Your Brand. Our Business. - Cascadia Capital · 2019. 1. 22. · 2 FOOD & BEVERAGE DEAL FLOW BY...

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Your Brand. Our Business.

Packaged Food & Beverage:

Industry PerspectivesFALL 2017

1

Food & Beverage Industry Overview

RECENT CASCADIA FOOD & BEVERAGE TRANSACTIONS

Packaged food and beverage is among the most dynamic segments in the capitalmarkets. The industry is undergoing a seismic shift driven by evolving consumerpreferences and demographic changes. These forces are rewriting everything we knowabout the industry -- how products are made, where they are sold, how brands connectwith customers, and how retailers merchandise and drive traffic.

When an industry changes this dramatically, it reformulates the recipe for success.Companies that get ahead of the change curve stand to benefit, enabling them to enjoyexceptional growth rates and create outsized shareholder value.

Cascadia Capital seeks to make sense of the emerging food and beverage landscape bymaintaining relationships with operating companies, with debt and equity capitalmarkets participants, and with corporate leaders. We also seek to partner with,position, and advise companies that are poised to benefit from the changes we identify,and will thereby be valued by the buyers and investors with which we interface.

In the pages that follow, we outline our current perspectives on the packaged food andbeverage market. We hope you enjoy this report and we would welcome theopportunity to speak with you to garner your feedback and insights.

-- Cascadia Capital, LLC, Consumer & Retail Team

Erik EinwalterSenior Vice President

(206) [email protected]

Bryan JaffeManaging Director


John C. SieglerManaging Director


James CartalesVice President


CASCADIA CAPITAL CONTACTS

Gregory HillVice President


2

FOOD & BEVERAGE DEAL FLOW BY QUARTER

Packaged Food & Beverage M&A Market Overview

2016 was a record year for food and beverage M&A transactions as 349 deals were completed. Year-to-date in 2017, M&A continuesto be robust. Transactions have been driven by two major themes: (1) consumer demand for food and beverage alternatives with“better-for-you” attributes has fueled the growth of a new set of industry participants representing acquisition targets for largeindustry consolidators, and (2) these large consolidators have outsourced much of their product innovation function, choosinginstead to allocate capital to acquire the best innovators. Through June 2017, more than 130 deals have been closed or announced,accounting for almost $8.0B of transaction value with a median EBITDA multiple of 10.4x.

Looking forward, M&A activity in the sector is expected to remain elevated. There is little evidence that large strategic buyers willshift away from outsourced innovation strategies in the near term. In the meantime, consumers will continue to seek alternatives toconventional and legacy CPG brands, that provide cleaner labeling, healthier attributes (including reduced sodium and sugarcontent), plant-based nutrition, enhanced portability and convenience, and functional benefits. Strategic acquirers will continue tobuy the brands that best demonstrate an ability to resonate with consumers, and leverage their in-house capabilities to reach newaudiences and build into adjacent product categories.

Source: S&P CapIQ, Pitchbook. Includes announced North American Food & Beverage M&A transaction. Excludes restaurants and retailers.

Dollars in billions

$4 $9

$3

$13

$31

$12

$3 $4

$21 $20

$10 $6

$62

$3

$108

$36

$3 $3

$16

$7 $0

$7

69

78

60

74 72 68

76 74 68

84 82 76 73

63

89 97

89 82

87 91

45

85

0

25

50

75

100

125

$0

$20

$40

$60

$80

$100

$120

Q12012

Q22012

Q32012

Q42012

Q12013

Q22013

Q32013

Q42013

Q12014

Q22014

Q32014

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Deal Value ($ B) Deals (#)

3

Packaged Food & Beverage M&A Metrics

Source: S&P CapIQ, Pitchbook. Includes announced North American Food & Beverage M&A transaction. Excludes restaurants, physical retailers, and online retailers.

M E D I A N M & A T R A NSAC T I ON M ULT I PL ES

D EA L CO UNT BY ACQ UI RE R T Y PE D EA L CO UNT BY S EC TO R – 2 0 1 7 Y T D

M & A T R A N SAC T I O N S I Z E OV E R T I M E

Dollars in millions

11.5x 9.7x 10.9x 13.8x 9.5x 10.4x

1.4x1.1x 1.3x

1.7x1.2x

2.4x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

2012 2013 2014 2015 2016 2017

EV/EBITDA EV/Revenue

Coffee1%

Baked Goods2%

Non-alcoholic Beverages

3%Confections

4%Dairy 4%

Seafood4%

Pet Products5%

Private Label Food and Beverage

6%Meat7%

Snacks7%

Ingredients & Flavors

8%

Fruit and Vegetable

11%

Branded Processed Foods

16%

Alcoholic Beverages

22%

Note: 2015 transaction value average skewed by the Kraft-Heinz and AB-InBev mergers

$26 $25 $73 $57 $51 $81

$303

$472 $531

$1,802

$300 $331

$0

$300

$600

$900

$1,200

$1,500

$1,800

2012 2013 2014 2015 2016 2017

Median Average

234 216249 254 267

99

2030

25 3738

22

27 4436

3144

16

0

50

100

150

200

250

300

350

400

2012 2013 2014 2015 2016 2017

Strategic Private Equity Other

4

Table of Contents

Industry Themes

Three Trends We See

Aisle Spotlight: Non-Alcoholic Beverage

Cascadia Overview

Appendix: Public Comparables

5

68%of people say they are

willing to pay more for food and beverages that do not

contain undesirable ingredients

40%of small manufacturer’s

sales come from clean label products, compared to only

24% for large manufacturers

53%of the growth in food and

beverage is driven by small manufacturers, despite comprising only 19% of

total industry dollar sales

87%of Millennials purchase or

are willing to purchase groceries online for

delivery to the home

Since the advent of the supermarket, the producer paradigm for packaged food and beverage has been based upon offeringconsumers a familiar and consistent product. This paradigm gave rise to large, industrialized brands producing at scale and leveragingthat scale to build large sales and marketing engines to push their products through well-established distribution channels.

In the past decade, consumers have turned this paradigm on its head. We live in a world where social media has democratizedconsumer communication; ecommerce has vastly expanded consumers’ access to innovative products and new categories;anonymous third-party reviews are trusted and instantly accessible anywhere; and supply-chain transparency is expected. In short,consumers have more food and beverage choices than ever before and they are more engaged with those choices. As a result, “craft”brands are capturing the consumer’s attention in a way no conventional CPG marketing campaign can hope to, and those emergingbrands are displacing the traditional, trusted packaged food and beverage brands of yesteryear.

