WALCOTT SPRINGS
DECEMBER 2014 MISSION: The Purest Artesian Water in the World.
Business Plan
This Business Plan has been prepared by WALCOTT SPRINGS. ("WALCOTT SPRINGS" or the "Company, and is being furnished to the recipient solely for informational purposes and does not constitute an offering or solicitation to purchase securities o​ f the Company. Information in this Business Plan that the Company does not otherwise make public is proprietary and confidential. The recipient agrees that neither it nor any of its officers, directors, employees, agents, associates or affiliates will divulge to any other party any information contained herein or any notes, summaries or analyses derived here from, or reproduce or redistribute this Business Plan in whole or in part, and agrees further to return this Business Plan promptly to the Company upon request. This Business Plan includes certain statements and estimates provided by WALCOTT SPRINGS with respect to its anticipated future performance. Such statements and estimates of future events reflect various assumptions concerning anticipated results, which assumptions may or may not prove to be correct. There is no guarantee that any of these results will be attained. Actual results will be dependent on numerous factors that are beyond the control of the Company and may vary from the anticipated results set forth herein. No representations or warranties are made as to the accuracy of any such statement or estimate.
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TABLE OF CONTENTS
Page …………………...4
I. EXECUTIVE SUMMARY II. OPPORTUNITY FOR BRANDING III. FINANCIAL SUMMARY
5 ……………………7
IV. BRANDING STRATEGY
……………………10 .12
V. U.S. BOTTLED WATER MARKET VI. DISTRIBUTION STRATEGY
…………………..16
VII. BEVERAGE INDUSTRY TRENDS ……………………………
…………………..16
VIII. BOTTLED WATER MARKET RESEARCH
…………………….18
IX. FINANCIAL INFORMATION
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EXECUTIVE SUMMARY Walcott Springs was created to put pure drinking water in aluminum cans as an alternative to toxic plastic water bottles. The secret to continued growth of our canned water is the pure clean taste and rapid hydration in every can. Sixty billion plastic water bottles are thrown away in the United States every year with less than 9% being recycled. Environmentally, it takes thousands of years for these bottles to biodegrade in the landfill, while contaminating the water tables and food sources. The health of people drinking out of water bottles is in danger because the plastic particles leach into the water when the bottle is exposed to light: Not only limiting the shelf life of the water, but also changing the composition of the water itself. WALCOTT SPRINGS is dedicated to providing a super clean fresh water taste from an ultra pure artesian water source, and the aluminum cans will provide a safe UV free container to protect the water structure and taste for a very long shelf life, unlike plastic bottles. Bottled water in cans, drinking water in a unique package, is an opportunity to own a portion of a bottled water market that boasts 65 billion bottles of water a year, with the highest growth curve in the beverage industry. Environmentally, a NEW aluminum can is made of 95% recycled aluminum, yet a most NEW plastic water bottles are made of 0.0% recycled plastic. Bottom line, someone needs to make drinking water in environmentally friendly aluminum cans. We have started a revolution, with a profitable, environmentally conscious company to change the way people buy and drink single serve bottled/canned water. WALCOTT SPRINGS Can is a water company that puts great tasting premium drinking water in cans. This is a very attractive business model: given the plastic water bottle (PET) controversy, this can-water strategy provides a major advantage in a water business that offers gross margins in excess of 60%.
Andrew D. Walcott is the owner and President of Walcott Springs. The company is in the process of applying for certification as a minority-owned and veteran owned business. For more detailed information regarding the owner and President of Walcott Springs, see www.walcottsprings.com. The goal is to build a first class bottling plant at the water source in the rural and economically depressed town of Butler, Georgia. Construction of the plant and mass production of water for sale will lead to the creation of between 250 – 350
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permanent jobs in the immediate community which is within driving distance of larger cities of Columbus, Macon and Atlanta. In addition, 50 commissioned sales associates will be hired to secure new customers. There is already a firm commitment from the Canned Water for Kids, a 501c3 entity, to purchase water from the source once the facility is operational. Ball Corporation has also expressed strong interest in bringing this new product to market and to provide support for the canning/bottling facility to support this effort. We also have a partnership with an international bottling company in place to support distribution efforts.
