investment banking i industry spotlight - fifth third bank · 1 food, beverage & agribusiness i...

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Food, Beverage & Agribusiness I Industry Spotlight

Q3 2017

Food, Beverage & Agribusiness I Q3 2017

Investment Banking I Industry Spotlight

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Q3 2017 Consumer & Retail Investment Banking

Representative Transactions

Charlie Hurt

Managing Director

(404) 279-4518

[email protected]

Red Farha

Principal

(704) 808-5129

[email protected]

Investment Banking

John Shoffner

Managing Director

(704) 688-1813

[email protected]

John Boisture

Director

(704) 688-4522

[email protected]

Bill Tyson

Co-Head, Capital Markets

(804) 916-1481

[email protected]

Eric Welsch

Sponsor Relationship Management

(216) 274-5793

[email protected]

Sponsor Coverage

Mike Brothers

Managing Director (DCM)

(312) 704-7362

[email protected]

Matthew Holbrook

Managing Director (DCM)

(704) 808-5052

[email protected]

Debt & Equity Capital Markets

Craig Wolf

C&R Group Head

(312) 704-2994

[email protected]

Michael Laurie

Food & Ag. Group Head

(312) 517-3291

[email protected]

Corporate Banking

Representative Transactions

Key Contacts Consumer & Retail Investment Banking

Fifth Third Securities’ Consumer & Retail Investment Banking Group advises middle market and mid-cap companies on M&A advisory, capital raising, and strategic alternatives in the following sectors:

Consumer Food, Beverage & Agribusiness

Restaurants Retail

Apparel, Accessories & Footwear

Building Products

Interior Furnishings

Personal & Household Products

Recreational Products

Consumer Services

Entertainment, Lodging & Leisure

Agricultural Inputs/Production

Beverages/Dairy

Horticulture

Foodservice Distribution

Grocery & C-Store Distribution

Ingredients & Flavors

Packaged Food/Snack

Casual Dining

Coffee & Specialty

Family Dining

Fast Casual

Fine Dining & Polished Casual

Franchisees

Quick Service (QSR)

Apparel, Accessories & Footwear

Discount & Off-Price

Furniture & Furnishings

Grocery & Pharmacy

Internet & e-Commerce

Mass Merchandise

Specialty

Mike Ryan

Managing Director (ECM)

(615) 687-3123

[email protected]

Susannah Lunke

Director (ECM)

(615) 687-3047

[email protected]

$425,000,000

has been acquired by

Sell-Side Advisor

obtained sub-debt financing from

Financial Advisor

has been acquired by

Croton Holding

Company

Sell-Side Advisor

obtained sub-debt financing from

Financial Advisor

Planet Fitness Midwest

$442,000,000

Senior Secured Credit Facilities

Joint Lead Arranger

$51,000,000


Lead Arranger

$650,000,000

Senior Unsecured Notes

Co-Manager

$74,000,000


Franchisee

Lead Arranger

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Q3 2017

(80.0%)

(40.0%)

0.0%

40.0%

Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17

Crude Oil Corn Soybeans Wheat

(80.0%)

(40.0%)

0.0%

40.0%

Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17

Cattle Chicken Pork

(20.0%)

(10.0%)

0.0%

10.0%

20.0%

30.0%

Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17

Restaurant Grocery

Food, Beverage & Agribusiness Vital Signs

Commodity Price Indices

Protein Price Indices

Restaurant and Grocery Store Sales Indices

Source: S&P Capital IQ, and Bloomberg

3-yr | 1-yr | YTD

3-yr | 1-yr | YTD

3-yr | 1-yr | YTD

Restaurant:

19.0% 2.0% (3.7%)

Grocery:

6.7% 1.1% (3.6%)

Soybeans:

(1.2%) 0.3% (3.5%)

Corn:

3.3% 5.3% 0.8%

Wheat:

(9.5%) 11.4% 10.0%

Crude Oil:

(44.0%) 19.9% (2.5%)

Cattle:

(26.0%) 9.9% 1.2%

Poultry:

(17.5%) 17.0% 4.4%

Pork:

(40.8%) 15.8% (14.4%)

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Q3 2017 Public Market Valuation Trends

5-Year EV / LTM EBITDA Performance[1] 5-Year Share Price Performance[1]

Sub Sector Indices’ Stock Price Performance[1]

Source: S&P Capital IQ

[1] Ingredients & Flavors, Branded Processed Foods, Private Label Food Manufacturers, and Natural/ Organic/ Better-for-You Indices correspond to the public comparables found in the following pages

Protein Processing/ Dairy is comprised of the Protein Processing and Dairy public comparables found on the following pages

Beverage is comprised of the Non-Alcoholic Beverages and Alcoholic Beverages public comparables found on the following pages

(50.0%)

0.0%

50.0%

100.0%

150.0%

200.0%

Sep-2012 Sep-2013 Sep-2014 Sep-2015 Sep-2016 Sep-2017

Ingredients & Flavors Protein Processing/ Dairy

Branded Processed Foods Private Label Food Manufacturers

Natural/ Organic/ Better-For-You Beverage

Ready-To-Eat S&P 500 Index

5.0x

10.0x

15.0x

20.0x

25.0x

Sep-2012 Sep-2013 Sep-2014 Sep-2015 Sep-2016 Sep-2017

Ingredients & Flavors Protein Processing/ Dairy

Branded Processed Foods Private Label Food Manufacturers

Natural/ Organic/ Better-For-You Beverage

Ready-To-Eat S&P 500 Index

Sub-SectorNumber of

Companies

Median

Enterprise Value

Median

% Change in Stock Price

Median TEV /

LTM Multiples

Median TEV /

Forward Multiples

$ in millions 1 Year 3 Year Revenue EBITDA Revenue EBITDA

Ingredients & Flavors 9 $12,695.1 0.7% 36.0% 1.9x 15.4x 1.7x 13.3x

Protein Processing/ Dairy 14 4,196.4 1.4% 26.3% 1.0x 9.6x 0.9x 9.8x

Branded Processed Foods 12 13,272.3 (14.5%) 15.7% 2.2x 12.1x 2.2x 11.6x

Private Label Food Manufacturing 4 3,309.5 13.5% 19.3% 0.9x 10.5x 1.0x 9.2x

Natural/ Organic/ Better-for-You 4 3,083.6 16.0% (19.5%) 2.4x 16.5x 2.3x 14.8x

Beverage 17 29,163.1 14.0% 23.5% 3.3x 15.1x 3.0x 13.8x

Ready-To-Eat 2 2,313.1 18.3% 72.2% 1.1x 12.4x 0.7x 8.6x

S&P 500 500 16.7% 26.9% 2.4x 12.3x 2.3x 10.6x

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Q3 2017 Public Company Comparables

Operating and Trading Statistics ($ in millions, except per-share data)

Source: S&P Capital IQ NA- Not Available NM – Not Meaningful E – Estimate Enterprise Value = Market Value of Equity + Book Value of Debt – Cash & Cash Equivalents

Stock % of 52- Enterprise Value /

Price at Week Market Enterprise LTM Financials Revenue Growth LTM Margins Debt / Price / Revenue EBITDA

9/29/17 High Cap Value Revenue EBITDA '15A - '16A '16A - '17E Gross EBITDA EBITDA Earnings LTM 2017E LTM 2017E

Agricultural Inputs

Monsanto Company $119.82 99.5% $52,640 $60,951 $14,516 $4,189 (10.0%) 9.5% 53.5% 28.9% 2.4x 26.1x 4.2x 4.1x 14.6x 15.3x

Archer-Daniels-Midland Company 42.51 88.8% 23,913 30,257 62,264 2,703 (7.9%) 1.6% 6.3% 4.3% 2.6x 18.0x 0.5x 0.5x 11.2x 11.0x

Bunge Limited 69.46 82.9% 9,766 15,608 45,988 1,292 (1.8%) 9.9% 4.5% 2.8% 4.5x 20.0x 0.3x 0.3x 12.1x 10.6x

