Driving Profits in the New Economy: Profiting From the Hottest Beverage Trends Presented by Robert Plotkin BarMedia Sean Ludford BevX.com Nightclub & Bar Show Las Vegas Tuesday, March 3 rd, a.m. – 11 a.m.

Knowing what lies just around the corner would make our business less precarious Forecasting trends before they hit is like knowing next month’s stock quotes What mega-trends are affecting the hospitality industry as a whole? What spirits are on the rise and which are cooling off? How is the recession affecting consumer spending? Which cocktails are gaining momentum and losing steam?

There were over 945,000 food and beverage establishments in U.S. in 2008 Every year 55,000 new restaurants open in the U.S. On average 133,000,000 Americans frequent restaurants every day Restaurant sales have grown from… $379B in 2000 …to a projected $558.3B in 2008 (+ 47.3%) Source - National Restaurant Association Industry Snapshot — By The Numbers

In 2008, 88% of restaurants in the U.S. were franchises or multi-unit operations Compared to 85% of all restaurants independently owned in % of franchise restaurants fail within 3 years 59% of independent restaurants fail within 3 years Source - National Restaurant Association Industry Snapshot — Independents vs Franchises

Spirits and Wine Outpace Beer Growth Industry Snapshot — On-Premise Volume Growth

Spirits Volume + 16% since 2003 (On- & Off-Premise) Industry Snapshot — Distilled Spirits Volume Trending Up

Vodka, Rum and Tequila Trending Up Industry Snapshot — Spirits’ Category Volume

2003 vs 2008 Industry Snapshot — Top 10 Selling Spirits Brands

2003 vs 2008

Industry Snapshot — Top Selling Spirits On-Premise 2003 vs 2008

Industry Snapshot — Top Selling Spirits Regionally Most Popular On-Premise Spirit Brands by Region, 2008

Industry Snapshot — Bestselling Cocktails On-Premise Most Popular On-Premise Mixed Drinks, 2008

Industry Snapshot — Bestselling Cocktails On-Premise — Regionally Most Popular On-Premise Mixed Drinks by Region, 2008

Consumer Research — Next Level Marketing & Nova Marketing Services In December 2008, Next Level Marketing and Nova Marketing conducted a research study of 500 on-premise consumers — All participants were of legal drinking age Split 50% male / 50% female Located evenly throughout U.S. All had ordered beverage alcohol on-premise past 30 days

Consumer Research — Next Level Marketing & Nova Marketing Services Research study gathered on-premise consumer insights into: Impact of the economic downturn On-premise purchasing habits Attitudes regarding drink pricing Drink menu effectiveness Quantitative findings come with a “confidence level” of 95% Next Level Marketing & Nova Marketing allowed us to share the study’s findings

Consumer Research — On-Premise Consumer Insights Reducing Full-Service Bar or Restaurant Spending — Nearly 80% of consumers say they’re going out less often — 25% spending less when they do Source: Next Level Marketing and Nova Marketing

Consumer Research — On-Premise Consumer Insights Ways To Reduce Spending Per Visit — Consumers looking to cut back on their spending per visit order less expensive entrees, take advantage of special promotions, cut back on side orders and cocktails Source: Next Level Marketing and Nova Marketing

Drinking Behavior Changes — When asked how their beverage alcohol purchases have changed over the past year, consumers split evenly between ordering the same and ordering less per occasion Source: Next Level Marketing and Nova Marketing Consumer Research — On-Premise Consumer Insights

Most Important Beverage Alcohol Items — Consumers rate “Everyday Drink Prices At A Good Value” as the most important beverage program element Source: Next Level Marketing and Nova Marketing Consumer Research — On-Premise Consumer Insights

Importance of Price When Ordering Drinks — Price of beer, wine and spirits/drinks is “very important” to 28% of consumers and “somewhat important” to 50% Source: Next Level Marketing and Nova Marketing Consumer Research — On-Premise Consumer Insights

