Corby Spirit and Wine Limited (CSWA) Earnings Call Transcript & Summary

Hello and good afternoon, everyone. My name is Liz Culley-Sullo, Vice President, Media. And on behalf of everyone here at Renmark Financial Communications Inc., we want to thank you, especially for those of you in Vancouver and surrounding areas and beyond, for joining us for today's live Virtual Non-Deal Roadshow. It gives me great pleasure to present to you today Corby Spirit and Wine Limited, trading on the Toronto Exchange under the ticker symbol CSW.A and CSW.B. Presenting to you today are Nicolas Krantz, President and Chief Executive Officer; and Edward Mayle, Vice President, Chief Financial Officer. Their presentation will last just about 30 minutes, at which point there will be a live question-and-answer session that will follow. [Operator Instructions] Your questions will be carried by me, your moderator for today, and I will be reading them to both Nicolas and Edward following their live presentation. And now without further ado, Nicolas, I hand the floor over to you.

Thank you, Liz, and good afternoon, everyone. Well, I hope you are all well, and thank you for attending this call today and giving us the opportunity to present our company, Corby Spirit and Wine. Let me start by introducing myself. So my name is Nicolas Krantz. I am the President and CEO of Corby. I joined the company based in Toronto last summer. I'm privileged to have been working in the spirits and wine industry for more than 22 years now in various roles in finance, strategy, operation and general management and as well in different countries like France, the U.K., Australia and Spain. I will be presenting today with my colleague, Edward Mayle, our CFO. Before we start, I would like to, of course, thank the team at Renmark for supporting us today. It is actually our first VNDR in Canada. So we're very pleased with that. And let me say maybe that I'm delighted that we can start with Vancouver in BC. A little personal anecdote: As a matter of fact, my wife is from Vancouver. So we have been very lucky to visit beautiful BC so many times over the last 20 years. So this being said, let's get started. Just a quick word about forward-looking information. I am sure that all of you are very much used to this type of statement. Our comments today will be historically focused. And as you know, any forward-looking statement involve risk. So Corby will be providing updates to any forward-looking statements as required in our disclosure documents. So as a matter of very brief introduction, what is Corby? Well, we are the #1 TSX-listed spirit and wine company in Canada. And the Canadian market is an important market in the global map of the wines and spirits industry, ranking last year, #1, #11 and probably this year #10 worldwide. We are the #2 player in this market. And in a nutshell, we are brand builders with a portfolio of iconic Canadian and international brands. And as Ed will show you later, we generate steady earning and cash flow. So Corby has been around for a while. Our company's rich history actually predate Canadian Confederation. And entrepreneur like William Gooderham, James Worts, J.P. Wiser, Hiram Walker and, of course, Henry Corby are a big part of our heritage. So Corby began the distillation whiskey in 1859. And as the business grew, he and the others helped build Canada as we know it today. Listed on the Toronto Stock Exchange since 1969, the majority shareholder was acquired by the group Pernod Ricard in 2005 as part of its acquisition of Allied Domecq. With an amazing growth story, Pernod Ricard listed in the Paris Stock Exchange and has become the global #2 of the wines and spirits industry. At Corby, we see today our mission as building bonds that celebrate the human spirit. We see our brand playing a key role to create those magical consumer moments between people. And I have to say that maybe the need for human connection has never been more important than today. So before speaking about our portfolio and our business, I would like to give you a sense of the size of the market in which we are operating in Canada. The beverage alcohol industry is a multibillion-dollar market, with the spirit and wine, of course, representing together the majority of that market with a retail value of nearly $15 billion. The Canadian spirits and wine market is regulated, as you probably know, by the provincial government monopolies. They are in charge of importation, distribution and retailing. And as a result, our largest customer, the LCBO, or the Liquor Board of Ontario (sic) [ Liquor Control Board of Ontario ], is the largest alcohol retailer in the world. The situation is, however, evolving. Some provinces like British Columbia and Alberta, as a matter of fact, have progressively opened their market to private retailers. So situation is evolving over the years. Today, 2/3 of the market in value is in Ontario and Québec combined. The 2 key channels for our industry are usually explained through what we call the off-premise, which is typically the liquor stores; and on the other hand, the on-premise, the restaurants, the café, the bars, the clubs, where the products are indeed consumed on-premise. While in Canada, the off-premise represent about 90% of the market, so very much an off-premise market. And the balance, 10%, is the on-premise. Of course, with the pandemic, the on-premise sales have