CF Industries Holdings, Inc. 35.16 94.6% 8,201 15,103 3,708 895 (14.5%) 4.8% 10.1% 24.1% 6.5x NM 4.1x 3.9x 16.9x 17.0x

The Mosaic Company 21.59 62.8% 7,579 10,865 7,147 1,074 (19.5%) (0.7%) 10.4% 15.0% 3.6x NM 1.5x 1.5x 10.1x 10.6x

Darling Ingredients Inc. 17.52 93.9% 2,885 4,610 3,518 429 0.0% 4.5% 21.6% 12.2% 4.1x 34.4x 1.3x 1.3x 10.8x 10.5x

The Andersons, Inc. 34.25 76.3% 964 1,520 3,818 120 (6.5%) 1.4% 9.0% 3.1% 4.7x NM 0.4x 0.4x 12.7x 9.4x

Mean (8.6%) 4.4% 16.5% 12.9% 4.0x 24.6x 1.8x 1.7x 12.6x 12.0x

Median (7.9%) 4.5% 10.1% 12.2% 4.1x 23.0x 1.3x 1.3x 12.1x 10.6x

Ingredients & Flavors

Associated British Foods plc $42.81 95.5% $33,744 $33,613 $17,851 $2,178 (11.2%) 17.6% 23.1% 12.2% 0.5x 25.2x 1.9x 1.6x 15.4x 13.3x

Givaudan SA 2,174.41 98.9% 20,039 21,531 5,023 1,038 4.6% 11.4% 45.0% 20.7% 1.7x 29.3x 4.3x 4.2x 20.8x 18.9x

McCormick & Company, Incorporated 102.64 96.4% 13,446 18,668 4,570 797 2.7% 9.0% 41.2% 17.4% 6.7x 28.5x 4.1x 3.9x 23.4x 20.6x

Kerry Group plc 96.08 99.2% 16,924 18,381 7,159 969 (2.4%) 15.9% 47.3% 13.5% 2.1x 27.8x 2.6x 2.4x 19.0x 17.1x

International Flavors & Fragrances Inc. 142.91 98.0% 11,286 12,695 3,211 671 3.1% 7.1% 44.6% 20.9% 2.8x 28.8x 4.0x 3.8x 18.9x 16.7x

Olam International Limited 1.49 93.1% 4,069 12,600 16,831 870 9.5% 9.1% 10.3% 5.2% 11.3x 16.2x 0.7x 0.8x 14.5x 13.1x

Ingredion Incorporated 120.64 87.7% 8,653 10,181 5,799 1,053 1.5% 3.9% 24.9% 18.2% 1.9x 18.1x 1.8x 1.7x 9.7x 9.3x

Tate & Lyle plc 8.69 76.3% 4,030 4,535 3,448 506 1.6% 10.7% 41.8% 14.7% 1.7x 12.8x 1.3x 1.2x 9.0x 7.8x

Rogers Sugar Inc. 5.06 91.1% 535 700 501 52 4.9% 35.1% 13.4% 10.5% 3.2x 18.0x 1.4x 1.2x 13.4x 9.4x

Mean 1.6% 13.3% 32.4% 14.8% 3.5x 22.8x 2.4x 2.3x 16.0x 14.0x

Median 2.7% 10.7% 41.2% 14.7% 2.1x 25.2x 1.9x 1.7x 15.4x 13.3x

Fruits, Vegatables, Nuts

Fresh Del Monte Produce Inc. $45.46 68.0% $2,278 $2,505 $4,084 $292 (1.1%) NA 9.7% 7.1% 0.8x 14.5x 0.6x NA 8.6x NA

Del Monte Pacific Limited 0.21 79.4% 415 2,223 2,259 297 (0.9%) 0.0% 22.0% 13.1% 6.0x 13.3x 1.0x 1.0x 7.5x 10.7x

Calavo Growers, Inc. 73.20 95.3% 1,283 1,314 1,046 68 9.2% 22.1% 10.5% 6.5% 0.6x 35.4x 1.3x 1.2x 19.3x 18.1x

Total Produce plc 2.72 100.0% 874 1,134 3,811 108 5.0% 29.6% 13.7% 2.8% 2.6x 21.7x 0.3x 0.3x 10.5x 11.6x

John B. Sanfilippo & Son, Inc. 67.31 90.1% 760 817 847 73 (11.1%) 2.2% 16.8% 8.6% 0.8x 21.2x 1.0x 0.9x 11.3x NA

Mean 0.2% 13.5% 14.5% 7.6% 2.2x 21.2x 0.8x 0.8x 11.4x 13.5x

Median (0.9%) 12.1% 13.7% 7.1% 0.8x 21.2x 1.0x 1.0x 10.5x 11.6x

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Protein Processing

Tyson Foods, Inc. $70.45 93.2% $25,848 $36,457 $37,271 $3,782 (10.9%) 5.2% 13.3% 10.1% 2.9x 14.9x 1.0x 0.9x 9.6x 9.8x

JBS S.A. 2.70 65.8% 7,067 22,714 48,996 3,793 27.3% (1.7%) 13.5% 7.7% 4.9x 10.5x 0.5x 0.4x 6.0x 5.5x

Pilgrim's Pride Corporation 28.41 95.1% 7,067 8,218 8,212 1,001 (3.0%) 11.6% 12.6% 12.2% 1.4x 14.3x 1.0x 0.9x 8.2x 7.0x

Seaboard Corporation 4,505.00 99.0% 5,273 4,483 5,524 355 (3.8%) NA 9.3% 6.4% 1.9x 16.4x 0.8x NA 12.6x NA

Sanderson Farms, Inc. 161.52 97.6% 3,674 3,275 3,213 527 0.4% 21.7% 19.6% 16.4% 0.0x 13.0x 1.0x 1.0x 6.2x 5.9x

Cal-Maine Foods, Inc. 41.10 89.1% 1,996 1,853 1,075 (79) (43.7%) 6.6% 4.2% NM NM NM 1.7x 1.6x NM NM

Bridgford Foods Corporation 12.05 66.9% 109 99 154 14 7.4% NA 37.6% 9.1% 0.0x 13.0x 0.6x NA 7.1x NA

Mean (3.8%) 8.7% 15.7% 10.3% 1.8x 13.7x 0.9x 1.0x 8.3x 7.1x

Median (3.0%) 6.6% 13.3% 9.6% 1.6x 13.7x 1.0x 0.9x 7.6x 6.5x

Branded Processed Foods

General Mills, Inc. $51.76 80.6% $29,417 $40,031 $15,481 $3,322 (5.7%) (1.2%) 35.7% 21.5% 3.0x 18.5x 2.6x 2.6x 12.0x 12.3x

The Hershey Company 109.17 93.7% 23,193 25,965 7,516 1,723 0.7% 1.1% 43.8% 22.9% 1.7x 34.9x 3.5x 3.5x 15.1x 14.2x

Campbell Soup Company 46.82 72.9% 14,071 17,318 7,890 2,003 (0.9%) (0.6%) 38.8% 25.4% 1.8x 16.2x 2.2x 2.2x 8.6x 9.7x

Conagra Brands, Inc. 33.74 69.1% 14,024 17,062 7,736 1,369 (9.7%) (1.5%) 30.1% 17.7% 2.4x 24.7x 2.2x 2.2x 12.5x 11.4x

The J. M. Smucker Company 104.93 73.0% 11,918 16,961 7,325 1,608 (5.4%) (0.8%) 37.9% 22.0% 3.3x 22.0x 2.3x 2.3x 10.5x 10.4x

Hormel Foods Corporation 32.14 82.7% 16,964 16,585 9,303 1,410 2.8% (3.4%) 22.5% 15.2% 0.2x 19.8x 1.8x 1.8x 11.8x 11.7x

Post Holdings, Inc. 88.27 99.1% 5,840 9,960 5,038 891 8.1% 7.2% 30.1% 17.7% 7.4x NM 2.0x 1.8x 11.2x 9.6x

Snyder's-Lance, Inc. 38.14 93.4% 3,686 4,823 2,211 266 27.3% 5.7% 36.7% 12.0% 4.3x NM 2.2x 2.2x 18.1x 15.5x

