FOOD AND BEVERAGE INDUSTRY UPDATE │ FEBRUARY 2017 www.harriswilliams.de Harris Williams & Co. Ltd is a private limited company authorised and regulated by the Financial Conduct Authority, 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 under company number 7078852. Directors: Mr. Ned Valentine, Mr. Paul Poggi, Mr. Thierry Monjauze and Mr. Aadil Khan. Harris Williams & Co. Ltd Niederlassung Frankfurt (German branch) is registered in the Commercial Register (Handelsregister) of the Local Court (Amtsgericht) of Frankfurt am Main, Germany, under registration number HRB 96687, having its business address at Bockenheimer Landstrasse 33-35, 60325 Frankfurt am Main, Germany. Permanent Representative (Ständiger Vertreter) of the Branch Niederlassung: Mr. Jeffery H. Perkins. 0 FOOD AND BEVERAGE INDUSTRY UPDATE │ FEBRUARY 2017 WHAT WE’RE SEEING CONTENTS MARKET UPDATE . INDUSTRY VITAL SIGNS . EQUITY MARKET OVERVIEW . M&A MARKET OVERVIEW The first two months of 2016 have shown significant momentum with over 100 . DEBT MARKET OVERVIEW . RECENT M&A ACTIVITY announced food & beverage transactions. Recent transactions of note include . EARNINGS CALENDAR Sovos Brands’ acquisition of Michael Angelo’s Gourmet Foods, Golden Gate GROUP OVERVIEW Harris Williams & Co. is a leading Capital’s acquisition of Bob Evan’s Restaurants, and RLJ Equity Partners and SJ advisor to the food and beverage market. Our significant Partners’ combined acquisition of Native Maine Produce and Specialty Foods, a experience covers a broad range of end markets, industries, and business models. This particular wholesale distributor of fresh produce, dairy, and specialty foods. report focuses on trends and metrics in the following areas: . Agribusiness . Baked and Prepared Goods HAT E VE EEN OING . Beverages W W ’ B D . Branded and Private Label . Dairy CLOSED HW&CO. TRANSACTIONS . Distribution . Ingredients . Meat and Protein . Natural and Organic . Processing a portfolio company of a portfolio company of a portfolio company of a subsidiary of . Produce . Restaurant and Retail and . Snacks has been acquired by has been acquired by has been acquired by has been acquired by CONTACTS Glenn Gurtcheff Managing Director [email protected] +1 (612) 359-2702 Tim Alexander Managing Director [email protected] +1 (612) 359-2716 a portfolio company of a portfolio company of a portfolio company of Ryan Budlong Managing Director has been acquired by [email protected] has been acquired by has been acquired by has been acquired by +1 (415) 217-3409 A Private Brant Cash Investor Group Director [email protected] +1 (612) 359-2709 Ryan Freeman Director [email protected] +1 (612) 359-2703 a portfolio company of a portfolio company of a portfolio company of Andy Warczak Vice President has been acquired by [email protected] +1 (612) 359-2714 has been acquired by has been acquired by has been acquired by www.harriswilliams.de PAGE | 1 FOOD AND BEVERAGE INDUSTRY UPDATE │ FEBRUARY 2017 WHAT WE’RE READING WHY THE ARCTIC APPLE MEANS YOU MAY BE