita consumption has not varied

Slide37

Craft Production Vs. Capacity

13.2

22.2

15.6

23.9

34.6

20.7

IBG estimates non-craft brewing excess capacity is 10-15 million barrels (after MC closes

Eden,

NC)37

Slide38

Under Utilization of CapacityExcess capacity leads to:

Less Aggressive

price increasesMore Discounting

More Brands and SKU’s

New Packages (discounted differently)

Blaming others (finger-pointing

)

Redundant information requestsExcessive Innovation

Slide39

Per Capita Beer, Wine & Spirits Consumption: Change in Share of Absolute Alcohol

Slide40

Millennials will represent 37% of the drinking population

(

Millennials were born 1980-2000)Millennials are not brand loyal or even category loyalThe

population is aging and per

capita consumption tends to decline with age

Hispanic population growth exploding at four times the rate of total population

growth

The next generation has less people than the Baby Boomers or Millennials

Demographic trends :40

Slide41

Nielsen studied a number of trends in household consumer spending. From

2020 through 2050

they predict spending will decrease due to retiring boomers; the decline of the middle class and the rapid growth rate of low income

households. Beer price growth historically rarely exceeded CPI and has averaged about 75 % of CPI since 1980. Not lately.

If we assume history as our guide, and a long-term CPI averaging 3.22% since 1913 and 2.3% since 1990, we could expect beer price growth to remain around 2% over the long term. Industry

will adjust

back to historical levels.

Household Income:

Slide42

Slide43

Distributor Numbers43

Slide44

44No Supplier gets enough Time and Attention

Mega Distributors

SKU proliferationPresales DilemmaMargins Grow

Gross Profit per CE growth

Operating Expenses DeclineOperating profit per CE grows

Slide45

45No Supplier,

ever gets enough time and attention!

Whether exclusive or non-exclusive

Slide46

ABI Mega Distributors

ABI

Hensley

ABI

Hand

ABI

Ben E. Keith

Nau

Lamantia

ABI

Dobbs

Jefferies

Stokes

Don K

Sheehan

HDL

By 2020, 125 distributors will do

80-85% of ABI volume

Hand

ABI

Sheehan

Dobbs

ABI

Clay Adams

ABI

Slide47

MC Mega Distributors

By 2020, 75 distributors will do

80-85% of MC volume

Manhattan Beverage

DBI

Reyes

Goldring

Moffat

Reyes

Capitol Wright

Andrews

Goldring

Moffat

HoBo

Taylor

HoBo

Andrews

Reyes

Glazer

Reyes

Glazer

Taylor

Clay

Reyes

Columbia

Monarch

Columbia

Slide48

X – W/S with significant beer.

Craft Mega Distributors

Sheehan

Brown

Sheehan

Click

Saccani

Brown

Ben E. Keith

Nackard

SW&S

Young

Self

Wirtx

Major Brands

Maletis

Stone

Wirtz

Major Brands

Maletis

Lamantia

Johnson Brothers

Slide49

SKU’s per Distributor49

Slide50

Despite SKU Proliferation, Presales Representatives Manage the Same Number of Accounts

Average Number of Presale Accounts per Presale Representative, 2008-2013

Average of Top 50 Owner Groups

Average of all Distributors

5 Year CAGR: -0.1%

5 Year CAGR: -0.3%

Slide51

Distributor Margin Trend

Slide52

Distributor Gross Profit Per Case

Slide53

Gross Profit / Operating Expense Trends

Slide54

Distributor Operating Profit Per Case

Difference: NBWA report has large representation of lower value distributors

Slide55

Summary55

Slide56

Single Source Distributor

(+) Multiple

Source Distributor

Multiple Distributors

in most markets(+) Mega Distributors

dominate large Markets

Volume Growing

(-) Volume declining

Significant Distributor Legislative influence

(-) Less Distributor Legislative influenceLess than 100 Brewers many with declining value(+) 4000+ Brewers with escalating value56Past (70’s) Future (2015+)(+) Good for Industry (-) Bad for Industry

Slide57

Below

CPI pricing

(+) Above CPI Pricing

Gaining on Wine & Spirits

(-) Losing to Wine & Spirits

Limited Useful

Capacity(-) Excess Capacity

Limited SKU’s and Brands

(-) Too Many SKU’s and BrandsPer Caps growing(-) Per Caps declining57Past (70’s) Future (2015+)(+) Good for Industry (-) Bad for Industry

Slide58

21-34 Demographics growing

(-) 21-34

Demographics will be less

Low to Middle

Household income growing(-) Low and Middle Household

income declining

Ample time to sell at

store level

(-) Very Limited time to sell at store level

Margins at distributor level 23% (+) Margins at distributor level 28% 58Past (70’s) Future (2015+)(+) Good for Industry (-) Bad for Industry

Slide59

Operating costs at

21%

on average(+) Operating cost at 19% on average

Operating

Profit growing slowly for the winners

(+) Operating

Profit

growing fast for the winnersExclusive Beer Distributors

(+) Non-Exclusive Mega Beer Distributors

Loyal Consumers(-) Promiscuous consumerFear of Termination(-) No Fear of Termination59Past (70’s) Future (2015+)(+) Good for Industry (-) Bad for Industry

Slide60

Macro

Marketing is key to brand

equity growth(+) Micro Marketing is key to brand equity growth

Small Retail Chain presence

(+) Huge Retail

Chain presence

Solid Franchise

protection(-) Leaking

Franchise protectionLimited Wine & Spirit availability

(-) Universal Wine & Spirit availabilityLimited Communication(+) Internet connects everyone60Past (70’s) Future (2015+)SCORE : (+) Good for Industry = 11 (-) Bad for Industry = 13

Slide61

Conclusion61

Slide62

Strive to always “Add Value” by constantly working to improve the equity value of the brands you represent

More sales people (Push)

Accept more marketing responsibility (Pull)Should understand that brewers now have other options.

You must be the most effective commercially viable access to market for brewers

Competitive systems exist if distributors don’t become logistics experts.

Learn to say no to bad ideas

One pallet of “Strawberry, lemon, apple flavored Bock Beer with a touch of Garlic” affects 5-15 people in your organization.

Distributors

Slide63

Start interacting instead of interfering with distributorsDon’t do their job for them.

Work within the Three Tier System to develop a more effective brand building model.

Brewers

Slide64

64Its time to feed the Goose that’s been laying the Golden Eggs

Distributors:

Assume more sales and marketing responsibilityR

ealize and adjust as Brands developBe willing to align incentives with performance

Brewers:

Develop Brand equity – if you have a pull problem, expanding territory or rushed innovation only makes the problem worse

nteract, don’t interfere with DistributorsDon’t do the Distributors job for them.

Slide65

Growing & Protecting Value - PowerPoint Presentation

Growing & Protecting Value - PPT Presentation

Share:

Link:

Embed:

Related Contents