B&G Foods, Inc. 31.85 64.4% 2,118 3,888 1,518 317 44.0% 18.8% 30.7% 20.9% 5.7x 20.9x 2.6x 2.4x 12.2x 10.8x

Lancaster Colony Corporation 120.12 80.5% 3,297 3,154 1,202 218 0.9% 1.3% 26.5% 18.2% 0.0x 28.6x 2.6x 2.6x 14.4x 15.0x

J&J Snack Foods Corp. 131.30 91.7% 2,460 2,318 1,030 151 1.7% 7.9% 30.2% 14.7% 0.0x 32.7x 2.3x 2.2x 15.3x 14.5x

Dean Foods Company 10.88 48.8% 989 1,862 7,905 376 (5.1%) 2.2% 24.3% 4.8% 2.4x 17.6x 0.2x 0.2x 4.9x 5.3x

Mean 4.9% 3.0% 32.3% 17.7% 2.7x 23.6x 2.2x 2.2x 12.2x 11.7x

Median 0.8% 1.2% 30.5% 17.9% 2.4x 21.5x 2.2x 2.2x 12.1x 11.6x

Private Label Food Manufacturers

Treehouse Foods, Inc. $67.73 74.9% $3,873 $6,316 $6,422 $654 92.6% 1.8% 18.8% 10.2% 4.0x NM 1.0x 1.0x 9.7x 9.2x

Cott Corporation 14.97 92.6% 2,082 4,266 3,683 378 9.9% 11.8% 34.2% 10.2% 6.1x NM 1.2x 1.2x 11.3x 10.1x

Refresco Group N.V. 20.14 88.3% 1,635 2,353 2,586 252 1.6% 22.3% 42.1% 9.7% 3.4x 18.0x 0.9x 0.9x 9.3x 8.6x

Seneca Foods Corporation 34.50 80.9% 340 718 1,273 54 (2.3%) NA 8.1% 4.2% 7.3x 29.0x 0.6x NA 13.4x NA

Mean 25.4% 12.0% 25.8% 8.6% 5.2x 23.5x 0.9x 1.0x 10.9x 9.3x

Median 5.7% 11.8% 26.5% 10.0% 5.1x 23.5x 0.9x 1.0x 10.5x 9.2x

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Bakery Products

George Weston Limited $86.93 86.5% $11,120 $25,062 $36,566 $2,959 5.7% 10.2% 29.3% 8.1% 3.4x 24.7x 0.7x 0.6x 8.5x 7.5x

Grupo Bimbo, S.A.B. de C.V. 2.42 82.0% 11,383 15,410 14,669 1,732 (3.8%) 19.5% 53.9% 11.8% 2.4x 40.3x 1.1x 1.1x 8.9x 9.6x

Flowers Foods, Inc. 18.81 89.6% 3,938 4,778 3,902 409 3.9% (1.0%) 48.7% 10.5% 2.1x 24.8x 1.2x 1.2x 11.7x 10.9x

ARYZTA AG 30.69 64.8% 2,724 4,768 4,475 476 3.2% (3.4%) 18.2% 10.6% 5.6x NM 1.1x 1.1x 10.0x 9.8x

Maple Leaf Foods Inc. 27.21 96.2% 3,500 3,426 2,629 279 4.5% 14.1% 17.8% 10.6% 0.0x 27.1x 1.3x 1.2x 12.3x 10.8x

Mean 2.7% 7.9% 33.6% 10.3% 2.7x 29.2x 1.1x 1.0x 10.3x 9.7x

Median 3.9% 10.2% 29.3% 10.6% 2.4x 25.9x 1.1x 1.1x 10.0x 9.8x

Natural/ Organic/ Better-For-You

Pinnacle Foods Inc. $57.17 85.8% $6,792 $9,641 $3,128 $669 17.8% 0.8% 29.4% 21.4% 4.5x 37.3x 3.1x 3.1x 14.4x 14.1x

The Hain Celestial Group, Inc. 41.15 90.2% 4,268 4,871 2,853 260 (1.1%) 1.7% 19.0% 9.1% 2.9x NM 1.7x 1.7x 18.7x 15.6x

SunOpta Inc. 8.65 79.9% 749 1,296 1,313 70 17.6% (2.0%) 11.2% 5.3% 6.7x NM 1.0x 1.0x 18.5x 16.8x

Amplify Snack Brands, Inc. 7.09 43.2% 544 1,119 345 81 47.2% 43.1% 41.7% 23.5% 7.2x 47.1x 3.2x 2.9x 13.8x 11.9x

Mean 20.4% 10.9% 25.3% 14.8% 5.3x 42.2x 2.3x 2.2x 16.4x 14.6x

Median 17.7% 1.3% 24.2% 15.3% 5.6x 42.2x 2.4x 2.3x 16.5x 14.8x

Dairy Products

Danone $78.44 95.5% $49,122 $70,037 $26,264 $4,640 (4.8%) 26.7% 50.2% 17.7% 5.4x 23.5x 2.7x 2.4x 15.1x 13.6x

Saputo Inc. 34.56 88.2% 13,351 14,421 8,790 1,020 (1.2%) 11.8% 11.6% 11.6% 1.1x 23.5x 1.6x 1.5x 14.1x 13.1x

Parmalat S.p.A. 3.66 96.3% 6,790 6,739 7,727 448 (1.7%) 20.6% 18.7% 5.8% 1.6x NM 0.9x 0.8x 15.0x 11.9x

Emmi AG 654.80 82.4% 3,503 3,910 3,408 337 (0.1%) 5.7% 36.1% 9.9% 1.9x 23.1x 1.1x 1.2x 11.6x 11.4x

Savencia SA 95.73 89.1% 1,329 1,937 5,342 376 (3.3%) 21.4% 36.5% 7.0% 2.9x 8.9x 0.4x 0.3x 5.2x 5.2x

Dean Foods Company 10.88 48.8% 989 1,862 7,905 376 (5.1%) 2.2% 24.3% 4.8% 2.4x 17.6x 0.2x 0.2x 4.9x 5.3x

Dairy Crest Group plc 8.24 91.9% 1,153 1,486 522 99 (14.2%) 14.6% 31.0% 19.1% 3.6x 28.0x 2.8x 2.5x 14.9x 12.2x

Mean (4.3%) 14.7% 29.8% 10.8% 2.7x 20.8x 1.4x 1.3x 11.6x 10.4x

Median (3.3%) 14.6% 31.0% 9.9% 2.4x 23.3x 1.1x 1.2x 14.1x 11.9x

Ready-To-Eat Products

Greencore Group plc $2.63 57.7% $1,856 $2,589 $2,255 $187 (5.1%) 67.0% 30.5% 8.3% 4.0x 28.5x 1.1x 0.8x 13.8x 9.4x

Bonduelle SA 45.03 97.4% 1,382 2,037 2,092 185 (1.0%) 39.7% 27.7% 8.8% 3.6x 25.4x 1.0x 0.7x 11.0x 7.9x

Mean (3.0%) 53.4% 29.1% 8.6% 3.8x 26.9x 1.1x 0.7x 12.4x 8.6x

Median (3.0%) 53.4% 29.1% 8.6% 3.8x 26.9x 1.1x 0.7x 12.4x 8.6x

8








Non-Alcoholic Beverages

The Coca-Cola Company $45.01 95.8% $191,981 $214,565 $38,862 $10,893 (5.5%) (16.4%) 61.2% 28.0% 4.6x 47.5x 5.5x 6.1x 19.7x 19.6x

Pepsico, Inc. 111.43 93.3% 158,845 181,142 63,301 12,420 (0.4%) 1.4% 54.9% 19.6% 3.2x 23.6x 2.9x 2.8x 14.6x 13.8x

Monster Beverage Corporation 55.25 96.5% 31,391 30,290 3,191 1,278 12.0% 10.9% 64.7% 40.0% 0.0x 41.8x 9.5x 9.0x 23.7x 22.6x

Dr Pepper Snapple Group, Inc. 88.47 88.9% 16,077 20,493 6,565 1,576 2.5% 4.8% 59.9% 24.0% 3.0x 21.2x 3.1x 3.0x 13.0x 12.4x

