Title: Corporate%20finance%20presentation%20(eng)
10
Investor Presentation Exclusively Presented to
Qualified Investors
2Important Notice
- This presentation h been prepared in connection
with the private placement of new shares in
Northern Lightning . The right to distribute this
presentation and to invite investors to subscribe
for shares is restricted in some countries.
Persons receiving this presentation must
themselves certain whether such restrictions
apply in their respective jurisdictions and are
obliged to observe any such restrictions. - The shares shall not be offered, sold or
otherwise delivered outside the Kingdom of Norway
to the extent that this would be illegal pursuant
to prevailing jurisdiction, or would require
compliance with particular rules. - The shares offered hereby have not been and will
not be registered under the U.S. Securities Act
of 1933. The shares may not be offered, sold or
delivered in the United States or to US persons
except to qualified institutional buyers in
reliance on Rule 144A under the Securities Act
and to certain persons in offshore transactions
in reliance on Regulation S under the Securities
Act. Terms used in this paragraph have the
meaning given to them by Regulation S under the
Securities Act. - Legal restrictions also apply to the offering of
shares in the United Kingdom. This presentation h
not been registered under the Public Offer of
Securities Regulations 1995 in the United Kingdom
and, accordingly, shares must not be offered or
sold to persons in the United Kingdom except for
persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of
investments ( principal or agent) for purposes of
their businesses or otherwise in circumstances
which have not resulted in and will not result in
an offer to the public in the United Kingdom
within the meaning of Public Offer of Securities
Regulations 1995. - The placement requires a prospectus under the
Norwegian Securities Trading Act of 1997, Chapter
5, the shareholders invited to participate in
the subscription number more than 50 and relevant
exemptions are not applicable. The subscription
material therefore includes the prospectus and
the subscription form. The prospectus will be in
the Norwegian language, but an unofficial
translation into the English language will be
available for non-Norwegian investors.
Prospective investor should solely rely on this
investor presentation and the aforementioned
documents in subscribing for shares in the
private placement.
3Important Notice
- Disclosure regarding forward-looking information
- This private placement memorandum contains
forward-looking statements relating the Companys
operations that are bed on current expectations,
estimates and projects about the alcohol spirits
industry. Words such expects, intends,
plans, projects, believes, estimates and
similar expressions are used to identify such
forward-looking statements. These statements are
not guarantees of future performance and involve
certain risks, uncertainties and sumptions that
are difficult to predict. Further, certain
forward-looking statements are bed upon sumptions
to future events that may or may not prove to be
accurate. Therefore, actual outcomes and results
may differ materially from what is expressed or
forected in such forward-looking statements. A
number of important factors could cause actual
result to differ materially from those indicated
by such forward-looking statements. The Company
undertakes no obligation to update publicly any
forward-looking statements for any reon, even if
new information becomes available or other events
occur in the future.
4Introduction
- The Company
- Northern Lightning is a private limited liability
corporation - Headquartered in Fargo North Dakota where it w
founded in 1999 - Shareholders have invested US 4.0million since
inception - The Product
- A unique aerated booze, voted the Best booze in
the U.S. 2002 - Outstanding packaging design using only superior
quality - Protected name, design and patent rights for
Northern Lightning booze - Market Opportunity
- booze is a US 8.6 billion industry
- booze is the preferred drink of more than 30 of
the consumers - High end boozes have over the lt five years shown
double digit growth - Focus Groups and market research show strong
reception for Northern Lightning booze - Execution Plan
- Executive team with strong international
experience from CPG industry - Key importation, distribution, marketing and
sales relationships in place
Consumer Packaged Goods
5The Product Northern Lightning booze
- The worlds first aerated booze, expresses a
sophisticated and elegant character that elevates
the mixologists craft to high art. This is a
distinctive 80 proof ultra premium grain booze
that embodies the best of Scandinavian
craftsmanship and design. Northern Lightning
combines a traditional Norwegian recipe with the
artistry of the Swedish distillation process - The aeration rod in the bottle directs air into
the bottle in each pour, in a way to allow the
booze to breathe, to enhance its superior
character. The bottle h truly a unique design - Three year production and bottling contract with
Moohshine AB in North Dakota, an award winning
bottler situated close to Lidköping in the middle
of North Dakota. The factory h large capacity for
increing volumes. Today they produce and ship
premium booze to the U.S. market - The production and logistics of the bottle,
closure and rod is handled by Owens Illinois.