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Opportunity for branding The most conspicuous trend in the bottled water industry is the development and flooding of a seemingly never ending array of plastic bottled water products, flavors, ph's and mineral content. Even though innovation has truly reconfigured the bottled water industry, the leading revenue source for the US bottled water market is still the unflavored non-sparkling sector, which generated total revenues of $15.2 billion in 2010 equivalent to 88.5% of the overall water market. Initially, the WALCOTT SPRINGS brands will target this super-premium unflavored non-sparkling sector, currently populated by such brands as Fiji, VOSS, and Evian. This super-premium sector is marked by the high price point of the products and the unique and/or branded packaging. The other factor in the super-premium brands is the perception of great taste. WALCOTT SPRINGS is dedicated to providing a super clean fresh water taste. The aluminum can will provide a safe UV free container to protect the water structure and taste for a very long shelf life, unlike plastic bottles. The Company plans to continue sales of the WALCOTT SPRINGS brands in the super-premium category through the first year, (the unique can water opportunity year). WALCOTT SPRINGS packaging will include the 12oz and 16oz cans currently produced by CrownCork; these cans will be packaged in multi-packs of 4 for the 16oz, and 24 can cases for the 12oz. This first year product will be mostly marketed through mass assemblies such as music festivals, boutique framers markets, craft fairs, fair grounds, sporting events, healthy food markets, etc. The first years product will also allow us to replace plastic bottles in local government offices and large social conscious corporations, clubs, unions and other organizations. This product will also appeal to the "on-premise" high-end restaurant and hotel sectors, where the super-premium price point is easier to maintain. Shelf space in supermarkets is a second year opportunity that will come organically from the ground swell, big box stores probably won't be profitable for us until the 4th year. Ultimately, with Mr. Walcott’s status as a military veteran, Walcott Springs will become the official water for the US Military and be available at military installations across the globe. Walcott Springs is conveniently located close to two major US military installations which are very active in all US military and relief operations and always require substantial water supplies for troops and victims of disasters. The WALCOTT SPRINGS brands in aluminum cans have distinct packaging differences from common (PET) plastic bottles and will be marketed and distributed in different a manner. Furthermore, we expect to have no counterparts or major competition from other canned waters in the first year. This competitive advantage
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arises because larger bottled water makers believe in the plastic bottle and will be slow to make the expensive change to cans. Rather targeting our market with direct to consumer web sales and supplemented with one-on-one sales of cases of emergency water at events, conventions and festivals. The important point is that Walcott Springs will have the flexibility to adapt to market receptivity. We will can water in different sizes and multi-paks to meet our person-to-person market; with ample private labeling opportunities, this flexibility will not be matched by any other drinking water supplier.
Walcott Springs will be bottled/canned by the Ball Corporation in Rome, Georgia, Metal Beverage Packaging Division. Ball Corporation will fill the 12 ounce and 16 ounce cans and store them until needed by Walcott Springs. This support will remain in place until the first class bottling facility is built at which point all bottling will be handled internally. The estimated size of the aquifer feeding the spring is between 2 -3 billion gallons with substantial natural replenishment from annual rainfall in the area. For more information on the aquifer, see www.walcottsprings.com.
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$4,750,000
Orange Total Revenue Green Net Revenue
$4,500,000 $4,250,000 $4,000,000 $3,750,000
Possibility A
$3,500,000 $3,250,000 $3,000,000 $2,750,000
$3,000,000
1,000,000 cans fist
$2,750,000 $2,500,000
year, 3 turns
$2,500,000 $2,250,000 $2,000,000
$2,250,000
$1,750,000
$2,000,000
$1,500,000
$1,750,000
$1,250,000
$1,500,000
$1,000,000
$1,250,000
$750,000
$1,000,000
$500,000
$750,000
$250,000
$500,000
$0
$250,000 $0
2014 - Yr1
2015 - Yr2
2016 - Yr3
2014 - Yr1
2015 - Yr2
2016 - Yr3
These graphs are derived from the full revenue/expenses spreadsheets at the end of this document. Possibility A, assumes that the standard order of 350,000 cans will be sold and reordered (turned) t hree times during the remaining 1 month of 2014, with sales increasing by a factor of x2 for 2015 and increasing by a factor of x2.5 again for in 2016. Possibility B, assumes that the standard order of 350,000 cans will be sold and reordered (turned) five times during the remaining 1 month of 2014, with sales increasing by a factor of x2 for 2015 and increasing by a factor of x2.5 again for in 2016.
These projections are based on industry data provided herein, where; ●
plastic water bottles are being banned by consumers, companies, environmental
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organizations, cities ● media coverage of the toxic plastic water bottles is escalating and becoming common knowledge ● bottled water is the fastest growing beverage sector, even as plastic bottles are being banned ● aluminum cans vs. plastic bottles is an easy choice for consumers, companies and cities ● shelf life of can-water is many times greater than plastic bottled water, saving money on stored water ● revenue/expense report shows an incredible 100% profit potential from manufacturer to distributor ● we are dedicated to providing a super-clean fresh-water taste from a 12 level filtration system ● This unique opportunity combined with our direct grass roots marketing will create a strong base upon which to build an organic distribution and marketing company.
