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2
Volume
• Moving Forward
• Industry volume will be down (-1.0% through 2020).
• ABI and MC will each be down.
• All Others will be up.
3
ABI & MC vs. All Others Forecast
160.0
148.5
143.3
140.0
138.1
132.6
127.1
121.4
120.0
115.5
100.0
70.7
61.1
64.1
67.3
74.2
2014
2015
2016
2017
2018
80.0
78.0
81.9
2019
2020
60.0
40.0
20.0
0.0
Assumes overall industry will be down 1.0% during each of the
forecast years.
4
% of Absolute Alcohol
70.0%
60.0%
59.6%
58.5%
57.0%
56.3%
55.2%
53.2%
52.0%
50.9%
31.8%
32.5%
33.3%
50.0%
Spirits
40.0%
30.0%
20.0%
27.6%
27.9%
29.0%
29.5%
30.4%
Wine
12.8%
13.6%
14.0%
14.2%
14.4%
15.0%
15.5%
15.8%
2001
2003
2005
2007
2009
2011
2013
2015
(est.)
10.0%
0.0%
Distilled Spirits Council
5
Per Capita Consumption - Beer
In Gallons
31.0
30.5
30.6
30.3
30.0
29.5
29.5
29.0
28.5
28.2
28.0
27.6
27.5
27.0
26.5
26.0
2005
2007
2009
2011
2013
6
Distributors Declining – Craft Brewers Increasing
4,500
4,000
4,000
3,500
3,200
2,975
3,000
2,615
2,500
2,267
Brewers 2020
???????????
1,905
2,000
1,500
950
1,000
500
900
650
42
0
1970
•
1990
1995
2000
2005
2010
IBG estimates:
• 2010 – 950 = 90% of volume.
• 2020 – 650 = 85% of industry volume.
• Self distribution, sort drink, specialty = 1,000 – 2,500.
2013
2020
7
Beer Brands by Segment -TUS Multi Outlet + Convenience

As of mid-year, craft brands and cider brands have already surpassed their numbers in 2013 (based on brands selling more
than 1 case).
Total Brands
4,577
Total Brands
4,031
Total Brands
4,975
Total Brands
4,948
3451
3493
3109
2669
801
748
57 116
125
215
101
60 113
2011
Premium
801
220 144
130
231
63 102
2012
Sub Premium
Import
765
134
216
193
63
92
2013
Craft
122
YTD
Super Premium
PAB
Cider
Source: Bump Williams Consulting
197
8
Beer SKUs by Segment 2010-2013
TUS Multi Outlet + Convenience + RMA Sum of Total Liquor Stores

The net number of beer SKUs increased by 4,031 or 62.8% over these four years (based on SKUs selling more than 1
case).
Total SKUs
9,447
Total SKUs
8,287
Total SKUs
7,256
Total SKUs
5,416
5156
4421
3772
3229
469 501
314 264
499 519
116
2010
Premium
347 365
528 535
Import
399
447
128
2011
Sub Prem
1891
1781
1626
1523
551 555
2012
Craft
Sup Prem
460 519
176
2013
PAB
Cider
Source: Bump Williams Consulting
315
9
Avg Items Carried Per Store - 2008 – 2012 Time Series by Channel
2008 – 2012 Increase
In Avg Item Per Store 224 or
+22%
Avg. Items Per
Store 1,234
Avg. Items Per
Store 1,202
Avg. Items Per
Store 1,124
900
800
700
Avg. Items Per
Store 1,080
Avg. Items Per
Store 1,010
767
760
693
647
586
600
500
400
300
200
100
113 94
115
89
271
254
239
228
217
117
76
126
120
69
67
0
2008
TOTAL U.S. FOOD
2009
TOTAL U.S. CONV
2010
TOTAL U.S. DRUG
2011
YTD 2012
Sum of Total Liquor Stores
Source: Bump Williams Consulting
10
Volume
• Distributors and retailers are very focused on above premium
category.
• Industry is losing heavy beer drinkers due to aggressive pricing.
