Naked Wines Plc · LSE:WINE
Naked Wines — Investor Presentation (September 2019)
24 slides from Naked Wines's investor presentation, September 2019
Slide 1: Investor Presentation September 2019
Investor Presentation September 2019
Slide 2: 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
Slide 3: What is Naked Wines
What is Naked Wines • Launched 2008 • FY19 sales of £178.4 million – US £75.6 million – UK £71.8 million – Australia £31.0 million • Stand still EBIT of £10 million • 1,000 wines from 200 winemakers in 17 countries • 18 million ratings from >500k customers 3 Investor Presentation September 2019
Slide 4: The US opportunity
The US opportunity Profitable Unique model gives us a Profitable and growing market - structural cost / growing Amazon quality strongly conflicted out advantage US DTC wine market is $3bn and We are to wine what Netflix is At a group level, has doubled over the last 7 years to movies Naked Wines PLC
Slide 5: 3 things to know about the US DTC wine market
3 things to know about the US DTC wine market 1 2 Growth in value ($ billion) Average price per bottle ($) 3.5 41.00 11.6% 3.0 15.5% 40.00 $39.70 2.5 18.5% 39.00 8.1% 2.0 15.5% 7.5% 38.00 9.9% 1.5 12.5% 37.00 1.0 36.00 0.5 0.0 35.00 2011 2012 2013 2014 2015 2016 2017 2018 2010 2011 2012 2013 2014 20
Slide 6: What problem does Naked Wines solve?
What problem does Naked Wines solve? In this $100 bottle of Napa Cab 00 … there is only $10 of Napa Cab $1 We can sell the same $10 of Napa cab for $25 – and still make $2 5 >50% margins 6 Investor Presentation September 2019
Slide 7: Our model gives us a structural price / quality advantage
Our model gives us a structural price / quality advantage 4 Which means that we can offer our 1 Our 500k+ subscribers generate customers better wines for less £100m+ cash subscriptions per money than our competition Subscribers year, and 18 million ratings Preferential 200 Wine- prices makers 3 Beca
Slide 8: One important thing about our model
One important thing about our model 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 ship direct to 43 We can beat our competitors One of the reasons that States - retailers can only ship
Slide 9: The proof is in the tasting...
The proof is in the tasting... We work with some of the best winemakers in the world 00 £1 £24 0 Our wine £50 £15 0 £420 Vivino ratings back up our promise - of all the Napa Cabs on Vivino rated 4.3 out of 5 and below… £60 • The average price was $100.11 £2 70 • The highest price is close to $400 •
Slide 10: The proof is in the tasting...
The proof is in the tasting... 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 to DTC Winery % sales NAKEDWINES.COM INC 11.0% WINE INSIDERS 8.6% LAITHWAITES 5.4% WOLF BLASS/ WINDSOR 2.8% FIRSTLEAF 2.4%
Slide 11: Profitable - and growing...
Profitable - and growing... 1• We could have made a profit of £10m - by limiting investment in new customer acquisition to that required to replace attrition 2• But we CHOSE to invest an 1 additional £11m - because it adds a 2 net (after attrition and overhead) 3 £5m additional EBIT per year, EVERY
Slide 12: This is supported by 10 years of returns on investment and retention
This is supported by 10 years of returns on investment and retention Naked Group repeat customer contribution by cohort • We have invested over £70m in 7.0 8.1 10.3 14.6 14.0 19.1 26.0 acquiring new customers… 50 Investment 86% 116% 102% 81% 78% 70% • Every £1 we spend generates 40 13.4 between £1 a
Slide 13: We are on track to double contribution from existing customers over the next 5 years
We are on track to double contribution from existing customers over the next 5 years by continuing to execute as-is • We are investing at the rate of Naked Group repeat customer contribution by cohort around £26m a year at present 7.0 8.1 10.3 14.6 14.0 19.1 26.0 26.0 26.0 26.0 26.0 26.0 90 • That g
Slide 14: FAQ
FAQ 1. 1 What is your target payback and why? 2. 2 Is payback sustainable? How do you manage it? 3. 3 What are the constraints to growth? 4. 4 How do you influence retention? 5. 5 How do you expect fixed costs to grow? 6. 6 How do you protect yourself from competition? 7. 7 So what could Naked Wines
Slide 15: What is your target payback and why?
1 What is your target payback and why? • In April 2018, we announced our intention to significantly grow investment and target a payback of 4x • A 4x target lifetime payback means that we can... – Recover the initial cost of investment in around 15 months - so we can recycle our new customer investm
Slide 16: Is payback sustainable?
2 Is payback sustainable? Yes, it is – unlike most retailers we are not suffering from decreasing marginal returns on investment 4.7x Underlying payback has £19m 4.5x fallen because: £15m £14m • we have increased 4.0x investment in NCA from £10m to £26m over 4 years • we have more new unproven Partn
Slide 17: How do you manage payback?
2 How do you manage payback? 1 2 Test and learn Continuous improvement Payback on Partners +13% Before we commit to any new We are continually improving investment opportunity we will economics on our historic always seek to: investments and reallocating capital • Conduct a small scale (e.g. a quart
Slide 18: What are the constraints to growth?
3 What are the constraints to growth? NOT NOT IS Supply Market size Discipline • There is systemic worldwide • US is 62% of world wine market • We test new investment oversupply of grapes GP opportunities before we commit to them • The missing piece of the puzzle • DTC market growing at 13% a is acc
Slide 19: What do you do to influence retention?
4 What do you do to influence retention? 1 2 3 Deliver on Customer powered wine Relentless optimisation our promise selection and pricing and innovation The best way to keep customers loyal We have created a forcing In the last 12 months is to keep delivering on the mechanism to ensure we maintain w
Slide 20: How do you expect fixed costs to grow
5 How do you expect fixed costs to grow What is in fixed costs ? How do we expect it to grow? Fixed costs includes both We expect fixed costs to grow at around 50% of the growth in sales • Traditional fixed cost line items like accounting and finance • We are already expensing the cost of growth • A
Slide 21: How do you protect from competition?
6 How do you protect from competition? • Best defence is offence - our goal is to make our 4x their 2x • Highly targeted proposition: high loyalty = high LTV = high growth and hard to compete • Optimise, optimise, optimise • Customer powered - customers decide – Which winemakers to back – Which wine
Slide 22: What could Naked look like in medium term?
7 What could Naked look like in medium term? • At our current rate of investment, if returns remain consistent with history, we would expect over the medium to long term Naked Wines to be a – ~$500m sales; growing at 10% p.a. – $15-20m EBIT; growing at 15-20% p.a. • HOWEVER, our plan is to continue
Slide 23: Finally - our goal is long term profitable growth.
Finally - our goal is long term profitable growth. So… We will continue to… We aim to… We have no plans to… • Deliver on our proposition • Grow investment in New • Make acquisitions - unless it Customer Acquisition at 4x proves cost effective as a • Test and learn - so we can new customer acquisitio
Slide 24: The US opportunity
The US opportunity Profitable Unique model gives us a Profitable and growing market - structural cost / growing Amazon is quality strongly conflicted out advantage US DTC wine market is $3bn and We are to wine what Netflix is At a group level, has doubled over the last 7 years to movies Naked Wines