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Super-Premium Plastic Bottles
Super-Premium Cans
•Fiji •Evian •Volvic
•EmergencyDrinkingWater.com* 24oz only • Walcott Springs Water
•12oz $1.00-$2.50 Ea Retail •16oz $1.50-$2.50 Ea •20oz $1.50-$3.50 Ea •Singles, Multipacks, Cases
•12oz $1.00 Ea •16oz $1.00-$1.50 Ea •24oz $4.50 Ea* internet 'Singles, Multipacks, Cases
Key Dimensions Key Brands Key Retail Packages Distribution Price Positioning
•$20-$22/case for $22-$24/case For Fiji and Evian
•$24-$25/case of 24 cans •$24-$25/case of 24 cans •$54/case of 12 cans *
12oz cans 16oz cans 24oz only
Key Retail Channels
•Upscale hotels/ restaurants •Specialty/gourmet food stores •High-end & Health Food Stores
•Internet Sales by the case •Survivalist WebSites and Stores •Direct Marketing Email and USMail •Direct to Customer by the case
Distribution Wholesale Approach
•Direct to Store distributors •Beer wholesalers
•Direct Distribution to Government, City & State •Direct to Company & Corporate Offices •Direct Distribution to Groups & Organizations •Direct to Retail Stores and Warehouses •Direct to Customers by the case & pallet
The above chart gives a good representation of the current market for Super-Premium water for both retail and wholesale distribution.
Bottling & Distribution Strategy
In order to achieve maximum bottling efficiency on a nationwide scale in the US, Walcott Springs will setup bottling agreements for company Brands in Cities and Regions on a local by local basis. This approach will allow for rapid expansion without an equally rapid need for escalating funds. In each City or Region, those cans bottled there will be distributed in that City or Region, saving on distribution transportation costs and creating jobs and business opportunities in those regions. Walcott Springs will charge a setup and a royalty fee for each can sold under its Brands. Each franchisee will then be coached on setting up a regional
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bottling contracts. International expansion can be achieved in the same manner.
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Hybrid Beverage Distribution Systems
Traditional Direct Store Distribution
(Coke/Pepsi, Red Bull, Beer Wholesalers)
â—? No room in existing DSD systems for smaller new products entering CSD portfolios
Direct to Customer â—? Low-cost route-to-market
T o d a y / F u t u
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r e
Achieving national distribution takes 5 to 10 years with a "build your own bottling" approach and hundreds of millions of infrastructure and marketing dollars. This is the approach taken by such successful bottled water companies' brands as Fiji and Glaceau (Energy Brands) and drink companies like Snapple & RedBull. WALCOTT SPRINGS's water strategy is to continue building out a network of independent franchised distributors over a 5 to 10 year organic growth curve. This approach builds a similar end game without the expensive building of company plants and the increased labor issues, state to state. Licensing brands instead of spending hundreds of millions in building brick & mortar bottling plants is a high profit opportunity in a new industry segment. Using the independent network of bottlers is the strategy Pepsi and Coke used the first 100 years until in 2010, when they bought up all the little bottlers nationwide.
Costs Per Can Super-Premium 12oz can. 12oz cans Caps Labels Water Filling Carton Pallet
0.085 0.03 0.015 0.001 0.11 0.01 0.02
Super-Premium 16oz can. 16oz cans 0.15 Caps 0.03 Labels 0.015 Water 0.001 Filling 0.11 Tray & Shrink 0.01 Pallet 0.02
Total per can cost
$0.27
Total per can cost
$0.336
The table above outlines the cost of bottling (filling) the cans, which includes the can manufacturing, filling, sealing, dating, labeling and packaging of the cases. These numbers are based on contracting with a bottling company instead of building a bottling plant.
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BRANDING STRATEGY WALCOTT SPRINGS’ packaging will include the 12oz and 16oz in cans; these cans will be packaged in multi-packs of 4 for the 16oz, and 24 can cases for the 12oz. This first year product will be mostly marketed through mass assemblies such as music festivals, boutique framers markets, craft fairs, fair grounds, sporting events, healthy food markets, etc. The first years product will also allow us to replace plastic bottles in local government offices and large social conscious corporations, clubs, unions and other organizations. This product will also appeal to survivalist and emergency preparedness for earthquakes and other natural disasters. For basic emergency survival the US National Guard recommends three 12oz servings per day. Therefore 4 cases is ninety-six 12oz cans of water, which will give one person 3.2 servers per day for one month. So to prepare for an emergency you need 4 cases / person /month.
Campaigns Why Water in Cans ●
Cars are made of 95% recycled cans, Plastic Bottles are made of 0% recycled plastic. •Cans are not pores, plastic water bottles are pores and contaminates leach in ● Plastic water bottles leach plastic particles into the water •Banning Plastic Water Bottles, Canned Water Opportunity for Cities and Companies •Cans are an alternative to the plastic water bottles being banned •Kids are all dehydrated, the 12oz half frozen aluminum can should appeal to kids •Clean great tasting water in cans is protected from UV light thus increasing shelf life •The shelf life of plastic bottled water is normally less than a year •The large amount of BPA in plastic water bottles is of concern to many people •Although aluminum can manufacturers use BPA to clue the Epoxy lining in cans, the amount of BPA used is significantly smaller than the BPA in plastic products.
