20 January 2015 Global Equity Research

Global Beverages

Connections Series

Brewers and soft drinks to further integrate?

■ Beer integrated with soft drinks bottling assets can work well: Combining dominant beer positions with soft drinks bottling assets has worked well in many markets, particularly in EMs where it has enhanced scale benefits and delivered strong growth. With weak growth, increasing regulation and competition, we believe it makes sense for further integration . ■ SAB's move to standalone bottling assets is less attractive: However, the creation of standalone bottler Coca-Cola Beverages Africa (57% owned by SAB) misses these benefits. We note KO bottlers generate at least c800bps lower CFROI® than best-in-class brewers, which has negative The Credit Suisse Connections Series leverages our exceptional breadth of valuation implications for SAB, whose bottling assets are generally not macro and micro research to deliver integrated with beer – KO bottlers trade at c25% EV/EBIT discount to brand incisive cross-sector and cross-border owners, only partly captured in SAB's recent relative valuation de-rating. thematic insights for our clients. ■ Implications for M&A:

Research Analysts i) For SABMiller, Castel (c$30bn+ EV with c50% vols from KO bottling) in Sanjeet Aujla Africa could be an obvious next step considering its alliance, however such a 44 20 7888 0353 deal could entail dis-synergies. Coca-Cola Amatil in Australia (c$9bn EV at [email protected] 30% premium) could also be a target, as both businesses feel margin Michael Steib compression from an increasingly competitive retail environment. Elsewhere, 212 325 5157 [email protected] opportunities appear limited. Antonio Gonzalez, CFA ii) The long-speculated ABI bid for SAB could be more difficult as SAB 52 55 5283 8921 becomes more involved in KO bottling assets – it could potentially mean ABI [email protected] having to dispose of c30% of SAB profits. Larry Gandler iii) ABI's relationship with Pepsi could evolve (current agreement expires in 61 3 9280 1855 [email protected] Dec '17), with scope to negotiate better terms and/or enter new bottling Pieter Vorster territories, such as Mexico, potentially replicating the successful beer/soft 27 11 012 80 64 drinks integrated model in Brazil [email protected] iv) Contrary to frequent press speculation, we view an outright bid for either KO or PEP by ABI or 3G/Buffett as unlikely at this stage given financing constraints. Even if ABI teamed up with Buffett/3G, we think that it would require significant equity financing. We think it is more likely that beer and soft drinks players assess opportunities on a market-by-market basis, rather than pursuing global mergers. ■ Remain positive on ABI and KO: For ABI, our base case of increasing cash returns and strengthening its relationship with PepsiCo supports our positive stance, with M&A a 'free' option (we think that mgt would only do a deal if value enhancing). KO is under pressure to deliver, but we believe it is now well positioned execute on its plan. SAB's venture into standalone KO

bottling assets has negative valuation implications, in our view.

DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATION® Client-Driven Solutions, Insights, and Access

20 January 2015 Key Charts

Figure 1: Those bottlers which have combined with beer Figure 2: Beer and soft drinks brand owners generate businesses generate higher margins (avg c20%) than higher returns than the bottlers standalone bottlers (avg c13%) 2013 CS HOLT Cashflow Return on Investments (CFROI) - % 2013 EBIT margin of integrated soft drinks bottlers v standalone bottlers - % 30% 30% 25% 25% 20% 20% 15% 15% 10% 10% 5% 5% 0% 0%

Source: Company data, Credit Suisse research Source: CS HOLT

Figure 3: Brewers have been able to expand their returns Figure 4: Therefore bottlers trade at a c25% valuation over the past decade, however the bottlers have seen discount to brand owners – this has negative implications declining returns due to rising capital intensity and for SAB's move to standalone bottling assets, partly margin pressures reflected in its recent relative de-rating 2013 CS HOLT Cashflow Return on Investments (CFROI) - % FY15E calendarised EV/EBIT - x 1,500 18.0 16.0 1,000 14.0

12.0 500 10.0

0 8.0

6.0 -500 4.0

-1,000 2.0

0.0 -1,500 Consumer staples (brand owners) KO bottlers Source: CS HOLT Source: Credit Suisse estimates

Figure 5: A potential SAB acquisition of Castel would be Figure 6: We believe ABI could extend its Pepsi expensive, and entail dis-synergies if soft drinks (c50% relationship through better terms or enter new markets – Castel vols) are split from its beer assets. Furthermore, it makes sense to combine beer and soft drinks in Mexico, we estimate Castel beer margins are already best-in-class where the Pepsi bottler (Cultiba) makes just 10% EBITDA 2013 Africa beer EBIT margins - % margins, 11-14pp below standalone KO bottlers 2013 Mexico KO v Pepsi bottler EBITDA margin - % 35% 25% 30% 20% 25%

20% 15%

15% 10% 10%

5% 5%

0% Castel Beer SAB South Africa SAB Africa Beer Heineken Africa 0% beer Cultiba KO FEMSA Arca Contal Source: Company data, Credit Suisse research Source: Company data, Credit Suisse research

Global Beverages 2 20 January 2015 Do beer and soft drinks mix? In this report we explore how the relationship between brewers (in particular ABInBev and SABMiller) and soft drinks companies could evolve over the medium term, particularly as: i) Emerging market growth is weaker due to a deteriorating macro backdrop and rising excise duties/regulatory constraints/sugar taxes ii) Competition is stepping up iii) M&A in beer is becoming more difficult The relationship between brewers and soft drinks companies is evolving The concept of beer companies integrating with soft drinks is not a new one − most of the world's largest brewers have long had soft drinks bottling agreements and even developed their own brands in certain markets.

■ SABMiller – Soft drinks now represent c26% of pro-forma group volumes, of which we estimate the Coca-Cola bottling business accounts for 22%, with the balance being own soft drinks brands, malt beverages and water. SAB's Coca-Cola bottling interests are in Africa (newly formed Coca-Cola Beverages Africa and through its 20% stake in Castel); Latin America (Coca-Cola bottler in El Salvador and Honduras) and Europe (through indirect stake in Coca-Cola Icecek).

■ ABInBev/AmBev – Soft drinks represent c30% of its volumes in Latin America. In Brazil, the soft drinks portfolio is evenly split between Pepsi brands (AmBev has been the exclusive Pepsi bottler in Brazil since 1997) and its own brands (Guaraná Antarctica). For ABInBev, Pepsi accounts for c5% of consolidated group volumes.

■ Carlsberg – Soft drinks represent c15% of group volumes. Carlsberg is a Coca Cola bottler in Denmark and Finland, and a Pepsi bottler in Norway and Sweden. Its soft drinks interests extend to Asia, where it is a Pepsi bottler in Laos. It has its own soft drinks brands (kvas) in Russia.

■ Heineken – Soft drinks represent c5% of total consolidated volumes, and c20% in Africa alone, where Heineken is a Coca-Cola bottler in Central African markets, and also has its own soft drinks and malt brands in Nigeria. A legacy arrangement in Brazil means that the Coca-Cola bottling system distributes Heineken's beer brands across the country (c10% market share).

In the past few months, we have seen evidence of brewers and soft drinks companies across the world forging greater ties:  In Africa, SABMiller merged its existing Coca-Cola bottling interests with privately owned Coca-Cola Sabco to form Coca-Cola Beverages Africa, which represents c40% of total Coca-Cola volumes in the continent.  In Latin America, Chilean listed brewer CCU (c33% owned by Heineken) announced the formation of a JV in Colombia with established local soft drinks operator Postobon to build a brewery with capacity to supply c15% of the beer market, challenging SABMiller's dominant position (c98% market share) in this profitable market (c52% EBITDA margin).

Global Beverages 3 20 January 2015

Beer & soft drinks integration adds scale in emerging markets Traditionally, the brewers have integrated their beer assets with soft drinks bottling operations in emerging markets to provide additional scale, particularly in small markets, where scale benefits from beer alone can be limited. For the soft drinks companies, the main rationale for partnering with brewers in such markets has been their route to market advantage, where otherwise it would have been too difficult and more expensive to go standalone. For example, SABMiller subsidiary Zambian Breweries (87% market share in beer) acquired two Coca-Cola bottlers in 2002, which helped the business generate significant scale, growing topline by 20% CAGR, EBIT by 15x and expand margins at the same time. Furthermore, AmBev (exclusive Pepsi bottler in Brazil, c70% market share in beer) in the past has estimated that the cost to serve for soft drinks is around 15% lower when integrated with beer versus standalone. Our analysis in Figure 10 shows that despite pricing lower than standalone Coca-Cola bottlers, AmBev's Pepsi portfolio generates superior margins and unit profitability driven by its significantly lower cost base (c25% lower COGs and c33% lower Opex). From a commercial standpoint, the Pepsi brands have better coverage of the entire trade than their competitors given AmBev's strong direct distribution (c70% of volumes), particularly in the on-premise (bars etc).

