yellow final
DESCRIPTION
TRANSCRIPT
W. J. Deutsch & Sons
[ yellow tail ]
Growth analysis
1. Problem Statement
2. Key Issues
3. Context
4. Alternatives Analysis
5. Recommendation
6. Financials
7. Implementation Plan
8. Risk Management
9. Sum up
Agenda
How to maintain market leadership in face of the current crisis ?
Problem statement
2. Problem Statement
Customers
Economic Climate
Product Identity
Key Issues
3. Key Issues
1. Industry Status
2. Wine segments
3. Yellow tail profile
4. Customer profile
Context
4. Context
Wine Consumption in the USA
1. Industry Status
4. Context
Growing trend until 2006
Stable since 2007
2. Wine Segments
4. Context
Wine Segments
TableWine
92%
Popular Premium
$3.00 - $7.00
Super premium
$7.00 - $14.00
Ultra-premium
$14.00 - $20.00
Luxury premium
> $20.00
Others (sparkling wines, wine coolers, pop
wines, fortified wines)
Highest market share31 %
Highest market share92%
- Table wines (traditionally consumed with food)
- Prices- $4.00 to the popular premium segment- $10.00 to the super premium segment
- Big portfolio of wines - 7 red - 5 white- 1 rose
- Modern brand
3. Yellow tail profile
4. Context
Age: 21 – 35
4. Customer profile
4. Context
High alcohol consumption
Alcohol consumption per age, 2006, USA
4. Customer profile
4. Context
Income above
average
Main characteristics:- Modern, young and cosmopolitan- Middle class - Sees wine as something more than a drink
“something you share with family and friends”
4. Customer profile
4. Context
How to maintain market leadership in face of the current crisis ?
Problem statement
2. Problem Statement
Wine market division
Red White Rose
Alternatives
Increase sales
Table Wine Other wines
Dessert and fortified Champagne and sparkling Aperitif
Alternatives
Alternatives
1. Business as usual
2. Consolidate marketing efforts
1. Move focus into new categories and products
1. Focus on new segments
2. Focus on new table wines
Expand & diversify Table
Maintain Table Explore other
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 20080
50000
100000
150000
200000
250000
300000
Table vs Other Wines evolutionIn thousand nine litter cases
Table Other
Table wines are growing
Alternatives
account for
92% of
the market in 2008
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 20080
5000
10000
15000
20000
25000
30000
35000
Table vs Other Wines evolutionIn thousand nine litter cases
Imported
Domestic
Total
Other wines sales have decreased 10% in 10 years
Alternatives
Yellow Tail Brand and current capacity
Successful branding strategy
The Coca-Cola of wine Wine for those who didn’t like
wine Round, fruity and user-friendly Complex, aristocatic
Mass production facilities
30,000 bottles bottled per hour 11 million cases per year
Alternatives
Alternatives assessment
Alternatives
Canada Germany Japan
Sales share 5 3 2
Growth 4 2 1
Necessary Know How 3 5 1
Brand identity 4 4 2
Total 16 14 6
Expand & diversify Table
Maintain Table Explore other
Alternatives scorecard from 1 (low) to 5 (top)
Alternatives assessment
Alternatives
Canada Germany Japan
Sales share 5 3 2
Growth 4 2 1
Necessary Know How 3 5 1
Brand identity 4 4 2
Total 16 14 6
Expand & diversify Table
Maintain Table Explore other
Alternatives scorecard from 1 (low) to 5 (top)
Alternatives assessment
Alternatives
Canada Germany Japan
Sales share 5 3 2
Growth 4 2 1
Necessary Know How 3 5 1
Brand identity 4 4 2
Total 16 14 6
Expand & diversify Table
Maintain Table Explore other
Alternatives scorecard from 1 (low) to 5 (top)
Wine “tutoring”
Widen costumer base
Adjust pricing strategy
3 Objectives:
Recommendation
Recommendation
Pro
duct
• 375 ml. Bottles
• Mix Packages
• Cock[tail]s
Pric
e
• 2$ Cage decrease in
• Chardonnay