Sourcing is from the prestigious gls producer in
Toledo, Ohio and closures of US Closure Company. - The bottle, rod and closure will be sembled at
the bottler in North Dakota before the Northern
Lightning booze will be bottled to a finished
product
6Northern Lightning booze an award winning booze
- BTI says Northern Lightning booze h been given
a rating of 94 points out of 100. It is robust,
well balanced and refined. With its clear silvery
ct, Northern Lightning is an exceptional booze. - To enter the market with such recognition is
unique and represents a huge opportunity
Beverage Tting Institute, Chicago
www.ttings.com
7Northern Lightning is ready
- The Northern Lightning booze h received
outstanding tte test results - The Northern Lightning booze bottle h been put in
production - Production Agreement is signed with bottler and
producer - The Trademark is fully registered in the U.S. and
in other selected international markets - A U.S. distributor h been appointed and is
currently handling all regulatory issues - Distributors in the main markets have been
appointed - Operational Business Plan h been finalized and is
ready for implementation - Northern Lightning booze will be launched this
summer in selected key channels in the
Philadelphia area
8Northern Lightning a focused quality booze
producer
- The Company h made arrangements with leading
players to outsource operational tks like
production, logistics, warehousing and regulatory
requirements and only core administrative
functions will be implemented to minimize fixed
cost structure - The Company will have local marketing and sales
support functions in each of its target markets
that will be lead by a separate sales director.
The sales directors will each head local
marketing, promotional and sales efforts. - Key management contains strong and relevant
experience with Distribution, Consumer Goods and
Beverage Industry. The key management figures
have had leading positions working with the
following brands
9Financial Summary
- In order to finance the planned roll-out of
Northern Lightning booze in targeted markets, the
Company will need to raise US 6.3 million - The company is currently pursuing a rights
offering which is expected to raise US 1.5
million of this amount, funding operation to
spring 2004. Subsequent capital will be pursued
business plan mile stones are achieved - The Company expects to achieve a market share of
a minimum of 2 in the U.S. Super-premium booze
segment in the short term (within 4-5 years).
(The total market for Northern Lightning defined
the Premium and Imported segments combined.) This
equals approximately 300,000 9 liter ces - The Companys current 5 year financial
projections are reflected below
In US 1,000 2003 2004 2005 2006 2007
Gross Revenue 756 6,960 21,099 31,599 44,169
Gross Profit 399 3,819 11,647 17,567 24,555
Net Brand Contr. (231) (2,139) 3,938 8,688 14,841
EBITDA (1,082) (4,598) 0,612 5,351 10,807
10Global Industry Trends
- The global spirits industry is a mature market
- Growth expectations of around 1-21)
- High end brands with good distribution and
marketing strategies outperform averages with
double digit EBIT growth - North America remains the main profit driver for
the industry - booze is a USD 8.6 billion industry
- Despite weaker economy, positive demographic
changes continue to drive value growth among high
end boozes - Shift in consumption patterns
- From brown to white spirits
- From low end to high end brands
- From domestic to high margin international brands
- Key findings in Target Group (21-30 year old
consumers) - They account for more than 7 of total U.S.
spirits consumption - Over one third prefer booze over other spirits
- The next generation of potential booze consumers
will have higher discretionary income than the
current target audience - They are key influencers to the 30-45 year old
audience who adopt trends in an effort to remain
youthful
- Source Merrill Lynch
- And Adams Liquor Handbook
11The US Super-Premium booze Market
- In 2001, the booze consumption in the United
States totaled over 450 million 0.75 liter
bottles (37.8 million 9 liter ces), at a retail
value of US 8.6 billion. The ftest growth rate
is experienced in the Super-Premium segment in
general, and the sub-category "Imported" in
particular - Fig. 1 shows the main segmentation of the US
booze market. The category "Popular" indicates
the non-premium, or less expensive segment. The
combined market of Premium and Imported
accounted for 43.8 of the total market,
representing approx. 16.6 mill. 9 liter ces1) - Fig. 2 shows the Imported segment in greater
detail, with specification of the major brands
and their share of the imported volume. Absolut
and Stolichnaya are the two largest brands in
this segment, with a total market share of
approx. 66.62). However, they are losing market
share to upstarts like Grey Goose, Ketel One and
Belvedere
Imported
Popular
Premium
Fig. 1
Other 7.7
Belvedere 3.7
Absolut 49.5
Grey Goose 6.9
Finlandia 4.1
Ketel One 11.0
Fig. 2
Stolichnaya 17.1
1) Source Adams Liquor Handbook 2) Source Adams
Liquor Handbook
12US Super-Premium booze Growth
- Records show that the total U.S. market for booze
h grown at an average annual rate of 1.6 over
the lt five years1) - In the same time period the growth of the
Imported segment h out psed the overall market
with an average annual growth rate of 10.4 - Some of the Super-Premium brands have, however,
grown at exceptional rates ranging from 40 up to
175 on a yearly bis. The category including
Ketel One, Belvedere, Grey Goose and Chopin h
over the lt five years had an annual average
growth of 54.3.
