Business Plan Contact Info: Brian Haghighi Co-Founder, CMO

1
Business Plan
Contact Info:
Brian Haghighi
Co-Founder, CMO
cell: (760) 519-4221
bus: (858) 522-WINE
[email protected]
California Fruit Wine Company - 1040 La Mirada Court - Vista, CA 92081
2
Executive Summary
California Fruit Wine Company is a trend-setting winery in San Diego that handcrafts wine from a variety
of fruit other than grapes. We are currently vetting equity partners to strengthen our team and
capitalize our fast-growing business. Funds will be allocated toward custom packaging, wine-making
equipment, a small but effective sales and promotion force, as well as a 6 month buffer for the
operating budget.
Co-founders, Brian and Alan Haghighi, started California Fruit Wine because of what they determined
was an untapped potential in millennial consumers for fruit wine. With three years of direct market
research and studying the trends in the wine industry, California Fruit Wine is now well positioned to be
the first in this emerging category. In a little over one year, CFW plans to be the first nationally
distributed fruit wine. Within five years, CFW plans to dominate what will be a new market for fruit
wines.
This is a unique opportunity for the right type of investor who understands the amazing upside our
company has while we position and solidify ourselves as the front-runners in an emerging wine
category.
Company Snapshot
Business Structure: S-Corp in March 2013
Owners:
Alan Haghighi (37.5%) - Co-CEO/Winemaker
Brian Haghighi (37.5%) - Co-CEO/CMO
David Haghighi (10%) - President of Sales
Todd Clever (15%) - Silent Partner
Additional Executives:
Nay Liebenau - CFO/COO
Production Capacity: 16,000 cases/year*
Production Time: 4 weeks
Production Season: 12 Months Year-round
Distributor: Self-Distributed locally
Serviceable Area: San Diego County
Established accounts: Local Albertsons, Navy Exchange, and Major Market
3 years of direct-to-consumer market research
R&D for most marketable wines and how to style them
Determined target demographic, price point, and relationships with retail outlets
Developed millennial driven branding
Identified suppliers and negotiated cost-cutting prices.
Built a strong core team of both innovators and experts.
Relationships with the regional wine buyers in Costco and Whole Foods, both anxious to see the new
branding.
Strong visibility in SD with lots of media coverage
Compelling narrative - Young entrepreneurs
#1 SEO for “fruit wine”
3
Market Analysis - The Wine Industry
The US off-premise wine sales for 2012 was $13.3 billion.1 That was up 4.4% from the previous year.
Sweet wine accounted for 11% of that category or $1.46 billion. In 2011, the Wine Institute of California,
released their annual findings on sales trends in the US wine market, which revealed:
The most impressive percentage gains were Muscat/Moscato now up close to 4 percent market
share, and growing by 73 percent in volume, and sweet red wines, close to a 1 percent share, with
growth over 200 percent. Also of note among varietals with double digit gains were Malbec,
holding a 1 percent share, up 33 percent in volume and Pinot Noir, a 4 percent share and growing
12 percent in volume. Blended Red wines also grew at double digit levels and moved up close to a
5 percent market share.2
Sweet and fruit forward wines are clearly on the rise. What explains their growth and how can a forward
thinking winery take advantage of these trends?
Market Analysis - Two Case Studies
Barefoot Cellars- Moscato
In 2007, Moscato was an obscure Italian varietal - at the time considered a dessert wine - that had no
significant marketshare. However, in 2008, Barefoot Cellars - in response to requests by their
consumers for sweeter, more approachable wines - decided to mass-produce Moscato, not as a
dessert wine, but as a wine for everyday consumption.3 It was a huge success! Moscato sales that first
year totaled to over 490,000 cases.1 Four years later, in 2012, Moscato sales increased to 3,700,000
cases- a 755% growth in volume.1
Since then, industry producers have been searching for The Next Big Thing, or TNBT, which has now
become a commonplace acronym thrown around in industry executive meetings.
Wines styled similarly to Moscato, but which expand to more diverse flavor profiles, represent an
enormous blue ocean in the wine industry. Moscato has revealed a huge window of opportunity which a
pioneering fruit wine company can take advantage of.
Yellowtail
Barefoot Cellars succeeded because they took a Blue Ocean4 approach, finding a new customer-base
in an uncontested market. Yellowtail did the same thing. In 2000, Yellowtail realized there was a lot of
competition in both the premium and cheap wine markets, so they created a new in-between category
appealing to a new consumer. By 2003, it was the number one imported wine in the US. Today they
produce 11 million cases of wine annually.
1
Nielsen Company (January 17th, 2013) Sweet Reds, Moscato, Malbec, Rosé Driving Off-Premise Wine
Growth.
