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Translating Industry Trends Into Actionable Insights

Translating Industry Trends Into Actionable Insights. U.S. Drinks Conference 2010. Session Overview . Using Beer, Wine and Spirits category trends to make informed decisions on building your brands . U.S. Drinks Conference 2010. Agenda . xxxxxxx.

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Translating Industry Trends Into Actionable Insights

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  1. Translating Industry Trends Into Actionable Insights

  2. U.S. Drinks Conference 2010 Session Overview Using Beer, Wine and Spirits category trends to make informed decisions on building your brands

  3. U.S. Drinks Conference 2010 Agenda xxxxxxx • Macro Consumer Trends Impacting The Industry • Total Beverage Alcohol Consumption Trends • Spirits Category Consumption Trends • Wine Category Consumption Trends • Beer Category Consumption Trends • Summary Of Key Takeaways

  4. U.S. Drinks Conference 2010 Macro Trends Impacting The U.S. Beverage Alcohol Industry

  5. Macro Economic Trends U.S. Drinks Conference 2010 CREATE 1-5 NEW SLIDES • The U.S. Economy • Shifting Consumer Behavior • U.S. Population Size And Growth • Growing Ethnic Diversity • Seeking Out New Drink Experiences • Premiumization And Affordable Luxury

  6. U.S. Drinks Conference 2010 The U.S. Economy xxxxxxx • Unemployment is beginning to go down but remains high at 9.6% and is expected to remain elevated for 2-5 years • Mortgage foreclosures will continue to impact the housing market • Tight credit is dampening consumer spending • Consumers focus more on debt reduction and savings rather than over-indulgence • Consumer confidence is improving marginally and spending is starting to improve Sources: U.S. Bureau Of Labor Statistics and Market Harmonics

  7. U.S. Drinks Conference 2010 Shifting Consumer Behavior xxxxxxx Frugality is fashionable and deals and value for the money are key Consumers drinking more at home to save money Consumers drinking more but trading down across all categories

  8. U.S. population over 300 million with legal drinking age consumers growing by 20 million every 10 years U.S. Population Size And Growth 8 Sources: U.S. Census Bureau – Demographic Trends in the 20th Century, Nov. 2002.

  9. Growing Ethnic Diversity U.S. Drinks Conference 2010 The fast growing multi-ethnic population is fueling interest in new drink experiences from around the world such as Cachaça from Brazil and Pisco from Peru Sources: U.S. Census Bureau

  10. U.S. Drinks Conference 2010 Seeking New Drink Experiences Consumers are actively seeking out new taste experiences across beer, wine and spirits through a wider selection of new and undiscovered brands, varietals and categories 10

  11. Premiumization And Affordable Luxury Consumers aspire to luxury across all segments with Premium Beverage Alcohol offering “Affordable Luxury” High-end Beverage Alcohol has grown to about 20% of category Beverage Alcohol High-end Market Share Everyday Luxury Items High-End Beverage Alcohol Source: DISCUS and Next Level Marketing Consumer Research

  12. U.S. Drinks Conference 2010 Total Beverage Alcohol Trends

  13. Data Sources U.S. Drinks Conference 2010 xxxxxxx The data in this presentation comes from the Beverage Information Group’s 2010 Liquor, Wine and Beer Handbooks. These Handbooks contain the most current and complete statistics on the Spirits, Wine and Beer categories.

  14. 2009 Total U.S. Beverage Consumption Beverage Alcohol ranks as the 4th largest beverage type in the U.S. Market and sales have been flat during the recession 14 Source: B.I.G. 2010 Handbook Advance

  15. Total U.S. Beverage Alcohol Industry • The U.S. market size is 3.3B 9L cases and $188B in retail sales • Beer dominates consumption with an 85% volume share • Spirits are much more important on a dollar share basis Retail Sales Of $189 Billion Volume Of 3.3 Billion 9L Cases Spirits 5% Spirits 34% 29 29 3.3 Billion 9L Cases $188 B Retail Sales 15 • The B.I.G. 2010 Liquor , Wine And Beer Handbooks

  16. 2009 Volume Trends U.S. Drinks Conference 2010 Total Beverage Alcohol consumption fell by 1.8% driven by a 2.1% decline in Beer but led by growth in Wine and Spirits +1.6% +0.8% -1.8% -2.1% • The B.I.G. 2010 Liquor , Wine And Beer Handbooks