Figure 7: Zambian Breweries' EBIT has expanded 15x Figure 8: Critically, margins have expanded despite since the acquisition of the Coca-Cola bottling rights in significant investments 2002 to complement its beer business Zambian Breweries EBIT margin (March year-end) - % Zambian Breweries EBIT (March year-end) 300 25.0%

250 20.0%

200 15.0% 150

100 10.0%

50 5.0%

0 0.0% 2002 2014 Source: Company data Source: Company data

Figure 9: In the past, AmBev has estimated the cost to Figure 10: Despite pricing lower than Coca-Cola in Brazil, serve for soft drinks is 15% lower when combined with its AmBev's Pepsi portfolio generates superior margins dominant beer business versus standalone driven by its lower cost to serve Cost to serve soft drinks when standalone and integrated with beer – 2013 AmBev Pepsi v Andina (KO bottler) unit case analysis in Brazil – R$ US$ per case 22 Andina AmBev Difference - % Net revneue 4.09 3.39 -17% 21 COGs -2.57 -1.91 -25% Gross profit 1.53 1.47 -3% 20 Gross profit margin - % 37.3% 43.5% 619

19 Opex -1.03 -0.69 -33% EBIT 0.49 0.78 58% 18 EBIT margin - % 12.0% 23.0% 1,097

EBITDA 0.65 0.97 47% 17 EBITDA margin - % 16.0% 28.5% 1,249 16 CSD standalone CSD + beer Volume - m cases 243 170 -30%

Source: 2005 InBev investor day Source: Company data, Credit Suisse research

Global Beverages 4 20 January 2015

Synergies between combining beer and soft drinks operations in emerging markets include:  Procurement – Beer and soft drinks have common raw and packaging materials, including glass, aluminium, PET, labelling, etc. A combined entity would have better bargaining power against suppliers.  Production synergies – Beer and soft drinks can typically be produced at the same site. Note AmBev has 30 plants in Brazil, of which 13 produce both beer and soft drinks (4 standalone soft drinks plants). From a technical standpoint, a soft drinks operation is not as sophisticated, and does not require as much space as a brewery operation.  Salesforce – In many emerging markets, SKU proliferation in beer and soft drinks is relatively low, markets tend to be relatively more consolidated given high barriers to entry, and the retail environment remains largely informal. As such, there are potential synergies from combining salesforces between the two product lines.  Route to market – Scope for rationalisation of warehouses/depots, as well as better optimisation of delivery sizes and frequencies.  Revenue synergies – A full beverage portfolio could give access to more distribution points and bargaining power with retailers. However, in some EMs, regulatory obstacles can make integration difficult (e.g. in South Africa, where liquor licensing requirements lead to limited point of sale overlap between beer and soft drinks). The benefits of beer and soft drinks integration have not been limited to emerging markets, but have been more apparent in these regions as both businesses have started from a small base and have grown in tandem, such that full synergies from integration have been easier to extract. The concept has also worked in small developed markets (as evidenced by Carlsberg and Royal Unibrew in Northern Europe), however these are more mature, lower growth markets, where route to market networks are already well entrenched. Brewers have been able to grow soft drinks just as well, if not better, than beer The brewers have been good custodians of soft drinks assets, with growth similar to or faster than beer over the past decade, despite it being a generally more competitive category than beer.

Global Beverages 5 20 January 2015

Figure 11: SABMiller Africa soft drinks portfolio has Figure 12: SABMiller South Africa soft drink volumes grown faster than beer over the past decade, but have grown c3x faster than beer, however growth has converged in recent years converged in recent years due to competition from B SABMiller Africa beer v soft drinks volume growth - % brands SABMiller South Africa beer v soft drinks volume growth - % 25% 10% Beer: 9.2% CAGR Beer: 1.2% CAGR CSD: 11.4% CAGR CSD: 3.5% CAGR 20% 8% 6% 15% 4% 10% 2% 5% 0%

0% -2%

-4% Beer CSD Beer CSD

Source: Company data Source: Company data

Figure 13: SABMiller LatAm soft drink volumes have Figure 14: ABI LatAm North soft drink volume growth has grown in line with its beer business been slightly faster than its beer business over the past SABMiller LatAm beer v soft drinks volume growth - % decade ABInBev LatAm North beer v soft drinks volume growth - % 15% 12.0% Beer: 3.1% CAGR Beer: 4.2% CAGR CSD: 3.0% CAGR 10.0% CSD: 4.9% CAGR 10% 8.0% 6.0% 5% 4.0% 2.0% 0% 0.0%

-5% -2.0% -4.0% -10% -6.0% Beer CSD Beer CSD

Source: Company data Source: Company data

Figure 15: ABI's soft drinks market share in Brazil has grown to its all-time highs in FY14 ABI Brazil soft drinks market share - % 19.5%

19.0%

18.5%

18.0%

17.5%

17.0%

16.5%

16.0% 2007 2008 2009 2010 2011 2012 2013 2014 YTD

Source: Company data

Global Beverages 6 20 January 2015

As such, there is a good case to be made for brewers with dominant positions to pursue closer integration with soft drinks bottling assets, particularly in emerging markets. However, SABMiller's recent deal in Africa to form Coca-Cola Beverages Africa (CCBA) suggests it is moving away from a model of beer and soft drinks integration to being a pure standalone soft drinks bottler, where we believe the returns are generally less attractive than in beer (brand owners), beer integrated with soft drinks bottling assets and owned soft drinks brands. Returns of standalone soft drinks bottling assets are less attractive Whilst soft drinks bottling businesses are less capital intensive than beer, we believe that they ultimately generate lower returns given the lower margins versus beer, which can be significantly influenced by the brand owner (e.g. Coca-Cola). Note in Africa specifically, CCBA's already best-in-class pro-forma EBIT margin of 17% compares to SAB's African beer margin of c30%. Figure 19 shows that best-in-class KO bottlers (Coca-Cola FEMSA and Arca Continental) still generate CFROI c600bps below SABMiller, as ultimately they are not brand owners – We estimate concentrate costs for Coca-Cola bottlers paid to KO represent c20% of sales, a significant amount of the economic pie transferred to the brand owner. Furthermore, CFROI for all bottlers has declined over the past decade due to rising capital intensity and margin pressures, in part from concentrate price increases. However, we note that own brand soft drinks margins can be comparable to beer – our analysis in Figure 21 shows that ABI's own soft drinks brand portfolio in Brazil (Guaraná Antarctica) generates a similar EBIT margin (c40%) to its beer portfolio.

Figure 16: Coca-Cola Beverage Africa generates c17% Figure 17: Those bottlers which have combined with beer margins relative to c30% for SAB's African beer business businesses generate higher margins (avg c20%) than 2013 CCBA EBIT margin v SABMiller Africa beer EBIT margin - % standalone bottlers (avg c13%) 2013 EBIT margin of integrated soft drinks bottlers v standalone bottlers - % 35% 30% 25% 30% 20% 25% 15%

20% 10% 5% 15% 0% 10%

5%

0% Coca-Cola Beverages Africa SABMiller Africa beer

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse research *SAB Africa includes KO bottling assets in Zambia and Botswana

Global Beverages 7 20 January 2015

Figure 18: Beer and soft drinks brand owners generate Figure 19: Brewers have been able to expand their returns higher returns than the bottlers over the past decade, however the bottlers have seen 2013 CS HOLT Cashflow Return on Investments (CFROI) - % declining returns, as have KO and PepsiCo due to consolidation of lower return bottling assets in the US 2003-13 Change in CFROI - bps 30% 1,500 25% 1,000 20% 15% 500 10%

5% 0 0% -500

-1,000

-1,500 Source: Credit Suisse HOLT Source: Credit Suisse HOLT

Figure 20: Concentrate costs for bottlers typically Figure 21: However, soft drinks brand owners can have account for c20% of net sales comparable margins to beer 2013 Concentrate costs for bottlers as % of net sales 2013 AmBev Brazil Pepsi, own soft drinks and beer EBIT margins (excluding other income) - % 30% 45% 40% 25% 35%

20% 30%

25% 15% 20%

10% 15%

10% 5% 5%

0% 0% FEMSA Amatil Icecek CCHBC Consolidated Enterprises Pepsi CSD Own soft drinks brands Beer

Source: Company data, Credit Suisse research Source: Company data, Credit Suisse estimates

SAB is going down the standalone soft drinks bottling path SABMiller has been clear in its intent to develop a closer relationship with the Coca-Cola system over the past few months, which eventually led to the merger of its African soft drinks bottling business with that of Coca-Cola Sabco (a privately owned bottler in Southern and Eastern Africa), to form a new company Coca-Cola Beverages Africa (CCBA), in which SAB will have 57% economic control and 50% (plus 1) voting rights. The new entity represents c40% of the total Coca-Cola system volumes in Africa.

Global Beverages 8 20 January 2015

Figure 22: SABMiller raising its exposure to soft drinks Figure 23: CCBA will control c40% of Coca-Cola volumes bottling assets following deal with Coca-Cola Sabco in Africa FY14 SABMiller volume split pre and post deal - % FY14 Coca-Cola Africa volume share by bottler - % Heineken Other 3% 11%

CCBA CCHBC Nigeria 40% 11%

Castel 35%

Source: Company data Source: Company data, Credit Suisse research

On the one hand:  There was no capital employed, SAB's implied premium was small and it has control of the entity  The business will have more scale to invest and more focus to accelerate topline growth  SAB is able to leverage best practice into previously privately owned bottler However, the entity will be run independently from SAB's beer assets, despite big overlapping markets where SAB has very strong market positions (60-90% market share in Tanzania, Uganda, Mozambique). We believe there would be significant synergy potential from combining soft drinks bottling assets with SAB's dominant beer positions in these markets. Furthermore, the deal could also have given SABMiller access to the lucrative Kenyan beer market (6th largest market in Africa), using Sabco's strong Coca- Cola route to market, where it currently has no exposure (the Kenyan beer market is dominated by Diageo).

