AGENDA 10.30 Train departs Liverpool St Presentations: 12.27 Arrive Norwich Introduction: Our Group Vision 12.30 Transfer to Naked HQ and lunch on arrival Part 1: Naked Wines - a real life 13.00 Presentations and Questions working example 14.45 Walk-round Part 2: Customer Engagement 15.15 Wine Tasting and Presentation 16.30 Bus departs for Norwich Train Part 3: Proof the model works: station / Football Taste the difference! 17.00 Train departs for London 18.57 Train arrives at Liverpool St 2
OUR VISION IS TO.. Deliver sustainable growth in shareholder value …by doing the right thing * for our customers, suppliers and people * If we wouldn’t want to tell our mums about it, we don ’ t do it! 4
GROUP OVERVIEW Majestic Retail Naked Wines Majestic Lay & Wheeler Commercial Market size* £2.2bn £17bn £2.0bn £0.7bn (UK) (Global) Sales for the year £231m £81m £42m £10m to March 2015 Proposition Help people find Making a privilege Making your wine Your trusted wines they will into a pleasure list profitable guide into fine love wine Competitive 800 delightful The model – 200 delivery hubs Normal people advantage graduates who crowdfunding who happen to love wine independent love fine wines winemakers * Source: Internal data 5
NAKED WINES MODEL Delivering sustained growth in Delivering high levels of shareholder value by doing the customer loyalty, drives right thing for our customers, retention… suppliers and people …enabling us to target profitable segments with High retention drives compelling customer strong cash flow… propositions… High growth attracts the …which we reinvest best people and suppliers aggressively in growth 6
Part One: Naked Wines – Real life example
1 TARGETING PROFITABLE SEGMENTS… Sales (£) Margin (%) Gross Profit (£) x = Price Price Price (£) (£) (£) £5 £10 £10 £18 £6 £12 Majestic Average Price Point: £7.88 / bottle* Naked & Majestic target the most profitable segment of the wine market: customers looking for inspiration . Naked Average Price Point: £9.54 / bottle* Why? Because… • These customers value SERVICE * FY16 YTD, ex sales tax, excluding beer/spirits • QUALITY matters – a good buyer can add value • It’s FUN for staff and customers • ‘That’s where the money is’ 8
2 …WITH A COMPELLING PROPOSITION Customers got a great deal… …so we launched an appeal One of our wine …AND the satisfaction makers needed of helping a talented help… wine maker 9
3 DELIVERING LOYALTY AND LIFETIME VALUES Naked Wines UK Total contribution by year of Angel acquisition (£k) Contribution compounds year- on-year, driving growth – with even the earliest cohorts of Angels still in growth 10
4 …WHICH DRIVES STRONG CASH FLOW Reported EBITDA Standstill EBITDA 6 4 If we stopped investing 2 in growth, we would 0 £m -2 make £5m a year -4 -6 -8 FY14 FY15 FY13 FY16 H1 11
5 …WHICH WE INVEST AGGRESSIVELY Growth spend & ROI history (rolling 12 months) 3,500 160% 140% 3,000 Increasing 120% 2,500 investment while 100% improving ROI 2,000 80% 1,500 60% 1,000 40% 500 20% - 0% L12M Spend L12M RoI 12
6 …WHICH DRIVES GROWTH Mature Angel Numbers (thousands) H1: +29k net new Mature Angels* (vs +16k in H1 FY15) 2008 2009 2010 2011 2012 2013 2014 2015 *Reminder: A Mature Angel is an Angel who has started their fourth month 13
7 GROWTH ATTRACTS THE BEST PEOPLE AND WINE MAKERS Some of our Famous Wine Labels: 14
OUR APPROACH TO INVESTMENT – AGGRESSIVE AND DISCIPLINED JAMES’ JOB DESCRIPTION: “Release under -performing capital and redeploy it into proven high ROI opportunities, while being agnostic about Country, Company, Open/Capex, Customer acquisition/retention etc …” 15
AIM TO DELIVER ABOVE MARKET ROI WE ARE AGNOSTIC ABOUT COUNTRY, COMPANY, OPEX/CAPEX, ACQUISITION/RETENTION Current ROI’s: Retail Commercial Naked L&W Wines We have a rich New Customers 30%+ 60-80% >100% TBC opportunity to Stores <25% n/a n/a n/a redeploy capital efficiently Wine quality – Bottle TBC TBC ~20% TBC ageing Wine Quality - Product TBC TBC 50%+ TBC Service – 5* Inbound TBC TBC >100% <0% to Service – Outbound TBC TBC TBC >100% Earlier Wine Maker 20-25% payment 16