• Shiraz
• Merlot
• Cabernet-
Sauvignon
Pla
cem
ent • [yellow tail]
Store & Lounge• 2 Pilot Stores
(NY and California)
• Lounge and sales space
• Instore Sommelier
• Online sales
Pro
mot
ion
• Curtis Stone• Advertising
campains• Weekly
videocasts
• Wine tasting Workshops
• Facebook and Youtube campaings
• Free Wine Guide
• Taxi campaigns
Initiaves – Marketing Mix
Product Price Placement Promotion
Wine Tutoring
Widen costumer base
Adjust pricing strategy
Assessment Card
Financial Impadct
Financial Impact
Investment By Item
Financials
Investment Total ($)
Rent Stores 2,700,000
Staff 200,000
Workshops 40,000
“Curtins Stone Campaign” 7,000,000
"Wine Instruction Manual" 239,600
Social Media Initiatives 900,000
The Mini Wallaby 950,000
Market Studies 1,000,000
Super-Market Staff + Initiatives 280,000
Taxi Advertising 1,200,000
Total 14,509,600
Financial Assumptions
Conservative Without Project
Financials
Without Project
Assumptions \ Calc. 2009 2010 2011 2012
Tax Rate 30%
WACC 9%
% Yellow to Total 2,82%
Total Wine Consumption -2% 10% 3% 3%
Inflation -0.40% 1.60% 3.20% 0.80%
Conservative Scenario
Assumptions \ Calc. 2009 2010 2011 2012
Tax Rate 30%
WACC 9%
% Yellow to Total 2,82% 3,5% 3,8% 4,2%
Total Wine Consumption -2% 10% 3% 3%
Inflation -0.40% 1.60% 3.20% 0.80%
Revenues Evolution
2012 2011 2010 2009 2008000
200,000,000
400,000,000
600,000,000
800,000,000
1,000,000,000
1,200,000,000
Without Project
Conservative
Best
Worst
USD
Sensitivity Analysis
Best
NPV$ 613,804,996.00
A.Payback Period1 Years
Worst
NPV$
154,270,401.00
A.Payback Period2 Years
Conservative
NPV$ 458,860,457.73
A.Payback Period
1.5 Years
Sensitivity Analysis
Conservative
NPV$ 458,860,457.73
Adjusted Payback Period 1.5 Years
Activities ObjectiveEst. Cost (Dolars)
2009 2010 2011 2012
1 Q 2 Q 3 Q 4 Q 1 Q 2 Q 3 Q 4 Q 1 Q 2 Q 3 Q 4 Q 1 Q 2 Q 3 Q 4 Q
Stores
Rent StoresCreate Proximity
Relation
$ 2,700,000.
00P E E E E
Specialist Staff Costumer Suport$
200,000.00P E E E E E
Educate Consumers
WorkshopsCreate Social Experience
$ 40,000.00
P E E E E E E E
"Wine Instruction Manual" Educate Consumer$
237,600.00P E E
Social Media InitiativesVirtual Proximity
Relation$
900,000.00P E E E
Capturate New Segments
The Mini Wallaby New product Offer$
950,000.00 P E
Pricing ExperimentEvaluate Price
Sensitivity- P E
Pricing Strategy ExpansionMarket Share
Boost- P P P P
Market StudiesUnderstand Consumers
$ 1,000,000.
00 P
Traditional Marketing
Super-Market Island Biggest Visibility - P E
Super-Market Staff Advise Consumer$
280,000.00P E E E E E
“Curtins Stone Campaign” Boost Visibility$
7,000,000.00
P E E E
Taxi ads Boost Visibility$
1,200,000.00
P E E
Activities KPI Contingency2009 2010 2011 2012
1 Q 2 Q 3 Q 4 Q 1 Q 2 Q 3 Q 4 Q 1 Q 2 Q 3 Q 4 Q 1 Q 2 Q 3 Q 4 Q
Stores
Rent StoresStore Profit >0.000
after 2nd yearDon't Expand to New
StoresP E E E E
Specialist StaffStore Profit >0.000
after 2nd yearDon't Expand to New
StoreP E E E E E
Educate Consumers
Workshops > 200 / Event Increase Divulgation P E E E E E E E
"Wine Instruction Manual"
10%\Year In SM Knowledge
Study Consumer Response
P E E
Social Media Initiatives10% Likes / Subs.
IncreaseHire SM consulting
companyP E E E
Capturate New Segments
The Mini Wallaby> 5% Share of Total
Sales
Discontinue if <2% / Increase Divulgation if
>2% P E
Pricing Experiment>10% revenues
better than expected
End Trial P E
Pricing Strategy Expansion
>2% profits than expected
End Expansion P P P P
Market StudiesSuccess of Other
InitiativesChange Consulting
Company P E
Traditional Marketing
Super-Market Island>10% Sales for specific Store
Change Store P E
Super-Market Staff>10% Sales for specific Store
Change Store P E E E E E
“Curtins Stone Campaign”