  17. 2009 Dollar Sales Trends U.S. Drinks Conference 2010 Total Beverage Alcohol sales dollar fell by 0.4% driven by Beer volume declines, Wine trade-down and Spirit trade-up +1.9% -0.4% -1.1% -3.2% • The B.I.G. 2010 Liquor , Wine And Beer Handbooks

  18. Five Year Category Growth Rates U.S. Drinks Conference 2010 Over the last five years, Spirits and Wine consumption have grown much faster than Beer consumption • The B.I.G. 2010 Liquor , Wine And Beer Handbooks U.S. Drinks Conference 2010

  19. On Vs. Off-Premise Case / Dollar Sales U.S. Drinks Conference 2010 Across all categories on-premise does about 25% of cases and off-premise does 75% but dollar sales are split equally 80% 77% 75% 56% 53% 52% 48% 47% 44% 25% 23% 20% • The B.I.G. 2010 Liquor , Wine And Beer Handbooks

  20. On And Off-Premise Growth Trends U.S. Drinks Conference 2010 The Off-premise channel is now the key growth driver for Beer, Wine and Spirits as today’s cash conscious consumers have shifted towards more at home consumption +3.2% +2.6% -0.1% -3.3% -3.9% -5.9% • The B.I.G. 2010 Liquor , Wine And Beer Handbooks

  21. U.S. Drinks Conference 2010 Spirit Category Trends

  22. Distilled Spirits Sales Trend • Spirit consumption has grown steadily to a record level of • 188,630 million 9-liter cases with 1.6% growth in 2009 Source: Adam’s 2008 Advance 22 • The B.I.G. 2010 Liquor Handbook (Thousands 9-Liter Cases)

  23. Top 10 Markets For Spirits U.S. Drinks Conference 2010 The top 10 states account for 60% of U.S. Spirits volume MI NY MA PA IL OH NJ VA CA TX FL • The B.I.G. 2010 Liquor Handbook

  24. Imported Vs. Domestic Volume Share U.S. Drinks Conference 2010 Domestics Spirits account for 60% of volume with Imports making up 40% and both showing growth in 2009 • The B.I.G. 2010 Liquor Handbook (Thousands 9-Liter Cases)

  25. Imported Vs. Domestic Spirits Trend U.S. Drinks Conference 2010 Prior to the Recession, Imports were driving Spirits category growth with both continuing to grow +5.4% +5.0% +2.3% +2.1% +2.0% +1.8% -1.4% +1.1% • The B.I.G. 2010 Liquor Handbook

  26. Spirit Volume And Share By Category U.S. Drinks Conference 2010 Vodka dominates the Spirits category with a 31% volume 31.0% 13.3% 10.7% 10.6% 8.3% 6.0% 5.9% 5.5% 4.7% 3.4% 0.6% • The B.I.G. 2010 Liquor Handbook

  27. Spirits Growth By Category U.S. Drinks Conference 2010 Irish Whiskey, Vodka, Rum and Tequila continue to be the key growth driving spirits categories +13.0% +5.9% +1.6% +1.1% +0.9% +0.2% +0.1% -0.6% -1.0% -2.4% -3.6% • The B.I.G. 2010 Liquor Handbook

  28. Top 25 Spirit Brand Trends 28 28 • The B.I.G. 2010 Liquor Handbook (Thousands 9-Liter Cases)

  29. U.S. Drinks Conference 2010 Wine Category Trends

  30. U.S. Drinks Conference 2010 Wine Consumption Trend Wine consumption has grown steadily posting 0.8% growth in 2009 to reach a record level of 296,960 million 9-liter cases. • The B.I.G. 2010 Wine Handbook (Thousands 9-Liter Cases) 30

  31. Top 10 Markets For Wine U.S. Drinks Conference 2010 The top 10 states account for 60% of U.S. Wine volume WA NY MA IL OH NJ VA CA TX FL • The B.I.G. 2010 Wine Handbook

  32. Imported Vs. Domestic Volume Share U.S. Drinks Conference 2010 Domestics Wine accounts for 75% of volume with Imports making up 25% and declining slightly in 2009 • The B.I.G. 2010 Wine Handbook (Thousands 9-Liter Cases )

  33. Imported Vs. Domestic Wine Trend U.S. Drinks Conference 2010 Prior to the Recession, Imports were driving Wine category growth but they have declined for the past two years +7.3% +5.6% +2.7% +2.9% +2.9% +1.8% -1.7% -2.2% • The B.I.G. 2010 Wine Handbook (Thousands 9-Liter Cases)

