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Stock Price $0.003B $.004 A Bionic Products, Inc. has developed and tested a new Shares Outstanding 496,000,000 category of functional energy drinks that appeal to a Est. Float 95,000,000 broader consumer target than the traditional 18-24 year Fiscal Year 12/31 old males that consume the current energy drinks marketed today. Bionic Tonic TM builds upon the conventional energy drink nutraceutical base with a unique proprietary formulation that enhances human potential by boosting energy and mental wellness while suppressing the compulsive appetite for food. Various nutraceutical ingredients contained in the proprietary formula have properties that; aide in digestion, weight loss, stimulates circulation to the brain and enhances memory and learning ability. These elements will add a new dimension to the energy drink market that will appeal to women who are watching their weight and professionals in high stress jobs where decision making, mental acuity and motivation are key elements of success. The Energy Drink Market Alternative beverages, including energy drinks, are the fastest segment of the beverage category. According to Market Research Group, the energy drink category has grown 440% since 2002 to an estimated $6.6 billion in 2007. The report further estimated that the market will grow to $9.0 billion by 2011. The growth has not gone unnoticed by the multinational companies specifically, Coke and Pepsi. Pepsi has seen unprecedented growth in its non-soda category while carbonated beverages have shown little or no growth over the last 5 years. To catch up, Coke has gone on an acquisition binge culminating in the purchase of Energy Brands Inc. for $4.1 billion. Energy Brands is commonly known as in vitamin water and had 2006 sales of $355.0 million. Coke paid 12x 2006 sales for the company! Currently, the major brands in the marketplace are Red Bull, Rockstar and Monster. Hansen Natural Corp. (NASDAQ: HANS) owns the Monster® brand and has experienced dynamic growth over the last few years. As of December 20, 2007, Hansen’s stock price was $46.86 with a market cap of $4.32 billion. Trading at an almost 37 PE the stock is certainly reflecting an expectation of robust growth the the alternative beverage market. With revenue of $809.17 million the company trades at over 5x sales. U.S. LIQUID REFRESHMENT BEVERAGE MARKET Millions of Gallons Growth Share of Volume Segments 2005 2006 2005/2006 2005 2006 CSDs 15,396 15,284 -0.7% 52.9% 50.9% Bottled Water 7,539 8,253 9.5% 26.1% 27.8% Fruit Beverages 4,119 4,020 -2.4% 14.3% 13.5% Sports Drinks 1,207 1,348 11.7% 4.2% 4.5% RTD Tea 555 701 26.2% 1.9% 2.4% Energy Drinks 152 227 49.1% 0.5% 0.8% RTD Coffee 38 43 10.4% 0.1% 0.1% TOTAL 29,009 29,879 2.9% 100% 100% Any new regional brand must be differentiated from these top brands to succeed. Bionic Tonic (BT) is such a brand. The “screaming green” packaging is differentiated from the packaging currently available from these top national brands. This packaging will appeal to a broader and more sophisticated M/F 18 – 40 year old consumer. Additionally, BT’s proprietary blend of green tea, maca root, yerba mate, gota kola and other vitamin infused ingredients cannot be found in these leading competitor’s products today. This unique formulation addresses functional benefits beyond energy, as these ingredients are commonly used to aid digestion, increase metabolism, assist weight loss, stimulate circulation to the brain, and improve memory. BT will appeal to consumers who previously tried and rejected energy drinks based on taste, sugar content or efficacy, as BT contains no carbohydrates or calories, no medicinal or “nutraceutical” after- taste, and provides sustained quality energy – not just a short burst of sugar and caffeine fueled nervous energy followed by a “crash.” BT’s broader positioning as a truly functional energy drink will appeal to consumers who are interested in food and beverage brands that offer health and wellness benefits. These consumers are driving double-digit category growth in select beverage categories such as energy, bottled water, ready-to-drink tea, ready-to-drink coffee and sports drinks. With its unique blend of ingredients, BT is well positioned to appeal to consumers and retailers alike with a brand positioning that goes beyond energy. Retailers respond favorably to brands that do not simply steal share from within a category, but expand the category by bringing in new users through added functional benefits or product/packaging innovation. BT will expand the energy drink category by appealing to emerging M/F category users that are slightly older (18-40) and more sophisticated through differentiated packaging and delivery of unique functional benefits beyond a strong dose of caffeine. BIONIC