U.S. Alcoholic Beverage M&A and Market Performance in 1Q 2016

VALUE FOCUS
Food & Beverage
www.mercercapital.com
Executive Summary: Alcoholic Beverages
The alcoholic beverage landscape continues to grow worldwide and especially in the U.S. market.
Within the beer segment, super premium beers have shown the strongest growth among pro-
ducers and consumers, while sub-premium has declined. Since 2008, upstart craft breweries
have increased 127% through 2014, while large breweries are merging and consolidating. Each
trend is placing pressure on the supply of feed commodities which is a significant concern in
the industry. Within the wine segment, the U.S. continues to lead the world in consumption. To
quench the thirst, approximately 525 wineries began operations in the United States during 2014
alone. Following a similar form to beer, the spirits segment is consolidating into fewer, but larger,
international conglomerates.
First Quarter 2016
M&A Overview
Alcoholic
Beverage Segment 1
Segment Public Company
Performance Overview 5
Beer
United States 6
Current Litigation 10
Worldwide 11
Spirits
United States 16
Worldwide 17
Wine
United States 19
Current Litigation 22
Worldwide 23
Public Company
Information
Food Processors 24
Restaurants 25
Non-Alcoholic
Beverages 26
Alcoholic Beverages 27
About Mercer Capital 28

© 2016 Mercer Capital // www.mercercapital.com 1
Mercer Capital’s Value Focus: Food Beverage Industry First Quarter 2016
According to Capital IQ, the brewery segment of the alcoholic beverage industry had 57 closed transactions during
2015. Of the transaction values available, the largest transaction was Kirin Holdings’ acquisition of Myanmar
Brewery Ltd, valued at $554 million, with a revenue multiple of 4.86x, and an EBITDA multiple of 13.71x.
The table on page 2 displays closed transactions in which the acquirer was a major market player, save for the inclusion
of Dogfish Head Craft Brewery, added due to its craft brewery status. On September 29, 2015, LNK Partners, a New
York-based private equity firm, bought a 15% stake of Dogfish Head, the 13th largest craft brewery in the U.S.
Although financial information for the transaction was not disclosed, LNK states that it typically invests between $50
million and $150 million. LNK will hold a seat on Dogfish Head’s board of directors. Dogfish Head’s goal is to use
LNK’s investment to fuel enough growth so that it can repurchase LNK’s 15% stake and keep the brewery family
controlled.
2015 also saw 23 brewery transactions announced (table on page 3). One notable transaction, announced September
17, 2015, is Anheuser-Busch InBev’s (ABInBev) planned acquisition of SABMiller PLC. As ABInBev remains the
largest brewer and beer distributor not only in the United States, but also in the global market, the company’s potential
acquisition of SABMiller PLC, the second largest brewer in the global market, poses a threat to the craft brewery
segment of the industry. The Brewers Association notes that the transaction would make the market much less
accessible for small brewers, who are becoming an increasingly profitable segment to the industry. According to
Bob Pease, the CEO of the Brewers Association, the transaction would increase both ABInBev’s international
footprint and scale, “Giving the company greater influence over commodities used in brewing and many other facets
of the beer industry that could affect competition in the U.S. market.”
MA
Overview
Alcoholic Beverage
Segment

MA
Overview
Alcoholic Beverage
Segment
(continued)
Brewer Transactions Closed
Acquirer Target Date
Trans.
Value
($mm)
EV /
Revenue
EV /
EBITDA
Heineken NV Namibia Breweries Ltd 12/1/15 na na na
Heineken NV DHN Drinks Limited 12/1/15 na na na
Grupo Modelo
Cerveceria Tijuana and Cerveceria
Mexicana
11/10/15 na na na
Heineken NV Lagunitas Brewing Company 10/15/15 na na na
Heineken NV Pivovarna Lasko DD 10/15/15 340.64 1.94x 9.51x
Heneken NV
49.99% Stake in GAPL Pte Ltd
and 57.87% stake in Desnoes
Geddes Ltd
10/7/15 na na na
LNK Partners
15.0% Stake in Dogfish Head Craft
Brewery, Inc.
9/29/15 na na na
Kirin Holdings Ltd Myanmar Brewery Ltd 8/19/15 553.89 4.86x 13.71x
Brown-Forman Corporation Slane Castle Irish Whiskey Ltd 6/2/15 na na na
Ambev SA
Beertech Bebidas e Comestiveis
Ltda.
5/31/15 na na na
Anheuser-Busch InBev SA Bogota Beer Company SAS 5/1/15 na na na
Anheuser-Busch InBev SA Elsyian Brewing Company Inc. 4/13/15 na na na
Molson Coors Brewing Company Thomas Hardy Burtonwood Ltd 3/25/15 na na na
Anheuser-Busch InBev SA InBev India International Ltd 2/26/15 na na na
Source: SP Capital IQ

Brewer Transactions Announced
MA
Overview
Alcoholic Beverage
Segment
(continued)
Trans.
Value
($mm)
EV /
Revenue
EV /
EBITDA
Constellation Brands, Inc Home Brew Mart, Inc 11/16/15 1,021.32 9.95x 32.08x
Molson Coors Brewing Company MillerCoors LLC 11/11/15 12,019.10 2.67x 12.41x
Anheuser-Busch InBev SA SABMiller PLC 9/17/15 116,285.61 7.44x 20.27x

