FOOD AND BEVERAGE INDUSTRY UPDATE │ JANUARY 2016 www.harriswilliams.de Harris Williams & Co. Ltd is a private limited company incorporated under English law having 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, authorised and regulated by the Financial Conduct Authority. 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. FOOD AND BEVERAGE INDUSTRY UPDATE │ JANUARY 2016 WHAT WE’RE SEEING CONTENTS MARKET UPDATE . INDUSTRY VITAL SIGNS . EQUITY MARKET OVERVIEW 2015 was a robust year for food and beverage M&A, with over 230 North . M&A MARKET OVERVIEW . DEBT MARKET OVERVIEW American transactions announced. HW&Co. capitalized on the strong market in . RECENT M&A ACTIVITY 2015, closing seven transactions in the snacks, ingredients, restaurant, food . PUBLIC COMPARABLES distribution, and food processing segments. Looking forward, HW&Co. anticipates . EARNINGS CALENDAR that 2016 middle market deal flow will remain strong despite China’s economic GROUP OVERVIEW slowdown and continued uncertainty in the global economy. Middle market deals Harris Williams & Co. is a leading should continue to garner significant interest, as both strategic and financial advisor to the food and beverage market. Our significant buyers continue to be eager to put capital to work in the space. experience covers a broad range of end markets, industries, and business models. This particular report focuses on trends and WHAT WE’VE BEEN DOING metrics in the following areas: . Agribusiness CLOSED HW&CO. TRANSACTIONS . Baked and Prepared Goods . Beverages . Branded and Private Label . Dairy . Distribution . Ingredients a subsidiary of a portfolio company of . Meat and Protein a portfolio company of . Natural and Organic has been acquired by . Processing has been acquired by has been acquired by . Produce has been acquired by . Restaurant and Retail . Snacks CONTACTS Glenn Gurtcheff Managing Director [email protected] +1 (612) 359-2702 Tim Alexander a portfolio company of a portfolio company of a portfolio company of Managing Director [email protected] has been acquired by +1 (612) 359-2716 has been acquired by has been acquired by has been acquired by Ryan Budlong Director A Private [email protected] Investor Group +1 (415) 217-3409 Brant Cash Director [email protected] +1 (612) 359-2709 Ryan Freeman Vice President [email protected] a portfolio company of has divested selected assets a portfolio company of to +1 (612) 359-2703 has acquired Andy Warczak and has been acquired by has been acquired by Vice President [email protected] +1 (612) 359-2714 www.harriswilliams.de PAGE | 1 FOOD AND BEVERAGE INDUSTRY UPDATE │ JANUARY 2016 WHAT WE’RE READING STARTUPS TAKE BITE OUT OF FOOD POISONING In the wake of large-scale food poisoning outbreaks across much of the United States, a handful of startups have arisen to help suppliers, restaurants, and even individual consumers identify potential contaminants, allergens, and spoilage in their food. The makers of these pocket-sized devices, which scan samples at a molecular level, are wagering that these products will have a transformative impact on food safety standards. Access to the full article here. CAMPBELL SOUP SWITCHES SIDES IN THE GMO LABELING FIGHT The Campbell Soup Co., a leading voice in the hotly-contested debate regarding required labeling of genetically modified ingredients, has surprised many with its recent shift in support of such measures. In response to consumer pressure and in avoidance of conflicting demands by individual states, the company has called for federal regulation that will affect many of its own products as well as a broader industry that has vehemently opposed the move. Access to the full article here. NEW DIETARY GUIDELINES GARNER CRITICISM Following the release of new dietary guidelines, the USDA and Department of Health and Human Services have found themselves contending with a wave of criticism claiming that their recommendations are muddled and confusing. These complaints raise questions about the role of special interest groups in crafting the guidelines that play a