XYZ Spirits, LLC. Business Plan. June P a g e

Transcription

1 XYZ Spirits, LLC Business Plan June P a g e

2 TABLE OF CONTENTS 1. Executive Summary Company Overview Mission Statement The Business Opportunity Company Description Industry background Capital Requirements Growth Strategy The Products Product Line Overview & Strategy XYZ Vodka XYZ Whiskey XYZ Rum Pricing Strategy The Market Target Market Analysis Target Consumer Profile Grocery Stores Drug Stores Liquor Stores Mass market retailers Restaurants Bars/Nightclubs U.S. Vodka Market Analysis Figures Trends Industry Analysis U.S. Rum Market Analysis Figures Trends Industry Analysis U.S. Whiskey Market Analysis Figures Trends Industry Analysis Europe Alcohol Spirits Market Analysis Profile of Direct Competitors Diageo Constellation Brands Bacardi Limited Pernod Ricard Suntory Holdings Limited Competitive Analysis P a g e

3 5. Marketing Plan Marketing Overview & Strategy Branding Strategy Internet Marketing Print Advertising Public Relations Affiliate Marketing TV Advertising Industry Trade Shows & Events Operational Plan Operational Overview Hours of Operaion Legal Structure Operational Growth Plan Inventory Management Computer Hardware & Software Legal & Insurance Accounting Management & Staff Executive Management John Doe, Chief Executive Officer John Doe, Chief Operating Officer John Doe, Chief Financial Officer Board & Advisors John Doe, Chairman of the Board Financing & Growth Strategy Capital Requirements Risk Analysis Financials Sales Projections Expenses G & A Expenses Marketing Expenses Staff Headcount & Salaries Pro-Forma Financial Statement Annual Summaries Pro-Forma Income Statement Pro-Forma Statement of Cash Flows Pro-Forma Balance Sheet P a g e

4 1. EXECUTIVE SUMMARY There is no existing alcohol product on the market that has been designed to REMOVED INFO. XYZ Spirits, LLC produces whiskey, vodka, and rum that has been carefully crafted to REMOVED INFO and are the first-of-its-kind. The products are a unique blend of alcohol and REMOVED INFO. In addition, the products REMOVED INFO. The products were invented by an internationally acclaimed team of scientists over several years. XYZ, LLC will launch with 3 products: XYZ Vodka, XYZ Whiskey, and XYZ Rum, which are respectively vodka, whiskey, and rum products. The products will come in the following five sizes: 50 ml, 200 ml, 375 ml, 750 ml, and 1 L. XYZ, LLC s target consumer profile will be men and women between the ages of 21 and above, sports fans, and REMOVED INFO. The Company will target grocery stores, mass market retailers, drug stores, and liquor stores in the U.S., Canada, Europe, and potentially additional markets. U.S. Vodka industry revenue has increased at an annualized rate of 6.0% to $3.7 billion over the five years to The U.S. whiskey and bourbon distillery market is projected to grow at annualized growth rate of 6.2% between 2011 and 2016, reaching $3.0 billion. Revenue in the North America Rum segment was $3.6 billion in Europe Spirits market revenue is estimated to amount to US$43.46 billion in 2018 and expected to grow 1.9% annually between 2018 and XYZ Spirits, LLC will implement a robust marketing campaign that includes marketing materials integrating distribution partnerships, Internet marketing, print advertising, public relations, industry trade shows & events, TV advertising, and promotions. The Company seeks to raise $12,000,000 of which an estimated $500,000 will for capital expenditures and the remaining $11,500,000 will be for working capital. The Company s owners have invested $x.x million into the Company, which includes REMOVED INFO. 4 P a g e

5 2. COMPANY OVERVIEW 2.1. MISSION STATEMENT XYZ Spirts, LLC s mission is to become the leading U.S. and global producer of REMOVED INFO alcohol products that REMOVED INFO THE BUSINESS OPPORTUNITY COMPANY DESCRIPTION XYZ Spirits, LLC (herein also referred to as the Company or XYZ ) was established as a limited liability corporation based in ABC in January 2018 and is owned and led by John Doe. XYZ Spirits produces whiskey, vodka, and rum that REMOVED INFO. The Company s products are the first of its kind. The Company s products are a unique blend of alcohol and REMOVED INFO. In addition, the products REMOVED INFO. The products were invented by an internationally acclaimed team of scientists with several years of research and development and are manufactured in the United States. XYZ s products have been designed to REMOVED INFO: REMOVED INFO REMOVED INFO REMOVED INFO REMOVED INFO REMOVED INFO REMOVED INFO REMOVED INFO REMOVED INFO XYZ Spirits, LLC will launch an aggressive marketing campaign throughout the U.S. and Canada to become a market maker for its new category of alcohol products in the U.S. and Canada. The Company will soon expand marketing efforts geographically into Europe to establish itself as a market maker in Europe as well. The Company will potentially expand marketing geographically into additional international markets. The Company will promote its products via distribution partnerships, sales, celebrity endorsement, internet marketing, television advertising, print advertising, industry trade shows, promotions, and public relations. 5 P a g e

