connoisseur consulting final

Connoisseur Consulting

Thomas CaseyRichard HofferSarah SafeerYael Smolar

W.J. Deutsch & Sons Proposal


Agenda

2

Untapped Market: Millennials

Trade Up or Trade Down

Issues

Recommendations

Increase [ yellow tail ] Pricing

New Sub-Premium Wine Brand

Long Term Outlook

Anticipated ResultsGenerate Profit with Proposed Recommendations


W.J. Deutsch & Sons Core Values

3

Family Focus Prestigious Global Wines

Loyalty Appropriate Pricing


Market Segment: Baby Boomers

4

• High disposable income• Established tastes• Trading down from luxury and deluxe wines


Baby Boomers Trading Down

5

Expected Wine

Spending

-32.3%

Expected Change

in Income-27.8%

Income Elasticit

y of Wine1.3

Premium Wine($7.00- $9.99)

$9.48

American Association of Wine Economists, U.S. News and World Reports

Deluxe Wine ($14.00+)

$14.00


[ yellow tail ] Trading Up

6

Price Increase of 15%

New Premium Classification

7


Convergence at Premium Pricing

Deluxe($14.00+)

Premium($7.00-$9.99)

Sub-Premium($3.00-$6.99)

Baby Boomers

[ yellow tail ]


Effect on Existing Consumers

8

Price Elasticity of Demand

Starbucks -0.40

Price Elasticity of Demand Wine

-0.24

American Association of Wine Economists, Yahoo Finance

9


Starbucks Trading Up

2003 2004 2005 2006 2007 2008 3,000,000,000

3,500,000,000

4,000,000,000

4,500,000,000

5,000,000,000

5,500,000,000

6,000,000,000

6,500,000,000

7,000,000,000

Cups of Coffee Sold

Year

Cup

s So

ld

2003 2004 2005 2006 2007 2008$1.00

$1.10

$1.20

$1.30

$1.40

$1.50

$1.60

$1.70

Coffee Price Per Cup

Year

Pric

e

Bloomberg Business


Market Segment: Millennials

10

Currently Not Brand Committed

Want Good Quality for Lower Price

Open to Experimentation

11


Product Adoption Curve

Millennials

Boston Consulting Group 11


New Partnership

12

Dom

estic • Consumer

shift to imported wines

• 2008 weather difficultiesO

ld W

orld • Antiquated

• Variable product

• Limited production

New

Wor

ld • Consistent tastes

• Fruity flavors• Advanced

technology


New World Wine Partnership

13

Argentina

Bodega Catena Zapata

Production

A Top International Winemaker

Large, Family Owned Winery

One Million Cases per Year Since 2002


[ elevation ]

15

Chardonnay

Popular White Wine

Argentine Twist

Malbec

Adventurous

National Specialty


Implementation of [ elevation ]

16

2009 2010 2011

Secure partnership and finalize negotiations with Bodega Catena Zapata

Import 75k cases and place in existing retail channels

Marketing Campaign: 20% of anticipated profit from

[ elevation ]


Complete Portfolio

17

New Consumers

[ elevation ]

Core Consumers

[ yellow tail ]


Financials in 2010

18

[ elevation ]Profit$1.1M

Total Recommendati

on Profit$146.2M

[ yellow tail ] Profit

$145.1M


Financial Projections

19

2009 2010 2011 2012 2013 2014 2015$100,000,000

$120,000,000

$140,000,000

$160,000,000

$180,000,000

$200,000,000

$220,000,000

$240,000,000

$260,000,000

$280,000,000

Total Profit From RecommendationFinancial Projections Without Recom-mendation

Year

Profi

t

$66.2M Marginal

Profit


Conclusion

20

[ yellow tail ] Repositionin

g[ elevation ]

DevelopmentComplete

Wine Portfolio

Successful Market Capture

and Profit Generatio

n


Questions?