2
The Wine Institute (March 22nd, 2012). 2011 California and U.S. Wine Sales.
3
Franson, Paul (February 14th, 2012). Muscat Wines Steal Sauvignon Blanc's Slot
4
Kim, W. Chan; Mauborgne, Renée (1 February 2005). Blue Ocean Strategy: How to Create Uncontested Market
Space and Make Competition Irrelevant. Harvard Business Press.
4
To be the first in an uncontested category results in a great advantage. Implementing a Blue Ocean
Strategy becomes a very profitable enterprise if proper analysis has been conducted to determine the
potential in an undiscovered/untapped market.
Market Analysis - Millennial Consumers
Recent studies show that millennial consumers (21-40) are the ones driving the growth in the wine
industry - and yet they represent an untapped market.5 Moscato has been so successful amongst
millennials because it appeals to their palate; it is sweeter, simpler, and not bitter in comparison to
other traditional wines.6 Here’s what is unique about this demographic:
●
●
●
●
●
They spend a higher percentage of their money than any other group on alcohol.7
They are more experimental and explorative without set preferences.8
They grew up drinking carbonated soft drinks, sweetened sports drinks, and flavored coffees.
They are more environmentally conscious and health conscious.
They are more likely than any other demographic to respond to wine labels.9
Many millennials lack the confidence and expertise to navigate through the overly-complex world of
wine, riddled with foreign names, a plethora of options, and lofty social norms. Yet, every wine producer
seeks to gain marketshare with this generation.
Thousands of commercially available wines are packaged with attractive labels that entice millennials.
That is because without the skill set to navigate through the wine aisle, millennials use labels to
choose between wines.9 However, labels are only so effective; while they can lead to an initial
purchase, the quality of what’s inside the bottle is what will create a satisfied and returning customer.
Studies show that millennials will rarely take chances on trying wines that are over $10.10 Additionally,
they are increasingly less likely to purchase wines that are less than $7, assuming that they are of
substandard quality. We are setting our prices accordingly.
Market Analysis - Millennials Dissected
There are three primary categories of millennials that compose the foundation of our target market:
fashionistas, health conscious individuals, and foodies.
First and most important category is that of the fashionista- trendsetting females within the age
range of 21-29. These contemporary women regularly allocate time and money for girls’ nights
out/pre-partying, centered around drinking classy cocktails in the company of their closest friends.
Since these women are trendsetters they will become a strategic part of our grassroots marketing
campaign as they raise awareness of our fruit wine through word of mouth.
5
Nichols, Rachel. (January 24th, 2011). U.S. Wine Consumer Trends: Boomers' Tastes Evolve, Millennials
Continue to Drive Market Growth
6
Franson, Paul (February 14th, 2012). Muscat Wines Steal Sauvignon Blanc's Slot
7
Brager, Danny. (January 26th, 2011). State of the Wine Industry. p 53-63
8
Millennials and the Confidence of the Palate
9
Millennials Open to Non-Traditional Wine Containers.
10
Wolf, M. and Thomas, S. (2007), “How Millennial, Generation X, and Baby Boomer Wine Consumers
Evaluate Wine Labels”, Journal of Food Distribution Research, Vol. 38 No. 1, pp. 170-181.
5
The second category of targeted millennials are health conscious individuals encompassing the entire
millennial age group of 21-40 years old. These individuals are cautious about what they eat, considering
the nutritional contents of their various food options. Traditional red wine, made from grapes, contains
antioxidants but is relatively vitamin deficient. Fruit wine benefits from being rich in both antioxidants
AND vitamins because they are made from super fruits. Since this group encompasses a large part of
our targeted demographic, product placement in stores which they frequent, such as Trader Joes and
Wholefoods, is paramount to our marketing strategy.
The third category is that of foodies- those who also span the entire age group of millennials. These
people are food hobbyists and invest in the latest food trends. Foodies will be attracted to the
diversity of flavor profiles of our fruit wines and the excitement of pairing them with their newest
edible discovery.
Execution Plan - This Next Year
Product Positioning - frē-bē™ line
frē-bē™ = a friend with benefits
frē-bē™ is a new line of super-fruit wines, developed by California Fruit Wine
Company. The brand was created to emphasize the health benefits of wine made
from these vitamin-rich super-fruits. Where many traditional wines can be bitter and
oaky - frē-bē™ wines are crisp, well-balanced, and fruit-forward. Also, because they
are crafted from fruit other than grapes, frē-bē™ wines will appeal to many people
who may not have a taste for traditional wine.
The packaging, price-point, and styling have been tailored to appeal to a very large
customer base, most of whom are younger, more health-conscious consumers that
enjoy the growing foodie culture. The quality and taste of the wines will serve to
bring these consumers back to purchase frē-bē™ wines on a regular basis.
