The Czech Business of Stock Spirits Group
Czech Capital Markets Visit 25 & 26 June 2019 Section Presenter
The Czech Market Petr Kasa
The Alcohol Market Jan Havlis
Stock in Czech Jan Havlis
Portfolio Development & Jan Havlis Republica Trade Landscape and Jan Havlis Route to Market
Financials Petr Kasa
Q&A
1 Disclaimer
This presentation, any ancillary documents relating to it, any oral presentation and any question or answer session at which this presentation is made (together, the “Presentation”) has been prepared by Stock Spirits Group PLC (“Stock Spirits Group” or the “Group”). By attending the meeting where the Presentation is made, or by reading the Presentation slides, you agree to be bound by the following conditions. This Presentation contains forward looking statements, which are based on the Stock Spirits Group Board's current expectations and assumptions and may involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. These statements typically contain words such as “anticipate”, “assume”, “believe”, “expect”, “plan”, “intend” and words of similar substance. The forward looking statements contained in this Presentation are based on past trends or activities and should not be taken as a representation that such trends or activities will continue in the future. It is believed that the expectations reflected in these statements are reasonable, but they may be affected by a number of variables which could cause actual results or trends to differ materially, including, but not limited to: conditions in the market, market position of the companies comprising the Stock Spirits Group, earnings, financial position, cash flows, return on capital and operating margins, anticipated investments and economic conditions; the Group's ability to obtain capital/additional finance; a reduction in demand by customers; an increase in competition; an unexpected decline in revenue or profitability; legislative, fiscal and regulatory developments, including, but not limited to, changes in environmental and health and safety regulations; exchange rate fluctuations; retention of senior management; the maintenance of labour relations; fluctuations in the cost of raw material and other input costs; and operating and financial restrictions as a result of financing arrangements. Accordingly, readers should not place undue reliance on forward looking statements due to the inherent uncertainty herein. No statement in this Presentation is intended to constitute a profit forecast, nor should any statements be interpreted to mean that earnings or earnings per share will necessarily be greater or lesser than those for the relevant preceding financial periods for the Group. Each forward looking statement relates only as of the date of this Presentation. Except as required by the Listing Rules, the Disclosure and Transparency Rules, the Prospectus Rules, the London Stock Exchange or otherwise by law, the Group expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward looking statements contained herein to reflect any change in the Group's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Other than the financial results shown in the Presentation, the information contained in this Presentation has not been independently verified and no reliance should be placed on such information. No representation, warranty or undertaking, express or implied, is made by the Group or its advisors, representatives, affiliates, officers, employees or agents as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or opinions contained in this Presentation or in any communication (whether written or oral) accompanying this presentation. Neither the Group nor any of its advisors, representatives, affiliates, officers, employees or agents shall have any liability whatsoever (in negligence or otherwise) for any direct or consequential loss, damages, costs or prejudices whatsoever arising from the use of this Presentation or its contents or otherwise arising in connection with the Presentation. The information contained in this Presentation is subject to, and must be read in conjunction with, all other publicly available information. In making this Presentation available, the Group gives no advice and makes no recommendation to buy, sell or otherwise deal in shares in Stock Spirits Group PLC or in any other securities or investments whatsoever. The information in this Presentation does not constitute an offer to sell or an invitation to buy any securities or an invitation or inducement to engage in any other investment activity. This Presentation is not intended for distribution to, or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation or which would require any registration or licensing within such jurisdiction.