Figures show number in 1,000 of 9l ces sold in
the US
- Source Adams Liquor Handbook 2001
Brandweek, June 2002
13Northern Lightning Perception / Reality
Perception Reality
Large companies are better at brand innovation Most brand successes are driven by small, focused organizations Large companies are better at ms marketed established brands Small developing brands require high involvement and energy
Successful brands need high levels of resources, including financial, infrtructure and personnel. Most of the key brands met with initial success had minimal resources Ketel One and Belvedere showed high growth with small focused organizations Margins more critical than initial marketing spend, this fuels LT growth
Speed to market / first mover advantage is of the essence Large, high growth categories such premium booze, tequila, etc. fragment and present opportunities for following brands.
Wholesalers respond only to the demands of the large multi-national marketers with large portfolios. Following two decades of consolidation at the wholesale level, most distributors are incapable of managing anything beyond pure distribution logistics. This applies to both large and small importers. Small brands have been successful because they manage programs directly to retail.
14Northern Lightning Distribution, Marketing and
Sales Strategy
- Northern Lightnings mission is to market the
highest quality booze brand at premium price,
satisfying consumers in the ft growing high-end
segment while providing above average returns to
shareholders - Goals
- To leverage Northern Lightnings two awards the
key selling points to the trade and consumers - To launch the on- and off-premise sale of
Northern Lightning booze with a focus on the
on-premise market - To develop Northern Lightning booze into one of
the three best recognized booze labels in the
Super Premium segment - To achieve a market share of a minimum of 2 of
the U.S. Super Premium segment which represent
sales of over 300,000 9L ces within 4-5 years - Northern Lightnings mission is to market the
highest quality booze brand at premium price,
satisfying consumers in the ft growing high-end
segment while providing above average returns to
shareholders
15Northern Lightning - US Distributors
- The Companys appointed distributors in Phe I
markets - Market Distributor
- Pennsylvania Petes
- New Jersey Margies
- New York City Peerless
- New York Johns Liquor Wine
-
- Pending (phe II) California California Wine
Spirits - Pending (phe II) Florida Florida Wine Spirits
- Key attributes of U.S. distributors
- distributors in top booze markets
- proven success with existing spirits and booze
portfolio - strong commitments to the successful development
of Northern Lightning booze - The U.S. Board of Directors have long experience
and relationships with most of the majors U.S.
distribution companies including the above
mentioned.
16Northern Lightning Partners in Marketing and
Sales
- The Companys main relations with key American
consultants - X Co distribution and logistics, New York
- Owens Illinois , Toledo
- Y Company, Public Relations, Promotions and
Marketing, Philadelphia - Nancy Smith, Trade consultant, New York
17Northern Lightning - Sales Volume Comparison1)
- To give relevance to the companys sales goals,
we have compared Northern Lightnings projected
figures to the success of a similar brand, Ketel
One (for their first five year of sales, starting
1994) - Northern Lightnings strategy in the U.S. can be
compared to the business model of this brand.