Figure 24: SABMiller has strong beer market shares in Figure 25: Coca-Cola Sabco is also the second largest Mozambique, Tanzania and Uganda, where there could Coca-Cola bottler in South Africa after SABMiller have been obvious synergies from combining with Coca- 2013 South Africa Coca-Cola volume share by bottler - % Cola Sabco's bottling assets SABMiller beer market share in Coca-Cola Sabco's African markets (2013) - % 100% Shanduka 7% 90% 80% Penbev 70% 12% 60% 50% 40% 30% Sabco (Coca- Cola Fortune) SABMiller 20% 26% 55% 10% 0% Mozambique Tanzania Uganda Namibia Kenya Ethiopia

Source: Company data Source: Company data

Global Beverages 9 20 January 2015

SAB will therefore have to unwind its current beer and soft drinks integration in Zambia and Botswana which will be merged into CCBA – in these markets, soft drinks represent c30% of total volumes and generate c26% margins, versus c18% in the markets such as South Africa where soft drinks is standalone. This move to standalone bottling is in contrast to the past, where SAB (and the industry) has advocated scale advantages in combining beer and soft drinks assets particularly in small EMs (as discussed above), where scale benefits from beer alone can be limited.

Figure 26: SAB has to dis-integrate existing beer and soft Figure 27: The markets where soft drinks is integrated drinks integration in Zambia and Botswana, which will with beer generate higher margins (26%) than those entail some dis-synergies where soft drinks is standalone, implying potential dis- SABMiller portfolio volume split in Zambia and Botswana - % synergies SABMiller EBIT margin of integrated soft drinks v standalone soft drinks - % 100% 30% 90% 28% 29% 80% 25% 70% 60% 26% 20% 33% 50% 40% 15% 30% 47% 10% 20% 38% 10% 5% 0% Zambia Botswana 0% Other Soft drinks Beer Standalone CSD Integrated CSD

Source: Company data Source: Company data, Credit Suisse estimates

Why is SABMiller therefore pursuing standalone bottling assets? We see three potential reasons:

■ SABMiller is very growth focused: SABMiller management is heavily incentivised on growth (management remuneration targets are geared to EPS growth with little focus on ROIC measures). As shown in Figure 28, SABMiller's soft drinks business has consistently grown faster than its beer business in recent years when it has accounted for c20% of group volumes but c45% of group volume growth.

■ SABMiller wants to strategically align itself to KO: Assuming SABMiller does not want to be acquired, it may see strategic logic in strengthening its relationship with KO, which could make a possible bid for SAB from ABInBev more difficult (see page 19 for further analysis). From KO's perspective, there is strategic merit in consolidating its bottling relationships in Africa, particular with a partner who has a deep knowledge of operating in these markets.

■ KO may not allow beer and soft drinks integration in such an important growth region: However, whilst KO is willing for SAB to be a consolidator of bottling assets in Africa, we consider that KO may want to isolate SAB's beer and bottling assets in the region in case it is acquired by ABInBev − it would be easier for KO to take back the bottling assets in the region, which are a very important growth driver for the company longer term, of which ABInBev may not be the best operator, given it has no experience of operating in the African region. We note beer and soft drinks integration has been a big feature of Coca-Cola bottling assets across the region. Note Castel (represents 35% of Coca-Cola vols in Africa) has integrated its beer business with soft drinks and SAB's operations in the past have been integrated.

Global Beverages 10 20 January 2015

Figure 28: SABMiller's soft drinks business has consistently grown faster than its lager volumes, accounting for c45% group volume growth in recent years SABMiller soft drinks v lager volume growth - % 12%

10%

8%

6%

4%

2%

0%

-2%

Lager Soft drinks

Source: Company data

Valuation implications for SABMiller We estimate that Coca-Cola bottling assets represent c22% of SABMiller's pro-forma volumes and 12% of pro-forma EBITA. If standalone soft drinks bottling assets are going to be a bigger growth driver for SABMiller, this should arguably be reflected in valuation − ultimately soft drinks bottlers are not brand owners, which is where the bulk of the economic profit lies. As we have experienced with many bottlers in the past, Coca-Cola ultimately controls the excess returns of its bottlers, which is why these businesses trade at a c25% FY15E EV/EBIT discount to brand owners. This is supported by historical transaction multiples, which have averaged c10x EBITDA for Coca-Cola bottlers versus 13x for brewing assets.

Figure 29: Standalone Coca-Cola bottlers generate lower Figure 30: Coca-Cola bottlers trade at a c25% EV/EBIT returns than SABMiller discount to brand owners SABMiller 2013 CFROI v KO bottlers - % Calendarised FY15E Consumer staples v KO bottlers EV/EBIT multiple - x 25% 18.0

20% 16.0

15% 14.0

10% 12.0

5% 10.0

0% 8.0 6.0

4.0

2.0

0.0 Consumer staples (brand owners) KO bottlers

Source: CS HOLT Source: Company data, Credit Suisse estimates

On a headline basis, SABMiller now trades on an calendarised FY15E EV/EBIT of 16.6x, a 3% premium to other consumer staples businesses, versus c5-10% historically.

Global Beverages 11 20 January 2015

Applying at 12.9x EV/EBIT multiple on its soft drinks bottling assets (in line with listed Coca-Cola bottlers), then the implied multiple of the rest of the business is 17.1x, a 6% premium to other Consumer staples businesses. As such, we believe the recent de-rating in the stock already partly reflects the changing shape of the business.

Figure 31: Coca-Cola bottling transactions have averaged Figure 32: …which compares to historical brewing 10x EBITDA… transactions of c13x EBITDA multiple of recent Coca-Cola bottling transactions - x EBITDA multiple of historical beer transactions - x Date Target Acquiror EBITDA multiple Date Target Acquiror EBITDA multiple - x Dec-08 Argentina Arca 9.7 Jan-14 Oriental Brewery ABI 11.0 Sep-12 Asia Pacific Breweries Heineken 17.1 Sep-09 Nordic interests CCE from Coke 8.3 Jul-12 Asia Pacific Breweries Kindest Place Group 18.0 Feb-10 US assets Coke from CCE 8.9 Jun-12 Grupo Modelo ABI 16.4 Sep-10 EBC Arca 7.1 Apr-12 Cerveceria Nacional Dominicana AmBev 13.0 Jun-11 Continental Arca 11.5 Apr-12 StarBev (CVC) Molson Coors 11.0 Nov-11 Schincariol Kirin 13.0 Jun-11 Tampico FEMSA 9.6 Oct-11 SABMiller Russia & Ukraine Anadolu Efes 12.8 Sep-11 Cimsa FEMSA 10.0 Sep-11 Fosters SABMiller 13.7 Mar-12 FoQue FEMSA 9.7 Jan-10 FEMSA Cerveza Heineken 12.0 Mar-12 La Polar Andina 11.0 Oct-09 ABI CEE business (StarBev) CVC 9.1 Sep-12 Sorocaba Andina 8.9 May-09 ABI South Korea (Oriental Brewery) KKR 8.8 Apr-09 Lion Nathan Kirin 13.4 Dec-12 Philippines (51%) FEMSA from Coke 13.5 Feb-09 San Miguel Brewery Kirin 9.4 Jan-13 Sacremento Bottling Co Coke 9.0 Jan-09 ABI stake in Tsingtao Brewery Asahi 14.2 Jan-13 Yoli FEMSA 10.8 Jun-08 Anheuser-Busch InBev 12.4 Jun-13 Conpanhia Fluminese FEMSA 11.2 Apr-08 Eichhof Brewery Heineken 12.0 Jan-08 Scottish & Newcastle Heineken 13.7 Jul-13 Ipiranga Andina 10.8 Jan-08 Scottish & Newcastle Carlsberg 12.1 Sep-13 Spaipa (Brazil) FEMSA 12.2 Nov-07 Royal Grolsch SABMiller 15.4 Average 10.1 Average 12.9 Source: Company data, Credit Suisse research Source: Company data, Credit Suisse research

Global Beverages 12 20 January 2015 Implications for future M&A In this section we assess scope for:

■ SABMiller to further extend its relationship with Coca-Cola

■ an ABInBev acquisition of SABMiller

■ ABInBev to evolve its soft drinks bottling interests

■ Coca-Cola and PepsiCo as potential acquisition targets i) SABMiller as a Coca-Cola bottler going forward With SABMiller now seemingly seeing itself as a Coca-Cola bottler in its own right, we assess the opportunities for further consolidation of bottling assets. In our view, the biggest opportunities are in:

■ Africa – potential acquisition of Castel, which is 20% owned by SABMiller. We estimate c50% of Castel volumes are from its Coca-Cola bottling assets, which account for c35% of total Coca-Cola volumes in the Africa.

