czech craft brewery fund specialopportunity · marketing and sales. as a result there is little to...

1Private and conditional. Unauthorised distribution strictly prohibited. © 2015 Symfonie Capital LLC

Czech craft brewery fundSpecial Opportunity

June, 2020


The Opportunity

➢ Double digit growth in demand for craft beer in general – specifically Czech beer export, as ALL Czech beer is considered “craft” by export markets

➢ Fundamental changes in domestic and export distribution

➢ Craft brewers struggling with financial and operating cash flows

….

➢ The opportunity is to acquire shareholdings in craft microbreweries, creating synergies in…:

➢marketing (development of suite of craft brewing brands)

➢distribution (domestic and export)

➢operations (purchasing, logistics, services etc.)


Growth of Czech domestic market


Capitalising on experience

CASE STUDY➢ Dogfish Head, founded in 1995, was sold to Boston Beer Company for

$300 million

– production of approx. 352 000 hl in 2019

– US-based valuation: 852 USD/1 hl (incl. cash assets, fixed assets, brandequity etc.)

APPLICATION➢ Our target is to consolidate production volume of 30 000 hl

– Ability to purchase at of average 400 USD/1 hl = 12 million USD

– 400 USD/1hl is a significant 53% discount on the Boston Brewing Company deal

– With planned growth to 90 000+ hl over 5 years, the fund investments could be worth a min. of 36 million USD at 400 USD/1hl

Our mission is to select microbreweries with potential to succeed, and then to help them succeed by actively working with them to execute their business plans… from the day we invest to the day we exit.


Roadmap to success

➢ Make direct investments in microbreweries

➢ Identify opportunities where we can add value through our involvement with the company – marketing, business management, production, distribution and export – including locking in HOREKA contractually for minimal volumes

➢ Add value by working closely with management - we know the microbreweries, their key managers, shareholders (almost always the same people)

➢ Generate internal hl growth of 200% over 5 years

➢ Generate net investment returns of at least 35% per annum

➢ Exit investments in 5 years at exit multiples of at least 2.5X initial investment

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Competitive Edge – Opportunities to Get Market Share

Lower costs – consolidated puchasing of rawmaterials, packaging, marketing, logistics and services

Data gathering – gather data on customers in multiple regional domestic and export marketsand tailor products to meet their needs

Centralized distribution – lower distributioncosts with significantly expanded offer enablingfull servicing of HOREKA in Prague with single sales team

Centralized logistics – ensures more effectiveand better priced warehouseing for local and export markets – will deliver mixed pallets forexport

Better financing costs – offer loans with declining monthly payment as an alternative to the traditional flat payment structure

Coordinated marketing – cross sell brands and products

➢We understand the industry, the competitive

environment and the customers

➢We understand the products, brands,

production process and marketability

➢We have an experienced management team


The Symfonie Edge

• A dedicated team of professionals with decades of experience and a track record of success in all aspects of the beer industry, FMCG, beverage import and export

• Professional investment managers with experience in financial analysis, transaction structuring, fund management, marketing and product development

Pavel Prchal

Investment Principal

• 25 years experience

managing breweries

large and small

Michael Sonenshine, CFA,

Investment principal

• 30 years in fund

management, banking

and credit analysis

Paul Kucera

Investment principal

• 30 years experience

in FMCG, beverages,

beer and marcoms


8 Key Factors to Success in Microbrewing

The vast majority of craft microbrewers in the Czech Republic are small family operations, with between one to three persons responsible for all aspects of their business, including brewing, marketing and sales. As a result there is little to no professional business development – regional microbreweries do not have economies of scale to enter the Prague market, the wherewithal to consider export, the skillsets to execute quality marketing and the vast majority do not have cash reserves. Product innovation is an ad-hoc affair and technological investments, after the initial buildout, are on an as-needed basis. Czech microbreweries need to:

➢ Embrace technology – in production and marketing

➢ Anticipate growth but not over-expand

➢ Maintain consistent quality

➢ Experiment. Differentiate. Automate.

➢ Improve tasting room strategies = Margins

➢ Improve distributor relationships

➢ Improve community and local marketing

➢ Run their businesses more professionally

Yet despite the identified challenges, the domestic craft brewing scene is growing in double digits annually. Or was, until Covid-19-related shutdowns struck.


