How The Global Drinks Business Works...

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The only un-sponsored seminar of Tales of the Cocktail 2011, How The Global Drinks Business was a sold-out seminar taught by Philip Duff on Wednesday 20 July.

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  • S
  • Ginebra San Miguel estimated around 27m cases – outsells the world's best selling gins all put together and doubled!
  • Consumers go from water to beer/wine to spirits as wealth increases US consumers drinks spirits because of Prohibition Vanilla extract example Respond to incentives, laws : abolition trade tariffs Portugal led to increase in whiskey consumption from 7.5% to 33.5% in 11 years
  • Importance of personal connections to people, belief
  • Producers – farmer mentality Not always the marketer – consulting wave 1960s broke the link Being good is not easy – too many modern day master distillers Owes a lot to process management and chemistry Products very often not popular in their country of origin-Grey Goose, Scotch whiskey, cognac Factors: fermenting, distilling (pots/columns), blending, aging, bottling. Specialties: flavours, creams, filters Managing stocks – e.g. Macallan, forecasting demand, running a multi-brand distillery e.g Cooley NDAs for development Trademarked procedures NPD – specialist Usually agency driven, need to anticipate trend, not just answer demand Client will come with a brief, e.g. Ciroc-grapes, bottle. Cost of Goods Liquid producers need to be able to agree a very detailed brief with clients! Fragrance houses – aromas, liquids, off the shelf, new processes, 2 year offer cycles like Pantone
  • )
  • Marketing a new discipline, a la Peter Drucker. Previously, focus was production Ernest Saunders an early convert to marketing, ex Beechams and Nestle, hired as professional manager to turn around Guinness, market cap $239m Brought in Bain consulting, who spread tendrils throughout Guinness 1759: Guinness founded 1877: Distillers Company Limited (DCL) founded by 6 Scotch continual distillers 1934: MRMA / Grand Met founded (hotels, real estate) 1981: Guinness market cap $239m 1985: Guinness buys Arthur Bell's Scotch whisky 1986: Guinness buys DCL, becomes Guinness-UDV (United Distillers & Vintners) 1997: Guinness merges with Grand Met, becomes Diageo 2001: Diageo buys large parts of Seagrams spirits 2010: Diageo market cap of $42bn (grew 175 times bigger in under 30 years!)
  • Marketing a new discipline, a la Peter Drucker. Previously, focus was production Ernest Saunders an early convert to marketing, ex Beechams and Nestle, hired as professional manager to turn around Guinness, market cap $239m Brought in Bain consulting, who spread tendrils throughout Guinness 1759: Guinness founded 1877: Distillers Company Limited (DCL) founded by 6 Scotch continual distillers 1934: MRMA / Grand Met founded (hotels, real estate) 1981: Guinness market cap $239m 1985: Guinness buys Arthur Bell's Scotch whisky 1986: Guinness buys DCL, becomes Guinness-UDV (United Distillers & Vintners) 1997: Guinness merges with Grand Met, becomes Diageo 2001: Diageo buys large parts of Seagrams spirits 2010: Diageo market cap of $42bn (grew 175 times bigger in under 30 years!)
  • Marketing a new discipline, a la Peter Drucker. Previously, focus was production Ernest Saunders an early convert to marketing, ex Beechams and Nestle, hired as professional manager to turn around Guinness, market cap $239m Brought in Bain consulting, who spread tendrils throughout Guinness 1759: Guinness founded 1877: Distillers Company Limited (DCL) founded by 6 Scotch continual distillers 1934: MRMA / Grand Met founded (hotels, real estate) 1981: Guinness market cap $239m 1985: Guinness buys Arthur Bell's Scotch whisky 1986: Guinness buys DCL, becomes Guinness-UDV (United Distillers & Vintners) 1997: Guinness merges with Grand Met, becomes Diageo 2001: Diageo buys large parts of Seagrams spirits 2010: Diageo market cap of $42bn (grew 175 times bigger in under 30 years!)
  • Marketing a new discipline, a la Peter Drucker. Previously, focus was production Ernest Saunders an early convert to marketing, ex Beechams and Nestle, hired as professional manager to turn around Guinness, market cap $239m Brought in Bain consulting, who spread tendrils throughout Guinness 1759: Guinness founded 1877: Distillers Company Limited (DCL) founded by 6 Scotch continual distillers 1934: MRMA / Grand Met founded (hotels, real estate) 1981: Guinness market cap $239m 1985: Guinness buys Arthur Bell's Scotch whisky 1986: Guinness buys DCL, becomes Guinness-UDV (United Distillers & Vintners) 1997: Guinness merges with Grand Met, becomes Diageo 2001: Diageo buys large parts of Seagrams spirits 2010: Diageo market cap of $42bn (grew 175 times bigger in under 30 years!)