6 The Company s target consumer profile will be men and women between the ages of 21 and above, sports fans, and REMOVED INFO. The Company will target grocery stores, mass market retailers, drug stores, and liquor stores in the U.S., Canada, Europe, and potentially additional markets. In compliance with U.S. and Canada law, the Company will sell its products to multiple distributors throughout the U.S. and Canada, who will, in turn, market and sell the products on a wholesale basis to liquor stores, mass market retailers, grocery stores, e-tailers, and drug stores in all 50 U.S. states. As the Company expands marketing and sales on an international basis, the Company will identify and partner with distribution companies in Europe and potentially additional countries INDUSTRY BACKGROUND 1 REMOVED INFO 1 New Opportunities in Herbal & Spiced Infused Beverages MyDrink; P a g e

7 2.3. CAPITAL REQUIREMENTS The Company seeks to raise $12,000,000 of which an estimated $500,000 will be used for capital expenditures and the remaining $11,500,000 will be available for working capital to support marketing, operations, and inventory. The Company s owners have already invested $x.x million into the Company, which includes REMOVED INFO 2.4. GROWTH STRATEGY XYZ Spirits has carefully developed its growth strategy as follows: Phase 1 (Months 1-24): Develop the packaging and branding strategy of new products to be marketed and sold in the U.S. and Canada Establish distribution partnerships with companies that can distribute to all 50 states throughout the U.S Engage a celebrity to endorse the products Launch a comprehensive and aggressive marketing campaign throughout the U.S. and Canada that targets consumers, as well as businesses and distributors Hire and train staff and management Phase 2 (Months 25-36): Increase marketing in the U.S. and Canada to further penetrate the U.S. and Canada markets Launch a comprehensive and aggressive marketing campaign throughout Europe targeting consumers, as well as businesses. Establish additional distribution partnerships throughout North America Establish distribution partnerships throughout Europe Improve operational efficiency by maximizing output and minimizing cost Hire and train additional staff and management Phase 3 (Months 37-60): Increase marketing in the U.S., Canada, and Europe to further penetrate the U.S., Canada, and Europe markets Establish additional distribution partnerships throughout Europe Hire and train additional staff and management 7 P a g e

8 3. THE PRODUCTS 3.1. PRODUCT LINE OVERVIEW & STRATEGY The Company will launch with three products: XYZ Whiskey, XYZ Vodka, and XYZ Rum, which will be a whiskey, vodka, and rum product. The products will come in the following five sizes: 50mL, 200mL, 375mL, 750mL, 1 L XYZ VODKA XYZ Vodka has been distilled from high quality grains, REMOVED INFO. The vodka is REMOVED INFO. XYZ Vodka has been crafted with REMOVED INFO XYZ WHISKEY XYZ Whiskey has been blended with high quality bourbon REMOVED INFO to give the core whiskey flavor, smoothness and rich taste. XYZ Whiskey has been crafted with a proprietary blend of REMOVED INFO XYZ RUM XYZ Rum, which is a REMOVED INFO. REMOVED INFO. XYZ Rum has been crafted REMOVED INFO PRICING STRATEGY The Company will maintain very competitive pricing and projects the following pricing at the wholesale level for its products: XYZ Vodka 50 ml = $x.xx XYZ Vodka 200 ml = $x.xx XYZ Vodka 375 ml = $xx.xx XYZ Vodka 750 ml = $xx.xx XYZ Vodka 1 L = $xx.xx XYZ Whiskey 50 ml = $x.xx XYZ Rum 50 ml = $x.xx XYZ Whiskey 200 ml = $x.xx XYZ Rum 200 ml = $x.xx XYZ Whiskey 375 ml = $xx.xx XYZ Rum 375 ml = $xx.xx XYZ Whiskey 750 ml = $xx.xx XYZ Rum 750 ml = $xx.xx XYZ Whiskey 1 L = $xx.xx XYZ Rum 1 L = $xx.xx 8 P a g e