2 THE CZECH MARKET
3 The Czech Republic – history and geography
Key facts
Area 78,870 km2 • 1918 establishment of (first) Czechoslovak Republic from the Austro-Hungarian empire Population 10.6 million • After WW2 the country became communist under Soviet influence Workforce 5.4 million • 1989 Velvet Revolution the communist regime collapsed Capital Prague • January 1993 - two independent states: the Czech Republic and Slovakia Language Czech • EU member country since 1 May 2004 Currency Czech crown (CZK) • Bordering countries are Germany, Poland, Slovakia, Austria
4 The economy
Trends over time: GDP index from 2008 Unemployment rate Inflation rate 108 6% 106 5% 104 5% 102 4% 4% 100 3% 98 3% 96 2% 2% 94 1% 92 1% 90 0%
88 0%
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Jun-18
Oct-17 Oct-18
Apr-18 Apr-19
Feb-18 Feb-19
Dec-17 Dec-18
Aug-18
2008 - - 2008 Q3 - 2009 Q2 - 2010 Q1 - 2010 Q4 - 2011 Q3 - 2012 Q2 - 2013 Q1 - 2013 Q4 - 2014 Q3 - 2015 Q2 - 2016 Q1 - 2016 Q4 - 2017 Q3 - 2018 Q2 - 2019 Q1
• The economy has grown consistently since 2014, but growth rates are slowing • The government has already started to cut costs and look for extra income for 2020 onwards • Unemployment rate is low (2.6%), making recruitment difficult • Inflation is rising (2.9%) driven by rising salaries and labour shortages • Key exports are vehicles and machinery including computers and other electrical
5 Source: Makroekonomika The Czech FMCG food market is growing in value, driven by beverages
Total Czech categories performance – MAT Q4 2018: • 2018 had a very long Value Categories Nominal Value Growth and hot summer, Contribution helping beverages Total FMCG 100% 1.7% and ice cream to lead 0.1% Dairy 18.9% the growth of food 6.5% Beverage Alcohol 17.2% categories Sweet and Treats 14.3% 0.2% Health and Beauty 12.0% 1.6% • Trend: Healthier Culinary - Shelf Stable 9.6% -2.0% lifestyles are driving Beverages Non Alco 8.9% 6.8% the performance of Beverages Hot 4.0% -1.3% premium categories Home Care excl. Laundry 3.2% 1.7% in many products, Pet Care 2.3% 2.8% from commodities Home Care - Laundry 2.2% -1.1% such as flour (with a Infant Care 2.0% -0.7% trend towards Culinary - Frozen 1.8% -2.3% healthier Frozen-Ice Cream 1.6% 17.0% alternatives), to Baking-Shelf Stable 1.4% -9.1% personal care Culinary - Refridgerated 0.5% -6.6% products with therapeutic benefits 6 Source: AC Nielsen Private labels have increased share
Share of private label in FMCG consumption across Europe In Czech, share of private label has increased from 21% in Czech R. Slovakia Poland Russia 2016 to 23% in 2018 23% 27% 18% 7% Share is still lower compared Hungary Ukraine with Western European 27% 3% consumption
Croatia Romania The share of private labels in 21% 14% spirits is only 14.8% in Off- Austria Germany Serbia Trade (13.4% in 2018) 32% 36% 5%
Turkey Bulgaria 20% 9%
7 PrivateSource Label: GFK, purchases FMCG shareexcl. ofFresh household food |expenditures Spendings %| Base: | 2018 FMCG exc8l. Fresh The Czech Republic is a leading EU country in promotional dependency
Percentage of promotional deals within retail across Europe In Czech, percentage of retail promotions is high at 47% Czech R. Slovakia Poland Russia 47% 40% 23% 18% The level of promotional Hungary Ukraine activity has been around this 29% 5% level for many years
Croatia Romania Spirits is the category with the 44% 20% highest promo share - 70% Austria Germany Serbia of all spirits expenditure is on 30% 16% 21% promotions
Turkey Bulgaria 8% 23%
8 Source: GFK, FMCG excl. Fresh food | Spendings % | 2018 THE ALCOHOL MARKET
9 Consumers: habits
How Czechs drink spirits Consumption habits and insights:
Switching between spirits and wine • Czechs come to a pub/bar for a beer and then Switching between Neat no ice spirits and beer 2% later move on with spirits 22% 20% • Typical On-Trade place of consumption is a local pub with a group of friends 6% Neat with ice • Typical Off-Trade place of consumption is a friends 24% get-together at home or a party Mixed drinks 26% Non alcoholic • Young consumers (18-26 y/o): beverage alongside spirits • Tend to drink spirits less often than other age groups Frequency of consumption • Experiment and make their consumption Daily preferences around the age of 25 Several times a week 2% 12% • Their spirit choice is strongly influenced by a Once a month 35% group of friends • Prefer spirits in mixed drinks (40% share) 28% Once a week
24% Bi-weekly 10
Source: IPSOS research, May 2019, Insiqua Research 2018 Consumers: occasions
Percentage split by On/Off Trade occasions and by type Key consumer trends and facts
On-Trade Off-Trade • Consumers are willing to pay more for quality Consumption 48% 52% occasions • Good food is becoming more important to drive traffic to gastro (triggered by smoking ban) • Czech is still very promo Casual hang-out 22 25 focused • People like trying new products, brands, liquids • Czechs love music festivals, but Connected with meal 8 are not big club goers
14 Indulge 11
Party 7 11
2
11 Source: KANTAR Miillward Brown research 2018 Alcohol consumption in Czech
Litres of alcohol consumption by category Key consumer facts
• Czech has the second highest per capita alcohol consumption in Europe • It is also the ninth for spirits consumption • Beer in Czech is a key category • Overall alcohol consumption is decreasing in the long- term, driven by spirits
12 Source: World Heath Organisation statistics Consumption: led by beer
Alcohol consumption 1989-2017 Spirit market categories (per capita litres of pure alcohol) (volume MAT December 2018)
11
10 Whisky Aperitives Brandy 7% 4% Emulsion liqueur 9 4% 3% spirits Fruit and Other liqueur 8 6%
7 Vodka Fruit spirits 24% 5% 6 wine Total: 2% Gin 5 66M litres 4 0% Tequila 14% 3 Herb and Bitter Liqueur beer 2
31% 1 Rum and Local 0 1989 1992 1995 1998 2001 2004 2007 2010 2013 2017
• Additional +7m litres in small certified distilleries made of own fruits • Estimated +5-7m litres in black market
13 Source: Czech Statistical Office, 2017 and pie chart: Nielsen, RetailZoom, Dec 2018 Excise tax on spirits The recent proposal for a significant increase is being assessed
Alcohol consumption 2000-2017 per capita • An excise tax increase for spirits (wine and beer (litre of pure alcohol) excluded) of 37 CZK (13%) as of 1/1/2020 was proposed by the Ministry of Finance and supported 6.0 by the government three weeks ago
5.0 • If approved by parliament, the senate and the 10% category drop with 31CZK increase 14% category drop president, there a category shrinkage is expected 4.0 with 20CZK increase due to: 3.0 • Consumption switch to wine, beer and ciders 2.0
1.0 • Growth of black market and cross-border sales 0.0 2000 2005 2010 2015 2017 • Actions: spirits wine beer • Meetings with key stakeholders incl. Ministers and Members of Parliament to moderate their proposal • Preparation for the tax change: • Planning across the business is underway
• Pre-sell to delay and limit the impact 14 Source: Czech office of statistics Czech regulations
Advertising rules BAC* limits for driving
• Beer, wine and spirits advertising permitted on all • Czech Republic is one of four EU communication channels such as TV, radio, print countries with zero tolerance media, cinema, outdoors and internet • Usually 0.5 mg/ml, UK 0.8 mg/ml • No limit for sponsorship or sales promotions • Proposal to increase the BAC to 0.5 mg/ml • However, should never target under 18s and proposed by opposition party ODS: low advertising should not be positioned close to support from other political parties schools
• There are no legal restrictions on the use of digital and social media
• The Czech Anti-drug Coordinator announced plans to limit: • Advertising for alcohol
• Physical availability of spirits (eg. petrol stations) 15 Note: *blood alcohol concentration Industry body
