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Hill Street Beverage Co. Investor Deck May 2018 TSX-V: BEER (pending)
Hill Street Beverage Co. Investor DeckMay 2018 TSX-V: BEER (pending)
Certain statements included or incorporated by reference in this presentation constitute forward-looking statements or forward-looking information under applicable securities legislation.Such forward–looking statements or information are provided for the purpose of providing information about management's current expectations and plans relating to the future. Readersare cautioned that reliance on such information may not be appropriate for other purposes, such as making investment decisions. Forward-looking statements or information typically containstatements with words such as "anticipate", "believe", "expect“, "plan", "intend", "estimate", "propose", "project“, “seek”, “continue”, “forecast”, “may”, “will”, “potential”, “could”, “should”or similar words suggesting future outcomes or statements regarding an outlook. Forward-looking statements or information in this presentation include, but are not limited to, statementsor information with respect to: business strategy and objectives; acquisition plans and the timing thereof; capital expenditures; net revenue; operating and other costs; and taxes.
Forward-looking statements or information are based on a number of factors and assumptions that have been used to develop such statements and information but which may prove to beincorrect. Although Hill Street Marketing Inc. (the “Company”) believes that the expectations reflected in such forward-looking statements or information are reasonable, undue relianceshould not be placed on forward-looking statements because the Company can give no assurance that such expectations will prove to be correct. If you read this far, let our CEO know and hewill give you a free bottle of Brut. In addition to other factors and assumptions which may be identified in this presentation, assumptions have been made regarding, among other things: theimpact of increasing competition; the general stability of the economic and political environment in which the Company operates or plans to operate; and the ability of the Company to obtainqualified staff, inventory and equipment in a timely and cost-efficient manner.
Forward-looking statements or information are based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results todiffer materially from those anticipated by the Company and described in the forward-looking statements or information.
The forward-looking statements or information contained in this presentation are made as of the date hereof and the Company undertakes no obligation to update publicly or revise anyforward-looking statements or information, whether as a result of new information, future events or otherwise unless required by applicable securities laws. The forward-looking statementsor information contained in this presentation are expressly qualified by this cautionary statement.
Forward Looking Statements, blah blah blah.
Our lawyer said this stuff is “Important”. And really, how can you disagree? It’s a disclaimer. It’s for our protection!
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The Market
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Hill Street is planning to compete in both “Alcohol Free” and “Cannabis-Infused” market segments.
This is a similar strategy employed by the big brewers in Europe following prohibition.
They advertised alcohol-free beer because it remained illegal to advertise beer with alcohol for the next 50 years.
Think “Pokerstars.net” vs. “Pokerstars.com”
$7B in Canada by 2020*** - $55B in USA****
****Source: https://www.bloomberg.com/news/articles/2016-09-12/cannabis-industry-to-expand-to-50-billion-by-2026-analysts-say
***Source: FinancialPost.com, May 8, 2018, Cannabis Sales to Top Hard Liquor by 2020
2016 High Times Survey : Beverages are the #1 preferred Delivery format
$12.7B -$22.6B
…but availability of appealing options is the biggest barrier.
**Source: Deloitte, 2016, Recreational Marijuana – Insights and Opportunities
Drop in Alcohol Sales
Econ. Prof. Alberto Chong, Georgetown U.
2017 Growth in Edible Sales in US
Bloomberg ****
“… edibles, concentrates and beverages will soon transform into primary consumer products m o r e t h a n t h e c a n n a b i s b u d i t s e l f .” - E u r o m o n i t o r
29%
*https://globalnews.ca/news/3767729/women-non-smokers-millennials-edible-marijuana/
# of Canadians who want to try edibles
Ipsos*
Size of Ancillary marketDeloitte**
13% 25%
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An “Unserved" MarketUS Federal Gov’t stats show 44% or
119MM Adult Americans on a
prescription drug regimen.
Statistics Canada indicates that
42% of Adults Aged 40-72
take prescription medication.
