envisioning the future of beverages

ENVISIONING THE FUTURE OF BEVERAGES

Another Decade of Change…

FF&B Inc Confidential Use With Permission Only

Contact [email protected]

NEIL KIMBERLEY

(914) 482 0534

[email protected]

Wh

o A

m I? • Born in the UK,

now live in Brewster, NY

• Moved to the US at 21, went to GWU

• Past careers include Audio Engineering and Advertising

• Last 18 years in beverages

Wh

y W

ou

ld Y

ou

Lis

ten

To

Me

? • Brand Director on Snapple 97 -00

• VP Strategy CSAB 00 - 07

• Foray into ownership in 2008

• Started FF&B in 09 servicing private equity investors, beverage entrepreneurs and Wall Street analysts

Wh

y A

m I

He

re? • Networking

• Business Development

• I want your thoughts and opinions

2

FF&B Inc Confidential

Use With Permission Only

contact [email protected]

OBSERVATIONS

1. The ability to exploit change is the

ability to win

3




WINNERS HAVE EXPLOITED CONSUMER

CHANGE




4

$-

$1,000

$2,000

$3,000

$4,000

$5,000

$1,400

$95

$375

$1,600

$800

$237

$4,100

$2,000

$3,600

$400

$5,000

The Business Development Theory

BUT “WINNING” IS NEVER IMMEDIATE

-

20.0

40.0

60.0

80.0

100.0

120.0

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Year 11

Year 12

Year 13

Year 14

Year 15

Year 16

Year 17

Year 18

Year 19

Year 20

Vo

l (2

88

oz E

Q)

Source: Beverage Digest 2007

Innovation Brand Volumes Since Launch Through 2007

Frappucino SoBe AriZona Snapple

Glaceau Fuze Nantucket Nectars Propel

Red Bull Hansens Rockstar

5



Value

Function

Health

Distribution Consolidation

InnovationTaste

Fun

SociabilityConvenienceDesign

Conversation

Wellness

Buzz

Relationships

More SKUs

Tech-Based Selling

Data For Everything

People

“Fact-Based” Selling

Fewer People

Retail Consolidation

Retail Discipline

…AND CHANGE HAS NOT JUST BEEN IN PRODUCT

1999 2009

Consumer

Drivers

Commercial

Drivers

6




OBSERVATIONS

1. The ability to exploit change is now

the ability to win

2. A Unique Idea is Not Enough

7




THE DRIVERS OF SUCCESS

Attribute Implication

1. Tenacious, but flexible

management

• Strong enough to have

strength of conviction

• Realistic enough to change

when it is needed

2. Consumer Relevant

Product Difference

• Easy to understand and

dimensionalize

3. Willingness to Drive own

Distribution Strategy

• Challenge conventions

when needed

4. Effective Capitalization • Focus on the business, not

the investors

6. The Right Marketing • Build a brand from a product8




BIG BEVERAGE HAS THE IDEAS AND PROCESSES…

But innovation and

incubation run counter to

their business model

Fear of failure

Slow to respond

Over-Analytical

Impatient for success

Over-invest too early

Lack of Prioritization

Silo-ed Responsibility


Contact [email protected] 9

Ineffective Portfolio Strategy

Ineffective Incubation Strategy

9

COKE AND VENTURING

Acquisition Approach Investment

Approach



Glaceau, Fuze, NOS, Honest Tea, Zico, Illy

The approach is a step in the right direction, but the brands are still vulnerable to the challenges that have always beset big beverage incubation.

No Scale = No Focus10

NEW BEVERAGE DYNAMICS

Big Beverage View

Easier to buy than Innovate

No More Bathtub

Millionaires

Needs to be a big idea

Overpay and Underperform

Portfolio Fit

Entrepreneur View

Build To Flip

Maximize Growth

Minimize Profit

When to hold, when to fold?

Set Up Bidding

Keep Investors Hopeful

11Portfolio Incrementality

Ability to SupportEase of

ManagementFair Share of Value

Distributor View



OBSERVATIONS

1. The ability to exploit change is the

ability to win

2. A Unique Idea is Not Enough

3. Change is Inevitable

12



MAINSTREAM BEVERAGES ARE BEING SQUEEZED

Health Functionality

Mainstream

Beverages

CSDs

Milk

CoffeeWater

Tea

Juice

Sports

Energy

Emerging

Medium Margin Low Margin High Margin



13

Short Term

2010

- Bringing The Pain

- Consolidating for Success

- Slowing Innovation

SO, WHERE ARE WE GOING?

14



BRINGING THE PAIN

Soft Drink Businesses have performed well in the recession

Retailers will look to increase their share of value

Input costs increasing

Consumer buying power flat – and willing to compromise

Short Term



KO VS PEP VS SWY VS KR VS WMT

16

Short Term

DPS VS HANS VS SWY VS KR VS WMTShort Term



OIL PRICES

18

Short Term



ALUMINUM PRICES

19

Short Term



CONSUMER VALUE INDICATOR - COTShort Term



CONSOLIDATING FOR SUCCESS

Consolidated Model

Split Model

Opportunites Risks

Less

Dissonance from

Boardroom to

Shelf

More Distance

from the

marketplace

Ability to Be

Retailer Intimate

Held Hostage by

Retailer

Less Overhead

in Management

Less Nimble,

Less Nuanced,

Greater Portfolio Less Focused

Short Term

More

Value

Available

Less

Value

Available21



SLOWING INNOVATION

Fewer innovations likely

Small Beverage Co’s Less Angel and Venture capital

available

Big Beverage Co’s More Risk Averse

Barriers to entry increasing Distribution and Retail

Consolidation

Consumer retrenchment More Risk Averse

Short Term

22



Medium Term

2011- 2012

- New Model Marketing

- “Evil Sugar”