The 92-million-strong Millennial generation – the largest in United States history – is driving this change with its willingness to buy,and even pay a premium for, products that resonate with their core beliefs and ideals. Inputs are always top of mind, packaging is asimportant as the product itself, and artisan or localized brands that create a sense of community have a competitive advantage.

The Age of Consumer Exploration is Upon Us

Source: US Census Bureau, Nielsen

6

Big CPG Companies Are Not Innovating In-House

Source: CircleUp, Deloitte

0.9%

23.9%

R&D Advertising

BIG CPG

13.5%

17.7%

R&D Advertising

Tech

2 0 1 6 S PE ND A S A PE RC E NTAG E O F NE T SA L ES

4%

8%

8%

8%

10%

10%

11%

12%

13%

13%

15%

15%

24%

Energy

Banking/Finance/Insurance

Transportation

Manufacturing

Healthcare/Pharmaceuticals

Retail Wholesale

Education

Service Consulting

Communications/Media

Mining/Construction

Consumer Services

Tech Software/Biotech

Consumer Packaged Goods

M A R K E T ING S PE ND A S A PE RC E NTAG E O F R E V E NUE

Food and Beverage is No Longer Just a Scale Game

Building upon decades of refinement, big CPG companies havebecome exceptionally fine-tuned brand marketing machines.On average, companies in the industry invest nearly one-quarter of revenue on sales and marketing initiatives to supporttheir core distribution channels believing that this capitalallocation will generate the highest returns. However, emergingbrands are nimbler and better able to identify and execute onnew trends than larger peers even without the same resources.

Innovation at Scale is Risky and Expensive

Consumer exploration and the explosion of access to newchoices is driving a renaissance for product innovation in thefood and beverage industries. Yet the brand manager overlordsof Big CPG have become too divorced from their productdevelopment teams, electing to rely instead upon clevermarketing and incremental product tweaks to drive theirbusinesses (see: Cheetos Crunchwrap Sliders at Taco Bell).

To be fair, perhaps only the most devil-may-care big CPG brandmanager would risk millions of dollars and his or her career bycannibalizing a tried-and-true brand in one’s portfolio with realproduct innovation. This means that the risk of innovation isbeing outsourced to the entrepreneurs building the nextgeneration of “craft” brands. Their prospective reward?Outsized exits to the very companies which, although they stillown the lion’s share of the shelf space and brand equity, aretoo immutable to recognize nascent opportunities andcapitalize on the change in consumer appetites.

7

Acquirers’ Reaction to the Changing Food Landscape

Source: CB Insights, Pitchbook, Merger Market, Cascadia Capital Proprietary Data

In reaction to the shifting consumer paradigm across multiple categories, acquirers are paying significant premiums for the growth potential of emerging brands

F UNC T I O NA L B E V E R AG E F UNC T I O NA L FO O D

6.9x

5.0x4.4x 4.3x

3.7x

2.9x 2.6x2.2x 2.0x

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

7.0x

8.0x

9.0x

10.0x

5.5x

3.0x

2.3x2.1x 2.1x 2.0x

1.7x1.3x 1.3x

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x10.0x

6.5x

3.9x 3.9x 3.5x 3.4x 3.2x 3.1x 2.8x 2.7x 2.7x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

NUT R I T I O NAL FO O D S PEC I A LT Y O R O RG A NIC

TEV / Revenue TEV / Revenue

TEV / Revenue TEV / Revenue

7.6x

5.5x

4.6x4.2x 4.1x

3.6x

2.6x 2.6x2.2x

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

7.0x

8.0x

8

In response to both shifting consumer preferences and the ever-increasing acquisition prices of fast-growing emerging brands, big foodconglomerates have created venture capital arms to invest in emerging brands, mimicking strategies that are prevalent in thetechnology and healthcare industries. CPG venture capital deals hit an all time high in 2016. Through the first two quarters of 2017,activity has remained robust and six corporate venture funds that launched in 2016 are still looking for their first investments.

Historically, large CPG companies have relied on later-stage acquisitions to supplement growth, but escalating M&A valuations havedriven decision makers to place bets on emerging brands sooner in an effort to gain access and control the ultimate exit of thewinners. With almost every major CPG company seeking inorganic growth opportunities and private equity firms sitting on anabundance of dry powder, auction-based sales processes have led to record-breaking valuations for food and beverage acquisitiontargets.

Venture arms provide an opportunity for large players to invest in brands with authentic products and developing distributionplatforms that can be more easily scaled by leveraging the larger companies’ established channels. For the price of a small initialinvestment, large strategic buyers can immediately rejuvenate a stale brand portfolio and buy the right to fully acquire the flourishingcompany after market validation.

Big CPG Venture Deals Are Emergent

Source: CB Insights, Pitchbook, Edgar

V E NT UR E - BAC K E D C PG D EA L S

$239 $427 $942 $1,117 $844

90103

123

145167

2012 2013 2014 2015 2016

Disclosed Funding ($M) Deals

Dollars in millions

In 2007, Snyder’s made an initial investment in Late July and then acquired a majority share in 2014

Pepsi invested in Kevita in 2014 before acquiring the company in 2016 for $250 million

I N C U BAT E D T H E N ACQ U I RE D

9

Acre Venture Partners

Unilever Ventures

Timeline of Major CPG Corporate Venture Arms

Source: Pitchbook, S&P Capital IQ

2007

2012 2016 2016

2013 2016 2016

2002

Manifesto Ventures

Eighteen94 VenturesNaked Emerging Brands301 Inc.

Cultivate Ventures

7 VenturesVenture & Emerging Brands

Tyson New Ventures

10

Table of Contents

Industry Themes

Three Trends We See


Cascadia Overview


11

On June 16th, Amazon announced its acquisition of Whole FoodsMarket for $13.7B. When the transaction closes, this will beAmazon’s largest deal ever and is a clear statement regardingAmazon’s strategic focus on the $674B US grocery market.Combined, the two companies will rank as the fifth-largest USgrocery retailer.