9 4. THE MARKET 4.1. TARGET MARKET ANALYSIS TARGET CONSUMER PROFILE The Company s target consumer profile includes: Everyone aged 21 and above. Sports fans GROCERY STORES There are currently 38,441 supermarkets in the U.S. 2 The largest supermarkets and grocery stores in the U.S. are respectively: Kroger, Albertson s, Ahold USA, Publix Super Markets, H-E-B Grocery Co., Walmart Stores, Inc. (Neighborhood Market), and Whole Foods Markets DRUG STORES There are currently about 67,000 drug stores/pharmacies in the U.S. 4 The 5 leading drug store chains are Therespectively: Walgreens Boots Alliance, CVS Health Corporation, Express Scripts, Inc. Walmart Stores, Inc., and Rite Aid Corporation LIQUOR STORES There are currently 69,534 liquor stores in the U.S MASS MARKET RETAILERS There is currently a total of 33,742 mass merchandise and dollar stores in the U.S. There are over 11,453 Walmart stores across the U.S. There are 663+ Costco locations across the U.S. with over 700 million subscribing members. Kroger is the 3rd largest Mass Market Retailer in the U.S. with over 2,625 stores RESTAURANTS There are currently 31,480 full service restaurants in the U.S BARS/NIGHTCLUBS There are currently 62,500 bars, taverns, and nightclubs in the U.S. 9 2 Number of Supermarkets & Grocery Stores in the U.S. from 2011 to 2016 ; Statista; Largest Grocery Stores & Supermarkets in the U.S. in 2016 ; Statista; Pharmacies in the U.S. ; Wikipedia; 6/ The 5 Largest Drug Stores in the U.S. ; NPI; June 28, Liquor stores in the U.S. ; Manta; Sizing up the Competition for Costco & Other Warehouse Clubs ; Market Realist; January Number of restaurants in the U.S. from 2011 to 2017 ; Statista; Bar & Nightclub Industry Statistics & Facts ; Statista; P a g e

10 4.2. U.S. VODKA MARKET ANALYSIS FIGURES The Vodka Distilleries industry has experienced impressive growth in both revenue and establishments over the five years to Consumers have increasingly gravitated toward alcoholic beverages that offer high quality, craft - based ingredients, and a new class of regional vodka distillers has emerged to satisfy this new consumer trend. As a result, industry revenue has increased at an annualized rate of 6.0% to $3.7 billion over the five years to 2017, while the number of industry enterprises has increased at a sharp annualized rate of 28.3% to 212 distilling companies over the same period. The wide range of available vodkas is expected to yield an additional 6.0% revenue increase in Over the five years to 2022, the Vodka Distilleries industry is anticipated to grow at an annualized rate of 4.5% to $4.6 billion. During the five-year period, the industry will benefit from expected increases in per capita expenditure on alcohol and disposable income, which will drive demand for more high-value industry goods. Nevertheless, consumers of vodka have historically demonstrated a degree of brand loyalty, particularly to brands that are imported from distilleries across the world. Many of the industry s most widely consumed brands, including Finlandia, Stolichnaya, Grey Goose and Absolut, are not produced by US distilleries and are therefore major competitors to domestic vodka brands. Total imports of vodka are expected to increase at an annualized rate of 3.1% over five years to 2022, which will put increased pressure on industry demand TRENDS Per capita disposable income will affect consumers willingness to purchase relatively frivolous goods such as vodka and other spirits. Furthermore, higher levels of income will likely enable consumers to purchase premium, high-margin vodkas more regularly. Per capita disposable income is expected to increase in 2017, representing a potential opportunity for the industry. 10 Vodka Distilleries in the US ; IBISWorld; October P a g e

11 The rate at which Americans consume alcohol determines demand for vodka distilleries products; as personal consumption increases, each individual s demand for vodka also increases. Combined with a growing adult population, per capita expenditure on alcohol is an important factor that contributes to longterm industry growth. Per capita alcohol expenditure is anticipated to increase in The Vodka Distilleries industry is expected to continue expanding over the five years to Factors such as rising per capita disposable income and alcohol consumption, a stagnating excise taxes on distilled spirits and growing interest among consumers in a range of alcoholic beverages will benefit the industry throughout the period INDUSTRY ANALYSIS The U.S. vodka market is currently in its growth phase. The industry is heavily regulated with a moderate amount of competition U.S. RUM MARKET ANALYSIS FIGURES 11 Revenue in the Rum North America segment is estimated to US $3.6 billion in The market is expected to grow annually by 0.2% (CAGR ). In the market for Rum, volume is expected to amount to 173.0ML by The average volume per person in the market for Rum amounts to 0.5L in TRENDS 12 The rise of the rum cocktails is a successful trend, with the popularity of concoctions such as mojito and Mai-tai contributing greatly in the growth and development of the rum market. A great example is Havana Club a rum brand leader. It continues to focus its marketing messages around lifestyle and cocktails on social media and at consumer events with great success. 11 Rum North America ; Statista Market Forecast; A Rum Business Market Trends in 2017 ; Wild West; February 20, P a g e

