Consumer Products and Retail Quarterly update Q4 2018 Deloitte Corporate Finance LLC | www.investmentbanking.deloitte.com Quarterly update | Q4 2018 | Consumer Products and Retail Consumer Products and Retail trends In this update 1,2 3 On-the-go Artificial Intelligence (AI) • Consumer trends As the boundary between snacking AI is one of several disruptive • Economic outlook and dining shifts, the ways in which technologies that consumer product foods are marketed and packaged are companies are looking to take • Industry analysis changing to accommodate a new advantage of as these technologies • Select M&A transactions generation of on-the-go consumers. continue to evolve. The technology Companies across the snacking can help strengthen a company’s • Appendix spectrum have taken note of the competitive advantage in the uptick in demand for convenience and marketplace and enhance the have responded with new packaging customer experience in a number This update will focus on formats designed to make meal of ways. Many companies are news and trends in the preparation and consumption faster currently utilizing automated following areas: and easier. Food manufacturers are processes to realize greater feeling the effects of this trend as well, efficiencies, augment decision- seeing an increase in orders for snacks making, efficiently allocate • Food & Beverages that can present similar health and resources, and are even employing nutritional benefits of a complete AI to generate product and service • Products & Durables meal, while offering portability. innovations. • Restaurant & Food Transparency4 Self-expression5 Services The modern US consumer Many of today’s consumers are • Specialty Retail increasingly wants more and more aligning with companies that insight into how their food is made, represent similar values to their Who we are where it comes from, and exactly own. For “Gen Zers” in particular, what the ingredients are, food is more than sustenance, it challenging food producers to is a symbol of personal values and Deloitte Corporate Finance a form of self-expression. With 44 improve transparency of their LLC is a leading global operations and production process. percent of consumers stating that With 75 percent of shoppers saying social and cultural factors have middle market M&A that they are more likely to switch gained importance to them over advisor. The firm’s to a brand that provides more in- previous years, many companies professionals have are listening more to what depth information beyond what is extensive knowledge of provided on the label, being consumers are saying and beginning transparent about what is going into to integrate this increased and transaction experience a product is becoming essential for awareness and monitoring in the Consumer Products many food and beverage brands. of expression into their core and Retail space. marketing processes. In the news October 31, 20186 – In October, PepsiCo, Inc. (NASDAQ: PEP) (Pepsi) purchased Health Warrior, Inc. (Health Warrior) for Contacts an undisclosed amount. Health Warrior, a brand of plant-based protein-dense bars, mixes, and snacks will be the first brand to Lorin DeMordaunt be a part of Pepsi’s new innovation program labeled The Hive, Managing Director which was designed to focus on small, emerging brands. Management of The Hive plans to continue building the Health Warrior brand at [email protected] a deliberate and sustainable pace, looking to leverage its entrepreneurial +1 (704) 333-0591 expertise and talents to benefit the broader portfolio. Matt Preece Managing Director November 29, 20187 – The Kraft Heinz Company (NASDAQ: KHC) (Kraft Heinz) announced the acquisition of Primal Nutrition, LLC [email protected] (Primal Nutrition) for approximately $200 million. The young, +1 (704) 731-7186 better-for-you brand that focuses on condiments, sauces, and dressings is expected to generate approximately $50 million in net sales this year, Garett Poston representing a four times forward looking revenue multiple which Kraft Heinz paid for the business. Primal Nutrition will join Kraft Heinz under Managing Director Springboard, Kraft Heinz’s platform which they created to partner with [email protected] founders and brands to disrupt the food industry. +1 (213) 593-4544 www.investmentbanking.deloitte.com | Page 2 Quarterly update | Q4 2018 | Consumer Products and Retail MacroeconomicMacroeconomic andand ConsumerConsumer ProductsProducts andand RetailRetail Sectorsector Outlookoutlook US gross domestic product1 US Treasury yield curve2 $20.0 5.0% 3.5% (nominal vs. real) 3.0% 4.0% $15.0 2.5% 3.0% 2.0% ate $10.0 r 1.5% 2.0% Interest $ in trillions $ in 1.0% $5.0 1.0% YoY percent change