Union of Spirits Producers and Distributors • UVDL is a key institution for advocating the interests of the industry with state authorities • Member of Spirits Europe • Members represent over 80% of spirit businesses in Czech Republic • As of July 2016 Stock has Vice President role
In the last two years: • Rum ether: prolongation of usage by five years • Egg liqueur: milk usage approved permanently • Home distillation with no excise tax: refused by Czech Republic • Excise tax
16 STOCK IN CZECH
17 Stock’s history in the Czech Republic
1884 Lionello Stock established the “Camis and Stock Company” in Trieste, supplying the Austro-Hungarian Empire
1920 Lionello Stock bought existing distillery in Pilsen Božkov and established the “Stock Cognac Medicinal” branch
1927 Fernet Stock launched
1948 Domestic rum “tuzemsky” launched
1989 Stock Pilsen company formed
1993 Majority owner of Stock Pilsen became Stock Trieste
2013 IPO on London Stock Exchange
2016 Acquisition of Bohemia Sekt spirit brands
2019 Acquisition of Bartida 18 Our team and operations in Czech
Headcount (incl. Agency Staff): 301 Commercial division (incl. 30 Bartida): 133 Operations (Pilsen, Prádlo): 168
Prague Prague Pilsen Prádlo Pilsen
Prádlo
19 Organisational structure
Country Director Jan HAVLIS
Marketing Trade HR Director Logistics & Operations, Sales Director Marketing Director Finance Customer Bartida procurement, Jan ŘÍHA Director Dana Tomáš Director DEMJANOVIČOVÁ Service IT, and NPD HEJKAL Petra KOCOUROVÁ Petr KASA Tomáš Jakub Svoboda Špidlen 59 13 10 18 4 11 30 156
20 Team engagement – survey results
• Our people feel much more engaged and our enablement is higher than a benchmark of high performing companies: KEY ATRIBUTES … DEFINED STRATEGY 91% believe in defined Strategy EMPLOYEE ENABLEMENT 82% EMPLOYEE ENAGAGEMENT 70% +13 points
CONFIDENCE IN LEADERS + 12 points TREND VS DEVELOPMENT OPPORTUNITIES + 13 points 2017 WORK, STRUCTURE, PROCESSES + 14 points COLLABORATION + 11 points
• Achieved by involving employees in improvements of key business and organisational areas, as well as a by having a simplified structure and improved communication
21 PORTFOLIO DEVELOPMENT
22 2013 OTHERS GIN EMULSION & FRUIT VODKA HBL WHISKYY RUM
LIQUEURS portfolio our product premiumised significantly IPO wehave Since the BOURBON TUZEMSKÝ leader category LOW PREMIUM LOW PREMIUM HIGH PREMIUM 23 2014 OTHERS GIN EMULSION & FRUIT VODKA HBL WHISKYY RUM LIQUEURS BOURBON TUZEMSKÝ Diageo from portfolio core premium whole the gained and we In 2014 DIAGEO DIAGEO LOW PREMIUM LOW PREMIUM leader category dropped TullamoreDew HIGH PREMIUM 24 From 2014 Diageo contributed to the major premiumisation mind-set shift
World class brand building approach Diageo • Track record of innovation in brand building (e.g. Captain • Main brands: Captain Morgan, Morgan ship, and trailer) Johnnie Walker, Baileys, Smirnoff, Pampero, Gordons • Representing c. 13% of revenue • Premiumised the portfolio offering • Stock became relevant to premium On-Trade
• Important know/how sharing • Bold changes of RTC and continuous innovation • Brand Ambassador program • Specialists for large On-Trade key accounts • Focused on proper execution, brand visibility and activation (several POPAI awards)
25 2016
OTHERS GIN EMULSION & FRUIT VODKA HBL WHISKYY RUM Sekt Bohemia from brands spirits weacquired In 2016 LIQUEURS BOURBON TUZEMSKÝ DIAGEO DIAGEO LOW PREMIUM LOW PREMIUM leader category Brands from Bohemia Sekt Bohemia HIGH PREMIUM 26 Bohemia Sekt mainly strengthened the vodka portfolio
Acquisition improved mainly our vodka proposition: 1. Optimised portfolio • Reduction of unnecessary SKUs to reduce complexity (from 21 to 10 in 2019)
2. Keeping the brands and using them tactically • Prazska vodka is a key volume builder in the Off-Trade mainly due to tactical pricing
3. Working on further brand strength building • Brand definition and communication • NPDs
The acquired brands represent c. 5% of revenue