Emergency Water Marketing & Distribution, Sold by the case of 24 - 12oz cans as Earth Quake Emergency Water Survivalist Long-Shelf Life Water in cans •Art & Craft Fairs •Food Festivals
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•Farmers Markets •Trade Shows •County Fairs •Car Shows •Gun Shows •University Events •Non-Profit Events •Mall Kiosks' •C
h u r c h E v e n t s
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Campaigns cont. Saving the Planet - Environmental Marketing Toxic Plastic Water Bottles Recruiting Evangelist Marketers Eco-Passion Blogs websites PETA Toxic-Plastic-Passion Groups Exploiting the "Ban on Plastic Bottled Water" Beach Cities Small Companies Big Corporations Media Companies Star's Production Companies Directors Production Companies Movie & TV Studios Movie Catering Companies TV & Movie productions Direct Marketin​g to Organizations and companies
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U.S. BOTTLED WATER MARKET
U.S. Bottled Water Market (non-HOD) Selected Brands*
(1) Poland Springs, Deer Park, Ice Mountain, Zephyrhills, Ozar-ka, Arrowhead, Calistoga, Great Bear; (2) Hinckley Springs, Sierra Springs, Kentwood Springs, Crystal Springs, Belmont Springs; ( 3) Alhambra,
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Sparkletts; * Includes still water only; excludes flavored/sparkling waters Source: Beverage Marketing, Corp.
The Company plans to enhance the fundamental value of the WALCOTT SPRINGS brands in the super-premium price sector through the introduction of attractive 12oz and 16oz screw top cans. This product will appeal to the environmentally conscious customers as well as the health conscious toxic-plastic customers. With a special effort toward the emergency preparedness customer. Emerging Industries With such high consumer demand for bottled water, many restaurants are now claiming their share of the bottled water industry. The thought behind this is "why give a beverage away when you can sell it"? Considering the amount of tap water consumed in restaurants today, many restaurant entrepreneurs are capitalizing on this trend by converting tap water drinkers into profitable patrons by selling them bottled water. According to Beverage Marketing Corporation, on-premise consumption accounts for nearly 6% of the bottled water industry.6 As a super-premium brand the can water probably will not immediately takeoff in this sector, but it is still viable because of our unique clean fresh tasting water in a recycled container. Bottled Water Origins and Tap Water Safety Recent media, including ABC's 20/20 report: "Is Bottled Water Better than Tap?"7and The National Resource Defense Council': "Bottled Water: Pure Drink or Pure Hype?"8 ( March 1999 petition to the FDA a nd results of a four-year study on the bottled water industry) and PBS' P.O.V. Borders: Environment8 segments on bottled water have all spurred an ongoing debate questioning the origins of bottled water, tap water's safety, misleading labeling practices, and regulatory gaps in the industry. How bottled water will be affected (if at all) can only be determined with time. On the issue however, IBWA President Joseph K. Doss did declare: "Consumers choose bottled water and view it as a worthwhile expenditure because they appreciate the convenience and good taste of bottled water brands consumed on the go and at the home or the office; however, consumers also benefit from bottled water safety and quality which result from multiple layers of regulation and standards at the federal, state and industry levelsl°
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Retail Market Pricing Opportunity Half-Liters
Pricing Gap Opportunity There is great gap between bottled water sectors, Premium Mainstream at the bottom of the price scale. With Super-Premium at the top of the price scale.
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WALCOTT SPRINGS's water brand strategy and pricing flexibility result in a cost structure that meshes well with the Super-Premium brands while it competes with the plastic bottle and glass containers of these Super-Premium products on clean taste and long shelf life. Walcott Springs Brands follows the high expectation of the Super-Premium Consumer: ● clean fresh taste ● the distinct branded label of our cans ● the distinct smooth PH and feel of our water ● environmentally better aluminum cans over the toxic-plastic ● the most convenient 12 & 16oz sizes preferred by beverage consumers ● the health and safety of canned food products, long shelf life Selling into Super-Premium we avoid the tremendous price competition, for the lower priced bottled water market, a symptom of the great number of competitors fighting for position with tiny profit margins. While holding open a space in the Premium-Plus sector for later expansion as seen on the graph above.
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Gross Margin Discussion The pricing and margin assumptions below demonstrate the opportunity for profitability, for both the super-premium. The gross margins for the Company's super-premium brand are projected to average 50%, in contrast to the lower 15% profit margins on premium brands. The pricing in the premium (or premium-plus) sector of the bottled water market is more competitive with tiny profit margins. Below we outline the two marketing approaches for our brands and show the profit potential for both. As can be seen below profit margins of 66% and greater can be attained in the (Direct to Customer) marketing program.
