Knightsbridge Fine Wines, Inc. (KFWI)
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strong management and superior sales team are giving Knightsbridge Fine Wines acquisitions
an edge in the marketplace
Mr. Shapiro: I have been a fan of wine for many years and started my career as an investment banker and was presented with a small European wine company for sale. Initially I wasnt very excited about it because it was a very small business, but upon due diligence, I found many people in the wine industry had tremendous emotional reactions when you mentioned certain brands. I got very excited by seeing the emotional reactions that people had to specific brands of the wine industry. That led me to do homework on the industry and realize that there are several critical difficulties that most wineries face, that would make it hard for them to succeed. However, as part of a global wine country, they would have a much greater chance to become a very important player within the wine industry. I built a business plan and based on my hypothesis, I was met with a tremendous response from winery owners in the four different continents.
CEOCFOinterviews: What do you want to do?
Mr. Shapiro: We are set up to build a truly global wine company with a state winery in every great wine-growing region of the world. There are few to no global brands that exist right now, whether you want a Shiraz from Australia, a Cabernet from California, a Sauvignon Blanc from New Zealand, or a Chianti from Tuscany, they can buy the brand that represents the best from the best, at that particular wine-growing region from the world. We are set to build a truly diversified global wine company that represents the best from the best.
CEOCFOinterviews: What do you realize about doing this that hasnt been thought of before?
Mr. Shapiro: Many wineries are set up as family businesses and one of the biggest challenges of winery owners is that they were very successful in different businesses such as construction or real estate and dot.com companies, and owning a winery is the ultimate statement of success in the world. What happens is there are people who have been successful in other businesses, but they have no knowledge of how to develop a consumer brand, how to market wide and sell wide. We have built the dream team of sales and marketing; we have hired the best of the best from all of the great wine countries in the world to build a sales and marketing organization, that has an average of 15 to 20 years experience in the industry.
CEOCFOinterviews: When you buy a winery, what is it that you are looking for?
Mr. Shapiro: The
type of winery we look to acquire should have a healthy balance sheet and there has to be
tremendous quality within the bottle. It takes five to seven years to make a bottle of
wine, so we are not going to look at properties with poor quality. We do the hard part; we
know how to move and sell the products, that is where we specialize. We find these estate
wineries with great products that dont know how to sell them, and we allow the owner
stay involved in the production and operation side, which is where they excel, and we come
and do the heavy lifting which is selling the inventory and creating the
brand. When we come in, we are warmly embraced as the saviors of the wineries
because they didnt know how to compete in the global marketplace. It is extremely
expensive for any single winery or boutique brand, to have a national or international
sales force. We have about eighteen fulltime sales and marketing people in the United
States alone, and we have sales departments in 45 countries in the foreign market. It is
such a large distribution that we have built, that it would be cost prohibitive for any
individual winery to do on their own, and without it they arent going to get any
sales to the end consumer.
and where is the wine distributed?
CEOCFOinterviews: Do you do any advertising that targets the end-user?
Mr. Shapiro: We do some advertising to the wine enthusiasts and spectators of the world; we primarily target the distributors or hotel or restaurant operators, and the people that will be asked for recommendations.
CEOCFOinterviews: How do you convince the dealers to give you the shelf space?
Mr. Shapiro: It is an extremely competitive marketplace; it is a relationship business. To that end our sales team is run by Joseph Carr, Executive Vice President of Sales, who is a former executive vice president of Beringer Blass Wines and former president of Mildara Blass Wines, which is the second or third largest wine company in the world. Our sales team all comes from E. & J. Gallo Winery, Mendazi, the Charmer Sunbelt Group and Brown-Forman Corporation (BFB); the biggest and most successful wine companies in the United States. We combine those relationships with products that are with exciting packaging that catches the eye, priced at the right price point and tastes good to great. We got a phenomenal response back from our distributors because of the amount of marketing research and time that went into the development of these products. It is very difficult to differentiate your wine from someone elses wine on a wine shelf and we have gone to great lengths to do that and we have gotten much appreciation from the wine retailers.
CEOCFOinterviews: How active are you with your subsidiaries companies?