Whole Foods’ storefronts will allow Amazon to captureincremental spend from consumers who prefer the experience ofshopping in grocery stores over delivery options, includingAmazon Fresh. Notably, every Whole Foods store has a built-incommissary, enabling Amazon to launch prepared food delivery toexpand its addressable market. Stores will also function as mini-distribution centers allowing package pickup in core markets.

In addition to 460 Whole Foods stores, Amazon will also controlWhole365, giving it the ability to sell a highly-regarded owned-brand directly online in numerous consumables categories,bolstering the success it has had with its AmazonBasics strategy.

Amazon has been an unparalleled disruptor across a number ofsectors, and in response to the announcement, major competitorssaw significant reductions in share prices, wiping out over $37B ofmarket cap from large grocery and CPG companies in a single day.It’s not just the big players that need to pay attention either asthe acquisitions will also effect emerging brands. Whole Foods hasbeen the primary incubation platform for up-and-coming craftfood and beverage brands for the past decade.

1. Amazon is Changing the Grocery Game

Source: Capital IQ, Wall Street Journal

% C H A N G E - DAY O F A N N O U N C E M E N T

2.44%

(7.19%)

(9.24%)

(6.29%)

(14.36%)

(5.14%) (4.65%)

$13.7Btransaction value

10.3xTTM EBITDA

27.0%premium to last close

0.9xTTM Revenue

12 Source: Pitchbook, Markets and Markets

2. Plant-Based Alternatives are Here to Stay

has been acquired for $550M by

2015

The long-term secular consumer shift towards consumption of “better-for-you” and environmentally-sustainable products has fueled a proliferation ofplant-based food and beverage brands. Plant-based dairy and meatalternatives, which have amassed meaningful scale in recent years, areprojected to maintain outsized growth rates for the foreseeable future.

Due to the category’s growth at scale, plant-based alternatives have proventheir legitimacy in changing the food and beverage landscape, resulting insignificant investor attention at premium valuations. Financial investors,attracted by the sector’s high growth potential, have made notableinvestments such as the 2016 Google Ventures-led $30M investment intoRipple Foods, a pea-based dairy alternative. On the other hand, strategicinvestors are seeking to defend market share and capitalize on consumertrends through the acquisition of, or investment in early-stage companies, ashighlighted by Tyson’s investment into Beyond Meat and its establishmentof a $150M investment fund dedicated to making investments in alternativeproteins.

PL A NT - BA S E D A LT E R NAT I V ES G ROW T H

$7.4 $8.2

$9.2 $10.3

$11.5 $12.8

$14.4

$4.1 $4.3 $4.6 $4.9 $5.2 $5.6 $6.0

2016 2017P 2018P 2019P 2020P 2021P 2022P

Plant-Based Dairy Alternatives Plant-Based Meat Substitutes

Dollars in Billions 6-Year CAGR of 11.8%

6-Year CAGR of 6.6%

has received a $75M investment led by

2017


2017


2016


2017

has received an $24M investment led by

2016

13

Consumer’s ongoing desire for “convenient consumption” balanced withincreased wellness and nutritional considerations have driven a massiveexpansion in the snack bar and meal replacement categories. The decline oftraditional snacking categories (among the top-10 core snacking categories, onlygranola bars grew both dollar and unit sales in 2016) has also fueled this trend.

Unsurprisingly, investors are taking notice, with a number of leading growthequity firms investing in healthy, snack/nutrition “bar” brands in the past 24months. Highlighting interest in the food and beverage industries from SiliconValley disruptors, Google Ventures and Andreessen Horowitz recently led a$50M investment in Soylent, a shelf-stable, nutrition-oriented brand of mealreplacement products.

One unique driver of growth is the online grocery channel which benefits fromthe easy-to-ship form factor of bars and shelf-stable meal replacements.Ecommerce sales have given scale to niche DTC brands in the category as smallbrands outperform large brands online, enabling them to then garner moreshelf space in traditional grocery channels.

3. Convenient Consumption is Driving Growth

Source: Pitchbook, IRI, Packaged Foods

U. S . S N AC K BA R SA L ES


2017


2015

has received an investment led by

2015

has received an investment led by

2017

has received an $8M investment led by

2017


2016

13

$5.7$6.2

$6.8$7.3

$7.8$8.3

2011 2012 2013 2014 2015 2016

Dollars in Billions

14

Table of Contents

Industry Themes

Three Trends We See


Cascadia Overview


15

BeerProduce

Wine / Liquor

Meat/Poultry/FishDairy

BakeryFrozen Foods

Grocery Aisle Spotlight: Non-Alcoholic Beverages

Center Aisles

Non-Alcoholic Beverages

16

The non-alcoholic beverage market has received significant investmentin recent years as the market has been disrupted by a long term declinein consumption of carbonated soft drinks and the rise of “Ready-to-Drink” products. The most active niches within the category have beencoffee and functional beverage. Following an extended period of focuson natural, better-for-you food, innovative beverage companies areemerging across the world while traditional CSD and juice companies areattempting to combat diminishing sales within their core products.

A wave of investments in early-stage beverage over the last three yearshas vastly outpaced M&A activity in the space. In the coming years, therewill be a spike in acquisitions of the market leaders in on-trendcategories, while a number of brands will fail due to increasedcompetition and lack of consumer adoption.

The non-alcoholic and alcoholic strategic buyer universe has begun tomerge, with dwindling sales in a number of alcoholic beverage sub-categories and heightened regulatory pressure driving companies suchas AB InBev to explore atypical inorganic growth opportunities anddiversify. This trend is illustrated by a few prominent transactions:

▪ AB InBev acquired Hiball Energy, a San Francisco, California-basedenergy drink maker

▪ Diageo-backed accelerator Distill Ventures made an investment ina UK-based non-alcoholic spirits producer, Seedlip

▪ In early 2017, AB InBev and Keurig announced that they hadentered into a research and development-driven joint venture todevelop an in-home alcoholic drink system

▪ AB InBev’s venture arm, ZX Ventures, has made investments inKombrewcha, a maker of low-alcohol, organic kombucha drinks,and Owl’s Brew, a maker of tea-based mixers and radlers