  • ...sales projected to decline 50%
  • When signed contract, couldn't find Guinness to toast with in Geneva! Marketing a new discipline, a la Peter Drucker. Previously, focus was production Ernest Saunders an early convert to marketing, ex Beechams and Nestle, hired as professional manager to turn around Guinness, market cap $239m Brought in Bain consulting, who spread tendrils throughout Guinness 1759: Guinness founded 1877: Distillers Company Limited (DCL) founded by 6 Scotch continual distillers 1934: MRMA / Grand Met founded (hotels, real estate) 1981: Guinness market cap $239m 1985: Guinness buys Arthur Bell's Scotch whisky 1986: Guinness buys DCL, becomes Guinness-UDV (United Distillers & Vintners) 1997: Guinness merges with Grand Met, becomes Diageo 2001: Diageo buys large parts of Seagrams spirits 2010: Diageo market cap of $42bn (grew 175 times bigger in under 30 years!)
  • Marketing a new discipline, a la Peter Drucker. Previously, focus was production Ernest Saunders an early convert to marketing, ex Beechams and Nestle, hired as professional manager to turn around Guinness, market cap $239m Brought in Bain consulting, who spread tendrils throughout Guinness 1759: Guinness founded 1877: Distillers Company Limited (DCL) founded by 6 Scotch continual distillers 1934: MRMA / Grand Met founded (hotels, real estate) 1981: Guinness market cap $239m 1985: Guinness buys Arthur Bell's Scotch whisky 1986: Guinness buys DCL, becomes Guinness-UDV (United Distillers & Vintners) 1997: Guinness merges with Grand Met, becomes Diageo 2001: Diageo buys large parts of Seagrams spirits 2010: Diageo market cap of $42bn (grew 175 times bigger in under 30 years!)
  • Marketing a new discipline, a la Peter Drucker. Previously, focus was production Ernest Saunders an early convert to marketing, ex Beechams and Nestle, hired as professional manager to turn around Guinness, market cap $239m Brought in Bain consulting, who spread tendrils throughout Guinness 1759: Guinness founded 1877: Distillers Company Limited (DCL) founded by 6 Scotch continual distillers 1934: MRMA / Grand Met founded (hotels, real estate) 1981: Guinness market cap $239m 1985: Guinness buys Arthur Bell's Scotch whisky 1986: Guinness buys DCL, becomes Guinness-UDV (United Distillers & Vintners) 1997: Guinness merges with Grand Met, becomes Diageo 2001: Diageo buys large parts of Seagrams spirits 2010: Diageo market cap of $42bn (grew 175 times bigger in under 30 years!)
  • Marketing a new discipline, a la Peter Drucker. Previously, focus was production Ernest Saunders an early convert to marketing, ex Beechams and Nestle, hired as professional manager to turn around Guinness, market cap $239m Brought in Bain consulting, who spread tendrils throughout Guinness 1759: Guinness founded 1877: Distillers Company Limited (DCL) founded by 6 Scotch continual distillers 1934: MRMA / Grand Met founded (hotels, real estate) 1981: Guinness market cap $239m 1985: Guinness buys Arthur Bell's Scotch whisky 1986: Guinness buys DCL, becomes Guinness-UDV (United Distillers & Vintners) 1997: Guinness merges with Grand Met, becomes Diageo 2001: Diageo buys large parts of Seagrams spirits 2010: Diageo market cap of $42bn (grew 175 times bigger in under 30 years!)
  • Marketing a new discipline, a la Peter Drucker. Previously, focus was production Ernest Saunders an early convert to marketing, ex Beechams and Nestle, hired as professional manager to turn around Guinness, market cap $239m Brought in Bain consulting, who spread tendrils throughout Guinness 1759: Guinness founded 1877: Distillers Company Limited (DCL) founded by 6 Scotch continual distillers 1934: MRMA / Grand Met founded (hotels, real estate) 1981: Guinness market cap $239m 1985: Guinness buys Arthur Bell's Scotch whisky 1986: Guinness buys DCL, becomes Guinness-UDV (United Distillers & Vintners) 1997: Guinness merges with Grand Met, becomes Diageo 2001: Diageo buys large parts of Seagrams spirits 2010: Diageo market cap of $42bn (grew 175 times bigger in under 30 years!)
  • Marketing a new discipline, a la Peter Drucker. Previously, focus was production Ernest Saunders an early convert to marketing, ex Beechams and Nestle, hired as professional manager to turn around Guinness, market cap $239m Brought in Bain consulting, who spread tendrils throughout Guinness 1759: Guinness founded 1877: Distillers Company Limited (DCL) founded by 6 Scotch continual distillers 1934: MRMA / Grand Met founded (hotels, real estate) 1981: Guinness market cap $239m 1985: Guinness buys Arthur Bell's Scotch whisky 1986: Guinness buys DCL, becomes Guinness-UDV (United Distillers & Vintners) 1997: Guinness merges with Grand Met, becomes Diageo 2001: Diageo buys large parts of Seagrams spirits 2010: Diageo market cap of $42bn (grew 175 times bigger in under 30 years!)
