discus 2011 industry review final 2011 industry review final.pdf1282% 432% 472% $2 $4 $6 2011 ......
TRANSCRIPT
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Distilled Spirits CouncilDistilled Spirits CouncilDistilled Spirits Council2011 Industry ReviewDistilled Spirits Council2011 Industry Reviewyy
New York CityNew York CityNew York CityJanuary 30, 2012
New York CityJanuary 30, 2012
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Top Line Economic Snapshot2010 t 20112010 to 2011
• Volume growth: up 2 7% to 195 8M 9-liter casesVolume growth: up 2.7% to 195.8M 9 liter cases
• Revenue growth: up 4.0% to $19.9B
• Revenue market share grows to 33.6%
• Export growth: up 16.5% to $1.34B
2
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Spirits revenues up 4.0% to $19.9B2000 2007 average growth 6 5%2000 – 2007 average growth 6.5%
20 $18 2$18 7 $18 7$19.1 $19.9
14161820
ev (B
il.)
$13.2$13.9$15.1 $16.0$17.2 $18.2$18.7 $18.7
8101214
Gro
ss R
e $12.2 $13.2$11.7
2468
pplie
r G
02
Sup
3Source: DISCUS MSDB
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2011: Industry Growth Returns
• Growth leads to more market share gains
N l 5 i t i 2000– Nearly 5 points since 2000
• Industry drives growth through innovation
• Economic improvement fosters return to premiumization
– Decade of industry emphasis on high end bears fruit– Decade of industry emphasis on high end bears fruit
• Modernization helps to level the playing field
• Strong case against higher hospitality taxes largely successful
– Mitigates economic harm to the hospitality industryg p y y
• Record exports boost U.S. economy4
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2011: Industry Growth Returns
• Responsible marketing initiatives contribute to market share gain
• Extraordinary fascination with spirits continues
– Innovation built on heritage key to fostering growth
• Social responsibility gains accompany commercial gains
• Government emphasis on moderate drinking contributes to social responsibilityp g p y
• 2012: Challenges for maintaining growth Korea:
5
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Factors Driving Market Share Growth:I d t C ti it
• Innovation
Industry CreativityInnovation– Bold modification of iconic brands– New products; flavor trends spread to different categories
St b d h it id f d ti f i ti– Strong brand heritage provides foundation for innovation
• Premiumization– On-premise strength builds off-premise growth– Affordable luxuries even during tough economic times– New categories of consumers embrace high-end spiritsNew categories of consumers embrace high end spirits– Consumers are returning to premium products
• Craft distilling large and small adds to consumer interest• Craft distilling, large and small, adds to consumer interest
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Factors Driving Market Share Growth:Market Modernization Momentum ExpandsMarket Modernization Momentum Expands
• “Deep South” Georgia passes Sunday Salesp g p y– Becomes 37th state; 15 new states have passed Sunday Sales since 2002
– Over 100 local Georgia communities raced to pass; Atlanta votes 82-18% yes
– What does this bode for Dallas, Hartford, Indianapolis & Minneapolis?