  34. Wine Consumption By Type U.S. Drinks Conference 2010 Table Wines represent over 91% of U.S. Wine consumption and they continued to show growth of almost 1% in 2009 34 Source: Adam’s 2008 Advance. Volume Stated On A Thousands Of 2.25-gallon Cases Basis. • The B.I.G. 2010 Wine Handbook (Thousands 9-Liter Cases )

  35. Table Wine Consumption By Varietal U.S. Drinks Conference 2010 Chardonnay, Cabernet and Merlot combine for 54% of U.S. Wine consumption by All Other Varietals represent opportunity at 24% 35 • The B.I.G. 2010 Wine Handbook Source: Adam’s 2008 Advance. Volume Stated On A Thousands Of 2.25-gallon Cases Basis.

  36. Top 25 Domestic Table Wine Brands U.S. Drinks Conference 2010 36 • The B.I.G. 2010 Wine Handbook (Thousands 9-Liter Cases)

  37. Wine Import Trends By Country U.S. Drinks Conference 2010 The top 10 countries account for 96% of U.S. Imported Wine sales • The B.I.G. 2010 Wine Handbook: Source U.S. Department Of Commerce

  38. Top 25 Import Wine Brand Trends U.S. Drinks Conference 2010 38 • The B.I.G. 2010 Wine Handbook (Thousands 9-Liter Cases )

  39. U.S. Drinks Conference 2010 Beer Category Trends

  40. U.S. Drinks Conference 2010 Beer Consumption Trend After three years of growth, Beer declined by 2.1% in 2009 to 2.9 Billion 2.25 Gallon Cases • The B.I.G. 2010 Beer Handbook (Millions of 2.25-Gallon Cases)

  41. Top 10 Markets For Beer U.S. Drinks Conference 2010 The top 10 states account for 53% of total U.S. Beer volume • The B.I.G. 2010 Beer Handbook

  42. Imported Vs. Domestic Volume Share U.S. Drinks Conference 2010 Domestics Beer dominates at 87.5% of volume with Imports declining by 6.9% in 2009 • The B.I.G. 2010 Beer Handbook (000 2.25-Gallon Cases)

  43. Imported Vs. Domestic Beer Trend U.S. Drinks Conference 2010 Prior to the Recession, Imports were driving Beer category growth but they have declined for the past two years +12.1% +3.6% +0.9% +0.9% -0.2% -1.2% -1.4% -6.9% • The B.I.G. 2010 Beer Handbook

  44. Domestic Beer Consumption By Type U.S. Drinks Conference 2010 Domestic Light is the largest segment with a 52.8% share but Super Premium/Craft is the fastest growing segment 44 Source: Adam’s 2008 Advance. Volume Stated On A Thousands Of 2.25-gallon Cases Basis. The B.I.G. 2010 Beer Handbook (000 2.25-Gallon Cases)

  45. Top 25 Domestic Beer Brand Trends U.S. Drinks Conference 2010 45 • The B.I.G. 2010 Beer Handbook (000 2.25-Gallon Cases)

  46. Beer Import Trends By Country U.S. Drinks Conference 2010 The top 10 countries account for 96% of U.S. Imported Beer sales • The B.I.G. 2010 Beer Handbook (000 2.25-Gallon Cases)

  47. Top 25 Import Beer Brand Trends U.S. Drinks Conference 2010 47 • The B.I.G. 2010 Beer Handbook (000 2.25-Gallon Cases)

  48. U.S. Drinks Conference 2010 Summary Of Key Takeaways

  49. Summary Of Key Takeaways U.S. Drinks Conference 2010 The U.S. Beverage Alcohol market is very large and highly profitable at 3.3B 9L cases and $189B in retail sales Despite the slow economy, there is still growth in the U.S. Beverage Alcohol industry and the future outlook is strong Macro trends in the U.S. market are very favorable to the continued growth of the Beverage Alcohol industry Consumers are trading down consistent with past recessions but the premium end always recovers and is already doing so On-premise recovery is key to future growth and trade-up as the economy recovers

  50. Key Implications U.S. Drinks Conference 2010 • The number of new product launches has decreased during the recession increasing interest in new brands. • Consumers and retailers are interested in discovering and experiencing new products across all categories • Consumers are seeking value more than ever opening brand building opportunities in all price segments • Over half of Beer, Wine and Spirit volume is concentrated in the top 10 states so focus brand launches in key markets • Building beverage brands in the U.S. requires a disciplined, hands on, long-term approach but it can be done

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