The following tables display closed transactions in the distiller and vintner segments of the market during 2015. There
were 46 distiller transactions and 74 vintner transactions. One distiller transaction included Diageo PLC, which holds
30.8% of the U.S. market share. Diageo PLC is also a top global market player in the brewer segment of the industry.
One top market player in the vintner segment, EJ Gallo Winery, Inc., had two transactions during 2015, though
financial information for the transactions was not available.
Distiller Transactions Closed
Vintner Transactions Closed
Trans.
Value
($mm)
EV /
Revenue
EV /
EBITDA
Diageo PLC Brandhouse Beverages Ltd 12/1/15 na na na
Tequila Cuervo La Rojena, SA
The Old Bushmills Distillery Co.
Limited
2/27/15 703.67 na 7.25x
Trans.
Value
($mm)
EV /
Revenue
EV /
EBITDA
Accolade Wines Australia Limited Agricola y Forestal Arco Iris SA 9/14/15 24.99 na na
EJ Gallo Winery, Inc. Asti Winery 7/31/15 na na na
Union INVIVO Cordier Mestrezat Grands Crus SA 6/5/15 34.48 0.994x na
Macro-Link International Land
Limited
New Silkroad Culturaltainment
Limited
5/19/15 87.74 3.52x na
EJ Gallo Winery, Inc. J Vineyards Winery LLC 3/31/15 na na na
MA
Overview
Alcoholic Beverage
Segment
(continued)

Both year-over-year and Q4 2015 performance were generally positive for U.S. publicly traded alcoholic beverage
companies. The top year-over-year performer was Constellation Brands, rising 46.0%. In the fourth quarter of
2015, Anheuser-Busch InBev had the largest improvement, rising 19.0%. Despite success in overall craft beer
sales, one member of the craft beer segment of the market—Boston Beer Company—fell approximately 30.0%
since year-end 2014 and approximately 4.0% since the fourth quarter of 2014. Diageo PLC, the top market share
holder of the global distiller segment, declined by a slight 1.5% between year-end 2014 and year-end 2015, though
rose 1.2% in Q4 2015. Molson Coors improved 13.6% quarter over quarter; Altria Group and Brown-Forman
improved 8.0% and 2.8%, respectively. Despite significant year-over-year success, Constellation Brands increased
a mere 0.9% quarter-over-quarter.
Segment Public
Company
Performance
Overview
-100%
0%
100%
200%
300%
400%
500%
600%
700%
1/4/12
3/4/12
5/4/12
7/4/12
9/4/12
11/4/12
1/4/13
3/4/13
5/4/13
7/4/13
9/4/13
11/4/13
1/4/14
3/4/14
5/4/14
7/4/14
9/4/14
11/4/14
1/4/15
3/4/15
5/4/15
7/4/15
9/4/15
11/4/15
Constellation Brands, Inc. Brown-Forman B Molson Coors-B Diageo PLC
Anheuser-Busch InBev Altria Group Inc Craft Brew Allia Boston Beer-A
Source: Bloomberg
4-Year Change in Stock Prices for Publicly Traded Alcoholic Beverage Companies

Since 2010, industry revenue has risen consistently; beer production, on the other hand, has fluctuated. Year-to-date
production as of November 2015 was 2 million barrels less than YTD November 2014, suggesting that overall 2015
production will be on par with 2013 levels. While premium beer (commonly sold “flagship” brands) is the largest con-
tributor to brewery revenue; craft beer, a fast-developing segment, has significantly driven the estimated 5.8% annual
growth rate over the past five years. At the end of the second quarter of 2015, craft brewers sold 12.2 million
barrels, up from the 10.6 million barrels sold during the first half of 2014. Furthermore, according to the Brewers
Association, 42 of the top 50 overall U.S. brewing companies in 2014 (based on sales volume) were craft breweries.
Premium beer consists of the largest, most widely available, and most frequently sold “flagship” brands in the
beer industry. Examples include Budweiser (Anheuser-Busch), Coors (Coors Brewing Company), and Miller High
Life (Miller Brewing Company). The “light” varieties of these beers (i.e. Bud Light) are also included in this category.
Sub-premium beers are also widely available, but are known primarily by their affordability. This category of beer
is typically the cheaper brews offered by major brewers, and is sold in bulk packaging. Natural Light, Busch Light,
and Keystone Light are a few of the brands in the sub-premium beer category. Brewers are able to charge lower
prices for these brands because they do not devote much advertising to the brands. The brewers’ incentive to sell
sub-premium beer is to diversity product offerings. Super-premium beers are marketed as the brewers’ most esteemed
brand offerings, sometimes with altered flavorings to distinguish them from the rest of the brewers’ products. Super-
premium brands include Michelob Ultra and Budweiser American Ale.
Beer
United States
15600
15700
15800
15900
16000
16100
16200
16300
16400
LTM
2010
LTM
2011
LTM
2012
LTM
2013
LTM
2014
LTM
2015
Thousands
Source: Alcohol and Tobacco Tax and Trade Bureau
0.00
5,000.00
10,000.00
15,000.00
20,000.00
25,000.00
30,000.00
35,000.00
40,000.00
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016*
$millions
Source: IBISWorld | * estimate
Average Monthly U.S. Beer Production U.S. Breweries Revenue

42.1%
16.9%
15.0%
14.0%
6.4%
5.6% Premium beer
Sub-premium beer
Craft beer
Super-premium beer
Progressive Adult
Beverages
Malt Liquior
Source: IBISWorld
Brewery Revenue Segments (2016*)
2015 Brewery Highlights
There were a total of 4,144 breweries,
breaking the previous record from
1873.
Brewery openings exceeded 2 per day.
15 states are now home to more than
100 breweries.
IPA was the top style sold by inde-
pendent craft brewers, growing faster
than the overall craft category.
Craft beer, now one of the fastest growing alcoholic beverage segments in the U.S., has been defined by the
Brewers Association according to the size of the brewery and the methods in which these breweries make beer. A
craft brewer generally sells less than 6 million barrels per year, and is at least 75.0% independently owned. Craft beer
should be made with high quality hops, barley, water, and other additives, though craft beers do not have strict quality
standards. Nevertheless, the Brewers Association’s goal is for industry operators to produce superior beer.
Progressive adult beverages are defined as products manufactured by industry brewers that do not follow the general
process associated with brewing beer. Boston Beer Company’s Twisted Tea and Mike Hard’s Lemonade are two
such brands in this category. Hard cider is not considered a progressive adult beverage. Malt liquor is a beer product
that has an alcohol content exceeding its jurisdiction’s local limit on which products are legally considered “beer.” The
typical alcohol by volume (ABV) limit is 5.9%, though this varies by state. Much of malt liquor’s increasing share
of industry revenue is due to iffy classification: some local laws have rashly classified many craft brewers’ stronger
products as legally being malt liquor. The Brewers Association has been in the process of lobbying state governments
to make distinct laws and/or exceptions for craft brewers whose beers are categorized as malt liquor. The Brewers
Beer
United States
(continued)

