CORPORATE PROFILE
THE CHILDREN'S BEVERAGE GROUP (OTC BB: TCBG)
September 23, 1998
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Price and Common Stock Data Earnings per share Income and Net Income
Price a/o 9/23/98 1 3/32 1998 E $.02 1998 E Sales $ 3,000,000
52 Week Range 17/32- 7 7/8 1999 E $.24 1998 E Income $ 450,000
Shares Outstanding 22,150,000 1998 E Book Value $.15
Free Trading 9,650,000
Market Capitalization $24,227,000 1999 E Sales $35,000,000
1999 E Income $5,250,000
1999 E Book- Value $.60
E=estimated
Summary
The Company
The Children's Beverage Group (TCBG) is a manufacturer and marketer of unique products for the children's beverage market. The Company currently produces two product lines; Brainforest plain and flavored spring water varieties and Brainslush, a flavored drink that doesn't fully solidify even when placed in the freezer, producing a slushy liquid that appeals to children and adults alike. Both of these products are sold in a "stand up" aseptic pouch package. Made of PET film, TCBG's packages are see-through and flexible, able to be stored for long periods of time at room temperature, eliminating the need for refrigeration or frozen storage facilities.
These unique pouches include a built-in "Rip it sip it" straw, a patent-pending drinking system. TCBG's process consists of inserting the straw directly into the product-filled pouch during the manufacturing process. The straw is then accessed via a laser score line. The consumer simply tears the film and pushes the straw up from the bottom of the package. Not only is this system convenient, but it eliminates the spillage problem inherent with other drink pouches.
TCBG offers all the key aspects necessary to make significant inroads into the children's beverage marketplace: innovative, kid-friendly packaging, an excellent "flavor profile", a low price to the consumer, and a desirable profit margin to the retailer.
TCBG has positioned itself with unique packaging and products within the PET packaged segment of the juice and bottled water marketplaces. With double-digit growth in the last few years, projected total industry sales are expected to total $6 billion by 2001. TCBG has plans to continue to make significant inroads into both the direct-to-retail and private label marketplaces.
Recent Developments
 Winn-Dixie Stores Has Chosen The Children's Beverage Group To Produce The Beverage For Its PAK.A.LUNCH(R) Product, May 22 -- The Children's Beverage Group, a manufacturer of specialty children's beverage packaging, has been chosen as the exclusive supplier by Winn-Dixie (NYSE:WIN) to produce TCBG's patent pending rip it sip it(TM), no spill, straw in the pouch, fruit drink for its PAK.A.LUNCH(R) product. Winn-Dixie's projected annual volume on this exclusive item is in excess of 8 million units.
 The Children's Beverage Group Increases Manufacturing Capacity to Over 200 Million Units. June 5--The Children's Beverage Group Inc., a manufacturer of specialty children's beverage packaging, announced Friday that the acquisition of three new Volpak manufacturing units will boost the company's total production output to over 200 million units annually, representing over $30 million in revenues. "This increased manufacturing capability will make The Children's Beverage Group the second largest producer of soft pouch drink packaging in the US, second only to Kraft/Capri Sun," said Jon Darmstadter, president and CEO of The Children's Beverage Group. He added, "With all six of our exclusive Volpak manufacturing units fully committed for 1998-99, we will continue our development program to realize the goal of bringing on additional manufacturing capacity." The Volpak machines are being delivered and installed with initial production slated to fill the previously announced Winn-Dixie (NYSE:WIN) order for the snack packet product utilizing The Children's Beverage Group's exclusive "Rip it sip it"(tm) soft pouch drink package.
 The Children's Beverage Group Inc. Enters Into Co-Packaging Agreement With Sweet Ripe Drinks Ltd. to Produce Over 70 Million Units Annually, June 10 --The Children's Beverage Group Inc., a manufacturer of specialty children's beverage packaging, has announced a co-packaging agreement with Sweet Ripe Drinks Ltd. of Ontario, Canada. As a result of this agreement, two of Children's Beverage's Volpak machines, which manufacture the "rip it sip it(tm)" soft pouch drink package with the straw in the pouch, are currently being installed in the 150,000 sq. ft. Sweet Ripe Drink Ltd. facility. Both machines are expected to be in full production by Aug. 1, 1998, producing Children's Beverage's BrainForest(tm) spring water and juice products, along with other private label brands for major retailers. This facility will produce over 70 million units annually, representing over $12 million in revenues. Sweet Ripe Drinks Ltd. is the largest privately owned tetra manufacturing facility in North America and is a leader in aseptic beverage technology. They produce in excess of 20 million cases of beverage products annually for the leading trade brands in Eastern Canada. Sweet Ripe Drinks Ltd. has attained a AAA quality rating, given only to the top food & beverage manufacturing facilities in Canada by Agriculture Canada. By combining free trade and NAFTA provision advantages, and a strong US dollar, The Children's Beverage Group expects substantial cost savings with this strategic Canadian location serving major US markets.