21


Appendix

22

A1. Projected Financials Explained A2. Simplified Projected Financials A3. [ yellow tail ] Price Increase (White) A4. [ yellow tail ] Price Increase (Rosé and Red) A5. [ elevation ] Projected Financials A6. [ elevation ] Demand Variables A7. [ elevation ] Results A8. [ yellow tail ] vs. [ elevation ] Chardonnay A9. Baby Boomers Gained A10. Existing Consumers Lost A11. New World Partnership Options

23


A1. Projected Financials Explained

Net Effect 2009 2010 2011 2012Total Revenue From [ yellow tail ] Recommendation $310,625,000 $414,676,155 $496,645,335 $548,055,464[ elevation ] Profit ($300,000) $1,098,672 $1,483,207 $1,779,849Total Revenue From Recommendation $310,325,000 $415,774,827 $498,128,542 $549,835,313Financial Projections Without Recommendations $310,625,000 $352,736,000 $368,978,876 $409,043,838Profit From [ yellow tail ] Recommendation $108,718,750 $145,136,654 $173,825,867 $191,819,412Profit From [ elevation ] Recommendation ($300,000) $1,098,672 $1,483,207 $1,779,849Total Profit From Recommendation $108,418,750 $146,235,326 $175,309,075 $193,599,261Financial Projections Without Recommendation $108,718,750 $123,457,600 $129,142,607 $143,165,343Increase From Recommendation ($300,000) $22,777,726 $46,166,468 $50,433,918Net EffectTotal Revenue From [ yellow tail ] Recommendation[ elevation ] ProfitTotal Revenue From RecommendationFinancial Projections Without RecommendationsProfit From [ yellow tail ] RecommendationProfit From [ elevation ] RecommendationTotal Profit From RecommendationFinancial Projections Without RecommendationIncrease From Recommendation

2013 2014 2015$605,682,890 $670,470,032 $743,545,408

$2,135,819 $2,562,982 $3,075,579$607,818,708 $673,033,014 $746,620,987$454,193,808 $505,217,635 $563,057,777$211,989,011 $234,664,511 $260,240,893

$2,135,819 $2,562,982 $3,075,579$214,124,830 $237,227,493 $263,316,472$158,967,833 $176,826,172 $197,070,222

$55,156,997 $60,401,321 $66,246,250

24


A2. Simplified Projected Financials

Year 2009 2010 2011 2012 2013 2014 2015Total Profit From Recommendation $108.4M $146.2M $175.3M $193.6M $214.1M $237.2M $263.3MFinancial Projections Without Recommendation $108.7M $123.5M $129.1M $143.2M $159.0M $176.8M $197.1MIncrease From Recommendation ($300,000) $22.8M $46.2M $50.4M $55.2M$ $60.4M $66.2M

25


A3. [ yellow tail ] Price Increases (White)

Wine Price Elasticity of Demand: -0.24*

*American Association of Wine Economists

White 2009 2010 2011 2012 2013 2014 2015Chardonnay 38.00$ 44.46$ 52.02$ 53.06$ 54.12$ 55.20$ 56.31$ Expected Case Sales 1,450,000 1,637,400 1,683,918 1,797,329 1,918,377 2,047,578 2,185,481 Expected Price Per Bottle 3.17$ 3.71$ 4.33$ 4.42$ 4.51$ 4.60$ 4.69$ Expected Retail Price 6.33$ 7.41$ 8.67$ 8.84$ 9.02$ 9.20$ 9.38$ Pinot Grigio 34.00$ 40.10$ 48.41$ 50.50$ 52.69$ 54.97$ 57.35$ Expected Case Sales 585,000 624,259 673,567 715,565 760,181 807,579 857,933 Riesling 29.00$ 34.35$ 41.79$ 43.91$ 46.13$ 48.46$ 50.91$ Expected Case Sales 410,000 460,519 489,867 511,009 533,063 556,068 580,067 Sauvignon Blanc 31.00$ 36.65$ 43.29$ 44.67$ 46.09$ 47.55$ 49.06$ Expected Case Sales 220,000 286,545 357,195 450,552 568,311 716,846 904,204

26


A4. [ yellow tail ] Price Increase (Rosé and Red)

Varietal 2009 2010 2011 2012 2013 2014 2015Rose 27.00$ 31.05$ 40.31$ 43.29$ 46.50$ 49.94$ 53.64$ Expected Case Sales 290,000 327,480 346,989 362,252 378,187 394,822 412,189

