Consolidation
It’s Just Beginning – You Ain’t Seen Nothing Yet!
Monday, October 27th, 2008
Charlotte, North Carolina
Topics
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Supplier consolidation
Distributor consolidation
Retailer consolidation
Other consolidation
Supplier Consolidation
Supplier Consolidation
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It will continue
More appropriately – Polarization
Expect consolidation among larger players
In turn, spawning lots of small players and one or two mega players
Perhaps even a “beer, wine and liquor” mega player
In total today, though, it is still very fragmented!!!
Be prepared for the entry of completely new players
These new players, as you will see, might well impact control states
Vertical integration?
For sure – Lots of ongoing change!
Still Fragmented – Fair Size Players
Diageo
Bacardi
Pernod Ricard
Moet Hennessy
Gruppo Campari
Remy Cointreau
Edrington Group
Fortune Brands
Brown-Forman
SPI
UB Group
William Grant
Marnier Lapostolle
Grupo Cuervo
C&C International
TCC
Bols
Suntory Group
Hite (Jinro)
Heaven Hill
CL Financial
TaKaRa
Mast-Jagemeister
ILLVA Saronno
La Martiniquaise
DeKuyper
Henkell & Sohnlein
Nolet Distillery
E&J Gallo
Tanduay
Industrias Muller
Russian Standard Bank
Nikka / Asahi
Drambuie Group
San Miguel
Osborne Group
Oaktree Capital
Barton Brands
Antiqueno
Berentzen
Bohae
Mostly ignores beer and wine. In
All, 215 medium / large players
Boisset
Borco Marken
Brugal
Caninha Da Roca
Caninha Oncinha
Capel
Daesun
Fratelli Branca
Glen Catrine
Godo Shusei (Oenon)
Halewood Vintners
Hardenberg
Industrias Reunidas
Independent Distillers
J&G Grant
Jagajit
Keumbokju
Kikkoman
Kirin
Kyongwoul
Kyowa Hakku
Mercian Corp
Mohan Meakin
Muhak
Nemirov Vodka Company
Pitu
Rhadico Khaitan
Ron Matusalem
Russian Wine & Spirits Co.
Santa Teresa
Sanwa
Satsuma
Seralles
Tekel
Unkai
Ypioca
First Ireland
Mou Tai
Wuliangyie
Antigua Distillers
Inner Circle
Highwood Distillers
Soyuz Victan
Uto Nederland
RC Cooymans
Arcus
Polarization – Emergence Of Small Players
Gemini Spirits & Wine
Kobrand Corporation
Infinium Spirits
Shaw Ross International
Craft Distillers (Hangar One)
Phillips Distilling
Castle Brands
Fifth Gen Inc (Tito's)
AV Imports
Luctor International
Sans Wine & Spirits
W.J. Deutsch
Mutual Wholesale (Monopolowa)
Terlato Spirits
Admiral Imports
Niche Import Company
Palm Bay Imports
MHW Limited
BenDistillery
Crillon
Nicholas Enterprises
Preiss Imports
Capstone International
Jinro America
LIPS Imports
Chatham Imports
Drinks America
International Beverage
Halby Marketing
Heartland Distributing
Clear Creek Distilling
Bardenay Distilling
Sovereign Brands
Icon Brands
Specialty Spirits Imports
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Other Contenders
3D Spirits
Altamar
Bacmar International
Belmont Farms
Camus Cognac
Carnivo Unlimited
Cognac Ferrand USA, Inc.
Distillery No. 209
Distillery Resources, Inc.
Duggans Distilled Products
Frank Pesce Group
Frederick Wildman
Gil Schy
Harbrew Imports Ltd.
Hardy USA
Heck Estates (Korbel)
Koenig Distillery
Magic Spirits
Maine Distilling
Maison JMRE
Mango Bottling
Marsalle Company
Mystique Brands (Royal)
Natural West
Oliphant USA
Opici Imports
Pacific Edge Wine & Spirits
Parliament Imports
Pasternak Imports
Philadelphia Distilling
Quadro Group, LLC
Reformed Spirits Co.
