FOOD AND BEVERAGE INDUSTRY UPDATE │ JANUARY 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 │ JANUARY 2017 WHAT WE’RE SEEING CONTENTS MARKET UPDATE . INDUSTRY VITAL SIGNS . EQUITY MARKET OVERVIEW . M&A MARKET OVERVIEW 2016 was a record year for food and beverage M&A activity and that level of . DEBT MARKET OVERVIEW . RECENT M&A ACTIVITY activity is continuing with a robust start to 2017 across several food and beverage . EARNINGS CALENDAR verticals. Recent transactions of note have included the sale of Rita’s Italian Ice, a GROUP OVERVIEW Harris Williams & Co. is a leading water-ice and custard chain, to an investor group comprised of Argosy Private advisor to the food and beverage market. Our significant Equity and MTN Capital as well as the sale of TIC Gums, a producer of food experience covers a broad range of end markets, industries, and business models. This particular texturizers, to Ingredion as it seeks to expand its higher-value specialty portfolio. 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 │ JANUARY 2017 WHAT WE’RE READING THESE FOODS AREN’T GENETICALLY MODIFIED BUT THEY ARE “EDITED” Created with tools that snip – rather than add – DNA at precise locations, “gene-edited” crops differ from their “genetically modified” counterparts. In fact, they largely fall outside of current regulations, including labeling practices, altogether. Regulators and consumers alike are beginning to question whether technical intricacies are stymieing the more practical objectives of regulations. Access the full article here. WHY GOING ORGANIC JUST GOT EASIER FOR FARMERS With the rising popularity of organic animal-feed applying pressure to domestic supply, the Organic Trade Association and the USDA are rolling out a new, transitional certification. Their goal is to lower the hurdle for farmers seeking to take the leap into organic farming practices. Access the full article here. SOY, ALMOND, COCONUT: IF IT'S NOT FROM A COW, CAN YOU LEGALLY CALL IT MILK? Soy, almond, rice, hemp, pistachio, macadamia, and sunflower – just a sampling of the types of “milk” consumers are likely to see in the dairy cases of their local grocery stores. Now, the National Milk Producers Federation, which represents dairy farmers nationwide, is fighting back, calling on the FDA to limit plant-based drinks’ ability to market themselves as “milk.” 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 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 (59.5%) Corn Soybeans Wheat Crude Oil PROTEIN PRICE INDICES2,3 140 130 Beef: 120 14.0% 110 Pork 4.7% ProteinPriceIndex 100 Poultry: 90 2.2% Nov-12 May-13 Nov-13 May-14 Nov-14 May-15 Nov-15 May-16 Nov-16 Beef Pork Poultry PAGE | 2 FOOD AND BEVERAGE INDUSTRY UPDATE │ JANUARY 2017 VITAL SIGNS RESTAURANT AND GROCERY STORE SALES INDICES4 140 Restaurant: 25.6% 120 Grocery: 100 12.5% SalesIndex 80 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Restaurant Grocery CONSUMER FOOD PRICE INDEX INFLATION2 4.0 3.0 2.0 Inflation(%) 1.0 0.0 Nov-12 May-13 Nov-13 May-14 Nov-14 May-15 Nov-15 May-16 Nov-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 (2.4%) 17.3% 4.0% 28.7% 11.9x 13.3x 7.9x 2.9x Fruit and Vegetable 2.4% 32.1% 9.5% (0.6%) 15.9x 21.7x 9.9x 0.4x Ingredients / Flavors (6.2%) (0.2%) (13.7%) (6.6%) 19.9x 23.8x 14.6x 1.3x Inputs Agribusiness 5.7% 27.1% 7.3% 21.1% 17.3x 16.7x 10.3x 2.1x Branded Processed Foods (1.7%) 8.0% (10.2%) (7.6%) 20.5x 26.1x 13.5x 2.3x Private Label Foods and Beverages (19.1%) 5.5% (9.5%) 1.9% 25.6x 24.8x 10.4x 3.3x Natural / Organic Foods / BFY 6.4% 17.9% 2.0% (2.6%) 18.8x 32.5x 17.1x 3.5x Baked Goods 3.9% (4.5%) 6.9% (23.5%) 20.7x 30.3x 9.5x 2.1x Dairy 0.1% 14.1% 0.8% 8.4% 19.9x 24.8x 13.7x 1.7x Non-Alcoholic Beverages (2.1%) 1.8% (9.7%) (5.4%) 20.8x 23.3x 12.5x 1.8x Alcoholic Beverages (4.4%) 1.7% (12.9%) (11.3%) 20.2x 25.0x 13.5x 2.6x Food and BeverageFood and Snacks 6.4% 14.0% 0.5% 4.3% 23.0x 24.0x 15.0x 1.7x Grocery Distribution 15.8% 20.4% 18.8% 27.9% 17.4x 22.3x 9.3x 2.0x Food Retail 4.3% (5.9%) 2.6% (9.1%) 18.2x 19.7x 7.4x 2.1x Foodservice 24.9% 37.0% 16.6% 20.7% 21.4x 30.4x 12.2x 4.7x Quick Service Restaurant 12.4% 17.2% 5.4% (2.4%) 22.7x 21.8x 11.8x 2.8x Fast Casual 5.1% (2.6%) 2.3% (2.7%) 44.4x 35.7x 12.5x 1.3x Differentiated Casual 12.5% (6.4%) 1.4% (14.7%) 23.3x 27.8x 9.8x 0.9x Casual Dining Restaurant 2.9% (1.7%) 7.3% (0.7%) 14.9x 21.7x 7.9x 2.5x Fine Dining 28.0% 12.5% 19.5% 5.3% 17.0x 19.5x 9.8x 2.6x Consumer and Retail and Consumer Pizza 9.2% 55.1% 3.6% 19.2% 32.7x 34.7x 18.1x 4.0x Beverage / Snack Retail (4.7%) (11.3%) 0.5% (4.1%) 22.6x 30.6x 16.0x 2.7x Family Restaurant 19.7% 29.9% 4.4% 7.2% 20.2x 44.1x 10.8x 2.2x Overall Median 3.1% 9.2% (0.4%) (1.6%) 20.5x 24.9x 11.3x 2.1x PAGE | 3 FOOD AND BEVERAGE INDUSTRY UPDATE │ JANUARY 2017 PUBLIC EQUITY MARKET OVERVIEW PUBLIC COMPANY SECTOR PERFORMANCE (ONE YEAR CHANGE IN STOCK PRICE)5 Pizza Foodserv ice Fruit and Vegetable Family Restaurant Agribusiness Grocery Distribution Natural / Organic / BFY S&P Protein Processing Quick Serv ice Restaurant Dairy Snacks Fine Dining Branded Processed Foods Priv ate Label Non-Alcoholic Bev erages Alcoholic Bev erages Ingredients / Flav ors Casual Dining Restaurant Fast Casual Baked Goods Food Retail Differentiated Casual Bev erage / Snack Retail (30.0%) (15.0%) 0.0% 15.0% 30.0% 45.0% 60.0% 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 $13.5 Debt Repayment Working Capital PAGE | 4 FOOD AND BEVERAGE INDUSTRY UPDATE │ JANUARY 2017 PUBLIC COMPARABLES5 Price at As a % of Market Enterprise LTM Revenue Growth LTM Margins P/E EV / LTM EV / 2016E ($ in millions, except per share data) Ticker 1/12/17 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 $31.56 63.5% $25,772 $26,153 $19,015 $2,171 (3.8%) (2.9%) 8.0% 11.4% 26.1x 1.38x 12.0x 1.54x 13.1x B&G Foods, Inc.