Top 10 U.S. Overall Brewing Companies* (2014) Top 10 U.S. Craft Brewing Companies* (2014)
Association also wants there to be a distinction between traditional malt liquors (such as Olde English 800), extra-
strength beers (Volt 45), and stouts/porters from craft breweries.
Although the domestic beer industry is generally a net importer, foreign demand for craft beer has risen as U.S.
microbreweries have gained a better reputation internationally. While Canada accounted for 53.0% of U.S. exports,
Brazil was the fastest-growing export market, exhibiting growth of 63.9%. The largest craft brewery is Boston
Beer Company, which is expected to have a market share of 3.6% in 2016. By the end of 2017, however, Boston
Beer Co. is projected to size out of “craft brewer” status. By the end of 2016, industry revenue is projected to reach a
total of $37.8 billion.
Beer
United States
(continued)
Brewing Company Location
Anheuser-Busch, Inc St. Louis, MO
Miller Coors Chicago, IL
Pabst Brewing Co Los Angeles, CA
D.G. Yuengling and Son, Inc Pottsville, PA
Boston Beer Co Boston, MA
North American Breweries Rochester, NY
Sierra Nevada Brewing Co Chico, CA
New Belgium Brewing Co Fort Collins, CO
Craft Brew Alliance Portland, OR
Gambrinus Shiner, TX
*based on 2014 beer sales volume
Source: Brewers Association (BA)
Brewing Company Location
D.G. Yuengling and Son, Inc Pottsville, PA
Boston Beer Co Boston, MA
Sierra Nevada Brewing Co Chico, CA
New Belgium Brewing Co Fort Collins, CO
Gambrinus Shiner, TX
Lagunitas Brewing Co Petaluma, CA
Deschutes Brewery Bend, OR
Bell's Brewery, Inc Comstock, MI
Stone Brewing Co Escondido, CA
Minhas Craft Brewery Monroe, WI
*based on 2014 beer sales volume
Source: Brewers Association (BA)

Despite craft beer’s growing contribution to the brewery industry, Anheuser-Busch InBev—a single brewer—held a
45% share in the U.S. market in 2015 while the entire craft segment held an 11% share. Imported beer held a 29%
market share. In 2014, Mexican beer sold solely in grocery stores equaled all of the craft beer sold from both grocery
and convenience stores. Craft breweries lack access to the mass production techniques of traditional breweries, as
well as the power to negotiate with large supply contracts. Craft breweries thus have to charge higher prices to pay
for their inputs. In spite of the recent consumer preference shift towards craft beer, overall demand for the brewery
industry is projected to plateau over the next five years as an increasing number of microbreweries enter the
market, and as consumers’ preferences widen to demand substitutes, such as wine and spirits.
Beer
United States
(continued)

Congress currently has two bills in motion to revamp the federal excise tax, the most expensive ingredient in beer.
The Craft Beverage Modernization and Tax Reform Act (also referred to as the “Small Brewer Reinvestment and
Expanding Workforce Act,” or “Small BREW Act”), originally introduced in 2013, proposes to do the following:
»» Reduce the federal excise tax to $3.50 per barrel on the first 60,000 barrels for domestic brewers producing
less than 2 million barrels per year
»» Reduce the federal excise tax to $16.00 per barrel on the first 6 million barrels for all other brewers and beer
importers
»» Keep the current excise tax at $18.00 per barrel for barrelage over 6 million
»» Simplify label approvals and repeal unnecessary restrictions on inventory
On February 23, 2016, a “sister act” was introduced. The Fair Brewers Excise and Economic Relief Act of 2015
(referred to as the “Fair BEER Act”) proposes the following:
»» No federal excise tax on the first 7,143 barrels produced
»» A federal excise tax of $3.50 per barrel on the production of 7,144 through 60,000 barrels
»» A federal excise tax of $16.00 per barrel on the production of 60,001 through 2 million barrels
»» An $18.00 per barrel excise tax on the production of over 2 million barrels
The current law in place defines small brewers as producing up to 2 million barrels. They are taxed $7.00 per barrel
on the first 60,000 barrels and $18.00 on every barrel after that. For brewers who supply greater than 2 million barrels
every year, the federal excise tax is $18.00 per barrel. According to the Beer Institute, more than 90% of brewers
produce 7,143 barrels or less. The Small BREW Act would reduce excise taxes from $7.00 per barrel to $3.50 per
barrel for these small brewers. The Fair BEER Act would eliminate these small brewers from paying any excise tax.
Beer
Current Litigation