Investment Process – Research Driven

Deal EvaluationMeeting with management and comparison to threshold investment criteria

Execution & MonitoringDocumentation of investment and legal registration, Setting up with CoLocal app,Regular meetings with management. We or our appointed representative joins corporate governing body

Due Diligence & StructuringBackground checks on managementBackground checks on companyReview company accountsNegotiate investment terms and conditions

Deal ResearchReview company business plan, product line, brand potential, and market relationships

Deal OriginationReferrals from network of contacts and own marketknowledge

Deal ExitStrategic partnershipTrade saleManagement buyoutBalance sheet refinancing


Foundations for Successful Investing

➢ Research

– We have taken a significant amount of time to understand the companies and marketsin which to invest. We have also researched export opportunities with mixed pallets to initial Berlin, Vienna and Warsaw markets

➢ Team

– Our team has experience with microbeer production, management, all aspects of marketing and sales including beverage import and export, along with fundmanagement and SME business oversight – locally and abroad

➢ Know the target companies

– We focus on companies where we and our partners know the company and its management. Our deals come to us by referral. We build and develop trust and confidence so that we understand the company, its challenges and potentials.

➢ Be involved

– We work closely with the owners and management of the breweries we invest in. through our CoLocal marketing app partnership and inhouse team, we will centrally manage much of the brewery online marketing activities, as well as assisting them with financial and business management.


Term Sheet

Term Summary

Investment target 12 million USD

Investments From 500 000 USD

Tenor / Maturity 5 years

Use of Proceeds Equity investments, business development

Expected disbursement date June 2025

Currency hedging Yes

Management fee 2%

Performance fee15% of realized performance over and above 8%

per annum hurdle

Auditor PWC


Opportunity for craft beer producers

Craft brewing is a still a relatively new phenomenon in Central and Eastern Europe, yet there are close to 500 microbreweries, covering approx. 2.5% of consumption.

This will grow to 15-20% of total consumption, or CZK 7 - 10 billion in sales, in the coming years. Yet there is no CZ craftmarket leader. The vast majority of microbreweries do not have expansion or export projects, serving mostly local distribution.

The same is true for customer service and community engagement, when in most cases they are unable to invest in pub taps, provide sales support, etc. Often their beers are unidentifiable to consumers, who lack "beer knowledge" and beers are often emotional expressions of the brewery owner without purposeful style or type determination, resulting in names such as "Golden Rocket", "Hopped Monkey", "Black Swine" or "Fat Bat" without clarity about the style of beer.

Identified fund microbreweries deliver beers accordingto recognized styles, introducing each beer according toits origin, brewing it according to original recipes whereit originated, investing in customer service to become afully-fledged competitor to other regional andindustrial beer operations and professional purveyorsof craft beers.

The market is leaning towards authentic, original, non-industrial, healthy and local production. Consumersare willing to pay for such quality, if the rightcombination of locality, production and story aredelivered. The fund team delivers this with the beers,experience, financial and business management,marketing and sales.


The CZ and CEE craft beer business

The Czech Republic has an average annual consumption of 150 liters of beer – the highest per capita in the world. There is a long tradition of brewing top quality lagers. While total consumption has been stagnating for some time, there is a clear shift in demand for regional and craft brands at the expense of large multinational brands. Consumers have become more interested in and seek out more authentic and traditional beer production styles, which industrially produced beer cannot deliver.

The young male population and millennials especially are expanding their horizons as concerns different types of beers. They are demanding a wider range, especially ales with higher hop content. They are willing to pay a higher price for quality beers, a trend copying the development on developed markets. Women are also becoming interested in draft craft beers and their consumption is increasing.

Top fermented beers represent 1% of the Czech beer market. In the next 5-10 years, we expect a significant increase in this segment to 5% in production and more than 10% in revenue.

Craft lager production is currently at 1% of total lager production in the Czech Republic and is expected to grow to more than 15% of market volume over the next 10 years.

In order to meet our business plans, we do not have to compete with the well-established large breweries, but "only" to capture sales in the still new and growing craft beer market segment and deliver export.


