Naked Wines Plc · LSE:WINE
Naked Wines — Investor Presentation (December 2019)
37 slides from Naked Wines's investor presentation, Dec 9, 2019
Slide 1: Investor Presentation: Is a High Growth Model Feasible?
Investor Presentation Is a High Growth Model Feasible? December 2019 Winemaker: Scott Kelley 1 Investor presentation, December 2019
Slide 2: Purpose
Purpose • At our interim results we signaled the start of a new chapter for Naked – Clear focus on US growth opportunity – Capital and resources required in place – Team in place to deliver • We also signaled 2 potential trajectories for the business – Medium growth, cash to return – High growth • T
Slide 3: The US opportunity: four growth levers
The US Improve Harness scale Unlock new opportunity proposition to efficiency to drive investment increase LTV LTV channels 3 Investor presentation, December 2019
Slide 4: The US market opportunity is huge
The US market opportunity is huge DTC market on track for $5bn by 2024 3.5 US DTC market ($bn) 11.6% 3.0 15.5% 2.5 18.5% 8.1% 2.0 15.5% 7.5% 9.9% 1.5 12.5% Tracking at 11% (PA benchmark), 1.0 Naked share would be $0.6bn 0.5 0.0 2011 2012 2013 2014 2015 2016 2017 2018 2024 Source: 2019 Direct to Cons
Slide 5: We have favourable economics
We have favourable economics We are NOT a wine retailer. Like Netflix, we produce original content, so... 1 2 3 We are regulated We access 3 levels We own as a winery of GP our brands We can access 96% of US We can beat our competitors Customers become loyal to wine drinking population on price and
Slide 6: And an advantaged model vs competitors
And an advantaged model vs competitors Vs Traditional Vs DTC Vs Vs Retailers Wineries Competitors Other Models Ship to 43 states vs 12 Large winery DtC offers Scale & capability Amazon locked into retail configured to avoid harm to 3 advantaged: model post Whole Foods Access 3 tiers of GP vs 1 Tier
Slide 7: And an established leadership position
And an established leadership position Nakedwines.com Nakedwines.com voted as the is the market leader in Pennsylvania - the #1 US wine club by USA Today most recent major state to open for DTC Winery % sales NAKEDWINES.COM INC 11.0% WINE INSIDERS 8.6% LAITHWAITES 5.4% WOLF BLASS/ WINDSOR 2.8% FIRST
Slide 8: The proof is in the drinking!
The proof is in the drinking! Competitive advantage translates into measurably better wine for less Matt Parish Rutherford Reserve Cab • $34.99 Angel price saving 65% vs Market Price of $104.99 • 96% customer rating • 9,300 bottles sold out in 2 months (estimated annual demand 40,000 bottles) Try fo
Slide 9: Capitalized to support growth
Capitalized to support growth Business will have c. £50m of cash post initial completion(s) £m FY20 disposal proceeds 84 Net debt at closing (estimated) (32) Continuing business cash 52 9 Investor presentation, December 2019
Slide 10: If we can deploy the capital …
If we can deploy the capital … Current trajectory Deploy excess capital Sales trajectory +10% - 15% p.a. +20% p.a. SS EBIT % at maturity c.10% c.10% Total cumulative cash burn1 £10-15m £40m • Illustrative example showing what the business is capable of at different levels of investment • Two attract
Slide 11: Why do we believe we can accelerate?
Why do we believe we can accelerate? 1. Improve Economics 2. New Channels Improve Harness scale Unlock new proposition to efficiency to investment increase LTV drive LTV channels Improved economics help unlock new channels 11 Investor presentation, December 2019
Slide 12: The US opportunity
The US Improve Harness scale Unlock new opportunity proposition to efficiency to investment increase LTV drive LTV channels 12 Investor presentation, December 2019
Slide 13: Increase LTV: Why?
Increase LTV: Why? Driving retention and LTV has been and will continue to be single greatest lever to unlocking new investment Compound Deepen moat We’ve done it impact Stickier model Sales retention 1ppt increase in with more loyal levels higher in retention = ~8% customers AND increase in LTV mor
Slide 14: Increase LTV: Why do we believe?
Increase LTV: Why do we believe? (1) We’ve invested in capability • Material investment in capability announced at FY19 results as we planned to exit Majestic • Resource in prior 4 years biased to Majestic • Initial wave of proposition enhancement projects for Naked now starting to be released… 14 I
Slide 15: Increase LTV: Early positive signs from investment
Increase LTV: Why do we believe? (2) Early positive signs from investment Customer powered pricing Signed c.15k Angels in LOTS more projects first 2 months in pipeline: Auto-reorder • Funnel curation • Wine Genie • Next Best Action • Subscription level testing Driving retention AND contribution per
Slide 16: Increase LTV: Early positive signs from investment
Increase LTV: Why do we believe? (2) Early positive signs from investment Contribution per potential LTV enhancement customer Test Control 0 50 100 150 Days since refund 16 Investor presentation, December 2019
Slide 17: Increase LTV: Higher LTV amongst recent US cohorts
Increase LTV: Why do we believe? (3) Translating into higher LTV amongst recent US cohorts Cumulative Contribution per Joining Angel (H2 FY19 and H1 FY20 Cohorts, USA) +21% average increase in contribution per joining angel P6 P5 P4 P3 P2 P1 P12 P11 P10 P9 P8 P7 L12 12M Y-1 12M Y-2 17 Investor prese
Slide 18: Increase LTV: Disciplined investment model
Increase LTV: Why do we believe? (3) Disciplined investment model applied to LTV maximization • Our approach to investing in increasing lifetime value is underpinned by same discipline as investment in customer acquisition – Discrete & measurable investments – Test & learn approach – Back the winner
Slide 19: The US opportunity
The US Improve Harness scale Unlock new opportunity proposition to efficiency to investment increase LTV drive LTV channels 19 Investor presentation, December 2019
Slide 20: Scale Leverage: Why?