Millennials enjoy craft, FMB’s and cider and drink less than past
consumers.
• Is our industry spending enough time and attention on premium,
premium light and sub premiums?
• Currently All Others sell 61M bbls while ABI and MC combined sell
over 148M bbls.
• Are you spending twice as much time on premium, premium light and sub
premium as you spend on All Others?
• How many presales people did you have in 2008? How many do you
have now?
• Is retail taking space from ABI / MC and giving it to specialty, craft,
FMB’s, etc.?
• We are not saying to diminish effort on All Others, only
increase effort on premium, premium light and sub
premiums.
11
Margin
• Margins will be up but will increase slower.
• Return to normal at CPI– 2.5% to 3.0%.
12
Distributor Gross Profit Slowing
9.0%
8.1%
8.0%
7.0%
5.9%
6.0%
5.0%
4.5%
4.5%
4.0%
3.0%
2.3%
2.0%
1.1%
1.0%
0.0%
2005
2007
2009
2011
2013
2014 (est.)
13
Cost
• Labor costs will increase.
• Number of people.
• Particularly ABI/MC sales people.
• Wages per person.
• Capital expenditures will increase faster than before.
• Many distributors have used up excess capacity.
• Size matters.
• Mega distributors.
• 16% cost / 26% margin / $1.75 ++ profit per c/e.
• 30 distributors = 30% of volume.
• Traditional distributors.
• 21 % cost / 25% margin / less than $1.00 profit.
• 920 = 60% of volume.
• “All Other” distributors will increase but will be more expensive to
operate.
• 1,000 to 2,500 = 10% of volume.
• Plenty of access to market.
14
Profitability
15
Distributor Gross Profit Per Case
$5.05
$4.91
$4.85
$4.60
$4.65
$4.45
$4.51
$4.15
$4.25
$4.25
$4.05
$3.75
$3.85
$3.94
$3.65
$3.55
$3.45
$3.55
$3.71
$3.25
2005
2007
2009
NBWA Productivity Report
2011
IBG
2013
16
Distributor Operating Profit Per Case
$1.30
$1.25
$1.20
$1.10
$1.10
$1.00
$1.00
$0.90
$0.75
$0.80
$0.80
$0.75
$0.70
$0.60
$0.50
$0.60
$0.67
$0.59
$0.53
$0.40
2005
2007
2009
2011
2013
17
Consolidation
• Pace of consolidation will increase.
• Value will depend on location, portfolio depth and diversity, strategic potential,
number of people interested.
• Access to market will be expanded.
• Self distribution, Specialty Distributors, Wine / Spirits, Distributors, Soft Drink
Bottlers.
• Industry will be less stable.
• Legislative changes escalating.
• On-going violations of 3-tier principles.
• Supplier self distribution.
• Distributors with more diverse portfolios makes it harder to defend
beer’s protection.
• Mega distributors, supplier distribution and specialty distributors will grow
while traditional distributors will get squeezed from both ends.
• Value of distributorships has grown significantly.
• Less desirable markets will be difficult to sell.
• Growth markets with good portfolios can name their price.
18
WA
ABI
MT
ME
ND
VT
MN
OR
ID
X
WI
SD
X
NE
Keith &
MI
Don
UT
KS
AZ
Hensley
Dobbs
NM
X
OH
IN
IL
CA
RI
CT
PA
Hand
CO
ABI
ABI
X
IA
ABI
Stokes
MO
TN
X
WV
VA
Jefferies
NC
Hand
OK
AR
SC
TX
Nau
MS
X
AL
GA
Dormity
LA
FL
Lamantia
ABI Mega Distributors
NJ
ABI
DE
KY
ABI
Ben E. Keith
MA
ABI
NY
WY
NV
NH
MD
19
WA
CoHo
MT
ME
ND
Taylor
VT
MN
OR
NH
MA
ID
Clay
WY
Ingram
WI
SD
Reyes
Clay
CO
X
IL
MC
KS
AZ
OK
X
Clay
NM
Andrews
OH
Monarch
X
X
Keg 1
Glazer
Andrew
s
Reyes
VA
KY
NC
X
TN
AR
SC
Glazer
Reyes
MS
LA
Goldring
/
Moffat
AL
X
RI
CT
NJ
DE
IN
MO
TX
MC Mega Distributors
PA
WV
CA
Goldring /
Moffat
?