TONIC TM Bionic Tonic TM is an premium functional beverage with a unique blend of ingredients addressing energy, health and mental awareness. The following are some of the unique ingredients: Green Tea Extract – Green Tea is rich in catechin polyphenols, a powerful antioxidant which is credited with inhibiting the growth of cancer cells, lowering LDL cholesterol levels, and inhibiting the abnormal formation of blood clots. Green Tea is believed to aid digestion, increase metabolism and suppress appetite, which all contribute to proper weight management. Green tea is also a good source of vitamin C and fluoride to prevent cavities.1 Maca Root - The nutritional value of dried maca root is high, similar to cereal grains such as rice and wheat. It contains 60% carbohydrates, 10% protein, 8.5% dietary fiber, and 2.2% fats.. Maca is rich in essential minerals, especially selenium, calcium, magnesium, and iron, and includes fatty acids including linolenic acid, palmitic acid, and oleic acids, and 19 amino acids, as well as polysaccharides..2 Yerba Mate - Mate contains xanthines, which are alkaloids in the same family as caffeine, theophylline, and theobromine, well-known stimulants also found in coffee and chocolate. Mate also contains elements such as potassium, magnesium and manganese.. It is commonly used as a “caffeine free” stimulant and lacks the negative side effects commonly associated with caffeine such as jitteriness, heart palpitations, diarrhea, and anxiety.3 Gota Kola – Is referred to as the “memory herb” as it is believed to stimulate circulation to the brain and increase learning ability. BT’s target market intersects energy and health lifestyle drinks at the premium level. Analog or comparable products include bottled water, sports drinks, energy drinks, and ready-to-drink (RTD) coffees and teas. Their respective markets and the overall liquid refreshment beverage (LRB) market underline BT’s market potential. Indeed, these sectors embody the energy, functionality, and fun that BT represents, and display robust growth trends that bode well for BT. BT Target Market Liquid Refreshment Beverages Bottled Water Energy Sports Drinks Drinks Bionic Tonic Ready- Specialty Ready- Smoothies to Coffees to- Drink Drink Coffees Teas Functional Beverages: BT benefits through “Health Halo” BT will enjoy a “health halo” sales benefit through strong consumer communication of its added physical and mental functionalities in addition to its energy attributes. BT will be merchandised adjacent to or with other fast growing functional beverages at retail locations. U.S. liquid refreshment beverage market grew by 2.9 percent in 2006 due to strong growth from bottled water, RTD teas, sports and energy drinks. These beverages are considered functional and are growing at a faster rate than carbonated soft drinks (CSD). Although CSDs accounted for more than half of total liquid refreshment volume, its share is decreasing and beverages with a health halo or functional benefits are growing at a faster rate. Energy drinks, led by Red Bull and Monster brands, continue to chart astronomical growth, although somewhat lower than previous years. The energy drink category launched in the U.S. with the introduction of Red Bull in 1997. Less than 10 years later, the energy drink category is $3.4B in retail dollars and growing more than 53% annually, making it the fastest growing segment in the beverage industry.1 The $3.4B energy drink categoryi continues to be the fastest growing segment in the beverage industry, +53% in retail dollar volume versus year agoii... The category is dominated by three top brands with national distribution: Red Bull, Monster and Rock Star, and numerous regional and start- up brands. In this highly competitive category, a brand must be strongly differentiated from the market leaders while maintaining a laser focus position targeting the core consumer... BT’s physical and mental benefits, in addition to quality energy, will the drive desirable results. Energy Drinks – Retail $ Volume ($ Millions) $300 $250 $200 $150 $100 $50 $0 Source: IRI period ending July 17, 2006 (Excludes Wal-Mart, Gas & Convenience and On-Premise channels) Energy drinks also continue to be the strongest growth driver of the U.S. liquid refreshment beverage market, reaching a volume of 227.4 million gallons in 2006. The category experienced a 109.8- percent volume growth in 2001 as category leader Red Bull took off. Growth then slowed slightly before jumping back up again, reaching almost 80 percent growth in 2005, perhaps spurred on by all the new energy drink introductions in the market. ENERGY DRINK VOLUME GROWTH 2000/2001 109.8% 2001/2002 52.9% 2002/2003 54.9% 2003/2004 64.0% 2004/2005 79.2% 2005/2006 49.1% Key Success/Growth Factors The success of analog/comparable products underlines