critical role in determining the foods America produces, buys, and eats. Access to the full article here. VITAL SIGNS COMMODITY PRICE INDICES1 160 140 Soybeans: (23.0%) 120 Corn: 100 (36.6%) 80 Wheat: 60 (39.1%) 40 Crude Oil: Commodity PriceIndex Commodity 20 (64.7%) Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Corn Soybeans Wheat Crude Oil PROTEIN PRICE INDICES2,3 150 Beef: 140 29.6% 130 Pork: 8.1% 120 Poultry: 110 4.6% 100 ProteinPriceIndex 90 Nov-11 May-12 Nov-12 May-13 Nov-13 May-14 Nov-14 May-15 Nov-15 Beef Pork Poultry PAGE | 2 FOOD AND BEVERAGE INDUSTRY UPDATE │ JANUARY 2016 VITAL SIGNS RESTAURANT AND GROCERY STORE SALES INDICES4 140 Restaurant: 120 18.5% Grocery: 100 SalesIndex 9.6% 80 Nov-11 May-12 Nov-12 May-13 Nov-13 May-14 Nov-14 May-15 Nov-15 Restaurant Grocery CONSUMER FOOD PRICE INDEX INFLATION2 5.5 4.0 2.5 Inflation(%) 1.0 (0.5) Nov-11 May-12 Nov-12 May-13 Nov-13 May-14 Nov-14 May-15 Nov-15 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 (15.4%) (1.1%) (1.3%) (12.7%) 11.3x 8.4x 5.7x 2.6x Fruit and Vegetable 2.4% 14.3% (0.2%) (6.7%) 15.8x 16.4x 10.4x 1.0x Ingredients / Flavors (0.1%) 1.6% 0.1% 3.0% 21.6x 24.9x 15.4x 1.8x Inputs Agribusiness (24.1%) (39.6%) (1.8%) (17.4%) 10.6x 13.9x 7.8x 1.9x Branded Processed Foods (2.3%) 15.1% 0.6% 13.2% 19.8x 28.7x 14.0x 2.5x Private Label Foods and Beverages (1.3%) 4.7% (11.0%) (26.5%) 30.9x 27.2x 11.7x 5.3x Natural / Organic Foods / BFY (16.9%) (9.7%) (4.0%) (11.7%) 19.1x 32.5x 19.6x 5.0x Baked Goods (4.0%) (2.8%) (3.6%) 14.7% 21.0x 30.0x 12.4x 3.1x Dairy (2.5%) 0.5% (0.2%) (7.4%) 20.5x 24.0x 11.1x 1.6x Non-Alcoholic Beverages 1.4% 2.5% 2.5% 9.3% 21.9x 28.8x 13.5x 1.8x Alcoholic Beverages 0.8% 7.8% (0.5%) 2.7% 23.0x 23.8x 13.9x 2.7x Food and BeverageFood and Snacks (2.1%) 17.1% (1.7%) 4.0% 25.5x 29.0x 14.5x 2.0x Grocery Distribution (15.8%) (22.6%) (8.2%) (23.1%) 13.1x 13.5x 6.8x 2.1x Food Retail (5.4%) (9.6%) (2.4%) (12.6%) 19.0x 20.3x 7.6x 1.4x Foodservice (1.3%) (31.0%) (4.3%) (11.4%) 20.6x 31.4x 11.0x 5.5x Quick Service Restaurant 0.9% (0.1%) 2.3% (6.9%) 22.6x 25.4x 12.6x 2.6x Fast Casual (16.7%) (34.6%) (17.8%) (49.2%) 35.1x 23.7x 11.7x 0.8x Differentiated Casual (16.0%) (13.0%) (12.0%) (18.0%) 25.2x 32.9x 11.0x 1.1x Casual Dining Restaurant (8.9%) (21.5%) (4.0%) (19.5%) 17.2x 22.1x 8.7x 2.3x Fine Dining 5.1% (8.5%) 3.7% (20.3%) 17.0x 19.3x 10.2x 0.3x Consumer and Retail and Consumer Pizza (19.5%) (4.9%) (8.5%) (13.0%) 24.8x 34.8x 12.5x 3.7x Beverage / Snack Retail (8.7%) (14.2%) (0.8%) (13.5%) 31.5x 27.6x 16.9x 2.8x Family Restaurant (14.9%) (12.4%) (14.3%) (24.2%) 19.9x 21.7x 9.3x 2.0x Overall Median (3.5%) (0.9%) (2.4%) (6.9%) 20.9x 24.8x 11.9x 2.1x PAGE | 3 FOOD AND BEVERAGE INDUSTRY UPDATE │ JANUARY 2016 PUBLIC EQUITY MARKET OVERVIEW PUBLIC COMPANY SECTOR PERFORMANCE (ONE YEAR CHANGE IN STOCK PRICE)5 Snacks Branded Processed Foods Fruit and Vegetable S&P Alcoholic Bev erages Priv ate Label Non-Alcoholic Bev erages Ingredients / Flav ors Dairy Quick Serv ice Restaurant Protein Processing Baked Goods Pizza Fine Dining Food Retail Natural / Organic / BFY Family Restaurant Differentiated Casual Bev erage / Snack Retail Casual Dining Restaurant Grocery Distribution Foodserv ice Fast Casual Agribusiness (45.0%) (30.0%) (15.0%) 0.0% 15.0% 30.0% Inputs Food and Beverage Consumer and Retail RECENT EQUITY OFFERINGS6 Gross Proceeds Close Date Filing Date Issuer Ticker Transaction Type ($mm) Use of Funds 12/29/15 12/29/15 Avidus Management Group Inc AVD Follow-On $0.9 General Corp. Purp. & Working Capital 12/15/15 10/06/15 Spot Coffee (Canada) Ltd SPP Follow-On $1.1 General Corp. Purp. Reduce Indebtedness 12/09/15 12/09/15 Rest Brands Intl Inc QSR Follow-On $601.7 Secondary Pay Fees & Expenses 12/04/15 12/04/15 Vitamin Shoppe Inc VSI Convertible $143.8 Stock Repurchase 11/23/15 11/23/15 The JM Smucker Co SJM Follow-On $468.3 Secondary 11/06/15 11/06/15 The Habit Restaurants HABT Follow-On $119.8 Secondary 10/26/15 07/02/15 Del Taco Restaurants Inc TACO Follow-On $46.5 Secondary 10/19/15 09/15/15 GreenSpace Brands Inc JTR Follow-On $1.1 Acquisition Fin.