SEEING MORE GMOS AT THE STORE The Arctic Apple, a genetically modified Golden Delicious, is set to hit test markets as the first apple of its kind in history. It is the latest target in a transformative shift that has led scientists to shift from “transgenic” crops that include foreign DNA to “cisgenic” crops that are altered using their own genome, bucking many existing GMO regulatory hurdles. Access the full article here. MILLIONS TO FIGHT FOOD INDUSTRY SWAY, FROM A SNACK BAR CEO With a $25 million pledge, Daniel Lubetzky, the CEO of KIND, has vowed to create a group dedicated to reveal corporate influence in the nutrition field with activities such as education campaigns and investigative journalism. The move comes as the division between traditional “Big Food” and newer, better-for-you businesses continues to widen. Access the full article here. FOR FOOD MANUFACTURERS, 'SELL BY' LABELS MAY HAVE REACHED THEIR EXPIRATION DATE In a bid to combat food waste, the Grocery Manufacturers Association and the Food Marketing Institute are teaming up, advising companies to abolish their “Expires On” and “Sell By” labels. According to the groups, the labels prompt over-cautious consumers to throw away perfectly good, though less fresh, food. Access the full article here. VITAL SIGNS COMMODITY PRICE INDICES1 120 Soybeans: 100 (29.8%) 80 Crude Oil: (48.0%) 60 Corn: 40 (50.5%) 20 Wheat: Commodity Price Index PriceCommodity Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 (59.5%) Corn Soybeans Wheat Crude Oil PROTEIN PRICE INDICES2,3 140 130 Beef: 120 14.5% 110 Pork 6.4% ProteinPriceIndex 100 Poultry: 90 3.0% Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Beef Pork Poultry PAGE | 2 FOOD AND BEVERAGE INDUSTRY UPDATE │ FEBRUARY 2017 VITAL SIGNS RESTAURANT AND GROCERY STORE SALES INDICES4 140 Restaurant: 22.8% 120 Grocery: 100 10.3% SalesIndex 80 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Restaurant Grocery CONSUMER FOOD PRICE INDEX INFLATION2 4.0 3.0 2.0 1.0 Inflation(%) 0.0 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 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 3.2% 10.0% 13.2% 9.6% 11.9x 12.9x 9.3x 2.9x Fruit and Vegetable (0.7%) 31.9% 6.3% 5.1% 15.2x 20.8x 10.4x 0.4x Ingredients / Flavors 3.6% 10.5% (12.5%) (5.2%) 19.9x 23.9x 14.4x 1.4x Inputs Agribusiness 8.0% 35.1% 3.2% 5.5% 18.0x 20.3x 10.6x 2.4x Branded Processed Foods 7.7% 8.5% (5.5%) (0.7%) 20.3x 26.4x 13.7x 2.3x Private Label Foods and Beverages 8.0% 15.0% (3.1%) 21.4% 26.5x 14.0x 10.4x 4.2x Natural / Organic Foods / BFY 12.1% 35.3% 2.1% (5.9%) 18.0x 32.4x 16.8x 3.5x Baked Goods 1.0% 13.8% (1.2%) (16.7%) 21.5x 27.8x 9.3x 2.1x Dairy 8.1% 13.1% (0.3%) 6.9% 19.6x 24.6x 13.8x 1.7x Non-Alcoholic Beverages 3.4% 7.8% (6.0%) (2.0%) 20.9x 23.3x 12.9x 1.8x Alcoholic Beverages 2.0% 9.3% (8.3%) (10.7%) 20.2x 24.1x 13.4x 2.6x Food and BeverageFood and Snacks 4.2% 19.6% 2.9% 5.4% 23.2x 27.7x 17.5x 1.7x Grocery Distribution (1.6%) 20.3% 7.7% 29.4% 17.3x 21.3x 9.0x 2.0x Food Retail (0.6%) (4.0%) 4.6% (11.2%) 