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WINE + SPIRITS BUSINESS STRATEGY | June 5, 2013

Jay Wright + Chris Fehrnstrom


Building Brands That People Love
President, Wine & Spirits Division

2 | Building Brands That People Love


WINE MARKET
Overview

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On / Off Premise Industry Trends
10 Year CAGR 3 Year CAGR
+3% +3%
350
Millions of 9L Eq. Cases

300

250

200

150

100

50

0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013P
Off Premise On Premise

*Source: Beverage Information Group and


Internal Estimates 4 | Building Brands That People Love
Premium Continues to Outperform Value
8%
7%
7%
6% 6%
6%

5%
4%
4%

3%

2%

1%
1%
0%
0%
Pre-Recession (12/2007-9/2008) Recession (10/2008-12/2009) Post Recession (1/2010-2/2013)
Value (<$5) Premium Plus ($5+)

Source, Symphony IRI – Total US Food and


Drug 5 | Building Brands That People Love
US Wine Volume by Trade Channel

On-Premise Food/Drug
Convenience 19%
3% 36%
Mass
8%

Club
6%

Liquor
27%

Source: SymphonyIRI, Beverage Information 6 | Building Brands That People Love


Group, Internal Company Estimates
Industry Consolidation
Number of Distributors

3,000 35% 35%


30% 31%
2,500
25% 25%
2,000
20%
3,000
1,500 15%
1,000 10%
5%
500 675
0%
0 2006 2010 2015P
1994 2012
Top 5 Retailer Wine Share

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US Leads in Total Wine Consumption
350 4.0%
3.0%
300 2.7% 3.0%
2.3%
250 2.0%
Millions of 9L Cases

200 1.0%

150 0.0%

100 -1.0%
-0.7% -0.9%
50 -2.0%
-1.6%
0 -3.0%
US France Italy UK Australia Canada

Wine Consumption 3 Year CAGR

Source: IWSR, 2011 8 | Building Brands That People Love


U.S. & Canada Per Capita Consumption Growth Drives Opportunity
60 2.0%
1.8% 1.6%
50 0.8% 1.0%

40
Liters Per Person

0.0%
30

-1.0%
20

10 -1.5% -1.6% -2.0%

-2.2%
0 -3.0%
France Italy Australia UK Canada US

Per Capita Consumption 3 Year CAGR

Source: IWSR, 2011 9 | Building Brands That People Love


Beverage Alcohol: Key Growth Contributor to Retail Channel
2012 Total CPG $ Growth +2.5%
$80,000,000,000
6.6% 6.9% 6.9% 8%

7%
$70,000,000,000
5.7% 6%
$60,000,000,000
4.3% 4.2% 5%

$50,000,000,000 4%
4.2%
3%
$40,000,000,000
2%
$30,000,000,000 1%

0%
$20,000,000,000
-1%
$10,000,000,000 -0.5%
-1.1% -1.3% -2%
-1.8%
$0 -3%

Dollar Sales Dollar Sales % Chg YA


Source: SymphonyIRI, Total U.S. – Multi-Outlet+Convenience Cal Yr 2012

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KEY U.S. TRENDS WHY THEY MATTER
Core Wine Consumers have Frequency of Consumption
grown ~70% since 1994 Driving Category Growth

~30% of Core Consumers are Driving Short & Long Term


Millennials Growth

Household Penetration for Wine More Households Consuming


increased 12% since 2008 Wine

Super / Ultra Premium Account Wine Consumers Continue to


for ~65% of Category Growth “Premiumize”

Wine is One of Largest Retailer Support of Wine


Growth Categories in IRI Category Will Drive Growth
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Millennials & Gen X Driving New Wine Growth

Net percentage drinking more wine compared to a few


years ago
51%
39%

22%
10%

Millennials Gen X Baby Boomers 65+


(21-34) (35-46) (47-65)

Source: Wine Market Council Tracking Study – 2012

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STZ WINE + SPIRITS
Overview

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Grew U.S. Depletions in FY13

Focus Brands Depletions +8% vs. LY

FY13 Total Depletions = +4%

Total Wine + Spirit


Market Growth = +3%

Source : Company Information and Beverage 14 | Building Brands That People Love
Information Group Handbook Advance 2013
Constellation U.S. Market Share and Position

Constellation Brands Dollar Share of Segment


25.0
#1
20.0 #1 #1
#2
#1
15.0

10.0

5.0

-
Premium Glass Super Premium Ultra Premium Luxury ($15-$20) Premium+ (>$5)
($5-$8) ($8-$11) ($11-$15)