  • Marketers – sometimes but not always the producer Usually sold as a brand Brand = product + emotion+personality. Malibu made initially UK! Both anticipate and respond to demand Companies became big through vertical integration then were de-merged from Prohibition (US) and 1989 (Supply of Beer act, UK) to, respectively, zero and max. 2000, then became multinationals Portability affects internationalisation - beer first, wine last Pre 1960s, drinks business profitable but easy, little internationalisation, run by nice chaps, fat margins, little professionalisation, lots of family firms Good: little pressure for immediate growth: Grand Met initially real estate, no pressure no drinks division Marketing a new discipline, a la Peter Drucker. Previously, focus was production BUT families has a face, a la Michel Roux, Tom Ford, etc – is this because drinks is about the product while fragrances are about hype? Brought in Bain consulting, who spread tendrils throughout Guinness Current situation : the Big Guys consider their expertise to be production/finishing and marketing Global priority: managed same everywhere, local priority, category brands Cheaper to buy a brand
  • NPD Too risky Impossible to innovate and be entrepreneurial in a large company Lack of commitment and passion NPD: 95% failure rate! First mover advantage, Glenfiddich 1964, baileys 1970s, pasteurised beer, stable milk Cheaper to buy a brand Baileys: oversupply milk, export subsidy, vertical integration Grand Met express dairies, Irish Mist More efficient to revive a slumbering brand or push a success, than NPD Piat d'or – consumers like image red, prefer taste white, never sold France Line extensions to create eternal life brand – Baileys whiskey, Gilbeys Green Label gin to whiskey (India 1995), Bols Brandy (India, SA), flavoured vodkas, Freedom until you hit the 100k case mark
  • NPD Too risky Impossible to innovate and be entrepreneurial in a large company Lack of commitment and passion NPD: 95% failure rate! First mover advantage, Glenfiddich 1964, baileys 1970s, pasteurised beer, stable milk Cheaper to buy a brand Baileys: oversupply milk, export subsidy, vertical integration Grand Met express dairies, Irish Mist More efficient to revive a slumbering brand or push a success, than NPD Piat d'or – consumers like image red, prefer taste white, never sold France Line extensions to create eternal life brand – Baileys whiskey, Gilbeys Green Label gin to whiskey (India 1995), Bols Brandy (India, SA), flavoured vodkas, Freedom until you hit the 100k case mark
  • NPD Too risky Impossible to innovate and be entrepreneurial in a large company Lack of commitment and passion NPD: 95% failure rate! First mover advantage, Glenfiddich 1964, baileys 1970s, pasteurised beer, stable milk Cheaper to buy a brand Baileys: oversupply milk, export subsidy, vertical integration Grand Met express dairies, Irish Mist More efficient to revive a slumbering brand or push a success, than NPD Piat d'or – consumers like image red, prefer taste white, never sold France Line extensions to create eternal life brand – Baileys whiskey, Gilbeys Green Label gin to whiskey (India 1995), Bols Brandy (India, SA), flavoured vodkas, Freedom until you hit the 100k case mark
  • M&A – Absolut deal set a different valuation level, 22 times earnings. Valuation now based on cashflow – Benedictine profit 850k but cashflow 10.5m Previously involved property, since Sapphire M&A intellectual property – stock, recipe, trademark Examples; Tuthilltown (? 10k cases, $13m), Daucourt ($40m,60,000 cases), 42Below ($91m, 188k cases 30 countries, now 120k in 7) Reserve Brands Same reason why many acquisitions do not work out – Bacardi buy 42 Below, sales decline from 188k cases 2005/6 to 120k now Complete outsourcing – QCM, Stranger, Navyblue, liquid flavour specialists Advantage of a small firm is speed, recklessness, short chain command 18 month manager problem – senior VP is a longterm pro, managers don't have much impact! Projects get killed Compliance – t10 noncompliant/White tie tiara /jazz age example Foreign subsidiaries as separate as separate companies
  • M&A – Absolut deal set a different valuation level, 22 times earnings. Valuation now based on cashflow – Benedictine profit 850k but cashflow 10.5m Previously involved property, since Sapphire M&A intellectual property – stock, recipe, trademark Examples; Tuthilltown (? 10k cases, $13m), Daucourt ($40m,60,000 cases), 42Below ($91m, 188k cases 30 countries, now 120k in 7) Reserve Brands Same reason why many acquisitions do not work out – Bacardi buy 42 Below, sales decline from 188k cases 2005/6 to 120k now Complete outsourcing – QCM, Stranger, Navyblue, liquid flavour specialists Advantage of a small firm is speed, recklessness, short chain command 18 month manager problem – senior VP is a longterm pro, managers don't have much impact! Projects get killed Compliance – t10 noncompliant/White tie tiara /jazz age example Foreign subsidiaries as separate as separate companies
