State of the Spirits Industry
2013
Spirits Continues to Gain U.S. Market Share at the Expense of Beer
Supplier $ Share (Billions)
Beverage Alcohol Market Share
2005 – 2011 CAGRs
2000
Wine: 3.4%
Spirits: 3.7%
Beer: 2.2%
$49.9
$52.2
$8.6
$8.3
$16.0
2011
Wine
16%
$17.2
$54.9
$56.6
$57.0
$57.6
$59.2
$9.2
$9.4
$9.5
$9.8
$10.2
$18.2
$18.7
$18.7
$19.2
$19.9
Wine
17%
Spirits
29%
$25.6
$26.3
$27.5
2005
2006
2007
$28.5
2008
Beer
Spirits
$28.8
$28.6
$29.2
2009
2010
2011
Spirits
34%
Wine
Servings (Billions)(1)
Growth in Servings
2011 – 2015P
CAGR: 0.3%
2005 – 2011 Absolute Growth:
118.2
120.8
123.7
124.5
123.9
123.6
124.6
126.0
17.0
17.6
18.3
18.4
18.5
18.7
19.2
20.3
34.9
36.2
37.5
38.0
38.5
39.1
40.2
42.6
3.6%
66.9
67.8
68.2
66.9
65.7
65.1
Beer: (1.7%)
Spirits: 15.0%
Wine: 13.1%
6.1%
4.0%
1.0%
66.2
Beer
49%
Beer
55%
3.6% 3.8%
1.3%
1.1%
0.5%
1.4%
0.4%
2006
2007
2008
Beer
2009
Spirits
2010
2011
(1.8%)
2006
2015P
2007
Wine
Source: Beer Marketer’s Insights, DISCUS, IMPACT Spirits Databank.
(1)
1.7%
0.7%
2.7% 2.5%
1.3%
(0.9%)
63.1
Beer
2005
5.7%
Serving size: Beer – 12 oz; Spirits – 1.5 oz; Wine – 5 oz.
2
2008
2009
(1.8%)
Spirits
(3.1%)
Wine
2010
2011
2015P
Vodka and Whiskey are Large and Driving Spirits Industry Growth
Spirits Industry Market Size
Varieties of Spirits
(cases in millions)
185
179
172
3.6%
187
193
190
2005
203
198
Brandy
7%
3.6%
3.0%
Cocktails &
Mixed
Drinks
4%
Gin
6%
2.7%
2005
2006
2007
2008
1.7%
1.4%
2009
2010
9 Liter Cases Consumed
2011
Growth by Spirit Variety
2005 - 2012P
CAGR:
80
$108
$97
45 +0.5%
40
26
21
13
11
10
8
20
0
Vodka
Tequila
Source: IMPACT Spirits Databank.
Whiskey
Brandy
(1)
2009
Rum
Gin
2010
2011
$140
$133
60
2008
Whiskey
22%
$160
69 +5.2%
2007
Rum
13%
Whiskey
25%
Average FOB by Spirit (2011 vs. 2010)
(cases in millions)
2006
Vodka
34%
Cordials &
Liqueurs
10%
Rum
13%
Growth %
Brandy
6%
Tequila
6%
Cordials &
Liqueurs
12%
2012P
Cocktails &
Mixed
Drinks
4%
Gin
5%
Vodka
28%
Tequila
5%
2.2%
1.1%
2005
2012P
$118
$9.17
$96
$4.25
+2.6%
(0.1%)
+4.7%
(0.3%)
(0.6%)
+2.3%
2012P
Cordials
Cocktails
$2.60
$1.60
3
$0.88
$1.38
Gin
Cocktails
& Mixed
Drinks
($0.11)
Vodka
Whiskey
Rum
Cordials & Tequila
Liqueurs
2011 Average FOB
Serving size: Beer – 12 oz; Spirits – 1.5 oz; Wine – 5 oz.
$60
$1.28
Brandy
$ Increase from 2010
Vodka is the Fastest Growing Spirit (’05 – ’12P CAGR: +5.2%)
Overview




