FOOD AND BEVERAGE INDUSTRY UPDATE │ DECEMBER 2017 www.harriswilliams.com Investment banking services are provided by Harris Williams LLC, a registered broker-dealer and member of FINRA and SIPC, and Harris Williams & Co. Ltd, which is a private limited company incorporated under English law with its registered office at 5th Floor, 6 St. Andrew Street, London EC4A 3AE, UK, registered with the Registrar of Companies for England and Wales (registration number 07078852). Harris Williams & Co. Ltd is authorized and regulated by the Financial Conduct Authority. Harris Williams & Co. is a trade name under which Harris Williams LLC and Harris Williams & Co. Ltd conduct business. FOOD AND BEVERAGE INDUSTRY UPDATE │ DECEMBER 2017 WHAT WE’RE SEEING CONTENTS MARKET UPDATE . INDUSTRY VITAL SIGNS . EQUITY MARKET OVERVIEW The food & beverage M&A market remains active through December, with several . M&A MARKET OVERVIEW . DEBT MARKET OVERVIEW notable transactions. Arby’s, a portfolio company of Roark Capital Group, . RECENT M&A ACTIVITY announced its acquisition of Buffalo Wild Wings, demonstrating the continued . EARNINGS CALENDAR appetite of private equity groups to enter or continue to expand their holdings in GROUP OVERVIEW the restaurant space. Also notable is Nestle’s announced acquisition of Atrium Harris Williams & Co. is a leading advisor to the food and Innovations. Nestle is actively looking for growth avenues in consumer healthcare beverage market. Our significant to complement its focus on high-growth food and beverage categories. Mars’ experience covers a broad range of end markets, industries, and minority investment in KIND further illustrates the desire of large CPGs to capture business models. This particular report focuses on trends and growth in fast-growing categories. metrics in the following areas: . Agribusiness . Bakery . Beverages WHAT WE’VE BEEN DOING . Branded and Private Label . Dairy CLOSED HW&CO. TRANSACTIONS . Distribution . Ingredients . Meat and Protein The Soup & Infant . Natural and Organic Feeding Business of a division of . Processing a partnership of a portfolio company of . Produce Restaurant and Retail PizzaRev & . a portfolio company of Founders . Snacks has been acquired by has been acquired by has been acquired by has been acquired by CONTACTS Tim Alexander Managing Director [email protected] +1 (612) 359-2716 Ryan Budlong Managing Director [email protected] a portfolio company of a portfolio company of a portfolio company of a portfolio company of +1 (415) 217-3409 and Brant Cash Director has been acquired by has been acquired by has been acquired by has been acquired by [email protected] +1 (612) 359-2709 Ryan Freeman Director [email protected] +1 (612) 359-2703 Andy Warczak Vice President [email protected] +1 (612) 359-2714 a subsidiary of a portfolio company of a portfolio company of has been acquired by has been acquired by has been acquired by has been acquired by www.harriswilliams.com PAGE | 1 FOOD AND BEVERAGE INDUSTRY UPDATE │ DECEMBER 2017 WHAT WE’VE BEEN READING DIGITALIZATION AND THE FUTURE OF FOOD The massive power of digitalization – the great opportunities