RU Brands, LLC
Seashore Marketing
Speyside Importing Co.
Stellar Imports
Terlato
Total Beverage Solution
Wein-Bauer, Inc.
White Gold USA, LLC
Winebow, Inc.
World Contact
To Give You A Flavor For The Battle At The Top….
Company
Exxon = $355.0 B
Mkt Cap
Anheuser Busch
$42.4
Diageo
$36.0
LVMH
$31.5
InBev
$22.6
SAB Miller
$20.2
Pernod Ricard
$11.8
Heineken
$11.1
Foster's
$10.3
Bacardi*
$8.0
Asahi Brewing
$7.8
Brown-Forman
$7.0
Fortune Brands
$5.3
Carlsberg
$5.0
Constellation Brands
$2.9
Modelo
$1.8
Campari
$1.8
Remy Cointreau
$1.7
Excludes Debt Numbers
New Players To The U.S.
InBev
SPI
UB Group
Grupo Cuervo / Proximo
TCC
CL Financial
Belevdere S.A. / Imperial Brands
Russian Standard Bank
Oaktree Capital
So What?
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For the Xenophobes = They are all “Foreigners”
Not used to the 21st Amendment
Not used to a mandated three tier system
InBev
SPI
Not used to “Control States”
UB Group
Grupo Cuervo
No one knows what changes they
TCC
might start lobbying for
CL Financial
Belevdere S.A.
• Many trade associations,
Russian Standard Bank
Oaktree Capital
government lobbying groups,
are controlled by foreign entities
Distributor Consolidation
Distributor Consolidation
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It will continue
Will it bifurcate into sales and logistics?
Public flotation?
What would a distributor be worth?
Would suppliers try to prevent it?
Could suppliers prevent it?
CEDC – Publicly traded wholesaler, market capitalization of $1.0 billion
It is possible that there may be only one logistics distributor in a market
Be prepared for the entry of completely new players
These new players, as you will see, may impact control states
Certain major suppliers have explored the “new player” options
Current Paradigm
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Southern W&S
Young’s Market
RNDC
Glazer
Charmer-Sunbelt
Wirtz
Control States
Tomorrow’s Paradigm
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Southern W&S
Young’s Market
RNDC
Glazer
Charmer-Sunbelt
Wirtz
Control States
• DHL / Exel
• UPS
• FedEx
• Centrex, Rhode Island
• Food Brokers
• Sysco
• US Foodservice
• Performance Food Group
• Reyes Holdings
• Ben E. Keith
• Crescent Crown
• Self Distribution
Who is CEDC?
 Originally founded in 1990
 NASDAQ listed since 1998 with current market
capitalisation of over US$1 billion
The leading distributor and importer of alcoholic
beverages in Poland.
The leading producer of vodka in Poland and the 4th
largest producer of vodka worldwide.
 2006 forecasted sales of US$931 m to US$956 and
forecasted EPS of US$1.90 to US$2.10
A battle is brewing between Anheuser-Busch and the beermaker's sole distributor
in Miami-Dade and Monroe counties.: Anheuser-Busch nixed the planned sale of
a distributor to a rival.
Byline: Patrick Danner
Jun. 14 2007
Distributor Eagle Brands was in line to be sold for $62 million to rival company Gold
Coast Beverage Distributors of Miami. But Anheuser-Busch quashed the deal, saying
Gold Coast would have a virtual monopoly on beer distribution in the two counties.
Now Eagle Brands is demanding the $62 million from Anheuser-Busch, the brewer
says. And the St. Louis-based father of Budweiser is asking a federal judge to rule that
its action did not violate Florida beer-franchise law, in a nine-page lawsuit filed
Tuesday in U.S. District Court in Miami....
Food Service Distributors
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Sysco – Market Cap of $14.0 billion
U.S. Foodservice
Performance Food Group
As wholesale consolidation enters next phase
do they jump in?
