ma print - ppt presentation craft breweries • despite large beer conglomerates picking off larger...
TRANSCRIPT
Craft Breweries
Market Monitor
Summer 2017
2
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Industry Update 3
Relevant Transactions 6
Public Company Stock Performance 8
Moss Adams Overview 10
Contents
3Source: Brewer’s Association & Moss Adams Capital estimates.
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• Despite large beer conglomerates picking off larger craft breweries, the number of craft breweries has risen from 4,548 in 2015 to 5,301 in 2016 reaching an all-time high. The totalnumber of permitted U.S. breweries has reached 7,190, tripling the amount over the past six years.
• With an all-time high of U.S. breweries, some of the top breweries are experiencing slower growth rates due to increased competition.
• Craft beer volume grew just 6% in 2016, compared to 13% in 2015 and 18% in 2014. Conglomerate beer companies Heineken and Anheuser-Busch have acquired dozens of small brewers.
• Regional craft brewers are facing the toughest competition yet as large brewers have a surplus of cash to buy brands from the craft sector. At the other end of the market, micro brewers,which are breweries that produce less than 15,000 barrels per year, grew rapidly in 2016 (at 27%) and accounted for 78% of the craft beer growth, taking away many local customers fromlarger, macro-breweries.
• Consumer appetite has been shifting in the past couple years as consumers want a more local craft beer. Consumers want to support their local breweries instead of paying for products bylarge multi-national corporations. Craft brewers are embracing this trend by selling more beer out of their taprooms, which is more profitable per barrel produced.
Number of BreweriesCraft Beer Sales
0
2,000
4,000
6,000
8,000
'93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17est
Craft Beer Industry Snapshot
D. G. Yuengling & Son Inc
12%
Boston Beer Co10%
Sierra Nevada Brewing Co
5%New Belgium Brewing Co
4%
Gambrinus Company
2%
Next 25 Largest23%
All others44%
Top 5 States by …# of Breweries Breweries per capita
State # State # / 100,000 adultsCalifornia 623 Vermont 10.8Colorado 334 Montana 9.0Washington 334 Colorado 8.4New York 269 Maine 7.6Oregon 243 Washington 6.3
7.8 8.4 9.4 10.712.4
14.5
21.023.2 23.2
27.9
$6.2 $6.8 $7.9 $9.1 $10.7
$13.0
$18.0 $21.4
$23.5
$29.4
$0
$5
$10
$15
$20
$25
$30
5
10
15
20
25
30
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17 est
$ in
mill
ions
mill
ions
of b
arre
ls Sales in Barrels
Sales in $USD
4Source: Brewer’s Association & Moss Adams Capital estimates.
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2016 Financial Brewery Benchmarks2016 Breakdown of U.S. Beer Styles in Sales
Craft Beer Industry Snapshot
Below is a graph that displays expenses as a percentage of sales by five different production size categories.IPA 25.4%
Seasonal 13.3%
Other Pale Lagers 1 1.2%Pale Ale 8.8%
Variety 7.6%
Amber Ale 4.3%
Amber Lager 4.1%
Other 25.3%
23%
(2%)
9%
4% 5%
1%
(6%)(10%)
(5%)
0%
5%
10%
15%
20%
25%
IPA Seasonal Other PaleLagers
Pale Ale Variety Amber Ale Amber Lager
2015
to 2
016
Grow
th
Revenue/Barrel
$348
$295
$303
$362
$555
(Barrels)
COGS Labor Overhead Sales & Mktg. EBITDA
Brewery Size
• COGS contains all materials used for food, beer, and other revenue streams
• Labor contains administration, sales, marketing, and taproom expenses
• Overhead contains rent, utilities, insurance, etc.
• Sales & Marketing expenses do not include labor expenses
28%
32%
31%
31%
40%
40%
30%
28%
26%
26%
27%
16%
15%
17%
14%
4%
4%
4%
7%
5%
1%
17%
22%
20%
15%
0% 20% 40% 60% 80% 100%
1-5,000
5,001-15,000
15,001-30,000
30,001-60,000
60,001+
5
Current Events
Source: Beer Street Journal
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Brewery Expansions Upcoming Events
Planning on opening second brewery in Detroit, Michigan which is expected to be completed in Winter 2018.
Adding a $2 million sour and wild ale facility just outside Atlanta, Georgia that is expected to open later this month.
Built a brewery expansion at the newly constructed Suntrust Park, which is the new home for the Atlanta Braves.
Planning another expansion which will incorporate a $15 million fermentation facility in Paso Robles, California.
Invested $85 million in their new brewing facility in Roanoke, Virginia which is projected to produce 150,000 barrels to start.
Added a new 57,000 square foot wild and sour beer production facility in Asheville, North Carolina.
Developed a new wood-aged specialty beer facility named Splinter Cellar.
Announced in March 2017 that they are opening a new barrel-age focused brewing facility in Shallotte, North Carolina, which is expected to open over the next several weeks.