 The Children's Beverage Group Inc. and Cliffstar Corp. Form Alliance, June 17--The Children's Beverage Group Inc. announced today that they have entered into a manufacturing alliance with Cliffstar Corp. to expand TCBG's product line, and generate sales of these products. In this agreement, Cliffstar Corp., the nation's largest private label juice manufacturer, will produce TCBG's exclusive flexible, stand-up, no-spill pouch with the patent pending built-in straw. TCBG will provide Cliffstar Corp. with its state-of-the-art Volpak 240 DF form, fill and seal pouch-making machinery. TCBG will expand its current "BrainForest(tm)" 10% Juice Drink, "BrainForest(tm)" Pure Spring Water and "BrainForest(tm)" Flavored Spring Water line to also include 100% Juice and Cranberry blends. This will be the first opportunity for the consumer to purchase the expanded line of products in a flexible pouch. Cliffstar Corp. will market and sell the expanded TCBG product line into its current account base which includes the nation's premier grocery, mass merchandiser and drug retailers.
 The Children's Beverage Group Inc. and Wal-Mart's Great Value Brand Team-Up to Sponsor Indy 500 Winner Team Cheever, June 19--The Children's Beverage Group Inc., a manufacturer of specialty children's beverage packaging, announced that in recognition of The Children's Beverage Group's commitment to produce its unique no-spill, patent-pending, straw-in-the-pouch fruit drinks for Wal-Mart (NYSE:WMT - news) under the Great Value brand, it will co-sponsor the Team Cheever race car for all Indy Race League events for the 1998-99 season, currently driven by Robby Unser. Robby Unser is the son of legendary race car driver Bobby Unser. The unique Great Value brand 10% fruit juice drink manufactured by The Children's Beverage Group will be available at Wal-Mart stores this Fall.
 The Children's Beverage Group, Inc. Enters Into Exclusive Marketing Agreement With Sweet Ripe Drinks, Ltd., July 7 -- The Children's Beverage Group, Inc. has named Sweet Ripe Drinks, Ltd. as its exclusive Canadian marketer of the unique, patent pending ''rip it sip it(TM)'' straw-in-the-pouch drink package. Sweet Ripe Drinks, Ltd. will be marketing TCBG's exclusive drink packaging with its best-selling Canadian brands including Allen's Apple Juice and Everfresh.
 The Children's Beverage Group, Inc. Expands Agreement With Cliffstar Corporation, July 24 -- The Children's Beverage Group, Inc. has expanded their, agreement with Cliffstar Corporation to include sales and marketing rights. TCBG and Cliffstar Corporation have come to an agreement to allow Cliffstar, in concert with TCBG to sell nationwide into all major mass merchandisers and grocery chains, their exclusive ''Rip It Sip It(TM)'' no-spill pouch in 10% juice drinks and pure flavored spring water. Additionally, Cliffstar will manufacture, sell and market an expanded line of pouched products, which will include 100% fruit juice drink, citrus product and cranberry blends. The agreement allows Cliffstar to access TCBG manufacturing capacity to produce these additional products. TCBG sales generated by these items are expected to exceed $10 million in 1999, and would be in addition to royalty fees paid on the unique patent-pending pouch.
 The Children's Beverage Group, Inc. To Significantly Boost Production With Confirmed Delivery Of Seven New Volpak Machines, July 29-- In response to tremendous demand, The Children's Beverage Group, Inc. has announced the acquisition of seven additional Volpak production machines that will become operational in the next seven months. These new machines will produce their exclusive ''rip it sip it(TM)'' no-spill fruit juice-filled pouches.
 The Children's Beverage Group, Inc. Appoints Daymon Associates, Inc. Aug. 18 -- The Children's Beverage Group, Inc. announced today that the Company has named Daymon Associates, Inc. of Stamford, CT as its private label sales and marketing representative on their line of aseptic pouch juice and drinks. Daymon Associates, Inc., is the largest corporate brand sales and marketing organization in the USA. Its accounts include, but are not limited to: Kmart (NYSE: KM - news), Costco (Nasdaq: COST - news), A&P, American Stores (NYSE: ASC - news), Fleming Companies (NYSE: FLM -news), and Topco Associates.