Scale Leverage: Why? Opportunity to drive material scale efficiency 1. Leveraging our scale will allow us to deepen competitive moat Increasing scale allows us to deliver BOTH cost reduction and an advantaged customer proposition, heightening barriers to entry (e.g. National 2-day fulfillment networ
Slide 21: Scale Leverage: Why?
Scale Leverage: Why? Scale benefits materially enhance investment economics Payback Impact of Cost / Order Savings • Scale benefits to order costs could 1x 0.9x unlock material extra payback 0.8x 0.6x • Our intent would be to ‘re-invest’ in 0.6x opening more spend at 4x 0.4x 0.3x 0.2x • $6 saving wo
Slide 22: Scale Leverage: Why Believe? Experienced team in place
Scale Leverage: Why Believe? Experienced team in place Brian Peabody Antonio Trevino Lucy Devlin • Operations Director • VP Winemaking with 24 years of • VP Planning, Procurement & • Since joining in 2017 has wine industry experience Customer Experience reconfigured network best in • Former Director
Slide 23: Scale Leverage: Clear opportunities over medium term
Scale Leverage: Why Believe? Clear opportunities over medium term Opportunities in dry goods, production and grape sourcing Buying Warehouse delivery Potential $4-$6 savings per order Major opportunities in network configuration and efficiency Opportunities to drive self Customer service service and
Slide 24: Scale Leverage: Early benefits already being realized
Scale Leverage: Why Believe? Early benefits already being realized Restructured US supply chain Initial network strategic plan now complete: • Scalable commercial agreement with our Logistics partners • Network capacity doubled • 98% national 2-day coverage • Warehouse restructure to enhance Next da
Slide 25: Scale Leverage: Key efficiency levers
Scale Leverage: Why Believe? We’ve identified 4 key efficiency levers Warehouse Partner Warehouse Inventory Holding Final Mile Margin Efficiency Efficiency Reduced stock Commercial Higher throughput Approaching scale cover as % sales agreement in place per site driving required to driving lower to l
Slide 26: The US opportunity
The US Improve Harness scale Unlock new opportunity proposition to efficiency to investment increase LTV drive LTV channels 26 Investor presentation, December 2019
Slide 27: New Channels: Why?
New Channels: Why? We are currently sub-scale vs DtC leaders Selected DtC Leaders Marketing Investment1 $254m $152m $117m NW USA Blue Apron StitchFix HelloFresh 1. Naked Wines USA FY19 Investment, Blue Apron, HelloFresh and StitchFix investment levels from latest full year annual reports. US investm
Slide 28: New Channels: Multiple additional channels available
New Channels: Why Believe? Multiple additional channels available that are working for peers Naked Scale Partner Insert Marketing High Facebook, Google Med Strategic Partnerships New Paid Influencer, Affiliate, Direct Mail, DR TV, Native, Display, Low / Podcast, Outdoor, Print Media, YouTube, Lead G
Slide 29: New Channels: Data Science capability
New Channels: Why Believe? Data Science capability allowing higher ‘hit-rate’ on investment growth 15.0x £20-25m 25.0 We have … 13.0x • Refined our investment approach 11.0x 20.0 • Improved early warning systems 9.0x Investment • Developed effective data analytics 15.0 7.0x Payback New growth plan,
Slide 30: New Channels: Growth in investment and payback
New Channels: Why Believe? Evidenced by growth in investment AND payback US performance, H1 FY20 Investment Payback Underlying Sales revenue retention growth +21% +0.2x +17% +1 ppt 30 Investor presentation, December 2019
Slide 31: New Channels: Investing in team & capability
New Channels: Why Believe? Investing in team & capability • Naked co-founder • Relocated to NY to as VP Growth • Focus on growing investment & broadening channel mix • Unique mix of business development skillset and knowledge of Naked model 31 Investor presentation, December 2019
Slide 32: Strategic Partnerships – what's that?
New Channels: Why Believe? Strategic Partnerships – what’s that? Strategic • Scale partners offering Depth of Relationship Partnerships step change growth • True partnership with 2-way value creation Traditional Naked Partner Relationships Scale of Partner 32 Investor presentation, December 2019
Slide 33: Strategic Partnerships approach
New Channels: Why Believe? Strategic Partnerships approach ● Target transformational partners with game-changing customer bases ● Take a more strategic approach than simply parcel inserts: ○ Longer-term Profit/Revenue share agreements ○ Change currency to include access to our high value customers ○
Slide 34: An Example: Wayfair
New Channels: Why Believe? An Example: Wayfair • Initial deal signed with Wayfair a more commoditized partnership • Low level of engagement and moderate results Depth of Relationship • Through deeper engagement and refresh of marketing content now top 5 partner this peak OND • Performance proven and
Slide 35: Naked already attracting top-tier partners
New Channels: Why Believe? Naked already attracting top-tier partners New Existing 35 Investor presentation, December 2019
Slide 36: In Summary
In Summary NOT a promise of a certain rate of future growth While we see a material opportunity and a path to faster growth, the rate of growth remains uncertain and progress from year to year will be lumpy NOT a single initiative that will transform business There are no silver bullets. Acceleratin
Slide 37: Disclaimer
Disclaimer This presentation (the “Presentation”) has been produced for discussion purposes only. The information contained in the Presentation is not intended for any other use. The Presentation is being made only to, and is only directed at, persons to whom it may lawfully be communicated (“releva