It is pretty stunning to me this pervasive mentality that resides within our society. I mean seriously. It is akin to a guy who is cheating on his wife and goes out with another woman. While out, he foils a would be thug's attempt to murder someone. He saves someone's life. What's the result? It's so simple! He needs to be publicly ridiculed in the town square for committing adultery! He needs to be banished from society! And on and on.
This is no different with PK and Drinks, and what you are doing to him. I don't have any knowledge that isn't out there already. But think about it. MBC dumping $$$millions into production of the beer? Why would they do this if they were just "contracted" to make the beer? Why are the labels submitted and approved by and for MBC? Why is Kid spending the $$$millions for advertising if he doesn't have substantial vested ownership?
American Badass Brewing Company was conceptualized, formed, and is now doing business from PK. As was stated here before, Drinks files the trademarks, then they are transferred back to the owner, or the icon, then they are licensed back to Drinks for a standard number of years. Maybe 20, maybe 50, maybe 75. It doesn't matter. It's no different than Labatt selling High Falls a license. It's just how business is done. For all I know, this could be an equal triangular relationship. That part doesn't matter.
What does matter is simple. PK doesn't buy breweries. He doesn't own breweries. And there is good reason. He doesn't have to hire 400 people. He doesn't have to deal with State Regulators, and employees, and benefits, and excise taxes, and high dollar plants and production costs. Once again, it is simple.
MBC produces a beer that THEY bare all the costs to produce. They sell their finished product to DKAM, a licensed brokered deal in a sense but by design as a licensed part owner in the brand. For every $7.82 million in beer they buy, they record $10 million in sales as it moves out to distributors. (This number was given by PK at the annual meeting that beer for DKAM carries gross margins of around 28%). So, on $100 million in sales, gross profit is $28 million.
As far as where Kid's cut comes in, I haven't a clue. More than likely, it is a cost of production. Since the product is being born out of ABBC, then that is a "production cost." The same would hold true of the advertising $$$ he spends.
In this sense, PK has the best deal going. He doesn't have all the headaches of production. He simply provides products to distributors and coordinates nationwide expansion and promotion.
Now, when it comes to buyout, this is also a sweet deal. Somebody can come buy the entire product and production phase. But it is highly unlikely that would occur. Simply because it would put 400 people out of work and force the closure of MBC should it be a mogul with large production capacity. No, they would buy the license FROM ABBC, and ultimately FROM DKAM, just like any other brand. So, in that sense maybe I misstated what all this dribble is about. In other words, for their part, DKAM owns the perpetual distribution rights to ALL ABBC beers. But as far as I can see, Kid and MBC own the name. If somebody wants to sell Kid Rock beer, they have to come to PK to buy the rights to sell it, and it needs approval from all three vested interests in ABBC to make it happen.
Just look at the numbers. If MBC sells $7.82 million in beer to Drinks, they probably had roughly $65-$68 million in overall production costs to produce it. Margins are very slim and fighting the line of being a loser until sales are maximized. PK steps in and picks up the product and generates a much greater margin to move it out to distributors.
When it comes to the numbers, you can only look to the most efficient in Bud to see where the numbers come in. At Bud's last annual report before the buyout, they sold roughly $19 billion in beer worldwide on 161 million barrels. That is cost to distributors of $118/barrel, or $59 per keg across all brands. Remember though, Bud has ridiculous advertising and sales cost expenses. Not to mention much higher employee costs and incentives. That puts "per case" pricing just over $8.57 a case out the door to distributors across ALL brands.
MBC is not as efficient but has a HUGELY lowered cost basis on a worldwide scale to ship and advertise the Kid brand DOMESTICALLY. It will cost MBC roughly $6.50 a case (Yes! The same beer we pay over $20 for!) to produce the beer to finish. Kid's cut is added in. Then it is shipped out to DKAM around $7.82 or so. Then Drinks pushes it through distribution at roughly $10 a case. Slightly higher than Bud and rightly so since it is "an iconic brand."
It then goes from distribution to retail at $13-$14 a case, and then the retailers pop everyone good selling it for a hefty margin at $19.99 a case. $5.99 for a six pack. Kegs go to retailers(bars) at roughly $80-$90 a keg. That single keg will bring in the bar owner $372 at $3 a pop! (16 oz)
Once again, and of course what EVERYONE FAILS TO NOTICE, and it would appear to be that way by design, is that Drinks doesn't have to bear ANY of $65 million in production costs for many months to bring in $78.2 million in sales. They bear the costs of $78.2 million in product costs of which THEY HAVE ALREADY BEEN PAID TO BRING IN, or will be paid for in 30 days. By PK's way, the cost of money is so hugely reduced.
I'll thank everyone to remember that and not waste our time any longer with who said what and who did who and who is cheating with someone else's wife.
This is the best deal this company has ever been involved in and will change the face of this company for good...despite the continual public flogging of the CEO for getting it done in the toughest economic environment this country has faced in our lifetime. Not to mention not leaving you a voicemail when he took a crap, or when he didn't clue you in to what Kid had for lunch and who he is doing after tonight's concert.