• Wet/Dry votes proliferate; opens many new marketsTX 2011 35 f l l ti– TX 2011: 35 more successful elections
– 315,000 new adult consumers
• Many liberalized trade practices also contribute to growthMany liberalized trade practices also contribute to growth– 43 states allow some form of spirits tastings
– Helps drive premiumization trend
• Washington State privatization encourages control states to modernize
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Factors Driving Market Share Growth:Strong Case Against Higher Taxes Resonates With Most Policy Makers
• 2011 budget gaps applied serious tax pressure in states
Strong Case Against Higher Taxes Resonates With Most Policy Makers
• Despite tough economy, industry successfully fought back majority of threats
• Spirits taxes repealed in Massachusetts and Michigan
• Spirits tax threats materialized in 20 states
• Threats defeated in 18 states; avoids harm to the hospitality industry
• Municipal taxes a growing concern:
– Tax increases in D.C. and Chicago-area are harmfulTax increases in D.C. and Chicago area are harmful
8
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Factors Driving Market Share Growth:Responsible and Innovative Marketing
• Creative marketing campaigns support new product growth
Responsible and Innovative Marketing
• Spirits advertising achieves widespread equal treatment• Sports sponsorships are now commonplace
I d k i C d 1 6% d l d hi• Industry marketing Code: 71.6% new adult demographic– Demographic standard raised immediately to track latest Census data
• New industry social media guidelines added to Code• New industry social media guidelines added to Code– Provides framework for new marketing approaches
9
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Factors Driving Market Share Growth:Extraordinary Fascination With Spirits Continuesy p
10
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Social Responsibility Gains Accompany Commercial GainsImportant 2011 Developments:
p y p y
• Record lows in major U.S. Government annual studies: – Underage drinking rates and drunk-driving fatalities at lowest levels since surveys began
• Industry commitment to social responsibility efforts key to progress
• Proves again that population-based controls are not effective or warranted 11
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Government Emphasis on Moderate Drinking Contributes to Social Responsibility
Important 2011 Developments:
• New Federal Dietary Guidelines d d fi iti f t d d d i k
Government Emphasis on Moderate Drinking Contributes to Social Responsibility
underscore definition of standard drink- Emphasize standard drink of beer, wine and
spirits contain same amount of alcoholFirst time: 6 oz measure included- First time: .6 oz measure included
- Science contributes to equal treatment
CDC St d• CDC Study: - Moderate alcohol consumption is 1 of 4
key healthy lifestyle behaviors
• National Institute of Health Study:- Moderate alcohol consumption is 1 of 5
lifestyle factors that “when considered inlifestyle factors that “when considered in combination are associated with a substantial reduction in risk for diabetes.”
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Record Exports Boost U.S. Economy
Christine LoCascioSenior Vice President, International Trade
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U.S. Spirits Exports Hit New Record(through Nov. 2011)
$1,400
$1,600
(through Nov. 2011)
$1.34 billion
$1 22 billion
$1 000
$1,200
$1.14 billion
$1.22 billion
$800
$1,000
Mill
ions
Beer
Wine
Distilled Spirits
$400
$600
$334 million
$
$200
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2011P2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2011P
Source: U.S. Department of Commerce, Compiled by U.S. International Trade Commission (FAS value – Free Alongside Ship is the value of exports at the U.S. port, based on transaction price including inland freight, insurance and other charges. Figures for 2011 are year-to-date Jan-Nov.)
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U.S. Spirits Exports Skyrocket 16.5%American whiskeys: 69% of totalAmerican whiskeys: 69% of total
(2000-2011YTD*)$1,400