According to a Kirin Beer University report, global beer production fell in 2014 for the first time in 30 years. 191
million kiloliters were produced in 2014, a 0.5% decline since 2013. Asia remained the top producing region for the
sixth year in a row, with a global market share of 33.9% in 2014. Africa, ranked fifth in regional beer production, saw
another year of growth, marking 14 consecutive years. China was the top beer producing country in 2014, holding
the spot now for 13 years, despite a year-over-year decline in production of 3.1% due to poor weather conditions in
the summer, the highest beer consuming season. In the United States, beer production rose 0.2% in 2014, ranking it
second, and Brazil’s production grew 5.0%, ranking it third. The increase in the U.S. can be attributed to craft beer’s
growing popularity with the younger U.S. generation and subsequent increasing market share (in 2014, the craft beer
segment had a market share of 11.0%). Brazil’s production increase was the result of hosting the World Cup soccer
tournament. China held 23.5% of the global market share in 2014; the U.S. held 11.8% and Brazil held 7.4%. Also
notable was that for the first time in 14 years, Russia (number 6) ranked lower than Mexico (number 5). Russia’s 8.2%
decline in 2014 production was due to a weakened economy and increased taxes, while Mexico’s production levels
remained unchanged.
Beer
Worldwide Production
Asia
33.9%
Europe
27.0%
South
America
17.2%
North
America
12.8%
Africa
7.3%
Oceania
1.1%
Middle East
0.7%
Source: Kirin Beer
University
Global Beer Production by Region in 2014

Global beer consumption, on the other hand, rose
0.4% to 189.06 million kiloliters in 2014, continuing the
29-year trend of growth. The Kirin Beer University
report notes that this consumption level equates
to filling up the Tokyo Dome approximately 152
times. In addition to producing the most beer, Asia
remained the top consuming region in 2014 for the
seventh year in a row, despite a 1.3% consumption
decline in the region. In 2014, Asia still held a
34.0% share of the global beer market. Likewise,
China marked its twelfth year as the largest beer-
consuming country, holding a market share of 23.7%.
The United States and Brazil consumed 0.5% and
5.0% more beer in 2014, respectively, ranking two
and three. The determinants of consumption levels
around the world exactly mirrored the determinants
of production: poor summer weather in China; the
rising popularity of craft beer in the United States;
and the World Cup soccer tournament in Brazil.
Beer
Worldwide Consumption
Asia
34.0%
Europe
27.0%
South
America
16.6%
North
America
13.9%
Africa
6.8%
Oceania
1.1%
Middle East
0.6%
Source: Kirin Beer
University
Global Beer Consumption by Region in 2014
Photo Credit: Tokyo Dome Corporation

Global Beer Production and Consumption by Country in 2014 (Top 25 Countries)
Production Consumption
Rank* Country
Volume
(thousand
kiloliters)
Growth
Rate
(2013-
2014)
Global
Market
Share
(%)
Volume
(thousand
kiloliters)
Growth
Rate
(2013-
2014)
Global
Market
Share
(%)
Net Supply /
(Demand)
(thousand
kiloliters)
1 / 1 China 44,933 -3.1% 23.50% 44,853 -3.1% 24.6% 80
2 / 2 United States 22,547 0.2% 11.80% 24,172 0.5% 12.8% (1,625)
3 / 3 Brazil 14,147 5.0% 7.40% 13,146 5.0% 6.6% 1,001
4 / 5 Germany 9,560 1.3% 5.00% 8,441 0.1% 4.5% 1,119
5 / 6 Mexico 8,200 0.0% 4.30% 6,908 2.5% 3.6% 1,292
6 / 4 Russia 7,636 -8.2% 4.00% 10,012 -0.5% 5.3% (2,376)
7 / 7 Japan 5,469 -1.1% 2.90% 5,407 -1.5% 2.9% 62
8 / 8 United Kingdom 4,120 -1.8% 2.20% 4,375 3.1% 2.3% (255)
9 / 9 Poland 3,987 0.8% 2.10% 3,776 1.1% 2.0% 211
10 / 11 Vietnam 3,890 9.0% 2.00% 3,640 6.4% 1.8% 250
11 / 10 Spain 3,354 2.6% 1.80% 3,729 3.4% 1.9% (376)
12 / 12 South Africa 3,150 0.0% 1.60% 3,150 0.0% 1.7% 0
13 / na Nigeria 2,700 1.9% 1.40% na na na nm
14 / 13 Ukraine 2,420 -10.7% 1.30% 2,420 -10.7% 1.4% 0
*Production rank is listed first. Consumption rank is listed second.
Source: Kirin Beer University Report
Beer
Worldwide

Global Beer Production by Country in 2014 (Top 25 Countries)
Production Consumption
Rank* Country
Volume
(thousand
kiloliters)
Growth
Rate
(2013-
2014)
Global
Market
Share
(%)
Volume
(thousand
kiloliters)
Growth
Rate
(2013-
2014)
Global
Market
Share
(%)
Net Supply /
(Demand)
(thousand
kiloliters)
15 / na Netherlands 2,370 0.3% 1.20% na na na nm
16 / 22 Thailand 2,235 -3.2% 1.20% 1,794 -2.4% 1.0% 441
17 / 15 South Korea 2,075 -1.4% 1.10% 2,292 11.7% 1.1% (217)
18 / 16 Venezuela 2,065 -7.9% 1.10% 2,173 2.0% 1.1% (108)
19 / 17 Colombia 2,020 -2.9% 1.10% 2,155 1.9% 1.1% (135)
20 / 14 India 2,000 0.5% 1.00% 2,350 6.4% 1.2% (350)
21 / 18 Canada 1,894 -1.2% 1.00% 2,026 -2.4% 1.1% (132)
22 / 19 France 1,875 1.4% 1.00% 1,924 2.8% 1.0% (49)
23 / 20 Czech Republic 1,851 -0.6% 1.00% 1,879 -1.6% 1.0% (28)
24 / na Belgium 1,821 0.4% 1.00% na na na nm
25 / 23 Australia 1,691 -2.6% 0.90% 1,753 0.5% 0.9% (62)
na / 21 Argentina na na na 1,826 -1.0% 1.0% nm
na / 24 Romania na na na 1,689 -3.5% 0.9% nm
na / 25 Italy na na na 1,678 0.2% 0.9% nm
*Production rank is listed first. Consumption rank is listed second.
Source: Kirin Beer University Report
Beer
Worldwide
(continued)

