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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. ABI & MC vs. All Others Forecast. All Others.

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Presentation available online at independentbeveragegroup

Presentation available online at independentbeveragegroup.com


Volume

Volume

  • Moving Forward

    • Industry volume will be down (-1.0% through 2020).

    • ABI and MC will each be down.

    • All Others will be up.


Abi mc vs all others forecast

ABI & MC vs. All Others Forecast

All Others

Assumes overall industry will be down 1.0% during each of the forecast years.


Of absolute alcohol

% of Absolute Alcohol

Beer

Spirits

Wine

Distilled Spirits Council


Per capita consumption beer in gallons

Per Capita Consumption - BeerIn Gallons


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Distributors Declining – Craft Brewers Increasing

3,200

Brewers 2020

???????????

42

  • IBG estimates:

    • 2010 – 950 = 90% of volume.

    • 2020 – 650 = 85% of industry volume.

    • Self distribution, sort drink, specialty = 1,000 – 2,500.


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  • Beer Brands by Segment -TUS Multi Outlet + Convenience

  • 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 Brands

4,948

Total Brands

4,975

Total Brands

4,577

Total Brands

4,031

Source: Bump Williams Consulting


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  • Beer SKUs by Segment 2010-2013

  • TUS Multi Outlet + Convenience + RMA Sum of Total Liquor Stores

  • 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 SKUs

9,447

Total SKUs

8,287

Total SKUs

7,256

Total SKUs

5,416

Source: Bump Williams Consulting


Avg items carried per store 2008 2012 time series by channel

Avg Items Carried Per Store - 2008 – 2012 Time Series by Channel

2008 – 2012 Increase

In Avg Item Per Store 224 or +22%

Avg. Items Per Store 1,234

Avg. Items Per Store 1,202

Avg. Items Per Store 1,124

Avg. Items Per Store 1,080

Avg. Items Per Store 1,010

Source: Bump Williams Consulting


Volume1

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.


Margin

Margin

  • Margins will be up but will increase slower.

    • Return to normal at CPI– 2.5% to 3.0%.


Distributor gross profit slowing

Distributor Gross Profit Slowing


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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.


Profitability

Profitability


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Distributor Gross Profit Per Case


Distributor operating profit per case

Distributor Operating Profit Per Case


Consolidation

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.


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WA

ABI

ME

MT

ND

VT

MN

OR

X

NH

MA

ABI

ID

WI

NY

SD

Keith & Don

RI

WY

MI

CT

ABI

PA

Hand

NJ

X

IA

X

NE

X

NV

OH

DE

IN

IL

CO

UT

X

ABI

ABI

Stokes

MD

WV

VA

KS

MO

CA

KY

Jefferies

Hand

ABI

NC

TN

ABI

AZ

Hensley

Dobbs

OK

AR

SC

NM

TX

Ben E. Keith

GA

AL

MS

Dormity

X

Nau

LA

FL

Lamantia

ABI Mega Distributors


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WA

CoHo

ME

MT

Taylor

ND

VT

MN

OR

NH

MA

ID

WI

NY

SD

?

Clay

Reyes

RI

WY

MI

CT

North Coast

PA

Ingram

NJ

IA

X

NE

NV

Clay

OH

Monarch

CO

DE

IN

IL

UT

MC

MD

WV

Reyes

VA

KS

MO

CA

X

X

KY

AZ

NC

X

Goldring / Moffat

Reyes

TN

X

Clay

OK

Glazer

AR

SC

Reyes

NM

GA

Andrews

AL

MS

X

X

TX

Keg 1

Goldring / Moffat

Reyes

LA

Glazer

Taylor

FL

Gold Coast

Andrews

MC Mega Distributors


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Click

WA

ME

MT

Maletis

ND

Sheehan

VT

MN

OR

Sheehan

NH

MA

ID

WI

Sheehan

NY

SD

RI

WY

MI

CT

Sheehan

PA

NJ

IA

Saccani

NE

NV

Rucker

OH

CO

DE

SW&S

Wirtz

X

IN

IL

UT

X

Sheehan

X

MD

Major Brands

WV

Sheehan

VA

KS

Self

MO

CA

KY

Sheehan

X

AZ

NC

Nackard

Clement

TN

X

OK

AR

SC

SW&S

Stone

X

NM

Ben E. Keith

Lamantia

GA

Young

AL

MS

TX

LA

Brown

FL

Craft Mega Distributors

X – W/S with significant beer.


Positives

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.


Major points

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.


Model 2020

model 2020


Model 20201

Model - 2020

  • Challenge:

    • How to add complexity, contain costs and provide “brand building” benefits.


Model 20202

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.


Model 20203

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.


Model 20204

Model - 2020

  • Margin.

    • 18% to 35%.

    • Average will tend to be lower than today.

  • Profit.

    • More total profitability but less per case.


3 things to remember

3 Things to remember


3 things to remember1

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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