FOOD AND BEVERAGE INDUSTRY UPDATE │ NOVEMBER 2016 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 authorised 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 │ NOVEMBER 2016 WHAT WE’RE SEEING CONTENTS MARKET UPDATE . INDUSTRY VITAL SIGNS . EQUITY MARKET OVERVIEW . M&A MARKET OVERVIEW With over 500 transactions announced through November, the food and . DEBT MARKET OVERVIEW . RECENT M&A ACTIVITY beverage M&A market is on track to achieve record activity in 2016. To that end, . PUBLIC COMPARABLES . EARNINGS CALENDAR HW&Co. is pleased to announce the acquisition of Mercer Foods, a leading GROUP OVERVIEW provider of freeze-dried fruits and vegetables in the United States, to Graham Harris Williams & Co. is a leading advisor to the food and Partners. The transaction marks the latest in HW&Co.’s food & beverage practice, beverage market. Our significant experience covers a broad range building on recent momentum in both the better-for-you ingredients and snacks of end markets, industries, and business models. This particular report focuses on trends and subsectors. metrics in the following areas: . Agribusiness HAT E VE EEN OING . Baked and Prepared Goods W W ’ B D . Beverages . Branded and Private Label CLOSED HW&CO. TRANSACTIONS . Dairy . Distribution . Ingredients . Meat and Protein . Natural and Organic a portfolio company of a portfolio company of a portfolio company of a subsidiary of . Processing . Produce and . Restaurant and Retail has been acquired by has been acquired by has been acquired by has been acquired by . Snacks CONTACTS Glenn Gurtcheff Managing Director [email protected] +1 (612) 359-2702 Tim Alexander Managing Director a portfolio company of [email protected] a portfolio company of a portfolio company of +1 (612) 359-2716 has been acquired by Ryan Budlong has been acquired by Managing Director has been acquired by has been acquired by [email protected] A Private +1 (415) 217-3409 Investor Group Brant Cash 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 has been acquired by Vice President has been acquired by has been acquired by [email protected] has been acquired by +1 (612) 359-2714 www.harriswilliams.com PAGE | 1 FOOD AND BEVERAGE INDUSTRY UPDATE │ NOVEMBER 2016 WHAT WE’RE READING HW&CO. ADVISES ON THE SALE OF MERCER FOODS Overview On November 10, 2016 Mercer Foods, a portfolio company of Frontenac and Lake Pacific Partners, was successfully sold to Graham Partners. The sale represents the latest in HW&Co.’s growing list of better-for-you snack food and ingredient transactions. Company Description Mercer Foods is the leading provider of freeze-dried fruits and vegetables in the United States, with one of the largest and most efficient freeze-drying facilities in the world. The Company has been a leader in the industry for over 35 years, capitalizing on the clean label and “better-for-you” food industry megatrends. Key Value Drivers for Mercer Foods Representative . Recognized as a market leader in the freeze-dried industry Applications/Products: for its innovation, quality, and customer service. Viewed as a trusted partner by its blue-chip customer a portfolio company of base, relying on Mercer Foods for clean label ingredients. and . Leader in high growth sectors of the food industry, including freeze-dried packaged snacks. has been acquired by . Sustainable competitive advantages due to internally designed equipment and extensive production know-how. Proven management team with over 100 years of industry experience. VITAL SIGNS COMMODITY PRICE INDICES1 Soybeans: 120 (36.6%) 100 Corn: (52.6%) 80 Crude Oil: 60 (52.3%) 40 Wheat: (61.5%) Commodity PriceIndex Commodity 20 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Corn Soybeans Crude Oil Wheat PROTEIN PRICE INDICES2,3 130 Beef: 120 19.2% Pork: 110 6.2% 100 Poultry: 1.1% ProteinPriceIndex 90 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Beef Pork Poultry PAGE | 2 FOOD AND BEVERAGE INDUSTRY UPDATE │ NOVEMBER 2016 VITAL SIGNS RESTAURANT AND GROCERY STORE SALES INDICES4 140 Restaurant: 120 25.6% Grocery: 100 11.6% SalesIndex 80 