27 2018 EMULSION & FRUIT HBL WHISKYY OTHERS GIN VODKA RUM whiskies Quintessential and portfolio SuntoryBeam LIQUEURS BOURBON TUZEMSKÝ DIAGEO DIAGEO LOW PREMIUM LOW PREMIUM leader category Brands from Bohemia Sekt Bohemia BEAM SUNTORY SUNTORY Quintessential B. HIGH PREMIUM 28 New partners significantly enlarged our whisky offering
Beam Suntory Quintessential Brands • Since 2018 • Since 2018 • Main vrands: Jim Beam, Maker’s Mark, • Main brands: Dubliner, Dublin Liberties Laphroaig, Courvoisier • Unique Irish premium whisky offering • Representing c.3% of revenue (Irish being the most popular • Significantly widened the whisky portfolio subcategory) • Further expanded the proposition (e.g. • Unique Irish whisky honeycomb liqueur Cognac, gin)
29 2019 OTHERS GIN EMULSION & FRUIT VODKA HBL WHISKYY RUM LIQUEURS BOURBON
TUZEMSKÝ acquisition Bartida 2019 DIAGEO DIAGEO LOW PREMIUM LOW PREMIUM leader category Brands from Bohemia Sekt Bohemia BEAM SUNTORY SUNTORY Quintessential B. BARTIDA BARTIDA TA LECHI HIGH PREMIUM 30 Bartida: step-changing On-Trade capabilities
• Formed in 2006 by Petr Dzurec and Miroslav Zoul
• First own-brand launched in 2011
• In 2012 degustation bar, shop and training centre opened in Prague
• Own E-shop since 2016
• 30 employees, 17 in On-Trade sales team
• Predominantly On-Trade business combining direct and wholesaler delivery
• 1,000+ outlets in coverage; over 600k litres/year EMULSION & FRUIT Y OTHERS GIN VODKA HBL WHISKY RUM 2019 2017 LIQUEURS BOURBON
TUZEMSKÝ development ownpremium our for portfolio the We expanded have DIAGEO DIAGEO LOW PREMIUM LOW PREMIUM leader category Brands from Bohemia Sekt Bohemia BEAM SUNTORY SUNTORY Quintessential B. BARTIDA BARTIDA TA LECHI Stock Premium HIGH PREMIUM 32
Our own premium development
VODKA
BRANDY
HERBAL
RUM
WHISKY APERITIVE
33 BRAND BUILDING: REPUBLICA
34 We have identified the potential among “sipping rums”…
Value Value Price segment (AVG Rum type growth share price)
Sipping rums Super premium Not mixed 2% 840 Kč
Rums meant to Premium be mixed with 5% 450 Kč coke
Mainstream Local tuzemsky 230 Kč „rum“ 94% Economy 190 Kč
35 Source: AC Nielsen data, Total Grocery value MAT Aug 2017 … and crafted a high quality product under a loved brand for a fair price
1.Great concept • Celebrating Golden Era of Czechoslovakia
2. Premium quality • Taste developed and fine tuned to best fit Czech consumer taste preferences
3. Strong brand • Already perceived as an expert in (local) rum • Well loved brand
4. Smart format play => The right formats 0.7L (on trade + supplement in off trade) 0.5L (off trade to upsell Božkov users) Gift packs
5. Fair price • Approximately double the price of Božkov • In a per litre price range of mixing rums
36 Božkov Republica soon became the best selling sugar cane rum in Czech
Volume sold (litres) in Czech by month by brand in the rum category
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
Jul2018
Jan 2018 Jan 2019 Jan
Jun2018
Oct 2018 Oct
Apr2018 Apr2019
Feb 2018 Feb 2018 Sep 2019 Feb
Dec 2018 Dec
Aug 2018 Aug
Nov 2018 Nov
Mar 2018 Mar 2019 Mar May May 2018
Bozkov Republica Captain Morgan Original Havana Club Anejo Legendario Elixir Bozkov Spiced Captain Morgan Black Jamaica Rum James Cook Stock Key Rum White Others
37 Source: Nielsen April 2019 total Czech Off-Trade TRADE LANDSCAPE and ROUTE TO MARKET
38 The total spirits market landscape
Share of market by sales value in 2018 and growth Distribution channel: Wholesalers + Makro % from 2017 to 2018 are in long term decline, lost -3pp value share in last four years to Off-Trade • Stabilised in 2018
Off-Trade: +5% Makro -4% • Highly dependent on development of HoReCa 13%
Wholesalers: +2% Off-Trade (Modern and Traditional Trade): Value +3.4% 24% no major change in buying patterns from Volume +0.6% consumers between different retail types 64% • Off-Trade is growing +5% in value • Growth in value is faster than in volume = premiumisation • Spirits are the third largest food category after dairy and beer
