TOP SHELF SAMPLE-SIZED WINE BOTTLES

TEAM: VENTURISTSMarket Size ValidationVenture Lab19th May 2012

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Executive Summary Value Proposition Target Statistics Revenue Streams Market Size Calculations Survey Results: end consumers and wineries Next Steps

CONTENT

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EXECUTIVE SUMMARYo Sample-sized wine bottles have been successfully launched in overseas markets

including France and America; this project attempts to bring the market to the fast growing wine market of Australia

o Market Validation was conducted through a number of different streams using demand for substitute products since the samples do not currently exist in the Australian Market;

• Although arriving at very different sizing numbers, Market Validation confirmed the market is of a significant size to support this new venture

• Market Validation was conducted in two directions: 1. Towards the wineries with the purposes of establishing a new channel

Wineries were found to be broadly comfortable with the idea although some specific concerns were raised, and discounting which we originally though to be an option has been ruled out (more wineries will be contacted in the future to confirm if this is a general concern from wineries)

2. Towards consumers to determine if they would be open to this new product range Consumers were overall very positive to the idea although there is

currently some hesitance to buying wine online which must be overcome through sales & marketing since the online wine market is growing in Australia

o Overall the business model was found to be largely validated although it is clear there are points of concern for both wineries and consumers

o A pilot phased approach is posed as the next step to gather more data and adjust product-market fit

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VALUE PROPOSITION

Top Shelf’s sample-sized wine bottle is a product for tasting ‘ultra premium’ and ‘luxury’ wines at a relatively low cost and offers boutique wineries a different sales channel for their products in order to reach a wider network of wine lovers

More than a label or a medal, the tasting of wines is the best way to demonstrate their quality. We have chosen small convenient sized samples as the ideal medium to deliver sample wines to the homes and offices of our customers

Top Shelf will offer 6cl sample-sized wine bottles which are the perfect size for pouring into a glass, without waste or decline in quality. This provides consumers with a new way to sample and discover ‘ultra premium’ and ‘luxury’ wines at a relatively low cost and offers boutique wineries a new sales channel

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Top Shelf's collection will represent a range of appellations and producers

Small boxes (4 to 6 sample-sized wine bottles) will be available for individual consumption or as a gift pack

Larger boxes (12-18 sample-sized wine bottles) will be available for wine tasting parties at home

There is also the opportunity to expand the business by offering online wine courses with quarterly or monthly deliveries of wine samples

PRODUCT TYPES

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o Australian Marketo Male/ Female 25+, high household income 125K+o Wine lovers looking to taste high price wines and/or increase

their wine knowledge at an affordable price without the risk of blindly purchasing a full bottle of an expensive wine

CONSUMER TARGET

• Wine lovers looking to taste high price wines and/or increase their wine knowledge at an affordable price

• Boutique wineries looking to increase sales and/or promote ‘ultra premium’ or ‘luxury’ wines

• Restaurants and bars looking to offer more variety of wines ‘by the glass’ without compromising on quality and waste

• Wine clubs trying to promote their wines

• Wineries trying to send samples to wine experts and/or wine bloggers

6 months Year 1 Year 2 to 5

• Offer online wine courses including the delivery of sample-sized wine bottle boxes on a monthly or quarterly basis

7-$10

$-

$10

$20

$30

$40

$50

$60

-5 0 5 10 15 20 25 30 35 40 45

Pri

ce

Volume %

Over the last 50 years Australia gradually lost its tag of being a beer drinking nation and it is now the 12th largest wine-consuming nation in the world

Since 1970, wine consumption grew from 8.9 litres per head to ~29.7 litres per capita in 2011 (more than 230% growth in 40 years)

That consumption change saw a move away from fortified wine towards table wine and more recently from bag in the box wine casks to premium bottled table wine - particularly red wine

Ultra Premium and Luxury wines now represent 13% of total wine market share

13% wine market share

Niche Market

WINE TYPE TARGET

Sources: Wine Australia & ABS: http://www.abs.gov.au/ausstats/abs@.nsf/Lookup/4307.0.55.001main+features52010-11

Luxury: >$50Market Share 4%

Ultra Premium: $25-$50Market Share 9%

Super Premium: $15-$25Market Share 13%

Premium: $10-$15Market Share 16%

Popular: $5-$10Market Share 25%

Basic: <$5Market Share 25%

Wine Classification Key Assumption #1: The target

group will spend >$500 per year on

wine

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The dramatic shift in the consumption of wine is reflected in the growth of the premium and super-premium market segments at the expense of the basic segment

Consumers appear to be ‘trading up’ with premium, the fastest growing price segment; ultra premium and superior wines are also experiencing strong growth

There are fundamental trends, independent of fluctuations in the economy, which are driving this premium wine growth: As income and wealth increases, consumers spend a higher proportion on wine The prime wine consuming age group is a growing proportion of the population and their

wealth share is increasing Wine fits lifestyle shifts in favour of natural, customised and organic products as well as

a desire for premium experiences

Our end consumer survey results showed that most people would not risk buying a bottle a wine above $25 without tasting the wine first

Source: Wine Australia and Survey conducted in May 2012

WHY LUXURY AND ULTRA PREMIUM WINES?