declined by more than half actually. But the off-premise sales have accelerated, as we will see very shortly. So in term of trends, the Canadian market is a dynamic market, and I would like to highlight mainly 3 key points. The market could be qualified being relatively mature with low single-digit growth, but the growth is often driven by innovation and dynamic innovations. The market usually sees a positive value realization with value ahead of volume as a result of positive pricing and mix effect. This means that our consumers are purchasing more premium products. And in term of recent evolution, as I said, we have seen a very positive growth during 2020. Effectively, whilst the on-premise channel has been adversely impacted, the off-premise channel, the off-trade, has been very dynamic with increased at-home consumption during the pandemic, whilst our consumers were looking for a bit of engaging moments at home. So looking at the various categories of our market. You can see that vodka, Canadian whiskey and rum are the 3 largest categories above $1 billion retail value. And that all the categories are showing solid growth with double-digit increase, for example, for the gin and the liqueur categories. In most categories, Corby has a significant market share, in particular, in the whiskey categories, where Corby is the #1 overall. So as a result, Corby has a strong market position overall with 17% of market share for spirits and with 3 of the top 10 brands in Canada and with the position of #2 in the Canadian spirit market. And as I mentioned, we are the market leader in Canadian whiskey. We are also present in the wine category. This is a much more fragmented market than the spirits, and we are focused only around some key country of origin as we are representing wines from America, many from Australia, New Zealand and Spain and from The Wine Group with Californian origin. Now let me introduce one of core aspect of our strategy, our consumer-centric approach. Our job at Corby is really to put the right brand in the hand of the right consumer at the right moment of consumption. Our consumer do not look for simply a whiskey, a vodka, a gin or a wine. They are really looking for a brand that will fit the occasion they want to have: A relaxing moment to sip a drink, a more sophisticated evening where they want to share cocktail, for example, or a drink to have before or during a casual meal. If you take, for example, a group of 4 friends together with 4 different drinks, what define their choice is the occasion. That is what is important to them. So we define some key occasion to segment of consumer needs and aspirations. Therefore, instead of presenting our portfolio of brands by category, I would like to show you that we have the most diverse portfolio in the market with amazing brands covering all categories and, more importantly, all key consumer occasions. This is how we create value for our consumers, absolutely. So you may recognize some of our key brands since we have a great mix of them in our portfolio, from long-standing Canadian favorites like J.P. Wiser's or Polar Ice Vodka but also big international and aspirational brands like ABSOLUT, Jameson, Beefeater, Kahlúa or The Glenlivet. We also have some emerging homegrown brands like Ungava Gin and Cabot Trail liquor from Québec or current brands like Lot 40 or Pike Creek. We also have some award-winning still and sparkling wines like Jacob's Creek, the #1 Australian brand. So all these strong brands play a role and are answering consumer needs driven by occasions. Now there is one brand I would like to spend a few minutes on. It is a flagship brand, J.P. Wiser's. The brand was founded in 1857, as I mentioned before, older than Canada as a country. So you can imagine that the brand has an amazing history and still stands strong today at 800,000 cases. It is a key brand in our portfolio, but it is actually a very significant brand in the Canadian market, ranking as #5 spirits brand in Canada overall. So J.P. Wiser's has a great history and scale as we have seen. And our more recent effort and focus has been to transform the brand into a premium powerhouse brand within the Canadian whiskey category. And I would like to share with you 3 key recent initiative that are quite important and quite illustrative and typical of what we do to boost the brand performance. I will move the slide on this. Sorry. So these initiatives -- sorry, I think we have a little bit of a slide mix-up. I apologize for that. So the 3 initiative I referred to: To really work on the brands; our packaging evolution, this is very much for the bottle to be more contemporary and distinctive on shelf. Portfolio management, clearly, is much guided by the understanding of our consumer needs. Today, for example, our range extension targets convenience and an approachable entry point into whiskey so we can deliver against our recruitment ambition. So we launched successfully what we call ready-to-serve cocktails, old fashioned and Manhattan, 2 iconic whiskey cocktail. And actually, the old fashioned is already the #2 innovation in the category. Third initiative, consumer engagement. This is our communication platform. And our objective was to evolve our communication towards social connectivity and friendship. And this is, of course, supported by new visual identity, better representative of our inclusive and approachable premium