- Outsiders Take An Interest

- Distributor Leverage


23



A MARKETING MODEL FOR THE DIGITAL AGE

• Differentiation based in marketing

• Vulnerable to price-oriented promotion

• Awareness driven by one-way advertising

• Availability bought

Old Model

• Differentiation based in product

• Price-oriented promotion less effective

• Awareness built by consumer conversation

• Availability earned

New Model

24

Medium Term

24



TRADITIONAL BEVERAGE MARKETING

APPROACH

25

Trial

Build Consumer and Retailer Experience

of brand

Availability

Get Distributors and Retailers to carry your

brand

AwarenessCreate a brand

with target consumers

• Prioritizing

Availability alone

is not enough to

generate success

• But generating

trial and

awareness are

considered

expensive and

inefficient.

Medium Term



FEET ON THE STREET – RED BULL

Red Bull has been the master of resourcing street level “Feet on the street” activity.

Field Marketing Manager

On Premise Manager

Key Account Manager

Field Sales

Manager

Field Sampling Manager

Red Bull Micro Cell Plans and executes bar/club events

Executes Nationally Mandated

Off Premise Retail Events

Creates unpaid local exposure

• Coolers at radio stations

• Coolers at local tV news

• Locker rooms at local sports teams

Plans and executes local sampling

events at retail and events

Links to Distributor• Maintains link between

microcell and distributor• Develops driver sales people

Medium Term

26



FEET ON THE STREET – GLACEAU

Glaceau’s marketing model

relied on product trial with

retailers and consumers

Market Blitz Momentum

forced availability

Developed distributor

confidence

Visible sign of

commitment

Trial + Availability

Consumer Events

Retailer Visibility

Distributor Confidence

H

u

m

a

n

R

e

s

o

u

r

c

e

s

Glaceau organized their model targeting the weakest links of the selling chain:

Point of contact with retail.

Medium Term

27



A NEW WORLD?

Real Life Execution

Digital Activation

Business Strategy

28

A New Approach To The Old Issue…

Product

Positioning

Targeting

Efficient consumer delivery,

Drive to store (co -marketing),

Impel to purchase

Sales Calls

Store Promotion

Sampling

Medium Term



EVIL SUGAR

New Tax is almost inevitable despite the inequities

Cause multiple complications for the industry

Will become a political football

The more we oppose, the more likely the tax will be poorly thought through

Medium Term

29



DISTRIBUTOR LEVERAGE

Drivers…

Scale

Tactical Opportunity

Vanity

Medium Term



OUTSIDERS TAKE AN INTEREST

One of the non-US global players will want to be

bigger in non-alcoholic US beverages

Medium Term

31



Long Term

2012 – 2014

- Food is Medication

- The Big Shakeout

- Customer Evolution


32



LONG TERM

Long Term

Food is Medicine

• The next level of functional products

• Nutrigenomics

• Greater Understanding of Diet”

• Real, Believable approach to healthy

The Big Shakeout

• Ineffective pricing and promotional models put multiple retailers in jeopardy

• Failure of inefficient retailers results in even greater consolidation

Customer Evolution

• Fewer, more powerful customers at the top

• Multiple smaller customers in emerging channels at the bottom

33



AN EXAMPLE OF A PROJECT LEVERAGING

THIS THINKING

Unmet Consumer

Need

Product Execution

Effective Capitalization

Flexible Sales

New Model Marketing

Trial

AwarenessAvailability

PhyGital Marketing

34



APPETITE SUPPRESSION IS

THE NEXT BIG DIET TREND

•Research identifies that appetite suppression is a key need for dieters, but there is a lack of effective food or supplements - AND NO BEVERAGES!

“Focus is shifting towards foods and beverages that can be digested more slowly, reducing hunger pangs between meals and allowing dieters to consume less.”

Weight Loss Programs

• Example: Weight Watcher’s Momentum featuring Hungry

• “Control Hunger, Beat Temptation, Stop Dieting, Start Living”

Weight Loss Books

• The Volmetrics Weight Control Plan

• “Feel Full on Fewer Calories”

Even diet plans have begun to address the appetite suppression need…



THE 1ST APPETITE SUPPRESSION

BEVERAGE LAUNCHES FEBRUARY 2010

underWAY is simple

and effective

Dow Superfiber stops

“gastric emptying” -

increases feeling of

stomach fullness -

without gas or bloating

Low GI Sweeteners

stop insulin and blood

sugar spikes that tell

the brain you are

hungry

B Vitamins increase

energy levels

underWAY - The healthy way to put hunger on hold™…

underWAY will drive awareness

through significant TV, Outdoor and

PR support at introduction and on an

ongoing basis.

Brooke Burke - Spokesperson

Winner – Dancing with the Stars

Host – Making the Band

CEO Modern Mom Magazine

More at www.under-way.com

36FF&B Inc Confidential Use With Permission Only


ENVISIONING THE FUTURE OF BEVERAGES

Thank You!


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