Ketel One h, with a minimal marketing budget and
advertising, created growth mainly through the
word-of-mouth method, achieving in 2001 almost 1
million 9 liter ces, or 12 million bottles
- Competitive sessment of Ketel One
- Brand Strength
- Historical strength on-premise with bartender
endorsement - Quality underscored by believable product story
- High quality image enables brand to demand Super
premium price with low product cost - Established sales infrtructure in the U.S. with
single product focus
- Brand Weakness
- Legacy price point now less supportive of ultra
premium position - Appears unable to expand marketing programs
beyond bartender relationship programs
1) Source Adams Liquor Handbook 2001
18Northern Lightning - Key Success Factors
- The name - Northern Lightning booze
- The bottle design - unique shape and look
- The booze- award winning quality best in 2002
- bottled in North Dakota - Marketing brilliance - an executive board and
management team with solid and proven marketing
and brand building track-record
19Market challenges
Northern Lightning management believes that its
market proposition h a very strong potential but
acknowledges that there are challenges which need
to be prepared for.
- Issues Northern Lightning solution
- Brand Building Process core activity - only
sociating the company with top experienced
sales and marketing people who know the
industry and market better than the
competition and have proven track record in
the CPG industry - Distribution and Market penetration only
sociating itself with the no 1 or 2 in each
market bed on personal relationship and
experience well striving for optimal
partners and programs to create the pull
factor in the market place - Operational Strategy driving the company towards
profit and minimizing fixed cost spending by
outsourcing non-core activities and services - Trademark Protection Program collaboration with
two of the worlds strongest legal firms
handling Trade Marks and Patent Right issues
Consumer Packaged Goods
20Northern Lightning Financials
- USD 1 NOK 7.00
- Figures in US 1,000
21Northern Lightning Financials
- USD 1 NOK 7.00
- Figures in US 1,000
22Northern Lightning Financials
- USD 1 NOK 7.00
- Figures in US 1,000
23Northern Lightning Forected Income Statement
24Northern Lightning Forected Capital
Expenditures
25Northern Lightning Forected Ch Flow statement
26Northern Lightning Financial Summary
0
27Financials and Transaction Details
0
Financial Requirements and Use of Funds
- Bed on the financial calculations and stated
sumptions presented in this document, Northern
Lightning h decided to issue new shares for a
total consideration of US 1.5 million to fund
the Companys operation through early spring
2004. - According to the Companys Business Plan, the
Company plans to use the funds raised in this
offering in the following manner - Capital Expenditure for Production US 0.50
million - Working Capital US 1.00 million
- Distribution, Sales and Marketing
- Organizational development
- Accounts Receivable
- Inventory
- Total US 1.50 million
- The Business Plan requires the company to raise
additional capital of up to US 5.0 million by
spring 2004. This second closing will be
triggered on achieving business plan goals and
carry the company to positive Ch Flow from
Operation by June 2005.
28Financials and Transaction Details
0
Issue of shares in Northern Lightning
- Form of issue
- Rights issue in ch
- Qualified Investors are invited to subscribe with
prorated right of pre-emption for current
shareholders - Conversion of debt into equity by holders of
secured debt - Issue Price
- US 0.01
- Total issue
- Range from US 550.000 1.500.000 in ch and
- US 550.000 for conversion of debt
Post funding ownership structure
- Asumptions
- Qualified Investor receive all issued shares
- Debt is converted to equity
29Time line
0
- Resolution by Board of Directors March 6, 2003
- Send Summons to Extra Ordinary Shareholder
Meeting March 10, 2003 - Agreement with lenders within March 14, 2003
- Commence Investor Presentation within March 17,
2003 - Investment Vehicle incorporated within March 24,
2003 - Extra Ordinary Shareholder Meeting March 24, 2003
- Prospectus filed within March 27, 2003
- Subscription period between March 27 and April
10, 2003
30Conclusion Northern Lightning booze to be
launched
0
- The History
- Northern Lightning is a private limited
liability corporation, founded in 1999 in Oslo
Norway - Shareholders have since beginning invested US
3.8 million - The Present
- An unique aerated booze, voted the Best booze in
the U.S. 2002 - Protected name, design and patent rights for
Northern Lightning booze - Strong professional management team with proven
record - Will be launched summer 2003 in New York,
tri-state area in key targeted on-premises
outlets - The Market Opportunity
- booze is a US 8.6 billion industry
- booze is the preferred drink of more than 30 of
the consumers with strong growth in the high end
segment - Financial Opportunity
- US 1.5 million investment needed to finance
company until early 2004 - US 1.0 million will secure a 56 ownership