The Non-Alcoholic Beverage Market

NO N - A LCO HO L I C B E V E R AG E M & A

has been acquired by

has received a strategic investment led by

have received strategic investments led by

B UY E R UNI V E RS ES A R E M E RG I NG

29

41

50 51 50

9

0

10

20

30

40

50

60

2012 2013 2014 2015 2016 YTD 2017

Dea

l Co

un

t

17

The Strategic Beverage Buyer Universe is Expanding

ActiveInactive

Domestic

International

Source: CB Insights, Pitchbook, Cascadia Capital Proprietary Data

18

Luigi LavAzza acquires Kicking Horse Coffee

▪ Kicking Horse is a premium organic and fair trade coffee roasterwith headquarters in British Columbia, Canada

▪ LavAzza, the 122-year old Italian company, acquired 80% of theKicking Horse from Swander Pace Capital in hopes of capturing therapid growth in the North American coffee market during a time ofslow growth in Western Europe

Notable Non-Alcoholic Beverage M&A Transactions

Key Metrics

Announced Date: 5/24/17

EV: $172.0M

EV / Revenue: NA

EV / EBITDA: NA

Key Metrics

Closed Date: 1/31/17

EV: $1.7B

EV / Revenue: 4.1x

EV / EBITDA: NA

Dr. Pepper Snapple acquires Bai

▪ Bai produces antioxidant infused, fruit-flavored beverages

▪ With the acquisition, Dr. Pepper Snapple hopes to enticeincreasingly health-focused consumers with the low sugar,nutrient enhanced water

▪ Dr. Pepper had previously invested in Bai in 2013

AB InBev acquires Hiball Energy

▪ Hiball Energy is a San Francisco-based company making organicenergy drinks and carbonated juices and water

▪ AB InBev is broadening its portfolio as consumers shift away fromAmerican lagers and traditional CSD products, and as InBev facesincreased regulatory pressure within the beer market after a stringof craft acquisitions in recent years

Key Metrics

Announced Date: 7/20/17

EV: NA

EV / Revenue: NA

EV / EBITDA: NA

Source: Pitchbook, Cascadia Capital proprietary data

19

Contract manufacturing is one of the fastest growing segments in thebroader food and beverage industry, due to four primary growthdrivers:

1. Innovative, craft food and beverage companies often experiencerapid consumer acceptance – the consumer equivalent of “goingviral” – and lack the resources and time to construct owned-production facilities necessary to meet their sales ramps

2. The cost of food safety compliance has increased dramatically

3. Brands are facing increased scrutiny from investors regardingthe need to rationalize capital expenditures and improve returnson investment

4. Shorter product life cycles and the pressure from fickleconsumers for greater variety and constant innovation hasforced brands to outsource production to established platforms

Outsourced production lowers the barriers to entry in the non-alcoholicbeverage industry, increases speed to market, and allowsentrepreneurs to leverage production partners with deep experience ina particular category

▪ Within beverage, shipping costs alone deter many emergingbrands from attempting national distribution, but strategicallylocated contract manufacturers can greatly reduce a product’slanded cost

Large CPG companies often view quality contract manufacturers as a“safety valve” for their business, giving them the flexibility to buildinventory throughout the country and make deliveries during peakseasons or demand surges

Manufacturing is Becoming the Industry Choke Point

Source: ING, Refresco company data

U S S O F T D R I N K S C O - PA C K I N G M A R K E T

317 446 834

2,759 2,788 2,780

13% 16%

30%

2013 2017 2024

Branded Co-packing (CEs) Co-packing (CEs) Branded Penetration

Case Equivalents in millions

59 130

141

505

117

188

2013 2024Large Brands (CEs) Small Brands (CEs)

New Entrants and Locals (CEs)

G R OW T H C O M E S F R O M T H E S M A L L G U YS

Case Equivalents in millions

20

Carbonated soft drink consumption volume has dropped by16% over the past 15 years as consumers have migratedtowards beverages with actual or perceived health benefits.The kombucha category has been a notable beneficiary of thisshift in consumer behavior, and the category is still growing at ahealthy rate following a number of investments and strategicacquisitions in the space.

Going forward, ready-to-drink nutritional beverages,performance energy drinks, and enhanced waters will continueto attract premium valuations from investors. Non-alcoholicbeverage industry giants like Pepsico and Coca-Cola continue toallocate resources towards functional alternatives to CSDs,while the entrance of alcoholic beverage industry players intothe non-alcoholic space provide ample exit opportunities forthe top performing functional brands.

Functional Beverage Remains in the Spotlight

THE HUMM STORY

F UNC T I O NA L B E V E R AG E S EG M E NT

Founded in 2009, HummKombucha is an emerging brandof scoby-brewed kombucha soldthrough conventional grocery,natural and club channels. Theproduct is designed with themass market in mind, with aunique flavor profile meant for apalate-pleasing taste that canconvert conventional CSD-drinkers to kombucha.

With sales and distributiongrowing rapidly, Humm engagedCascadia Capital to raise growthequity to help the Companyscale. After running a processthat garnered significant interestfrom top tier growth investors,Humm selected VMG Partnersdue to its cultural fit, industryexpertise, and value-addedability to help enhance Humm’sstrategy to penetrate nationalaccounts.

$35 $37 $41 $44

$50

$75

$0

$20

$40

$60

$80

2013 2014 2015 2016 2017 2018 2019 2020 2021

* Sales growth estimates

Dollars in billions

Source: Spins, BCC Research

21

The Energy beverage category continues to be an attractive beveragesegment, combining high growth with meaningful market size.

▪ Despite concerns around negative press, the energy categoryhas enjoyed robust growth due to exceptional strength andloyalty within core demographics, supporting a dependablerunway for growth through 2020

▪ Energy remains a dominant segment within the broader andtrending functional beverage category as leading brands havemerged additional nutritional attributes such as protein,vitamins, and hydration to match consumers’ demands

The market remains largely controlled by top energy brands:

▪ RedBull: ~38% US market share

▪ Monster: ~27% US market share

▪ Rockstar: ~8% US market share

Exposure to these dominant brands indicates growth opportunitiesfor key contract manufacturing partners

Consumer preferences continue to drive energy as one of the fastestgrowing segments within beverage.

