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Growing brands like
Willie Nelson’s Old Whiskey River Boubon, Newman’s Own Lemonades and Rheingold
Beer along with good financial discipline will expand profitability for Drinks Americas
Consumer Goods
Beverage
(DKAM-OTC: BB)
Drinks Americas Holdings, Ltd.
372 Danbury Road
Wilton, CT 06903
Phone: 205-762-7000
Patrick Kenny
Chief Executive Officer
Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
August 25, 2005
CEOCFO: Mr. Kenny, what
was your vision when founding Drinks Americas and how have your progressed?
Mr. Kenny: “The vision at the beginning was to form a
company in the alcoholic and non-alcoholic beverage sector that would grow from a platform
that we set up to become a two to three hundred million dollar enterprise. The approach we
took was to build the management team, the distribution infrastructure, and the network
first. We would then go find products that were different and a cut apart from the average
new product introductions, which we could acquire or develop, and put into the
distribution infrastructure and marketing machine that we built. We set about doing just
that and we are relatively far along.”
CEOCFO: Are the
alcoholic and non-alcoholic beverages distributed the same way or are there two separate
channels?
Mr. Kenny: “Our view is that they are consumed by the
same people and we are playing a field where anyone who touches a beverage to their lips
is a field where we are competing. In many states, California being one of the largest,
the retail outlets selling non-alcoholic beverages such as our tea or Newman’s
Sparkling Fruit Juices, also sell alcoholic beverages like Willie Nelson’s Old
Whiskey River, or Cohete Rum. The outlets in many states are the same. In some states,
they are hybrid, where in some states there are alcoholic beverage distributors and in
some states, they combine. At the end of the day, there is enough in common to have
efficiency by combining both types of product in the same company.”
CEOCFO: Is that typical
in the industry?
Mr. Kenny: “No, the alcoholic beverage industry has
evolved since prohibition, and the non-alcoholic beverage business through Coke and Pepsi.
They have evolved to be very separate in the parent companies. On the top of the food
chain, you have Coke and Pepsi that are specifically non-alcoholic beverage companies, and
you have Diageo, and Gallo Wine Company that are some of the greatest and most successful
companies. We did not see ourselves, or our business plan, locked into what has happened
over the last thirty, forty or fifty years. We saw ourselves building a company for the
next 5-20 years forward.”
CEOCFO: Will you tell us
about some of the choices you have made for your product line and why?
Mr. Kenny: “We have directed our product line with three
specific characteristics. One, we are in the alcoholic beverage industry with spirits and
wine. We are in the beer business as well. We are in the non-alcoholic, New Age and
premium juice and beverage business. Across all categories, we are in the premium segment
where consumers will pay a premium because of the quality and secondly the image and
marketing around that quality product, which reassures the consumer that it is a value
based purchase. We have targeted celebrity, and by celebrity, I mean icon celebrity
products that have the benefit of association with timeless icons like Willie Nelson and
his Bourbon, Paul Newman and his consumer product enterprise and we are the distributor of
his sparkling fruit juices. Roy Yamaguchi is an Asian fusion chef who is famous in Asian
circles and in the culinary world. We have acquired icon products such as Rheingold Beer,
which we think has great potential in metro NY, the eastern seaboard and Florida market.
It has been marketed in N.Y. since 1838. We think the longevity of a trademark has certain
value as well. We have tilted our business plan since its inception to recognize the
growth and opportunity in the Hispanic market, and against that, we have launched a
Hispanic rum called Cohete Rum. We have recently acquired the U.S distribution rights to
Damiana, which is a very popular Hispanic Mexico liqueur, and we will continue down that
path to acquire legitimate Hispanic beverage properties that have real meaning to the
Hispanic community; not contrived or Anglo beverages with a U.S. marketing plan that has
been transcribed to have a Hispanic marketing approach. We think there is a good growth
potential.”
CEOCFO: Is it
distribution rights that you are purchasing as opposed to purchasing the company?
Mr. Kenny: “No. We own most of the brands that we sell.
Some brands are so special and unique that we have entered a contract for the distribution
rights in the United States for a very long time. In the case of Damiana, we have a
fifteen-year renewable contract for the U.S. and distribution rights. We own that product
essentially within the United States.”
CEOCFO: Is there a
strategy for the types of companies that you are choosing to look at or is it on a case by
case basis?
Mr. Kenny: “Prior to going public, the benefit of the
alcoholic and non-alcoholic mix of product is that the cash flows balance out with their
individual seasonality’s. Sixteen percent of the wine and spirits business is done in
the calendar fourth quarter and the bulk of the new age and premium non-alcoholic
business, as our Newman Sparkling. We have a distributor in New York who is selling
multiple trucks weekly that in the holiday time may not be selling truckloads of products.”