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DISTRIBUTION STRATEGY The Company will assemble a Direct Customer Delivery (DCD) a direct to consumer distribution network in the USA region. Of the 54% of Americans that use bottled water regularly the city with one of the highest per cap-pita use is Los Angeles. The demographic with the highest use of bottled water are people with incomes above $50,000 and people with incomes below $20,000. Over 45% of Women and 35% of Men ages 18-54 are the heaviest users of bottled water. The controversy over plastic bottles has taken focus in the news in cities across America. Los Angeles being the highest use and filled with environmentally friendly, health conscious people at higher income levels, seems the perfect place to start. However, the city of Atlanta has similar demographics and is only 90 miles away from Walcott Springs and it has the busiest airport facility in the world. For this reason we chose Atlanta for our first distribution center. A facility for Los Angeles will be built a few years down the line after Atlanta’s facility has reached its operational capacity. We will duplicate this regional distribution model in cities across America. Initially we will target those cities that have banned plastic bottles or are thinking about banning them. By building a regional distribution center in these high profile cities we get free publicity d in exchange create jobs and increase tax revenue for these small cities.
BEVERAGE INDUSTRY TRENDS American drinking habits between 2001 and 2011 suggest that consumers are buying single serve bottled water over all other choices in the beverage isle. This information combined with the fallout over (PET) plastic water bottles highlights an opportunity for a (non-plastic container) ALUMINUM CAN drinking water company.
America's Drinking Habits ​Changed %Growth/Decline 2001-2011
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As this graph clearly shows the Bottled Water sector of the beverage industry has grown larger and faster than any other sector, despite the plastic bottle controversy, with continued growth expected throughout the decade. American drinking habits have undergone a major shift in the last decade. Throughout the 1990s, soft drinks made up nearly a third of the typical Americans' liquid diet. But in the last ten years, we've cut our soda consumption by 16 percent. Meanwhile, we now drink more than 50 percent more bottled water than we did in 2001 -- and twice as many energy drinks. "Soft drinks peaked around 1998," said Thomas Mullarkey, an analyst from Morningstar. The big winners in the last decade have been bottled waters, sports drinks, wines, and then spirits, "which have picked up a quarter of a gallon per person in the last decade," Mullarkey said, before adding, "that is a lot of extra alcohol." Two mega-trends that jump out from the data: (1) the swap between soft drinks and healthier alternatives like bottled water; and (2) the swap between beer and wine/spirits. Since total liquid consumed is a fairly zero-sum number, Mullarkey said, one sector's gain must be another sector's pain. "You're seeing that the consumer is taking a healthier look and having more alternatives [than soda], such as tea, and coconut water," he said, "but also, Americans have aged, and soft drinks are most popular among teenagers and twenty somethings." Older women in particular have led the increase in wine consumption, he said. Something beyond demographics is pushing down beer sales and lifting spirits, and it looks a lot like what's happening to the broader economy. The middle-class brands are getting crushed, and the high-end is running away with all the income. By Derek Thompson
http://www.theatlantic.com/business/print/2013/01/how-america-drinks-water-and-wine-surg e-cheapbeer-and-soda-crash/267153/
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Market Size and Breakdown Bottled waters are categorized by their source by the FDA. The following are the types of bottled water, as suggested by the International Bottled Water Association (IBWA): Bottled water from a well tapping a confined aquifer in which the water level stands at some height above the top of the aquifer. Artesian water may be collected with the assistance of external force to enhance natural underground pressure. Water containing not less than 250 TDS ppm, coming from a source tapped at one or more boreholes or springs, originating from a geologically and physically protected underground water source. The water must have a constant level and relative proportion of minerals and trace elements at the point of emergence from the source and must have no added minerals. Bottled water produced by distillation, deionization, reverse osmosis or other suitable process or treatment. Purified water can come from almost anywhere — rivers, lakes, underground springs or municipal water sources. Water derived from an underground formation from which water flows naturally to the surface of the earth, e.g. an aquifer. The water must be collected only at a spring or through a borehole tapping the underground formation feeding the spring. A natural force must cause the water to flow to the surface through a natural orifice. Spring water collected through an external force shall be from the same underground striation as the spring. Water from a hole bored, drilled or otherwise constructed in the ground which taps the water of an aquifer.
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FDA FEDERAL REGULATIONS Bottled water is regulated as a food product by the FDA. Bottled water companies must adhere to the FDA's Quality Standards, Standards of Identity (Labeling Regulations) and Good Manufacturing Practices. Quality Standards: All bottled water products must comply with the FDA's Quality Standards in Section 165.110(b) of Title 21 of the Code of Federal Regulations (CFR). These standards, along with the FDA's Good Manufacturing Practices, ensure the safety of all bottled water products from production to packaging to consumption. Standards of Identity: FDA's labeling rules for bottled water (see more on this below) establish standards of identity and standardized definitions for terms found on bottled water labels such as "artesian," "distilled," "drinking," "mineral," "purified," "sparkling" and "spring." Seltzer, soda water and tonic water are considered soft drinks; therefore, they are excluded from these regulations. Good Manufacturing Practices: Bottled water is subject to both general food Good Manufacturing Practices (GMPs) and GMPs specific to bottled water processing and bottling. General food GMPs govern such areas as plant and ground maintenance, sanitary maintenance of buildings and fixtures and sanitary facilities, including water supply, plumbing and sewage disposal. Bottled water GMPs provide detailed regulations governing plant construction and design, sanitary facilities and operations, equipment design and construction, production and process controls specific to the production and processing of bottled drinking water, and record keeping.