October 5 – 7, 2017 Great American Beer Festival
Denver, CO
April 30 – May 3, 2018
Craft Brewer’s Conference & BrewExpo America
Nashville, TN
May 3, 2018 World Beer’s Cup Awards Ceremony
Nashville, TN
May 14 – 20, 2018 American Craft Beer Week
Nationwide
June 28 – 30, 2018 AmericanHomebrewer’sAssociation Homebrew Con & National Homebrew Competition
Portland, OR
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1 2 1 2 1 2 1 3 1 1 1 28
1 11 5
8 71 0
1 6 1 71 2
1 9 1 71 2
8
1 1 2 2 4 24
3
4
27
8
34
7
11
8
6
0
5
10
15
20
25
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2013 2014 2015 2016 2017
Capital Raise Mergers & Acquisitions
Select, Recent M&A Activity
Source: CapitalIQ, PitchBook, company filings, news releases.
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* Indicates that transaction is a minority deal
$ in millionsClose Date Target Location Acquirer/Investor Est. Production
Announced Magnolia Brewing Co, Inc. San Francisco, CA New Belgium Brewing Company Inc. 6,000
Announced Anchor Brewing Company, LLC San Francisco, CA Sapporo Holdings Limited 132,000
Announced Monkey Paw Brewing Company San Diego, CA Coronado Brewing Company, Inc. 4,000
Announced Revolver Brewing, LLC Granbury, TX Tenth and Blake Beer Company 40,000
Announced Glens Falls Brewing LLC Glen Falls, NY Northern Eagle Beverages, Inc. 5,500
Announced Hopothesis Beer Company LLC Chicago, IL Finch's Beer Company, LLC 10,000
Announced Four Peaks Brewing Company, Inc. Tempe, AZ Anheuser-Busch Companies, LLC 38,000
Aug-17 Funky Buddha Brewery LLC Oakland Park, FL Constellation Brands, Inc. 28,000
Jul-17 *Wynwood Brewing Company Miami, FL Craft Brew Alliance, Inc. 5,000
Jul-17 *Shorts Brewing Company Inc. Bellaire, MI The Lagunitas Brewing Company 35,000
May-17 Wicked Weed Brewing LLC Asheville, NC Anheuser-Busch Companies, LLC 5,000
May-17 Arbor Brewing Company, North American operations Ann Arbor, MI Bigalora Wood Fired Cucina 6,000
May-17 The Lagunitas Brewing Company Petaluma, CA HEINEKEN USA Incorporated 916,420
Dec-16 Devils Backbone Brewing Company LLC Lexington, VA Anheuser-Busch Companies, LLC 62,000
Aug-16 Hop Valley Brewing Co. Eugene, OR Tenth and Blake Beer Company 39,000
Jul-16 Indian River Beverage Corporation Cape Canaveral, FL ANSA McAL US Inc. 35,000
Jun-16 Hilliard's Beer Seattle, WA Odin Brewing Company 3,300
May-16 *Cigar City Brewing LLC Tampa, FL United Craft Brews LLC 55,000
Apr-16 Southern Tier Brewing Company, LLC Lakewood, NY Craft Revolution LLC 110,000
Mar-16 Breckenridge Brewery, LLC Littleton, CO Anheuser-Busch Companies, LLC 70,000
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Selected Deal Profiles
Craft Brew Alliance (CBA) acquires minority stake in Wynwood Brewing CompanyJuly 31, 2017
• Craft Brew Alliance (CBA) acquired a 24.5% stake in Wynwood Brewing Company for an estimated less-than $30 million valuation*.
• CBA described the transaction as a “strategic partnership”, allowing Wynwood to tap into their wholesaler network.
• Wynwood is expected to change from a 15-barrel brew system to a 100-barrel system due to the investment from CBA.
• This transaction marks CBA’s third small brewery partnership in the last 2 years, with CBA’s CEO, Andy Thomas, commenting that “[w]e are looking to support the Kona brand with strong brands in key markets. The southeast was a priority for us and we got that checked off.” He also stated that “[t]here are a lot of interesting opportunities, and California is something that is important to us.”
Coronado Brewing Company announced their acquisition of Monkey Paw Brewing Company Announced July 18, 2017
• Coronado Brewing Company announced that they will be acquiring Monkey Paw Brewing Company for an undisclosed amount.
• Monkey Paw made 650 barrels in 2016, and Coronado’s COO Brandon Richards stated, “I anticipate Monkey Paw will be able to make up to 3,000 to 4,000 barrels in a year. We’ll be able to quadruple their business.”
• Richards also commented that, “There is an increased focus on local, and rather than going into new markets where we wouldn’t be as well known, we thought it would be better to remain more relevant by bringing on another local partner.”
• Coronado mentioned in their press release that the acquisition is giving them an opportunity to grow in California and that this acquisition is a great way for them to expand their offerings.