0

5

10

15

20

25

30

35

40

 $41-$60 

9%

 $26-$40 

24%

 $16-$25 

38%

 $11-$15 

16%

 Less than $10 

7%

 $60 plus

 

5%

What is the ceiling price people would be prepared to pay for a bottle of wine that you have little or no prior

knowledge of?Key Assumption

#2: Consumers are reluctant to buy a

wine they have not first tried

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The wine consumption per capita in Australia is low compared with other countries in Europe or South America which means there is still a lot of potential in this country to increase the wine consumption

STATISTICS

Source: Wikipedia

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REVENUE STREAMS

Revenue

$$$

Subscriptions to online wine

courses

Percentage fee if wine bottles sold

through our website/ courses

Percentage fee from wineries to

promote their wines in our

online coursesDirect sales of

samples through our website and

or partner's websites

(wineries, other channels)

Advertising wineries on our

website

Multiple revenue streams are proposed for this product:

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MARKET SIZE CALCULATION

Assumptions:o As this product does not currently exist in the

Australian Market, we based our calculations on substitute products (Two of the largest Australian wine magazines – “Wine” and “WineState”)

o 75% of Wine and WineState’s combined readership of 205,000 only read one of the two magazines

o Readers of these magazines attend wine tasting events on average once a quarter

Note:o Demand will not be limited to current readers of the

wine magazines

Sources: http://www.ibisworld.com.au/industry/default.aspx?indid=398, http://www.winestate.com.au/advertising/, http://www.acpmagazines.com.au/gourmet_traveller_wine.htm

100K+ readers

105K readers

Total readers: 205KOverlap 25%Adjusted total readers: 153,750

Assuming and average price per box of $30:

Demand Similar Product

Wine samples Potential Demand

Wine samples Market Size in AUD

Wine samples Sales ~$18.5Mil(0.48% of Australian Wine Sales)Australian Wine Sales - $3.88 billion

Australian Alcohol Sales - $16 billion

ScenariosSample-sized bottles/ year per reader

sample boxes

per yearBest Case (1/month)

12 1,845,000

Most Likely (1/Qtr.)

4 615,000

Worse Case (1/year)

1 153,750

ScenariosMarket Size

(AUD)Best Case (1/month) $ 55,350,000

Most Likely (1/Qtr.) $ 18,450,000

Worse Case (1/year) $ 4,612,500

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WHAT THE END CONSUMERS THINK ABOUT OUR PRODUCT?

Source: Survey of 93 Australians - performed in May 2012Notes: Survey results were submitted in a separate report

0

5

10

15

20

25

30

8%

 Shipping time 

14%

 Shipping costs 

10%

 Other 

25%

 I prefer

to taste

before I buy 

25%

 Privacy/Securit

y 

5%

 Don’t trust

product 

12%

 Don’t trust

merchant 

Why don’t you purchase wine online?

 No38%

Yes62%

0

10

20

30

40

 More than

$1000 

34%

 More than $500 

16%

 Between $200-

500 

30%

 Less than $200 

20%

Would you be interested in an online wine tasting course which delivers a variety of small sample-sized bottles to your doorstep?

Approximately how much money do you spend on wine

per year?

Current ways to taste wines before buying include:• Wine festivals• Wine courses• Wineries: cellar doors• Restaurants/ Bars

0

10

20

30

40

 wine festival

s 

23%

 wine course

s 

8%

 wine clubs

 

18%

 liquor

shop 

35%

Not interest

ed

15%

What channels are you currently using to learn

about wines?

Why we think

this is a good idea

We are solving the problem of people having to buy a bottle of wine before

tasting

We are making the tasting

process easier and cheaper for people

The majority of people

surveyed were interested our

product

Most people would be

prepared to pay for our

product (34% spend

AUD1000+ per year on wine)

Some assumptions about the product idea made in the earliest stage of the project were confirmed through the survey results:Key Assumption

#1: The target group will spend

>$500 per year on wine

Key Assumption #2: Consumers are reluctant to buy a

wine they have not first tried

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KEY ASSUMPTIONS - WINERIES

Assumption Result Pivot

40-60% of wineries will be open to the idea of marketing through this new sales channel

Of those who are interested, 50% will be interested in a partnership style arrangement

30% of wineries will consider selling at a discount

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WHAT THE WINERIES THINK ABOUT OUR PRODUCT?

Source: Interviews to wineries executed in May 2012 across different wine regions in Australia

not answered interview

64%

answered36%

Wineries interviewed

Total Wineries Contacted: 25

How they responded to the idea of their wines being sold in sample-sized

samples?

Not interested 22%

Very interested56%

Open to the idea22%

Open to possibility of partnership

No22%

Yes78%

Open to sell wines at a discount to be re-packed in

samples

Negotiation according to volumes

22%

No78%

Other notes and comments:o No wineries were concerned having their wine samples sold onlineo Concerns:

• Some concerns about control over branding• 1 winery required the tubing process to be certified organic• 1 winery wanted tight control over where samples are distributed to

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KEY ASSUMPTIONS - WINERIES

Assumption Result Pivot

40-60% of wineries will be open to the idea of marketing through this new sales channel

Of those who are interested, 50% will be interested in a partnership style arrangement

30% of wineries will consider selling at a discount

Adjust business model to focus on convenience rather than price

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WHAT NEXT?

1. Adjust business model to work out whether high volumes, or premium prices are to be pursued for the sample packs

2. Procuring samples from the US and France and introducing them to Australian consumers

3. A pilot phase approach with one machine and a small group of initial wineries to test the process and gather feedback

4. Established business structure, resourcing and commitment from key players

5. Prepare business plan and execution plan

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TEAM MEMBERS

Ray Tran David Lindell Joel Heenan Stephen Koo Ana Garnek