Vodka Market Size (Consumption)
(9L eqv. cases in millions)
Vodka has grown at a faster rater since 2005 than any other
spirit (+5.2%); 4 of the top 5 brands are gaining size
The Vodka market is approximately 60% domestic and 40%
imported
– Imported Vodka is pushing industry growth with a CAGR
approaching 10% since 2005; Domestic Vodka is also
growing strong at a 3% CAGR
– 3 of top 5 Vodkas are imported, with Svedka growing over
10%
Beam’s Pinnacle will enter the top 10 in 2012 and is growing
nearly 50%
Diageo’s Smirnoff is the industry’s dominant brand, >2x the
size of the 2nd largest Vodka brand
2005 – 2012P CAGRs
Imported: 9.9%
Domestic: 3.0%
48.4
13
17
19
20
Constellation
5%
Sazerac
8%
Beam
6%
Source: IMPACT Spirits Databank and IRI 52 Weeks Ending December 2, 2012.
4
66.2
24
22
5.3%
69.0
26
5.0%
5.1%
40
41
42
43
2009
2010
2011
2012P
3.6%
35
36
2005
2006
38
39
2007
2008
Domestic
Pernod
Ricard
9%
63.0
7.2%
4.1%
Diageo
25%
Bacardi
6%
57.0
Imported
Top Brands
Nolet Spirits
4%
Campari
6%
15
55.0
6.0%
Top Producers
Other
31%
51.3
60.0
Growth %
4.2%
Vodka SKU-Magedon — Growth Driven by Flavor Expansion
SKU Expansion Over Time
Select Vodka Brands Flavor SKU-ing Over Time
(9L Cases in Thousands)
2000
Citrus
13%
Vanilla
6%
2000
2010
Other
3%
Flavored
4%
Raspberry
12%
Other
38%
Flavors: 29
2010 Depletions: 9,550
Citrus
52%
Orange
30%
Orange
10%
Apple
3%
Raspberry
9%
Strawberry
3%
1.9 Million
9L Cases
Grape
5%
Vanilla
7%
Flavors: 18
2010 Depletions: 4,630
7.2 Million
9L Cases
Flavored
23%
Non-Flavored
77%
Non-Flavored
96%
Flavored
22%
Cherry
9%
2010
Flavored
26%
Non-Flavored
74%
Non-Flavored
78%
Flavored
5%
Flavors: 11
2010 Depletions: 2,700
Flavored
9%
Non-Flavored
95%
Non-Flavored
91%
Flavored
30%
Flavored
45%
Flavors: 20
2010 Depletions: 1,800
Non-Flavored
70%
Source: IMPACT Spirits Databank.
5
Non-Flavored
55%
Whiskey is Large and Steadily Growing (’05 – ’12P CAGR: +0.5%)
Overview
Whiskey Market Size(1) (Consumption)

Whiskey has grown at a CAGR of 0.5% since 2005; the top 3
brands are growing above the Whiskey average