▪ Energy volumes have grown 7.3% over 2014-2016, comparedto just 3.1% for the overall non-alcoholic

▪ Manufacturers continue to transition product mixes into fastgrowing segments such as energy and away from slow andnegative growth segments such as traditional soft drinks

Energy Drinks Continue to Benefit from Tailwinds

Source: IRI Research, Mintel Research, Beverage Marketing Corporation Data, IBISWorld Data

US E NE RGY D R I NK M ARK E T G ROW T H

2 0 1 4 - 2 0 1 6 US VO LUM E G ROW T H C AG R

$9.4 $11.0

$11.9 $12.8

$13.8 $14.9

$16.1

2014A 2015A 2016A 2017P 2018P 2019P 2020P

Dollars in billions

13.7%

9.9% 8.2%

7.3%

4.7% 3.8%

3.1%

(1.2%) (1.8%)

RTDCoffee

Water"Plus"

Water Energy Sports RTD Tea IndustryAverage

CSDs Fruit

22

Table of Contents

Industry Themes

Three Trends We See


Cascadia Overview


23

▪ Leading diversified investment bank

- M&A, private placements, advisory services

- Specialized in-depth expertise across multiple industry verticals

▪ Founded in 1999, Cascadia has a successful 17 year history

- Successfully completed over 245 transactions with more than $8

billion in transaction value

- 32 closed transactions in 2016

- Representing clients in the U.S. and globally, including Europe, Asia

and Australia

▪ Experienced team with successful track record

- Wall Street training and experience

- Decades of investment banking and operational expertise

- Deep capital markets expertise

▪ Coordinated delivery of appropriate expertise across the firm

- 40 investment banking professionals

- 12 Managing Directors in four cities

» Headquartered in Seattle, with Managing Directors in Los

Angeles, Minneapolis, and New York

Leading Diversified Investment Bank

Industry Expertise

Deal Volume

Results Focus

Adding Value to Clients in the Northwest and Beyond

24

▪ Team Members Have Deep Transaction Expertise

- With bankers in ten different industry verticals, we have the experience to offer industry breadth while maintaining sector depth

- Dedicated resource model with comprehensive vertical expertise from Managing Director to Analyst

▪ We Differentiate Each Process with a Customized Approach

- We are thoughtful advisors who deliver a tailored process to suit the needs of our clients

- We understand the strategies of the counterparties, enabling us to tell them why they should be interested – allowing Cascadia to drive the transaction and maximize results

▪ Our Experience and Approach Drive Results

- We have experience, industry focus and a differentiated process that drives success

- Our transactions are built upon delivering the best quantitative and qualitative terms with the most desirable counterparty

Process and Experience Deliver Results

Cascadia is a Highly Active, Diversified Investment Bank

300+ transactions

$11+ billion in aggregate

value

$9+ billion in M&A

transactions closed

$2+ billion in total capital

raisedCreating Lasting Results

Cascadia Capital serves more industries, covers more ground, and closes more deals. We make deals happen based on a powerful combination of expertise, industry experience, customized positioning, and a deep understanding of clients’ businesses and personal

motivations.

25

Our Industry Expertise

Consumer Products & Services Food & Beverage

Ecommerce Restaurants

Catalog & Specialty Retail Retail Technology

TechnologyReal EstateIndustrialsHealthcare & Technology

Food & Agribusiness

Energy & Applied Tech

Consumer & Retail

Business Services

Auto Aftermarket

PRINCIPAL SECTOR FOCUS

We have 8 professionals with greater than 50 years of

collective consumer investment banking experience that

have completed over 40 transactions since the beginning

of 2010 valued in excess of $1.9 billion in enterprise

value, including ten capital markets transactions and 29

M&A advisory assignments.

PRACTICE OVERVIEW

26

Proven Results within Consumer Segments

December 2011


FOOD &

CONSUMABLESDURABLES

RESTAURANTS &

RETAIL

February 2015

June 2013


27

John C. SieglerManaging Director

Co-Head, Consumer Practice

Experience:

25+ years banking

5 years with Cascadia

Education:

BA, Princeton University

MBA, University of Chicago

Bryan JaffeManaging Director

Co-Head, Consumer Practice

Experience:

18 years banking


Education:

BA, Washington University

MBA, Wharton School of Business

Consumer and Retail Leadership Team

Erik EinwalterSenior Vice President

Experience:

10 years banking


Education:

BA, University of Washington

28

Table of Contents

Industry Themes

Three Trends We See


Cascadia Overview


29

Food & Beverage Public Comps

Source: S&P Capital IQ. Market data as of 8/18/17

Alcoholic Beverages

Anheuser-Busch InBev $109.30 $211,348 $336,588 $57,883 $22,005 24.0% 6.2% 62.1% 38.0% 31.9x 5.8x 5.8x 15.3x 14.0x

Asahi Group Holdings 51.52 23,601 35,014 19,754 2,710 0.0% 0.0% 37.9% 13.7% 21.8x 1.8x 1.7x 12.9x 11.8x

Brown-Forman 55.60 26,335 28,327 3,140 1,142 3.7% 0.9% 67.5% 36.4% 42.2x 9.0x 8.5x 24.8x 23.5x

C&C Group plc 3.55 1,059 1,269 641 122 (14.0%) (6.9%) 52.0% 19.1% 18.3x 2.0x 2.0x 10.4x 10.0x

Carlsberg A/S 121.57 18,485 22,341 10,218 2,204 (1.3%) (1.4%) 50.9% 21.6% 26.6x 2.2x 2.2x 10.1x 10.1x

Craft Brew Alliance 17.99 345 371 207 14 0.7% 1.7% 30.8% 6.9% 198.1x 1.8x 1.8x 26.0x 18.5x

Constellation Brands 217.91 42,120 51,331 7,447 2,984 2.8% 7.7% 51.0% 40.1% 29.8x 6.9x 6.4x 17.2x 17.1x

Diageo plc 32.81 80,464 95,443 16,751 5,965 7.6% 5.9% 61.7% 35.6% 27.1x 5.7x 5.7x 16.0x 16.3x

Heineken N.V. 103.80 59,189 76,762 26,952 5,890 5.3% 4.4% 39.7% 21.9% 31.1x 2.8x 2.8x 13.0x 11.7x

Kirin Holdings Company 25.81 23,550 29,174 17,659 2,760 4.8% (5.3%) 43.6% 15.6% 22.6x 1.7x 1.6x 10.6x 11.8x