In addition to holding the largest share of the U.S. market, Anheuser-Busch InBev held an approximate 21% share of
the global market in 2014; Anheuser-Busch has been the top market player since 2008 (the earliest period shown in
the chart below), dominating the global beer market despite a declining market share between 2008 and 2012. SAB-
Miller PLC ranked second in 2014 with a 9.7% global share. Heineken NV was close behind, holding a share of 9.1%.
Beer Global Market Share (%)
Company 2014 2013 2012 2011 2010 2009 2008
% Change
2008-2014
Anheuser-Busch InBev NV 20.73 19.87 18.01 18.15 18.48 18.63 19.99 3.70
SABMiller PLC 9.71 9.58 9.61 9.73 9.18 8.83 9.10 6.65
Heineken NV 9.09 9.00 9.10 8.62 8.48 6.56 6.80 33.65
China Resources Enterprise Ltd 5.97 6.16 5.42 5.31 4.94 4.51 3.94 51.63
Carlsberg A/S 6.11 6.33 5.58 5.62 5.84 5.88 5.86 4.24
Tsingtao Brewery Co Ltd 4.74 4.42 4.03 3.71 3.37 3.18 2.90 63.28
Molson Coors Brewing Co 3.18 3.24 3.28 2.67 2.73 2.67 2.65 20.22
Beijing Yanjing Brewery-A 2.76 2.89 2.74 2.86 2.68 2.52 2.29 20.34
Kirin Holdings Co Ltd 2.26 2.39 2.53 2.58 1.76 1.86 1.37 65.35
Asahi Group Holdings Ltd 1.16 1.17 1.29 1.35 1.40 1.50 1.60 -27.81
Others 34.29 34.95 38.39 39.40 41.14 43.87 43.49 -21.16
Source: Bloomberg
Beer
Worldwide
(continued)

Since the recession, the distillery industry has performed well primarily due to the “premiumization trend” (the increase
in consumption of high-grade liquors/spirits) and the success of craft spirits. IBISWorld expects industry revenue to
have grown 7.8% annually between 2010 and 2015, reaching a 2015 revenue level of $11.7 billion. Other contributors
to increasing demand for spirits include the rising popularity of cocktails, which have become a symbol of class and
sophistication; higher per capita disposable income (and thus more discretionary spending on higher-priced spirits);
and the rising population of legal drinkers. Despite increasing revenue, higher input costs (specifically grains and
sugar) limited industry profit between 2010 and 2015.
The distillery industry is somewhat concentrated, with three companies accounting for approximately 59.0% of
domestic production. Diageo PLC holds a market share of 30.8%, Brown-Forman Corp. holds a market share
of 15.1%, and Suntory Beam Inc., 12.9%. Yet, craft spirits are increasingly becoming more competitive with these
traditional distillers. As of 2015, over 500 craft distillers were open, compared to a mere 60 in 2000, as craft spirits
have become trendy among the millennial generation. Popular craft spirits include bourbons, straight whiskeys, rye
whiskeys, and blended whiskeys—unsurprising since whiskey accounts for 32.5% of overall industry revenue.
Spirits
United States
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
LTM
2010
LTM
2011
LTM
2012
LTM
2013
LTM
2014
LTM
2015
Thousands
Source: TTB.gov
0.00
2,000.00
4,000.00
6,000.00
8,000.00
10,000.00
12,000.00
14,000.00
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015*
$millionsSource: IBISWorld | * estimate
Average Total Monthly U.S. Spirits Production
in Proof Gallons
U.S. Distilleries Revenue

Asia-Pacific has dominated the global spirit market due to rising consumption in China and India. In 2013, China
consumed 1.2 trillion 9-liter cases of spirits, solidifying itself as the top spirit-consuming country. India followed second,
consuming 310 million 9-liter cases. Russia and the U.S. were the third and fourth countries in spirit consumption. The
global recession hindered the global spirit market, but since 2013, the industry has seen growth due to heightened
demand from Brazil, Russia, India, and China. Rising disposable incomes and growth in younger populations are
expected to contribute future boosts to the spirit market. In 2014, global spirit volume increased 1.7%, primarily
driven by whiskies and baijiu (a Chinese white spirit). Each year into 2018, the global spirits market volume and value
is projected to increase by 1.5% and 3.16%, respectively. Vodka and whiskey are expected to be the largest drivers,
increasing by 0.08% CAGR and by 17.1% CAGR, respectively, through 2018.
Spirits
Worldwide
32.5%
25.0%
10.6%
10.3%
9.1%
8.8%
3.7%
Whiskey
Vodka
Cordials
Rum
Tequila
Other Spirit
Gin
Distillery Revenue Segments (2015*)

In the global market, Diageo PLC held the largest share at 9.3%. It surpassed UB Group in 2012 to become the
leading market player. The UB Group held 4.6% of the market in 2014, following the second-ranked Pernod-Ricard
SA with a market share of 4.5%.
Spirits Global Market Share (%)
Company 2014 2013 2012 2011 2010 2009 2008
% Change
2008-2014
Diageo PLC 9.27 4.86 4.86 4.58 4.38 4.38 4.41 110.14
UB Group 4.60 4.30 4.60 4.68 4.51 4.10 3.60 27.83
Pernod-Ricard SA 4.49 4.41 4.39 4.41 4.43 4.32 4.47 0.40
Hite Jinro Co Ltd 2.82 na na na na na na nm
Thai Beverage PCL 2.78 2.76 2.66 2.56 2.52 2.43 2.23 24.56
Bacardi Corp 1.51 1.55 1.55 1.60 1.62 1.64 1.65 -8.37
Alliance Global Market Group Inc 1.43 1.39 1.55 1.13 0.68 0.50 0.54 166.54
Beam Inc 1.42 1.37 1.42 1.30 na na na nm
Russian Standard Corp 1.16 1.25 0.09 0.08 0.07 0.07 0.06 1687.23
Lotte Chillsung Beverage Co Ltd 1.13 1.10 1.13 1.20 1.18 1.15 na nm
Others 69.39 77.02 77.75 78.48 80.60 81.41 83.04 -16.43
Source: Bloomberg
Spirits
Worldwide
(continued)