whiskey. These are very good illustration of our consumer-centric approach to brand building. So of course, you have seen with J.P. Wiser what we do with the brand. But what we do is very much the same given the innovation. So innovation really in our industry is a key growth driver, and this ability to innovate is very important to us. So we do that always by building a pipeline of what we call purposeful innovation. Some are launched nationally, while other are launched first regionally in one province, for example, to test and learn and then roll out more nationally. And we do this always with a very strong collaboration and planning with our customers. We have what we call a long lead time. It takes between 12 to 18 months to really plan and deliver the innovation. So we have this collaboration with our customers and the liquor board, and we share with them relevant consumer insights and trend. So this is a very important part of our strategy. Now whilst our main battleground is the Canadian domestic market, of course, we also export some of our Canadian brands. The export market are currently only 10% of our volume, so represent, of course, a small portion and, therefore, a great opportunity to aim our growth for the future. The simple fact that I'd like to share that really got my attention when I joined Corby is that the Canadian whiskey is the #1 imported whiskey category in the U.S., and we have still a very small volume base there, so a lot of room for growth. The other market to call out is the U.K., where we have rejuvenated our brand Lamb's Rum with a new packaging again and a spiced rum innovation. And today, the rum is the #4 in the dynamic spiced rum category in the U.K. and enjoying one of the fastest growth. So another good example of how to resonate and boost the brand performance. Now I could not talk about our business without mentioning our commitment to sustainability and responsibility or what we call S&R. It is truly embedded in our business model today. And we summarize this with a simple mission: aiming at bringing good times from a good place, to create a more [ convenient ] world and a world without excess. It is really our compass in everything we do. And it is quite simply articulated around 4 pillars: Valuing people, nurturing terroir, circular making and responsible hosting. And of course, as a key player in the wines and spirits industry, we are committed to fighting alcohol issues and create better ways to live and work together. We also do support the communities and partners. And I am very proud, for example, that the teams at Corby and Hiram Walker distillery came together with government official to develop a plan for producing and donating over 200,000 liters of hand sanitizers to nursery homes, hospitals and frontline workers during the first phase of the pandemic. It was also important for us to help the hard-hit hospitality sector impacted by the closure of restaurants and bars, and we have done that with several donations to the Bartender Benevolent Fund. So to wrap up my section, let me summarize briefly what we believe is a winning business model for growth and value creation. We have a portfolio of strong brands covering all major categories and consumer occasion. Corby has its own dedicated and experienced sales force across the whole country in every product. Our strategy of premiumization is supported by dynamic revenue growth management and a purposeful innovation pipeline. Some key export markets represent a great opportunity to accelerate growth, and we have the capacity and the capability to do some bolt-on acquisition to strengthen our business. And finally, as a company, we have great data. And that's not the case of every company and every industry. So we are leveraging very much that through an ambitious digital transformation to build a competitive advantage, to create new opportunities like e-commerce, to connect better with our consumer and to continuously improve our efficiencies and effectiveness. So Corby has a clear and robust strategy, and that's the job of the management team to deliver a successful execution. So yes, Corby top management is a team. This is how we work, and this is how we win. And I'm very lucky to have a fantastic team of experienced and diverse professional and executive. I will let, of course, Ed introduce himself a bit more in a minute. But we have a great mix in the team: International experience with Caroline, for example, our VP, Marketing, who worked in the U.S., in China, in Ireland and the U.K.; Mark as well, our VP, Sales, worked in the U.K. and Eastern Europe. But we also have Canadian industry experts with Stéphane, Melissa and Marc, who each have about 20 years or more of experience in the spirits industry in Canada. And we are all supported by strong talents with Valerie and Venita. Valerie has been working in the communication and public relation for Microsoft, Nissan and Marriott Hotels in Canada and overseas. And Vanita, our HR Director, who came to Corby after working in leadership position at various iconic companies in Canada such as Shoppers Drug Mart, Loblaws or Rogers Communication. So as I said, a team of talented and passionate people who have also become expert in working virtually together, I can tell you that. All right. So let me now pass over to Ed, who will present you the key financial aspects of the company. Ed, over to you.