  • M&A – Absolut deal set a different valuation level, 22 times earnings. Valuation now based on cashflow – Benedictine profit 850k but cashflow 10.5m Previously involved property, since Sapphire M&A intellectual property – stock, recipe, trademark Examples; Tuthilltown (? 10k cases, $13m), Daucourt ($40m,60,000 cases), 42Below ($91m, 188k cases 30 countries, now 120k in 7) Reserve Brands Same reason why many acquisitions do not work out – Bacardi buy 42 Below, sales decline from 188k cases 2005/6 to 120k now Complete outsourcing – QCM, Stranger, Navyblue, liquid flavour specialists Advantage of a small firm is speed, recklessness, short chain command 18 month manager problem – senior VP is a longterm pro, managers don't have much impact! Projects get killed Compliance – t10 noncompliant/White tie tiara /jazz age example Foreign subsidiaries as separate as separate companies
  • M&A – Absolut deal set a different valuation level, 22 times earnings. Valuation now based on cashflow – Benedictine profit 850k but cashflow 10.5m Previously involved property, since Sapphire M&A intellectual property – stock, recipe, trademark Examples; Tuthilltown (? 10k cases, $13m), Daucourt ($40m,60,000 cases), 42Below ($91m, 188k cases 30 countries, now 120k in 7) Reserve Brands Same reason why many acquisitions do not work out – Bacardi buy 42 Below, sales decline from 188k cases 2005/6 to 120k now Complete outsourcing – QCM, Stranger, Navyblue, liquid flavour specialists Advantage of a small firm is speed, recklessness, short chain command 18 month manager problem – senior VP is a longterm pro, managers don't have much impact! Projects get killed Compliance – t10 noncompliant/White tie tiara /jazz age example Foreign subsidiaries as separate as separate companies
  • M&A – Absolut deal set a different valuation level, 22 times earnings. Valuation now based on cashflow – Benedictine profit 850k but cashflow 10.5m Previously involved property, since Sapphire M&A intellectual property – stock, recipe, trademark Examples; Tuthilltown (? 10k cases, $13m), Daucourt ($40m,60,000 cases), 42Below ($91m, 188k cases 30 countries, now 120k in 7) Reserve Brands Same reason why many acquisitions do not work out – Bacardi buy 42 Below, sales decline from 188k cases 2005/6 to 120k now Complete outsourcing – QCM, Stranger, Navyblue, liquid flavour specialists Advantage of a small firm is speed, recklessness, short chain command 18 month manager problem – senior VP is a longterm pro, managers don't have much impact! Projects get killed Compliance – t10 noncompliant/White tie tiara /jazz age example Foreign subsidiaries as separate as separate companies
  • M&A – Absolut deal set a different valuation level, 22 times earnings. Valuation now based on cashflow – Benedictine profit 850k but cashflow 10.5m Previously involved property, since Sapphire M&A intellectual property – stock, recipe, trademark Examples; Tuthilltown (? 10k cases, $13m), Daucourt ($40m,60,000 cases), 42Below ($91m, 188k cases 30 countries, now 120k in 7) Reserve Brands Same reason why many acquisitions do not work out – Bacardi buy 42 Below, sales decline from 188k cases 2005/6 to 120k now Complete outsourcing – QCM, Stranger, Navyblue, liquid flavour specialists Advantage of a small firm is speed, recklessness, short chain command 18 month manager problem – senior VP is a longterm pro, managers don't have much impact! Projects get killed Compliance – t10 noncompliant/White tie tiara /jazz age example Foreign subsidiaries as separate as separate companies
  • Partner deals – Diddy 60k to 400k in 1 year! $14m investment, now 1m case brand
  • Partner deals – Diddy 60k to 400k in 1 year! $14m investment, now 1m case brand
  • Partner deals – Diddy 60k to 400k in 1 year! $14m investment, now 1m case brand
  • Partner deals – Diddy 60k to 400k in 1 year! $14m investment, now 1m case brand
  • Partner deals – Diddy 60k to 400k in 1 year! $14m investment, now 1m case brand
  • Distribution is key – van Munching example Be listed in bars that love your brand Biggest issue is delegation, brand owner thinking they know the market better Getting attention from distributors How to pick? - Structure – Portfolio – emphasis on/off trade – sales force & managers Vertical integration – UK pubs, US pre-Prohibition, govt monopolies Sweden, Canada Margin squeezing, layers of mgmt removed US: 3 tier system allows little guys to compete, distrib collects taxes, but de factor ownerships, states set own rules – Missouri only went wet again in 1966 Southern – 20% mkt, $7bn sales 2006 Small brands need own PR and sales manager Choices: little brands – little distribs = little reach What's your strategy – disrupt/ Build? Get attention? Must give distrib margin, agree to split A&P – Roux example of passing on higher selling rpice to supply chain Distribs rarely go 50/50 on A&P, often brandowner above the line, distrib below the line World grey market