> 5% total sales Discontinue Campaign P E E E
Taxi ads> 2.5% total sales
after 1st YearDiscontinue Campaign P E E
Risk Analysis
32
1. Store flop2. Demand non-reaction
towards price decrease3. Decrease in wine
consumption
Severity
Pro
bab
ilit
y
1
2
3
Risk analysis
33
1. New and Repeat costumers may not adhere to the store concept.
Mitigation Plan:2. Organize marketing campaigns and periodic store events
Severity
Pro
bab
ilit
y
Store Flop1
34
Demand non-reaction towards price decrease 2Severity
Pro
bab
ilit
y
1. Demand may not respond to the new princing strategy
Mitigation Plan:
• Advertise price campaign
35
Decrease in wine consumption
1. Demand may contract more than expected
Mitigation Plan: • New marketing campaigns• Store launch• New product size and packages
3Severity
Pro
bab
ilit
y
Questions and Answers
Appendix
Financial Assumptions
Best Worst
Worst Scenario
Assumptions \ Calc. 2009 2010 2011 2012
Tax Rate 30%
WACC 9%
% Yellow to Total 2,82% 3% 3% 4%
Total Wine Consumption -2% 10% 3% 3%
Inflation -0.40% 1.60% 3.20% 0.80%
Best Scenario
Assumptions \ Calc. 2009 2010 2011 2012
Tax Rate 30%
WACC 9%
% Yellow to Total 2,82% 4% 4% 5%
Total Wine Consumption -2% 10% 3% 3%
Inflation -0.40% 1.60% 3.20% 0.80%
(nine liter cases) (in thousands)
USA Consumption of Wine
Year \ Item Total Consumption % Growth Total Total Yellow Tail % Growth Yellow Tail % Yellow to Total
2008294,740
0.91%8,300
3.11%2.82%
2007292,090
3.21%8,050
0.00%2.76%
2006283,000
3.40%8,050
7.33%2.84%
2005273,685
2.10%7,500
15.38%2.74%
2004268,062
3.81%6,500
51.87%2.42%
2003258,232
4.86%4,280
256.67%1.66%
2002246,268 1,200 0
Without Project
USA Consumption of Wine
Year \ Item Total Consumption % Growth Total Total Yellow Tail % Growth Yellow Tail % Yellow to Total
2012 337,079.46 3.00% 14,157 13.84%4.20%
2011 327,261.61 3.00% 12,436 11.83% 3.80%
2010 317,729.72 10.00% 11,121 36.72%3.50%
2009 288,845.20 -2.00% 8,134 -2.00%2.82%
2008 294,740.00 0.91% 8,300 3.11% 2.82%
2007 292,090.00 3.21% 8,050 0.00% 2.76%
2006 283,000.00 3.40% 8,050 7.33% 2.84%
2005273,685.00
2.10%7,500
15.38%2.74%
2004268,062.00
3.81%6,500
51.87%2.42%
2003258,232.00
4.86%4,280
256.67%1.66%
2002 246,268.00 1,200 0
Conservative Scenario
USA Consumption of Wine
Year \ Item Total Consumption % Growth Total Total Yellow Tail % Growth Yellow Tail % Yellow to Total
2012 337,079.46 3.00% 14,157 13.84% 4.20%
2011 327,261.61 3.00% 12,436 11.83% 3.80%
2010 317,729.72 10.00% 11,121 36.72% 3.50%
2009 288,845.20 -2.00% 8,134 -2.00% 2.82%
2008 294,740.00 0.91% 8,300 3.11% 2.82%
2007 292,090.00 3.21% 8,050 0.00% 2.76%
2006 283,000.00 3.40% 8,050 7.33% 2.84%
2005 273,685.00 2.10% 7,500 15.38% 2.74%
2004 268,062.00 3.81% 6,500 51.87% 2.42%
2003 258,232.00 4.86% 4,280 256.67% 1.66%
2002 246,268.00 1,200 0
Best Scenario
USA Consumption of Wine
Year \ Item Total Consumption % Growth Total Total Yellow Tail % Growth Yellow Tail
% Yellow to Total
2012 337,079.46 3.00% 15,169 15.88% 4.50%
2011 327,261.61 3.00% 13,090 3.00% 4.00%
2010 317,729.72 10.00% 12,709 56.25% 4.00%
2009 288,845.20 -2.00% 8,134 -2.00% 2.82%
2008 294,740.00 0.91% 8,300 3.11% 2.82%
2007 292,090.00 3.21% 8,050 0.00% 2.76%
2006 283,000.00 3.40% 8,050 7.33% 2.84%
2005 273,685.00 2.10% 7,500 15.38% 2.74%
2004 268,062.00 3.81% 6,500 51.87% 2.42%
2003 258,232.00 4.86% 4,280 256.67% 1.66%
2002 246,268.00 1,200 0
Capex 2008 2009 2010 2011 Total
Rent Stores 450,000 450,000 900,000 900,000 2,700,000
Staff 50,000 50,000 50,000 50,000 200,000
Workshops 10,000 10,000 10,000 10,000 40,000
Tv Ads 500,000 500,000 500,000 500,000 2,000,000