Well, thank you, Nicolas, and good afternoon, everyone. So my name is Edward Mayle, I'm VP, CFO for Corby. Like Nicolas, I'm 22 years with Pernod Ricard, having spent the majority of my career in Europe working in Ireland, Czech Republic, Sweden and the U.K. and in various CFO roles for Pernod Ricard affiliates before joining Corby a little over 2 years ago. Now before discussing extracts from Corby's latest financial statements, I'd like to take a few moments to explain a little about Corby's capital structure and then to explain the key features to look out for in Corby's financials before turning to a description of our first half performance for the 6 months to December. And just a reminder, Corby's fiscal year runs from July to June. Now on this slide, I'm showing 3 elements of Corby's capital structure I'd like to mention. First, Pernod Ricard has a majority stake in Corby. Pernod Ricard pursued a series of acquisitions during the 2000s, beginning with Seagram's at the start of the decade and ending with The Absolut Company in 2008. In 2005, Pernod Ricard, along with Beam Suntory, acquired Allied Domecq with the assets split between them. Pernod Ricard then acquired Hiram Walker, which was the owner of the majority stake in Corby. At that time, Pernod Ricard had only a small distribution business in Canada but, through the acquisition of Corby, was able to take a much stronger market position. Secondly, the relationship between the 2 companies is governed through a series of agreements. The first of these is the representation agreement through which Corby is the distributor of the Pernod Ricard portfolio in Canada. The original agreement is coming to an end, and Corby has recently concluded a new 5-year agreement beginning 1 July 2021. And Corby will pay to Pernod Ricard an upfront fee in September 2021. Pernod Ricard, through Hiram Walker, is the producer of much of Corby's portfolio, particularly, of course, its whiskeys. They also provide Corby a range of back-office services delivered through a shared service structure. And then thirdly, looking at the share structure, Corby has 2 share classes, A shares and B shares. The A shares have voting rights, of which Pernod Ricard owns 51.6% and, therefore, its majority rights; and then the B shares, which have no voting rights. Both classes of shares are treated equally for dividend entitlements. Beside from Pernod Ricard, there's no other major shareholder above 10%. Those remaining shares are owned by a mix of institutions, retail investors and employees. Now Corby's financial performance is understood in the first instance through the measurement of volume sales in units of 9-liter cases, where 1 case is made up of 12 750 ml bottles. We report in our MD&A depletion volumes. These are our sellout volumes in Canada as reported by our customers, and this gives a clear view of our brand performance in the market. The second view of volume is our shipments, which are sales of products invoiced to customers. And this directly drives our P&L revenue. Revenues are generated from 3 sources. The first is from those shipment volumes, so the sales of Corby-owned products, primarily in Canada and also, to a smaller degree, in the rest of the world such as the U.S. and the U.K. Case goods revenue in 2020 were $121 million out of the total revenue of $153 million and then a gross margin of 52%. Second revenue source is from our commission income. We have 2 portfolios we represent, the major one being the Pernod Ricard portfolio and the second being the wine portfolio from The Wine Group. Commission income is reported net of the amortization of the upfront fee. Commission income reported in 2020 was $28 million, reported net of $5.8 million amortization. And the third revenue stream is from other services, and this covers sales of bulk whiskeys and incidental services. And in 2020, this generated revenue of $4 million. Marketing and sales expenses are then deducted to bring us to our earnings. The marketing expenses on represented brands are recharged to the brand owners, while we, of course, retain the investments related to the Corby-owned brands. Sales and administration expenses for servicing all parts of the portfolio are retained in Corby. Full year net earnings in 2020 were $26.7 million, so $0.94 a share. On the balance sheet, we reported shareholders' equity of $173 million, and I draw attention to 2 features. First, our cash generation will usually be running significantly ahead of net earnings due to the P&L bearing the annual amortization of the upfront fee. In fiscal '20, from net earnings of $27 million, we had a cash generation of $49.5 million, favorably impacted as well by working capital effects driven by COVID. And we held cash deposits of $82 million. The second feature is the property, plant and equipment. Corby is relatively asset-light as its production is, as I said, largely outsourced to Hiram Walker. Our annual capital investments relate to barrel purchases to store new whiskeys, IT investments or investments in our wholly owned production sites. And we have 2 small facilities, 1 in Québec and 1 in Niagara. CapEx in 2020 was $3 million. Now a word on our dividend policy. The major use of our cash generation is to fund Corby's generous dividend policy. We recognize many of our investors are attracted to Corby due to its stable and resilient cash flows as high dividend payout. Our policy aims to pay 90% of prior year earnings paid through 4 quarterly payments. Actual payment is, of course, subject to approval from the Board of Directors. So now a quick look at our current H1 performance. Our first half takes place within the context of the exceptional COVID-19 pandemic and the related economic volatility. We enjoyed a growth of 4% in revenue. Due to lower marketing sales and administration expenses, notably a result of reduced marketing investments in the on-premise channel, and the reduced business travel caused by lockdowns, we enjoyed an unusually strong H1 net earnings of plus 30%. And then on cash, we generated $20.9 million, slightly up on last year. Now to call out some of our brand highlights. Flagship brand J.P. Wiser's grew 4% in volume and enjoyed a strong value conversion with 7% value growth. The Ungava Spirits brands grew 5%, though product mix subdued value growth. Polar Ice Vodka was particularly negatively impacted by the closure of the on-premise sector. McGuinness liqueurs enjoyed a boost from home cocktail making, while Lamb's Rum benefited from the strong performance in the U.K. And then commission income on our represented brands grew strongly, up 7%. And then finally, repeating what we saw on the H1 summary, that is for June to December. We enjoyed a strong earnings growth of 30% with solid revenue, amplified by a low cost base, reflecting the exceptional circumstances from the COVID environment. So that concludes my introduction to Corby's financials. And I'd like then to hand back to Nicolas for our wrap-up.