percent YoY 0.5% $0.0 0.0% 0.0% GDP ($ in trillions) YoY % growth (Adj. for inflation) Real yield (%) Nominal yield (%) US unemployment rate3 ISM non-manufacturing index and consumer confidence index4 10.0% 600 64.0 145.0 9.0% 550 62.0 135.0 500 8.0% 60.0 125.0 450 58.0 115.0 7.0% 400 56.0 105.0 housands) onfidence t nemployed 6.0% c ( u 350 anufacturing 54.0 95.0 m % 5.0% laims 300 c 52.0 85.0 Non- 4.0% 250 50.0 75.0 Consumer ISM Jobless 3.0% 200 48.0 65.0 Initial jobless claims Unemployment rate (%) ISM Non-manufacturing Consumer confidence US per capita disposable income5 Monthly total US retail sales6 $50.0 $48.5 $420.0 $48.0 $410.0 $46.0 $400.0 $43.8 $44.0 $390.0 $380.0 housands $42.0 t illions in $370.0 $40.0 b $ in $360.0 $38.0 $ $350.0 $36.0 $340.0 $34.0 $330.0 $32.0 $320.0 www.investmentbanking.deloitte.com | Page 3 Quarterly update | Q4 2018 | Consumer Products and Retail Consumer Products and Retail sector breakdown and trading statistics1 Last twelve months NTM Median Median LTM Median Median Number of % of 52 EV/ EV/ EV/ Sector revenue CAGR EBITDA EBITDA enterprise companies Week high Revenue EBITDA EBITDA (3 Yr) ($M) margin value ($M) Beauty & cosmetics 12 82.6 % 2.9 % $836.8 14.9 % $8,782.8 1.6 x 12.3 x 11.2 x Food & beverage 10 90.6 (1.1) 2,547.9 19.4 31,570.9 2.5 13.7 12.2 Home & garden 10 76.0 3.7 739.2 15.7 8,118.9 1.9 11.0 11.8 Restaurant & food services 18 82.1 3.7 374.4 12.4 4,450.0 1.6 12.4 10.6 Apparel & specialty retail 10 67.6 4.6 414.2 13.6 4,790.5 1.2 9.1 8.2 Consumer products index 60 79.2 % 3.2 % $557.6 14.5 % $6,928.4 1.8 x 11.7 x 10.5 x Public comparables three-year stock market performance2 S&P 500 index 19.22% NASDAQ Composite index 28.68% Consumer index* 10.48% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% (10.0%) (20.0%) S&P 500 index NASDAQ Composite index Consumer index *Consumer Index companies listed on pages 6 and 7 in the Appendix. www.investmentbanking.deloitte.com | Page 4 Quarterly update | Q4 2018 | Consumer Products and Retail Select recent Consumer Products and Retail M&A transactions1 Enterprise EV/ Announce date Target/acquiror Target Business Description value EBITDA (EV) Hat World, Inc. owns and operates a chain of retail Hat World, Inc. and Certain assets of GCO Canada and Flagg Bros. Pending stores for sports hats, apparels, and accessories in the $100.0 N/A Ames Watson Capital LLC United States and Canada. The Schwan Food Company, Inc. The Schwan Food Company, Inc., through its Pending 2,300.0 N/A CJ Foods America Corp. subsidiaries, produces and sells frozen food products. Bojangles', Inc. Bojangles', Inc. develops, operates, and franchises Pending The Jordan Company; Durational Capital Management; The Resolute 756.1 11.1 limited service restaurants in the United States. Fund IV. TOYS''R''US, SARL TOYS''R''US, SARL owns and operates 30 stores across Pending 186.1 N/A Cyrus Capital Partners, L.P. France and sells toys and games for children. JACK WOLFSKIN Ausrüstung für Draussen GmbH & Co. JACK WOLFSKIN Ausrüstung für Draussen GmbH & Co. KGaA Jan-19 KGaA manufactures functional outdoor clothing, 473.3 11.9 Callaway Golf Company footwear, and equipment. Primal Nutrition, LLC Primal Nutrition, LLC manufactures and markets food Jan-19 200.0 N/A The Kraft Heinz Company seasonings, such as condiments, sauces, and dressings. Diageo plc produces, markets, and sells acoholic Nineteen brands of Diageo plc beverages worldwide. Diageo divested 19 brands Dec-18 550.0 N/A Sazerac Company, Inc. including Seagram’s VO, Seagram’s 83, Myers’s, Parrot Bay, Romana Sambuca, and Goldschlager. Jostens, Inc. Jostens, Inc. provides products, programs, and services Dec-18 1,300.0 N/A Platinum Equity, LLC for high schools and universities. SlimFast/Health and Nutrition Systems SlimFast and Health and Nutrition Systems offer weight Nov-18 350.0 N/A Glanbia plc management, and health and wellness products. Health Warrior, Inc. Health Warrior, Inc. produces and markets chia bar Oct-18 N/A N/A PepsiCo, Inc. snacks and seeds. Annual Consumer Products and Retail M&A transaction volume2 3,500 3,213 3,199 3,041 2,874 3,000 2,772 2,603 2,479 2,500 2,369 2,212 eals d 1,983 2,000 1,500 Number of Number 1,000 500 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Undisclosed <$100M $100-$250M $250M-$500M $500M-$1,000M >$1,000M www.investmentbanking.deloitte.com | Page 5 Quarterly update | Q4 2018 | Consumer Products and Retail Appendix Consumer Products and Retail trading multiples1 Historical Last twelve months NTM % of 52 Revenue LTM EBITDA Enterprise EV/ EV/ EV/ Company (ticker) Week high LTM revenue CAGR (3 Yr) EBITDA margin value (EV) Revenue EBITDA EBITDA ($ in millions) Beauty & cosmetics (12) Avon Products, Inc.