Wine Instruction Manual 61,400 59,400 59,400 59,400 239,600
Social Media 600,000 100,000 100,000 100,000 900,000
Mini Wallaby 50,000 300,000 300,000 300,000 950,000
Market Studies 1,000,000 0 0 0 1,000,000
Super Market Staff 70,000 70,000 70,000 70,000 280,000
Taxi Advertising 300,000 300,000 300,000 300,000 1,200,000
Total (M$) 2,791,400 1,539,400 1,989,400 1,989,400 9,509,600
Stores
Area (sq feet) 1500
Price \ sq feet 300
Total Stores 2
Total Stores 900000
Grand Total
Wine Instruction Material
Conception 2000
Per Bottle 0.1
Adjusted Payback Period
Cenario Year 2008 2009 2010 2011 2012
Worst Adjusted Cash Flow -2,791,400.00 -2,539,945.40 29,836,455.01 52,411,928.15 140,235,981.11
Conservative Adjusted Cash Flow -2,791,400.00 -2,539,945.40 116,647,782.04 247,990,261.81 381,059,313.02
Best Adjusted Cash Flow -2,791,400.00 -2,539,945.40 205,562,059.31 379,700,619.11 432,114,103.78
Cenario 2008 2009 2010 2011 2012
Worst
Inc. Revenues -2,791,400.00 0.00 38,576,445.60 39,733,738.97 152,161,972.92
CAGR 345%
NPV $ 154,270,401.00
Conservative
Inc. Revenues -2,791,400.00 0.00 143,427,253.20 212,527,869.89 307,892,683.42
CAGR 692%
NPV $ 458,860,457.73
Best
Inc. Revenues -2,791,400.00 0.00 248,278,060.80 255,726,402.62 374,634,416.49
CAGR 897%
NPV $ 613,804,996.00
Growth of Wine Sales
Source: Silicon Valley Banking
1. Industry Status
BACK UP
Back-up
Expected sales in volume
Expected Case Sales 2009 2010 2011
Cabernet-Merlot
Expected Case Sale 440 430 470
% Growth - -2,27% 9,30%
Shiraz-Cabernet
Expected Case Sales 375 390 430
% Growth - 4,00% 10,26%
Pinot Grigio
Expected Case Sale 585 610 660
% Growth - 4,27% 8,20%
Riesling
Expected Case Sale 410 450 480
% Growth - 9,76% 6,67%
Pinot Noir
Expected Case Sale 480 520 570
% Growth - 8,33% 9,62%
Rose
Expected Case Sale 290 320 340
% Growth - 10,34% 6,25%
Sauvignon Blanc
Expected Case Sale 220 280 350
% Growth - 27,27% 25,00%
Shiraz
Expected Case Sale 900 1090 1050
% Growth - 21,11% -3,67%
Chardonnav
Expected Case Sale 1450 1600 1650
% Growth - 10,34% 3,13%
Merlot
Expected Case Sale 950 1100 1050
% Growth - 15,79% -4,55%
Cabernet Sauvignon
Expected Case Sale 1100 1250 1200
% Growth - 13,64% -4,00%
Reserve Cabernet
Expected Case Sale 500 600 650
% Growth - 20,00% 8,33%
Total 7700 8641,226 8900,662
% Growth - 12,22% 3,00%
2009 2010 20110
200
400
600
800
1000
1200
1400
1600
1800
Expected Sales in volume until 2011
Cabernet-Merlot
Shiraz-Cabernet
Pinot Grigio
Riesling
Pinot Noir
Rose
Sauvignon Blanc
Shiraz
Chardonnav
Merlot
Cabernet Sauvignon
Reserve Cabernet
Appendix
Back up
2009 2010 2011800
900
1000
1100
1200
1300
1400
1500
1600
1700
Expected Sales in volume until 2011
Shiraz Chardonnav
Merlot Cabernet Sauvignon
Appendix
Back up
2009 2010 20110
100
200
300
400
500
600
700
Expected Sales in volume until 2011
Cabernet-Merlot
Shiraz-Cabernet
Pinot Grigio
Riesling
Pinot Noir
Rose
Sauvignon Blanc
Reserve Cabernet
Appendix
Back up
Consumption per person – Countries Compared
Supermarket sales
Nielsen also tracks varietal sales by package size (e.g., 750 ml. bottles, 1.5 liter "magnums," 187 ml. single-serve bottles, etc.). Over the past year, the biggest dollar sales increases were for varietals bottled in the 1.5 liter (+20%) and 750 ml. (+18%) sizes. During the same period, 750 ml. wines accounted for roughly 50% of supermarket dollar sales, compared to 31% for 1.5 liter magnums.Premium wineries enjoying the greatest percentage increases in supermarket sales over the past year were Sutter Home, up 23% in dollar sales, followed by Fetzer, up 18%, Robert Mondavi-Woodbridge, up 15%, and Beringer, up 12.5%.