Vodka is the Fastest Growing Spirit (05 12P CAGR: +5.2%)
Overview
Vodka Market Size (Consumption)
(9L eqv. cases in millions)
Vodka has grown at a faster rater since 2005 than any other spirit (+5.2%); 4 of the top 5 brands are gaining size The Vodka market is approximately 60% domestic and 40% imported Imported Vodka is pushing industry growth with a CAGR approaching 10% since 2005; Domestic Vodka is also growing strong at a 3% CAGR 3 of top 5 Vodkas are imported, with Svedka growing over 10% Beams Pinnacle will enter the top 10 in 2012 and is growing nearly 50% Diageos Smirnoff is the industrys dominant brand, >2x the size of the 2nd largest Vodka brand
2005 2012P CAGRs
Imported: 9.9% Domestic: 3.0% 48.4 13
17
19
20
Constellation 5%
Sazerac 8%
Beam 6%
Source: IMPACT Spirits Databank and IRI 52 Weeks Ending December 2, 2012. 4
66.2 24
22
5.3%
69.0 26
5.0%
5.1%
40
41
42
43
2009
2010
2011
2012P
3.6%
35
36
2005
2006
38
39
2007
2008
Domestic
Pernod Ricard 9%
63.0
7.2%
4.1%
Diageo 25%
Bacardi 6%
57.0
Imported
Top Brands
Nolet Spirits 4%
Campari 6%
15
55.0
6.0%
Top Producers Other 31%
51.3
60.0
Growth %
4.2%
Vodka SKU-Magedon Growth Driven by Flavor Expansion
Whiskey is Large and Steadily Growing (05 12P CAGR: +0.5%)
Overview
Whiskey Market Size(1) (Consumption)
Whiskey has grown at a CAGR of 0.5% since 2005; the top 3
brands are growing above the Whiskey average
The Whiskey market is approximately 50% domestic and 50%
imported
Domestic Whiskey is growing at a 2005 2012P CAGR of
1.0% whereas Imported Whiskey is flat
3 of top 5 Whiskies are domestic, with the top 3 brands
all growing above industry growth
(9L eqv. cases in millions)
2005 2012P CAGRs Imported: 0.0% Domestic: 1.0%
2005 2012P CAGR: 0.5%
43.9
44.3
44.6
44.5
44.7
44.9
45.2
45.4
24
24
24
24
24
24
24
24
0.4%
0.4%
0.9%
0.7%
0.0%
Diageo is the clear category leader with 2 of the top 5 brands
and 24% market share
0.4%
20
21
21
21
21
21
22
22
2005
2006
2007
2008
2009
2010
2011
2012P
Domestic
Top Producers Campari 3%
0.7%
(0.2%)
Imported
Growth %
Top Brands
Other 11%
2011
Diageo 26%
Constellation 3%
2010 - 2011
Distiller / Importer
(Thousands)
Growth
Brown-Forman
4,860
2.0%
Diageo
4,185
1.0%
Beam
3,305
2.5%
Diageo
2,390
(1.0%)
Constellation
1,780
(0.6%)
Rank
Heaven Hill 4% Pernod Ricard 7% Sazerac 7%
Depletions
Brown Forman 21% Beam 18%
Brand
Source: IMPACT Spirits Databank and IRI 52 Weeks Ending December 2, 2012. (1) Domestic Whiskey includes Tennessee and Kentucky Whiskies, Bourbons, and Blends. Imported Whiskey includes Scotch, Canadian, Irish, Japanese, and other imported Whiskies. 6
Flavored Whiskies Seeing Hyper-Growth and an Explosion of SKUs
Overview
IRI Growth of Select Flavored Brands
Whiskey brands are SKU-ing into new flavors and un-aged to give current drinkers expanded offerings and new consumers a more mild Whiskey entry
Both line extensions (Jim Beam Red Stag, Jack Daniels Tennessee Honey, etc.) as well as upstart brands (Ole Smoky Tennessee Moonshine, Cabin Fever Maple Honey, etc.)
Typically a combination of flagship Whiskey mixed with
flavored liqueurs
Line extensions generally priced a few dollars premium to
the original product
Un-aged Whiskey, also known as White Whiskey or
Moonshine, easy to flavor, as well as attracting the Whiskey enthusiast, looking for a higher proof Whiskey
BrownForman 80 Proof
Beam 80 Proof
Sazerac 125 Proof
BrownForman 70 Proof
Campari 71 Proof
($ in millions)
$10.5 $7.9
$0.5
Evan Williams Cinnamon
Diageo 71 Proof
Source: IRI 52 Weeks ending December 2, 2012.
7
Heaven Hill 70 Proof
$1.7
$0.9
Diageo 80 Proof
$2.3
Evan Williams Honey
Beam 80 Proof
Heaven Hill 70 Proof
Jim Beam Red Stag
Diageo 71 Proof
Ole Smoky 100 Proof
New Investment Anchoring Whiskey Brands with a Sense of Place for Authenticity Jim Beam American Stillhouse (Beam)
Wild Turkey (Campari)
$30 million Jim Beam
Visitor Center and Distillery opened October 2012 in Clermont, Kentucky
$4 million new Wild
Turkey Visitor Center expected to open in April 2013 in Lawrenceburg, Kentucky
Offers visitors first ever
tour of adjacent production facility (expected to attract 200,000+ visitors yearly)
Adjacent $40 million
bottling and packaging operation also under construction (125,000 sq. ft.)
