recipe for retail sector success: q&a with andrew heyer, jamba juice investor, mist

Mistral Equity Partners

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Executive Summary

Mistral Equity Partners was founded in 2007 to make control-oriented buyout and growth equity investments in lower middle market companies in the consumer industry

Differentiated investment strategy has successfully combined the experience and networks of the Investment Team and Management Board

Thematic approach, focusing on businesses benefiting from changing consumer demographics and psychographics

Flexible transaction structures to enhance risk-reward profile of investments Advantaged transaction origination and due diligence Unique value creation capabilities

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1 Excludes recapitalization of Worldlynx in August 2014 which generated $11.3 million of proceeds


Top-tier Management Board

Fund Management Board members have added significant value in due diligence and portfolio company oversight; selected members of the Fund Management Board include: Jay Schottenstein, Chairman, Schottenstein Family of Companies Frank Belatti, Former Chairman and Chief Executive Officer, AFC Enterprises, Inc. Donny Deutsch, Chairman, Deutsch Inc. Steven Heyer, Former Chief Executive Officer, Starwood Hotels & Resorts Worldwide Inc.;

Former President of The Coca-Cola Company William Louis-Dreyfus, Former Chief Executive Officer, Louis Dreyfus Group David Simon, Chairman and Chief Executive Officer, Simon Property Group Inc. Irwin Simon, Chairman, Chief Executive Officer and Founder, The Hain Celestial Group, Inc.

Aggregate commitments of approximately $120 million to Fund

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Investment Strategy

Thematic approach to the consumer industry in the lower middle market Identify powerful demographic and psychographic trends impacting consumer behavior and

spending patterns Develop investment themes where the impact of these trends support substantial growth

under varying economic conditions

Flexible transaction structures Fund transactions have included buyouts, growth equity investments, recaps, roll ups, PIPEs,

and both majority and minority investments Investments structured to meet company-specific needs and mitigate risks without

sacrificing full equity upside

Advantaged transaction origination and due diligence Active participation by Strategic Partner and Management Board Design strategies to mitigate risks specific to investing in the consumer industry (commodity

prices, real estate costs, etc.) with input from sophisticated companies and industry participants

Unique value creation capabilities Drive value creation post-acquisition by leveraging resources and experience of Investment

Team, Strategic Partner and Management Board Help entrepreneurs develop institutional systems and processes, and help corporate

structures become more entrepreneurial

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Universe of retail investing

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Consumer spending accounts for ~70% of GDP, which creates a wide breadth of retail investment opportunities

Each retail sector has unique opportunities and risks. It’s important to “pick your spots”

Categories of Retail

Hard Goods

Electronics

Sporting goods / action sports

Furniture and home goods

Home and garden

Jewelry (discount, fashion, luxury)

Hobby and craft

Toys

Food and Beverage

Grocery

Convenience stores

Alcoholic beverages

Pet and pet food

Dollar stores

Luxury / specialty

Catering

Restaurants

Quick service

Fast casual

Entertiainment

Special occasion

Daypart: breakfast, lunch, snack, dinner

Apparel and Footwear

Fast fashion

Lifestyle brands

Mens, womens, kids, baby

Accessories

Multi-brand vs. single brand

Department stores vs. specialty

Niche: bridal, swim, big & tall

Health & Beauty

Cosmetics

Salon services

Gyms and yoga

Dentistry

Cosmetic procedures

Weight loss

Other

Niche financial services

Self-storage

Education

Value orientation: luxury/white tablecloth, aspirational, popular price/family dining, discount/outlet/QSR, dollar

Real estate strategy: malls, strip centers, urban, free-standing, pads, temporary, store-in-store

Demographic or psychographic appeal: Ethnic segment vs. broad appeal, age appeal, health vs. indulgence

Elements spanning all categories

Product/Brand lifecycle strategy: Exposure to fashion or obsolescence, seasonality, product diversity, menu changes

Franchising: Franchisor, franchisee, terms of relationship


The zone of opportunity

Unrealized Potential

Leadership / Maturity

New

Unfocused

ErodingPotential

Young Mature

Low

Bran

d an

d C

oncep t V

itality(D

ifferenti ation & R elevance )

Company Lifecycle

Mistral invests in the Zone of Opportunity

Investing in this zone provides Mistral with the greatest growth opportunities and return potential, at acceptable levels of risk. It is also unlikely that companies need

capital beyond this zone.