+16.5%
$1,000
$1,200
+13.6%
$600
$800
Mill
ions
$200
$400
$-2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2010
YTD*2011 YTD*
Total U S Spirits Exports All Whiskeys including Bourbon and Tennessee Whiskey
Source: U.S. Department of Commerce, Compiled by U.S. International Trade Commission*Year-to-date: January - November
Total U.S. Spirits Exports All Whiskeys, including Bourbon and Tennessee Whiskey
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A Decade of Growth: Top 10 U.S. Spirits Export MarketsTop 10 U.S. Spirits Export Markets
Country2001 Value
(Jan-Nov) (millions of USD)
2011 Value(Jan-Nov)
(millions of USD)% growth
Canada 61.9 165.8 +168%
UK 68.2 138.2 +103%
Germany 58 8 104 7 +78%Germany 58.8 104.7 +78%
Australia 50.3 111.7 +122%
France 22.8 113.0 +396%
Japan 67.0 81.6 +22%
Netherlands 11.3 51.2 +353%
Spain 20.9 50.4 +141%
Italy 18.6 30.0 +61%
Mexico 18 1 43 0 +138%Mexico 18.1 43.0 +138%
Source: U.S. Department of Commerce, Compiled by U.S. International Trade Commission (FAS Value)
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Emerging Export MarketsExperience Phenomenal Growth
$18
Experience Phenomenal Growth(2000-2011YTD*)
$14
$16
$18
485%
388%
1408%
$8
$10
$12
Mill
ions
2000495%
388%
156%
1108%
1862%
207%
1282%
432%472%
$2
$4
$6
M 2000
2011
68%
495% 472%
509%
$0
$2
*DISCUS conducted U.S. Spirits PromotionsSource: US Department of Commerce Compiled by U.S. International Trade Commission (FAS Value)
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European Union:Accounts for 47% of U S Spirits ExportsAccounts for 47% of U.S. Spirits Exports
$700
U.S. Spirits Exports to the EU-27 Share of U.S. Spirits Exports2011 YTD
$500
$600
4%2% 2%
1%2%
1% 0%
+13.4%
$400
$500
Mill
ions
Whiskeys
Rum and Tafia
Liqueurs and Cordials
Grape Brandies
$200
$300M
88%
Other Spirits
Ethyl Alcohol
Vodka
Gin and Geneva
$0
$100
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2010 YTD
2011 YTD
Source: U.S. Department of Commerce, Compiled by U.S. International Trade Commission (FAS Value). YTD figures are for Jan-Nov.
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Russia – A Booming Market for U.S. Spirits
$70
U.S. Spirits Imports into Russia Share of U.S. Spirits Imports
2011 YTD
$50
$60
1% 0%
0%
0%
2011 YTD
Whiskies
Liqueurs And
$30
$40
Mill
ions
42%
Liqueurs And CordialsRum And Tafia
Other spirits
Grape Brandy
$20
$3053% Vodka
$0
$10
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2010 YTD
2011 YTD
4%
Source: Global Trade Atlas, based on Russian Customs import figures. YTD figures are for Jan-Oct.
YTD YTD
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USDA MAP Partnership Promotes American Spirits Growth in Emerging MarketsAmerican Spirits Growth in Emerging Markets
201/30/2012
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Recent Trade Developments PresentNew Opportunities to Expand ExportsNew Opportunities to Expand Exports
• U.S. Prevails in Philippines WTO Case– Discriminatory excise taxes must be replaced
• Korea Free Trade Agreement (FTA)– Will eliminate 20% tariff on Bourbon/Tennessee Whiskey– World’s 10th largest spirits market
• FTAs with Colombia and Panama– Will eliminate tariffs on U.S. spirits/address other barriers
• Trans-Pacific Partnership Negotiations– Will open up key emerging markets (e.g. Vietnam)
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2011 Economic Overview
David OzgogSenior Vice President, Economic and Strategic
Analysis y
22
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Economic Overview
• Total industry growth
• Market share
• Growth by price segment
• Drivers
C t hi hli ht• Category highlights
23
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Volume up 2.7% in 2011Consistent with 2000 – 2007 average growth 2 9%Consistent with 2000 – 2007 average growth 2.9%
2 7%
180
200
ts (M
il.)
4 1%2.7%4.1% 2.2% 1.7% 1.4%2.0% 2.7%
160
Ship
men
t
1.0% 2.0%3.8%4.1%
3.0%
120
140
iter
Cas
e
1009-L
i
24Source: DISCUS MSDB
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Spirits revenues up 4.0% to $19.9B2000 2007 average growth 6 5%2000 – 2007 average growth 6.5%
20 $18 2$18 7 $18 7$19.1 $19.9
14161820
ev (B
il.)