■ Asia-Pacific – potential combination with Coca-Cola Amatil (see recent report Coca- Cola Amatil – Indo Restructure: What it means, 17th Dec 2014), as both businesses are suffering from weak demand, increasing competition and a tougher retail environment in Australia. Coca-Cola's attitude towards beer In the past, Coca-Cola has preferred to keep the strategic functions for beer and soft drinks assets separate where there is little overlap in consumer profile and retail coverage. However, where possible, the company has been open to capturing any route to market and back-office synergies from integrating beer and soft drinks. Does the creation of Coca-Cola Beverages Africa change this mind-set? On the one hand, Coca-Cola is entrusting SABMiller, the world's second largest beer company, with operating c40% of its business across Africa, an important long-term growth driver for the business. There is arguably no other beverages business with such a long history and widespread exposure to the African continent than SABMiller. However, on the other hand, it is entirely separating the soft drinks operations from SAB's beer operations, and leaving behind any route to market and back office synergies, which would have been more apparent in sub-scale African growth markets than others. We do not believe SAB/KO's approach taken to Africa necessarily applies to other markets − KO's broad view of seeking route to market and back office synergies between beer and soft drinks could still prevail, particularly in low growth markets such as Australia. Africa Any potential Castel acquisition could be expensive and entail dis-synergies A combination between SABMiller and Castel (privately owned brewer and Coca-Cola bottler predominantly in Western Africa) has been long touted (Source: Bloomberg). SAB has a 20% stake in Castel, who in turn has a 38% stake in SAB Africa, and has publicly commented on its desire to strengthen the relationship – each party has first option on the other's African business in the event of a sale.

Global Beverages 13 20 January 2015

We estimate that Castel's African beverages portfolio has a broadly even volume split between beer and soft drinks, which in most markets are integrated – Castel is the second largest Coca-Cola bottler across the African continent, representing c35% KO volumes in the region behind SAB's new venture Coca-Cola Beverages Africa (see Figure 23).

Figure 33: We estimate Coca-Cola bottling assets Figure 34: …and c33% of its EBITA represent c50% of Castel's volumes FY13 Castel EBITA split - % FY13 Castel volume split - % Other 4% Soft drinks 33%

Beer Soft drinks 49% 47%

Beer 67%

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Given SABMiller cites increasing scale in soft drinks as a core part of its strategy, we believe if it were to ever acquire Castel, it is likely that the Castel Coca-Cola bottling assets, currently integrated with its beer assets, would be merged into the new Coca-Cola Beverages Africa entity (CCBA). The problem with this approach is that it would inevitably lead to some dis-synergies, just as SABMiller will experience in Zambia and Botswana where it has to separate the KO bottling business from its beer assets to form CCBA. Aside from dis-synergies from splitting beer and soft drinks (see Figure 26 and Figure 27), we believe any net cost savings from an SAB/Castel deal scenario would be limited given likely re-investment requirements - note we estimate Castel beer margins are already the highest of African brewers).

Figure 35: We estimate Castel already generates best-in-class margins in its beer business across the region – as such, synergies could be limited, particularly as SAB may have to invest in the business 2013 Africa beer EBIT margins - % 35%

30%

25%

20%

15%

10%

5%

0% Castel Beer SAB South Africa SAB Africa Beer Heineken Africa beer

Source: Company data, Credit Suisse research

Global Beverages 14 20 January 2015

Figure 36: SAB/Castel deal scenario: We estimate Figure 37: SAB/Castel deal scenario: At 15x EBITDA, acquiring the 80% of Castel and 38% of SABMiller Africa it Castel would need to grow at 15% CAGR to meet cost of doesn’t own could cost $28-37bn capital by year 10 (assuming no cost synergies) Potential EV of Castel acquisition - $bn Potential ROIC of Castel acquisition at 16x EBITDA - % 2016E 14% 80% of Castel 1,857 12% 38% of SAB Africa 295 10% EBITDA 2,152 8% EBITDA multiple - x 13.0 14.0 15.0 16.0 17.0 6% 4% Enterprise value 27,971 30,123 32,274 34,426 36,577 2%

0% 1 2 3 4 5 6 7 8 9 10

ROIC - 10% EBIT CAGR ROIC - 15% CAGR

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates Financials based on March 2016E estimates

Assuming SABMiller is only able to leverage its balance sheet to 3.5x net debt/EBITDA, we believe any SAB/Castel deal would likely require some equity funding (we estimate c30%). Assuming any cost synergies are re-invested, we see scope for just low-single digit earnings accretion in this scenario. Assuming the Castel family doesn’t want to cash out and a deal is 100% equity financed, we estimate c10% EPS dilution. Other assets in Africa Elsewhere in Africa, we would highlight other potential bottling acquisitions to include Equatorial Coca-Cola bottling company (operates in 13 relatively small countries in North and West Africa) and CCHBC's Nigerian bottling operations. Coca-Cola HBC Nigeria represents c10% of all Coca-Cola volumes across Africa. This could be an attractive asset, however we think it is unlikely that CCHBC would be willing to sell. Whilst Nigeria in our view doesn’t really fit in with CCHBC's European exposure, we note:  Nigeria is CCHBC's third largest market (after Russia and Italy), representing 10% of its total volumes, and is an important long-term growth driver for the business.  CCHBC has a long history in the country, operating there since 1953. As recently as 2011 the company acquired the 34% minority interest in the business for €94m (an implied c7x EBITDA multiple) – the David-Levantis family (owns 23.2% through Kar- Tress Holding), and is likely in favour if keep control of the asset given its strategic importance. We note CCHBC's bottling agreements with KO were only recently extended to 2023, and in the meantime KO is only able to terminate any agreement with CCHBC in the event of default, change of control or non-performance (which has never happened in the past). As such, it may be difficult for KO to force a sale of the asset to the new Coca-Cola Beverages Africa entity in the near term.

Global Beverages 15 20 January 2015

Figure 38: CCHBC has generated strong growth in Nigeria Figure 39: Nigeria has become a more important growth over the past decade driver for the group in recent years given difficulties CCHBC Nigeria volume growth - % elsewhere across Europe CCHBC Nigeria v group volume growth - % 12% 14% 12% 10% 10%

8% 8% 6% 6% 4% 2% 4% 0% 2% -2% -4% 0% -6% Nigeria Group -2% Source: Company data Source: Company data

We don't rule out SABMiller expanding its bottling interests outside of Africa over time − Coca-Cola FEMSA's acquisition of the Coca-Cola Bottlers Philippines, one of KO's largest markets, demonstrates that KO is willing to allow anchor bottlers to expand beyond their traditional markets.

Asia-Pacific A tie up with Coca-Cola Amatil could make sense in Australia In Australia, both SABMiller and Coca-Cola Amatil are having a tough time, in part due to the challenging competitive and retail landscape, which is dominated by two large retailers, Woolworths and Coles. Indeed, SABMiller H1 margins in the region were down c370bps in H1, and consequently distanced itself from the medium-term target to increase pricing 1.2- 1.5x CPI set in 2012 following the acquisition of the business. We believe there could be benefits from the two entities possibly merging, to help stem the profit erosion in both business and generate synergies.

Global Beverages 16 20 January 2015

Figure 40: The retail environment in Australia is Figure 41: Weak macro is leading to increased price consolidating, with national accounts growing competition and trade investments in Australia (c10% significantly in importance group EBITA), which could continue to negatively impact Australia beer volumes by channel - % profitability SABMiller Australia organic volume v price/mix - % 6% 4%

2%

0% Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 H1 15 -2%

-4%

-6%

-8%

-10% Volume Price/mix

Source: Company data Source: Company data

Figure 42: Coca-Cola Amatil's Australia price/mix has Figure 43: Coca-Cola Amatil's Australia EBIT margins deteriorated in the past few years have declined by c440bps in the past 3 years Coca-Cola Amatil Australia price/mix - % Coca-Cola Amatil Australia EBIT margin - % 5% 25%

4% 20% 3% 15% 2%

1% 10%

0% 5% 2008 2009 2010 2011 2012 2013 H1 14 -1% 0% 2007 2008 2009 2010 2011 2012 2013 H1 14 -2% Source: Company data Source: Company data

We note KO was willing to accept a proposal from Lion Nathan (number two beer player in Australia owned by Japanese brewer Kirin) to merge its beer business with CCA back in November 2008, however the deal fell apart apparently due to differences of opinion in other parts of the business outside Australia. Lion Nathan's offer for CCA valued the business at 10x EBITDA, citing A$100-130m in cost synergies (c5% of CCA's Aus sales) from:  Joint procurement of raw materials and non-raw material costs  Back office and corporate costs  Distribution savings (these would take time and some capex to extract) Furthermore, the company identified scope to improve availability, by putting more products in more points of distribution. The company stressed the need for the two businesses to have separate salesforces so as not to dilute their customer coverage.

Global Beverages 17 20 January 2015

Such a deal could also provide SABMiller a platform to expand into the rest of Asia (Amatil generates c70% in Australia, and has interests in Indonesia, New Zealand & PNG). In our valuation scenario, assuming an acquisition at a 30% premium (historical average in bid premium in consumer staples), to CCA's current share price (US$9bn EV, implied 11.5x FY15E EBITDA multiple) we estimate an all cash transaction could be c7% EPS accretive for SABMiller by year three. Europe Here, we consider CCHBC, predominantly exposed to Central & Eastern European markets. However, we do not believe SABMiller would be an acquirer of this asset, noting:  SABMiller's beer interests across the region only overlap with c47% of CCHBC's soft drinks interests across the region.  Both CCHBC and SABMiller's businesses in the region have been ex-growth in the past few years.  We don't believe SAB (or other consumer companies) want to increase their presence to Russia (20% of CCHBC volumes), given weak macro and geopolitical uncertainties.