Food Brokers: an oligopoly in the middle
Even more dramatic than the concentration of supermarkets has been the concentration of
food brokers, the middlemen in the food industry. There are now just three privately held
companies in the U.S. that dominate this field: Acosta, Advantage Sales and Marketing, and
Crossmark. All three have quadrupled in size over the past decade. At that point there were
around 2,500 regional grocery brokers. Through acquisition and hard competition, these three
dominate the majority of the business between them. They are now working on expanding
abroad, buying up local distributors from Europe to Australia.
Broker are in charge of selling and stocking products to food sales outlets from supermarkets
to convenience stores to corner grocers. The advantage they give is that they can coordinate
sales nationwide and manage warehousing and delivery efficiently, something most food
manufacturers have traditionally not wanted to do or couldn't afford to do.
Retailer Consolidation
Retailer Consolidation
• Comes in many shapes and sizes
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Bricks and mortar
Internet
Grocery, Drug, Liquor, Hotels, Restaurants
Country by country
It’s happening all over the globe
It will definitely impact our US market
Significant attempts to deregulate the alcohol market
“Global” pricing threatens large supplier margins
Vertical integration either literal or through private label
Not sure the crafters of the 21st Amendment
thought about the need to protect us
from very large retailers
Large Supermarkets
Wal*Mart
$204.0
Tesco
$38.4
Carrefour
$25.7
Costco
$22.0
Kroger
$17.2
Royal Ahold
$11.2
Safeway
$9.0
Sainsbury
$7.0
Supervalu
$3.0
Publix
$0.0
Coles Myers
$0.0
Woolworths
$0.0
Aldi
$0.0
Delhaize
$0.0
Supermarket Consolidations
FTC Approves Sale of Albertson's
BOISE, Idaho -The Federal Trade Commission on Tuesday approved the $9.7 billion sale
of Albertson's Inc., the nation's second-largest grocery store chain, to
a consortium led by Minnesota-based grocer Supervalu Inc. and drugstore
chain CVS Corp, reported the Associated Press.
Arnault looks to increase Carrefour Stake
Source: Financial Times
By Scheherazade Daneshkhu in Paris
Published: Jul 19, 2008
Billionnaire Bernard Arnault is intent on increasing his stake in Carrefour with Colony Capital, his joint venture partner, but
does not seek to take control of the French retailer, according to a regulatory filing.
Blue Capital, the investment vehicle held equally by Colony and Mr Arnault, who is also chairman of LVMH, the luxury goods
group, has taken advantage of Carrefour's weak share price to increase its stake over recent days.
How stores pile alcohol high and sell it cheap
Last updated at 00:52am on 15th February 2008
Supermarkets are selling alcohol at a loss to pull in customers.
They are offering shoppers savings worth millions, particularly around
the time of sporting events and national holidays.
Evidence supplied to a Competition Commission inquiry suggests the
big four - Tesco, Asda (Wal*Mart), Sainsbury's and Morrisons - sold an
estimated £100 million worth of beer, wines and spirits below cost at the
time of the World Cup in 2006.
Recent promotions of cheap lager and cider have brought down the cost
of alcohol to below the prices charged for some bottled water.
Australia: Battle of the booze
February 5, 2006
Retail giants Coles Myer and Woolworths have a new battleground - booze.
Or, more specifically, discount booze sold in warehouse-style
facilities: what they call, unglamorously, their "big-box liquor offer".
And as in most of their colossal battles over the years, there will be
winners - the two retailers and probably consumers - and losers - anyone
in the industry who gets in the way of these market titans or can't
adapt to serve them.
Large Drug Chains
CVS
$39.0
Walgreen's
$21.9
Rite Aid
$0.5
Drug Chain Consolidations
Rite Aid To Buy Two Rival Chains
HARRISBURG, Pa., Aug. 24, 2006
(AP) Rite Aid Corp., the nation's third-largest drugstore chain, said Thursday it will purchase the U.S. Eckerd and Brooks operations of Canada's Jean
Coutu Group Inc. for about $2.55 billion in cash and stock.
The deal, Rite Aid's first major acquisition since a turnaround team arrived to bring the company back from the brink of bankruptcy six years ago, will
make it the largest drugstore chain operator on the East Coast, Rite Aid said. However, it will still trail Walgreen and CVS nationally.