39 Sources: Retailzoom & AC Nielsen, Value MAT Dec 2018 Route to market for Stock in Czech
STOCK 1 3 Direct sales
1,300 via Bartida
Key Key
Accounts
International
Trade -
20:80 Trade
-
Off HoReCa
Wholesalers On 2 Distribution channel
Trade Makro Traditional Cash & Carry consumption) home of (out 60:40
1. Stock sells direct to Traditional trade and key accounts – e.g. Tesco, Kaufland, Lidl etc. in the Off-Trade 2. Sells to distribution channel of wholesalers / cash & carry: they then distribute to smaller Traditional trade and On-Trade outlets 3. Bartida acquisition now allows us to sell directly to premium On-Trade outlets 40 OFF TRADE: Top retailers are still growing and are key to our success
Top eight retailers by share of Off-Trade Top 8 retailers account for 75% of the Off-Trade market: 74% 75% 73% 72% 74% • Kaufland is the largest with 15% of 3.2 3.4 3.6 3.7 the market 3.7 5.8 5.9 6.1 6.0 6.1 • Discounters (e.g. Lidl, Penny) and 7.2 6.4 6.1 6.9 6.8 supermarkets (e.g. Billa & partially 9.2 8.9 9.1 9.1 9.7 Ahold) are on the rise 9.2 9.7 10.3 9.5 9.9 Stock is winning with retailers 9.4 9.2 10.7 10.6 12.2 disproportionately via joint business planning (JBP) and category 12.6 12.3 11.9 11.8 12.3 management framework
16.4 15.8 15.9 15.6 15.4
76% 76% 77% 77% 78% H1 2016 H2 2016 H1 2017 H2 2017 H1 2018 Kaufland Ahold Lidl Tesco Penny Market Billa Coop Globus
41
Sources: AC Nielsen April 2019 Category management: Stock’s successes
Joint business planning process Developed a joint business planning approach with key retailers: • Promo and price management including multi-brand and tailor made activities based on certain occasions TOP level of cooperation • Standard level e.g. Easter, Father’s day etc. • + Joint Business Plan to drive business • Category management, to help tailor together with category management • Promotional optimisation activities shelf contents and displays driven by • Shopper loyalty building activities, etc. shopper behaviour
Standard level of cooperation Successes: • Base level • + Portfolio and shelf layout • Penny Market: value growth FYTD proposal preparation for customers (index 138) and Stock (index 274) via JBP Base level of cooperation • Analyses preparation • Lidl: cooperation started before end • Opportunities identification of 2018. We managed to list three • Tracking of development SKUs permanently and agreed on eight in&outs for 2019
42 Ahold category management (as a result of two years of JBP)
HBL Rums Vodkas Final Stock shelf shares:
Shelf share
Category Old New % change
Total 22% 36% 64% Rum and Local 39% 59% 50% Herb and Bitter Liqueur 36% 42% 26% Vodka 28% 31% 8% Rums Rums HBL Vodkas Change of all 335 stores (hypermarkets and supermarkets) New space and position of individual subcategories Optimisation of assortment (74 SKUs delisted (21% in hypermarkets), 4 SKUs of Stock)
43 Off trade: Stock is the market leader, driving growth
Mast Jagermeister (distributors of Jagermeister, Tullamore Stock has outperformed the market in terms of growth; Dew, Grants, Metaxa) has been driving aggressive pricing driven by JBP approach with key retailers and a focus on these key brands in the market on premiumisation and core mainstream portfolio
Private label volume share increased by 3.6pp since 2017 Stock has grown value significantly ahead of volume, due to novelties in vodka, tuzemsky and liqueurs (driven driving premiumisation of the market by Penny and Tesco) Organic growth (without Beam) 9.8% in value, 5.3% volume 44 Sources: AC Nielsen MAT April 2019 On-Trade
Share of On-Trade revenue by consumption type and share change 2018 vs. 2017 On-Trade or HoReCa Universe (Hotels, restaurants and cafes) is in decline -3%. Low value outlets such as pubs closing due Wine: +3.5 % to implementation of electronic evidence of revenues and smoking ban Spirits represents 13% of the total category value with + 3.9% growth (volume -1.2% ) Beer: +5.7 % New restaurant concepts and more premium Total On-Trade +9% bars are growing, driving more premium Spirits +3.9% brands