National Beverage Corp. 124.05 95.6% 5,779 5,598 870 190 17.3% 13.4% 39.7% 21.8% 0.0x 49.8x 6.4x 6.0x 29.5x 26.6x

Lassonde Industries Inc. 194.63 97.0% 1,360 1,557 1,167 131 7.6% 9.2% 28.6% 11.2% 1.3x 24.5x 1.3x 1.3x 11.9x 10.8x

A.G. BARR p.l.c. 8.29 93.2% 952 942 352 69 (12.1%) 13.4% 46.5% 19.5% 0.2x 21.3x 2.7x 2.6x 13.7x 13.2x

Mean 3.1% 5.3% 50.8% 23.5% 1.7x 32.8x 4.5x 4.4x 18.0x 17.0x

Median 2.5% 9.2% 54.9% 21.8% 1.3x 24.5x 3.1x 3.0x 14.6x 13.8x

Alcoholic Beverages

Anheuser-Busch InBev SA/NV $119.73 86.0% $231,514 $351,722 $52,415 $18,900 4.4% 25.4% 60.9% 36.1% 6.3x NM 6.7x 6.2x 18.6x 15.9x

Diageo plc 32.89 93.8% 82,475 95,106 15,650 5,044 12.3% 5.0% 61.2% 32.2% 2.4x 23.5x 6.1x 5.8x 18.9x 17.0x

Heineken N.V. 98.87 93.2% 56,322 72,204 24,156 5,264 (1.5%) 18.0% 39.4% 21.8% 3.4x 27.1x 3.0x 2.8x 13.7x 12.0x

Constellation Brands, Inc. 199.45 97.2% 38,922 47,943 7,395 2,593 12.0% 2.1% 49.5% 35.1% 3.6x 25.0x 6.5x 6.4x 18.5x 16.9x

Pernod Ricard SA 138.34 94.1% 36,551 45,707 10,280 2,795 6.6% 3.3% 62.2% 27.2% 3.5x 23.1x 4.4x 4.3x 16.4x 14.9x

Molson Coors Brewing Company 81.64 72.8% 17,584 29,163 8,782 1,933 36.9% 127.7% 42.3% 22.0% 6.1x 8.2x 3.3x 2.6x 15.1x 12.0x

Kirin Holdings Company, Limited 23.52 98.6% 21,461 27,447 15,424 2,200 (3.2%) 15.4% 52.6% 14.3% 2.3x 14.4x 1.8x 1.6x 12.5x 12.1x

Brown-Forman Corporation 54.30 90.9% 21,101 23,091 3,056 1,081 (3.1%) 5.1% 67.4% 35.4% 2.1x 30.0x 7.6x 7.3x 21.4x 20.6x

Carlsberg A/S 109.43 93.2% 16,571 20,494 9,688 2,089 (6.5%) 12.4% 50.8% 21.6% 2.1x 22.1x 2.1x 2.1x 9.8x 9.7x

Sapporo Holdings Limited 26.95 90.9% 2,099 4,115 4,904 419 4.5% 6.6% 35.3% 8.5% 4.9x 25.6x 0.8x 0.8x 9.8x 9.5x

Mean 6.2% 22.1% 52.2% 25.4% 3.7x 22.1x 4.2x 4.0x 15.5x 14.1x

Median 4.5% 9.5% 51.7% 24.6% 3.4x 23.5x 3.9x 3.5x 15.7x 13.5x

Food Distribution/ Wholesale

Sysco Corporation $53.95 94.5% $28,479 $35,887 $55,371 $3,031 9.9% 1.7% 19.1% 5.5% 2.7x 25.9x 0.6x 0.6x 11.8x 10.9x

US Foods Holding Corp. 26.70 86.9% 5,991 9,568 23,466 889 (0.9%) 4.9% 17.5% 3.8% 4.2x 20.0x 0.4x 0.4x 10.8x 9.3x

Performance Food Group Company 28.25 94.5% 2,940 4,229 16,762 342 4.1% 3.7% 12.7% 2.0% 3.8x 30.4x 0.3x 0.2x 12.4x 10.2x

United Natural Foods, Inc. 41.59 83.6% 2,105 2,476 9,274 319 9.5% 2.4% 15.4% 3.4% 1.2x 16.2x 0.3x 0.3x 7.8x 7.5x

Core-Mark Holding Company, Inc. 32.14 72.9% 1,489 1,789 11,832 118 29.9% 36.5% 6.4% 1.0% 2.8x 36.1x 0.2x 0.1x 15.2x 11.7x

SpartanNash Company 26.37 65.3% 983 1,620 7,925 228 1.1% 5.4% 14.4% 2.9% 2.9x 15.1x 0.2x 0.2x 7.1x 6.4x

The Chefs' Warehouse, Inc. 19.30 96.7% 509 792 1,260 56 13.9% 8.6% 25.4% 4.5% 5.7x 40.0x 0.6x 0.6x 14.1x 12.2x

Colabor Group Inc. 0.71 58.2% 73 167 1,036 21 3.4% 3.7% 2.1% 2.0% 4.5x 34.6x 0.2x 0.2x 8.0x 7.0x

Mean 8.9% 8.4% 14.1% 3.1% 3.5x 27.3x 0.3x 0.3x 10.9x 9.4x

Median 6.8% 4.3% 14.9% 3.2% 3.3x 28.2x 0.3x 0.3x 11.3x 9.7x

9


Q3 2017

8.0x

9.3x

8.7x

7.2x

8.1x8.4x 8.3x 8.4x

9.3x

9.9x 9.7x10.0x 10.2x

8.8x 8.7x9.0x

8.3x8.8x 9.0x

8.7x 8.7x 8.9x

9.6x9.3x

10.2x

8.5x

6.0x

8.0x

10.0x

12.0x

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD8/2016

YTD8/2017

Financial Buyers Strategic Buyers

0

4,000

8,000

12,000

16,000

20,000

24,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 3Q 2016 3Q 2017

Under $25mm $25 to $500mm Above $500mm Undisclosed

U.S. M&A Volume and Valuation Trends

Median Transaction Multiples (Enterprise Value / LTM EBITDA)

Transaction Volume

Note: This data represents the entire U.S. market (all industries) Source: PitchBook, S&P Capital IQ, and S&P Capital IQ LCD

Recession Recession

’16 vs. ’17

▼ 15%

‘07 to ‘11 Median Financial = 8.4x Strategic = 8.8x

‘12 to ‘16 Median Financial = 9.3x Strategic = 8.9x

10


Q3 2017

8.4x 7.8x

10.9x9.2x

12.4x10.1x

11.7x13.1x

9.9x

4.8x

10.8x 10.9x12.4x

13.5x14.6x

17.5x

2010 2011 2012 2013 2014 2015 2016 YTD 2017

Middle Market > $1 Billion

Food and Beverage M&A activity dipped in both value and volume for 3Q17, compared to the previous quarter

More than half of the sector’s value still derived from large transactions, which should continue as sector bellwethers consolidate the industry and divest “non-core” assets

− Bob Evan’s was acquired by Post for ~$1.6 billion

− Refresco acquired Cott’s carbonated beverage & juice manufacturing businesses for ~$1.3 billion

− McCormick & Company acquired French’s Food Company from Reckitt Benckiser for $4.2 billion

Deal multiples have risen through the year, with both Middle Market and large corporate multiples topping last year’s valuation levels

M&A outlook for Food & Beverage remains strong

– Favorable capital markets

– Broad set of Food & Beverage companies up for sale

– Strategic buyers continue to aggressively pursue transactions to drive growth and unlock value

U.S. Food and Beverage M&A Announced Deal Value ($ in billions)

U.S. Food and Beverage M&A Announced Deal Volume

U.S. Food and Beverage M&A Closed Deal Average EV / EBITDA Multiple

Source: Fifth Third Securities, S&P Capital IQ Note: Middle Market defined as transactions with disclosed deal values less than $1 billion. Food & Beverage M&A volume excludes restaurant transactions EV – Enterprise Value NA – Not Available

M&A Trends Food & Beverage Specific Activity

Middle Market 7 Yr. Mean: 10.4x > $1 Billion 7-Yr. Mean: 11.8x

0

50

100

150

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

3Q

14

4Q

14

1Q

15

2Q

15

3Q

15

4Q

15

1Q

16

2Q

16

3Q

16

4Q

16

1Q

17

2Q

17

3Q

17

$0

$20

$40

$60

$80

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

3Q

14

4Q

14

1Q15

2Q

15

3Q

15

4Q

15

1Q

16

2Q

16

3Q

16

4Q

16

1Q

17

2Q

17

3Q

17

Middle Market > $1 Billion

11


Q3 2017 Highlighted M&A Transactions

Source: Company Filings, S&P Capital IQ

Mars, Inc. Acquires Preferred Brands International, Inc.