Thank you, Ed, for this very comprehensive review of our financials. So to conclude and before we open for Q&A, let me articulate some key reason why to invest in Corby. And if you have to remember just 3 things from today, I would spotlight that: One, we have strong financials that provide consistency and visibility; two, we have a robust business model with successful track record; and three, we have talented and passionate people across our company, led by a strong and diverse management team. With that, let me thank you very much for your attention. We are at your disposal now with Ed, if there is any questions. So Liz, back to you to open and moderate the Q&A session. Thank you.

Thank you very much, Nicolas and Ed. And yes, ladies and gentlemen, we have now moved into the live question-and-answer portion for today's Virtual Non-Deal Roadshow. [Operator Instructions] Now gentlemen, while you were speaking, we did get quite a few questions from the audience eager to learn more. So let's dive into a few of those questions. Your first, "Can you comment on how inflation would affect your business?" Who will take this question? Ed, over to you.

Well, inflation is going to have a number of impacts. It depends where the inflation is being driven from. Obviously, cost of goods inflation, whether it's in the commodities, which are underpinning the production of our products, which could be included in the raw materials for the production of liquid or the raw materials for the packaging material, and of course, that inflation then leads into higher cost of goods and depresses our margin. Conversely, a higher inflationary environment can be positive in terms of sustaining, supporting price increases. Nicolas mentioned our approach toward data, which is very important to us, particularly in relation to revenue growth management, where we are constantly looking to optimize our value, to drive our value ahead of volume and to identify opportunities, whether for headline price increases or to optimize our promotional activity and to run those promotions more effectively.

Your next question, gentlemen, "Does Corby have to deal with any sort of marketing restrictions based on the different jurisdictions that the company operates in?" Who will take this question? Nicolas, over to you.

Yes. I mean, of course, the industry operates in a regulated environment, there's no question. That's the case, by the way, in many countries in the world in term of marketing. So there are some restructuring in term of advertising. It's all about protecting rightly so the consumers. So there are some restrictions about targeting, of course, people under drinking age, for example. So the leveraging influencers in Canada is forbidden for that matter. So there is a series of restrictions. But I would say the market -- typically, a western market is a market where, as a player, we can operate quite nicely. In any case, it is very much part of our responsibility to also promote what I would call responsible marketing, and I think this is what we mean. So there is a set of regulation, the way you do sponsorship, the way you use influencers. It's all about doing the right things in term of our consumers, and the rules are the same for everyone. Now the market is regulated, as I mentioned before. The route to market is also regulated. That will depend from provinces. I've mentioned before, the West is a bit more deregulated than the East. We know that. But for example, things are evolving in Ontario. Wine and beer can be sold in grocery. And we have made no secret that as also as a spirit player, we believe that spirit should be also part of the same mix so that things will evolve over time. So regulated market, which is at the end of the day, still determined to do a lot of things.

Thank you. And as a follow-up to that, this viewer comments first and says, "Strong H1 net income -- net income, excuse me, due to low marketing costs to on-premises." The question they have is, "Do you have an expectation of what those marketing costs will be going forward and how that will impact future earnings?" Perhaps this might be a question for you, Edward? Excellent. Sending it over to you.

Yes. Indeed, the H1 result was exceptional, as the questioner noted, due to that reduction in our expenses. The overall market in off-premise has, in total, ensured that performance is maintained at least as strong as pre-COVID. And our ambition going forward is to retain that footprint that we have successfully established in the off-premise. And of course, once the on-premise opens up, it's to recover our position in the on-premise. So we will, of course, pivot our investments to make sure that we are active and engaged in the on-premise once it opens up. And that is something that we can expect to see reflected in the shape of earnings in the future. I know we're very limited on the future-looking statements that we can make in these forums. But certainly, 30% net earnings is a very exceptional and unusual earnings, and I think that's fair to say.

Thank you. And we're going to pivot on to another topic here, gentlemen. This viewer asks, "Has the coronavirus slowed down your M&A activity?" Who will take this question? Nicolas?

You mean -- I'm not sure. You say your M&A activity?

That is correct, M&A activity.

Okay. So I would say on the M&A, if I take your question a bit more broadly, maybe to answer very directly, no, the pandemic hasn't changed the way we look at the market because this type of decisions are strategic decisions for the long term. We strongly believe that whilst the pandemic has, of course, impact into many businesses, it is, to some degree, a short-term impact. By the way, this impact has been, for the industry, as we mentioned before, relatively positive because the retail sales has more than compensates the sales decline from the on-premise. So the general context and health of the industry is pretty good. Regarding the M&A activity, we -- and Corby always look at -- for opportunities. It is, I mentioned, part of our strategy to try to find some bolt-on acquisition to complement our business. I think it's fair to say that it's been done in the past. There has been some acquisition made in Québec to really boost our market share and growth profile in that province. We acquired as well a small winery in Ontario as well, Foreign Affair. And I think we continue, of course, to look for opportunities. Of course, to make it happen, you need to be 2 parties, and there are some good trend to look into the market. It's clear that the trend in term of craft and micro winery or distillery is a very appealing one. It is all about the premiumization as well. I think the local aspect, the made-in-local is a trend which is important to consumers. They want something that resonates with their communities. So there are opportunities. I will not say plenty of opportunities, but there are opportunities. And really, innovation and M&A are the 2 legs to really add on to the current business baseline to boost the business going forward. So we are very attentive. There's always a watch into the market. But to make it happen, you need the stars to be aligned.

