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Castle Brands Inc's Comment on Competitors and Industry Peers
The beverage alcohol industry is highly competitive. We believe that we compete
on the basis of quality, price, brand recognition and distribution strength. Our
premium brands compete with other alcoholic and nonalcoholic beverages for consumer
purchases, retail shelf space, restaurant presence and wholesaler attention. We
compete with numerous multinational producers and distributors of beverage alcohol
products, many of which have greater resources than us.
Over the past ten years, the U.S. wine and spirits industry has undergone dramatic
consolidation and realignment of brands and brand ownership. The number of major
importers in the U.S. has declined significantly. Today there are eight major
companies: Diageo PLC, Pernod Ricard S.A., Bacardi Limited, Brown-Forman Corporation,
Beam Suntory Inc., Davide Campari Milano-S.p.A., Remy Cointreau S.A. and LVMH
Moët Hennessy Louis Vuitton S.A.
We believe that we are sometimes in a better position to partner with small to
mid-size brands than the major importers. Despite our relative capital position
and resources, we have been able to compete with these larger companies in pursuing
agency distribution agreements and acquiring brands by being more responsive to
private and family-owned brands, offering flexible transaction structures and
providing brand owners the option to retain local production and “home”
market sales. Given our size relative to our major competitors, most of which
have multi-billion dollar operations, we believe that we can provide greater focus
on smaller brands and tailor transaction structures based on individual brand
owner preferences. However, our relative capital position and resources may limit
our marketing capabilities, limit our ability to expand into new markets and limit
our negotiating ability with our distributors.
By focusing on the premium and super-premium segments of the market, which typically
have higher margins, and having an established, experienced sales force, we believe
we are able to gain relatively significant attention from our distributors for
a company of our size. Our U.S. regional vice presidents provide long-standing
relationships with distributor personnel and with their major customers. Finally,
the continued consolidation among the major companies is expected to create an
opportunity for small to mid-size wine and spirits companies, such as ourselves,
as the major companies contract their portfolios to focus on fewer brands. | |