Bartida will help us to access high-end Spirits: +3.9 % HoReCa via Premium HoReCa specialised
Food +14.8% sales force, direct distribution and outlets coverage Non-alcoholic cold: +11.4 %
45 Sources: Dotykačka.cz , 2018 Stock covers 32% of On-Trade universe, representing 50% of volume
Segmentation Gastro coverage – 25,530 outlets Picture of success • Being updated with Bartida • Is driven by different need Premium On-Trade coverage state 1,300 outlets - Bartida
• System based on three key Contracted gastro 350 outlets metrics: Supported gastro • Type of outlet (nine 5,400 outlets
types) e.g. cocktail, New call centre coverage 1,000 outlets disco, beer concept Non serviced gastro by Stock 17,380 outlets • Price range (only via Whosalers cooperation) • Volume/image • Stock’s focus on premium, defending economy
46 On-Trade: Stock is the leader, driving growth
On-Trade metrics by key players in the Czech market Stock is the clear market leader in value, volume and coverage with a focus on proper distribution and activation. Figures include Bartida acquisition which increases value 100% and volume share by 2.5% and 1.3% 90% respectively 80% 70% Stock has increased its value and 60% volume market shares by 1.3pp and 50% 0.5pp respectively in the last 12 months 40% (excluding Bartida acquisition) 30% 20% 10% We see slightly growing importance of gin 0% and apperitives, in seasonal pop-up outlets Stock Becher Remy Cointreau Brown Forman Others
Value market share Volume market share Weighted distribution Stock is changing the rum category in volume and value due to NPD of Republica
47 Sources: Dotykačka Q4; 2018 E-commerce and digital marketing
Market share of online alcohol net sales by retailer in 2017 Total Off-Trade alcohol sales are c.6% of total retail sales
Online alcohol purchases are only Kosik: 8% 1.1% of the total Off-Trade. Room for growth and opportunity
iTesco: 41%
E-commerce is mostly suitable for Alkohol.cz: 16% premium portfolio : Johnnie Walker White had higher sales in one E-shop Rohlik: 22% (alkohol.cz) than in Ahold chain in the same period
Number of SKUs Net Sales CZK Stock % change in Progress 2018 2019 2018 2019 net sales
iTesco 89 89 1 118 904 1 131 517 1.1% Rohlik 17 33 881 649 1 011 398 14.7% Koslik 12 40 294 405 468 005 59.0% Alkohol.cz 0 92 - 416 319 n/a Gurmetum 19 22 93 795 177 289 89.0% Total 137 276 2 388 753 3 204 529 34.2% 48 Sources: IWSR Czech Republic study ;2018; data from retailers + AC Nielsen FINANCIALS
49 Czech financials – historical trends
Growth in revenue and EBITDA for Czech - €000s Revenue and profits have consistently grown 80,000 25,000 over the last five years 70,000 20,000 60,000 Successful NPD 50,000 15,000 EBITDA (Republica), agency brands Revenue 40,000 (Beam Suntory) and control 30,000 10,000 of overheads and promo
20,000 budgets are key drivers 5,000 10,000
- - Czech is also a strong 2013 2014 2015 2016 2017 2018 cash generator for the (proforma) (proforma) Group Revenue Adjusted EBITDA
Note: Years 2013 – 2016 are for the year ended December; proforma years are for the revision to the year ended September and restated 50 for the implementation of IFRS15. All figures are in reported values and not at constant currency Czech financials – H1 2019
Revenue (€m) at constant currency Key drivers of top-line growth: • Volume +4.3% 44.9 • Pricing -1.9% 39.2 • Mix +11.9% +14.3%
Strong revenue growth from higher
Mar 18 Mar 19 volume and mix signifies success in premiumisation – Republica and Beam Reported for 2018: €39.6m
EBITDA (€m) at constant currency EBITDA increase also reflects reduced marketing investment 15.4 due to fewer new launches 12.0 compared to last year
30.5% 34.3%
Mar 18 Mar 19 X.X% EBITDA % Reported for 2018: €12.1m 51 Q&A
52