Figure 44: CCHBC only overlaps with SABMiller's beer Figure 45: CCHBC has struggled to grow volumes in the operations in c50% of its business past 4 years Overlap with brewers as % CCHBC FY13 volume CCHBC v SABMiller Europe volume growth- % 100% 12% 90% 10% 80% 8% 70% 6% 60% 4% 50% 2% 40% 0% 30% -2% 20% -4% 10% -6% 0% Heineken Carlsberg SABMiller CCHBC SABMiller Europe

Source: Company data, Credit Suisse research Source: Company data, Credit Suisse research Latin America We see fewer opportunities for SABMiller to consolidate the Coca-Cola bottling system in Latin America beyond its current territories in El Salvador and Honduras, as the region is already the most successful part of the Coca-Cola system (highest margin region for Coca-Cola and across global bottlers), dominated by three successful bottlers (FEMSA, Arca Continental and Andina). Having said that, the Coca-Cola bottling assets in Peru (where SABMiller has a c90% market share in beer) are controlled by the Lindley family, so there could be potential interest but nothing at all has been said on this front. The business generates c10% EBIT margins, low relative to LatAm peers. However, if the company was ever open to being acquired, there would likely be competition from the other LatAm KO bottlers. From the Lindley family's perspective, if it were to ever sell the business (and assuming cash wasn’t the only factor in their decision), potentially taking equity in a larger, more diversified global business such as SABMiller could be appealing – SAB has a good track record in equity funded acquisitions, which have generated high returns, in particular for the Santo Domingo family (Bavaria acquisition in 2006) and Altria (Miller acquisition in 2002).

Global Beverages 18 20 January 2015 ii) ABI/SAB merger scenario Our view on the long speculated ABI approach for SABMiller remains that we do not believe paying a premium to current valuations would generate attractive financial returns for ABInBev based on cost savings alone (see report Global Beverages – Assessing the consolidating scenarios, 19 Sept 2014); we estimate ABI only meets cost of capital by year eight. In our view, SABMiller's strengthening relationship with Coca-Cola could on the one-hand end up simplifying a potential ABI/SAB merger, but also highlights the challenge ABI would face in creating value from such a combination: We estimate ABI could be a forced seller of c30% of SABMiller's EBITA  We note ABI would have to dispose of the MillerCoors JV (12% EBIT) and potentially SAB's China JV (2% EBIT) for anti-trust purposes. We estimate pro-forma Coca-Cola bottling assets represent a further 12% of SABMiller's EBITA (note Coca-Cola has a change of control clauses in their agreements in their bottling contracts). In addition, SAB's stakes in the beer businesses of Castel and Anadolu Efes (who also have change of control clauses), represent a further c5% of SAB's EBITA.  From Coca-Cola's perspective, it may not be willing to put Coca-Cola Beverages Africa, such an important long term growth driver of its business in the hands of ABInBev who i) remains a committed Pepsi bottler (in its LatAm business); ii) potentially does not share the same philosophy in running soft drinks as a standalone entity as SABMiller iii) has no experience of operating in Africa, the main reason for KO being in favour of SAB consolidating the region. As discussed on page 10, this may be a key factor as to why KO is moving towards a standalone bottling business in Africa. Impact on value creation  If Coca-Cola and other parties exercise their change of control clauses in the event of an ABI acquisition of SABMiller, then from ABI's perspective, after paying a premium on SABMiller, we estimate it could be 'forced seller' of assets equivalent to c30% of SABMiller's EBIT, at a relatively lower multiple. We believe this would make it more difficult for ABI to extract value from an acquisition.  Assuming ABI disposes of the KO bottling assets as well as Castel and Efes beer relationships, it would take 10 years to meet cost of capital (vs 8 years otherwise), on our analysis.  We believe ABInBev may prefer SABMiller to acquire Castel before it may consider an acquisition of SABMiller itself.

Figure 46: ABI may need to dispose of c31% of SABMiller's EBITA if it was unable to come to an agreement with Coca-Cola and other SAB strategic partners % of SABMiller pro-forma EBITA which ABI may need to dispose of in an acquisition scenario MillerCoors 12% CR Snow 2% Anadolu Efes (inc KO Icecek) 2% Castel (inc KO bottling) 5% Other KO bottling assets 10% - Africa 7% - LatAm 2% Total 31% Source: Company data, Credit Suisse estimates

Global Beverages 19 20 January 2015 iii) ABInBev's approach to soft drinks could evolve organically ABI/Pepsi relationship has evolved over the years Over the past 17 years, ABI/AmBev and Pepsi have formed an increasingly close alliance, which spread outside of bottling assets in Latin America to joint procurement initiatives in the US on indirect spend. However, this initiative has since been disbanded, as the amount of non-strategic joint procurement had become minimal compared to the cost of the JV. However the companies still partner on US commercial initiatives such as Super Bowl cross merchandising programmes (combining Bud Light, Doritos and Pepsi displays).

Figure 47: ABInBev and Pepsi have been strengthening their relationship in recent years ABInBev & Pepsi relationship timeline Date Notes 1997 Brahma acquired exclusive rights to sell and distribution Pepsi CSD products in NE Brazil out to 2017 1999 Brahma obtained exclusive rights to sell and distribution Pepsi CSD products in all Brazil Jan-02 AmBev (formed from merger of Brahma and Antarctica) expands Pepsi relationship to include Gatorade brand Oct-02 AmBev establishes 50/50 JV with Central America Bottling Corporation (Pepsi anchor bottler in Central America) to supply beer in Guatemala and other Central America countries Jan-03 AmBev acquires stake in Argentinian listed brewer Quinsa, also the main Pepsi bottler in Argentina and Uruguary Oct-03 AmBev acquires franchise for Pepsi products in Lima and Northern Peru through acquisition of Embotelladora Rivera Feb-04 AmBev acquires majority stake in Embotelladora Dominicana, the Pepsi bottler in Dominican Republic, and started a beer business after a construction of a brewery in 2005 Mar-09 AmBev acquires Bolivian Pepsi bottling operations from SABMiller Oct-09 ABI and Pepsi announce joint procurement initiative on indirect goods and services in the US excluding raw materials, however has since been disbanded Jan-13 ABI and Pepsi partner on cross merchandising programmes in the US

Source: Company data, Credit Suisse research

ABI/AmBev's agreement with Pepsi in Brazil expires in December 2017, which is automatically renewed for another 10 years unless i) either party notifies its intent not to renew the contract with at least two years notice (i.e. by Dec 2015) ii) Change of control iii) failure to comply with material commitments. We believe that ABI/AmBev will look to renew its Pepsi agreement – after all, why would a company let go of 15% of its volumes (in LatAm) and the significant fixed cost leverage this provides across the key markets in the region? Furthermore, AmBev has recently stepped up its investments behind the Pepsi portfolio in Brazil, including the roll-out of the new Pepsi 1 litre returnable glass bottle. How could this relationship evolve going forward?

■ Extract better terms from Pepsi: Given ABInBev & Ambev's growth since its Pepsi agreement was last revised in 2001, it could look to demand better economic terms from Pepsi in its existing bottling territories across Latin America, perhaps in the form of lower concentrate fees. We estimate ABI generates a 23% EBIT margin on its Pepsi portfolio, relative to c40% on its own soft drinks brands (Guaraná Antarctica) in Brazil. Furthermore, the company generates just 15% EBIT margins on its Pepsi portfolio in LatAm South, which it could look to improve.

Global Beverages 20 20 January 2015

Figure 48: We estimate ABI Brazil generates a c17pp Figure 49: ABInBev and AmBev are significantly bigger lower margin on its Pepsi soft drinks portfolio vs its own companies than when the Pepsi bottling agreements were soft drinks brands last renewed in 2001, potentially implying better ABI Brazil EBIT margin across portfolio - % bargaining power ahead ABI, AmBev and PepsiCo market capitalisation – U$m 45% 200,000 180,000 40% 160,000 35% 140,000 30% 120,000 100,000 25% 80,000 20% 60,000 15% 40,000 20,000 10% 0 5%

0% Pepsi CSD Own soft drinks brands Beer ABInBev AmBev PepsiCo

Source: Company data, Credit Suisse estimates Source: Thomson Reuters

■ Enter new markets: We believe it makes strategic sense for beer and soft drinks to combine in Mexico, particularly given the high route to market overlap driven by the prevalence of mom & pop stores (see Figure 50). This could give further fixed cost leverage for ABInBev in Mexico, as well as a significant margin opportunity through cost synergies above and beyond those in the beer business. We note Cultiba generates c10% EBITDA margin in Mexico, c11- 14pp below its Coca-Cola bottlers. Assuming ABI can take Pepsi Mexican margins to in line with KO bottlers, we estimate a deal could be c5% EPS accretive. Our LatAm analysts note that Cultiba's controlling shareholder faces a call option (expiring on Sept 2016) from Pepsi and their Venezuelan partners, Polar, which could take away from Cultiba control of the Mexican Pepsi bottler. Since the exercise of this option depends, among others, on Cultiba's own trailing EBITDA multiple, our analysts believe Cultiba's control group has strong incentives to find M&A alternatives in the interim (see recent report Cultiba – Downgrading to Neutral, upside could come from corporate restructuring, 17th Dec 2014).