 The Children's Beverage Group, Inc. Makes An Unsolicited Cash Offer To Purchase Nestle's 'Juicy Juice' Product Line, August 20 -- The Children's Beverage Group, Inc. has tendered an unsolicited cash offer to Nestle S.A. to purchase their "Juicy Juice" brand of 100% juice drinks. Terms were not disclosed.
 Production scheduled to produce and ship back orders commencing November 1998.
Significant Developments
TCBG's Legal Challenge Breaks Kraft/Capri Sun's Domination of the Stand-Up Pouch Drink Market
According to industry sources, Capri Sun juice drinks, packaged in aseptic foil (not see-through) stand-up pouches, produces over 1 billion units each year, representing the entire U.S. market for manufactured stand-up pouches. Kraft attempted to corner the marketplace on this type of packaging by way of a U.S. trademark on stand-up pouches. TCBG mounted a legal challenge to Kraft's dominance in this marketplace and won, making it the only other U.S. company able to legally manufacture, market and distribute stand-up pouch products. As part of the settlement of TCBG's lawsuit, the Company owed Kraft nothing, and has opened up outstanding market opportunities with its own proprietary products as well as potential private label contracts. Kraft continues to protect its US Trademark against other competitors, since the TCBG settlement refers to the Company exclusively.
TCBG offers a more economical package (including the built-in drinking straw), which means advantageous consumer pricing within the billion dollar overall children's beverage market. Currently Capri Sun holds about a 36 percent share.
As a result of this legal decision, TCBG has gained an enviable position within this industry, with little competition in the drink pouch category beyond the current dominant brand: Kraft/Capri Sun.
In addition TCBG has the right of first refusal on all the Volpak SZ40DF machines manufactured for the US market. Since these are the only machines capable of producing TCBG's exclusive packaging, the Company is protected against competition in this regard.
Patent Process Sought For TCBG's Award-Winning Built-in Straw Drinking System
To solidify TCBG's ability to offer unique, consumer-friendly drink packaging, the Company has applied for a utility patent to protect its one-of-a-kind built-in straw drinking system. Called the "Rip it sip it" straw, it is literally built into the package during the manufacturing and product-filling process. The consumer simply rips a pre-scored corner of the package to access the straw, eliminating the spillage encountered with other pouch packages which requires the straw to be manually inserted into the package. This is the case with Kraft/Capri Sun products, and all other aseptic juice products, whether packaged in Tetra boxes or Capri Sun style pouches.
Innovative Packaging: Innovative Manufacturing Equipment
The Company has purchased new Volpak S240DF manufacturing units designed to create the state-of-the-art liquid gusset pouches with the built-in straw system that forms the basis of the TCBG product line. These unique machines are the only ones capable of manufacturing and filling TCBG's exclusive pouch packaging. They are also capable of outstanding production rates: completing up to 120 units per minute.
These first three units were received in the U. S. in 1998 and transported to Ontario, Canada pursuant to an agreement executed with Sweet Ripe. Production is scheduled to commence by October.
Trade Group Gives Award for TCBG's Unique Packaging
The Institute of Packaging Professionals gave its 1997 Silver Star Award to TCBG for its stand-up pouch pack including the "Rip it sip it" built-in straw system. This trade group honors the most innovative, market friendly packages in the industry
Each machine has the capacity to produce three million units per year. Based upon a staggered machine delivery schedule in 1998, TCBG will have the capacity to produce a minimum of 20,000,000 drink pouches this year. The resulting sales in 1998 are expected to be about $3 million. For calendar year 1999, the company expects to take delivery on additional machines boosting unit production to over 270 million, resulting in gross revenues exceeding $35 million. By the year 2000, TCBG projects sales at approximately $80 million.
TCBG currently has contract commitments from some of the largest retailers in America, including Wal Mart and Win Dixie that will make use of all of the available production capacity the Company has planned for the near future. These are private label products each retailer will sell in competition with major brands on store shelves.
The Aseptic Packaging Marketplace
 Aseptic (sealed, room-temperature safe) juice packaging is an $800 million + marketplace. These products are sold through food, drug and mass merchandising channels. The juice market is dominated by Kraft/Capri Sun with about a 36 percent share. All Kraft products (including Capri Sun) constitute an overall 50% share of this market.
 TCBG's potential sales in the juice category alone are projected to be $43.5 million within 3 years.
 Bottled water manufacturers are increasingly turning to alternative packaging methods to be better able to compete with the explosive growth of private label brands vs. traditional brand names, TCBG is strategically positioned to take advantage of this growing trend with a unique pouch package that is economically priced.