Enterprise Value: $172.8 mm

Announced: August 14, 2017

Preferred Brands produces Ready-to-Eat Indian entrees, Asian noodles, and rice products

Leverages Tasty Bite’s strong product development pipeline, flavor expertise, and strategic sourcing of quality ingredients

Sapporo Holdings Limited to Acquire Anchor Brewing Company


LTM Revenue Multiple: 2.6x


Anchor Brewing Company produces beers and ales in San Francisco

Aimed at building a portfolio of “highly unique” alcoholic beverage, food and soft drink brands from around the world

Refresco Group Acquires Cott Retail Brands, Carbonated Soft Drinks

Enterprise Value: $1,250.0 mm


LTM EBITDA Multiple: 9.2x

Announced: July 25, 2017

The Carbonated Soft Drinks division offers soft drinks, flavored waters, juice-based products and energy drinks

Creates nationwide coverage in the US and extends Refresco’s broad product portfolio in the UK

McCormick & Company, Inc. Acquires French’s Food Companies



Announced: July 18, 2017

French’s Food produces ketchup, mustard, dressings and other food products

Capitalizes on the growing consumer interest in healthy, flavorful eating and coincides with McCormick’s strategy to re-focus on consumer health

Bob Evans Farms, Inc. produces and distributes food products for retailers

Strengthens Post Holding’s portfolio of brands, expands choices for customers and increases Post’s presence in higher growth packaged food



LTM EBITDA Multiple: 15.4x

Announced: September 19, 2017

Post Holdings, Inc. to Acquire Bob Evans Farms, Inc.



B&G Foods, Inc. to Acquire Back to Nature Foods Company, LLC

Back to Nature Foods produces cookies, crackers, granolas, juices and nuts

Diversifies B&G’s portfolio of brands and invests in the fast-growing Better-For-You market

12


Q3 2017

Food, Beverage & Agribusiness ($ in millions)


Recent FB&A Sector M&A Activity

Announced Private Equity Enterprise

Date Target Seller Acquirer Involvement Value (EV) Revenue EBITDA Revenue EBITDA

LTM EV / LTM

09/22/17 Angie's Artisan Treats, LLC - Conagra Brands, Inc. - - - - -

09/20/17 Sager Creek Vegetable Company, Inc. Del Monte Foods, Inc. Mccall Farms, Inc. $55.0 - - - -

09/19/17 Bob Evans Farms, Inc. (NasdaqGS:BOBE) Sandell Asset Management Corp. Post Holdings, Inc. $1,631.0 $418.2 $64.8 3.9x 25.2x

09/19/17 PetzLife Products, Inc. - Manna Pro Products, LLC - - - - -

09/19/17 CSM Bakery Solutions LLC, Brands CSM Bakery Solutions LLC BakeMark USA LLC - - - - -

09/15/17 Legacy Ventures International Inc. - Nexalin Technology, Inc. - $0.2 ($0.7) - -

09/14/17 Seven Sundays, LLC - Katjesgreenfood Gmbh & Co. Kg - - - - -

09/14/17 Blue Bottle Coffee, Inc. Index Ventures; et. al. Nestlé S.A. - - - - -

09/14/17 Erath Vineyards, Inc., Prince Hill Vineyard Erath Vineyards, Inc. Silver Oak Cellars, Inc. - - - - -

09/12/17 Frozen Foods Division, Inventure Foods Inventure Foods Oregon Potato Co. $50.0 - - - -

09/12/17 Aristocrat Group Corp., Assets Aristocrat Group Corp. International Spirits & Beverage Group, Inc. - - - - -

09/12/17 Ruby Fresh, Inc. - POMWonderful LLC - - - - -

09/07/17 Gertrude Hawk Chocolates, Ingredients Division Gertrude Hawk Chocolates, Inc. Barry Callebaut AG - $83.0 - - -

09/07/17 Sweet Earth, Inc. Renewal2 Management Company Nestlé USA, Inc. - - - - -

09/07/17 Columbia Basin Dairy Holdings, LLC - High Performance Beverages Company - - - - -

09/07/17 Mayacamas Vineyards Inc. - Private Investors - - - - -

09/06/17 Diamond Wings Upland Game Birds, LLC - Private Investors - - - - -

09/06/17 The Coca-Cola Company, Denver bottling plant The Coca-Cola Company Swire Pacific Holdings, Inc. - - - - -

09/06/17 Soupman, Inc., Substantially All Assets Soupman, Inc. WealthColony Management Group LLC $6.8 - - - -

09/01/17 Lathrop FSG, LLC - The Redwood Group, LLC - - - - -

08/31/17 Southeast Milk, Inc., shelf-life dairy products Southeast Milk, Inc. Saputo Inc. (TSX:SAP) - $47.0 - - -

08/31/17 Bluefin Seafoods Corporation - Creation Gardens, Inc. - - - - -

08/31/17 Coe Catanzaro & Sons Produce Inc. - Creation Gardens, Inc. - - - - -

08/29/17 The Coca-Cola Company, Production Center The Coca-Cola Company Swire Pacific Holdings, Inc. - - - - -

08/29/17 Popcorn, Indiana LLC - Eagle Family Foods Group LLC - - - - -

08/28/17 Greenrise Technologies, LLC - Boyne Capital Partners, LLC - - - - -

08/25/17 Fells Point Wholesale Meats, Inc. - The Chefs' Warehouse, Inc. $45.0 - - - -

08/25/17 Great Plains Coca-Cola Bottling Company, Inc. The Coca-Cola Company Coca-Cola Southwest Beverages, LLC $215.0 - - - -

08/22/17 Joseph Epstein Food Enterprises, Inc. - MamaMancini's Holdings, Inc. $4.7 - - - -

08/21/17 Traeger Pellet Grills, LLC Trilantic Capital Management LLC AEA Investors LP; et. al. - - - - -

08/21/17 Boyd Coffee Company, Inc. - Farmer Bros. Co. $58.6 $95.0 - 0.6x -

08/21/17 Glutenfreeda Foods, Inc. - Flagship Food Group LLC - - - - -

08/20/17 Back to Nature Foods Company, LLC Brynwood Partners; et. al. B&G Foods, Inc. $162.5 - - - -

08/17/17 Capitol Wholesale Meats, Inc. - Hormel Foods Corporation $425.0 - - - -

08/17/17 Labriola Baking Company C3 Capital Partners, LP; et. al. J&J Snack Foods Corp. - - - - -

08/17/17 Pepper Joe's, Inc. - Clickstop, Inc. - - - - -

08/17/17 Aquamar, Inc. - LM Foods, LLC - - - - -

08/16/17 IF & P Foods, Inc. - Rotunda Capital Partners, LLC - - - - -

08/16/17 Craft Distillers Inc. - E. & J. Gallo Winery, Inc. - - - - -

08/16/17 Dungeness Valley Creamery, Inc. - Jackie's Jersey Milk, Inc. - - - - -

13


Q3 2017






LTM EV / LTM

08/15/17 Richgood Gourmet LLC - Royal Cup, Inc. - - - - -

08/15/17 Calera Wine Company - Duckhorn Wine Company, Inc. - - - - -

08/14/17 Preferred Brands International Inc. - Effem Holdings Ltd. $172.8 - - - -