Mr. Shapiro: On the production and quality side, we export to our subsidiaries the ability to purchase; there are tremendous discounts in the wine industry, so we can immediately reduce their cost of goods. We can immediately reduce a lot of the accounting and financial administration overhead, which is all out of our world headquarters in Napa Valley. There is a lot of operational help that we bring to the table from the get-go. The biggest help Knightsbridge gives to the subsidiaries for the companies that we acquire is a dramatic improvement in cash flow. We immediately take their product and stick it into our pipeline and generate national and international distribution for them in a way that they have never seen or dreamed of before. That is the greater value that Knightsbridge has to any winery that it acquires. We also have many award-winning wine makers and one of the beautiful things of the wine industry is that it is easy to appreciate someone elses product without denigrating your own product, whereas you will never see the chairman of Ford, praised by General Motors. With wine, you appreciate it for the value that it has, so all of our wine makers provide different ideas to get the best final product out of each estate.
are a relatively new company, will you tell us about the financial condition.
CEOCFOinterviews: How many wineries do you look at before you decide on one?
Mr. Shapiro: At this point, we have reviewed over 140 wineries in four continents. We spend a lot of time interviewing each employee one-by-one to find out everything good and bad about the property. We do tremendous due diligence about the wine, the reputation and trade. It is a lengthy process, which probably takes an average of six to eight months before we will execute on a property.
CEOCFOinterviews: What do you see as your biggest challenges and how are you ready?
Mr. Shapiro: Our current challenge is that we think we are going to be sold out of our product very quickly. Because we are a growth company and our sales have grown at exponential rates, it is important and crucial to accurately predict our sales volume month-to-month and quarter-to-quarter. We are different than other industries in that wine is a very time intensive product especially when you are importing wines from around the world; it can be four to eight weeks just to bring in a wine from Australia, then we have to bottle it and let it age before it is released. We need to be predicting at least six months into the future after our sales. We are very nervous right now about selling out of a number of our products and not being able to fill all of our customer orders.
CEOCFOinterviews: You mentioned that you bottle the wine there; how does that work?
Mr. Shapiro: One of the things we do as in international company is we take the wine and put it into a container that has a big refrigerator inside, and we ship it in bulk format for our winery in California, who then puts it in the bottle and puts on the label. By doing this, we save four dollars per case in shipping costs because you can fit a lot more wine into a container that you could if you had to package it. It allows us to compete better on price or just as importantly, on margin. Many of the high volume products of the market place are the very low margin products for the retailer. We design our wine to compete or allow a much greater margin for the retailer, and for everything else we can get like shelf space, floor space etc. That is one example that we have of wine going out on a global basis, where we ship wines from Spain, Australia, California, and South America, in bulk format, and then being bottled at that specific winery for that specific continent. We save shipping costs by doing this.
CEOCFOinterviews: You were recently listed on the Franklin and Berlin exchanges, why is that?
Mr. Shapiro: Because of our acquisitions strategy in Europe, we thought it would be important to be a European listed company. We currently have a number of products being sold in the European market. Europe is a far more mature wine consumer market than the United States. Given the value that the investment community can associate with our brands in those markets, they still have a tangible product that they are familiar with, that they didnt buy from the local store, we thought that would be appealing. Another reason is because we are acquiring a number of European properties, we believe that we can facilitate the transactions by being listed on the European exchange as well, so we were not viewed as simply and American company but as a global company as well.
CEOCFOinterviews: In closing, why should investors be interested now, and what should they know that perhaps they might not realize when they look at your company:
Mr. Shapiro: Investors should realize that a company that becomes involved with Knightsbridge could dramatically increase their distribution on a global and national basis with the best sales team from the industry. Each member of our senior management in sales and marketing has a long resume of success of brands that they have created from nothing or brands that they have taken over and brought to million-case level sales volume. That is unique within the industry. The time is right now because there is a massive change going on in the wine industry and wineries that are single-brand will not be able to succeed in the future; they will not be able to get retail attention whatsoever due to the crowding of the marketplace. For the single brands that are not acquired by Knightsbridge or someone like us, it is unlikely that they will be in business in three to five years. Knightsbridge provides them a portfolio, platform and foundation to teach them how to correct all the mistakes that they have made, because we have been there and done that. That is why we are an exciting company in the wine industry and the reception that we receive from vineyard owners and distributors on a global basis, is a tremendous validation of our philosophy. We are very excited and we are lucky that we work in very fun industry. It is great to provide a product that enhances peoples lives.
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