Also will house new state-of-the-art Global Innovation
Center
Visitor Center 8x bigger
than previous facility
Evan Williams Bourbon Experience (Heaven Hill)
Independent Brand Visitor Centers
$10 million Evan Williams Visitor
Center expected to open in September 2013 in downtown Louisville, Kentucky Artisanal distillery, immersive tourism experience, and retail location located in Heaven Hills Bourbon Row Main Street location
Ole Smoky Tennessee Moonshine
opened a retail / production facility in Gatlinburg, Tennessee in July 2010
Michters Distillery opened a distillery,
bottling operation, and Visitor Center ($8 million) in Louisville, Kentucky in July 2011
Four Roses Distillery completed 5,000
sq. ft. Visitor Center expansion ($2.4 million) in Lawrenceburg, Kentucky in September 2012
Majority of Growth Coming from 6 of the Top 10 Players
Industry Growth by Supplier
Largest Growing Spirits Brands in 2012
Over 55% of the Industrys dollar growth has been driven
by the 6 of the Top 10 largest suppliers Diageo 20%
Other 44%
Beam 10%
Sazerac 9% Constellation Brands 4%
Pernod Ricard 6%
Brown Forman 7%
Source: IRI 52 Weeks Ending December 2, 2012.
9
Global Spirits Companies Acquiring Market Makers, Typically in Emerging Markets
Acquired Acquired Acquired December 2011
Acquired
February 2011
(Sichuan Swelfun) March 2012
September 2012
Acquired
January 2013 Acquired
Acquired
June 2011
Pending
Acquired
Acquired
August 2011
August 2012
10
Within the U.S., Beam is the Intriguing M&A Target, Especially for Pernod & Bacardi Pernod Ricard Current
Bacardi Current
(Market Share % / Portfolio Overview)
(Market Share % / Portfolio Overview)
Diageo
Beam
Cocktails 3%
10%
Pernod Ricard
8%
Bacardi
8%
Brown-Forman
Rum 12%
Sazerac
6% 3%
Heaven Hill
3%
Constellation
3%
Vodka 34%
2%
Bacardi
19%
Sazerac
Heaven Hill
3%
Constellation
Tequila 6%
Cocktails 5%
Campari
3% 3%
Constellation
3%
2%
Moet Hennessey
2%
2%
Vodka 22%
18% 8%
Brown-Forman
7%
Sazerac
Rum 7%
Vodka 24%
11
Cocktails 5%
Gin 4%
Other 1% Whiskey 33%
Cordials 7%
6%
Campari
3%
Heaven Hill
3%
Constellation Cordials 10%
Source: IRI 52 Weeks ending December 2, 2012.
26%
Pernod Ricard
3%
William Grant & Sons
Whiskey 9%
Bacardi
Other 2%
Whiskey 39%
Gin 7%
6% 3%
Rum 50%
6%
Diageo
26%
Campari
Gin 7%
(Market Share % / Portfolio Overview)
Diageo
7%
Other 3%
Bacardi Pro Forma with Beam
(Market Share % / Portfolio Overview)
Brown-Forman
Tequila 4%
8%
Heaven Hill
William Grant & Sons
Whiskey 24%
Cordials 6%
7%
Sazerac
Pernod Ricard Pro Forma with Beam
8%
8%
Brown-Forman
Gin 14%
Bacardi
10%
Pernod Ricard
Cordials 13%
Pernod Ricard
26%
Beam
Other 2%
7%
Campari
William Grant & Sons
Diageo
26%
Tequila 7%
3%
William Grant & Sons
2%
Moet Hennessey
2%
Vodka 19% Rum 24%
At the Same Time, Major Wineries Increasingly See Spirits as an Adjacency
Company
Select Brands
Commentary Continuing spirits legacy of E. & J. Brandy, Gallo launched New Amsterdam Gin in 2007 and New Amsterdam Vodka in 2011
Launched Family Camarena Tequila in 2010
Launched Shellback Caribbean Rum in 2012
(Producer)
Launched Cupcake Vodka in 2011 and flipflop Rum and
Big House Bourbon in 2012, extending successful Wine brands into Spirits
Housed under Underdog Wine & Spirits, The Wine
(Producer)
Groups Millennial-focused division
Acquired CRUZ Tequila in 2012 and developed
Trinchero Family Estates Spirits division
Signed agreement with Tres Agaves Tequila in 2012 to
import, sell, and market Tequila and non-alcoholic mixes
(Producer)
Formed separate Spirits division in 2009
Launched 2011 joint venture with Adult Beverage Company (Chocolate Milk, Limeade) with equity stake (Distributor)
2011 core initiative to build Spirits division with focus
on acquiring small amounts of equity in distributed Spirits brands
Sold equity stake in Skinnygirl Margarita to Beam
(Distributor)
in 2011
(Realized) 12
Demeter Group Recent Transactions (December 2010 2012)
Acquired by Acquired by
$850 million
Acquired by
Completed Transaction Value
Acquired by
15
Acquired by
Completed Transactions
Acquired by
67% Completed Transactions in Beverage Alcohol
Acquired by Acquired by Acquired by Acquired by Private Placement Acquired by Has Acquired Acquired by Joint Venture With 13
71%
36%
Transactions Marketed to Fewer Than 5 Potential Buyers
Transactions Marketed to 1 Buyer
Demeter Group Recent Beverage Alcohol Transactions
March 2011
May 2011
December 2010
July 2012
Acquired By: Beam Global Spirits & Wine
Acquired By: Crimson Wine Group
Acquired By: Fiji Water
Acquired By: Constellation Brands
September 2012
August 2012
June 2012
June 2012
May 2012
August 2011
Acquired By: E. & J. Gallo Winery
Acquired By: E. & J. Gallo Winery
Acquired By: Accolade Wines
Acquired By: E. & J. Gallo Winery
Acquired By: Precept Wines
Acquired By: Fiji Water
14
Jeff Menashe Chief Executive Officer menashe@demetergroup.net
220 Halleck Street, Suite 110
San Francisco, CA 94129 (415) 632-4400 www.demetergroup.net 15
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