08/14/17 Kansas City Sausage Company, LLC - Smithfield Foods, Inc. - - - - -

08/14/17 Nature's Rancher, Inc. - Pederson's Natural Farms, Inc. - - - - -

08/12/17 Del Sol Food Company, Inc. - Sabormex, S.A. de C.V. - - - - -

08/10/17 Funky Buddha Brewery LLC - Constellation Brands, Inc. - - - - -

08/10/17 Magnolia Brewing Co, Inc. - New Belgium Brewing Company, Inc. - - - - -

08/04/17 Crocker & Winsor Seafoods, Inc. - Newport Organization LLC - - - - -

08/03/17 Anchor Brewing Company, LLC Anchor Brewers and Distillers, LLC Sapporo Holdings Limited $85.0 $33.0 - 2.6x -

08/03/17 Cold Spring Brewing Company - Brynwood Partners - $60.0 - - -

08/03/17 Southern States Coop., Animal Feed Business Southern States Cooperative, Inc. Cargill, Incorporated - - - - -

08/02/17 TerraVia Holdings Inc., Substantially All Assets TerraVia Holdings, Inc. Corbion N.V. $20.0 - - - -

08/02/17 3 Badge Beverage Corporation, 2 Brands 3 Badge Beverage Corporation Deutsch Family Wine & Spirits - - - - -

08/01/17 Novel Ingredient Services, LLC GenNx360 Capital Partners Innophos Holdings, Inc. $125.1 $100.0 - 1.3x -

08/01/17 King Juice Company, Inc. - Mason Wells Inc - - - - -

08/01/17 Stratum Nutrition Novus Nutrition Brands, LLC ESM Technologies, LLC - - - - -

08/01/17 Yorktown Technologies, L.P. - Spectrum Brands Holdings, Inc. $53.9 - - - -

08/01/17 S&S Bakery, Inc. - Baked in the Sun, Inc. - - - - -

07/31/17 ZEN HERO, Inc. - MJ Biotech, Inc. - - - - -

07/31/17 Phila Foods - Land O Lakes Inc. - - - - -

07/29/17 The Coca-Cola Company, Distribution Facilities The Coca-Cola Company ABARTA, Inc. - - - - -

07/29/17 Wahluke Wine Company, Inc. - Private Investors - - - - -

07/26/17 Costa Farms, LLC - Markel Ventures, Inc. $255.0 - - - -

07/26/17 Short's Brewing Company, Inc. - The Lagunitas Brewing Company - - - - -

07/25/17 Traditional Carbonated Drinks & Juice business Cott Corporation Refresco Group N.V. $1,250.0 $1,700.0 $136.5 0.7x 9.2x

07/25/17 Chosen Foods, LLC - SESAJAL S.A. de C.V. - - - - -

07/24/17 Alphabet Holding Company, Inc. The Carlyle Group L.P. KKR & Co. L.P. - - - - -

07/24/17 Better Baked Foods & Drayton Enterprises, LLC Ne Foods Inc. The Schwan Food Company, Inc. - - - - -

07/23/17 Schuil Coffee Co Inc. - Private Investors - - - - -

07/20/17 Creekstone Farms Premium Beef, LLC Sun Capital Partners, Inc. Marubeni Corporation $170.0 $550.0 - 0.3x -

07/20/17 Hiball, Inc. - Anheuser-Busch Companies, LLC - - - - -

07/20/17 Taste, Inc. - Hojeij Branded Foods, Inc. - - - - -

07/20/17 East Balt, Inc. OEP Capital Advisors, L.P. Grupo Bimbo, S.A.B. de C.V. $650.0 $420.0 $70.0 1.5x 9.3x

07/19/17 PDQ Food Stores, Inc. - Kwik Trip, Inc. - - - - -

07/18/17 French's Food companies and Tigers Milk LLC Reckitt Benckiser LLC McCormick & Company, Incorporated $4,200.0 $564.2 - 7.4x -

07/18/17 Monkey Paw Brewing Company - Coronado Brewing Company, Inc. - - - - -

07/17/17 Gold Coast Bakeries, LLC - Peak Rock Capital - - - - -

07/17/17 Albertville Quality Foods, Inc. H.I.G. Capital, LLC OK Foods, Inc. $140.0 $270.0 - 0.5x -

07/17/17 Living Earth Technology Company Inc. - SJF Ventures; Bain Capital Private Equity, LP - - - - -

14


Q3 2017






LTM EV / LTM

07/17/17 BakeMark USA LLC CSM Bakery Solutions Pamplona Capital Management LLP - - - - -

07/14/17 Braunger Foods and The Thompson Company TOBA, Inc. US Foods Holding Corp. - $130.0 - - -

07/14/17 Michael Farmers Supermarket, LLC - iFresh Inc. $1.1 - - - -

07/12/17 Oasis Baklava - Dishdash Middle Eastern Cuisine - - - - -

07/12/17 Rudy's Tortillas, Inc. - Teasdale Foods, Inc. - - - - -

07/12/17 The Jersey Tomato Co. - KEEN Growth Capital - - - - -

07/12/17 Woodinville Whiskey Company, LLC - Moët Hennessy USA, Inc. - - - - -

07/11/17 Affinity Flavors, Inc. - T. Hasegawa U.S.A. Inc. - - - - -

07/11/17 Dairy Farmers of America, Inc., Plant Dairy Farmers of America, Inc. HP Hood LLC - - - - -

07/10/17 Home Bistro Inc. Dinewise, Inc. AlphaPoint Technology, Inc. - - - - -

07/10/17 Borden Dairy Company Laguna Dairy, S. de R.L. de C.V. ACON Investments, L.L.C - - - - -

07/06/17 Nevada Food Brokerage, Inc. - KeyImpact Sales & Systems, Inc. - - - - -

07/06/17 Pacific Foods of Oregon, Inc. - Campbell Investment Company $700.0 $218.0 - 3.2x -

07/06/17 Mi Pueblo LLC Cha Cha Enterprises, LLC Cardenas Markets, Inc. - - - - -

07/06/17 Kutoa Company, LLC - Toosum Healthy Foods, LLC - - - - -

07/06/17 Athena Brands, Inc. MSF International, Inc. Minerco, Inc. $0.4 - - - -

07/03/17 Stonyfield Farm, Inc. Danone Groupe Lactalis S.A. $875.0 $370.0 - 2.4x -

15


Q3 2017

Total U.S. Private Equity deal flow was down during the third quarter of 2017 on a volume basis but up on a deal value basis

Several large private equity transactions were announced in the third quarter driving total deal value

– HPS Investment Partners and Equity Group Investments agreed to acquire Waste Industries USA

– Sycamore Partners agreed to acquire Staples Inc. for $6.9 billion

– Bain Capital acquired a stake in Surgery Partners Inc. which will use the funding to acquire National Surgical Healthcare

Private equity activity started off slow in 2017, yet market fundamentals point to strong deal flow in the year ahead as fundraising has continued at a rampant pace

Food & Beverage private equity activity slowed compared to 3Q16, while overall invested capital increased

Private exits more than halved from 3Q16, but the median deal size significantly expanded, showing that Food & Beverage sector is willing to pay a premium for the right transaction

Overall U.S. Private Equity Deal Flow ($ in billions)

U.S. Food, Beverage & Agribusiness Private Equity Deal Flow ($ in billions)

U.S. Food, Beverage & Agribusiness Private Equity Exits ($ in millions)

Source: Fifth Third Securities, PitchBook ND – No Transaction Values Disclosed *3Q17 preliminary PitchBook data