12 Smart technology is a consumer trend on the up, and one that clever rum brands are jumping on. A nice example is Pernod Ricard s coconut flavored Malibu, which targets a younger consumer group by using smart phone technology allowing users to access content and enter prize draws by tapping their phone on the bottles INDUSTRY ANALYSIS The U.S. rum market is currently in its growth phase. The industry is heavily regulated with a moderate amount of competition U.S. WHISKEY MARKET ANALYSIS FIGURES The past five years have demonstrated remarkable change for the Whiskey and Bourbon Distilleries industry, not only from the industry s most dominant distillers, but also from an emerging class of independent micro distillers from across the country. Although industry household brands, such as Jim Beam, Evan Williams, Jack Daniel s and Wild Turkey, have all invested in major production facilities and new artisanal stills, it is the growing class of craft distilleries that provided the industry with its recent boost. Despite the top four whiskey companies holding an estimated 38.4% of market share, the number of industry establishments is projected to increase an annualized 22.6% over the five years to This massive growth from independent newcomers, like Kings County, Ole Smoky and Catoctin Creek, has contributed to a projected annualized revenue growth of 6.2% during the same period, reaching $3.0 billion. The industry s recent popularity is attributable to US consumers increasing preference for craft alcoholic beverages. The craft phenomenon has generally been driven by consumers who seek out alcoholic beverages that are made with premium ingredients, expert processes and careful attention to detail. Much of this craft craze began with craft beer and cider producers and the popularity of small-scale alcoholic beverage production has reached the Whiskey and Bourbon Distilleries industry in recent years. Industry distillers are projected to generate additional revenue growth of 3.7% in 2016 alone. 13 Whisky & Bourbon Distilleries in the US ; IBISWorld; October P a g e

13 Passionate drinkers of whiskey are more prone to purchase premium whiskey, but the emerging independent brewers in this industry still must establish themselves as legitimate contenders in the industry. Since it often takes several years for truly premium whiskeys to age in barrels and become desirable, there may be a lag in the industry s projected surge in growth over the next five years. Nevertheless, IBISWorld anticipates industry revenue to increase at an annualized rate of 1.4% rate over the five years to 2021, reaching $3.2 billion TRENDS Alcohol has gradually increased in terms of popularity, social acceptability and total expenditure for decades. While the adverse effects of excess alcohol consumption have been increasingly publicized in recent years, society has historically been tolerant of moderate alcohol consumption. Per capita expenditure on alcohol is expected to decrease in Grains are a key ingredient for distillers, and the price of coarse grains tends to be volatile. Distilleries typically enter contractual agreements to protect themselves from sudden price shocks in the short term, but they are still exposed to major changes in price upon contract renewal. Since many consumers only wish to purchase the most affordable brands of whiskey available, sudden increases in grain supply contracts for one distiller can have enormous repercussions on sales. The price of coarse grains is expected to fall in 2016, representing a potential opportunity for the industry. Levels of consumers disposable income will affect spending levels across all categories. When people have more money, they are more likely to increase purchases of premium spirits, which translates into better profit margins for distilleries. Consumers will also be more likely to dine out, which increases whiskey sales from bars and restaurants. Per capita disposable income is expected to increase during INDUSTRY ANALYSIS The U.S. whiskey market is currently in its growth phase. The industry is heavily regulated with a moderate amount of competition. 13 P a g e

14 4.5. EUROPE ALCOHOL SPIRITS MARKET ANALYSIS 14 Revenue in the Spirits segment amounts to US$43,458m in The market is expected to grow annually by 1.9% (CAGR ). In the Alcoholic Drinks market, 4% of total revenue will be generated through online sales by The market for Spirits is expected to show a volume growth of 0.5% in The average volume per person in the market for Spirits amounts to 5.3L in The average price per unit in the market for Spirits amounts to US$15.58 in PROFILE OF DIRECT COMPETITORS DIAGEO Year Founded 1997 Headquarters United Kingdom Types of liquor Scotch, whiskey, gin, vodka, rum, bourbon, and tequila Overview o Was the world s largest distiller until being overtaken in 2017 o Sells products in over 180 countries o Has offices in approximately 80 countries o Over 30,000 employees o Brands include Smirnoff, Johnnie Walker, Baileys, and Guinness 14 Europe Spirits Highlights ; Statista; P a g e

15 CONSTELLATION BRANDS Year Founded 1945 Headquarters New York, USA Types of liquor Wine, beer, scotch, whiskey, gin, vodka, rum, bourbon, and tequila Overview o The world leader in premium wine with an exciting portfolio of more than 100 wines, beers and spirits o Has approximately 40 facilities o Employs 9,000 people o Largest beer import company measured by sales o Acquired by Svedka in March 2007 for approximately US$384 million BACARDI LIMITED Year Founded 1862 Headquarters Cuba Types of liquor Scotch, whiskey, gin, vodka, rum, bourbon, and tequila Overview o Largest privately held, family-owned spirits company in the world o Bacardi Limited refers to the Bacardi group of companies, including Bacardi International Limited o Over 200 brands and labels o Bacardi employs 6,000 people, manufactures at 29 facilities in 16 markets on four continents, with sales in more than 150 countries o Bacardi Limited sells in excess of 200 million bottles per year 15 P a g e