$13.2$13.9$15.1 $16.0$17.2 $18.2$18.7 $18.7
8101214
Gro
ss R
e $12.2 $13.2$11.7
2468
pplie
r G
02
Sup
25Source: DISCUS MSDB
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Spirits Market Share – VolumeVolume share up 4 2 points since 2000Volume share up 4.2 points since 2000
31 6%
30%
31%
32%
hare
29 5%29.7%
30.2%30.9%
31.6%
28%
29%
30%
Mar
ket S
h
27.6%27.9%
28.5%29.0%29.3%
29.5%9 7%
26%
27%
28%
Spir
its M
27.6%27.3%27.4%
25%
26%
26
Source: DISCUS MSDB, BIG Handbooks, Company Reports
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Spirits Market Share – RevenueSpirits up 4 9 points since 2000 - $2 9B revenueSpirits up 4.9 points since 2000 $2.9B revenue
34%33 0% 33 1%33 1%
33.3%33.6%
32%
33%
are
31 1%
32.1%
33.0% 33.1%33.1%32.9%
30%
31%
Mar
ket S
ha
29.7%30.0%
31.1%
28%
29%
Spir
its M 28.7%28.7%
26%
27%
S
27
%
Source: DISCUS MSDB, BIG Handbooks, Company Reports
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Revenue market share by beverageRevenue market share by beverage
2010 2011
33.3%
49.8%SpiritsWine
33.6%
49 3%
SpiritsWine
16.9% Beer 17.1%49.3%
Beer
Sources: 10k Reports, DISCUS Estimates & Adams Wine Handbook, Distilled Spirits Council, Economic & Strategic Analysis Dept.
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Revenue market share by beverageRevenue market share by beverage
2000 2011
28.7%SpiritsWine
33.6%
49 3%
SpiritsWine
15.7%55.5% Beer 17.1%49.3%
Beer
Sources: 10k Reports, DISCUS Estimates & Adams Wine Handbook, Distilled Spirits Council, Economic & Strategic Analysis Dept.
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Volume Share by Price Category - 2011Share of U.S. Spirits Volume
7.4%14.5M
17 2%39.3%76.9 M
17.2%33.6M
36.1%70 8 M
Value Premium High End Super Premium
70.8 M
g p
30
Source: DISCUS MSDB
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Revenue by Price Category - 2011U.S. Supplier Gross Revenues
$4.1 B20 5%
$3.5 B17.4%
20.5%
$5.2 B26.4%
$7.1 B35.7 %
Value Premium High End Super Premiumg p
31
Source: DISCUS MSDB
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Volume Growth by Price Segment - 2011
9.0%
7.0%
8.0%8.9%
4 0%
5.0%
6.0%
5.3%
2.0%
3.0%
4.0%
2.4%
0.0%
1.0%
2.0%
0.9%2.4%
32
Super Premium
High EndPremiumValueSource: DISCUS MSDB
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New Revenue by Price Category – 2010 vs. 2011
$550
$350$400$450$500
$303$377
s (M
il)
$200$250$300$350
$142
$303
$183$151r
Rev
enue
s
20102011
$50$100$150$200
$55
$142
$47
$151
w S
uppl
ier
$100-$50
$0$50
-$76
New
-$100 -$76
33
Value Premium High EndSource: DISCUS MSDB
Super Premium
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Drivers• Consumer confidence: unemployment still high, but job
growth increasing willingness to spendgrowth increasing willingness to spend
• Price indices report – up +/- 1.0%
• Full-service restaurants and drinking places – revenue back to pre-recession
– 25-30% of volume, overweight toward high end
• Product innovation
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Full Service and Drinking Place Revenues(12 Month Rolling Totals)(12 Month Rolling Totals)
$240
$250
$220
$230
$
011
$s)
$200
$210
$220
Bill
ions
(20
$190
$200B
$180
Jan-
00Ju
n-00
Nov
-00
Apr
-01
Sep-
01Fe
b-02
Jul-0
2D
ec-0
2M
ay-0
3O
ct-0
3M
ar-0
4A
ug-0
4Ja
n-05
Jun-
05N
ov-0
5A
pr-0
6Se
p-06
Feb-
07Ju
l-07
Dec
-07
May
-08
Oct
-08
Mar
-09
Aug
-09
Jan-
10Ju
n-10
Nov
-10
Apr
-11
Sep-
11
N M A N M A N
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Source: U.S. Census Bureau/National Restaurant Assn.