18.7x 19.7x 7.4x 2.1x Foodservice 17.2% 28.1% 22.6% 10.5% 19.9x 28.6x 12.2x 4.7x Quick Service Restaurant 12.8% 28.1% 12.3% 4.7% 23.3x 22.3x 13.0x 3.1x Fast Casual 1.3% 0.8% 4.2% (10.9%) 43.9x 37.7x 13.2x 2.0x Differentiated Casual 4.4% 7.9% 4.0% (13.1%) 24.1x 28.6x 10.3x 0.5x Casual Dining Restaurant (6.6%) (2.9%) 4.6% 0.2% 15.2x 21.8x 7.8x 2.5x Fine Dining 5.9% 8.2% 14.5% 1.1% 16.5x 18.8x 9.9x 2.6x Consumer and Retail and Consumer Pizza 6.1% 70.1% 2.6% 29.0% 35.7x 34.4x 17.9x 4.0x Beverage / Snack Retail (0.4%) (9.9%) 0.3% (18.3%) 23.9x 26.5x 16.4x 2.4x Family Restaurant 5.9% 28.1% 15.5% 35.3% 21.0x 52.2x 11.8x 2.5x Overall Median 4.2% 10.5% 2.0% 0.8% 20.4x 24.2x 11.6x 2.2x PAGE | 3 FOOD AND BEVERAGE INDUSTRY UPDATE │ FEBRUARY 2017 PUBLIC EQUITY MARKET OVERVIEW PUBLIC COMPANY SECTOR PERFORMANCE (ONE YEAR CHANGE IN STOCK PRICE)5 Pizza Natural / Organic / BFY Agribusiness Fruit and Vegetable Foodserv ice Family Restaurant Quick Serv ice Restaurant S&P Grocery Distribution Snacks Priv ate Label Baked Goods Dairy Ingredients / Flav ors Protein Processing Alcoholic Bev erages Branded Processed Foods Fine Dining Differentiated Casual Non-Alcoholic Bev erages Fast Casual Casual Dining Restaurant Food Retail Bev erage / Snack Retail (15.0%) 0.0% 15.0% 30.0% 45.0% 60.0% 75.0% Inputs Food and Beverage Consumer and Retail RECENT EQUITY OFFERINGS6 Gross Proceeds Close Date Filing Date Issuer Ticker Transaction Type ($mm) Use of Funds 12/30/16 12/30/16 Eastside Distilling Inc EURC Follow-On $1.0 Working Capital General Corporate Purposes 12/22/16 12/27/16 RAVE Restaurant Group Inc RAVE Convertible $1.0 Capital Expenditure Working Capital 12/21/16 12/02/16 Long Island Iced Tea Corp LTEA Follow-On $1.6 Working Capital General Corporate Purposes 12/02/16 11/08/16 Diamond Estates Wines DWS Follow-On $6.0 Capital Expenditure 11/30/16 10/17/16 Bojangles' Inc BOJA Follow-On $119.0 Liquidity for Private Owners 11/24/16 11/21/16 Spot Coffee(Canada)Ltd SPP Follow-On $0.4 Capital Expenditure Working Capital 11/21/16 11/21/16 Hip Cuisine Inc N/A - $0.5 Working Capital 11/16/16 11/11/16 Performance Food Group Co PFGC Follow-On $228.5 Liquidity for Private Owners 11/15/16 10/10/16 Premium Brands Holdings Corp PBH Convertible $74.3 Debt Repayment Future Acquisitions 11/09/16 06/07/16 Saputo Inc SAP Follow-On $224.3 Liquidity for Private Owners 11/08/16 07/19/16 Naturally Splendid Entrp Ltd RCE.P Follow-On $3.0 Debt Repayment Working Capital 11/01/16 10/31/16 Wingstop Inc WING Follow-On $179.3 Liquidity for Private Owners 10/26/16 10/27/16 Chanticleer Holdings Inc HOTR Follow-On $13.5 Debt Repayment Working Capital PAGE | 4 FOOD AND BEVERAGE INDUSTRY UPDATE │ FEBRUARY 2017 PUBLIC COMPARABLES5 Price at As a % of Market Enterprise LTM Revenue Growth LTM Margins P/E EV / LTM EV / 2016E ($ in millions, except per share data) Ticker 2/12/17 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 $31.20 62.8% $24,701 $25,082 $19,015 $2,171 (3.8%) (2.9%) 8.0% 11.4% 24.2x 1.32x 11.6x 1.47x 12.5x B&G Foods, Inc.