SymphonyIRI, Total US Multi-Outlet+Convenience,


52 weeks ending Feb 24, 2013
15 | Building Brands That People Love
FY14 STRATEGIC
IMPERATIVES = PROFITABLE
ORGANIC GROWTH

Build Brands
to Grow Revenue Apply
Faster than the Financial Discipline
Market

Build the Best Organization


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FY14 Strategic Imperatives Summary
Build Brands to Grow Revenue Apply
Faster Than the Market Financial Discipline
• Keep big brands healthy • Optimize blend costs
• Continue focus on innovation and
new products • Deliver cost efficiencies
• Drive key Focus Brands with • Secure supply to support future
greatest potential growth
• Leverage brands globally • Continue to evolve and build
• Grow retail distribution distributor alignment

Build the Best Organization


• Drive enhanced accountability
• Drive employee engagement, recognition and career development
• React quickly to changing market trends
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Our Competitive Commercial Advantages

Best portfolio in Strong route to


wine industry market

Effective Supplier of choice


operating for key retail
platform partners

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Best Portfolio: Brand Growth
LUXURY
3,500,000 TOTAL

3,000,000
NPD
2,500,000 TOTAL

2,000,000
DISCON-
TINUED
1,500,000

TACTICAL
1,000,000

500,000

- FY13 Depletion Cumulative Growth

Source: FY13 Year End Depletion Data

19 | Building Brands That People Love


Best Portfolio

+32%
+8% +28%
+23%
+22% +5%
+20%

Source: SymphonyIRI Total US Multi


Outlet+Convenience, 52 weeks ending 20 | Building Brands That People Love
Feb 24, 2013
2012 Top 30 Momentum Table Wine Brands
#8 #19 #24 #26
#6 #12 #21 #25 #30

Black Box Arbor Mist FWC


Ruffino Black Box Simply Naked
Kim Crawford
Simi Kim Crawford SVEDKA
Mark West
Simply Naked Mark West The Dreaming Tree
Modelo Especial
SVEDKA Primal Roots Thorny Rose
Nobilo
Woodbridge Rex Goliath Woodbridge
Rex Goliath

Source: SymphonyIRI, Impact, and


Beverage Information Group 21 | Building Brands That People Love
Strong Route to Market: Exclusive Distributors
ME (1)
• One distributor per WA NH
market, where possible MT (1) ND MN VT (1)
MA
OR NY
WI RI
ID SD
MI NJ CT
• Dedicated headcount WY
IA OH
PA DE
NV NE MD
IN WV
(1000+ feet on the street) UT
IL
VA DC
CO KS MO KY
CA NC
• Increased marketing OK AR
TN
SC
AZ NM
investment MS AL GA
LA
TX
• Stronger relationship w/ FL
AK
distributors
HI
• Outperformed non-
exclusive states in
RNDC Horizon Young’s
depletion growth
Traditional
Southern Johnson
Franchise States

(1) Spirits Only

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Supplier of Choice: Execution at Retail

131% 140%
123%

105%
FAIR
SHARE
Distribution Display Feature Feature &
Execution Execution Display
Execution

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Supplier of Choice: Category Management

Helping
Constellation Brands
become known as the
“supplier of choice” Improving the creation and
execution of category
management processes

CMA
Certification
70 employees Industry &
certified this Customer
year alone! Awards

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EFFECTIVE
OPERATING PLATFORM

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Managing Grape Supply – Globally
Canada
Wash.
2k acres Italy
1 winery 1k acres
9 wineries
5 wineries
NY State
California
1 winery
12K acres
16 wineries

N. Zealand
4K acres
4 wineries

Location w/ physical assets Source of bulk supply

Current Annual Bulk Wine Purchased: >140M


Building Brands Liters
That People Love
Leveraging our size to deliver savings
throughout our supply chain
• Focus on global grape • Built best-in-class global grape
sourcing team with presence in all
sourcing strategy to improve major wine producing regions
blend costs while maintaining worldwide – allows for flexibility in
quality managing supply

• Collaboration with our


largest distributor to gain • Freight savings and improved
operational efficiency savings inventory management costs
and reduced freight

• Continuing Bottle in Country • Delivers freight and excise tax


of Sale (BICOS) program savings and reduces f/x expense

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Managing operations investment to
improve our cost structure
• Scaled expansion of • Expanding tetra packaging &
California winery capacity premium box production
to support growth • Leveraging existing infrastructure as
winery capacity expands

• Oak management driving 30%


• Consolidation of California reduction in spend & smaller
bottling and barrel footprint warehouse footprint
• Continued bottling site consolidation