Strategic Use of Capital
The official release of the frē-bē™ line begins in March 2013 and with the
custom-packaging to be unveiled in June 2013. With the branding, price-point, and
wine all dialed-in, we are ready to put substantial money towards custom-packaging,
a small but effective sales force, and a buffer for our operating budget as we build
our way to a cash-flowing situation.
Strategic Accounts - The Big Picture
We have already scheduled meetings with the wine buyers of
Wholefoods, Costco, and Trader Joes, whom we have been in
conversation with over the last year. Equipped with our super-fruit
frē-bē™ wines, which integrate with their health-centered product
offerings, and with our high visibility in San Diego County, we are
confident that, by July, one of these grocery store chains will carry
our wines in the San Diego Region.
Short Term- The Nitty Gritty
March (20 Accounts, 100 cases)
We have obtained verbal purchase commitments from 20
6
strategically located liquor stores throughout San Diego County. The rationale behind retailing at
liquor stores at this juncture, is that: 1) Millennials shop at liquor stores; 2) We are in the price point for
liquor stores; and 3) Many liquor stores are operated by the owners themselves who have more
interest in selling our product due to the local appeal they can offer to their customers. In
conversations with these liquor store owners, most anticipate moving one case per week to start.
Purchases at this stage will be fueled by consumer curiosity and education by liquor store personnel.
April through May (60 Accounts, 300 cases/month)
From April through May we will add strategic bar and restaurant locations to our portfolio at a rate of
20 per month. The increased projections come from these new accounts as well as our existing liquor
store accounts. We expect each account to grow 30% month-on-month during this initial phase.
June through August (100 Accounts, 1000 cases/month)
The summer season presents a big opportunity for us as we promote our frē-bē™ line as a great
summertime drink perfect for use in cocktails or simply on-the-rocks.11 We are already working with
Snake Oil Cocktail Company - a San Diego-based cocktail company that provides cocktails for many
high-end events including the Sundance Film Festival - to create our portfolio of refreshing
summertime cocktails. Starting in June, our wine will be in custom bottles. Sales will steadily grow as a
result of recurring purchases amongst our retailers as well as by the word-of-mouth chatter between
consumers.
September through December (100 Accounts, 1600 cases/month)
In turn, the fall presents an even more significant opportunity as we release our seasonal Pumpkin
Spice Wine, which will be a separate offering from our frē-bē™ line. Approaching retailers with the
pumpkin spice well in advance will give them adequate time to incorporate the wine into their
seasonal autumn offerings. Furthermore, discounts will be offered to customers who pre-order the
Pumpkin Spice Wine as an incentive to continue to explore our various crafted wines.
October 2013-October 2014 (200 Accounts, 2400 cases/month)
We forecast an increase from 1,600 cases per month sold in October 2013 to 3200 cases per month sold
by October of 2014. During this time we’ll double our tank capacity and hire more workers.
October 2014 and Beyond
In July of 2014, we will begin conducting another round of funding to scale our production for national
distribution. Our first national clients will be the major grocery store chains that carried us regionally.
Simultaneously we will be vetting wine distributors to facilitate introducing our wine to thousands of
restaurants and retailers throughout the nation.
Scaling our production to this level will require specific upgrades to our operation: First, moving into a
larger facility (50,000sqft.); second, purchasing more equipment to increase our production; third, hiring
the labor force to fulfill all aspects of the expanded manufacturing business. While there are costs to
expansion there are also major savings. The cost per bottle drops substantially as our volumes
increase giving us even better margins (reference cash flow). The first year we will be producing
144,000 cases, with most sales coming from self-generated accounts that will be serviced by a national
distributor. The national distributor will additionally build us into their own portfolio generating
additional sales. This gives us access to tens of thousands of retailers, bars, and restaurants across the
country.
11
Since fruit wine is a new category, fre-be will initially be positioned as an all-natural cocktail or happy-hour
style drink. We will use a promotion team to create demand at each of our restaurants, bars, and retailers. As
fruit wine becomes more visible, our narrative will shift to the merits of using fruit wine to cook and pair with.
7
We anticipate the growth of this category to be similar to that of Moscato. Sales of Moscato grew
from 495,000 cases in 2008 to 3.7 million cases in 2012. And Barefoot, being the first company to bring it
to market, still holds 41% market share. National demand for the category we have created, fruit wine,
is expected to grow beyond 2 million cases by 2017. Of which, we also anticipate carrying the largest
market share.
We are confident that our wine is The Next Big Thing. Its style, approachability, packaging, and
price-point have all been tailored to attract millennials, be they fashionistas, health-conscious
consumers, or foodies, to become loyal customers of California Fruit Wine.