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Product Innovation Key to Growth1800+ products introduced since 20091800+ products introduced since 2009
12
14
16
ns)
8
10
12
ses (
Mill
io 14.3 M
11.5 M
4
6
9-L
iter
Cas
0
2
Products Introduced 2009-2011 (2011 Vol me)
Industry Volume Growth 2009-2011
9
(2011 Volume)
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Source: DISCUS Brand Data, NABCA
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Category Performance• Vodka
• Bourbon & Tennessee Whiskey
• RumRum
• Tequila
• Cocktails
• ScotchScotch
• Irish Whiskey
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Vodka & Rum• Vodka accounts for 32% of all volume, 25% revenue
– Volume up 5.9% to 63M, revenue up 5.8% to $5.1Bp % , p % $
– Premium vol. up 11.3%, Super Premium up 12.7%
• Rum volumes down 0 7% to 24 7M cases revenues• Rum volumes down 0.7% to 24.7M cases, revenues up1.7% to $2.2B
G th d i b Hi h E d d S P i– Growth driven by High End and Super Premium, up 14.9% to 2.7M cases
– High End growth consistent with fast Bourbon growth?
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Bourbon & Tennessee Whiskey• Bourbon & Tennessee strong interest in new and existing products
• Volume up 3.9% (16M) cases – largest Whiskey category
• Revenue up 3.9% to $2.0B
• Performance by price segment:
– Value, volume down 0.7%, revenue down (-$1M) , , ( $ )
– Premium, volume up 2.4%, revenue up (+$17M)
– High End volume up 5 6% revenue up (+$40M)– High End, volume up 5.6%, revenue up (+$40M)
– Super Premium, volume up 15.4%, revenue (+$18M)
R 50%• Rye up 50%+
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Tequila & Pre-mixed Cocktails• Tequila volume grew 3.2% to 11.9M cases
• Tequila revenue also up 4.7% to $1.8B
• Performance by price segments
– Value, volume up 7.0%, revenue up (+$13.7M)
– Premium, volume -2.7%, revenue down (-$11.4M), , ( $ )
– High End, volume up 9.0%, revenue up (+$17M)
Super Premium volume up 11 3% revenue up (+$61M)– Super Premium, volume up 11.3%, revenue up (+$61M)
• Pre-mixed cocktails grew by 12.2% - 20% growth in premium
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Scotch & Irish Whiskey• Single Malt Scotch continues rapid growth
– Concentrated in High End and Super PremiumConcentrated in High End and Super Premium– Volume up 9.5% to 1.4M cases– Revenue up (+$29M)Revenue up ( $29M)
• Irish Whiskey fastest-growing category– Volume up 24% to 1.7M cases p– Now larger than Single Malt by volume– Revenue up (+$70M)p ( )
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Summary• Volume/revenue growth at pre-recession levels
– Revenue up 4.0% to $19.9BRevenue up 4.0% to $19.9B
– Volume up 2.7% to 195.8M 9-liter cases
• Growth driven by improving economy consumer confidence• Growth driven by improving economy, consumer confidence, increase in restaurant sales and product innovation
• Improved economy = return of premiumizationImproved economy return of premiumization
• Sales growth has pushed market share to 33.6% of revenue, 31 6% of volume31.6% of volume
• Future growth dependent upon state of economy
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2012: Challenges for Maintaining Growth Momentum
• National economic recovery remains soft – Employment at full service restaurants not back to pre-recession strength
– Hospitality industry key to national recovery
– Number two employer nationwide; important for entry-level jobs
• Tax environment– State and local budgets are stressed
• Modernization momentum grows– Governor supports Connecticut Sunday Salespp y
• Election year tax raisers vs. tax cutters
• Continued innovation in brands and marketingContinued innovation in brands and marketing
• Continue to open overseas markets43