The wine industry has seen a growing number of consumers, particularly millennials who have shifted their prefer-
ences to domestic wine versus premium beer. The main driver behind this shift is consumers’ rising emphasis on
health. Over the past ten years, medical studies have shown that moderate consumption of wine and spirits can lead
to overall heart health. Wine also provides a lower-calorie option compared to beer. Wine consumption rose to 2.8
gallons for 2014, continuing the decade-long increase in consumption. This has been encouraging new wineries to
enter the industry at a projected annual rate of 6.3% between 2010 and 2015. In 2015 alone, rising wine consumption
is predicted to increase revenue by 4.2% to reach $18.7 billion. Yet, the U.S. consumes less wine than France and
Italy, which, in addition to being major consumers, are major exporters of wine to the U.S. market.
The U.S. is a net importer of wine, although large companies such as EJ Gallo Winery and Constellation Brands
are involved in a lot of international trade. Imports are expected to grow as countries with suffering economies look
to export their products to our strong economy. U.S. wine exports have doubled in the last ten years, with the
majority of exports going to the Canadian market (34.0%), the result of our improved international reputation in the
wine industry. 90% of U.S. wine is produced in California, the 4th leading wine producer behind Italy, Spain, and
France. California vineyards have become globally renowned due to the state’s diverse range of grapes. Northern
San Francisco has 400 of the industry’s wineries. A potential threat to every wine producer is climate change (such
as soil erosion, drought, and wildfires), which affects production and costs. Because California essentially is the U.S.
market, its recent series of dry spells could make the U.S. wine industry very vulnerable in the future.
Wine
United States

Wine
United States
(continued)
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
LTM 2010 LTM 2011 LTM 2012 LTM 2013 LTM 2014 YTD Nov 2015
Thousands
Still Wines (Bulk) Still Wines (Bottled)
Effervescent Wines (Bulk and Bottled) Special Natural Wines
Other Special Natural Wines Wine Coolers
Source: TTB.gov
Average Monthly U.S. Wine Production
in Wine Gallons
720
740
760
780
800
820
840
860
880
900
920
2010 2011 2012 2013 2014
TotalWineGallons(Millions)
Source: TTB.gov
Wine Consumption in the U.S.

A growing trend in the industry is direct-to-consumer wine sales. 42 states have passed deregulation to allow
wineries to skip wholesalers and sell directly to consumers via online retail. This has primarily benefitted smaller
wineries, helping them to combat the relative disadvantages of increasing consolidation among the large wineries
in the market. Consolidation, paired with lower price points, has helped large wineries produce, distribute, and
market wine over the past 5 years. Small wineries, on the other hand, have struggled to provide these same ser-
vices at the same low prices.
Through 2020, industry revenue is expected to rise 3.8% annually. Currently, chardonnay and cabernet sauvignon
are the biggest revenue contributors.
Wine
United States
(continued)
0.00
2,000.00
4,000.00
6,000.00
8,000.00
10,000.00
12,000.00
14,000.00
16,000.00
18,000.00
20,000.00
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015*
$millions
Winery Revenue Segments (2015*)
27.0%
20.0%
17.0%
11.0%
11.0%
8.0%
6.0%
Chardonnay
Cabernet Sauvignon
Zinfandel, Riesling,
and other blends
Merlot
Pinot Grigio
Pinot Noir
Sauvignon Blanc
U.S. Wineries Revenue

On June 24, 2015, Congress passed the Bipartisan Congressional Trade Priorities and Accountability Act,
aimed at facilitating new free trade agreements and at growing exports of U.S. products, including California wines,
which account for 90% of U.S. wine exports. Wine Institute President and CEO Robert P. Koch noted that trade
agreements have increased U.S. wine exports to $1.5 billion as of 2014. The U.S. is also in the process of nego-
tiating trade agreements with 11 countries under the Trans-Pacific Partnership (TPP), and with the European Union
under the Transatlantic Trade and Investment Partnership (TTIP). According to Koch, the trade agreements will
open new markets and set “enforceable” trade rules with other countries.
In October 2015, the U.S. and 11 other Pacific Rim nations completed the Trans-Pacific Partnership (TPP) negoti-
ations, aimed at getting rid of the tariffs faced by California wineries abroad, removing non-tariff barriers, and
setting enforceable trade rules. The TPP countries include Australia, Brunei Darussalam, Canada, Chile, Japan,
Malaysia, Mexico, New Zealand, Peru, Singapore, United States, and Vietnam.
In December 2015, Congress passed the Omnibus Bill, which repealed the U.S.’s Country of Origin Labeling
(COOL) requirements for beef, pork, and poultry. In May of 2015, the World Trade Organization had deemed the
U.S. regulation as discriminating against Canadian and Mexican producers. Canada and Mexico thus sought to
enforce retaliatory tariffs (totaling $1 billion) on U.S. exports, including wine. This would have been especially
devastating to the wine industry, as U.S. wine producers export over $500 million of wine to both Canada and
Mexico every year, with the retail value of California wine sales in Canada reaching over $1 billion annually. The Bill
also increased the Alcohol and Tobacco Tax and Trade Bureau (TTB) annual budget by 5%, allowing the TTB—
the regulatory agency over the wine industry—to expand its previously shrunken workforce.
Wine
Current Litigation