16 PERNOD RICARD Year Founded 1975 Headquarters - France Types of liquor Scotch, whiskey, gin, vodka, rum, bourbon, and tequila Overview o Created after the banning of absinthe o World s second-largest wine and spirits seller o Owns the distilled beverage division of former corporation Seagram (including brands like Chivas Regal), along with many other holdings o Over 18,000 employees o Major legal battle with The Havana Club brand SUNTORY HOLDINGS LIMITED Year Founded Headquarters - Japan Types of liquor Scotch, whiskey, gin, vodka, rum, bourbon, and tequila Overview o Japanese brewing and distilling company o Expanded into the sandwich and soft drink markets o Became one of the largest makers of distilled beverages in the world after acquiring Beam, Inc. in 2014 o One of first Asian companies to employ U.S. celebrity for marketing 4.8. COMPETITIVE ANALYSIS Diageo is one of the world's leading premium drinks businesses with a collection of brands that include spirits, beer, and wine; though, it still a relatively young company. Diageo has a wider variety of products compared to XYZ; however, none of the products that Diageo sells are focused on REMOVED INFO. 16 P a g e

17 Bacardi Limited is the largest privately held, family-owned spirits company in the world. XYZ will have a competitive advantage over Bacardi for REMOVED INFO. Although Bacardi Limited s portfolio includes over 200 brands, none of those brands are REMOVED INFO like the Company. Constellation Brands is a leading liquor brand with a wide range of beer, wine, and liquor products. The Company will have a competitive advantage due to its competitive pricing, superior quality, and REMOVED INFO. Pernod Ricard is a French company that produces distilled beverages. Much like Diageo, Pernod Ricard has a greater variety of products compared to XYZ; however, the Company s focus and dedication to REMOVED INFO. Suntory Holdings Limited is a Japanese brewing and distilling company group that is one of the oldest companies in the distribution of alcoholic beverages in Japan. The Company s sole focus on REMOVED INFO alcohol will yield a competitive advantage to XYZ, as Suntory has expanded its focus to food and soft drinks. As the Company will be the only company in the world that produces alcohol with REMOVED INFO and will pursue an aggressive marketing campaign, it should be able to establish itself as the leader within this segment of the alcohol industry and penetrate the U.S. and global vodka, rum, and whiskey markets. 17 P a g e

18 5. MARKETING PLAN 5.1. MARKETING OVERVIEW & STRATEGY XYZ will implement a dynamic marketing campaign to drive business growth and maximize branding within the liquor production and distribution industry. The ultimate goal of the marketing campaign will be to promote visibility of the +Company s products in the liquor production and distribution industry. The Company plans to initially establish brand visibility within the United States of America and concurrently expand into other regional markets. The Company will implement a robust marketing campaign that includes: Marketing materials Distribution partnerships Internet marketing Print advertising Public relations Industry trade shows & events Television advertising Promotions 5.2. BRANDING STRATEGY The branding objectives for XYZ will focus on building credibility in the liquor production and distribution industry through REMOVED INFO. The Company will perform a marketing landscape assessment based upon its geographic location and the competitive landscape with regards to other liquor production and distribution companies in the United States and beyond INTERNET MARKETING Internet advertising is an important element of the Company s marketing campaign and will include display advertising, search engine optimization, and search engine marketing in order to promote the Company s liquor products to potential and existing customers as well as consumers. The Company will maintain a presence on Google, Bing, and all other online directories and search engines and ensure that the Company s website and articles will be found upon searches related to liquor production and distribution. The Company s search engine optimization efforts will include link building, blog commenting, social network marketing, and article marketing. The Company will also consider implementing PPC advertising, display advertising, and video marketing. The Company s website is very visually appealing, highly functional, and discloses detailed information regarding the Company and its products. 18 P a g e

19 5.4. PRINT ADVERTISING The Company will utilize print advertising as an important means to specifically target prospective customers. This will include regional and national newspapers and magazines that appeal to its demographic. Examples of newspapers and magazines in the U.S. that the Company can advertise in are: XYZ XYZ Magazine XYZ Magazine XYZ Magazine XYZ Advocate XYZ Magazine XYZ XYZ Advocate XYZ Magazine The Company will also advertise in consumer-oriented, leisure, and lifestyle magazines such as: XYZ XYZ XYZ XYZ Magazine XYZ XYZ XYZ XYZ XYZ XYZ XYZ 5.5. PUBLIC RELATIONS The Company will pursue a strong public relations campaign to gain public awareness and credibility that will lead to good relationships with retailers, bars/restaurants, and customers. The campaign itself will be designed to show the strength and innovation of the Company s products while maintaining a key focus on liquor production, distribution and customer satisfaction AFFILIATE MARKETING The Company will use sales and word-of-mouth marketing to help potential customers learn of the Company s presence. The Company will employ affiliate marketing efforts in order to spread awareness to and garner referrals from bartenders, servers, cashiers, and other employees in the service industry. The Company will make use of these affiliate partnerships to establish a wider base of potential customers through word-of- mouth referrals. 19 P a g e