Figure 50: There is a high point of sale overlap between Figure 51: Cultiba's EBITDA margins lag Coca-Cola beer and soft drinks in Mexico bottlers by 11-14pp, a gap which ABI could seek to close Mexico beer volumes by channel - % Cultiba Adjusted Mexico EBITDA margin v peers - % 25% On-premise 15% 20%

Other 8% 15% Mom & pop 47% 10% Supermarkets 13% 5%

Convenience 0% Cultiba KO FEMSA Arca Contal 17% Source: Company data Source: Company data, Credit Suisse research

Global Beverages 21 20 January 2015

■ Use Pepsi soft drinks as a route to market network in other EMs: We note ABI now has a strong global premium brand portfolio with Corona, Budweiser and Stella Artois, and has suggested scope to penetrate these premium brands into new markets with an 'asset-light approach' where it does not necessarily have a physical presence, relying on the strength of its brand portfolio and distributors to gain market share. ABI generates strong profitability and returns in markets where it has already adopted such an approach (in particular Australia and France). Going forward, ABI could extend this asset light approach through tapping into existing Pepsi route to market networks in other EMs, where it does not already have a beer presence.

Global Beverages 22 20 January 2015 iv) Could Coca-Cola or PepsiCo be bid targets? There has been much press speculation (source: Bloomberg) in recent months regarding a potential acquisition of Coca-Cola or PepsiCo by ABInBev or taken private by 3G capital/Warren Buffett (note 3G Capital is the private equity group of the Brazilian owners behind ABInBev, in which ABI's Belgian family shareholders have also invested in the past). The rationale is that both Coca-Cola and PepsiCo have bloated cost bases which best in class operators ABInBev and 3G capital could rectify. 3G Capital / Warren Buffett acquisition of either KO/PEP would be difficult to finance However, put aside any strategic rationale for a deal, we believe an outright acquisition of either Coca-Cola or Pepsi by 3G Capital/Warren Buffett would be extremely difficult to finance. In both scenarios, assuming a 30% take-out premium to current share prices:  Assuming leverage can be taken to maximum 7x net debt/EBITDA, the acquirers would still need to raise c$120bn of equity, unlikely unless they can get other partners involved.  The take-out multiples for Coca-Cola and PepsiCo would be 19x and 16x EV/EBITDA respectively, which compares to Burger King and Heinz completed at c9x and c13x EBITDA. Note recent reports (source Wall Street Journal) suggest that 3G Capital is setting up a new fund with just $5bn assets under management (see report 2015 US Packaged Food Preview, 12th Jan 2015).

Figure 52: An outright acquisition of KO or PEP by 3G capital/Buffett is unlikely given significant equity requirement of c$120bn Equity financing requirement under acquisition scenario of KO/PEP by 3G Capital/ Warren Buffett Acquisition scenarios KO PEP Share price - $ 42.5 97.3 Premium 30% 30% Offer price - $ 55.3 126.5 Avg # shares 4,395 1,478 Market cap - $m 243,000 186,949 Net debt 18,141 29,352 Associates/JVs -19,399 Minority interest 420 1,114 Enterprise value - $m 242,161 217,415 EBITDA 12,831 13,408 EV/EBITDA - x 18.9 16.2

Net debt/EBITDA - x 1.4 2.2

Leverage analysis 2015E EBITDA (pre synergies) 12,831 13,408 Target Net debt/EBITDA - x 7.0 7.0 Target net debt 89,816 93,857 Required Equity (Offer EV less target net debt) 152,345 123,557 Less existing 9% Buffett stake -28,750 Required Equity 123,595 Source: Company data, Credit Suisse estimates

Global Beverages 23 20 January 2015

Does it make sense for ABInBev to acquire Coca-Cola or PepsiCo? For ABInBev, teaming up with 3G Capital/Warren Buffett to acquire either Coca-Cola or PepsiCo would require significant equity funding on its part. Furthermore, any deal would likely have to work in the US, given the significance of the market to all companies. However, this may be difficult considering:

■ US Soft drinks are in decline Whilst in LatAm ABI has demonstrated it is able to run its beer and soft drinks business together, in the US market this might be more of a challenge. We note following the $2.25bn cost synergy delivery from the Anheuser-Busch acquisition, ABI has failed to grow its market share in US beer. As this is a key strategic priority for ABI, we do not believe managing a soft drinks business which faces its own challenges would make much sense over the long term. ABI has enough on its hands in reversing these US beer share trends without having to cope with similar dynamics in a different category.

Figure 53: ABI continues to lose market share in US beer Figure 54: US volume trends in soft drinks are even worse category – we doubt it has the ability to effectively than in beer manage a US soft drinks portfolio at the same time US beer v carbonated soft drinks volume growth - % ABI US beer market share change - bps 0 3.0% 2010 2011 2012 2013 9m 14 -10 2.0%

1.0% -20 0.0% -30 -1.0% -40 -2.0% -50 -3.0%

-60 -4.0% Soft drinks Beer -70 Source: Company data Source: Company data, Beverage Digest, Beer Institute

■ US distribution complexity In many US states, the 3-tier system in the US beer industry forbids beer manufacturers to supply directly to retailers, going through wholesalers instead. As such, it may be difficult for ABI to generate meaningful distribution savings – note ABI only directly distributes c10% of its US volumes, with the rest going through wholesalers.

We think it is more likely that beer and soft drinks players assess opportunities on a market-by-market basis, rather than pursuing global mergers.

Global Beverages 24

Beverages Global Figure 55: Calendarised valuation Comparables P/E EV/EBITDA EV/EBIT EV/NOPAT FCF yield Dividend yield Net debt/EBITDA Ticker Company name 2015E 2016E 2015E 2016E 2015E 2016E 2015E 2016E 2015E 2016E 2015E 2016E 2015E 2016E

European Beverages ABI.BR Anheuser-Busch InBev 21.0 19.0 13.8 12.8 16.5 15.3 21.1 19.6 5.3% 5.8% 3.1% 3.4% 2.1 2.0

SAB.L SABMiller 21.1 19.5 13.6 12.7 16.6 15.4 22.1 20.6 4.1% 4.7% 2.1% 2.2% 1.7 1.3 HEIN.AS Heineken 19.1 17.4 11.4 10.5 15.3 14.0 21.3 19.5 3.9% 4.5% 1.7% 1.9% 2.0 1.7 CARLb.CO Carlsberg 13.9 12.0 9.2 8.2 13.3 11.6 18.1 15.9 5.8% 7.3% 1.8% 2.1% 2.5 2.0 DGE.L Diageo 19.3 18.0 14.8 14.0 16.5 15.7 20.3 19.3 3.6% 4.3% 2.9% 3.1% 2.3 2.2 PERP.PA Pernod-Ricard 20.1 18.5 15.3 14.4 16.7 15.7 22.5 21.2 3.1% 4.1% 1.7% 1.9% 3.4 3.0 Average 19.1 17.4 13.0 12.1 15.8 14.6 20.9 19.4 4.3% 5.1% 2.2% 2.4% 2.3 2.0

US Beverages KO The Coca-Cola Company 21.1 19.6 14.5 13.8 17.5 16.8 22.9 22.0 4.6% 4.8% 3.1% 3.3% 2.4 2.3 PEP PepsiCo, Inc. 20.3 18.6 12.9 12.0 16.3 15.2 22.1 20.4 4.2% 4.5% 2.8% 3.1% 2.2 1.7 TAP Molson Coors Brewing Co 17.9 17.0 11.2 n/a 14.5 n/a 18.2 n/a 5.8% n/a 2.1% 2.3% 1.5 n/a STZ Constellation Brands Inc. 23.9 21.8 13.5 12.2 15.6 14.3 22.1 20.1 2.7% 2.4% 0.0% 0.0% 3.5 2.9 DPS.N Dr Pepper Snapple Group, Inc 19.7 18.4 11.9 11.5 13.7 13.3 21.2 20.4 5.2% 5.4% 2.3% 2.5% 1.6 1.5 Average 20.6 19.1 12.8 12.4 15.5 14.9 21.3 20.7 4.5% 4.3% 2.1% 2.2% 2.2 2.1

Soft drinks bottlers KOF.N Coca-Cola FEMSA 19.5 17.3 8.7 7.9 12.0 10.7 17.9 15.9 7.6% 8.5% 0.2% 0.2% 1.1 0.8 AC.MX Arca Continental 19.9 18.5 10.8 10.0 13.5 12.6 19.7 18.4 4.7% 5.0% 1.9% 2.1% 0.3 0.0 AND_pb.SN Andina 18.8 16.3 7.6 6.8 11.8 10.6 16.7 15.1 14.2% 14.9% 4.5% 5.2% 1.9 1.7 CCOLA.IS Coca-Cola Icecek 24.1 19.0 13.1 11.0 19.3 15.6 22.9 18.9 -0.8% 1.3% 0.9% 1.4% 1.9 1.5 CCL.AX Coca-Cola Amatil 18.3 16.9 9.4 8.7 13.4 12.4 19.0 17.5 7.7% 8.4% 4.6% 4.8% 1.8 1.4 CCH.L Coca-Cola HBC 15.5 13.8 7.4 6.8 13.3 11.8 17.5 15.5 5.7% 6.1% 2.8% 2.9% 1.5 1.2 CCE.N Coca-Cola Enterprises 15.1 13.9 10.4 10.1 13.6 13.1 18.7 17.9 n/a n/a 2.5% 2.8% 2.9 2.9 Average 17.9 16.1 9.0 8.4 12.9 11.9 18.2 16.7 8.0% 8.6% 2.7% 3.0% 1.6 1.3