  • Production compliance, label, liquid, alcohol percentage, permitted colourings
  • Production compliance, label, liquid, alcohol percentage, permitted colourings
  • Production compliance, label, liquid, alcohol percentage, permitted colourings
  • Production compliance, label, liquid, alcohol percentage, permitted colourings
  • Production compliance, label, liquid, alcohol percentage, permitted colourings
  • Production compliance, label, liquid, alcohol percentage, permitted colourings
  • Production compliance, label, liquid, alcohol percentage, permitted colourings
  • Wholesalers do not build brands – they move boxes Post Prohibition, retailers opposed consumer-friendly changes like opening hours and days Margins squeezed and (for the big guys) dictated European wholesalers and retailers created listing fees in the 1960s, spread to multiple grocers and bigbox stores, infected European businesses Carry many competing lines, want to deliver one-stop-shop to shops and bar owners, therefore one-stop-shop vodkas, flavours, whiskies, extra facings Growth of wine warehouses UK, WalMart US Canada shops don't stock soft drinks
  • Production compliance, label, liquid, alcohol percentage, permitted colourings
  • Production compliance, label, liquid, alcohol percentage, permitted colourings
  • Production compliance, label, liquid, alcohol percentage, permitted colourings
  • Production compliance, label, liquid, alcohol percentage, permitted colourings
  • Production compliance, label, liquid, alcohol percentage, permitted colourings
  • Production compliance, label, liquid, alcohol percentage, permitted colourings
  • Production compliance, label, liquid, alcohol percentage, permitted colourings
  • Production compliance, label, liquid, alcohol percentage, permitted colourings
  • Production compliance, label, liquid, alcohol percentage, permitted colourings
  • Huge shift towards spirits since 1990, globally DISCUS: US retail up 60% 97-05, to $53bn Premiums 2002-2005 +19% On-trade is the equivalent of couture Listing fees skew the balance Bars operate on a 10% net margin, best-case US system of effective listing fees, booking parties, dinner etc. Ambassadors increasingly being used to supplement the work of sales reps with 300+ accounts (Roux advised 40) US – regulations prohibit shipping from producer to store or from store to bar, so PR agencies and distributors are de factor couriers! Shops - the off-trade - include duty-free and military supplies Often limited shelf space, cater to wide range of consumers (unlike bars) Sometimes government controlled Easiest highest-margin sale compared to bars Bars – the on-trade High influence-ability of consumers High profile in on-trade drives media attention and listings in off-trade = drives volume Growing and extremely competitive n
  • We lack objective spirits media a la Robert Parker / wine world in general Very few professional spirits writers, very few who can make a living at it News is now free Link between advertising and copy is broken Declaration of interest / ethics statement Spirits tastings – real double blind
  • Consumers go from water to beer/wine to spirits as wealth increases US consumers drinks spirits because of Prohibition Vanilla extract example Respond to incentives, laws : abolition trade tariffs Portugal led to increase in whiskey consumption from 7.5% to 33.5% in 11 years Government regulations restrain personal choice in both good and bad ways Alcohol firms terrified of “cigarette” effect, invest heavily in PR and health/responsibility program Essential ability lacking is that of accepting the consequences of our actions
  • Consumers go from water to beer/wine to spirits as wealth increases US consumers drinks spirits because of Prohibition Vanilla extract example Respond to incentives, laws : abolition trade tariffs Portugal led to increase in whiskey consumption from 7.5% to 33.5% in 11 years
  • How The Global Drinks Business Works...

    1. 1. <ul>How The Global Drinks Business Works </ul><ul>by Philip Duff </ul>
    2. 2. <ul>How The Global Drinks Business Works </ul><ul><li>“ I want to make it clear at the outset that I have never been engaged in any of the manifold branches of the liquor business.
    3. 3. I am not a distiller, an importer, a bottler or a merchant of liquors.
    4. 4. I am not even a retired bartender.”