20 5.7. TV ADVERTISING The Company will utilize TV advertising as an important means to specifically target prospective customers. This will include regional and national channels that appeal to its demographic. An emphasis will be placed on TV advertising during sporting events INDUSTRY TRADE SHOWS & EVENTS The Company will attend industry events and trade shows in order to promote visibility of XYZ s products to distributors, producers, and retailers of alcohol products. The following are the upcoming trade shows and events that the Company could attend: XYZ Food Show March 2019 ABC, ABC XYZ Convention & Trade Show March 2019 ABC, ABC XYZ Wines & Spirits March 2019 ABC, ABC Wine & Spirits Wholesalers of America April 2019 ABC, ABC ABC Assn. Convention & Trade Show August 2018 ABC, ABC XYZ Association Annual Convention September 2018 ABC, ABC XYZ Fall Meeting September 2018 ABC, ABC XYZ Association Trade Show October 2018 ABC, ABC 20 P a g e

21 6. OPERATIONAL PLAN 6.1. OPERATIONAL OVERVIEW HOURS OF OPERAION The Company will conduct normal hours of business operations, which will be from 9AM to 6PM on Monday to Friday LEGAL STRUCTURE The Company has been established as a limited liability corporation in the state of ABC OPERATIONAL GROWTH PLAN As the Company grows, it will slowly expand its product line. Upon growth, XYZ will REMOVED INFO 6.2. INVENTORY MANAGEMENT The Company s administrative staff and executive team will manage and control all inventory to maintain a sufficient and reasonable stock of supplies to conduct day-to- day business. The Company s electronic logistic system will track inventory 6.3. COMPUTER HARDWARE & SOFTWARE The Company will obtain the essential computer hardware and software systems to support operations including inventory management systems, payroll administration programs, sales management tools, managerial accounting, and financial analysis and reporting, as well as performance management. The Company will also provide the necessary business software to support the Company s business strategy and to help with business optimization. A crucial element of the overall enterprise management system will be how the hardware and software will be setup. 21 P a g e

22 6.4. LEGAL & INSURANCE The Company will retain the services of a corporate attorney to handle all legal matters related to the operation of the business. This includes providing legal counsel on matters such as contract administration, employment, and corporate business issues. The Company will obtain the required insurance and permits to manage the risks are associated with this type of business operation and assure operations to be within the guidelines of national and state-wide regulations ACCOUNTING The Company will outsource all accounting responsibilities to a full-time accountant and CPA, who will produce monthly reports for accounts payable accounts receivable, payroll, and operational expenditures, and will report to the executive management team. 22 P a g e

23 7. MANAGEMENT & STAFF 7.1. EXECUTIVE MANAGEMENT JOHN DOE, CHIEF EXECUTIVE OFFICER REMOVED INFO JOHN DOE, CHIEF OPERATING OFFICER REMOVED INFO 23 P a g e

24 JOHN DOE, CHIEF FINANCIAL OFFICER REMOVED INFO 7.2. BOARD & ADVISORS JOHN DOE, CHAIRMAN OF THE BOARD REMOVED INFO 24 P a g e

25 8. FINANCING & GROWTH STRATEGY 8.1. CAPITAL REQUIREMENTS The Company seeks to raise $12,000,000 of which an estimated $695,000 will be used for capital expenditures and the remaining $11,305,000 will be available for working capital to support marketing, operations, and inventory. The Company s owners have already invested $x.x million into the Company, which includes REMOVED INFO RISK ANALYSIS Table 1 XYZ Spirits, LLC Capital Requirements Capital Expenditures: Cost Machine Tooling 500,000 Packaging Design 75,000 Marketing Materials Design 35,000 Website Design 10,000 Computer Hardware & Software 25,000 Office Furniture 50,000 Total capital expenditures 695,000 Working capital: Marketing expenses 6,250,000 G&A expenses 2,805,000 Inventory 2,250,000 Total working capital 11,305,000 Total capital requirements 12,000,000 The Company is a start-up company and will be managed by a group of professional and seasoned business owners. The risks associated with this venture are related to future uncertainties in the liquor industry and fall within the medium risk segment of the investment spectrum. Management believes that given the current trends in the economy that there will be strong demand for the products that the Company delivers to the marketplace. While there can be no guarantees that the Company will be able to effectively manage the business risks associated with the economic cycle, management is very confident that it will be able to effectively increase revenues throughout time. 25 P a g e