Private Equity Activity

$204

$297 $400

$125$70 $98 $94

$44626 26 23 25

33

43 15

7

2011 2012 2013 2014 2015 2016 3Q 2016 3Q 2017

Median Deal Size ($) # of Exits

$8.4$3.6

$38.1$12.2

$58.3

$20.7

$5.0 $8.1

94108 98

110125

147

4929

2011 2012 2013 2014 2015 2016 3Q 2016 3Q 2017

Capital Invested ($) # of Deals Closed

0

500

1,000

1,500

$0

$50

$100

$150

$200

$250

1Q

11

2Q

11

3Q

11

4Q

11

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q14

3Q

14

4Q

14

1Q

15

2Q

15

3Q

15

4Q

15

1Q

16

2Q

16

3Q

16

4Q

16

1Q

17

2Q

17

3Q

17*

Deal Value ($) # of Deals Closed

16


Q3 2017

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

MM B-rated MM NR

6.12%

6.29%

Note: This data represents the entire U.S. middle market (all industries) Note: The middle market is defined as deal size < $100 million and borrower sales < $500 million [1] Includes both non-sponsored and sponsored transactions; sufficient data not available for MM NR loans in 1Q15 and 1Q17 Source: Bloomberg, S&P Capital IQ LCD, and Thomson Reuters LPC

U.S. Middle Market Loan Market Trends

Loan Volume: Low Level of Supply Continues ($ in billions) Non-Rated Term Loan Yields Tighten Further [1]

Covenant-Lite Volume Surges in 2Q17 ($ in billions) Leverage Multiples Remain Aggressive on Middle Market LBOs

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

Non-Sponsored Sponsored

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

7.0x1st Lien Debt to EBITDA Junior Debt to EBITDA

17


Q3 2017 Economic Dashboard

National Unemployment Rate Real GDP Growth Additions to Non-Farm Payrolls

Retail Gas Prices Consumer Sentiment Index Housing Starts

Source: Bureau of Economic Analysis Source: Bureau of Labor Statistics Source: Bureau of Labor Statistics

Source: University of Michigan Source: Energy Information Administration Source: United States Census Bureau

(in $’s per gallon)

(in thousands of employees)

(in thousands of units)

5.0%

2.3%2.0%

2.6%2.0%

0.9% 0.8%1.4%

3.5%

2.1%1.4%

2.6%

3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q

'14 '15 '16 '17

4.0%

5.0%

6.0%

7.0%

0

100

200

300

400

75

80

85

90

95

100

105

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

750

850

950

1,050

1,150

1,250

1,350

18

Industry Spotlight Series: “The Amazon Effect”

19


Q3 2017 Consumer Industry is Evolving Amidst Challenges

Source: S&P Capital IQ and Company Filings [1] U.S. Census Bureau [2] IRI Total US - Multi Outlet [3] Company Filings & Technomic

0.0%

4.0%

8.0%

12.0%

$0.0

$30.0

$60.0

$90.0

$120.0

Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2013 2014 2015 2016 2017

e-Commerce Sales % of Total Retail Sales

e-Commerce Industry Growth ($ in Billions) [1]

Volume % Change Year Over Year - Total Retail Food & Beverage [2]

Restaurant Same Store Sales (SSS) Growth [3]

Traditional Mall-Based Retail Model is Evolving

Mall landlords are being forced to address increasing retail vacancies

– Retailers have announced nearly ~3,000 store closures in 2017

– Analysts predict that ~40% of U.S.-based malls will eventually close

Landlords have filled vacancies creatively with offices, churches, for-profit schools and open-air entertainment spaces, among other formats

Consumer Businesses are Forced to Address Amazon (AMZN) Competition in Different Ways

Nordstrom is considering a go-private transaction amid net earnings misses as a result of declining mall and retail foot traffic

Home Depot EPS has grown 16% YOY as a result of a 23% spike in online orders through its roll-out of “Buy Online, Pickup in Store”

Nike reached an agreement to sell shoes direct through AMZN

Consumers Desire Ease of Use & Mobile Accessibility

AMZN and Google launched “at-home” products (Alexa and Google Home) that allow consumers to order through voice activated commands

Food and consumer staples delivery services like Postmates and Handy make day-to-day tasks substantially easier for consumers

Retailers invest in mobile technology despite unproven return models, though some have been successful (see prior comment on Home Depot)

Packaged Foods Companies Respond to Evolving Consumer Tastes

Millennials respond to convenience while other generations are more brand-oriented, though both are seeking healthier options

Meal kit delivery services, ready-to-eat foods and private label grocery brands are stealing market share from the traditional channels

Weak Retail Traffic Growth Has Also Affected Restaurants Too

Same Store Sales (SSS) growth performance – the key indicator of organic growth – has grinded to a halt

The Casual Dining model has been upended by the more convenient Fast Casual segment, which is struggling itself to drive positive SSS growth

People still eat 3 meals a day, but, as spending habits shift to e-Commerce, fewer consumers are out and about shopping

(2.0%)

0.0%

2.0%

4.0%

6.0%

8.0%

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2015 2016 2017

Full Service Restaurants Limited Service Restaurants

0.4%

(0.7%)

0.9%

1.9%

1.0%

(0.9%)(1.3%)

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 Est.

20


Q3 2017 Amazon is Disrupting the Broader Consumer Industry

The Future The Present

[1] AMZN has not released prime membership data, and estimates on its actual size vary

Source: Bespoke Investment Group Source: Needham & Co.

AMZN’s business has been so disruptive, analysts at Bespoke have created the “Death By Amazon” Index, made up of 54 retailers all being

hit heavily by AMZN’s impact on the industry

Industry experts do not believe AMZN’s growth story will slow down anytime soon, as AMZN has positioned itself perfectly to continue its

development and capture more market share

Significant Dates

June 16th, 2017: AMZN announces acquisition of Whole Foods

− $21.7 billion in rivals’ market value destroyed

− KR down 8.0%; TGT down 5.1%; WMT down 4.9%

July 19th, 2017: AMZN announces alliance with Sears to sell Kenmore appliances

− $11.8 billion in rivals’ market value destroyed

− LOW down 5.6%; BBY down 3.9%; HD down 4.1%

AMZN’s ‘Secret Weapon’ for Sustainable Growth: Amazon Prime

Prime offers customers free shipping, television shows, music, discounts, and many other offerings for monthly or annual fees

− Research indicates that Prime memberships have doubled in the past 2 years [1]

− 80% of Prime members shop on Amazon once a month

− Prime members spend up to $1,500 a year on the site, more than twice the amount of non-members

34%37%

41%45%

47%50%

2016 2017 2018 2019 2020 2021

AMZN's % of Total U.S. e-Commerce Sales

21


Q3 2017 Amazon’s Growth Has Captured Share in All Sectors

Key Takeaways

Note: $ in billions Source: S&P Capital IQ, Press releases

Summary of Amazon Activity

AMZN has prioritized growth over profitability

Despite its growth, AMZN has the lowest operating margin of peers

Online sales are thought to be less profitable than in-store sales

Despite the elimination of a major fixed expense (rent)

Likely driven by the focus on low-price/value of online shopping

The public market has rewarded AMZN for its growth

Investors assign AMZN a premium valuation with the expectation that someday (in the future) it will be more profitable

Of the retailers shown, however, AMZN may be the worst performer based on traditional methodologies

AMZN’s growth has been in diverse categories

Grocery, home furnishings, electronics and food/beverage

AMZN has effectively become a conglomerate, though with a different delivery model

Grocery Meal Delivery Electronics Home Furnishings

Mkt. Cap Mkt. Cap 10-Yr. LTM Sales LTM Sales 10-Yr. Op. Income e-Commerce

Company Sep-07 Sep-17 CAGR Sep-07 Sep-17 CAGR Margin % of Sales

$33.0 $469.9 30.4% $12.2 $150.1 28.5% 2.3% 69.6%

179.3 234.1 2.7% 179.3 240.9 3.0% 4.7% 3.0%

55.8 30.7 (5.8%) 61.9 69.6 1.2% 6.9% 4.4%

27.0 69.4 9.9% 64.4 123.3 6.7% 3.1% 4.0%

20.8 16.6 (2.2%) 38.0 39.9 0.5% 4.6% 11.0%

13.6 46.1 13.0% 17.9 33.9 6.6% 11.3% 1.0%

19.1 6.8 (9.9%) 16.3 18.5 1.3% 7.3% 45.4%

75.6 177.7 8.9% 77.8 97.4 2.3% 14.4% 5.9%

46.1 62.5 3.1% 48.0 67.9 3.5% 9.2% 3.5%

~$1.15 billion in Furniture Sales/

Upcoming Amazon Furniture Stores

22


Q3 2017 Consumer Businesses Have Responded

Competitors’ Response to AMZN Strategy Key Takeaways

Source: S&P Capital IQ, press releases, company transcripts

Free two-day shipping for orders over $25

Launched Scan & Go app

New partnership with Google Shopping

Investing $7 billion in growth initiatives

Refitting stores to be more digitally integrated and to serve as distribution centers