Knowing Prices in Advance — Most consumers don’t know the exact price of beer, wine and cocktails before they place their orders Source: Next Level Marketing and Nova Marketing Consumer Research — On-Premise Consumer Insights

Drink Taste Expectations – Spirits Consumers strongly agree that cocktails made with premium brands taste better than those made with house brands Source: Next Level Marketing and Nova Marketing Consumer Research — On-Premise Consumer Insights

Drink Taste Expectations — Summary Consumers strongly agree that premium beers, wines and spirits taste better than house brands Source: Next Level Marketing and Nova Marketing Consumer Research — On-Premise Consumer Insights

How Much More Will Premium Cost? — On average, consumers expect to pay $1.81 more for premium beer, $2.44 more for premium wine and $2.80 more for a premium cocktail Source: Next Level Marketing and Nova Marketing Consumer Research — On-Premise Consumer Insights

Responsiveness to Suggestive Selling — Half of the consumers responded that they’d probably order a beer, wine or spirit suggested by a bartender/server Source: Next Level Marketing and Nova Marketing Consumer Research — On-Premise Consumer Insights

Beverage Purchase Decision Timing — Nearly 80% of consumers don’t know in advance what beer, wine or spirit/drink they’ll order Source: Next Level Marketing and Nova Marketing Consumer Research — On-Premise Consumer Insights

Beverage Purchase Influencers — Beverage menus and bartender/server suggestions are the most important order influencers Source: Next Level Marketing and Nova Marketing Consumer Research — On-Premise Consumer Insights

Reading Drink Menus — Nearly 90% of consumers read the drink menus at full-service bars and restaurants Source: Next Level Marketing and Nova Marketing Consumer Research — On-Premise Consumer Insights

Types of Drink Menus — Consumers clearly prefer stand-alone drink menus over drink listings in food menus, table tents or insert cards Source: Next Level Marketing and Nova Marketing Consumer Research — On-Premise Consumer Insights

Number of Offerings on Menus — On average, consumers want to see 14 beers, 14 wines and 16 cocktails offered on drink menus Source: Next Level Marketing and Nova Marketing Consumer Research — On-Premise Consumer Insights

Information on Drink Menus — Most consumers want to see drink descriptions on menus Source: Next Level Marketing and Nova Marketing Consumer Research — On-Premise Consumer Insights

Menu Test #1 - Functional Descriptions Only — Based on functional descriptions, 47% of consumers would order House Margarita, 31% Top Shelf Margarita and 22% Ultra-Premium Margarita Source: Next Level Marketing and Nova Marketing Consumer Research — On-Premise Consumer Insights

Menu Test #2 - Adding Romance Copy — Adding romance copy reduces orders of House Margaritas from 47% to 33% and increases orders of Ultra-Premium Margaritas from 53% to 67% Source: Next Level Marketing and Nova Marketing Consumer Research — On-Premise Consumer Insights

Menu Test Summary — Adding romance drink copy to menus drives significant drink trade-up — addition of drink prices has little impact on trade-up Source: Next Level Marketing and Nova Marketing Consumer Research — On-Premise Consumer Insights

Top 15 Cocktail Flavors Source: Next Level Marketing and Nova Marketing Consumer Research — On-Premise Consumer Insights

Interest in Emerging Cocktail Flavors Source: Next Level Marketing and Nova Marketing

Consumer Research — On-Premise Consumer Insights Top 15 Favorite Cocktails Source: Next Level Marketing and Nova Marketing

Consumer Research — On-Premise Consumer Insights Top 15 Favorite Call Brands Source: Next Level Marketing and Nova Marketing

Beverage Information Group The Beverage Information Group Handbook Division 17 High Street Norwalk, CT Eric Schmidt Manager of Information Services Publishers of:

Presented by Robert Plotkin BarMedia Sean Ludford BevX.com Driving Profits in the New Economy: Profiting From the Hottest Beverage Trends