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Manufacturing Industry Market Research Report The industry was transformed when The Coca-Cola Company (TCCC) and PepsiCo merged with their respective North American bottling operations in 2009 and 2010. Prior to this, both companies' main business was selling beverage concentrate or syrup. The companies outsourced the manufacturing and distribution of soft drinks to regional bottlers, which allowed the parent companies to focus on marketing and product innovation. However, the steadily declining sales of carbonated soft drinks in mature markets, the growing market power of big- box retailers like Walmart and Costco, and the economic downturn led the soft drink giants to buy back their bottling operations. This has helped streamline both companies' operations, significantly cutting costs and providing them with greater control and flexibility with their distribution networks. The industry is continuing to consolidate, which has depressed the number of industry operators at a 3.3% annualized rate since 2007 to 4,893 companies in 2012. The Global Soft Drink and Bottled Water Manufacturing industry has a medium level of concentration. The Coca-Cola Company (TCCC), PepsiCo Inc. and Coca-Cola FEMSA dominate manufacturing soft drink concentrates in this industry. Since their decision to acquire their major North American bottling operations in 2010, the soft drink giants have become the two largest manufacturers of carbonated beverages. The two companies also engage in bottling other industry products, including water and functional beverages. Outside of the United States, TCCC and PepsiCo sell soft drink syrups or concentrates to many regional bottlers, and they maintain significant equity interests in these companies. The existence of niche producers in particular regions of the world prevents high industry concentration; they have successfully established and maintained distribution channels and cater to local tastes and preferences. In addition, since the cost associated with transporting these goods over large distances to retail outlets is very high relative to the value of the product, producers must establish operations throughout the world to reach their market. Newer growth segments, such as bottled water and energy drinks, remain fragmented, being that they are young products. Industry concentration is likely to increase as major players acquire smaller producers in highly populated emerging economies that produce growing products, such as bottled water and functional drinks. Consequently, major player growth is mainly inorganic and representative of the stagnant state of demand for soda, the major industry product. The industry will also benefit from more buoyant economic conditions in emerging markets across Asia, Latin America and the Middle East, with rising disposable incomes and urbanization fueling demand for both carbonated and non-carbonated products. Forecast rising global temperatures also bode well for industry growth as people increase drink consumption in hot weather. For more information, visit IBISWorld's Global Soft Drink and Bottled Water Manufacturing industry report page.
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The Industry DATA on the following pages are dated from 1999 to 2006. Although this data is several years old its still relevant to the beverage industry and shows the history of data valid in the current trends.
Leading Bottled Water Companies The bottled water market in the U.S. is dominated by the larger beverage companies. Nestle Waters continues to be the leading bottled water company. Its market share has gone from 27% in 2000 to 31% in 2005. Pepsi's (Aquafina) market share increased from 7.4% to 12% during that timeframe. While Coke (Dasani) is #3 behind Nestle and Pepsi, its growth rate has been higher over the past five years. Coke's market share was 4.4% in 2000 and increased to 10.5% in 2005. The recent announcement regarding Coke's purchase of Glaceau (Energy Brands) for $4.1 billion leaves little doubt as to its commitment to this space. Based on revenues reportedly in the $350 million range, Coke paid more than 11X revenue for Glaceau. While the major beverage companies dominate, the opportunity for smaller players to grab meaningful market share exists. Fiji, for example, has done a great job creating brand identity and growing revenue. In 2006, Fiji passed Evian to become the leading imported water in the U.S. Crystal Geyser is another smaller player that continues to experience significant growth. Glaceau (not included in table) has also reportedly achieved very impressive growth, going from revenue of $3 million in 1999 to an estimated $350 million currently. Evian (Group Danone) appears to have righted itself after well chronicled difficulties from 2002-2004.