and great risks – is changing business models daily. To capitalize on this revolutionary period in manufacturing, food and beverage companies must leverage digitalization advantages in everything from restructuring the value chain to embracing virtualization. Access the full article here. E-COMMERCE EXPECTED TO LEAD SALES CHANNELS IN GROWTH THROUGH 2022 Euromonitor International recently released industry data suggesting that e-commerce will be the fastest growing retail channel through 2022. Within internet retailing, the food and drink category is expected to see the fastest growth at 80 percent. Access the full article here. WHAT’S YOUR FLAVOR? THE SFA’S CONSUMER TRENDS FOR 2018 The Specialty Food Association’s Trendspotter Panel identified macro trends like sustainability and wellness, combined with consumers’ demand for convenience and flavor adventure, are converging in its analysis of 2018 trends. Alternative sweeteners and a wider variety of plant-based foods were among the top trends to make the list. Access the full article here. VITAL SIGNS 5 COMMODITY PRICE INDICES 120 Soybeans: 100 (33.2%) 80 Crude Oil: 60 (42.6%) 40 Wheat: (47.8%) 20 CommodityPrice Index Corn: - Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 (53.8%) Crude Oil Soybeans Wheat Corn PROTEIN PRICE INDICES2,3 140 130 Beef: 120 11.9% 110 Pork (2.1%) ProteinPriceIndex 100 Poultry: 90 (7.7%) Nov-13 May-14 Nov-14 May-15 Nov-15 May-16 Nov-16 May-17 Nov-17 Beef Pork Poultry PAGE | 2 FOOD AND BEVERAGE INDUSTRY UPDATE │ DECEMBER 2017 VITAL SIGNS RESTAURANT AND GROCERY STORE SALES INDICES4 140 Restaurant: 130 19.2% 120 Grocery: 110 10.5% 100 SalesIndex 90 Nov-13 May-14 Nov-14 May-15 Nov-15 May-16 Nov-16 May-17 Nov-17 Restaurant Grocery CONSUMER FOOD PRICE INDEX INFLATION (YOY)2 4.0 3.0 2.0 1.0 Infation (%)Infation - (1.0) Nov-13 May-14 Nov-14 May-15 Nov-15 May-16 Nov-16 May-17 Nov-17 PUBLIC EQUITY MARKET OVERVIEW KEY TRADING STATISTICS5 Stock Price % Change EV/EBITDA % Change Current Valuation Stats Net Debt / Industry and Segment 3 Month 1 Year 3 Month 1 Year Fwd PE LTM PE EV/EBITDA EBITDA Protein Processing 9.1% 6.0% 5.2% (4.4%) 14.5x 14.4x 7.5x 3.2x Fruits and Vegetables 6.2% 4.4% 15.8% 40.5% 18.8x 22.8x 15.2x 0.7x Ingredients / Flavors 7.5% 24.6% 8.5% 4.9% 24.2x 30.7x 18.2x 1.4x Inputs Agribusiness 0.4% (7.1%) 0.4% 18.1% 20.1x 23.1x 12.8x 2.9x Branded Processed Foods 2.4% 1.4% (1.0%) (5.6%) 20.0x 25.2x 12.6x 2.2x Private Label Foods and Beverages 8.0% 15.8% 0.4% (1.7%) 22.3x 25.0x 12.6x 4.5x Natural / Organic Foods / BFY 0.3% 5.2% (12.5%) 11.3% 25.8x 48.5x 19.0x 7.2x Baked Goods 8.5% (2.8%) 9.9% 8.5% 21.1x 39.2x 13.2x 2.5x Dairy 0.7% 13.6% 2.0% 9.0% 19.6x 23.6x 14.5x 1.3x Non-Alcoholic Beverages 2.0% 30.2% 0.5% 7.9% 22.2x 24.3x 14.5x 1.7x Alcoholic Beverages 7.5% 34.3% 11.3% 14.0% 22.0x 27.0x 16.1x 2.6x Food and BeverageFood and Snacks 6.6% 1.0% 0.9% 5.5% 25.6x 27.0x 16.1x 3.1x Grocery Distribution 8.6% (13.2%) 4.3% 5.3% 17.9x 25.8x 10.3x 2.3x Food Retail 18.4% (23.1%) (7.7%) (10.5%) 13.3x 20.7x 6.5x 1.7x Foodservice 14.3% 16.0% 9.6% 22.7% 19.7x 28.1x 12.2x 4.6x Quick Service Restaurant 6.6% 11.6% 4.8% 9.7% 23.2x 24.1x 12.1x 