Managing the Three-Tier Distribu^On

Managing the Three-Tier Distribuon

November, 2017 Agenda

• Introducon to V2 Wine Group • Changing Marketplace Ø Distributor Ø Retailer Ø Supplier • Value Drivers • Building Value • Winning DFV/V2: A New Market Force America’s Fastest Growing Top Ten Wine Co

Top Ten Supplier to Powerfully Equipped to Ability to Develop Distributors & Retailers Manage All Channels from a Brands Across Posion of Leadership Segments from Ranging from Fine Wine to Luxury to Value Chain Grocery

Branded Distribuon in more than 100,000 Accounts

3 Hands-On Ownership

Dan & Katy Leese Chris Indelicato V2 Wine Group Delicato Family Vineyards Chris, leads the 3rd generaon family Dan has held numerous prior and oversees the winery’s strategic execuve roles with Brown-Forman, direcon, company culture and Beringer and Fosters Wine Estates commitment to sustainability

Chris proudly serves as President of Dan & Katy have co-owned successful the Winegrowers of Napa County, as entrepreneurial ventures since 2006 well as Second Vice-Chair of the California Wine Instute

V2 has grown to >500K cases in six A former CPA, Chris assumed the role years with an average price per bole of CEO in 2004 of ~$18.00

IRI, Total US MULO+Liquor, 52 weeks, 12.04.16 4 V2 Mission

To help Family Wineries achieve their goals in North America by driving their business through the challenging 3-er system

5 V2 Wine Group Portfolio

Washington State France (Cotes de Provence) Oregon (Willamee Valley) $12-50

$20-25

$15-50

Central Coast California Napa Valley

$12-30 $30-60 $40-45 Sonoma/Mendocino/North Coast

$27-200 $16-27 $12-50 $20-50

$15-40 $12-15

$15-30 $12-15 Australia (Barossa Valley) Chile (Maipo/Casablanca) $18-700 $10-30 6 Changing Marketplace

Supplier Tier Distributor Tier Retail Tier

7 Changing Marketplace

Supplier Tier Distributor Tier Retail Tier

8 Rise in Suppliers & Distributor Consolidaon 1995 2016

1,800 Wineries

9,872 Wineries +5% 2015 3,000 Distributors

675 Distributors

9 Wine Vine Analycs Large & Small Distributor Consolidation

Total Market $55B – Now Top 4 Distributors Control 61% of the Market

+ 22 States + DC $7.5B (13.5%) 15 States + DC $5.5B (10%) 44 States + Wash, DC $17.5B (32%) 10 States $3.0B (5.5%) A/O $21.5B (39%) Small Distributor Consolidaon: Winebow: NY, FL, GA, WA, WI, ID (18 Markets) McLane (Warren Buﬀe): TN, CO, MO

10 Shanken Impact(*2016 ﬁgure) Managing the Changing Distributor Environment

Keeping Execuon Use the Naonal, Opons Manpower Focus in Strength of Regional, Open w/ a Needs Marketplace the Porolio Market Focus Strategy

11 Changing Marketplace

Supplier Tier Distributor Tier Retail Tier

12 Top 10 Retail Grocery Chains Account for

Over 50% of Grocery Sales

Retail Grocery Industry – $594.4 Billion

Top 10 Retail Grocery Chains 50%++

13 Retail Consolidaon 2013-2017

There has been ~$45+ billion in supermarket mergers in 2013-2015 the hoest pace of consolidaon since 1999

Date Target Acquirer

2017 Whole Foods Market Amazon 2016 Lucky Markets Kroger 2015 Roundy’s (Marianos) Kroger 2015 Family Dollar Dollar Tree 2015 Ahold Delhaize 2015 Hiller Stores Kroger 2014 Safeway Haggen's 2014 Safeway Albertsons LLC 2014 Pro’s Ranch Markets Cardenas Markets 2014 Safeway (7 Dominick’s) Whole Foods Market 2014 Arden Group TPG Capital 2014 Safeway (11 Dominick’s) Roundy’s 2014 Belle Foods SWO Acquision 2013 Bi-Lo Holding (7 Stores) Publix 2013 Piggly Wiggly (22 Stores) Bi-Lo Holding 2013 Fresh & Easy (Tesco) Yucaipa 2013 United Supermarkets Albertsons LLC 2013 Nash Finch Spartan Stores 2013 Harris Teeter Kroger 2013 Delhaize (Sweetbay, etc.) Bi-Lo 2013 The Great A&P (2 stores) Madison Capital 2013 Albertsons (Supervalu) Albertsons LLC (Cerberus) 14 Super Market News Changing Marketplace: Oﬀ Premise

Retail Channel Changes Breakout of New Retailers Decentralized Exisng Stores Regional Accounts

Specialty Retailers

Non-Tradional Wine Retailers

15 Naonal On-Premise Consolidaon

16 There is $709.2 Billion in Restaurant

Sales in the United States

% of Food Dollar Sales in Restaurants 1MM Restaurant Outlets in the U.S.