Thank you. We're going to pivot on to another topic here, and it starts with a comment. This viewer says, "Congratulations on your success at the 11th annual Canadian Whisky Awards. This is a great acknowledgment from the industry." On that, there is a question. "With your leadership position in Canadian whiskey, do you feel like you can increase your market share? Or are you mostly focused on maintaining your position?" Nicolas, I feel this is a question for you.

Yes. Thank you, Liz. Great question, of course, and thank you for the comment. So we are absolutely proud of all the accolades that we received lately. That is really why we're in this business, to basically bring quality brand and quality products to our consumers. So for us, we are really fueled -- our energy is fueled by this type of things every year. So having said that, it's important. Now on the Canadian whiskey category, you're absolutely right. We have a leadership position because of the breadth of our portfolio. So we have many brands in that category, some of them with a more dynamic growth profile than others. So of course, the market share overall, depending on the year, could be a bit challenging. But with J.P. Wiser's, we are in a very good shape. I see our responsibility to lead that category not just from a market share point of view but also for what we stand for. I mentioned 2 things. I mentioned the export, which is, for us, an untapped, I would say, opportunity to unlock. It's not an easy market to the U.S., of course, to unlock, but it is such a large market that for us, it's a long build. And I think we have a lot of opportunity in the future there. So I think to grow the Canadian whiskey category is definitely an avenue. And then the other one is innovation. Again, I think there has been many example in other market where the local jewels like blended scotch in the U.K. or bourbon in the U.S. for many years were not a category which were very dynamic. They were not necessarily loved by local consumers. And then suddenly, things have changed. There are trends, and people realize the value in their own homegrown categories. I think the Canadian whiskey category have that. I think there is so much to learn and to educate. I'll speak very -- with humility. It's not a category which I knew many years back. And the more I look into it, the more I see the depth. It's a category that has a lot of versatility and a lot to give to consumers. It's very approachable. You really have for every type of consumers and every type of occasion, as I mentioned before. So I think there is still a bright future for the category and for Corby within that category as well. So we take our leadership role as a very important part of our responsibility, for sure.

And moving on, this viewer asks, "Are your margins in the prestige and craft channels much higher than in other categories, excuse me, or about the same?" Who will take this question? Edward, over to you.

Yes. So I think overall, our whiskeys, in general, are high-margin products. So whiskeys -- relative to the other products that we have in our portfolio, whether it's gin or liqueurs, whiskeys are a high-margin product to start with. Within whiskey, those premium whiskeys in our portfolio, which are relatively small in terms of the overall footprint, but they are, I'd say, substantially higher margin. So whether those are the aged variants, such as the J.P. Wiser's 15-year-old or 18-year-old, or whether they are our boutique variants like Lot 40 or Pipe Creek or Gooderham & Worts, I think generally, within the innovation that we develop within any brand family, that the innovation that we will be bringing to market will always be designed with margin enhancement in mind. And so that kind of continual effort to try to improve the margin and the mix of our products underpins a lot of the innovation efforts that we are making.

Thank you. Your next question, gentlemen, "In terms of brand recognition, can you talk about what goes into labeling and packaging and packaging process and how important that is?" Nicolas, I feel like this is a question for you.

Yes. Thank you. So I mean, the packaging is definitely part of the marketing mix. There's no question about that. There is an element of regulation that needs to end up on the packaging. That's okay. That's not, of course -- it's still a way to communicate with the consumers in term of the ingredient that are on -- in the bottle. I would probably make a little parenthesis here. I think going forward, the digital world is also going to show up there in term of information sharing with consumers and labeling because I think you don't want to crowd the packaging too much. But you can offer to the consumers so much more information through QR codes, a different way to connect with the consumers. So that's better space in term of packaging and labeling, which is very important. Because at the end of the day, if you take any shelf in liquor store, the visual aspect of your brand is your first ambassador. And you go into the stores, they are very well organized, but you also -- you can say the offering, in particular, in Canada with the principle of liquor boards, which have fantastic access to so many brands, you need your brand to stand up. So what we are looking while we do packaging is, of course, to be true to the brand, what we call the brand essence, what the brand stands for. But also, you want to stand out on shelf. And this is how we communicate with our consumers so -- which explain as well, from time to time, every few years, you want to refresh your packaging to make sure you continue to evolve your brand with your consumer target and the consumer occasion. So the packaging is a key part of the marketing mix. It is part of the effort to bring clarity about what is our brand on shelf. And yes, we put a fair bit of effort, and we try to improve always the look of our product when we bring it to market.

Thank you. Your next question, and I do believe this here might have been channeling your innovation slide that you had spoken to earlier in the presentation. Their question is, "What is the general time frame from concept to roll out on new products?" Nicolas, over to you.