3.6x Fast Casual 13.7% (14.5%) 3.3% (0.9%) 45.5x 46.1x 15.6x 1.8x Differentiated Casual 27.6% (8.2%) (1.0%) 2.7% 23.3x 23.9x 9.4x 0.6x Casual Dining Restaurant 9.6% 2.7% 1.8% 5.1% 17.1x 27.8x 8.5x 2.8x Fine Dining 7.9% (14.7%) 2.7% 17.3% 18.7x 22.4x 9.0x 1.2x Consumer and Retail and Consumer Pizza (4.2%) 12.4% (17.6%) 3.1% 24.0x 27.2x 14.3x 3.7x Beverage / Snack Retail (3.8%) (11.7%) 1.5% 3.0% 24.8x 28.3x 16.3x 2.3x Family Restaurant 9.7% (5.1%) 3.9% 4.0% 20.2x 22.8x 9.9x 2.1x Overall Median 6.0% 4.0% 2.7% 5.3% 21.2x 25.0x 12.3x 2.3x PAGE | 3 FOOD AND BEVERAGE INDUSTRY UPDATE │ DECEMBER 2017 PUBLIC EQUITY MARKET OVERVIEW PUBLIC COMPANY SECTOR PERFORMANCE (MEDIAN ONE YEAR CHANGE IN STOCK PRICE)5 Alcoholic Bev erages Non-Alcoholic Bev erages Ingredients / Flav ors S&P Foodserv ice Priv ate Label Dairy Pizza Quick Serv ice Restaurant Protein Processing Natural / Organic / BFY Fruits and Vegetables Casual Dining Restaurant Branded Processed Foods Snacks Baked Goods Family Restaurant Agribusiness Differentiated Casual Bev erage / Snack Retail Grocery Distribution Fast Casual Fine Dining Food Retail (30.0%) (20.0%) (10.0%) 0.0% 10.0% 20.0% 30.0% 40.0% Inputs Food and Beverage Consumer and Retail RECENT EQUITY OFFERINGS6 Gross Proceeds Close Date Filing Date Issuer Ticker Transaction Type ($mm) Use of Funds 12/06/17 12/20/17 Reed's Inc REED Follow-On $14.0 General Corporate Purposes Repay Indebtedness Working Capital 12/04/17 12/04/17 Performance Food Group Co PFGC Follow-On $188.2 Secondary Pay Fees & Expenses 11/23/17 11/16/17 Naturally Splendid Entrps Ltd RCE.P Follow-On $1.2 General Corporate Purposes Working Capital 11/22/17 11/22/17 Long Island Iced Tea Corp LTEA Follow-On - General Corporate Purposes 11/20/17 11/20/17 Captiva Verde Industries Ltd VEG Follow-On $0.3 General Corporate Purposes Furture Acquisitions Working Capital 11/20/17 11/20/17 Performance Food Group Co PFGC Follow-On $141.3 Secondary Pay Fees & Expenses 11/1/17 11/01/17 Naturally Splendid Entrps LTD NSP Follow-On $0.6 Working Capital 10/23/17 09/06/17 Fat Brands Inc FAT IPO $24.0 Pursue Growth Opportunities 10/23/17 10/23/17 Muscle Maker Inc MMB IPO $20.0 Working Capital 10/14/17 09/29/17 Long Island Iced Tea Corp LTEA Follow-On $1.3 General Corporate Purposes 9/14/17 09/14/17 RAVE Restaurant Group Inc RAVE Rights $5.0 Repay Indebtedness General Corporate Purposes 9/13/17 09/13/17 Performance Food Group Co PFGC Follow-On $142.0 Liquidity for Private Owners 9/12/17 05/11/14 Organto Foods Inc OGO Follow-On $4.1 Pursue Growth Opportunities 8/15/17 08/09/17 Eastside Distilling Inc ESDI Follow-On $5.4 General Corporate Purposes PAGE | 4 FOOD AND BEVERAGE INDUSTRY UPDATE │ DECEMBER 2017 PUBLIC COMPARABLES5 Price at As a % of Market Enterprise LTM Revenue Growth LTM Margins P/E EV / LTM EV / 2017E ($ in millions, except per share data) Ticker 12/13/17 52-wk High Cap Value Revenue EBITDA 1 Year 3 Years Gross EBITDA Multiple Revenue EBITDA Revenue EBITDA Food and Beverage Branded Processed Foods Associated British Foods PLC ABF-GB $38.81 86.6% $30,468 $29,557 $19,453 $2,345 2.3% (3.2%) 8.2% 12.1% 19.1x 1.52x 12.6x 1.44x 11.7x B&G Foods, Inc.