47% 35% Wine Serving Outlets 358,263 % of Wine Case Sales 65% in Restaurants Non-Wine Serving Outlets 651,737 19%

17 Wine Dollars Spent in Restaurants

By-The-Glass By-The-Bole

50%

45% 44% 61% 40% 35% 39% 30% 25% 27% 20%

15% 17% $5-$10/Glass $10+/Glass A/O 10% 12% 5%

0% <$20/bole $20-$30/Bole $20-$40/Bole $40+/Bole

18 NRA (*2014 ﬁgure) Managing the Changes in Account Environment: What’s your Compeve Advantage?

Alternave to Understanding Authencity of Regional Chain Commercial Chain Porolio Focus Brands Opportunity

19 Changing Marketplace

Supplier Tier Distributor Tier Retail Tier

20 Supplier Consolidaon

Homogenizing the Wine Industry Losing the Winery Story & Sense of Place

Acquires

7/15 4/15 3/15 ~6/11

Acquires Acquires

6/15

Acquires Acquires

11/14

Acquires Acquires

21 Top 9 Suppliers Have a 77% Share

of Wine Volume

Total Suppliers 330M Cases

82M (25%) 52M (16%)

10M (3%) 19M (6%)

50M (15%)

18M (5%) 8M (2%) 10M (3%) 6M (2%)

A/O 75M (23%)

22 Implicaons of Supplier Consolidaon

Top 9 Suppliers

Have a 77% Share

Brands / Sku’s Disappear 5% of SKUs Represent 80% of Wine Over 2,000 SKUs Disappear Every Year

Control Brands – Total Wine/

IMPLICATIONS Costco Control SKUs – BevMo/HEB

New Item Flood: 4,200 New in 2016 – 65% of Wine Growth from New Items

23 Managing the Changing Supplier Environment

Value of Family The Power of Winery Winery Porolio Partnership

24 2 New Value Drivers

Markeng NPD

Distribuon or Route-to-Market

25 Building Value in a Wine Business

4 Keys via 3-Tier Building a Creaon & Building a Management of Successful Management of Successful the Distributor Distributor Sales & Markeng (Valuable) Brand Network and the Network Infrastructure & Porolio Channels Within It

26 Building Value in a Wine Business

Building a Creaon & Building a Management of Successful Management of Successful the Distributor Distributor Sales & markeng (Valuable) Brand Network and the Network Infrastructure & Porolio Channels Within It

Large, Mul-state operators Large single state (e.g. SGWS, RNDC, (e.g. Fedway or Great Breakthru) Lakes)

Mid-sized Bouque

27 Building Value in a Wine Business

Chain Retail & Naonal Coverage vs. Geography Accounts

Top Independents Distributor Groups

28 Building Value in a Wine Business

Strategic and Valuable to Good Brands the Market Place

Growth Potenal Professional Management

29 Building Value in a Wine Business

Informaon Professionalism

Coverage Investment

Consistency

30 2 Key Strengths to Win #1: Brand or Porolio Strength

• Having a strategic, valuable Brand or Porolio that Distributors and the Trade want/need.

• Being a valued supplier that garners me and aenon.

• A Supplier that is commied to “being present” and acve in the Top markets.

• Brings Distributor investment of me and money…”a Supplier to bet on”.

• Requires a more consolidated, cohesive Distributor Network. (Comfortable with up to 2 Distributors in Top 10-15 markets, not more). 2 Key Strengths to Win How do you Build that Strong Brand?

• Strong, valuable and viable categories. (i.e. Pinot Noir, Chardonnay, above $15 retail).

• Consistency. Look, feel, quality and approach.

• Strong Branding/Strong Story.

• Authencity.

• Focused plan; geography, channels, etc.

• Stay RELEVENT 2 Necessary Strengths to Win #2: Organizaonal Strength

• Personnel: Probably at least 30 people; Mix of Sales and Support.

• Technology and Informaon: Beer and easier informaon and systems to support Sales.

• Logiscs: A Market Facing Supplier that provides state-of-the-art Customer Service and ease of interface. Key Take-Aways

• Consolidaon on all levels is driving the Industry; hence your 3-er Strategy needs to reﬂect that

• What is your Compeve Advantage?

• Route to Market choices are crical

• Build a strong Brand and stay Relevant Dynamic Marketplace Stay…

Strategic Focused Nimble Opportunisc But Flexible

35 Managing the Three-Tier Distribuon

November 2017