Added GE appliances to portfolio

Added 12 distribution centers in the past year (7 to 19)

Building ‘interconnected’ retail experience

Successful rollout of “Buy Online, Pick Up in Store”

Invested in e-Commerce and mobile platforms

Investing in marketing to leverage brand recognition

Launched Buy Online, Pick-Up In-Store, Curbside Pickup, and Reserve Online & Try In-Store programs

Formed Kroger Specialty Pharmacy

Expanding online platform

Testing meal kits

Investing in its digital business and enhancing the consumer experience

Leveraging peer bankruptcies

Now selling products on Amazon.com

Investing in international market (less competitive)

Investing significantly in network ‘synchronization’

Launched direct-to-consumer subscription business

Launched meal kit “Tyson Tastemakers” sold through Amazon Fresh

Plans to grow e-commerce business to $1 billion by 2020

Exploring product innovation to match consumer trends

Omni-Channel investment abounds

Omni-channel in its simplest form means “accessing the consumer at different touchpoints”

In retail, omni-channel often means investing in digital platforms that integrate with brick-and-mortar business

Stores are more frequently doubling as potential ‘distribution’ centers

Convenience : adding delivery & pick-up services, or removing check-out lines altogether

Some consumer businesses use AMZN’s platform to bolster theirs

NKE will sell through AMZN, to the chagrin of its retail partners

AMZN can serve as a platform to distribute slow-moving inventory (how profitably depends)

KSS now accepts AMZN returns at select stores

Meanwhile, others are taking on AMZN head-to-head

Food/grocery sector is testing meal kits and creating strategic alliances to counter AMZN

WMT acquired Jet.com and 9 other e-Commerce businesses

23


Q3 2017

9.9x 6.8x

9.6x 10.1x 13.9x

9.8x 7.9x 8.1x

15.1x

8.5x 12.1x 11.9x

17.9x 15.5x

11.7x 12.1x

Ingredients& Flavors

ProteinProcessing

/Dairy

BrandedProcessed

Foods

Private LabelFood

Manufacturing

Natural/Organic/

Better-for-You

Beverage Ready-To-Eat

S&P 500 Index

Aug-12 Aug-17

7.7x

11.5x

14.8x

10.9x 8.4x 8.2x 8.1x

11.5x 12.6x 14.0x

15.5x

12.7x 13.0x 12.1x

Branded Apparel & Footwear

Accessories &Jewelry

Activewear Personal Products RecreationalProducts

HouseholdProducts

S&P 500 Index

7.0x 6.7x

10.7x 8.3x 8.5x

6.8x 5.7x

13.6x

8.1x

4.3x

8.8x 9.7x 9.8x 8.1x

6.2x 6.4x

19.2x

12.1x

Apparel,Footwear &Accessories

Jewelry &Accessories

Discount Off-Price Supercenters DepartmentStores

Grocery Internet & e-Commerce

S&P 500 Index

Consumer & Food Correlate to S&P: Retail Has

Faltered

Retail Valuations & Change in Value from 2012 – 2017

Consumer Valuations & Change in Value from 2012 – 2017

Food & Beverage Valuations & Change in Value from 2012 – 2017

Source: S&P Capital IQ

Key Takeaways

50.2% 9.8% (5.4%) 42.5% 51.9% 59.0% 50.1%

(38.1%) 30.4% (10.0%) 17.3% (4.8%) 41.3% 50.1% (7.7%) 10.9%

52.3% 25.0% 25.8% 17.2% 47.3% 50.1% 29.2% 58.7%

The S&P EV/EBITDA multiple has grown from 8x to 12x over the past five years, a ~50% increase

Ultra-low cost of capital

40% fewer companies, but bigger and more concentrated sectors

Low-growth environment that rewards consolidators

Increased focus on share repo’s

Few Retail sector valuation multiples have increased similarly

Retail has been particularly challenged, especially in apparel and department stores

Consumer Products sectors, which benefit from exposure to consumer staples, have tracked the S&P

Only F&B companies have performed across the board, largely driven by consolidation and increasing consumer focus on healthy eating

AMZN disruption does seem to have created “winners and losers”

Few categories have been as challenged as Apparel and Department Stores

Meanwhile, e-Commerce (19x) and Natural/Organic Food (18x) have become the most valuable

24


Q3 2017

Options Commentary Examples

Embrace Omni-Channel

Successful retailers today are combining e-Commerce with brick-and-mortar to offer consumers a seamless shopping experience

Adding “Order Online, Pick-Up In-Store,” or similar services, has proven to increase performance for innovative retailers

Understanding the return model (ROIC) for omni-channel investments remains the greatest challenge, and objection, to evolving

Evaluate M&A Strategy

Larger bellwether companies like Wal-Mart have aggressively pursued e-Commerce acquisitions to supplement internal investment

Other consumer businesses have consolidated sectors or acquired complementary peer businesses to strengthen core competencies

Few companies display enough organic growth to avoid considering acquisitions, especially with the proliferation of activist shareholders

Elevate the Experience

“I don’t think retail is dead. Mediocre retail experiences are dead.” – Neil Blumenthal, Co-CEO of Warby Parker

As customers focus more on convenience, retailers focus on elevating the shopping experience to sustain (or restore) foot traffic

Experiential retail is becoming part of retailers’ DNA, but it is also a common focus/theme of acquisition strategy

Brace for Margin Compression

Consumer packaged goods companies are forced to pay a premium for shelf space at brick-and-mortar retail bellwethers like Wal-Mart

Consumer goods manufacturers should plan for long-term margin compression as AMZN gains similar buying leverage

Strategic mergers often create opportunities to right-size G&A or infrastructure, enabling consumer companies to buy contribution margin

The Consumer Industry Will Continue to Adapt

?

Sources: S&P Capital IQ, Press releases

25


Q3 2017 Notes & Definitions

S&P 500 Index- A broad index that includes American Companies. EBITDA- A company's earnings before interest, taxes, depreciation, and amortization, is an accounting measure calculated using a company's net earnings, before interest expenses, taxes, depreciation and amortization are subtracted, as a proxy for a company's current operating profitability. Dry Powder- Refers to cash reserves kept on hand to cover future obligations or to purchase assets. GDP- Gross domestic product is the market value of the goods and services produced by labor and property located in the United States Consumer Sentiment Index- The University of Michigan Consumer Sentiment Index is a consumer confidence index published monthly by the University of Michigan. The index is normalized to have a value of 100 in December 1964 National Unemployment Rate- the percentage of the total labor force that is unemployed but actively seeking employment and willing to work. Non-Farm Payroll- Nonfarm payroll employment is a compiled name for goods, construction and manufacturing companies in the US. It does not include farm workers, private household employees, non-profit organization employees, or government employees . It is an economic indicator released monthly by the United States Department of Labor as part of a comprehensive report on the state of the labor market. Housing Starts- are the number of new residential construction projects that have begun during any particular month. The Economist- offers authoritative insight and opinion on international news, politics, business, finance, science, technology and the connections between them LBO -- leveraged buyout (LBO) is the acquisition of another company using a significant amount of borrowed money to meet the cost of acquisition. The assets of the company being acquired are often used as collateral for the loans, along with the assets of the acquiring company. Industrial Production Index (IPI)- is an economic indicator published by the Federal Reserve Board of the United States that measures the real production output of manufacturing, mining, and utilities Capital Goods Orders. Covenant-lite loans- means that debt is being issued, both personally and commercially, to borrowers with less restrictions on collateral, payment terms, and level of income. IRR-Internal Rate of Return.

26

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Are Not Insured By Any Federal Government Agency Are Not A Deposit

26

About Fifth Third Capital Markets

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