Symfonie CEO, fund principal

Michael Sonenshine: Fund CEO / CFO

Mr. Sonenshine has over 30 years of experience in investment management and banking. He specialises in credit investments. His investment process is research driven with an emphasis on fundamental analysis. He founded Symfonie Capital in 2012. He is the architect driving the establishment of a Peer to Peer lending platform in Central Europe, under the SymCredit and SymVest brands. His experience includes:

• 2012–… Symfonie Group – SymCredit, SymVest, Symfonie Capital, SymfonieConsulting

• 2003–2012 MT Thaler, Prague/London: CEO/Partner, Head of Research. Investment funds focused on central and eastern Europe and pan-European credit markets

• 2000–2003 CSFB, London: European High Yield Debt Research

• 1998–2000 ING Bank, London: European High Yield Debt Research

• 1995–1998 ING Investment Management, Prague: CEO, Czech Republic

• 1994–1995 ING Bank, London: Analyst

• 1993–1994 Driehaus Capital, Prague: Analyst

• 1992–1993 Evrobank, Prague: Advisor

• MBA William Simon School, University of Rochester

• B.A., Tufts University


Symfonie CMO, fund principal

Paul Kucera: Fund business development and investor relations

Mr. Kucera is responsible for overseeing Symfonie Group’s marketing efforts and business development, a field with which he has close to 30 years experience. Prior to joining Symfonie Group, he worked with startups, international agencies and individual companies as a business development and marcom consultant / interim manager. He is the responsible for the Symfonie Consulting arm, founded in November 2018, that advises both SymCredit, SymVest and external clients. He has experience with realestate and real estate insurance. Prior to this his experience includes:

• 2018– Symfonie Group: Partner + ongoing consultanting for Symfonie Consulting clients• 2017–2018 Symfonie Group: External consultant including for internal (Big Terra, Skriply,

Boldbrick etc.) and external clients (MoH e-health, Ogilvy, JWA and others)• 2017–2019 Keller Williams: Advisory work to CZ Master Franchisee – setup and launch• 2014–2018 Zemsky flying brewery: Brand development, marketing and PR• 2004–2018 Euro Center Trade – external CMO, purchaser, import + business development for

wine, spirits, beer, e-shop dev., in-store sales and product training• 2016 OKsystem: C-suite advisory work for rebranding and relaunch of Babelnet (now

BabelApp) encrypted communication platform in Prague and Brussels• 2012–2019 Hill+Knowlton + Ogilvy Prague: Senior and Managing Consultant (including

merger of former into later)• 2010–2013 Guarenty Group: Co-founder, residential tenant default insurance• 2007–2010 Osin Financial: Partner, SME operational refinancing• 1994–2004 Eklektik Porter Novelli: Partner / COO – Public Relations & Public Affairs

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Symfonie Investor Services

Zuzana Cinařová: Fund client services and operations manager

Ms. Cinařová oversees all client administrative and operational issues for Symfonie in the SymCredit P2P arena, monitoring and improving the integrity and efficiency of all operational processes, on both sides of the marketplace (loan servicing processes, loan bidding and funding, investor reporting, etc...). She also manages day-to-dayoperational tasks and works on the development and continuous improvement of process flows and related operational tools.

• 2015– Symfonie Group – SymCredit, SymVest Client services and platformoperations manager

• 2011–2015 CQK Holding – Operations Manager

• B.A, Charles University - Faculty of Humanities


Fund microbrewery performance management team

Professional beverage background of partner, Pavel Prchal – Over 20 years of beer and brewery experience in positions including production, expedition, logistics, trade and managerial positions. Studied building engineering.• 1992 – 1993 Bernard brewery (production, expedition, trade mark)• 1993 – 1995 Agricultural Fermentation Distillery - Partner• 1995 – 1996 Vratislavice nad Nisou brewery - Sales Director• 1996 – 2003 Rebel Brewery Havlickuv Brod - Sales Director• 2003 – 2008 Crystalis Water Prague - Business and Operations Director• 2008 – 2013 Lobkowicz Breweries - Sales Director Prague and

operations director of Vysoký Chlumec Brewery• 2013 – 2018 Zemský flying brewery - MD, partner, founder• 2018 – now Craft Brewery – CEO, CTO, reconstruction, production