France produced 16.54% of the world’s wine in 2014; its 4.6 billion liters of wine ranked it first. Italy, which produced
4.4 billion liters, accounted for 15.85% of total world production. Spain and the United States ranked third and fourth,
respectively producing 3.8 billion liters (13.53%) and 3.0 billion liters (10.7%). Globally, world wine production totaled
28.2 trillion liters in 2014. The United States, France, and Italy also had the top three ranks for global wine consumption
in 2014. Of the 24.7 trillion liters of total wine consumed, the U.S. accounted for 13.03% of consumption; France and
Italy accounted for 11.29% and 8.26% of consumption, respectively. Germany ranked fourth, consuming 8.18% of total
consumption, and China ranked fifth at 6.40%. The United States was the only country in the top five that consumed
more wine year-over-year (between 2013 and 2014). Globally, world consumption of wine increased 0.5%.
The global wine market is less concentrated than the markets for beer and spirits. In 2014, EJ Gallo Winery held
a 2.7% market share, only one percentage point higher than Constellation Brands, Inc. at 1.7%. Wine Group Inc.
accounted for 1.5% of the market.
Wine
Worldwide
Wine Global Market Share (%)
Company 2014 2013 2012 2011 2010 2009 2008
% Change
2008-2014
EJ Gallo Winery 2.71 2.67 2.63 2.59 2.53 2.49 2.54 6.55
Constellation Brands Inc. 1.71 1.68 1.58 1.67 2.71 2.74 2.88 -40.85
Wine Group Inc 1.50 1.55 1.58 1.69 1.59 1.62 1.62 -7.49
Accolade Wines Ltd 1.12 1.12 1.14 1.04 0.01 na na nm
Vina Concha y Toro SA 1.04 0.94 0.93 0.92 0.90 0.89 0.84 23.31
Castel Group 1.03 0.98 0.94 0.93 0.93 0.95 0.96 7.56
Grupo Penaflor SA 0.97 1.00 0.87 0.84 0.85 0.89 0.82 18.87
Treasury Wine Estates Ltd 0.97 0.97 0.99 1.02 na na na nm
Pernod-Ricard SA 0.90 0.92 0.92 0.92 0.93 1.00 1.07 -16.07
Caviro Distillerie Srl 0.60 0.60 0.60 0.61 0.62 0.63 0.64 -6.13
Others 87.45 87.58 87.81 87.77 88.94 88.77 88.62 -1.32
Source: Bloomberg

Company Name Ticker
Price at
12/31/15
High Price
as of
12/31/15
% of High
as of
12/31/15
EV/
Revenue
EV/
EBITDA
Enterprise
Value
LTM
Revenue
LTM
EBITDA
PepsiCo Inc PEP $93.09 $94.21 98.8% 2.6 13.9 173,548.0 66,544.00 12,521.00
ConAgra Foods Inc CAG $33.04 $33.95 97.3% 1.3 14.7 22,933.7 17,742.20 1,561.20
Grupo Bimbo SAB de CV GRBMF $2.91 $3.45 84.3% 0.4 4.6 74,262.8 179,151.42 16,310.56
Tyson Foods Inc TSN $39.37 $44.07 89.3% 0.4 7.6 15,683.2 36,369.00 2,054.00
Hormel Foods Corp HRL $51.39 $51.52 99.7% 1.5 14.0 13,813.3 8,970.27 990.18
Sanderson Farms Inc SAFM $87.95 $102.82 85.5% 0.8 5.6 2,058.9 2,711.63 369.81
Darden Restaurants Inc DRI $51.46 $53.08 96.9% 1.2 11.8 9,564.2 8,091.60 811.30
Unilever NV UN $39.68 $43.99 90.2% 2.6 13.9 126,127.2 48,395.00 9,096.00
Nestle SA NESN $70.25 $71.70 98.0% 2.8 14.4 249,920.2 90,166.00 17,307.00
Average $52.13 $55.42 93.4% 1.5 11.2 76,434.6 50,904.6 6,780.1
Median $51.39 $51.52 96.9% 1.3 13.9 22,933.7 36,369.0 2,054.0
Source: Bloomberg
FOOD BEVERAGE INDUSTRY
Public Company Information
Food Processors

Company Name Ticker
Price at
12/31/15
High Price
as of
12/31/15
% of High
as of
12/31/15
EV/
Revenue
EV/
EBITDA
Enterprise
Value
LTM
Revenue
LTM
EBITDA
Frisch's Restaurants Inc FRS $28.30 $30.69 92.2% 0.8 7.1 159.2 209.17 22.40
Ruby Tuesday Inc RT $5.89 $8.22 71.7% 0.5 29.6 620.7 1,168.75 20.97
Darden Restaurants Inc DRI $51.46 $52.68 97.7% 1.2 11.8 9,564.2 8,091.60 811.30
Denny's Corp DENN $7.03 $7.51 93.6% 1.7 11.3 783.0 458.07 69.12
Bob Evans Farms Inc/DE BOBE $47.34 $57.48 82.4% 1.2 12.6 1,570.5 1,328.55 124.96
DineEquity Inc DIN $81.59 $84.23 96.9% 4.5 11.5 2,920.2 646.91 254.00
Red Robin Gourmet Burgers Inc RRGB $56.90 $86.83 65.5% 0.9 8.3 900.2 1,051.38 108.08
Cracker Barrel Old Country Store Inc CBRL $103.19 $115.71 89.2% 1.1 10.6 2,858.0 2,665.03 270.72
Average $47.71 $55.42 86.1% 1.5 12.8 2,422.0 1,952.4 210.2
Median $49.40 $55.08 90.7% 1.1 11.4 1,235.4 1,110.1 116.5
Source: Bloomberg
Restaurants