26 9. FINANCIALS 9.1. SALES PROJECTIONS Table 2 XYZ Spirits, LLC Sales Forecast Year 1 Year 2 Year 3 Year 4 Year 5 Sales (Bottles Sold): # of Drug Store Bottles Sold 69, , ,862 1,239,635 1,925,301 # of Grocery Store Bottles Sold 43, , , ,772 1,243,261 # of Mass Market Retail Store Bottles Sold 34, , , , ,693 # of Liquor Store Bottles Sold 52, , , ,405 1,361,463 # of E-Tailer Bottles Sold 10,151 38,303 91, , ,013 # of Food Service Bottles Sold 10,876 43, , , ,614 # of Bar/Nightclub Bottles Sold 58, , ,476 1,090,419 1,719,019 Revenues: Total Drug Store Revenues $907,810 $3,657,534 $9,302,289 $17,411,098 $27,717,560 Total Grocery Store Revenues $567,381 $2,285,959 $5,813,931 $10,881,936 $17,898,576 Total Liquor Store Revenues $251,721 $258,014 $264,464 $271,076 $277,853 Total Mass Market Retailer Revenues $187,812 $330,181 $338,436 $346,897 $355,569 Total E-Tailer Revenues $360,346 $770,978 $1,885,428 $3,888,697 $8,020,443 Total Food Service Revenues $1,351,188 $4,627,303 $11,981,732 $22,795,369 $36,834,739 Total Bar/Nightclub Revenues $1,125,990 $4,627,303 $11,981,732 $22,795,369 $36,834,739 Total Revenues $4,752,248 $16,557,271 $41,568,012 $78,390,442 $127,939,478 Cost of Sales: Cost of Goods Sold $2,257,318 $7,450,772 $18,705,605 $35,275,699 $57,572,765 Cost of Distribution $570,270 $1,904,086 $4,572,481 $8,230,996 $12,793,948 Cost of Freight $166,329 $662,291 $1,662,720 $3,527,570 $6,396,974 Total Cost of Sales $2,993,916 $10,017,149 $24,940,807 $47,034,265 $76,763,687 Gross Margin $1,758,332 $6,540,122 $16,627,205 $31,356,177 $51,175, EXPENSES G & A EXPENSES Table 3 XYZ Spirits, LLC General & Administrative Expenses Year 1 Year 2 Year 3 Year 4 Year 5 Wages & salaries 432, ,850 1,111,781 1,205,062 1,370,636 Payroll expense 60, , , , ,889 Benefits 43,200 73, , , ,064 Liability insurance 71, , ,520 1,175,857 1,919,092 Legal & consulting 120, , , , ,700 Supplies 18,000 22,500 27,000 31,050 34,155 Telephone & communications 30,000 37,500 45,000 51,750 56,925 Utilities/Internet 12,000 15,000 18,000 20,700 22,770 Travel 60,000 75,000 90, , ,850 Meals & entertainment 30,000 37,500 45,000 51,750 56,925 Auto mileage expenses 30,000 37,500 45,000 51,750 56,925 Total general & administrative expenses $906,964 $1,538,293 $2,452,129 $3,187,634 $4,187, P a g e

27 MARKETING EXPENSES Table 4 XYZ Spirits, LLC Marketing Expenses Year 1 Year 2 Year 3 Year 4 Year 5 Marketing materials 12,500 13,800 15,180 15,939 16,337 Internet marketing 900,000 1,125,000 1,350,000 1,552,500 1,707,750 Print advertising 900,000 1,125,000 1,350,000 1,552,500 1,707,750 Public relations 210, , , , ,475 Television Advertising 2,000,000 3,750,000 4,500,000 5,175,000 5,692,500 Celebrity Endorsement 1,750,000 2,333,275 3,000,000 3,250,000 3,500,000 Total marketing & advertising $5,772,500 $8,609,575 $10,530,180 $11,908,189 $9,522, STAFF HEADCOUNT & SALARIES Table 5 XYZ Spirits, LLC Staff Headcount (Year-End Totals) Year 1 Year 2 Year 3 Year 4 Year 5 Chief Executive Officer Chief Operating Officer Chief Financial Officer Operations Manager Administrative Assistant Account Executive Accountant Total Headcount Table 6 XYZ Spirits, LLC Staff Salaries Year 1 Year 2 Year 3 Year 4 Year 5 Chief Executive Officer $144,000 $158,400 $166,320 $170,478 $174,740 Chief Operating Officer $96,000 $105,600 $110,880 $113,652 $116,493 Chief Financial Officer $96,000 $105,600 $110,880 $113,652 $116,493 Operations Manager $78,000 $85,800 $87,945 $90,144 $92,397 Administrative Assistant $45,000 $42,000 $43,050 $42,000 $43,050 Account Executive $69,000 $72,450 $74,261 $76,118 $78,021 Accountant $51,000 $53,550 $54,889 $56,261 $57, P a g e