Professional beverage background of brewing consultant, Josh West –Award-winning master brewer (USA and Czech Republic), Josh West developed the historically first India Brown Ale and Colorado Pale Ale (voted best American Pale Ale by Pivo, Bier, Beer Magazine) to be brewed in the Central Europe (for Zemsky).• 2007 – 2010 Home brewer• 2010 – Built three kettle system from scratch, planted hops on side of

house, continues to refine his craft• 2014 – 2015 Designed Zemsky India Brown Ale and Colorado Pale Ale • 2012 – 2013 Lone Tree Brewing Company - Volunteer• 2013 – 2016 Lone Tree Brewing Company - Assistant Brewer• 2016 – 2019 Lone Tree Brewing Company - Master Brewer• 2018 – Consultant for Craft Brewing• 2019 – Coors Molson – Brewer


Contact

London:

85 Great Portland Street, First Floor, London W1 7LT

T: +44 20 3287 2690

Prague:

Olšanská 2643 /1a, 130 00 Praha 3

T: + 420 235 313 983, M: + 420 602 325650

E-mail: [email protected]@symfoniegroup.com

This publication has been prepared by Symfonie Capital (Symfonie) for information

purposes only. It is not an offer or solicitation for the purchase

or sale of any financial instrument. Reasonable care has been taken to ensure that the

information contained herein is not untrue or misleading, but no representation is made

as to its accuracy or completeness. This document is confidential and proprietary to

Symfonie. Transmission or publication of this document without the express prior

consent of Symfonie is strictly prohibited. Symfonie Capital reserves all legal rights in

connection with the publication of this document. © Symfonie Capital 2019.

mailto:[email protected]

mailto:[email protected]


Disclaimer

• This document has been prepared by Symfonie Capital LLC (“Symfonie”) for persons reasonably believed by Symfonie to be persons of the categories towhom Symfonie are permitted to communicate financial promotions. This document does not constitute or form part of any offer or invitation to sell, orthe solicitation of an offer to subscribe or purchase any investment. Symfonie believes that the information it provides is accurate as at the date ofpublication, but no warranty of its accuracy or completeness is given and no liability in respect of errors or omissions is accepted by Symfonie or anypartner or employee of Symfonie. Past performance is not necessarily a guide to future performance.

• This presentation is for illustration and discussion purposes only and is not intended to be, neither should it be construed or used as, financial, legal, taxor investment advice nor an offer to sell, nor a solicitation of any offer to buy, an interest in any of the funds managed by Symfonie (the “Funds”). None ofthe Funds have shares registered under the U.S. Securities Act of 1933, as amended. None of the Funds will be registered under the U.S. InvestmentCompany Act of 1940, as amended. Any offer or solicitation of an investment in any of the Funds may be made only by delivery of a respective fund’sConfidential Offering Memorandum to qualified prospective investors.

• This presentation is as of the date indicated, is not complete, and does not contain certain material information about the Funds, including importantdisclosures and risk factors associated with investments in any of the target breweries.

• Any indications of interest from prospective investors in response to this material involves no obligation or commitment of any kind. Subscriptions can bemade only on the basis of a Confidential Offering Memorandum to qualified investors. The investment objectives and methods summarized in thisdocument represent our current focus and intentions.

• There is no assurance that Symfonie will achieve its objectives or that its investment process or risk management will be successful. Investors may losemoney. No representation is made that any of the Funds will or are likely to achieve their respective objectives or that any investor will or is likely toachieve results comparable to any that may be shown or will make any profit at all or will be able to avoid incurring substantial losses. Past performance isno guarantee of future results.

• This presentation does not take into account the particular investment objectives or financial circumstances of any specific person who may receive it.Before making any investment, you should thoroughly review the particular fund’s Confidential Offering Memorandum with your financial and tax advisorto determine whether an investment in the fund is suitable for you in light of your financial situation.

• This presentation is subject to revision and updating. Certain information has been provided by third-party sources and, although believed to be reliable,it has not been independently verified and its accuracy or completeness cannot be guaranteed.

• This presentation is confidential, is intended only for the person to whom it has been delivered and under no circumstance may a copy be shown, copied,transmitted, or otherwise given to any person other than the authorised recipient.

• Symfonie is solely responsible for the content herein.

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