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Restaurant Grocery CONSUMER FOOD PRICE INDEX INFLATION2 4.0 3.0 2.0 Inflation(%) 1.0 0.0 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-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 (6.9%) 20.1% 10.8% 21.4% 11.7x 13.9x 7.2x 2.8x Fruit and Vegetable 6.1% 30.3% 9.6% (1.8%) 16.8x 20.8x 9.6x 0.6x Ingredients / Flavors (14.3%) 1.7% (10.6%) 2.2% 20.0x 24.0x 14.6x 1.3x Inputs Agribusiness (5.3%) 0.8% (6.7%) 30.9% 18.3x 15.8x 10.2x 2.1x Branded Processed Foods (13.7%) 10.6% (12.1%) (7.4%) 19.0x 24.5x 13.0x 2.3x Private Label Foods and Beverages (25.7%) 34.4% 8.7% (7.1%) 26.6x 22.1x 11.1x 3.3x Natural / Organic Foods / BFY (3.6%) 14.8% 4.7% (5.0%) 18.8x 38.4x 18.1x 3.5x Baked Goods 2.3% (6.0%) (5.3%) (21.8%) 16.5x 28.9x 9.3x 2.5x Dairy 0.2% 4.5% 3.3% 6.8% 18.8x 22.4x 12.3x 1.7x Non-Alcoholic Beverages (12.5%) 2.2% (10.5%) 1.4% 20.4x 22.6x 11.1x 1.9x Alcoholic Beverages (8.1%) (4.1%) (8.5%) 0.8% 19.7x 23.5x 13.5x 2.6x Food and BeverageFood and Snacks (3.7%) 4.9% (1.1%) 3.8% 22.1x 22.6x 13.5x 1.7x Grocery Distribution (5.8%) 4.3% (1.6%) (4.2%) 17.1x 20.1x 8.6x 2.0x Food Retail 0.5% (4.0%) (2.9%) (6.6%) 18.2x 19.5x 7.3x 2.0x Foodservice 13.2% 8.6% 6.3% 14.9% 21.1x 29.2x 11.0x 4.7x Quick Service Restaurant (2.4%) 7.3% (6.8%) (7.2%) 21.3x 20.8x 10.8x 2.4x Fast Casual (1.6%) (13.1%) (2.2%) (16.9%) 38.5x 33.6x 10.1x 0.7x Differentiated Casual (3.6%) 8.2% 0.4% (12.4%) 23.1x 26.9x 10.0x 1.4x Casual Dining Restaurant 1.6% 19.6% 0.0% (9.6%) 16.1x 22.7x 8.5x 2.3x Fine Dining 5.3% 1.2% 3.2% (1.5%) 16.1x 17.9x 9.6x 2.6x Consumer and Retail and Consumer Pizza 9.2% 49.0% 11.5% 1.5% 31.9x 33.8x 17.7x 4.0x Beverage / Snack Retail (6.5%) (12.1%) (7.4%) (14.7%) 23.4x 28.4x 15.6x 2.7x Family Restaurant 3.0% 9.9% 1.9% (0.7%) 19.2x 30.9x 10.2x 2.2x Overall Median (4.2%) 3.9% (2.8%) (5.0%) 20.0x 22.9x 10.6x 2.1x PAGE | 3 FOOD AND BEVERAGE INDUSTRY UPDATE │ NOVEMBER 2016 PUBLIC EQUITY MARKET OVERVIEW PUBLIC COMPANY SECTOR PERFORMANCE (ONE YEAR CHANGE IN STOCK PRICE)5 Pizza Priv ate Label Fruit and Vegetable Protein Processing Casual Dining Restaurant Natural / Organic / BFY Branded Processed Foods Family Restaurant Foodserv ice Differentiated Casual Quick Serv ice Restaurant S&P Snacks Dairy Grocery Distribution Non-Alcoholic Bev erages Ingredients / Flav ors Fine Dining Agribusiness Food Retail Alcoholic Bev erages Baked Goods Bev erage / Snack Retail Fast Casual (30.0%) (15.0%) 0.0% 15.0% 30.0% 45.0% Inputs Food and Beverage Consumer and Retail RECENT EQUITY OFFERINGS6 Gross Proceeds Close Date Filing Date Issuer Ticker Transaction Type ($mm) Use of Funds 11/09/16 10/10/16 Saputo Inc SAP Follow-On $224.3 Liquidity for Private Owners 11/08/16 06/07/16 Naturally Splendid Entrp Ltd RCE.P Follow-On $3.0 Debt Repayment Working Capital 11/01/16 07/19/16 Wingstop Inc WING Follow-On $179.3 Liquidity for Private Owners 10/26/16 10/31/16 Chanticleer Holdings Inc HOTR Follow-On $13.5 Debt Repayment Working Capital 10/27/16 10/27/16 Kokos Group Inc - IPO $0.2 Pay Fees & Expenses 10/17/16 10/17/16 Spot Coffee(Canada)Ltd SPP Follow-On $0.4 Capital Expenditure Working Capital 10/14/16 06/07/16 Naturally Splendid Entrp Ltd RCE.P Follow-On $3.0 Debt Repayment Working Capital 10/11/16 10/03/16 Ten Peaks Coffee Co Inc TPK Convertible $11.3 Pursue Growth Opportunities 10/06/16 10/06/16 Xfit Brands Inc XFTB Follow-On - Acquisition Financing 10/03/16 10/03/16 Captiva Verde Industries Ltd VEG Follow-On $0.9 Working Capital 07/29/16 07/29/16 Xylitol Canada Inc XYL Convertible $0.4 Working Capital 10/03/16 10/03/16 Ten Peaks Coffee Co Inc TPK Convertible $11.4 Pursue Growth Opportunities 09/08/16 09/08/16 Liquor Stores NA Ltd LIQ Convertible $52.2 Repay Indebtedness PAGE | 4 FOOD AND BEVERAGE INDUSTRY UPDATE │ NOVEMBER 2016 PUBLIC COMPARABLES5 Price at As a % of Market Enterprise LTM Revenue Growth LTM Margins P/E EV / LTM EV / 2016E ($ in millions, except per share data) Ticker 11/13/16 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 $32.70 60.5% $25,889 $26,269 $19,015 $2,171 (3.8%) (2.9%) 8.0% 11.4% 25.1x 1.38x 12.1x 1.52x 12.9x B&G Foods, Inc.