28 9.3. PRO-FORMA FINANCIAL STATEMENT ANNUAL SUMMARIES PRO-FORMA INCOME STATEMENT Schedule 1 XYZ Spirits, LLC Projected Income Statement Year 1 Year 2 Year 3 Year 4 Year 5 Revenues: Total Drug Store Revenues $907,810 $3,657,534 $9,302,289 $17,411,098 $27,717,560 Total Grocery Store Revenues $567,381 $2,285,959 $5,813,931 $10,881,936 $17,898,576 Total Liquor Store Revenues $251,721 $258,014 $264,464 $271,076 $277,853 Total Mass Market Retailer Revenues $187,812 $330,181 $338,436 $346,897 $355,569 Total E-Tailer Revenues $360,346 $770,978 $1,885,428 $3,888,697 $8,020,443 Total Food Service Revenues $1,351,188 $4,627,303 $11,981,732 $22,795,369 $36,834,739 Total Bar/Nightclub Revenues $1,125,990 $4,627,303 $11,981,732 $22,795,369 $36,834,739 Total Sales $3,665,083 $16,557,271 $41,568,012 $78,390,442 $127,939,478 Total Cost of Sales $2,993,916 $10,017,149 $24,940,807 $47,034,265 $76,763,687 Expenses: Marketing expense 5,772,500 8,609,575 10,530,180 11,908,189 13,022,812 General & administrative 876,964 1,500,793 2,407,129 3,135,884 4,131,006 Expenses - Total 6,649,464 10,110,368 12,937,309 15,044,073 17,153,818 Net operating income: ($5,978,297) ($3,570,246) $3,689,896 $16,312,104 $34,021,973 Depreciation 30,310 30,310 30,310 30,310 30,310 Interest earned 266,360 85, , ,369 1,195,991 Interest expense Income before taxes (5,742,247) (3,515,527) 3,773,491 16,741,164 35,187,654 Income taxes Net income ($5,742,247) ($3,515,527) $3,773,491 $16,741,164 $35,187,654 50% Net Profit Margin 0% -50% Y1 Q1 Y1 Q2 Y1 Q3 Y1 Q4 Y2 Q1 Y2 Q2 Y2 Q3 Y2 Q4 Y3 Q1 Y3 Q2 Y3 Q3 Y3 Q4 Y4 Q1 Y4 Q2 Y4 Q3 Y4 Q4 Y5 Q1 Y5 Q2 Y5 Q3 Y5 Q4-100% -150% -200% -250% 28 P a g e

29 PRO-FORMA STATEMENT OF CASH FLOWS Schedule 2 XYZ Spirits, LLC Projected Statements of Cash Flows Year 1 Year 2 Year 3 Year 4 Year 5 Cash flows from operations Net Income: ($5,742,247) ($3,515,527) $3,773,491 $16,741,164 $35,187,654 Depreciation 30,310 30,310 30,310 30,310 30,310 Increase (decrease) in accrued liabilities 22,320 15,802 19,320 4,820 8,555 Increase (decrease) in accrued taxes Increase (decrease) in accounts payable 396, , , , ,578 (Increase) decrease in accounts receivable (72,847) (125,747) (241,300) (334,391) (446,125) (Increase) decrease in inventory (414,689) (545,609) (916,466) (2,216,202) (7,574,318) Net cash flows from operations ($5,780,312) ($4,030,118) $2,809,469 $14,339,245 $27,315,653 Cash flows from investing activities: Capital expenditures 190, ,000 0 Prepaid expenses Net cash flows from investing $190,000 $0 $0 $20,000 $0 Cash flows from financing: Proceeds from issuance of debt Proceeds from sale of stock 12,000, Debt service payments Net cash flows from financing 12,000, Net increase (decrease) in cash 6,029,688 (4,030,118) 2,809,469 14,319,245 27,315,653 Beginning cash balance - 6,029,688 1,999,569 4,809,039 19,128,283 Ending cash balance $6,029,688 $1,999,569 $4,809,039 $19,128,283 $46,443, PRO-FORMA BALANCE SHEET Schedule 3 XYZ Spirits, LLC Projected Balance Sheet Year 1 Year 2 Year 3 Year 4 Year 5 Assets: Current assets Cash and marketable items $6,029,688 $1,999,569 $4,809,039 $19,128,283 $46,443,937 Accounts receivable 72, , , ,285 1,220,410 Prepaid expenses Total current assets 6,102,534 2,198,163 5,248,933 19,902,569 47,664,347 Net non-current assets: 159, ,381 99,071 88,762 58,452 Total assets 6,262,225 2,327,544 5,348,004 19,991,331 47,722,799 Liabilities & Shareholders' Equity Current liabilities+b33 Accounts payable 396, , , , ,731 Accrued liabilities 22,320 38,122 57,442 62,262 70,816 Accrued taxes Total current liabilities 419, , , , ,548 Long-term Liabilities Long-terrm debt (1) Total long-term liabilities Total Liabilities 419, , , , ,548 Shareholders' equity Common stock 12,000,000 12,000,000 12,000,000 12,000,000 12,000,000 Retained earnings (5,742,247) (9,257,774) (5,484,283) 11,256,881 46,444,535 Total shareholders' equity 6,257,753 2,742,226 6,515,717 23,256,881 58,444,535 Total liabilities and equity 6,676,914 3,287,842 7,224,768 24,084,296 59,390, P a g e