With Industry estimates pegging growth at an average of 5-8 percent each year until the year 2,000, and water marketers searching for economical packaging that facilitates the growing trend toward impulse buying, TCBG offers the ideal solution. TCBG is the first company to offer kid-friendly packaging in the pure spring water category. The plain water product is a healthy drink alternative, while the Company's flavored water and juice products have 20% less calories and sugar than its closest competitors.
The Competition
With Kraft/Capri Sun no longer an impediment to TCBG's growth prospects, this marketplace is ripe for increased development in both the juice and water categories. While aseptic box packaging is in wide use today, the industry generally acknowledges that the increasing popularity of soft pouches will make this type of packaging the fastest growing segment in the marketplace.
Kraft/Capri Sun is the only significant competition in the soft pouch category, and this is not expected to change in the foreseeable future. TCBG is aggressively seeking out private label packaging opportunities and expects this part of their business to drive significant revenues to the bottom line in the next few years.
With the nation's largest retailers onboard, combined with aggressive manufacturing goals and creating a product that offers economy market preference and excellent profit margins to retailers, the Company expects to bypass some of the largest competitors in annual sales. They include Cadbury/Schweppes, Proctor/Gamble, Nestles and General Mills. The remaining larger competitors will be Hi-C and Kraft/ CapriSun.
A Proven Management Team
Management Skill and industry experience is a critical factor in determining the success potential of a company in its early stages. Within a company like TCBG, the management team should exhibit strong marketing skills, extensive sales experience and the technical knowledge necessary to leverage the company's assets and capabilities to achieve the stated growth objectives.
Jon Darmstadter, Chief Operating Officer. Mr. Darmstadter was formerly Product Development/Brand Manager with United Beverage of Ohio. In this role he developed the first sports drinks marketed in this country. He was responsible for not only developing the product and its overall marketing concept, but also for its sales and other market strategies. Previous to his product development role, he was National Sales Manager for the company. Before that, he was National Sales Manager for Bidderman Industries, a brand marketer of men's designer clothing.
Edward Ferry, Vice President/Marketing. As the President of Corporate Confectionary/Confection Works, a specialty chocolate manufacturing company, Mr. Ferry developed and market unique products designed to serve the gift and custom incentive marketplace. Before that he was the Midwest Sales Manager for Ralph Laurent Ladies Wear.
J.P. Perrault, Vice President/Manufacturing. Mr. Perrault most recently was with Marson/Canada, a soft drink packager as Vice President of Contract Packaging. He is the only individual in North America
experienced with the operation of Volpak manufacturing machines used to produce TCBG's exclusive
Pouch packages- Previous to that, he was with Hershey's Chocolate/Canada as Manufacturing Manager and
Lever Brother/Canada in charge of their packaging manufacturing operations.
Conclusion
The near and long term outlook for the packaged and specialty drinks market continues to grow. The Children's Beverage Group has certainly carved an enviable niche within an enormous global marketplace. The continued demand for specialty beverage packaging is intensified due to environmental and distribution concerns. The Volpak packaging and manufacturing capabilities combined with its agreement with Kraft foods strategically positions this company for enormous growth opportunities.
Look to TCBG to increase its presence in a 6 billion-dollar plus market over the next few years. Given that this company is not riding on one product to flourish, it is capable of outstanding growth with the proven management in place.
Corporate Address
The Children's Beverage Group, Inc.
255 Revere Drive Suite 108
Northbrook, IL 60062
Phone (847) 562-4040
Fax: (847) 562-9428
Investor Relations
Phone (888) 338-3367
This publication is an advertisement on behalf of The Children's Beverage Group, Inc. and may not be construed as investment advice. This advertisement does not provide an analysis of the Company's financial position and is not a solicitation to purchase or sell securities of the Company. Readers should consult with their own independent tax, business and financial advisors with respect to any investment, including any contemplated investment in the advertised Company. All information contained in this advertisement should be independently verified with the advertised Company and by an independent financial analyst. The Publisher, its affiliates, officers, directors, subsidiaries and agents (collectively, “the Publisher) of this advertisement has been compensated by the Company. Compensation includes fifty thousand shares of freely tradable common stock. In preparing this advertisement the Publisher has relied upon information received from the Company, which, although believed to be reliable, cannot be guaranteed. This advertisement is not an endorsement of the Company by the Publisher. The Publisher is not responsible for any claims made by the Company. You should independently investigate and fully understand all risks before investing. Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: The statements which are not historical facts contained in this advertisement are forward-looking statements that involve certain risks and uncertainties, including, but not limited to risks associated with the uncertainty of future financial results, additional financing requirements, development of new products, government approval processes, the impact of competitive products or pricing, technological changes, the effect of economic conditions and other uncertainties.
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