ENERGY DRINK INVESTMENT OPPORTUNITY
Because we all need a pick-me-up from time-to-time
Working in partnership with Velocity Energy Drinks
We are offering a 30% stake holding in the company for £1.1 Million with full repayment included within 3 years. Maintain 30% holding. Contact us for more information.
Brief.
Velocity Drinks Ltd is a company established with the intention of purchasing developing and marketing the brand Velocity Energy Drinks for £1.1m. Velocity Drinks Ltd is looking to purchase and run the Velocity drinks brand. Velocity, a unique energy drink that is available in a range of flavours, already has already attracted significant customer demand. Velocity Ltd is looking to raise £1.1 m from private investment to enable the ‘Brand Purchase’ product development and Global expansion. The purpose of this document is to inform about the relevant information needed to make an investment decision based on the key areas of the brand.
Given the constraint on credit liquidity, the management is cognizant of the difficulties of sourcing funds in today's market. However given the proven business model and the continuing growth trend in the energy drinks market, we see this as offering significant investment returns in a limited time scale.
Investment Highlights.
Velocity - Entering a growing market sector
The energy drink sector continues to expand. In 2008 the energy drink market at retail was valued at $4.8 billion (Mintel), which represents a 400 percent growth rate from 2003 figures. Whilst Red Bull, the market leader, has sales figures that continue upwards, in a sector that is rapidly growing, however, Red Bull’s market share is actually in decline. As with the parallels drawn with the cola market, the energy drink consumer will try alternative brands and the time is right for a quality rival to Red Bull. In 2003, 9% of adults in the USA reported consuming energy drinks, while 15% did so in 2008. Even more startling are the figures amongst the young. 35% of teenagers in the USA said they regularly consume energy drink a huge rise from 19% in 2003. Velocity aims to take on the “Pepsi Cola” role of becoming the alternative worldwide and thus gain a huge market share. No one company currently fulfils this ideal position. In the differing world markets there are numerous localised brands supplying an alternative (demonstrating the willingness of the consumer to venture away from Red Bull) but no one brand has managed to capture a global position to rival Red Bull.
Velocity - Strong branding, full flavour
The Velocity logo and can livery has been specially designed to maximise brand recognition and loyalty. Vigorous and exciting, it is a visual representation of all the premium energy drink consumer is looking for. More than just the attractive packaging, Velocity improves on the element every energy drink must have; it is functional and it delivers the all important energy boost. Since the launch of Red Bull, however, there has been numerous energy drink launches. As in the fledgling cola industry of the 1900s most new starters have fallen by the wayside. This is where Velocity stands apart from the crowd. The biggest mistake that start ups make is to concentrate on the brand and the energy providing component, thus missing a key element; taste. And Velocity tastes great!
With three invigorating flavours Velocity will capitalise on a hole in the market. We will lead the way with exiting flavours such as Cranberry, Lemon and Lime as well as maintaining the traditional flavour which has an established market following. We have also started to expand our product range to incorporate Mango and papaya, and Apple and Kiwi.
Velocity - Flexible and ready to meet demand
As discussed under the Business Model heading, outsourcing production and using local distributors means that Velocity can meet changing market demands quickly. It can gain information and ideas in traditionally hard to reach markets, such as Africa and the Far East, with its network of distributors. Velocity’s global reach, therefore, will be able react and expand faster than any competitor.
Energy In Motion
contact our distribution & warehousing
Bridgemere Distribution Ltd
Crackley Gates Farm
Leycett Lane
Leycett
Newcastle Under Lyme
Staffordshire
ST5 6AW
Velocity - Ready with substantial returns for the investor
The financial at the rear of this document demonstrate the high profitability of the venture. Velocity will provide attractive dividends, high returns and excellent exit strategies. Making it not only a great tasting energy drink but also a very attractive investment proposition.
Velocity - Excellent exit opportunities
It is traditional within the drinks sector for large established companies to purchase smaller emerging competitors or companies in different categories. When Coca Cola recently bought the emerging independent brand Vitamin Water it paid $4.1 billion. Britvic purchased Orchard drinks for £30m. A trade sale would look to be the most viable exit for Velocity in a 3-5 year timeframe.
Velocity - Already making progress
The purchase price has been agreed for the Velocity brand and associated IP. Letters of Intent (LOI) are already in place with some major clients and talks continue with a multitude more. The financial model is based on a conservative estimate of the take up by clients, and is discussed further below. The production chain is in place. Customers are ready to buy Velocity and waiting to enjoy the great taste!
Investment Proposal
The proposal is intended to gain private investors for Velocity Drinks U.K Ltd to purchase the Velocity brand and intellectual property rights.
Velocity Drinks U.K Ltd will be offering ordinary shares as an investment into the company. 30% Equity will be available to investors for the £1.1 m raised for the purchase, production and development of the Brand.
Shareholders will be entitled to a dividend set at 2% above the base rate. It is the intention of Velocity Drinks Ltd that all investors will have there initial investment paid back in full within 3 years (You will see in the financials that this will be possible at the end of year 2) and they will hold there full shareholding within the company. Shareholders will be kept up to date with the progress of company and the development of new products and new markets.