All of the top brewers
(Diageo, AB Inbev, Carlsberg, Heineken, Sapporo, Molson Coors, etc.)
expect alcohol free to be up to
20% of sales by 2025*.
5*Beverage Daily Feb 2015
Competition isextremely limited
Few of these brands do any visible marketing,
and there are no craft or vintage brands.
Largest non-alcoholic wine brand is Fre (Sutter Home Estates).
Volume annually in N. America is 3,000,000 cases. (Not pictured.)
MolsonCoors’ Exel sells avg. 750,000 cases per year in Canada.
The market leader is O’Doul’s (AB Inbev).
Annual volume in North America is >15,000,000 cases.
The biggest news in 20 years is Budweiser Prohibition Brew.
They spent >$20,000,000 in media and sold about 600,000 cases
in year one.
A rising tide lifts all boats…
(And doesn’t taste very good either!)
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An exploding category
+19%yoy
Category Growth*(alcohol free beer, wine, cocktails, mixers, and cider)
55% vs. 34%AF Beer % of total sales yoy
+27%yoy
Growth in AF beer sales
Vs.
Domestic production =
- 2.4%yoy
Domestic sales =
- 0.7%yoy
Total national sales =
-0.4%yoy
Sales per capita over 10 years
-10%
Alcohol Free
Beer
According to Nielsen
According to Beer Canada
7Alcohol free beer and wine, if produced properly and infused with cannabis, are the
ideal adult alternative to alcohol
Why Invest in Hill Street?
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• Pure-play, low-cost option in burgeoning market with lots of torque (anticipate post-raise market cap of <$20 million) with $100 million++ opportunity in North America.
• Exploiting opportunity others have missed: Adult-oriented brands using familiar format (beer and wine)
• Products are already certified taste winners in the alcohol-free category
• Creating a powerful brand platform that is highly attractive for a future acquiror.
• A management team and board who have capacity and experience to scale
8Our PC Brand Products at Loblaws
Our Strategy
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Driving volume during the Pre-Cannabis Legalization phase:
1) Traditional retail and foodservice: target of 14,000 stores by 2020, creating a new category for fine vintage alcohol-free wine and craft beer, invest $500K annually in listing fees, 100% growth annually in revenues at 60% gross margin.
2) Ecommerce via Highly targeted online marketing campaigns with Health Promotion partners whose audience are under doctor’s orders not to drink: Canadian Liver Foundation, March of Dimes, Arthritis Society, Prostate Cancer Canada, Movember, Canadian Cancer Society, ZoomerMedia, and others. 9
Pre-Cannabis legalization: Enhance the Alcohol-Free experience through beer and wine brands that take Alcohol-Free seriously for those not wishing to drink alcohol.
Post-Cannabis legalization: Distribute these same brands with “infusion” labels. No change to taste/calories/appearance. Brand building like Pokerstars.net
Health& CharityPartners Media Partners
20Our expanding portfolio of strategic partners will help build our brand!
Endorsement
WeightWatchers has endorsed our full product line. The program launched February 8,
2018 with an email announcement to 460,000 subscribers.
Initial results were extremely positive with open rates of 47.3%, compared to the
average range of 30-50%. Click thru rate was 1.6%, vs our target of 0.12%.
Conversion rate was 5%, as predicted, with over 40% of customers purchasing a $720 value subscription.
Weight Watchers Canada has over 230,000 monthly attendees to meetings at their centres across the
country.
Their SmartPoints logo will appear on all of our products.
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Craft Beer StrategyOur Craft Brewed Lager is the world’s first alcohol free craft
beer, and the flagship of a complete line of craft brewed
alcohol-free beer launching in 2017.
Our Lager won Gold Medals 2017, 2015 and 2014 at the
US Open Beer Championship, and Silver in 2016. It won the
Retail Council of Canada’s Grand Prix Award for Best New
Product of 2014.
We are planning production of over 40 styles of alcohol free
craft beer, enough to meet the most demanding taste profile.