Retailers typically start life in the bottom left quadrant, then travel in a clockwise direction A key consideration in investing in the retail zone of opportunity is determining what risk-adjusted combination

of top-line growth and operational improvements will provide acceptable equity returns

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High

Matur

ing

Declinin

g


Theme Driven Investment Approach

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Healthy livingValue /

recession resistance

Affordable luxuryConvenience

Diverse channel / retail

strategy

Differentiated brands / products

Lifestyle products

Natural and organic

Green / ethical products

Fitness

Private label Consumer

staples Pets Juvenile

products and services

Leisure Small ticket

indulgences “Me time” and

self-pampering

On-the-go products

Broad product accessibility

Novel packaging and design

Small footprint retail

Multi-channel Internet and

non-traditional locations

Captive customers

Disruptive technologies

Innovative designs

Investment themes

Demographic / psychographic trends

Shifting age profile: maturing

boomers, emerging millenials

Increasing focus on health and

wellness

Ever-busier consumer lifestyles

Evolving ethnic profile and household

composition

Abundant product and pricing information

readily accessible to consumers

Sustained economic

uncertainty


Targeted Consumer Sectors

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Pets

Private label Natural, healthy,

organic Functional Convenience & on-the-

go Refrigerated & frozen Spirits & beer

Supplies & durables Vet services Grooming & boarding Nutraceuticals,

supplements & treats

Cosmetics & cosmeceuticals

Hair & skin care Wellness Gyms, yoga, spas Salons & services

Small footprint, internet & non-traditional

Lifestyle & luxury brands

Discounters Accessories

Flexible format & location

Quick service Fast casual Franchise

RetailRestaurantsFood & Beverage

OtherServices & MediaApparel & AccessoriesHealth & Beauty

Differentiated brands Affordable luxury Active & outdoor

Focused advertising Technology driven

platforms Targeted content Consumer healthcare

services

Innovative household products

Leisure & hospitality Juvenile products


Mistral Fund Portfolio Composition

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Opportunities reviewed and Fund portfolio by industry1 Fund I portfolio by industry2

1 Opportunities reviewed through 8/31/2014

Fund portfolio composition is consistent with investment themes

Portfolio overview

Invested capital

1262 opportunities reviewed

Jamba

BlueportXpresSpa

Vino Volo

Lovesac

Worldwise

Worldlynx

Abe’s

Shearer’s

Orval Kent

CountryPure

#1 private label snack food company in North America

Key national manufacturer of refrigerated prepared foods for retail and foodservice channels

#1 provider of portion juices to the institutional food service market (primarily schools and health care facilities)

#1 smoothie retailer and leading consumer brand

Leading airport wine bar and wine retailer

#1 wireless retail franchisee of Bell Canada

Leading retailer of alternative furniture with patented products

Largest airport spa retailer

Owns and operates furniture.com, as well as managing a full-service e-commerce platform

Leading e-commerce provider of natural and organic products

Major supplier of innovative, environmentally sustainable pet products and accessories

Leading provider of pet care services in the New York metropolitan area

Spot

http://www.shearers.com/

http://www.jambajuice.com/

http://www.orvalkent.com/

http://www.juice4u.com/


Investment Themes Evident Across Portfolio

Shearer’s Jamba WorldlynxOrval Kent Lovesac

Country Pure Worldwise XpresSpa Blueport Vino Volo Abe’s Spot

Healthy living

Convenience

Value / recession resistant

Affordable luxury

Diverse channel / retail strategy

Differentiated brands / products

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Mistral’s thematic focus on demographic and psychographic trends, and categories within the consumer sector which stand to benefit from those trends, is evident across the portfolio.

Investment themes


Flexible Transaction Structures

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Mistral structures its transactions to enhance the risk-reward profile of its investments, offering flexible capital deployed in a variety of ways with the goal of accelerating a company’s growth

Focus on companies with total enterprise value less than $200 million and EBITDA less than $25 million

Portfolio Company Transaction Type Transaction Structure1 Control2

Buyout Common equity, preferred equity

Yes

PIPE Convertible preferred equity 2 board seats; negative controls

Buyout / Consolidation Subordinated debt, common equity

Yes

Recapitalization / Growth Subordinated debt, preferred equity, senior debt, warrants

Shared

Recapitalization / Growth Common equity, convertible preferred equity, warrants

Yes


Yes


Yes

Recapitalization / Growth Common equity Yes

Growth Common equity Yes, with Strategic Partner

Growth Convertible preferred equity 2 board seats; negative controls

Growth Convertible preferred equity 1 board seat; negative controls

Growth Common Equity 1 board seat; negative controls

1 Includes follow-on investments2 Represents control at time of initial investment


Mistral Differentiation

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As the cornerstone of Mistral’s strategy, the Fund leveraged the experience of the Investment Team and Management Board across its portfolio to source and evaluate transaction opportunities and enhance the value of its portfolio companies

Shearer’s Jamba Worldlynx Orval Kent LovesacCountry

Pure Worldwise XpresSpa Blueport Vino Volo Abe’s Spot

Ability to add value

Proprietary origination

Advantaged due diligence

Post-closing value creation

Potential synergies with other portfolio cos.

Note: shaded portion of circle is intended to signify level of differentiation over other potential acquirers provided by Mistral’s Investment Team and Management Board