various key success factors that can be applied to BT. Product Innovation Brands have differentiated themselves by type (e.g., the bottled water market includes enhanced, spring, and purified water products), functionality (ranging from energy to mental acuteness to athletic performance), flavor, and low calorie/carb count. Packaging Innovation Innovative packaging helps to match products with various consumer lifestyles and preferences: sizes and shapes ranging from 8 oz. to 1L PET, multi-packs of 6, 12, 24 and 36 units, closeable sport caps, wide mouth bottles, slim “designer”/premium cans and label design create consumer appeal for an otherwise commodity product. Distribution and Merchandising BT’s analog/comparable LRB products are popular and profitable. Some, like bottled water, are “destination driver” in retail channels. Grocery chains feature bottled water sales on the front page of home-mailers to drive foot traffic. High consumer demand for these products has led to increased retail shelf sets and expansion into drug, mass and club retail channels. Most gas and convenience retailers now stock full doors of these analog/comparable LRB products. Conventional grocers stock multi-packs on warm shelves and full doors in cold boxes. Just five years ago retail distribution channels rarely carried these analog/comparable products. Now, however, these energy/functional items are regularly stocked and are merchandised together with sports drinks, bottled/enhanced water, and RTD teas and coffees. BT will target specialty retail channels (GNC, Vitamin Shoppe), gas and convenience stores, fitness & health clubs, drug stores, conventional grocery stores, club stores and mass outlets. BT will be distributed by independent food & beverage distributors who provide direct-store- delivery (DSD) service to their retail customers. BT will also be supplied directly to retail chains through their central warehouses. Retail BT’s analog/comparable products are generally impulse purchases, with the exception of bottled water purchased for regular home consumption. For example, the fastest growing LRB segment, energy drinks, have been impulse purchase items consumed immediately after purchase. This is still the dominant purchase pattern for the category, as the gas & convenience channel accounts for 67% of total category retail volume. Conventional grocery is the second largest channel for energy drinks, accounting for 26% of retail volume. Sales Promotion The Company will provide sales-based incentives for brokers, distributors and sales representatives. Brokers will be rewarded on a percentage of sales for securing retail chain distribution. Distributor’s sales reps will be eligible for $/case spiffs based on minimum case thresholds sold into retail stores. BT sales personnel are eligible for performance based financial rewards based on: securing distribution contracts, closing retail chain sales agreements, and meeting merchandising standards. Marketing Strategy It is critical BT reaches out to and appeals to core category users. There are two key strategic priorities for the BT marketing platform: Targeted Conventional and Grassroots Marketing: 1. Establishing a strong brand presence near urban centers with a large daytime workforce, student populations, health-oriented/active adults (18-40 year old bracket): a. Explore targeted billboard, transit shelter and kiosk media presence in high traffic corridors b. Penetrate 3rd party distributors specializing in “up-and-down-the-street” retail outlets in metropolitan centers: bodegas, independent grocers, gas and convenience c. Penetrate distributors who handle “Business & Industry” accounts: offer product to professionals in their place of business d. Target specialty retail: gyms, spas, nutrition 2. On-Premise Activation: a. Bar and nightclub awareness: target appropriate venues frequented by peer influencers with sampling and promotional material b. Develop bartender/manager incentive programs to promote “brand advocate” behavior, i.e. sales contests based on cases sold c. Sponsor BT nights with free samples and cocktail-recipe contests 3. Off-Premise Activation: a. Participate in strong in-store retail programs for conventional grocery, drug and mass channels: feature ads, display programs, electronic marketing (club card activation) b. Cross-category promotion: align with like-minded consumer product companies with similar consumer demographics, including but not limited to diet bars, energy bars, workout gear and urban spas. c. Develop distributor incentive programs to promote top-flight merchandising efforts from distributor sales and merchandising teams 4. On-Campus and Near-Campus Activation a. Hire student brand advocates at key college and university campuses to represent the brand on campus: establish public relations efforts with school media, organize sponsored events during Rush Week, Spring Break, and home football game events b. Establish distribution at on-campus and/or near-campus retail establishments (both on-premise and off-premise) 5. Strong on-line presence featuring downloadable BT artwork and user-friendly website 6. Informative and educational website that clearly communicates the efficacy of BT 7. Comprehensive Pay-per-Click (PPC) campaign and search engine optimization to drive website traffic Top flight merchandising: 1. Leverage the strong graphic branding of BT with window posters, static clings, suction racks, side-stack displays and shipper units. 