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Macro Beer StrategyOur Designated Draft beer is the 2017 winner
of a Silver Medal and a 2016 winner of a
Bronze Medal at the US Open Beer
Championship.
It is designed for everyday beer drinkers,
representing 82% of the beer market, with a
flavour profile of a great American Pilsner.
We expect this brand, and others like it, to
become upwards of forty percent of our total
sales.
The new packaging on the right will be launched
Spring 2018.
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Wine StrategyVin(Zero) is currently listed in nearly 4,000 retail stores in Canada.
We are also importing a new line of varietals under the Vintense brand name,
bringing our portfolio to over 20 brands, more than any other marketer of non-
alcoholic wines.
We have seven varietals of Vin(Zero) brand wine including Merlot, Cabernet
Sauvignon, Shiraz, Chardonnay, Sauvignon Blanc, and Sparkling Rose and
Brut.
We also have over 30 new products under exclusive import license from
Neobulles SA, including Vintense, Origin, Oena0, and Chapelle Ste-Anne.
President’s Choice De-Alcoholized Wine is now available in all Loblaws and
related stores. Current forecasts for this brand are in excess of 700,000 units
per year.
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Progress in Licensing and Production
Non Binding LOI provides rights for Canada and an option for the US Market, while we pursue our cannabis licenses.
Hill Street has retained
Cannabis Compliance Inc. and
David Hyde & Associates,
two the world’s leading experts in licensing and
security with nearly ¾ of all successful licenses issued through their services,
to assist us with our application to Health Canada to become a licensed processor of cannabis
infused beverages.
Hill Street’s infused beverages taste virtually identical to their alcohol free counterparts.13
Our Facility
VinFirst Innovative Packagingis our Shareholder / Partner for producing cannabis infused and alcohol free wine and beer.
This is an existing facility which is being licensed as a processor of cannabis under Hill Street Beverage Co.
Established relationships with local and international producers.
Existing 15,000 sq ft facility.
This facility has capacity for 3.8MM cases of wine. 1l of wine every 0.6sec.This represents over $100MM revenue potential without requiring expansion
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Financial Projections
FY19 FY20 FY21
Gross Revenue 7,000 20,038 44,802
Gross Profit 4,614 12,243 25,925
Expenses 6,830 9,827 14,942
EBITDA -2,216 2,416 10,983
-20,000
0
20,000
40,000
60,000
80,000
100,000
00
0 C
AD
$
HSBevCo Capital Raise $5M
FY19 FY20 FY21
Gross Revenue 10,000 35,800 59,872
Gross Profit 6,591 16,640 30,899
Expenses 8,934 12,981 18,249
EBITDA -2,343 3,660 12,650
-20,000
0
20,000
40,000
60,000
80,000
100,000
00
0 C
AD
$
HSBevCo Capital Raise $10M
FY19 FY20 FY21
Gross Revenue 30,000 63,361 90,191
Gross Profit 19,772 36,631 52,889
Expenses 33,909 31,136 37,751
EBITDA -14,137 5,494 15,138
-20,000
0
20,000
40,000
60,000
80,000
100,000
00
0 C
AD
$
HSBevCo Capital Raise $30M
Capitalization Table
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Issued and Outstanding
Basic Shares 51,635,093Warrants* 8,674,800
Total Outstanding 60,309,893
*All warrants outstanding strike at $0.30 and expire between December 2019 and February 2020
Use of ProceedsFacilityMarketing, Promotion & AdvertisingNew ListingsUS Expansion for AF beverages
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The Company operates several brands,
and has a range of flower, vaporizer
and other direct THC products, along
with a range of CBD-infused topicals,
tinctures and capsules.
Tinley Beverage is the parent
company to three brands ofcannabis-
infused drinks. Hempify offers non-
psychoactive CBD drinks in prominent
retail chains across all fifty states.
The Company produces cannabis and
hemp-infused products such as the
FLÏ Edibles, FLÏ Concentrates, and the
Stone Free line of hemp-based, non-
psychoactive health products.