RedCabernet Sauvignon $47.00 54.05$ 60.00$ $58.80 57.62$ 56.47$ 55.34$ Expected Case Sales 1,100,000 1,279,219 1,224,668 1,352,973 1,494,720 1,651,317 1,824,321 Cabernet-Merlot $41.00 47.15$ 58.61$ $61.33 64.19$ 67.17$ 70.30$ Expected Case Sales 440,000 440,051 479,662 474,211 468,822 463,495 458,228 Merlot $45.00 51.75$ 57.16$ $55.86 54.59$ 53.35$ 52.14$ Expected Case Sales 950,000 1,125,713 1,081,232 1,211,644 1,357,785 1,521,553 1,705,074 Pinot Noir $36.00 41.40$ 51.59$ $54.07 56.67$ 59.40$ 62.25$ Expected Case Sales 480,000 532,155 581,717 605,955 631,204 657,504 684,900 Reserve Cabernet $52.00 59.80$ 73.75$ $76.83 80.03$ 83.36$ 86.84$ Expected Case Sales 500,000 614,025 663,362 729,698 802,668 882,934 971,228 Shiraz $43.00 49.45$ 55.05$ $54.04 53.05$ 52.08$ 51.12$ Expected Case Sales 900,000 1,115,479 1,071,584 1,211,486 1,369,652 1,548,467 1,750,628 Shiraz-Cabernet $39.00 45.85$ 57.43$ $61.11 65.03$ 69.20$ 73.63$ Expected Case Sales 375,000 399,116 438,839 453,196 468,023 483,335 499,148

27


A5. [ elevation ] Projected Financials

*Industry Average

20% Yearly Case Demand Growth

$0.21 Variable Bottling Costs*

Year 2010 2011 2012 2013 2014 2015Malbec Case Demand 25,000 30,000 36,000 43,200 51,840 62,208 Chardonnay Case Demand 50,000 60,000 72,000 86,400 103,680 124,416 Total Wine Cost $2,506,500 $3,007,800 $3,609,360 $4,331,232 $5,197,478 $6,236,974Number of Export Crates 2.98 3.58 4.29 5.15 6.18 7.41 Total Export Cost $4,410 $5,292 $6,350 $7,620 $9,144 $10,973Total Costs $2,526,660 $3,031,992 $3,638,390 $4,366,068 $5,239,282 $6,287,138Total Revenue $3,900,000 $4,680,000 $5,616,000 $6,739,200 $8,087,040 $9,704,448Income Before Marketing Costs $1,373,340 $1,648,008 $1,977,610 $2,373,132 $2,847,758 $3,417,310Marketing Costs $274,668 $164,801 $197,761 $237,313 $284,776 $341,731Profit $1,098,672 $1,483,207 $1,779,849 $2,135,819 $2,562,982 $3,075,579

28


A6. [ elevation ] Demand VariablesDemand Variables Values

Yearly Case Demand Growth 20.00%Bottles per Case 12Malbec Cost per 9L Case $35.40Chardonnay Cost per 9L Case $38.00Bulk Discount 10%Malbec Cost per 9L Case (Discount) $31.86Chardonnay Cost per 9L Case (Discount) $34.20Export Cost (per 20 Foot Crate) $1,4809L Cases in Export Crate 25,171 Bottling Variable Cost $0.21Malbec Sales Price to Retailers $4.00Chardonnay Sales Price to Retailers $4.50Negotiation Sunk Costs (2009) ($300,000)

29


A7. [ elevation ] ResultsVariables PriceCost per Malbec Bottle $2.87Cost per Chardonnay Bottle $2.95Malbec Sales Price $5.74Chardonnay Sales Price $5.89Retailer Profit Malbec $1.75Retailer Profit Chardonnay $1.50

30


A8. [ yellow tail ] vs. [ elevation ] Chardonnay

[ yellow tail ]

TasteClassification

[ elevation ]

Premium

Sub-Premium

Classically Aged

Argentine Twist

31


Increased Case Sales540k

Adoption Rate 2%

Wine Consume

rs27M

A9. Baby Boomers Gained

Population Reference Bureau

32


A10. Existing Consumers Lost

Price Elasticity Of Demand Wine

-0.24*

Recommended Price Increase 15.0%

Cases Demanded

-3.60%

*American Association of Wine Economists

33


A11. New World Partnership Options

New Zealand

•Too similar to Australia

Chile

•Destabilized economy

South

Africa• Ne

gative connotation (apartheid)

Negative Connotation (apartheid)

Destabilized Economy

Similar to Australia

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