So that's, of course, again, a key part of our planning. If you are very good, you can go fast. But you need to go with what we call the business planning with the customers. And the more we plan with them, the better. So typical, I would say, it could be 18 months by the time you think about something, you share insights with your customers. So if you are quicker, that could be 12 months. But I would say, 12 to 18 months is usually the timing. We think that you can still change things and be agile. So there are things that will be landed towards the end of that period, but you don't show up 3 months before with the new idea. It won't happen like that. You need to make sure as well that it is a collaborative process because there is a listing process in liquor boards. So you need to make sure that your product comes with an appeal in term of the trend. Of course, as a key player in the industry, we have a very strong views and point of view on the consumer, what we call consumer insights. So we share that with our customers, and we try to really shape the market going forward with those insights. But it takes time. That's why we have this concept of building a pipeline. You always need to plan for the future. You always also have to recognize that some of them will be successful, and some of them will be less successful. And that's okay. I think what we need to be as an organization is to, some degree, to -- if you have to fail, you fail fast, as they say. And basically, that's the idea of constantly bringing views and have this pipeline being built. And we do that with all our customers. So that's roughly the business planning. And internally, it's fully, fully embedded in our way of working.

Thank you. And this question, we pivot on to another topic, is -- or a series of questions is discussing exports. It's 3-part question, so I'm going to ask it. This viewer asks, "What growth rate of exports are you targeting, part one? Do you anticipate the percentage of your growth -- the percentage growth of your exports to grow from 10% in 2021? And are there any key geographical locations that you are specifically trying to penetrate?" A lot of questions. Who will start? Edward, over to you.

Yes. It's a very good question. Our export footprint is a rather mixed footprint at the moment. We have, within the U.K., a legacy business from the Lamb's product. Lamb's in the U.K. had then struggled for a number of years, in part from changing consumer trends and also changing retailer trends. The big U.K. retailers were going through a process of simplifying their portfolios and reduced the number of SKUs that they were carrying on some products. And that included then for Lamb's, where we have 2 SKUs, a 1-liter format and a 70 cl format, the delisting of the 1-liter format. So about 3 to 4 years ago, we had quite a weak performance with Lamb's Rum in the U.K. That rebounded with the relisting of the 1 liter format, plus the introduction of the Lamb's Spiced with the new packaging, and both of those favorable events coincided, and then along with the COVID lockdown in the U.K., which has seen a similar market response to what we see here in Canada and the U.S., where overall retail volume has performed very, very strongly. So -- but that's, let's say, one part of our export footprint. The second part of our export footprint is the U.S. And as important as Lamb's Rum is as a business in the U.K., when I look at the U.S., it's our closest market. It's the largest Canadian whiskey market in the world, and we have a very, very small footprint there. Now success in the U.S. is very, very hard won. And some of you who are maybe more familiar with the history of Corby will know that Corby did make efforts to penetrate the U.S. market in -- around 2014. And we're not as successful as the plan had hoped for. Our approach to the U.S. is rather more now on a, let's say, slow and steady wins the race. So we're not looking at overinvesting to break into the U.S. market but to approach the U.S. market in a much more focused and concentrated effort, targeting particular states and particular cities and trying to build cumulatively on success. This is a long-term plan. It isn't a plan where we're going to be able to see from 1 year to the next a transformation in our overall performance. But it's going to be a consistent effort, which, really, when one looks to the future what Corby could look like if one imagines in 5 years' time or in 10 years' time, I would certainly hope that a successful footprint established in the U.S. is absolutely part of the overall successful Corby story. So beyond the U.K. and beyond the U.S., we do have established footprint in a number of markets. But I would say in terms of overall strategic focus, success in the U.S. is, for me, the real measure of our export strategy.

Thank you. And to piggyback off of that, there's a viewer who asks, "Is there any possibility of purchasing American brands as part of this expansion?" Who will take this question? Nicolas.

What do you mean, in term of M&A again?

I do believe perhaps that person is discussing that. And just, I guess, to kind of take what Edward was mentioning in the last question or in his response to the last question, maybe you might have some color on this viewer's question.

Yes. Okay. So now I mean, to rebound on the -- therefore on that, I will answer the question. Yes, the U.S. is definitely a focus. Ed is absolutely right. We want to do things for the long term. So it might be eventually a slow build, but it is a game changer if we succeed. There's no question about it. So to some degree, 5 years seems to be a long time. But in the same time, this is -- we want to do things for the longer term. So we have seen success with other brand in other parts of the world where this targeted approach, state-by-state, city-by-city and really getting loyal consumers is the right approach. So we want also do that in a responsible way. Now regarding American brand, I mean, we could look -- we are very open, but we also work in an environment where our playground really is more in term of additional brands to our portfolio will be probably more towards the Canadian domestic market. Looking at acquisition by Corby for a big U.S. opportunity, I would say, in theory, it's always possible, but it's also a matter of realistic opportunity. We are also affiliated with Pernod Ricard. So when there is a good opportunity in term of a U.S. brand, we are looking into it. The group has acquired some bourbon lately. So what we are more looking at is whether it makes sense for us to distribute those brands in Canada, for example. So we are very much looking into that. But in term of focus, I would say there is a portfolio to continue to develop and win in Canada. I think the job for the export market could be very much focused on the Canadian whiskey for now.