Company Name Ticker
Price at
12/31/15
High Price
as of
12/31/15
% of High
as of
12/31/15
EV/
Revenue
EV/
EBITDA
Enterprise
Value
LTM
Revenue
LTM
EBITDA
PepsiCo Inc PEP $93.09 $94.21 98.8% 2.6 13.9 173,548.0 66,544.00 12,521.00
Dr Pepper Snapple Group Inc DPS $64.31 $65.43 98.3% 2.5 10.8 15,183.5 6,035.00 1,408.00
National Beverage Corp FIZZ $19.50 $22.26 87.6% 1.5 12.2 930.6 641.14 76.14
Coca-Cola Co/The KO $42.66 $42.81 99.6% 4.9 18.8 227,307.1 46,220.00 12,120.00
Monster Beverage Corp MNST $91.67 $94.93 96.6% 6.5 22.7 15,324.6 2,354.60 676.28
Starbucks Corp SBUX $75.46 $81.48 92.6% 3.7 17.6 58,718.6 16,062.10 3,340.30
Average $64.45 $66.85 95.6% 3.6 16.0 81,835.4 22,976.1 5,023.6
Median $69.89 $73.46 97.4% 3.1 15.7 37,021.6 11,048.6 2,374.2
Source: Bloomberg
Non-Alcoholic Beverages

Company Name Ticker
Price at
12/31/15
High Price
as of
12/31/15
% of High
as of
12/31/15
EV/
Revenue
EV/
EBITDA
Enterprise
Value
LTM
Revenue
LTM
EBITDA
Constellation Brands Inc STZ $142.14 $144.56 98.3% 5.9 20.0 35,379.71 6,028.00 1,766.00
Craft Brew Alliance Inc BREW $8.37 $14.32 58.4% 0.9 11.9 174.36 200.00 14.60
Boston Beer Co Inc SAM $201.91 $325.00 62.1% 2.6 12.6 2,514.31 959.90 199.10
Molson Coors Brewing Co TAP $93.92 $95.51 98.3% 5.6 23.7 19,853.39 3,567.50 836.20
Brown-Forman Corp BF/B $99.28 $110.33 90.0% 6.9 20.2 21,723.20 3,134.00 1,078.00
American Brewing ABRW $0.39 $0.51 76.5% na na na 1.00 na
Willamette Valley WVVI $7.08 $8.20 86.3% 2.7 10.3 40.31 15.20 3.90
Anheuser-Busch InBev NV ABI $114.40 $124.20 92.1% 4.7 12.0 222,601.09 47,063.00 18,489.00
SABMiller PLC SAB $4,069.50 $4,090.00 99.5% 4.5 12.9 74,107.30 16,534.00 5,723.00
Ambev SA ABEV3 $17.73 $20.15 88.0% 7.2 15.0 274,102.14 38,079.80 18,219.10
Diageo PLC DGE $1,856.50 $1,992.18 93.2% 5.3 16.7 57,503.08 10,813.00 3,452.00
Heineken NV HEIA $78.77 $85.90 91.7% 2.8 12.5 58,344.73 20,511.00 4,669.00
Average $557.50 $584.24 86.2% 4.5 15.3 69,667.6 12,242.2 4,950.0
Median $96.60 $102.92 90.8% 4.7 12.9 35,379.7 4,797.8 1,766.0
Source: Bloomberg
Alcoholic Beverages

Contact Us
Copyright © 2016 Mercer Capital Management, Inc. All rights reserved. It is illegal under Federal law to reproduce this publication or any portion of its contents without the publisher’s permission. Media quotations with source attribution are encouraged. Reporters
requesting additional information or editorial comment should contact Barbara Walters Price at 901.685.2120. Mercer Capital’s Industry Focus is published quarterly and does not constitute legal or financial consulting advice. It is offered as an information service to
our clients and friends. Those interested in specific guidance for legal or accounting matters should seek competent professional advice. Inquiries to discuss specific valuation matters are welcomed. To add your name to our mailing list to receive this complimentary
publication, visit our web site at www.mercercapital.com.
BUSINESS VALUATION
FINANCIAL ADVISORY SERVICES
Services Provided
• Valuation of food and beverage industry companies
• Transaction advisory for acquisitions and divestitures
• Valuations for purchase accounting and impairment testing
• Fairness and solvency opinions
• Litigation support for economic damages and valuation and
shareholder disputes
Mercer
Capital
Food Beverage
Industry Services
Mercer Capital has expertise providing business valuation and financial advisory
services to companies in the food and beverage industry.
Industry Segments
Mercer Capital serves the following industry segments:
• Food Processing
• Restaurants
• Nonalcoholic Beverages
• Beer, Wine, and Spirits
Contact a Mercer Capital professional to discuss your needs in confidence.
Grant M. Farrell, ASA, CPA, ABV, CFF, CGMA
214.468.8400
farrellg@mercercapital.com
Timothy R. Lee, ASA
901.685.2120
leet@mercercapital.com
Chelsea E.Temple
901.322.9741
templec@mercercapital.com
MERCER CAPITAL
Memphis
5100 Poplar Avenue, Suite 2600
Memphis, Tennessee 38137
901.685.2120
Dallas
12201 Merit Drive, Suite 480
Dallas, Texas 75251
214.468.8400
Nashville
102 Woodmont Blvd., Suite 231
Nashville, Tennessee 37205
615.345.0350
www.mercercapital.com

U.S. Alcoholic Beverage M&A and Market Performance in 1Q 2016

Recommandé

Recommandé

Contenu connexe

Tendances

Tendances (16)

En vedette

En vedette (20)

Similaire à U.S. Alcoholic Beverage M&A and Market Performance in 1Q 2016

Similaire à U.S. Alcoholic Beverage M&A and Market Performance in 1Q 2016 (20)

Plus de Mercer Capital

Plus de Mercer Capital (20)

Dernier

Dernier (20)

U.S. Alcoholic Beverage M&A and Market Performance in 1Q 2016