EXAMPLE 1: CUSTOMER ACQUISITION 1,200,000 60,000 1. Cut the new business budget by this much at 1,000,000 50,000 the start of the year Mature Angels Recruited 2. Review proposals to build 800,000 40,000 spend back up 3. Ensure that deals in here £k spent 600,000 30,000 are not repeated 400,000 20,000 200,000 10,000 0 0 RoI on New Mature Angel Acquisition 17
EXAMPLE 2: OUTBOUND SERVICE • Redeployed resource out Campaign 1 of low value campaigns Campaign 2 Campaign 3 • Test and Learn – analyzing Campaign 4 ROI down to the level of Campaign 5 individual outbound campaigns – optimize our Campaign 1 service for ROI Campaign 2 Campaign 3 Campaign 4 Campaign 5 18
EXAMPLE 3: INBOUND SERVICE Key Metrics (Indexed to 5*=100) 5* ratings have gone up from 65% An Angel giving a 5* rating to 85% has twice the lifetime value of 1*-4* rating 19
EXAMPLE 4: IMPACT OF WINE INVESTMENT ON RETENTION * BIA = Buy It Again Example Wine 1 : Substituted with a reserve level product: % Customers converting to Mature Angels Result: Gross Profit reduced by 4.3% however base BIA score increased by 10bps to 91 First Order Wine Rating Learning points: • First … Guide people to the highest rated wines during the recruitment process Customers with stronger BIA* %’s across their • Connect new customer budgets for new angels to BIA rating initial orders go on to deliver substantially achieved greater loyalty and consequently lifetime value • Then… Review winemaking options to improve scores: Better wine, lower price, longer aging 20
EXAMPLE 5: IMPACT OF FIRST ORDER VALUE ON ROI Retention rate & annual contribution/customer (by first order spend, UK) % Customers Retained 2 Years as Mature 80% £100 £90 70% £80 Focus our recruitment 60% £70 activity on higher quality 50% £60 Angels 40% £50 prospects , who are willing to £40 30% spend more on first case… £30 20% £20 …leads to much lower 10% £10 attrition and step change in 0% £0 £ spent on first order First Order Wine Rating 2 customer lifetime value Retention % Cont / Customer 21
HOW DO YOU PUT A VALUE ON NAKED? 1 How big could it be? 2 How quickly can we get there? 4 3 The Plan... 22
HOW BIG COULD IT BE? Benchmark examples: UK USA AUS Market size £2bn £14bn £1bn Notable competitors and Laithwaites (c.£170m); Laithwaites USA ?? sales Virgin Wines (c.40m); (c.$170m?); Wine Society (c.£80m) Winery direct (c.$1.6bn) 23
HOW QUICKLY CAN WE GET THERE: MODELLING NOTE: COST CATEGORISATIONS ARE NOT THE SAME AS RESULTS PRESENTATION See comments in cells for FY16 assumptions FY15 FY16 FY17 FY18 FY19 FY20 INPUTS Growth Spend -3.1 -3.0 -3.0 -3.0 -3.0 -3.0 "Growth in Growth Spend" SIMPLIFIED GROWTH MODEL RoI on Growth Spend 120% 140% 140% 140% 140% 140% Growth in Admin Costs 26% Average contrib margin 7.2% 10% OUTPUTS Contribution (after mkting costs) 5.7 10.7 14.9 19.1 23.3 27.5 Admin (exc mkting costs) -8.3 -10.5 -10.5 -10.5 -10.5 -10.5 EBIT -2.6 0.2 4.4 8.6 12.8 17.0 Sales 79 107 #DIV/0! #DIV/0! #DIV/0! #DIV/0! Sales growth 35% #DIV/0! #DIV/0! #DIV/0! #DIV/0! 24
THE PLAN : INVESTING IN OUR CUSTOMERS ALLOWS US TO MAXIMISE RETURNS, FOR LONGER Target higher value customers More attentive customer service • Lower volumes short term – but greater • Increases service cost but delivers lifetime return enhanced ROI • Higher acquisition cost per customer Long term + Acquisition Retention Value Strengthen our Value proposition to enhance customer lifetime value • Improved quality by investing deeper in supply chain • Hold wine longer • Improve range breadth & depth 25
THE PLAN: APPLYING NAKED’S PRINCIPLES ACROSS THE GROUP Loyalty Cash Flow Investment Growth Attracting the Compelling best people & proposition suppliers Naked Wines Focus on: Retention, Loyalty Majestic Focus on: Investment, Growth, Proposition Commercial Majestic Focus on: Investment, Growth, People Retail Lay & Focus on: Cash, Investment, Growth Wheeler 26
Part Two: Customer engagement
OUR CUSTOMER ENGAGEMENT STRATEGY IS… 1 Unique 2 Hard to Copy 3 Our Competitive advantage 28
ENGAGING CUSTOMERS IS ABOUT SPEAKING TO THE THINGS THAT REALLY MATTER TO THEM Emotional needs Functional needs (money, time, (recognition, expression, inspiration, excitement) health) We want customers to feel… …they matter …they’re doing something good …they’re safe …they’re smarter than their peers 29
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