Thank you very much. And we're heading into your last few questions here, gentlemen. This viewer asks, "Have you had conversations with your potential European partners towards your expansion efforts?" Edward?

Yes. When it comes to European markets and, in fact, markets globally, our relationship with Pernod Ricard means that we are -- always as a first port of call, will be a discussion with a Pernod Ricard affiliate, whether they are the appropriate route to market for us. And we have a mix in different markets of distributing either through Pernod Ricard or through a third-party distributor. And we make that decision really on a case-by-case basis. So each situation will be assessed on its own merits. Sometimes a Pernod Ricard affiliate is the appropriate route. And for example, in the U.K., Lamb's is being distributed through Pernod Ricard in the U.K. But in other markets, it might be more appropriate to work through a third party. Often, that will be a question of scale. In any portfolio business, the challenge is to get top of mind, focus, attention, prioritization from the business. And if we're looking at a small footprint that we've got in the European market, we might find that the big Pernod Ricard affiliate is not best placed for the type of business that we need to develop. And then working with perhaps a smaller, more boutique type route to market or distributor is more effective in those cases. So case by case, we make a decision.

Thank you. Pivoting on a different topic, this viewer asks, "Are you offering a special price on stock purchases based on larger investment amounts?" I think this question is for you, Ed.

Yes. Well, we're not offering stock purchases directly ourselves. So we are not listing new shares. So I'm afraid that isn't something that we're in a position to support.

And your final question, "You are sitting on a healthy cash position. What are your plans for it?" Maybe this could be answered by both. Okay, Edward, off to you first.

Well, I'll take it first, and then I'll hand over to Nicolas to give the second answer or the second part of the answer to this question. In the first instance, as I mentioned, our cash generation is largely used for the dividend policy, but if we do still end with a net accumulation of cash. The representation agreement, which I mentioned with Pernod Ricard, will entail a upfront cash payment, I mentioned, I think in one of the slides, $54.4 million, which will be payable in September 2021. That will leave us with $30 million or so, which I would describe as our war chest. And the Board of Directors has asked us to maintain liquidity to enable us to work rapidly and tactically if the opportunity arose. But that would be my answer. And then back to Nicolas, if you want to expand on that.

Yes. Thank you, Ed. I mean, it's exactly that. First, it is a feature of Corby to have healthy financials and a strong balance sheet. It's very clear. And I think, as I've mentioned, that is also supporting a robust dividend policy. And I think for us, it's very important. This element of being flexible and agile to move if you find an opportunity is also very important. So our view is to use balance sheet as best as possible, but the bolt-on acquisition that we mentioned is always an objective for us. There is an element as well of how we invest behind the business. So this has given us always the way to do both a healthy and strong dividend policy but also to move on quick when we find a good opportunity. So that's a responsible way to manage our balance sheet, yes.

Thank you very much, gentlemen. And so ends the live question-and-answer portion for today's live Virtual Non-Deal Roadshow. If you did not get a chance to submit your question for Nicolas and Edward, don't worry. There's always time to do so by contacting your appropriate account manager here at Renmark, and we will be happy to give your question over to both gentlemen following today's live Virtual Non-Deal Roadshow. Now Nicolas, Edward, just before we let you guys go, Nicolas, I'm going to hand the floor back over to you for final remarks.

Thank you very much, Liz. So thank you very much for your attention and, again, giving us the opportunity to present Corby Spirit and Wine. It is a business which is very much part of the Canadian life. I think what I just want to finish on is to pay tribute to all the work from the team to ride the storm of this pandemic. We've been able to demonstrate that this business is actually very resilient. So we have an industry which is resilient and which has been also showing a fantastic feature of solidarity across the board. And we have a business within Corby which is very resilient. And I think this aspect of the steady and resilience is a key feature of our company. And that's something that you keep in mind, of course, in term of investment rationale. We're also very passionate people, and we look to the future with open and bright eyes to continue to create value for our consumers, for our customers and for our shareholders. So on this note, thank you again very much for your attention, and I wish you a very good end of the day.

That was Nicolas Krantz, President and Chief Executive Officer; along with Edward Mayle, Vice President, Chief Financial Officer, of Corby Spirit and Wine Limited, trading on the Toronto Stock Exchange under the ticker symbols CSW.A and CSW.B. My name is Liz Culley-Sullo, Vice President, Media. On behalf of everyone here at Renmark Financial Communications Inc., thank you especially to those of you in Vancouver and surrounding areas and beyond for joining us for today's live Virtual Non-Deal Roadshow. Please take you for other events in your areas. And until then, we will see you again soon. Be safe. Stay well, and have a great afternoon. Bye-bye now.