The shares being offered are ordinary shares carrying full voting rights. Velocity Drinks Ltd will be looking at the Enterprise Investment Scheme (EIS) to benefit both the investor and the company. (Information on the EIS is attached at the back of the plan)
Shareholders retain the right to sell their shares. If this should occur then Velocity Drinks Ltd has the right to offer the original purchase price for the shares. Shareholders retain the right to sell the shares to a third party. Velocity Drinks Ltd will be happy to authorise any paperwork necessary to facilitate this.
Investment into Velocity Drinks U.K Ltd will initially be held in a holding account. Once the intellectual property rights have been purchased for the Velocity brand, further monies will be used to produce and distribute the product as per the proposal.
Financial Highlights
Cash requirement approximately £500k
Cost of purchase (Velocity brand) £400k
Headroom £200k
The forecasts show that the business will be running on its own money by month 9
The business will make use of investment capital to provide the cash flow needed for manufacturing and delivery of stock (prior to payment)
NB: The financial plan has been produced in Sterling, the main operating currency for Velocity.
Market Conditions.
The energy drinks market was worth $4.8 billion in 2008
Energy drinks account for $1 dollar in every $5 spent on soft drinks
The Asia Pacific region has the highest consumption of energy drinks
The energy drinks market in the USA was worth $637 million in 2006, making it the second largest market region
Mintel, the market research group, suggests Ireland as a high growth market for energy drinks, making it ideal to use as a base and to conduct market research.
Business Model
The business model runs in a similar way to a franchise. However, instead of a franchise holder, it is the distributor that plays a key roll. Velocity will assign the rights to sell and market Velocity drinks to independent distributors. Various territories worldwide will have their own distributor who will manage their business as an independent entity. The distributors buy the drink units directly from Velocity and then take control of how the units arrive to market. This means that each unit sold to a distributor has a net profit from the outset. However, it means a lot more than just ease of finance. Each distributor will have regional knowledge specific to the area they are supplying. As each distributor is directly tied into the finance chain, the emphasis is on productivity. The more units they sell, the higher their revenue, the more units purchased from Velocity.
To minimise expenditure the production and packaging of Velocity drinks are outsourced to third parties (this is explained in detail under the Production Process heading). As well as reducing the initial cost base, this is also beneficial when the time comes to increase the number of units being produced (with the option of localising production to be near to individual world markets).
Product Specification
Currently available in the three main flavours of:
Original
Lemon and Lime
Cranberry
There is plenty of scope to add more flavours to the Velocity family.
The drinks are packaged in 250ml slim line cans
A tray of drinks consists of 24 cans
A pallet contains 120 trays
The unit of sale in the financial plan is a 40ft container which holds 3520 trays
The Lemon and Lime and Cranberry flavours are sugar free
Production Process
The ingredients of Velocity are currently manufactured in compound form. The ingredients are then taken to a filling plant located in Poland. The compound is hydrated and various acids are added. The drink is sealed into the cans on site. The finished product is then packaged into trays and loaded onto pallets ready for transport. It is then delivered to the country of destination. It is an efficient logistical operation. As demand increases, the product production can move into the various destination countries, minimising both transport costs and lead times.
Drinks companies that out source production to filling plants in this way often not only lose control of quality but also find that they become too reliant on the plant. The reason this occurs is that companies leave the sourcing of the ingredients and cans to the filling plant. Velocity has tackled this problem head on by keeping control of sourcing. Not being tied to one plant frees up the path for expansion and means that Velocity will always control the quality of its product.
The recipes used for the various flavours are exclusive to Velocity and remain a secret to those further down the production chain. Supplying the filling plant with the ingredients in compound form protects the secret. When something tastes this good, it needs protecting! Rudolph Wild GmbH produces the compounds for the various flavours under contract. Rudolph Wild is one of the world’s largest suppliers of ingredients and flavorings and is probably best known for its Capri Sun brand.
Rexam supplies the cans for Velocity. Rexam is a market leader in its field. The cans are produced under contract in Eastern Europe. The cans undergo a Bi-coating process ensures that the Velocity livery always shine with quality. The process begins with a high-white undercoat being applied to the fresh surface of the cans. This provides the best working surface for the next layer, the color field.
"Working in this way ensures the colours are as vivid as possible and the whites of the logo are crisp and clear."
Both Rudolph Wild GmbH and Rexam have offices and production facilities worldwide. This will be invaluable when the time comes for Velocity to expand!
The production process takes a total of three weeks from receipt of an order. Customers are advised of a four-week lead-time to allow for any unforeseen delays.
Velocity World Wide
Drinks markets through out the world are now taking notice of Velocity. Interested distributors in the Middle East, China, Eastern Europe, Portugal, Spain, America, South Africa, Nigeria and the Ireland have contacted Velocity. Below are some key areas that deserve a little more detailed explanation.
Velocity has already letters of intent
United Kingdom - The energy and sports drinks industry is a huge market and last year in the U.K alone gained 7% on cola's water and juice drinks. It was the only area in beverages to grow and now holds 31% of the soft drinks market.