CVS, Longs merger in sight
Source: Retailing Today
Oct 22nd
After a three-month battle with Walgreens,
CVS Caremark's bid for Longs has prevailed.
The company announced this week that its
tender offer for shares of common stock of
Longs Drug Stores at a price of $71.50 per
share has been successful.
Large Restaurant Chains
Darden
$2.8
Brinker
$1.0
IHOP
$1.0
Buffalo Wild Wings
$0.6
Texas Roadhouse
$0.5
Cheesecake Factory
$0.5
Red Robin
$0.2
Ruby Tuesday
$0.1
Carlson
$0.0
Outback Steakhouse
$0.0
Hooters
$0.0
Restaurant Consolidations
Darden Acquires RARE Hospitality
Publication: Foodservice Equipment and Supplies
Date: Saturday, September 1 2007
Darden Restaurants Inc. signed an agreement to purchase RARE
Hospitality International Inc., an operator of 317 restaurants,
including 287 LongHorn Steakhouse and 28 Capital Grille
restaurants. The total purchase price is approximated at $1.4
billion.
The offer is expected to close in October. Headquartered in
Orlando, Fla., Darden owns and operates nearly 1,400 Red
Lobster, Olive Garden, Bahama Breeze, Smokey Bones and
Seasons 52 restaurants with annual sales of $5.6 billion. RARE’s
annual sales average around $1 billion.
Large Hotel Chains
Marriott
$6.5
Starwood
$3.7
Intercontinental
$2.2
Hilton
$0.0
Accor
$0.0
Carlson
$0.0
Hyatt
$0.0
Cendant
$0.0
Hotel Consolidations
Liquor Store Chains
Liquor Stores Income Fund Announces the Planned
Acquisition of 12 Liquor Stores in Calgary
EDMONTON, May 31, 2006 - Liquor Stores Income Fund
announced today the planned acquisition of 12 additional stores in
Alberta. The Fund will be acquiring 12 of the 14 stores operated by
Willow Park Group in Calgary. Willow Park Group is the 6th
largest independent chain of liquor stores in Alberta.
EDMONTON, ALBERTA, April 10, 2007 – Liquor Stores
Income Fund (“Liquor Stores”)(TSX:LIQ.UN)
announced today that it has made an offer to acquire all
of the outstanding trust units of Liquor Barn Income
Fund (“Liquor Barn”) (TSX: LBN.UN).
The two businesses provide an excellent strategic fit and
together will create the leading independent liquor
retailer in Alberta and B.C. with 176 liquor stores,
providing a strong platform for future growth;
Liquor Store Chains
Liquor Stores Income Fund Enters U.S. Market
(In Anchorage, Alaska) With the Strategic
Acquisition of 19 Liquor Stores From Brown Jug
Inc.
Tuesday, July 22, 2008 5:03 PM
Liquor Stores Income Fund (the "Fund")
(TSX:LIQ.UN) announced today that the Fund has
signed a definitive agreement for the acquisition of
19 liquor stores in greater Anchorage by a whollyowned subsidiary of the Fund.
Irving Kipnes, CEO of the Fund, stated, "We are very
pleased with the planned acquisition of the Brown
Jug stores as our initial entry into the U.S. market, as
well as the addition of our new Canadian stores.
Liquor Store Chain Players
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ABC - Florida
Spec’s
Centennial
Twin Liquor
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Bevmo
PLCB
NHSLC
50 / 60 Others
Other Consolidation
Other Consolidation
• Raw Material consolidations
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Paraxylene
Glass bottles
• Shipping consolidations
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Truck lines
Rail lines
• All of the above can impact service / cost!
• Control State consolidations?
• Trade association consolidations (NABCA acquires DISCUS)
Exit Questions
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How does this overall landscape potentially affect your operations?
Will you be under more pressure or less in the future?
How do you maintain a level playing field?
What, if anything, can you do about it?
Does it help or endanger the future of the control states?
What impact might this have on the concept of the three tier system?
What impact does this have on alcohol’s status as “something different”
What impact might all this have on responsible consumption?
Questions?
Thank You!