2. Penetrate alternative distribution channels and supplement retailers 3. Provide strong performance-based incentives to distributors and merchandisers to maximize in-store presence. Key marketing drivers include: Sampling Product sampling is the foundation of BT consumer marketing platform. Sampling teams will target both retail and event venues. Product samplers will be comprised of the target-audience peer group and will be attired in appropriate BT sampling apparel. Sampling teams will distribute product and will be well versed in the brand story, able to communicate consumer information and handouts appropriate for the venue. Packaging BT is available in a 16 oz can with graphics and brand messaging that distinguish on the shelf. Consumers will immediately understand that BT is a lifestyle drink that transcends energy drinks by offering extraordinary functional benefits. Energy Plus BT will go beyond energy drinks by offering quality, sustained energy combined with general health and active lifestyle functionality, under a premium brand. Public Relations (PR) The BT PR team will fully exploit the innovative, revolutionary nature of the product by targeting appropriate online, print and broadcast media vehicles with a comprehensive brand launch package. The PR effort will focus on reaching publications and online sites covering the following industries: food & beverage, active lifestyle, and health & wellness... Price BT will be competitively priced with like premium-positioned 16 oz analog/comparable products from $1.99 to $2.49. BT will provide distributors and retailers price promotion incentives at rollout and once per quarter thereafter. BT’s pricing architecture ensures industry-standard margin expectations are met throughout the supply chain while achieving the target retail price. Management Team JD Pulver (President, J. Douglas Group, Inc.) Consultant/ VP/Director & Treasurer Bionic Products, Inc. Trading Symbol: BNPD Darin Ezra (Power Brands, LLC.) brings over a decade of experience in the Consumer Packaged Goods (CPG) industry. Darin founded SunWorld International (SunWorld), a company that specialized in the import and distribution of CPG brands. SunWorld acquired the import and distribution rights for top selling U.S. brands in Southern Africa, including Celestial Seasonings, Ice Drops and Energy Now (a top selling energy tablet in the U.S.). After two years of operating and growing the company, Darin sold his interest in SunWorld to IS Distributors (IS), the agent for The Dial Soap Company and Freeman Cosmetics, in order to relocate his business to the U.S. Darin formed Big Brands, which manufactured and distributed CPG brands in 30 states and abroad. Darin’s responsibilities included all design, development, packaging, marketing, and operations of the business. Big Brands successfully launched Mad Bull Energy Drink in the U.S., then developed and launched the popular Wild Buzz Energy Drink. After selling his interest in Big Brands, Darin launched several successful beverage brands, including Go Girl Energy Drink and Kabbalah Energy Drink, and is a sought after consultant in the beverage industry. Martin Molina (Power Brands, LLC.) manages all strategic marketing efforts for Power Brands... Martin brings over 12 years of food & beverage marketing experience with industry powerhouses such as Nestle U.S.A and Pepsi. Martin began his CPG career as a research analyst with A.C. Nielsen before joining Nestle U.S.A and progressing through brand management ranks on brands including Nestle Sweet Success, Nestle Carnation Baby Formula and Nestle Carnation Baby Cereal. Martin’s beverage experience includes over four years of channel marketing experience within the Pepsi Cola system. Most recently, Martin led the strategic marketing efforts for Light Force Water Source, a start-up incubator for new energy drink brands. Company News • Bionic Products, Inc. Shareholder Update and Progress Report for 4th Quarter 2007 Marketwire (Mon, Nov 26) Sources All statistics from IRI, Beverage Marketing Corporation, or Lexis Nexis, unless otherwise noted.
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