CEOCFO: In this
competitive market how do you get shelf space?
Mr. Kenny: “That is a question that is a function of the
quality and the demand for the product. For the full range of our products, the Newman
product moves so well and is such a spectacularly well received product within the
umbrella of its consumer franchise, that it is hard not to get shelf space. Retailers
often accept the product right away. With Old Whiskey River, we have gotten shelf space
just by the celebrity nature of the product; everybody recognizes Willie and the brand
sells. We have done some local and store level promotion. It is a disciplined approach. We
have not undertaken brand creation where we would be required millions of dollars in
slotting allowances just to put a product on the shelf. We tried through the icon
celebrities and the icon trademarks that had products that actually find a way onto the
shelf when the retailer has a chance to do that. The other part of our business plan is
that we are very disciplined in our approach. We do not get out ahead of our supple lines,
we recognize that some shelf prices are priced different from others, and there is a
disciplined way to approach the market and make sure you get more for your dollar as you
go along.”
CEOCFO: Will you tell us
about your background in the industry, as well as the management?
Mr. Kenny: “The management team and the Board are
spectacularly talented and well suited for this. I was an executive at Joseph E. Seagram
in excess of 20 years, and ran a variety of companies from a sales and marketing capacity.
The last company I ran as a general manager was the Seagram’s ginger ale, club soda
and tonic business, which we grew from one to 30 million cases and made profitable in a
very short time. That business was ultimately sold to Coca Cola for a very big profit. My
CFO from my time at Joseph E. Seagram, Jason Lazo, has joined us and is operating in a COO
capacity because he knows so much about production and management. Fabio Berkowicz, the
former managing partner of McGlandrey the accounting firm, and one of his partners has
joined us as CFO and controller of the company. Bruce Klein is operating partner with me
managing the business. Under that, we have a Board that is comprised of Marvin Traub, the
former CEO of Bloomingdales that brings us the vast degree of knowledge on trademark and
branding. Tom Schwalm, who sold SoBe to Pepsi for hundreds of millions of dollars, is also
on our board, and Fred Schulman who is principle of Key Foods, a strong metro New York
grocery wholesaler, and was the owner of the shell that we merged into, has also joined
our board. For advising the business, we have David Sonnemburg and Shep Gordon, both icons
within Hollywood. We have a partnership with Windstar Flavors, which is very important to
our overall operation. Windstar is top tier flavor house and does all of our product
quality, R and D and research work, and Steve SAVOGLY who is the CEO of Windstar, is early
investor in Drinks as well.”
CEOCFO: Why is it time
to go public now?
Mr. Kenny: “The place that we were at as a beverage
company, felt that given our association with icon celebrities and the public appreciation
for the value of the names and marketing surrounding the products we have, that the value
which the public market would give this company is aggressive. We believe that based
on that factor, that this is the time to go public. We have seen that reflected in the
short time that we have been listed.”
CEOCFO: What is ahead
for Drinks?
Mr. Kenny: “You will see significant top line growth for
Drinks. We will assemble additional icon brands into the company as well as grow at an
acceptable rate. The brands like Rheingold Beer have infinite potential in New York when
properly marketed. With Paul Newman’s lemonades, you will see incremental product
introductions in that brand category. It will be a combination of growing the brands we
have with good financial discipline, extending out the flavor offerings of some of those
brands and acquiring additional brands and entering ventures with top tier icon
celebrities and expanding profitably.”
CEOCFO: What are the
challenges that you face and how are you ready?
Mr. Kenny: “The challenges we face are the same
challenges that any consumer products company faces. We are smaller than Coca Cola or
Pepsi Cola, but the challenges are not smaller. The stakes may be higher but there is a
huge upside to our company as well. We are optimistic that we have operated for two and a
half years and we have reached a point where we are public. We have the resources to do
what we have to do to move forward and we think we are ready to meet the challenge.”
CEOCFO: In closing, what
should investors know that that they might not recognize when they first look at the
company?
Mr. Kenny: “What I hope jumps off the page for them is
that we are a financially disciplined company with a unique but very sound brand plan,
with products that are going to grow exponentially as demonstrated by our Paul Newman
growth and growth in the company. We will be on our way to being a multi million dollar
company in a very short time given the value of the brands we have now, the distribution
system that we have in place to accelerate their growth and the skill base of the
management team and the board of advisors to make that happen.”
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