    5. 5. David A. embury, 1948 </li></ul>
    6. 6. <ul>How The Global Drinks Business Works </ul><ul><li>Overview </li></ul>
    7. 7. <ul>How The Global Drinks Business Works </ul><ul><li>Overview
    8. 8. The World Drinks </li></ul>
    9. 9. <ul>How The Global Drinks Business Works </ul><ul><li>Overview
    10. 10. The World Drinks
    11. 11. Global spirits market: $216bn
    12. 12. ( 2007, Business Insights Ltd ) </li></ul>
    13. 13. <ul>How The Global Drinks Business Works </ul><ul><li>Overview
    14. 14. The World Drinks
    15. 15. Global spirits market: $216bn
    16. 16. ( 2007, Business Insights Ltd )
    17. 17. Projected 2012: $245bn </li></ul>
    18. 18. <ul>How The Global Drinks Business Works </ul><ul><li>Overview
    19. 19. The World Drinks
    20. 20. Global spirits market: $216bn
    21. 21. ( 2007, Business Insights Ltd )
    22. 22. Projected 2012: $245bn
    23. 23. Drivers: BRIC </li></ul>
    24. 24. <ul>How The Global Drinks Business Works </ul><ul><li>Overview
    25. 25. The World Drinks
    26. 26. Global spirits market: $216bn
    27. 27. ( 2007, Business Insights Ltd )
    28. 28. Projected 2012: $245bn
    29. 29. Drivers: BRIC </li><ul><ul><ul><ul><ul><ul><ul><ul><ul><li>Eastern europe </li></ul></ul></ul></ul></ul></ul></ul></ul></ul></ul>
    30. 30. <ul>How The Global Drinks Business Works </ul><ul><li>Overview
    31. 31. The World Drinks
    32. 32. Global spirits market: $216bn
    33. 33. ( 2007, Business Insights Ltd )
    34. 34. Projected 2012: $245bn
    35. 35. Drivers: BRIC </li><ul><ul><ul><ul><ul><ul><ul><ul><ul><li>Eastern europe
    36. 36. Middle East </li></ul></ul></ul></ul></ul></ul></ul></ul></ul></ul>
    37. 37. <ul>How The Global Drinks Business Works </ul><ul><li>Overview
    38. 38. The World Drinks
    39. 39. Global spirits market: $216bn
    40. 40. ( 2007, Business Insights Ltd )
    41. 41. Projected 2012: $245bn
    42. 42. Drivers: BRIC </li><ul><ul><ul><ul><ul><ul><ul><ul><ul><li>Eastern europe
    43. 43. Middle East
    44. 44. Innovation (In Mature markets) </li></ul></ul></ul></ul></ul></ul></ul></ul></ul></ul>
    45. 45. <ul>How The Global Drinks Business Works </ul><ul><li>Overview
    46. 46. The World Drinks Local </li></ul>
    47. 47. <ul>How The Global Drinks Business Works </ul><ul><li>Overview
    48. 48. The World Drinks Local </li></ul>
    49. 49. <ul>How The Global Drinks Business Works </ul><ul><li>Overview
    50. 50. The World Drinks Local </li></ul>
    51. 51. <ul>How The Global Drinks Business Works </ul><ul><li>Overview
    52. 52. The World Drinks Local </li></ul>
    53. 53. <ul>How The Global Drinks Business Works </ul><ul><li>Overview
    54. 54. The World Drinks Local </li></ul>
    55. 55. <ul>How The Global Drinks Business Works </ul><ul><li>Overview
    56. 56. ...But The valuable brands are international </li></ul>
    57. 57. <ul>How The Global Drinks Business Works </ul><ul><li>Overview
    58. 58. ...But The valuable brands are international </li></ul>
    59. 59. <ul>How The Global Drinks Business Works </ul><ul><li>Overview
    60. 60. ...But The valuable brands are international </li></ul>700,000 cases / Brand Value $275m = $393 Brand Value Per Case!
    61. 61. <ul>How The Global Drinks Business Works </ul><ul><li>Overview
    62. 62. ...But The valuable brands are international </li></ul>700,000 cases / Brand Value $275m = $393 Brand Value Per Case! (#1 Johnnie Walker = $135/case)
    63. 63. <ul>How The Global Drinks Business Works </ul><ul><li>Overview
    64. 64. The Big Boys Dominate </li></ul>
    65. 65. <ul>How The Global Drinks Business Works </ul><ul><li>Overview
    66. 66. The World Drinks Whisky, </li></ul>
    67. 67. <ul>How The Global Drinks Business Works </ul><ul><li>Overview
    68. 68. The World Drinks Whisky, Vodka </li></ul>
    69. 69. <ul>How The Global Drinks Business Works </ul><ul><li>Overview
    70. 70. The World Drinks Whisky, Vodka & Soju </li></ul>
    71. 71. <ul>How The Global Drinks Business Works </ul><ul><li>Overview
    72. 72. The World Drinks Whisky, Vodka & Soju </li></ul>
    73. 73. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers Marketers Distributors Wholesalers, Shops & Bars Media Consumers
    74. 74. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers
    75. 75. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers
    76. 76. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers
    77. 77. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers
    78. 78. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers
    79. 79. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers
    80. 80. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers
    81. 81. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Cost of producing 1 bottle of unaged spirit USD$
    82. 82. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Cost of producing 1 bottle of unaged spirit USD$ Grain alcohol ( Grape: 30-50% more ) 1
    83. 83. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Cost of producing 1 bottle of unaged spirit USD$ Grain alcohol ( Grape: 30-50% more ) 1 Bottle: Standard bottle, satin Finish, silkscreen label & window 1,77
    84. 84. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Cost of producing 1 bottle of unaged spirit USD$ Grain alcohol ( Grape: 30-50% more ) 1 Bottle: Standard bottle, satin Finish, silkscreen label & window 1,77 (Simple) screwcap 0,14
    85. 85. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Cost of producing 1 bottle of unaged spirit USD$ Grain alcohol ( Grape: 30-50% more ) 1 Bottle: Standard bottle, satin Finish, silkscreen label & window 1,77 (Simple) screwcap 0,14 Bottling 0,70
    86. 86. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Cost of producing 1 bottle of unaged spirit USD$ Grain alcohol ( Grape: 30-50% more ) 1 Bottle: Standard bottle, satin Finish, silkscreen label & window 1,77 (Simple) screwcap 0,14 Bottling 0,70 Case & Divider 0,35