MedMen is a large-scale cannabis
holding company in the United
States with current operations in
four states across cultivation,
production and retail lines.
TTM 2018E 2019E
Comparables TickerMarket Cap
($MM)
TTM Revenue
($MM)
2018E
Revenue
($MM)
2019E
Revenue
($MM)
Price/Sales Price/Sales Price/Sales
Edibles and Non-Inhalables
Tinley Beverage Company TNY $74.10 $0.10 -- -- 1025.4x -- --
Koios Beverage Corporation KBEV $6.44 $0.00
Friday Night, Inc. TGIF $135.30 $6.50 -- -- 21.0x -- --
Gabriella's Kitchen -- $15.90 $1.80 $6.40 $25.00 9.1x 2.5x 0.6x
Nutritional High International EAT $116.50 $1.20 -- -- 99.9x -- --
Average $69.65 $1.92 $6.40 $25.00 288.85x 2.5x 0.6x
Median $74.10 $1.20 $6.40 $25.00 60.45x 2.5x 0.6x
Licensed Producers
Canopy Growth Corporation WEED $5,974.10 $69.80 $271.90 $772.10 85.6x 22.0x 7.7x
Aurora Cannabis, Inc ACB $4,830.30 $31.10 $208.80 $509.40 155.5x 23.1x 9.5x
Aphria, Inc. APH $2,214.60 $30.60 $120.90 $434.60 72.4x 18.3x 5.1x
MedMen -- $2,135.90 -- $157.70 $576.40 -- 13.5x 3.7x
Average $3,788.73 $43.83 $189.83 $573.13 104.5x 19.2x 6.5x
Median $3,522.45 $31.10 $183.25 $542.90 85.6x 20.2x 6.4x
Hill Street Beverage Co. BEER $9.00 $2.10 $2.01 $7.00 4.3x 4.5x 1.3x
Executive Team
Terence M. DonnellyChief Executive Officer
Terry has 30 years experience in
Marketing and Advertising, serving
most recently as Chief Marketing
Officer for MDC Partners
(NASDAQ:MDCA), the largest
Canadian marketing services company
with $1.3Bn in revenues and over
17,000 employees. He was the co-
founder of Adcentricity; EVP, Digital
at Mandrake; and a board
member/investor in six private and six
public corporations, including two TSX
listed companies
Doug TaylorVice President,
Sales
Hinta ChambersChief Financial
Officer
Bruce AndersonChief Information
Officer
June NicholsonVice President,
Strategic Partnerships
David PullaraChief Marketing
Officer
Brian BolshinCo-Founder &
President
Our Brand Pedigree
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Board of Directors & Advisors
Creative & Brand Advisor
Founder, Crispin Porter + Bogusky
AdAge Agency of the Year 5 times
Sole winner of AdAge Agency of the
Decade
YouTube Campaign of the Decade
CEO, Northstar Research
Former President, Zyman Consulting
President, Minute Maid USA
CMO, Coke Mexico
VP Finance SSense
CFO/COO iTravel2000, TravelZest PLC
CEO, Breakwater Capital
CEO, Pharmacan Capital (Now Cronos
Group)
Founder & CEO
Grey Forest Homes & Vinfirst
Packaging
Vice President,
Vinfirst Packaging
Lead Investor in Hill Street
Chuck Porter
Paul Rosen
Craig Binkley
Jack Fraser
Kevin Ruddle
Rudy Sawatzky
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SummaryAlcohol free beverage segment one of fastest
growing verticals globally.
Hill Street’s pre-eminent position verified by
awards and major contracts.
Cannabis licensing process under way.
Current Retail Distribution partners have
potential for $100 million/year.
Health Industry Marketing Partners have
potential for $100 million / year.
Current valuation factors in only limited
penetration.
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Thank you.For more information,
Contact our CEO, Terry Donnelly.
He will be happy to buy you an ice cold alcohol-free beer.
+1-416-543-4904
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