MI
North
Coast
IA
NE
NV
UT
Reyes
NY
GA
X
Taylor
Reyes
FL
Gold
Coast
MD
20
ClickWA
MT
ME
ND
Sheehan
Maletis
VT
MN
OR
NH
Sheehan
MA
ID
WI
NY
Sheehan
SD
WY
RI
MI
Sheehan
PA
IA
Saccani
OH
CO
SW&S
Wirtz
UT
X
X
Sheehan
Stone
NJ
NE
NV
CA
CT
KS
Self
AZ
Nackard
Clement
IL
Major Brands
Rucker
IN
Sheehan
MO
X
MD
WV
Sheehan
VA
KY
X
DE
NC
TN
OK
X
AR
NM
X
Ben E. Keith
TX
Lamantia
MS
AL
SC
SW&S
GA
Young
LA
FL
Brown
Craft Mega Distributors
X – W/S with significant beer.
21
Positives
• Craft category’s creativity, intellect and entrepreneurial spirit
creates excitement in industry.
• Beer distributors retail penetration is superior to wine and
spirits / specialty and self-distribution (structural advantage).
• Soft drink?
• ABI distributors Monster performance vs. Coke Bottlers.
• Marketing potential.
• Import / craft marketing is fabulous.
• Major brewers marketing potential.
• Growing Hispanic demographic.
• Potential to expand consumer base with sweeter, flavored
products to women and young adults.
• Increasing competition.
• Gold system (Crown) is a 3rd competitor to ABI / MC.
22
Major Points
• IBG believes volume will be negative for several years.
• We get a new generation of consumers in 2020 to 2025.
• Wine and spirits will try to take share of stomach and will
not stop until someone stops them.
• Beer distributors will become beverage distributors.
• Beer distributors make less per case but sell more cases and could
make more money.
• Beer distributors will have less franchise protection in
some states.
• Beer Distributors will need to allocate more resources to
mega brands.
• Mega brands will not continue to pay the freight for others.
MODEL 2020
INDEPENDENT BEVERAGE GROUP
24
Model - 2020
• Challenge:
• How to add complexity, contain costs and
provide “brand building” benefits.
25
Model – 2020
• “Gigantic” attitude adjustment.
• ABI’s Impact Selling System was fantastic push system.
• Distributors need to focus on marketing to consumers at retail
(pull, not push).
• Do you believe beer distributors can significantly
influence consumer purchase at retail?
• Account managers should be responsible for creating a dynamic
purchase environment that emphasizes brand development –
“pull” marketing.
• More time to sell at store level.
• More presales people.
• More E-commerce.
• Transition replenishment from presales person to retailers
through technology.
• More inside selling in a professional manner.
26
Model - 2020
• Volume.
• Need to be beverage / DSD distributors.
• Will have a larger geographical footprint.
• Will have different territorial descriptions for different
categories.
• Will have unique accounts.
• Operating Costs.
• 12% - 30% average Operating Cost as a % of sales depending on
scale and performance requirements.
• Mega – 12%, traditional – 18%, others – 30%.
• ABI / MC and many distributors have recently cut costs and raised
prices but have been ineffective at marketing.
• Many brewers are slowly taking margin from distributors and we expect this to
escalate.
27
Model - 2020
• Margin.
• 18% to 35%.
• Average will tend to be lower than today.
• Profit.
• More total profitability but less per case.
3 THINGS TO
REMEMBER
INDEPENDENT BEVERAGE GROUP
29
3 Things To Remember
• Distribution system needs to focus more time,
people and money at improving retail
performance (pull, not push).
• Distribution system will be more complex and less
protected in the future.
• Consolidation will be much more difficult and time
consuming due to the number of suppliers and
categories involved.