Rest of World Beverages ABEV3.SA AmBev 20.0 17.6 12.6 11.5 14.4 13.1 17.9 16.4 4.3% 5.3% 4.3% 4.7% -0.5 -0.5 AEFES.IS Anadolu Efes 24.2 19.1 10.8 8.9 17.5 14.0 22.2 17.7 2.7% 1.0% 1.4% 1.4% 1.2 1.0 2503.T Kirin Holdings 29.6 26.6 8.4 8.2 18.6 17.5 30.0 27.7 6.1% 7.9% 2.7% 2.8% 2.6 2.2 2502.T Asahi Group Holdings 21.5 20.3 10.2 9.9 15.1 14.5 22.6 21.5 5.2% 5.4% 1.4% 1.5% 1.4 1.0 UNSP.BO United Spirits Ltd. 106.4 71.3 45.4 37.6 49.6 40.6 74.1 60.7 -0.4% 0.9% 0.0% 0.0% 3.9 2.9 TBEV.SI Thai Beverage 17.6 15.8 13.3 12.2 15.4 13.9 19.3 17.5 5.0% 5.6% 2.3% 2.7% 1.3 0.8 Average (ex United Spirits) 22.6 19.9 11.1 10.1 16.2 14.6 22.4 20.1 4.7% 5.0% 2.5% 2.6% 1.2 0.9

European Food/HPC NESN.VX Nestle 20.3 18.6 13.1 12.4 16.0 15.1 21.8 20.5 4.0% 4.4% 3.5% 3.7% 0.8 0.7 UNc.AS Unilever 20.8 19.6 14.8 13.8 17.2 16.0 23.2 21.5 4.1% 4.3% 3.5% 3.8% 1.0 0.8 DANO.PA Danone 20.3 19.0 11.9 11.2 15.0 14.0 21.8 20.4 3.7% 4.1% 2.8% 3.0% 2.2 2.0 OREP.PA L'Oreal 24.6 22.9 14.9 14.0 17.9 16.7 25.2 23.4 3.8% 4.0% 2.1% 2.2% 0.2 0.1 BEIG.DE Beiersdorf 24.5 22.5 14.6 13.5 17.2 15.9 25.7 23.8 2.6% 3.0% 1.1% 1.1% -3.0 -3.1 RB.L Reckitt Benckiser 22.7 21.4 17.0 15.8 18.3 16.9 23.2 21.4 4.6% 5.0% 2.2% 2.3% 0.1 -0.3 HNKG_p.F Henkel 21.8 20.2 14.2 13.0 16.4 15.0 21.8 20.0 4.5% 4.9% 1.5% 1.6% 0.4 0.0 Average 22.2 20.6 14.4 13.4 16.9 15.7 23.2 21.6 3.9% 4.2% 2.4% 2.5% 0.3 0.0

20 January 2015 January 20

Source: Credit Suisse estimates Priced on 16th January 2014

25

20 January 2015

Companies Mentioned (Price as of 16-Jan-2015) ARCA CONTINENTAL, S.A.B. DE C.V. (AC.MX, $89.4) AmBev (ABEV3.SA, R$16.9) Anadolu Efes (AEFES.IS, TL20.25) Anheuser-Busch InBev (ABI.BR, €100.75) Asahi Group Holdings (2502.T, ¥3,610) Carlsberg (CARLb.CO, Dkr480.5) Coca Cola Icecek (CCOLA.IS, TL46.4) Coca-Cola Amatil (CCL.AX, A$9.14) Coca-Cola Femsa SAB de CV (KOFL.MX, $127.06) Coca-Cola HBC (CCH.L, 1077.0p) Compañia Cervecerias Unidas (CCU.SN, CLP$5702.0) Diageo (DGE.L, 1891.5p) Embotelladora Andina (AND_pb.SN, CLP$1701.2) Heineken (HEIN.AS, €62.69) Kirin Holdings (2503.T, ¥1,457) Molson Coors Brewing Co (TAP.N, $75.05) ORGANIZACION CULTIBA, S.A.B. DE CV (CULTIBAB.MX, $17.67) Pernod-Ricard (PERP.PA, €102.05) SABMiller (SAB.L, 3389.5p) The Coca-Cola Company (KO.N, $42.53)

Disclosure Appendix

Important Global Disclosures The analysts identified in this report each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report. The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities As of December 10, 2012 Analysts’ stock rating are defined as follows: Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark*over the next 12 months. Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months. Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months. *Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ra tings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin Ame rican and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, 12-month rolling yield is incorporated in the absolute total return calculation and a 15% and a 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds replace the +10- 15% and -10-15% levels in the Neutral stock rating definition, respectively. Prior to 10th December 2012, Japanese ratings were based on a stock’s total return relative to the average total return of the relevant country or regional benchmark. Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances.

Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.

Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation: Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months. Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months. Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months. *An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors.

Global Beverages 26 20 January 2015

Credit Suisse's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution Rating Versus universe (%) Of which banking clients (%) Outperform/Buy* 46% (54% banking clients) Neutral/Hold* 38% (50% banking clients) Underperform/Sell* 14% (43% banking clients) Restricted 2% *For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.

Credit Suisse’s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated herein. Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research-and- analytics/disclaimer/managing_conflicts_disclaimer.html Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties. See the Companies Mentioned section for full company names The subject company (SAB.L, ABI.BR, HEIN.AS, DGE.L, KO.N, KOFL.MX, AC.MX, CCL.AX, CCH.L, ABEV3.SA, CCU.SN, 2502.T, TAP.N) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse. Credit Suisse provided investment banking services to the subject company (HEIN.AS, DGE.L, KO.N, KOFL.MX, CCH.L) within the past 12 months. Credit Suisse has managed or co-managed a public offering of securities for the subject company (DGE.L, KO.N, KOFL.MX, CCH.L) within the past 12 months. Credit Suisse has received investment banking related compensation from the subject company (HEIN.AS, DGE.L, KO.N, CCH.L) within the past 12 months Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (SAB.L, ABI.BR, HEIN.AS, DGE.L, PERP.PA, KO.N, KOFL.MX, AC.MX, CCL.AX, CCH.L, ABEV3.SA, CCU.SN, 2503.T, 2502.T) within the next 3 months. As of the date of this report, Credit Suisse makes a market in the following subject companies (KO.N, TAP.N). As of the end of the preceding month, Credit Suisse beneficially own 1% or more of a class of common equity securities of (SAB.L, DGE.L).

For other important disclosures concerning companies featured in this report, including price charts, please visit the website at https://rave.credit- suisse.com/disclosures or call +1 (877) 291-2683. Important Regional Disclosures Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report. The analyst(s) involved in the preparation of this report have not visited the material operations of the subject company (SAB.L, ABI.BR, HEIN.AS, CARLb.CO, DGE.L, PERP.PA, KO.N, KOFL.MX, AND_pb.SN, AC.MX, CCL.AX, CCH.L, AEFES.IS, ABEV3.SA, CCOLA.IS, CULTIBAB.MX, CCU.SN, 2503.T, 2502.T, TAP.N) within the past 12 months Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares. Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report. For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit http://www.csfb.com/legal_terms/canada_research_policy.shtml. Credit Suisse Securities (Europe) Limited (Credit Suisse) acts as broker to (CCH.L). The following disclosed European company/ies have estimates that comply with IFRS: (SAB.L, ABI.BR, HEIN.AS, CARLb.CO, DGE.L, PERP.PA, CCOLA.IS). Credit Suisse has acted as lead manager or syndicate member in a public offering of securities for the subject company (HEIN.AS, DGE.L, KO.N, CCH.L, CULTIBAB.MX) within the past 3 years. As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this report. Principal is not guaranteed in the case of equities because equity prices are variable. Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that.

Global Beverages 27 20 January 2015

To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important disclosures regarding any non-U.S. analyst contributors: The non-U.S. research analysts listed below (if any) are not registered/qualified as research analysts with FINRA. The non-U.S. research analysts listed below may not be associated persons of CSSU and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. Casa de Bolsa Credit Suisse (Mexico), S.A ...... Antonio Gonzalez, CFA Credit Suisse Securities Johannesburg (PTY) Ltd ...... Pieter Vorster Credit Suisse Equities (Australia) Limited ...... Larry Gandler Credit Suisse Securities (Europe) Limited ...... Sanjeet Aujla

For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at https://rave.credit- suisse.com/disclosures or call +1 (877) 291-2683.