• Reduced packaging costs • Expanded bulk glass capacity


through value engineering • Redesigned packing to reduce corrugate

28 | Building Brands That People Love


Build the Best Organization

Being Enabling with


nimble better technology

Holding suppliers &


distributors accountable

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CANADA &
INTERNATIONAL

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Canada Long-Term Health: Domestic / Imports
2009 - 2013 CAGR 2012 – 2013
Total : +3% Total: +4%
Imports: +4% Imports: +5%
50.0
Millions of 9L Eq Cases

40.0
27%

30.0

20.0 73%
10.0

0.0
2009 2010 2011 2012 2013
Import Domestic

Source: ACD for Actuals FY’09-F’13 31 | Building Brands That People Love
Growing in Canada
Continue profitable Accelerate growth in owned
growth in ICB business import brands to build market
ahead of market rate share in US, Italian & NZ categories

32 | Building Brands That People Love


International Strategy
• Leverage select, core brands in key geographies
representing most significant growth opportunities
for New World Wines:
• China
• Brazil
• Mexico
• Europe: Key Import Markets
• Enhance presence in Travel
Retail Channel

33 | Building Brands That People Love


FY14 STRATEGIC
IMPERATIVES = PROFITABLE
ORGANIC GROWTH

Build Brands
to Grow Revenue Apply
Faster than the Financial Discipline
Market

Build the Best Organization


Building Brands That People Love
Chief Marketing Officer, Wine & Spirits Division

35 | Building Brands That People Love


OVERARCHING STRATEGY
for Growth

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KEY U.S. WINE & WHAT WE’RE
SPIRITS FOCUS DOING
New, fresh advertising
Big Brands are Important campaigns for Woodbridge,
RMPS + Clos du Bois

Keep Big Brands Relevant Expanding Rex Wingman


Program + Introducing Tetras

Sweet Soars & Blends on the Continue launching new blends


Upswing + testing new sweet flavors

Targeting Key Demographic Females, Millennials, Hispanics


Groups

SIMI, Kim Crawford + Robert


Luxury is Back Mondavi’s strong growth /
Introducing new luxury brands
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Heritage Month
Celebrating the 100th Anniversary of Robert Mondavi’s Birth

38 | Building Brands That People Love


Increased presence at retail with
new packaging - shipping now

Multi-Million dollar advertising


campaign in U.S. and Canada

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Launching New “For Real” Campaign

• Establishes RMPS as the real +


substantive wine choice among
older Millennials (25-34)
• New National advertising
• Major digital campaign during key
holiday selling period Sept-Dec
• Display, Mobile + Social Integration
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18
90+ Scores
Napa Valley Cabernet Sauvignon Reserve

2009: 92 points 2007: 95 points 2005: 92 points


2008: 93 points 2006: 96 points 2004: 95 points

2009: 94 points 2007: 95+ points 2005: 90+ points


2008: 95 points 2006: 94 points 2004: 92+ points

2009: 90 points 2007: 95 points 2005: 94 points


2008: 92 points 2006: 90 points 2004:That
Building Brands 92People
pointsLove
Two new flavors

Re-stage core flavors

Increased regional investment

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Continue national TV ad
campaign

Product + package innovation

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New advertising platform launch

Packaging re-design

Increased spend in key target markets

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Deliver Hyper-Growth for Rex Goliath

Additional investments to drive growth:


• Supercharged
Wingman Program
• Moscato focus
• New line extensions
• 1.5L expansion
• Launch 500mL Tetra
packs
• Year-round
merchandising
support
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HOW ARE WE GOING TO
WIN WITH NPD?

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How We are Going to Win with NPD
• Connect with market trends
• Capitalize on emerging trends across the category
• Maximize consumer insights to target more specific
consumer segments and opportunities
• Give consumers what they want
• More regional launches to gain critical in-market
learnings
• Bring greater value to customers through new
initiatives

47 | Building Brands That People Love


NEW MARKETING
Opportunities

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Millennials are adopting wine at a faster
rate than the generations before them.

62
MILLION
Millennials between
21 and 36 in the U.S.

8
MILLION
Millennials reaching
LDABuilding
in next two
Brands That years
People Love
Our Investment in Digital
We’re connecting with
consumers in a digital
world through:
• Mobile
• Online Video
• Social Media
• Online Ads
• Search Marketing

51 | Building Brands That People Love


LOOKING AHEAD
Key Takeaways

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In Conclusion
We are:
• Building brands faster than the market
• Focusing on keeping big brands healthy
• Driving growth through innovation
• Leveraging best-in-class digital marketing
team
• Executing with excellence

53 | Building Brands That People Love


THANK YOU

Building Brands That People Love