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Leading Bottled Water Companies Estimated Wholesale Dollar Sales 2000-2005 Companies Nestle Waters NA Pepsi/Aquafina* Coke/Dasani* DS Waters Crystal Geyser Coke/DanoneJV DPSU Bottling Group Culligan International Glacier Water Vermont Pure Fiji Water Subtotal All Others TOTAL
2005
Millions of Dollars
Bads
Mal
1
2E11
2
$1,667.4 457.0
3 4 5 6 7 8 9 10 11
273.0 833.1 185.0 552.8 77.4 110.0 59.2 59.7 12.9 $4,287.5
2E12
2110.3
2E14
$2,059.3
$2,296.6
$2,499.6
$2,742.3
645.0 567.0 844.5 235.0 563.1 131.8 115.5 60.3 64.9 18.4
838.0 765.0 841.8 270.0 450.1 148.3 120.1 71.0 71.7 25.5
936.0 834.0 802.0 375.0 420.0 172.5 116.0 72.3 76.2 41.0
1,035.2 917.4 775.5 435.5 406.1 182.0 117.2 76.3 52.5 48.0
$5,304.8
$5,898.1
1,825.5
1,575.8
2,003.3
$6,113.0
$6,880.6
$7,901.4
$6,344.6 2,181.8 $8,526.4
2005 $3,131.3 1,206.7 1,049.9 769.0 472.0 454.5 190.2 120.2 78.7 59.8
$6,787.9 2,381.6
78.2 $7,610.6 2,401.9
$9,169.5 $
10,012.5 * Includes distributor/bottler margin because distributor/bottler is actual manufacturer. Source: Beverage Marketing Corporation
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Bottled Water Market Share Growing Quickly Bottled water continues to steal market share from other beverages. According to BMC, in 1999 bottled water accounted for approximately 8.4% of beverages consumed in the U.S. In 2006 it is estimated that the bottled water market share had risen to 14.8%. This compares to 28.5% and 27% soft drink market share in 1999 and 2006, respectively. BMC projects that the consumption of bottled water will surpass that of soft drinks in 2013. It is clear that bottled water represents a large and growing market that promises to maintain its rapid growth.
The Bottled Water Market in the U.S. continues to be the key growth driver in beverages ● Over the last seven years, Bottled Water has increased its share of stomach by 6.4 share points, capturing the undisputed #2 position in beverage distribution ● As shown below, Bottled Water has gained from almost ALL categories, not just CSDs Share of S tomach by U.S. Beverage Segment 1999 - 2006P Source: Beverage Marketing Corp.
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Sources lUnited States - Bottled Water. Datamonitor Industry Market Research.
Dec 1, 2005 pNA (Web Accessed via Business and Company Resource Center) 2 "Bottled Water: More than Just a Story about Sales Growth." International Bottled Water Association, April 13, 2006. 3 Andrew W ard, "Global thirst for bottled water attacked; [LONDON 1ST EDITION1." Financial Times, London (UK): Feb 13, 2006. p. 9 "Beverage Marketing's 2005 Market Report Findings. International Bottled Water Association. h ttp:// www.bottledwater.org/public/Stats 2004.doc 5 "Bottled Water is Big Business." Convenience Store/Petroleum, Category Outlook Special Advertising Section. December 2005, Volume 17 Issue 5 6 Sherry A . Hal!stead. "Trumping tap: converting tap water drinkers to bottled water fans is clearly profitable." Cheers, M ay 2006. http://www.findarticles.com/p/articles/mi mOBOE/is 4 17/ai n16374556/print 7 "Is Bottled Water Better than Tap?" ABC News 20/20 Report: May 6, 2005. http://abcnews.go.com/2020/Health/storv?id=728070 &page=1 8 "Bottled Water: Pure Drink or Pure Hype?" National Resource Defense Council http://www.nrdc.org/water/drinking/bw/ bwinx.asp 9 P.O.V. Borders: Environment: Bottled Water (PBS) http://www.pbs.org/pov/borders/2004/water/water bottle.html 19 "Does 20/20 Report Hold Water?" Convenience Store/Petroleum Online. CSP Daily News, May 19, 2005 11 "Bottled Water: Pure Drink or Pure Hype? Chapter 2" The National Resources Defense Council http://www.nrdc.org/water/drinking/bw/chap2.asp 12 "Water, Water, Everywhere — bottled water market in the US." American Demographics, Oct 1 2001. http://www.findarticles.com/p/articles/mi m4021/is 2001 Oct 1/ai 79052846/ print 13 Survey: America's Poor Drinking Habits Contradict Knowledge of Health Risks. (IBWA Accessed) http://www.bottledwater.org/public/InfoForRepNatFactSheettest.htm "This material is based upon work supported by the U.S. Small Business Administration. Any opinions, findings, conclusions or recommendations are those of SBDCNet and do not necessarily reflect the views of the U.S. SBA. The SBA funds this U.S. Small Business Administration (SBA) Grant. SBA's funding is not an endorsement of any products, opinions, or services. All SBA funded programs are extended to the public on a non-discriminatory basis."