Molson Coors Brewing Company 78.02 16,570 27,674 11,003 2,627 125.2% 38.4% 43.6% 23.9% 18.4x 2.5x 2.5x 10.5x 10.7x

Pernod Ricard SA 160.63 42,411 51,735 11,121 3,218 2.8% 4.1% 62.5% 28.9% 27.2x 4.7x 4.7x 16.1x 15.9x

Sapporo Holdings Limited 28.13 2,191 4,406 5,226 422 1.8% 2.1% 35.0% 8.1% 19.9x 0.8x 0.8x 10.4x 10.3x

The Boston Beer Company 163.35 1,890 1,824 863 169 (4.8%) (1.5%) 52.1% 19.6% 27.0x 2.1x 2.1x 10.8x 11.2x

Mean 11.3% 4.0% 49.3% 23.5% 38.7x 3.6x 3.5x 14.6x 13.8x

Median 2.8% 1.9% 51.0% 21.7% 27.0x 2.4x 2.3x 13.0x 11.8x

($ in millions, except per share data) Price Market Enterprise LTM Revenue Growth LTM Margins P/E EV / Revenue EV / EBITDA

Company 03/02/18 Cap Value Revenue EBITDA 1 Year 3 Years Gross EBITDA Multiple LTM NTM LTM NTM

Branded Processed Foods

Associated British Foods plc $35.92 $28,309 $27,482 $21,157 $2,611 14.6% 5.9% 23.5% 12.3% 26.2x 1.3x 1.2x 10.5x 10.1x

B&G Foods 29.03 1,832 3,843 1,668 324 19.9% 25.3% 27.7% 19.4% 15.9x 2.3x 2.2x 11.9x 10.9x

Campbell Soup Company 42.11 12,710 16,420 7,858 1,958 (0.9%) (1.9%) 37.6% 24.9% 13.6x 2.1x 2.0x 8.4x 9.3x

Conagra Brands 36.75 14,584 18,117 7,820 1,531 (5.0%) (17.3%) 30.0% 19.6% 22.0x 2.3x 2.3x 11.8x 12.0x

General Mills 50.82 28,777 38,694 15,568 3,311 (2.4%) (4.1%) 34.9% 21.3% 19.9x 2.5x 2.4x 11.7x 11.3x

Hormel Foods 32.48 17,140 17,634 9,219 1,371 (3.1%) (0.9%) 21.2% 14.9% 22.8x 1.9x 1.8x 12.9x 12.4x

Kellogg Company 67.37 23,134 31,484 12,923 2,919 (0.7%) (3.9%) 40.3% 22.6% 17.3x 2.4x 2.4x 10.8x 11.9x

McCormick & Company 107.87 14,006 18,860 4,834 932 9.6% 4.4% 42.0% 19.3% 30.1x 3.9x 3.5x 20.2x 16.9x

Nestlé S.A. 78.41 239,745 260,351 96,142 19,794 0.4% (0.6%) 50.2% 20.6% 25.1x 2.7x 2.7x 13.2x 13.6x

Post Holdings 77.37 5,236 11,044 5,409 974 7.6% 19.3% 30.4% 18.0% 33.1x 2.0x 1.7x 11.3x 8.5x

The Hershey Company 98.29 20,606 23,146 7,515 1,803 1.0% 0.4% 45.9% 24.0% 23.4x 3.1x 2.9x 12.8x 12.1x

The J. M. Smucker Company 128.17 14,416 19,172 7,360 1,632 (0.8%) 10.3% 38.0% 22.2% 21.9x 2.6x 2.5x 11.7x 11.3x

Mean 3.3% 3.1% 35.1% 19.9% 22.6x 2.4x 2.3x 12.3x 11.7x

Median (0.2%) (0.1%) 36.3% 20.1% 22.4x 2.4x 2.3x 11.8x 11.6x



30



Private Label Food and Beverages

Cott Corporation $15.66 $2,181 $4,329 $2,216 $267 (29.9%) 2.6% 49.7% 12.1% NM 2.0x 1.6x 16.2x 12.2x

Seneca Foods Corporation 30.03 288 735 1,315 42 2.5% 0.3% 6.6% 3.2% NM 0.6x 0.0x 17.4x 0.0x

Treehouse Foods 39.59 2,134 4,521 6,307 599 2.1% 28.9% 17.9% 9.5% 16.1x 0.7x 0.7x 7.6x 8.3x

Mean (8.4%) 10.6% 24.7% 8.3% 16.1x 1.1x 0.8x 13.7x 6.8x

Median 2.1% 2.6% 17.9% 9.5% 16.1x 0.7x 0.7x 16.2x 8.3x



Natural / Organic / Better-For-You

SunOpta $7.07 $602 $1,130 $1,249 $15 (5.0%) 5.1% 11.3% 1.2% NM 0.9x 0.9x 74.5x 12.7x

Pinnacle Foods 56.31 6,522 9,235 3,144 648 0.5% 6.7% 27.6% 20.6% 30.3x 2.9x 2.9x 14.3x 12.9x

The Hain Celestial Group 34.69 3,543 4,170 2,915 277 0.7% 5.7% 19.5% 9.5% 30.7x 1.4x 1.4x 15.1x 11.8x

Mean (1.3%) 5.8% 19.5% 10.4% 30.5x 1.8x 1.7x 34.6x 12.5x

Median 0.5% 5.7% 19.5% 9.5% 30.5x 1.4x 1.4x 15.1x 12.7x

Baked Goods

ARYZTA AG $23.62 $2,124 $4,234 $4,614 $537 (2.1%) 3.8% 18.2% 11.6% 34.9x 0.9x 1.0x 7.9x 10.2x

Flowers Foods 20.69 4,311 5,144 3,921 447 (0.2%) 1.5% 48.8% 11.4% 23.7x 1.3x 1.3x 11.5x 11.1x

George Weston Limited 80.37 10,329 24,650 37,590 3,289 0.6% 3.2% 29.9% 8.7% 32.0x 0.7x 0.7x 7.5x 7.4x

Grupo Bimbo 2.29 10,998 15,852 14,199 1,622 6.1% 12.7% 53.4% 11.4% 24.7x 1.1x 1.0x 9.8x 9.2x

Lancaster Colony Corporation 119.58 3,245 3,066 1,202 202 1.0% 4.2% 25.3% 16.8% 29.3x 2.6x 2.5x 15.2x 14.1x