    87. 87. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Cost of producing 1 bottle of unaged spirit USD$ Grain alcohol ( Grape: 30-50% more ) 1 Bottle: Standard bottle, satin Finish, silkscreen label & window 1,77 (Simple) screwcap 0,14 Bottling 0,70 Case & Divider 0,35 Total per bottle ( < c.4000 cases) 3,96
    88. 88. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Cost of producing 1 bottle of unaged spirit USD$ Grain alcohol ( Grape: 30-50% more ) 1 Bottle: Standard bottle, satin Finish, silkscreen label & window 1,77 (Simple) screwcap 0,14 Bottling 0,70 Case & Divider 0,35 Total per bottle ( < c.4000 cases) 3,96 Total per bottle ( > c.4000 cases) 2,97
    89. 89. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producer's margin on 1 bottle USD$
    90. 90. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producer's margin on 1 bottle USD$ Production cost (2,97 – 3,97) 3,33
    91. 91. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producer's margin on 1 bottle USD$ Production cost (2,97 – 3,97) 3,33 Producer's selling price 7,83
    92. 92. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producer's margin on 1 bottle USD$ Production cost (2,97 – 3,97) 3,33 Producer's selling price 7,83 Producer's $ Profit Per Bottle 4,50
    93. 93. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producer's margin on 1 bottle USD$ Production cost (2,97 – 3,97) 3,33 Producer's selling price 7,83 Producer's $ Profit Per Bottle 4,50 Producer's Profit % Per Bottle 57.46%
    94. 94. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers Marketers: The Marketing Approach
    95. 95. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers Marketers: Family
    96. 96. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers Marketers: Family Professional
    97. 97. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers Marketers: Private
    98. 98. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers Marketers: Private Public
    99. 99. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers Marketers: Consultants!
    100. 100. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers Marketers: How Firms Go Big 1759: Guinness
    101. 101. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers Marketers: How Firms Go Big 1877: DCL
    102. 102. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers Marketers: How Firms Go Big 1934: Grand Met
    103. 103. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers Marketers: How Firms Go Big 1981: Guinness in Shitter Market Cap $239m
    104. 104. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers Marketers: How Firms Go Big 1981: Guinness Hire Ernest Saunders
    105. 105. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers Marketers: How Firms Go Big 1985: Guinness Buys Bell's
    106. 106. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers Marketers: How Firms Go Big 1986: Guinness Buys DCL, Becomes Guinness-UDV
    107. 107. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers Marketers: How Firms Go Big 1997: Guinness UDV & Grand Met become:
    108. 108. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers Marketers: How Firms Go Big 2001: Diageo Buy (Large Bits Of) Seagram
    109. 109. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers Marketers: How Firms Go Big 2010: Diageo market Cap $42bn
    110. 110. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers Marketers
    111. 111. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Marketer/Importer's margin on 1 bottle USD$
    112. 112. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Marketer/Importer's margin on 1 bottle USD$ cost price (Producer's Selling Price) 7,83
    113. 113. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Marketer/Importer's margin on 1 bottle USD$ cost price (Producer's Selling Price) 7,83 Importer's Selling price 11,19
    114. 114. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Marketer/Importer's margin on 1 bottle USD$ cost price (Producer's Selling Price) 7,83 Importer's Selling price 11,19 Importer's $ Profit Per Bottle 3,36
    115. 115. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Marketer/Importer's margin on 1 bottle USD$ cost price (Producer's Selling Price) 7,83 Importer's Selling price 11,19 Importer's $ Profit Per Bottle 3,36 Importer's Profit % Per Bottle 30%
    116. 116. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers Marketers
    117. 117. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers Marketers
    118. 118. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers Marketers
    119. 119. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers Marketers
    120. 120. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers Marketers
    121. 121. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers Marketers
    122. 122. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers Marketers
    123. 123. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers Marketers
    124. 124. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers Marketers
    125. 125. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers Marketers 2003: Ciroc
    126. 126. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers Marketers 2007: 60,000 cases
    127. 127. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers Marketers 2007: Sean Combs
    128. 128. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers Marketers 2008: 400, 000 cases
    129. 129. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers Marketers 2011: 1m cases
    130. 136. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers Marketers Distributors
    131. 137. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Distributor's margin on 1 bottle USD$