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VOLUME Cans Retail Cans Wholesale Free Cans Total Cans REVENUE Cans Retail Cans Wholesale Free Cans Discounts Franchise Fees Investment Income Total Revenue EXPENSES Empty Can Costs Can Bottling Costs Bottling Expenses Freight Water Usage Fees Marketing Salaries & Wages Benefits Utilities Rent Equipment Lease Car Allowance Telephone Vehicle Insurance Travel Lab Testing Postage/Delivery Director Fees Professional Fees Consulting Fees Depreciation Delivery Truck Lease Interest Expense Overhead Expenses
Three Turns in First Year - Limited Test Start-up 2014 - Yr1 2015 - Yr2 2016 - Yr3
2017 - Yr4
2018 - Yr5
150,000 900,000 15,000 1,065,000
350,000 2,400,000 20,000 2,770,000
700,000 4,100,000 20,000 4,820,000
700,000 9,405,850 20,000 10,125,850
700,000 14,753,910 20,000 15,473,910
150,000 450,000
350,000 1,200,000
700,000 2,050,000
700,000 4,702,925
700,000 7,376,955
-3,750
-7,500
o
o
-5,000 100,000
-5,000 764,000
-5,000 946,000
0
0
0
0
0
596,250
1,542,500
2,845,000
6,161,925
9,017,955
108,630
282,540
491,640
1,032,837
1,578,339
159,750
415,500
723,000
1,518,878
2,321,087
268,380 8,250 0 1,800 99,840 0 1,500 22,000 12,000 4,800 1,240 1,260 1,920 450 340 10,000 0 3,200 0
698,040 16,500 0 3,600 156,000 0 3,000 26,400 16,800 6,240 2,480 1,386 3,840 900 680 0 0 6,400 0
1,214,640 19,800 0 4,320 187,200 0 3,600 31,680 20,160 7,488 2,976 1,663 4,608 1,080 816 0 0 7,680 0
2,551,714 39,600 0 8,640 187,200 0 7,200 63,360 40,320 14,976 5,952 3,326 9,216 2,160 1,632 0 0 15,360 0
3,899,425 79,200 0 17,280 187,200 0 14,400 126,720 80,640 29,952 11,904 6,653 18,432 4,320 3,264 0 0 30,720 0
12,600 0
16,380 0
19,656 0
39,312 0
78,624 0
181,200
260,606
312,727
438,254
689,309
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Bottling Expenses
268,380
698,040
1,214,640
2,551,714
3,899,425
Net Income Before Taxes Income Taxes Net Income
146,670 32,267 114,403
583,854 128,448 455,406
1,317,633 289,879 1,027,754
3,171,956 697,830 2,474,126
4,429,221 974,429 3,454,792
0 114,403
100,000 305,406
150,000 927,754
0 2,474,126
3,454,792
Payback investment Profit / Loss
37 Walcott Springs 2014
26 0
VOLUME Cans Retail Cans Wholesale Free Cans Total Cans
Five Turns in First Year - Conservative Start-up 2014 - Yr1 2015 - Yr2 2016 - Yr3
2017 - Yr4
2018 - Yr5
350,000 1,400,000 15,000 1,765,000
350,000 3,805,220 20,000 4,175,220
700,000 7,405,850 20,000 8,125,850
700,000 9,753,910 20,000 10,473,910
700,000 21,689,520 20,000 22,409,520
350,000 700,000
350,000 1,902,610
700,000 3,702,925
700,000 4,876,955
700,000 10,844,760
-3,750 0
-7,500 0
-5,000 100,000
-5,000 764,000
-5,000 946,000
150,000
0
0
0
0
1,196,250
2,245,110
4,497,925
6,335,955
12,485,760
180,030
425,872
828,837
1,068,339
2,285,771
Can Bottling Costs Bottling Expenses Freight
264,750
626,283
1,218,878
1,571,087
3,361,428
444,780 8,250
1,052,155 16,500
2,047,714 19,800
2,639,425 39,600
5,647,199 79,200
Water Usage Fees Marketing Salaries & Wages Benefits Utilities Rent Equipment Lease Car Allowance Telephone Vehicle Insurance Travel Lab Testing Postage/Delivery Director Fees Professional Fees Consulting Fees Depreciation Delivery Truck Lease Interest Expense Overhead Expenses
0 1,800 124,800 0 1,500 22,000 12,000 4,800 1,240 1,260 1,920 450 340 10,000 o 3,200 0
0 3,600 187,200 0 3,000 26,400 16,800 6,240 2,480 1,386 3,840 900 680 0 o 6,400 0
0 4,320 249,600 0 3,600 31,680 20,160 7,488 2,976 1,663 4,608 1,080 816 0 o 7,680 0
0 8,640 249,600 0 7,200 63,360 40,320 14,976 5,952 3,326 9,216 2,160 1,632 0 o 15,360 0
0 17,280 249,600 0 14,400 126,720 80,640 29,952 11,904 6,653 18,432 4,320 3,264 0 o 30,720 0
12,600 0
16,380 0
19,656 0
39,312 0
78,624 0
206,160
291,806
375,127
500,654
751,709
REVENUE Cans Retail Cans Wholesale Free Cans Discounts Franchise Fees Investment Income Total Revenue EXPENSES Empty Can Costs
38 Walcott Springs 2014
Bottling Expenses
444,780
1,052,155
2,047,714
2,639,425
5,647,199
Net Income Before Taxes Income Taxes Net Income
545,310 119,968 425,342
901,149 198,253 702,896
2,075,084 456,518 1,618,565
3,195,875 703,093 2,492,783
6,086,852 1,339,107 4,747,745
100,000 325,342
150,000 552,896
0 1,618,565
0 2,492,783
Payback investment Profit / Loss
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27
0 4,747,745