Sapporo acquires Anchor brewing Company Announced August 3rd, 2017
• Sapporo Holdings Ltd. acquired Anchor Brewing Company for an estimated $85 million dollars.
• Anchor Brewing is one of the oldest breweries in California, having been founded in San Francisco in 1896, and is credited by some to have created the craft brew trend in the United States by producing higher-quality and higher-priced beer than the macro-breweries.
• Anchor Brewing co-owner Keith Greggor stated that “We have been evaluating the future for some time and recognize the challenges in craft breweries and the number of breweries that have come to the market, we felt we needed to have a stronger partner to achieve our long-term goals.”
• Sapporo President and Representative Director, Masaki Oga, stated that “Both companies share a brewing philosophy backed by long histories and this transaction enables both Sapporo Group’s US business and Anchor Brewing Company’s global business to make a further leap forward.”
• Not included in the transaction was Anchor Distilling which is a small distilling operation run out of the brewery. The distillery will become a separate company.*Source: BevNET.com, Inc.
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• Large brewers are leading the way in public markets with an estimated sales growth of 12.7%. Larger breweries have beenable to grow by acquiring smaller, regional breweries and providing their supply chains and brewing facilities to increaseoutput and margins.
• The Craft Beer Alliance is at an all-time high valuation of 28.9x EBITDA as the demand for craft beer keeps growing.Large brewers are also seeing high valuations due to key acquisitions these firms have made in the past two years.
Public Market ValuationsNext 12 Months: Estimated Sales Growth
(1.9%)
6.6%
12.7%
6.7%
(4%)
(2%)
0%
2%
4%
6%
8%
10%
12%
14%
SAM BREW Large Brewers S&P 500Index
BREW28.9x
Large Breweries
16.3x S&P 500
12.1x SAM 9.1x 4.0x
9.0x
14.0x
19.0x
24.0x
29.0x
34.0x
39.0x
Continued Growth Leading to Increased Competition
Note: The Craft Breweries and Major Breweries Indices are composed of the public companies included on page 8.Source: S&P Capital IQ.
9
Public Company Valuations
Source: CapitalIQ, company filings.Note: NA if denominator is 0, for percentages and multiples, or if estimates are not available. NTM figures are based on the median estimate of Wall St. analysts.
($U.S. in millions, except per share amounts)
9/15/17 TTM Data EV Multiple
Company NameSharePrice
52 WeekHigh - Low
MarketCap
EnterpriseValue Sales EBITDA
EBITDAMargin
TTMSales
TTMEBITDA
NTMSales
NTMEBITDA
Major Breweries
Anheuser-Busch InBev SA/NV $118.95 $142.52 - $109.78 $230,007 $355,558 $52,415 $18,900 36.1% 6.8x 18.8x 6.1x 15.4x
Heineken N.V. 103.92 106.90 - 80.40 59,201 75,790 24,156 5,264 21.8% 3.1x 14.4x 2.8x 11.9x
Kirin Holdings Company, Limited 22.34 23.57 - 14.81 20,387 26,565 15,424 2,200 14.3% 1.7x 12.1x 1.5x 11.4x
Asahi Group Holdings, Ltd. 42.92 44.19 - 30.82 19,664 32,329 15,851 2,128 13.4% 2.0x 15.2x 1.7x 12.4x
Molson Coors Brewing Company 88.88 112.19 - 85.34 19,144 30,723 8,782 1,933 22.0% 3.5x 15.9x 2.7x 12.2x
Carlsberg A/S 114.86 118.38 - 91.71 17,401 21,497 9,688 2,089 21.6% 2.2x 10.3x 2.1x 9.8x
Tsingtao Brewery Company Limited 4.05 4.82 - 3.58 6,064 4,467 3,897 374 9.6% 1.1x 11.9x 1.1x 11.8x
United Breweries Limited 12.54 15.21 - 11.16 3,316 3,374 730 106 14.5% 4.6x 31.9x 4.1x 29.7x
Beijing Yanjing Brewery Co.,Ltd. 1.00 1.27 - 0.94 2,829 2,703 1,714 170 9.9% 1.6x 15.9x 1.5x 13.9x
Sapporo Holdings Limited 28.66 30.69 - 24.22 2,233 4,313 4,904 419 8.5% 0.9x 10.3x 0.9x 9.6x
Median $24,031 $9,235 $2,011 14.4% 2.1x 14.8x 1.9x 12.1x
Average $55,732 $13,756 $3,358 17.2% 2.8x 15.7x 2.4x 13.8x
Craft Breweries
The Boston Beer Company, Inc. $149.50 $186.94 - $128.70 $1,777 $1,706 $882 $186 21.1% 1.9x 9.2x 2.0x 10.6x
Craft Brew Alliance, Inc. 17.45 21.18 - 12.00 337 358 206 13 6.1% 1.7x 28.5x 1.6x 16.0x
Median $1,032 $544 $99 13.6% 1.8x 18.8x 1.8x 13.3x
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