With interest to run Velocity throughout its U.K stores Lidl will be among the first customers to be supplied. We have had a fantastic response since the decision to purchase the brand.
The online supplement company will manage all of our U.K online orders. The online supplement company is the 2nd largest supplement company in the world and will be assisting with their expertise to help market and advertise to reach out and maximise the potential online market, which is not achieved by competitive brands.
Vending
Velocity will also roll out in vending machines. With a company in line to accompany us we will use there resources and contacts to place machines in every service station running on the motorways allowing 24/7 access while shops are closed we will also place machines in factories offering profit share for the space required. The vending machine company has already requested product to be placed in there existing machines which are based in Lloyds TSB and Autolease, Orange, O2 and Vodafone call centers.
A full marketing plan is available on request.
Ireland - The test launch in Ireland was received in a fantastic manner. The consumers enjoyed the fresh, new brand, Velocity. The feedback strongly suggested that Velocity was functional as an energy drink but, unlike other brands, Velocity achieved this whilst maintaining the great taste. The consumers welcomed a brand that was not afraid to market its differences from Red Bull, rather than trying to emulate it. The decision was made that the Velocity management team would run the distribution in Ireland. By keeping the Irish market in house a working model can be created to apply to the various global markets. The benefits of working in this way are huge. Velocity will be able to keep afoot of the problems and challenges faced by distributors in other parts of the world. They will be able to monitor markets at first hand, as apposed to being once removed. On top of this, the profit margins in the Irish region will be maximised. Although Ireland has a small population of just 4.2 million, its GDP is £112 billion. There is another side to Ireland that makes it an ideal base; every year there are more visiting tourists (7.3m) than there are Irish residents. When it comes to spreading the Velocity brand world wide, Ireland is a good place to start! The drinks trade in Ireland is extremely well run and soft drinks have tended to do well. Velocity already has established links with wholesalers, catering suppliers and licensed trade, the market is waiting, the product now needs to be supplied!
India - A young population of over one billion people makes India the second most populous country in the world (New Delhi alone has a population of 14m). With a relatively closed economy it is escaping the worst of the present global down turn with growth rates estimated at 7% for this year and 6% for next. India represents a huge opportunity for Velocity; its GDP of £465 billion puts it 12th in the world. There is real scope to take a large market share in India. World corporations increasingly look to gain a foothold in the Sub-Continent, more often than not by acquisition. Velocity holding a large market share will add enormous value to the business. To this end Velocity has been busy moving the pieces into place and recently signed contracts with reputable Indian based distributor who has previously worked with, amongst others, Red Bull and Cobra Beer. He has already made his own suggestions for Velocity to develop new flavours that he feels will do well in India. Well known and charismatic (he has even represented India by playing rugby for the national team!) he is looking forward to taking Velocity to market via his well proven network routes to bars, clubs, convenience stores and super markets.
USA - The largest economy in the world with a population of 302 million the USA is a fantastic opportunity for Velocity. The distributors stateside already have serious interest from 7 Eleven and Costco. Such large scale, high profile retail outlets would provide the best possible platform from which to establish the brand in the USA. The marketing spend would be minimised because of the high level of in-store promotion. The rollouts are manageable because they are scaled. Two of the largest soft drink markets in the USA are California and Texas. Year round sunshine, a high level of sporting activity and sports based fashion help keep soft drink sales high. In its own right California is the world’s 10th largest economy. Because of this California and Texas are the key starting points for Velocity’s US launch.
Africa - The African continent is another huge market where Velocity has already started to make inroads. Despite various economic problems Africa has a growing consumer market. Velocity will use Nigeria as the doorway into Africa. There are various reasons for this. Nigeria’s GPD is £58,902m making it the world’s 41st largest economy and with 140m people it has the world’s 8th largest population. Heavily dependant on oil, Nigeria’s economy is actually growing rapidly. Velocity has chosen to use a Nigerian distributor who has excellent trade links in a country that can be very lucrative. In fact he holds the bottling rights for Becks Beer within Nigeria. He doesn’t require credit terms and will pay in advance. Nigeria could prove to be a lot more profitable than one would imagine and offers the chance to create a working model that can be moved forward into the rest of the continent.
Distribution
Bridgemere Distribution Ltd in Stoke on Trent will be responsible for the U.K transportation. It has been agreed that for the first 3 months they will house Velocity in there warehouse free of charge and rates have been confirmed for as little as £28 per pallet on single deliveries within the U.K. Bridgemere Distribution Ltd has coverage across the U.K and can achieve next day and same day deliveries. They will also have two of their trucks in Velocity Livery to help promote the brand whilst on the motorways. When Velocity requires larger offices we will move to premises that will enable us to warehouse up to 100 pallets of stock. In the financials this is expected to be in year 1 month 8 to coincide with the demands expected at Christmas.
Transportation into distribution centers such as LIDL Morrison’s or Bargain Booze will be shipped directly from the production plant in Poland. This will save costs due to Receipt handling and dispatch (RH&D) charges, which is standard plus additional transportation cost from the warehouse to the customer.