Mean 1.1% 5.1% 35.1% 12.0% 28.9x 1.3x 1.3x 10.4x 10.4x

Median 0.6% 3.8% 29.9% 11.4% 29.3x 1.1x 1.0x 9.8x 10.2x





31



Dairy

Danone $78.52 $49,376 $71,949 $30,387 $5,427 12.5% 5.3% 100.0% 17.9% 20.8x 2.4x 2.4x 13.3x 12.5x

Dean Foods Company 8.96 800 1,697 7,795 326 1.1% (6.4%) 23.3% 4.2% 13.7x 0.2x 0.2x 5.2x 5.5x

Emmi AG 749.97 4,012 4,428 3,483 347 0.6% (0.9%) 36.1% 10.0% 34.7x 1.3x 1.2x 12.8x 12.2x

Glanbia plc 17.73 5,177 5,625 2,910 463 7.0% (2.0%) 27.0% 15.9% 25.4x 1.9x 2.0x 12.1x 14.2x

Lifeway Foods 6.70 106 106 123 7 (0.3%) 2.2% 29.7% 5.6% 47.3x 0.9x 0.9x 15.3x 0.0x

Parmalat S.p.A. 3.64 6,754 6,700 8,369 485 5.0% 8.0% 18.7% 5.8% 45.1x 0.8x 0.8x 13.8x 10.7x

Saputo 31.20 12,035 13,336 8,965 1,001 3.1% 2.7% 11.2% 11.2% 24.5x 1.5x 1.4x 13.3x 12.1x

Savencia SA 102.70 1,426 2,082 5,766 410 7.5% 1.5% 36.5% 7.1% 10.6x 0.4x 0.3x 5.1x 5.3x

Mean 4.6% 1.3% 35.3% 9.7% 27.8x 1.2x 1.2x 11.4x 9.1x

Median 4.0% 1.9% 28.4% 8.5% 24.9x 1.1x 1.0x 13.0x 11.4x

Non-Alcoholic Beverages

A.G. BARR $8.84 $1,004 $993 $369 $72 5.6% 0.9% 46.5% 19.5% 26.8x 2.7x 2.6x 13.8x 13.4x

Cott Corporation 15.66 2,181 4,329 2,216 267 (29.9%) 2.6% 49.7% 12.1% NM 2.0x 1.6x 16.2x 12.2x

Dr Pepper Snapple Group 115.47 20,929 25,355 6,690 1,577 3.9% 3.0% 59.7% 23.6% 28.2x 3.8x 3.7x 16.1x 15.9x

Lassonde Industries 192.62 1,344 1,522 1,175 134 (1.1%) 10.6% 28.3% 11.4% 25.6x 1.3x 1.3x 11.3x 10.8x

Monster Beverage 53.98 30,710 29,509 3,369 1,246 10.5% 11.0% 63.5% 37.0% 41.7x 8.8x 7.8x 23.7x 20.9x

National Beverage 96.36 4,492 4,359 911 203 19.7% 12.5% 39.8% 22.3% 38.0x 4.8x 4.1x 21.5x 18.0x

Pepsico 108.28 153,520 173,227 63,525 12,723 1.2% (1.6%) 54.7% 20.0% 25.9x 2.7x 2.6x 13.6x 12.7x

The Coca-Cola Company 43.38 185,268 214,222 35,410 11,941 (15.4%) (8.4%) 62.6% 33.7% 28.5x 6.0x 6.8x 17.9x 18.5x

Mean (0.7%) 3.8% 50.6% 22.4% 30.7x 4.0x 3.8x 16.8x 15.3x

Median 2.5% 2.8% 52.2% 21.2% 28.2x 3.3x 3.2x 16.1x 14.6x

Snacks

Inventure Foods $0.00 $3 $5 $19 $2 0.0% 0.0% 56.7% 9.3% 0.0x 0.3x 0.0x 3.1x 0.0x

J&J Snack Foods 136.46 2,512 2,383 1,124 164 12.9% 6.6% 30.1% 14.6% 32.3x 2.1x 2.1x 14.5x 13.6x

John B. Sanfilippo & Son 57.42 652 720 849 66 (7.6%) 0.6% 15.9% 7.8% 21.7x 0.8x 0.8x 10.9x 0.0x

Mondelez International 44.31 64,877 82,338 25,896 5,067 (0.1%) (8.9%) 38.9% 19.6% 28.2x 3.2x 3.1x 16.2x 14.9x

Pepsico 108.28 153,520 173,227 63,525 12,723 1.2% (1.6%) 54.7% 20.0% 25.9x 2.7x 2.6x 13.6x 12.7x

Snyder's-Lance 49.90 4,904 5,980 2,227 253 5.6% 11.2% 35.9% 11.4% 66.2x 2.7x 2.7x 23.6x 18.1x

Mean 2.0% 1.3% 38.7% 13.8% 29.1x 2.0x 1.9x 13.7x 9.9x

Median 0.6% 0.3% 37.4% 13.0% 27.1x 2.4x 2.4x 14.1x 13.1x







32

Food & Beverage Inputs Public Comps




Protein Processing

JBS S.A. 3.07 8,344 22,853 49,805 3,654 (7.9%) 12.6% 14.4% 7.3% 19.0x 0.5x 0.4x 6.3x 5.1x

Sanderson Farms 122.63 2,806 2,417 3,426 511 18.2% 6.2% 18.4% 14.9% 10.9x 0.7x 0.7x 4.7x 5.8x

Seaboard Corporation 4,073.75 4,753 3,769 5,809 343 8.0% (3.5%) 9.5% 5.9% 17.7x 0.6x 0.0x 11.0x 0.0x

Tyson Foods 73.45 26,983 36,393 39,307 3,951 6.5% (0.3%) 13.1% 10.1% 15.1x 0.9x 0.9x 9.2x 8.4x

Mean 6.2% 3.8% 13.8% 9.6% 15.7x 0.7x 0.5x 7.8x 4.8x

Median 7.2% 3.0% 13.8% 8.7% 16.4x 0.7x 0.6x 7.7x 5.5x

Fruit and Vegetable

Calavo Growers $84.35 $1,475 $1,490 $1,076 $71 15.0% 11.2% 10.6% 6.6% 39.8x 1.4x 1.2x 21.1x 17.1x