Global Beverages 28 20 January 2015

References in this report to Credit Suisse include all of the subsidiaries and affiliates of Credit Suisse operating under its investment banking division. For more information on our structure, please use the following link: https://www.credit-suisse.com/who_we_are/en/This report may contain material that is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject Credit Suisse AG or its affiliates ("CS") to any registration or licensing requirement within such jurisdiction. All material presented in this report, unless specifically indicated otherwise, is under copyright to CS. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of CS. All trademarks, service marks and logos used in this report are trademarks or service marks or registered trademarks or service marks of CS or its affiliates. The information, tools and material presented in this report are provided to you for information purposes only and are not to be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for securities or other financial instruments. CS may not have taken any steps to ensure that the securities referred to in this report are suitable for any particular investor. CS will not treat recipients of this report as its customers by virtue of their receiving this report. The investments and services contained or referred to in this report may not be suitable for you and it is recommended that you consult an independent investment advisor if you are in doubt about such investments or investment services. Nothing in this report constitutes investment, legal, accounting or tax advice, or a representation that any investment or strategy is suitable or appropriate to your individual circumstances, or otherwise constitutes a personal recommendation to you. CS does not advise on the tax consequences of investments and you are advised to contact an independent tax adviser. Please note in particular that the bases and levels of taxation may change. Information and opinions presented in this report have been obtained or derived from sources believed by CS to be reliable, but CS makes no representation as to their accuracy or completeness. CS accepts no liability for loss arising from the use of the material presented in this report, except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to CS. This report is not to be relied upon in substitution for the exercise of independent judgment. CS may have issued, and may in the future issue, other communications that are inconsistent with, and reach different conclusions from, the information presented in this report. Those communications reflect the different assumptions, views and analytical methods of the analysts who prepared them and CS is under no obligation to ensure that such other communications are brought to the attention of any recipient of this report. Some investments referred to in this report will be offered solely by a single entity and in the case of some investments solely by CS, or an associate of CS or CS may be the only market maker in such investments. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Information, opinions and estimates contained in this report reflect a judgment at its original date of publication by CS and are subject to change without notice. The price, value of and income from any of the securities or financial instruments mentioned in this report can fall as well as rise. The value of securities and financial instruments is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities or financial instruments. Investors in securities such as ADR's, the values of which are influenced by currency volatility, effectively assume this risk. Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility, and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct their own investigation and analysis of the product and consult with their own professional advisers as to the risks involved in making such a purchase. Some investments discussed in this report may have a high level of volatility. High volatility investments may experience sudden and large falls in their value causing losses when that investment is realised. Those losses may equal your original investment. Indeed, in the case of some investments the potential losses may exceed the amount of initial investment and, in such circumstances, you may be required to pay more money to support those losses. Income yields from investments may fluctuate and, in consequence, initial capital paid to make the investment may be used as part of that income yield. Some investments may not be readily realisable and it may be difficult to sell or realise those investments, similarly it may prove difficult for you to obtain reliable information about the value, or risks, to which such an investment is exposed. This report may provide the addresses of, or contain hyperlinks to, websites. Except to the extent to which the report refers to website material of CS, CS has not reviewed any such site and takes no responsibility for the content contained therein. Such address or hyperlink (including addresses or hyperlinks to CS's own website material) is provided solely for your convenience and information and the content of any such website does not in any way form part of this document. Accessing such website or following such link through this report or CS's website shall be at your own risk. This report is issued and distributed in Europe (except Switzerland) by Credit Suisse Securities (Europe) Limited, One Cabot Square, London E14 4QJ, England, which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. This report is being distributed in Germany by Credit Suisse Securities (Europe) Limited Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuer Finanzdienstleistungsaufsicht ("BaFin"). This report is being distributed in the United States and Canada by Credit Suisse Securities (USA) LLC; in Switzerland by Credit Suisse AG; in Brazil by Banco de Investimentos Credit Suisse (Brasil) S.A or its affiliates; in Mexico by Banco Credit Suisse (México), S.A. (transactions related to the securities mentioned in this report will only be effected in compliance with applicable regulation); in Japan by Credit Suisse Securities (Japan) Limited, Financial Instruments Firm, Director-General of Kanto Local Finance Bureau (Kinsho) No. 66, a member of Japan Securities Dealers Association, The Financial Futures Association of Japan, Japan Investment Advisers Association, Type II Financial Instruments Firms Association; elsewhere in Asia/ Pacific by whichever of the following is the appropriately authorised entity in the relevant jurisdiction: Credit Suisse (Hong Kong) Limited, Credit Suisse Equities (Australia) Limited, Credit Suisse Securities (Thailand) Limited, regulated by the Office of the Securities and Exchange Commission, Thailand, having registered address at 990 Abdulrahim Place, 27th Floor, Unit 2701, Rama IV Road, Silom, Bangrak, Bangkok 10500, Thailand, Tel. +66 2614 6000, Credit Suisse Securities (Malaysia) Sdn Bhd, Credit Suisse AG, Singapore Branch, Credit Suisse Securities (India) Private Limited (CIN no. U67120MH1996PTC104392) regulated by the Securities and Exchange Board of India (registration Nos. INB230970637; INF230970637; INB010970631; INF010970631), having registered address at 9th Floor, Ceejay House, Dr.A.B. Road, Worli, Mumbai - 18, India, T- +91-22 6777 3777, Credit Suisse Securities (Europe) Limited, Seoul Branch, Credit Suisse AG, Taipei Securities Branch, PT Credit Suisse Securities Indonesia, Credit Suisse Securities (Philippines ) Inc., and elsewhere in the world by the relevant authorised affiliate of the above. Research on Taiwanese securities produced by Credit Suisse AG, Taipei Securities Branch has been prepared by a registered Senior Business Person. Research provided to residents of Malaysia is authorised by the Head of Research for Credit Suisse Securities (Malaysia) Sdn Bhd, to whom they should direct any queries on +603 2723 2020. This report has been prepared and issued for distribution in Singapore to institutional investors, accredited investors and expert investors (each as defined under the Financial Advisers Regulations) only, and is also distributed by Credit Suisse AG, Singapore branch to overseas investors (as defined under the Financial Advisers Regulations). By virtue of your status as an institutional investor, accredited investor, expert investor or overseas investor, Credit Suisse AG, Singapore branch is exempted from complying with certain compliance requirements under the Financial Advisers Act, Chapter 110 of Singapore (the "FAA"), the Financial Advisers Regulations and the relevant Notices and Guidelines issued thereunder, in respect of any financial advisory service which Credit Suisse AG, Singapore branch may provide to you. This information is being distributed by Credit Suisse AG, Dubai Branch, duly licensed and regulated by the Dubai Financial Services Authority (DFSA), and is directed at Professional Clients or Market Counterparties only, as defined by the DFSA. The financial products or financial services to which the information relates will only be made available to a client who meets the regulatory criteria to be a Professional Client or Market Counterparty only, as defined by the DFSA, and is not intended for any other person. This research may not conform to Canadian disclosure requirements. In jurisdictions where CS is not already registered or licensed to trade in securities, transactions will only be effected in accordance with applicable securities legislation, which will vary from jurisdiction to jurisdiction and may require that the trade be made in accordance with applicable exemptions from registration or licensing requirements. Non-U.S. customers wishing to effect a transaction should contact a CS entity in their local jurisdiction unless governing law permits otherwise. U.S. customers wishing to effect a transaction should do so only by contacting a representative at Credit Suisse Securities (USA) LLC in the U.S. Please note that this research was originally prepared and issued by CS for distribution to their market professional and institutional investor customers. Recipients who are not market professional or institutional investor customers of CS should seek the advice of their independent financial advisor prior to taking any investment decision based on this report or for any necessary explanation of its contents. This research may relate to investments or services of a person outside of the UK or to other matters which are not authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority or in respect of which the protections of the Prudential Regulation Authority and Financial Conduct Authority for private customers and/or the UK compensation scheme may not be available, and further details as to where this may be the case are available upon request in respect of this report. CS may provide various services to US municipal entities or obligated persons ("municipalities"), including suggesting individual transactions or trades and entering into such transactions. Any services CS provides to municipalities are not viewed as "advice" within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. CS is providing any such services and related information solely on an arm's length basis and not as an advisor or fiduciary to the municipality. In connection with the provision of the any such services, there is no agreement, direct or indirect, between any municipality (including the officials, management, employees or agents thereof) and CS for CS to provide advice to the municipality. Municipalities should consult with their financial, accounting and legal advisors regarding any such services provided by CS. In addition, CS is not acting for direct or indirect compensation to solicit the municipality on behalf of an unaffiliated broker, dealer, municipal securities dealer, municipal advisor, or investment adviser for the purpose of obtaining or retaining an engagement by the municipality for or in connection with Municipal Financial Products, the issuance of municipal securities, or of an investment adviser to provide investment advisory services to or on behalf of the municipality. If this report is being distributed by a financial institution other than Credit Suisse AG, or its affiliates, that financial institution is solely responsible for distribution. Clients of that institution should contact that institution to effect a transaction in the securities mentioned in this report or require further information. This report does not constitute investment advice by Credit Suisse to the clients of the distributing financial institution, and neither Credit Suisse AG, its affiliates, and their respective officers, directors and employees accept any liability whatsoever for any direct or consequential loss arising from their use of this report or its content. Principal is not guaranteed. Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that. Copyright © 2015 CREDIT SUISSE AG and/or its affiliates. All rights reserved. Investment principal on bonds can be eroded depending on sale price or market price. In addition, there are bonds on which investment principal can be eroded due to changes in redemption amounts. Care is required when investing in such instruments. When you purchase non-listed Japanese fixed income securities (Japanese government bonds, Japanese municipal bonds, Japanese government guaranteed bonds, Japanese corporate bonds) from CS as a seller, you will be requested to pay the purchase price only.

2015-01 - Global Beverages Global Beverages report_final.doc