    132. 138. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Distributor's margin on 1 bottle USD$ FOB price (Importer's Selling price) 11,19
    133. 139. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Distributor's margin on 1 bottle USD$ FOB price (Importer's Selling price) 11,19 Distribution Costs (Freight, taxes, etc.) 3,50
    134. 140. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Distributor's margin on 1 bottle USD$ FOB price (Importer's Selling price) 11,19 Distribution Costs (Freight, taxes, etc.) 3,50 Total cost price to Distributor 14,69
    135. 141. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Distributor's margin on 1 bottle USD$ FOB price (Importer's Selling price) 11,19 Distribution Costs (Freight, taxes, etc.) 3,50 Total cost price to Distributor 14,69 Distributor's Deep-deal selling price 20,99
    136. 142. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Distributor's margin on 1 bottle USD$ FOB price (Importer's Selling price) 11,19 Distribution Costs (Freight, taxes, etc.) 3,50 Total cost price to Distributor 14,69 Distributor's Deep-deal selling price 20,99 Distributor's $ Profit Per Bottle 6,30
    137. 143. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Distributor's margin on 1 bottle USD$ FOB price (Importer's Selling price) 11,19 Distribution Costs (Freight, taxes, etc.) 3,50 Total cost price to Distributor 14,69 Distributor's Deep-deal selling price 20,99 Distributor's $ Profit Per Bottle 6,30 Distributor's Profit % Per Bottle 30%
    138. 144. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers Marketers Distributors Wholesalers, Shops & Bars
    139. 145. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Retailer's margin on 1 bottle USD$
    140. 146. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Retailer's margin on 1 bottle USD$ Cost price (Distributor's Selling price) 20,99
    141. 147. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Retailer's margin on 1 bottle USD$ Cost price (Distributor's Selling price) 20,99 Retailer's selling price 29,99
    142. 148. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Retailer's margin on 1 bottle USD$ Cost price (Distributor's Selling price) 20,99 Retailer's selling price 29,99 Retailer's $ Profit Per Bottle 9,00
    143. 149. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Retailer's margin on 1 bottle USD$ Cost price (Distributor's Selling price) 20,99 Retailer's selling price 29,99 Retailer's $ Profit Per Bottle 9,00 Retailer's Profit % Per Bottle 30%
    144. 151. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Bar's margin on 1 bottle USD$
    145. 152. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Bar's margin on 1 bottle USD$ Cost price (Wholesaler's Selling price)20.99
    146. 153. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Bar's margin on 1 bottle USD$ Cost price (Wholesaler's Selling price)20.99 Bar's selling price 124,99 ( i.e., 16⅔ Shots (1½oz.)@$7,50 per )
    147. 154. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Bar's margin on 1 bottle USD$ Cost price (Wholesaler's Selling price)20.99 Bar's selling price 124,99 ( i.e., 16⅔ Shots (1½oz.)@$7,50 per ) Bar's $ Profit Per Bottle 104
    148. 155. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Bar's margin on 1 bottle USD$ Cost price (Wholesaler's Selling price)20.99 Bar's selling price 124,99 ( i.e., 16⅔ Shots (1½oz.)@$7,50 per ) Bar's $ Profit Per Bottle 104 Bar's Profit % Per Bottle 83%
    149. 156. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>The Value Chain of 1 bottle USD$
    150. 157. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>The Value Chain of 1 bottle USD$ Production cost 3,33
    151. 158. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>The Value Chain of 1 bottle USD$ Production cost 3,33 Producer's Profit 4,50
    152. 159. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>The Value Chain of 1 bottle USD$ Production cost 3,33 Producer's Profit 4,50 Marketer/Importer's Profit 3,36
    153. 160. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>The Value Chain of 1 bottle USD$ Production cost 3,33 Producer's Profit 4,50 Marketer/Importer's Profit 3,36 Distribution costs 3,50
    154. 161. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>The Value Chain of 1 bottle USD$ Production cost 3,33 Producer's Profit 4,50 Marketer/Importer's Profit 3,36 Distribution costs 3,50
    155. 162. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>The Value Chain of 1 bottle USD$ Production cost 3,33 Producer's Profit 4,50 Marketer/Importer's Profit 3,36 Distribution costs 3,50 Distributor's Profit 6,30
    156. 163. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>The Value Chain of 1 bottle USD$ Production cost 3,33 Producer's Profit 4,50 Marketer/Importer's Profit 3,36 Distribution costs 3,50 Distributor's Profit 6,30 Retailer's Profit 9,00 Cost to a consumer in a liquor store 29,99
    157. 164. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>The Value Chain of 1 bottle USD$ Production cost 3,33 Producer's Profit 4,50 Marketer/Importer's Profit 3,36 Distribution costs 3,50 Distributor's Profit 6,30 Bar's Profit 104,00 Cost to a consumer in a Bar 124,99
    158. 165. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers Marketers Distributors Wholesalers, Shops & Bars
    159. 166. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers Marketers Distributors Wholesalers, Shops & Bars Media
    160. 167. <ul>How The Global Drinks Business Works </ul><ul><li>Who Are “The Drinks Business”? </li></ul>Producers Marketers Distributors Wholesalers, Shops & Bars Media Consumers
    161. 168. <ul>How The Global Drinks Business Works </ul><ul><li>Thank Your For Your Attention!
    162. 169. More?
    163. 170. Philip @ Liquidsolutions . org </li></ul>

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