Fresh Del Monte Produce 47.14 2,298 2,654 4,086 238 1.9% 1.3% 8.1% 5.8% 25.1x 0.6x 0.0x 11.2x 0.0x

Total Produce plc 2.89 1,048 1,283 4,479 127 18.3% 11.3% 13.4% 2.8% 24.2x 0.3x 0.3x 10.1x 9.9x

Mean 11.7% 7.9% 10.7% 5.1% 29.7x 0.8x 0.5x 14.1x 9.0x

Median 15.0% 11.2% 10.6% 5.8% 25.1x 0.6x 0.3x 11.2x 9.9x



Ingredients / Flavors

Givaudan SA $2,244.58 $20,672 $21,816 $5,388 $1,089 8.3% 4.7% 44.5% 20.2% 40.0x 4.0x 3.9x 20.0x 17.4x

Ingredion Incorporated 130.62 9,315 10,601 5,832 1,089 2.2% 1.0% 25.4% 18.7% 19.3x 1.8x 1.8x 9.7x 9.2x

International Flavors & Fragrances 137.93 10,922 12,193 3,399 746 9.1% 3.2% 44.1% 21.9% 30.8x 3.6x 3.4x 16.3x 15.1x

Kerry Group plc 100.54 17,537 19,255 7,812 1,086 4.5% 3.6% 100.0% 13.9% 34.5x 2.5x 2.4x 17.7x 16.6x

Sensient Technologies Corporation 71.29 3,069 3,664 1,362 253 (1.5%) (2.0%) 35.1% 18.6% 27.1x 2.7x 2.6x 14.5x 12.8x

Symrise AG 79.08 10,265 12,095 3,640 758 8.1% 17.2% 41.2% 20.8% 35.8x 3.3x 3.2x 16.0x 15.1x

Tate & Lyle plc 7.64 3,542 4,037 3,899 654 12.9% 5.1% 43.4% 16.8% 14.3x 1.0x 1.1x 6.2x 6.8x

Mean 6.2% 4.7% 47.7% 18.7% 28.8x 2.7x 2.6x 14.4x 13.3x

Median 8.1% 3.6% 43.4% 18.7% 30.8x 2.7x 2.6x 16.0x 15.1x



33

Food & Beverage Grocery & Distribution Public Comps


Grocery Distribution

AMCON Distributing Company $90.00 $62 $77 $914 $7 1.2% 2.1% 7.9% 0.8% 21.4x 0.1x 0.0x 10.3x 0.0x

Core-Mark Holding Company 20.43 934 1,451 15,687 92 36.3% 24.3% 5.0% 0.6% 52.9x 0.1x 0.1x 15.8x 9.1x

Performance Food Group Company 31.63 3,171 4,574 17,340 363 5.9% 0.0% 12.8% 2.1% 29.4x 0.3x 0.2x 12.6x 10.2x

SpartanNash Company 18.12 611 1,346 8,128 215 5.1% 0.9% 14.1% 2.6% 9.5x 0.2x 0.2x 6.3x 5.8x

SUPERVALU 15.17 565 2,429 14,649 476 17.5% (5.7%) 12.7% 3.2% 7.3x 0.2x 0.1x 5.1x 4.9x

United Natural Foods 43.13 2,169 2,595 9,454 322 9.0% 9.6% 15.3% 3.4% 16.0x 0.3x 0.3x 8.1x 7.5x

Mean 12.5% 5.2% 11.3% 2.1% 22.7x 0.2x 0.2x 9.7x 6.2x

Median 7.4% 1.5% 12.7% 2.4% 18.7x 0.2x 0.2x 9.2x 6.7x



Foodservice Distribution

Sysco Corporation $59.47 31,033 38,992 57,007 3,072 7.4% 5.8% 18.9% 5.4% 25.5x 0.7x 0.7x 12.7x 11.6x

The Chefs' Warehouse 22.90 648 924 1,302 62 9.1% 16.1% 25.3% 4.7% 54.2x 0.7x 0.6x 15.0x 12.1x

Mean 8.3% 10.9% 22.1% 5.1% 39.9x 0.7x 0.7x 13.8x 11.8x

Median 8.3% 10.9% 22.1% 5.1% 39.9x 0.7x 0.7x 13.8x 11.8x



Food Retail

Costco $189.63 $83,004 $82,875 $132,734 $5,621 11.0% 5.1% 13.2% 4.2% 32.8x 0.6x 0.6x 14.7x 13.9x

J Sainsbury plc 3.49 7,619 9,633 38,885 1,517 19.0% 5.7% 6.6% 3.9% 27.3x 0.2x 0.2x 6.4x 5.0x

Natural Grocers by Vitamin Cottage 7.22 157 211 788 42 9.2% 13.0% 27.1% 5.3% 30.6x 0.3x 0.3x 5.0x 4.9x

Sprouts Farmers Market 25.50 3,443 3,907 4,665 324 15.3% 16.3% 28.9% 6.9% 27.6x 0.8x 0.7x 12.1x 11.3x

SUPERVALU 15.17 565 2,429 14,649 476 17.5% (5.7%) 12.7% 3.2% 7.3x 0.2x 0.1x 5.1x 4.9x

Tesco PLC 2.78 22,679 30,252 77,527 3,627 4.8% (1.4%) 4.4% 4.7% 29.1x 0.4x 0.4x 8.3x 7.3x

Kroger 27.22 24,202 38,673 119,240 5,615 4.7% 3.8% 22.7% 4.7% 15.8x 0.3x 0.3x 6.9x 6.6x

Weis Markets 38.33 1,016 984 3,508 166 19.1% 8.5% 27.1% 4.7% 19.2x 0.3x 0.0x 5.9x 0.0x

The Chefs' Warehouse 22.90 648 924 1,302 62 9.1% 16.1% 25.3% 4.7% 54.2x 0.7x 0.6x 15.0x 12.1x

Mean 12.2% 6.8% 18.7% 4.7% 27.1x 0.4x 0.4x 8.8x 7.3x

Median 11.0% 5.7% 22.7% 4.7% 27.6x 0.3x 0.3x 6.9x 6.6x



Your Brand. Our Business. - Cascadia Capital · 2019. 1. 22. · 2 FOOD & BEVERAGE DEAL FLOW BY...

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