The Whiskey market is approximately 50% domestic and 50%
imported

–
Domestic Whiskey is growing at a 2005 – 2012P CAGR of
1.0% whereas Imported Whiskey is flat
–
3 of top 5 Whiskies are domestic, with the top 3 brands
all growing above industry growth
(9L eqv. cases in millions)
2005 – 2012P CAGRs
Imported: 0.0%
Domestic: 1.0%
2005 – 2012P CAGR: 0.5%
43.9
44.3
44.6
44.5
44.7
44.9
45.2
45.4
24
24
24
24
24
24
24
24
0.4%
0.4%
0.9%
0.7%
0.0%
Diageo is the clear category leader with 2 of the top 5 brands
and 24% market share
0.4%
20
21
21
21
21
21
22
22
2005
2006
2007
2008
2009
2010
2011
2012P
Domestic
Top Producers
Campari
3%
0.7%
(0.2%)
Imported
Growth %
Top Brands
Other
11%
2011
Diageo
26%
Constellation
3%
2010 - 2011
Distiller / Importer
(Thousands)
Growth
1
Brown-Forman
4,860
2.0%
2
Diageo
4,185
1.0%
3
Beam
3,305
2.5%
4
Diageo
2,390
(1.0%)
5
Constellation
1,780
(0.6%)
Rank
Heaven Hill
4%
Pernod
Ricard
7%
Sazerac
7%
Depletions
Brown
Forman
21%
Beam
18%
Brand
Source: IMPACT Spirits Databank and IRI 52 Weeks Ending December 2, 2012.
(1) Domestic Whiskey includes Tennessee and Kentucky Whiskies, Bourbons, and Blends. Imported Whiskey includes Scotch, Canadian, Irish, Japanese, and other imported Whiskies.
6
Flavored Whiskies Seeing Hyper-Growth and an Explosion of SKUs
Overview
IRI Growth of Select Flavored Brands

Whiskey brands are SKU-ing into new flavors and un-aged to give
current drinkers expanded offerings and new consumers a more
mild Whiskey entry

Both line extensions (Jim Beam Red Stag, Jack Daniels Tennessee
Honey, etc.) as well as upstart brands (Ole Smoky Tennessee
Moonshine, Cabin Fever Maple Honey, etc.)
–
Typically a combination of flagship Whiskey mixed with
flavored liqueurs
–
Line extensions generally priced a few dollars premium to
the original product
–
Un-aged Whiskey, also known as White Whiskey or
Moonshine, easy to flavor, as well as attracting the Whiskey
enthusiast, looking for a higher proof Whiskey
BrownForman
80 Proof
Beam
80 Proof
Sazerac
125 Proof
BrownForman
70 Proof
Campari
71 Proof
($ in millions)
$10.5
$7.9
$0.5
Evan Williams
Cinnamon
Diageo
71 Proof
Source: IRI 52 Weeks ending December 2, 2012.
7
Heaven
Hill
70 Proof
$1.7
$0.9
Diageo
80 Proof
$2.3
Evan Williams
Honey
Beam
80 Proof
Heaven
Hill
70 Proof
Jim Beam
Red Stag
Diageo
71 Proof
Ole
Smoky
100 Proof
New Investment Anchoring Whiskey Brands with a Sense of Place for Authenticity
Jim Beam American Stillhouse (Beam)
Wild Turkey (Campari)

$30 million Jim Beam
Visitor Center and
Distillery opened
October 2012 in
Clermont, Kentucky

$4 million new Wild
Turkey Visitor Center
expected to open in
April 2013 in
Lawrenceburg, Kentucky

Offers visitors first ever
tour of adjacent
production facility
(expected to attract
200,000+ visitors
yearly)

Adjacent $40 million
bottling and packaging
operation also under
construction (125,000
sq. ft.)

Also will house new state-of-the-art Global Innovation
Center

Visitor Center 8x bigger
than previous facility
Evan Williams Bourbon Experience (Heaven Hill)


Independent Brand Visitor Centers
$10 million Evan Williams Visitor
Center expected to open in
September 2013 in downtown
Louisville, Kentucky
Artisanal distillery, immersive
tourism experience, and retail
location located in Heaven Hill’s
‘Bourbon Row’ Main Street
location
8

Ole Smoky Tennessee Moonshine
opened a retail / production facility in
Gatlinburg, Tennessee in July 2010

Michter’s Distillery opened a distillery,
bottling operation, and Visitor Center
($8 million) in Louisville, Kentucky in
July 2011

Four Roses Distillery completed 5,000
sq. ft. Visitor Center expansion ($2.4
million) in Lawrenceburg, Kentucky in
September 2012
Majority of Growth Coming from 6 of the Top 10 Players
Industry Growth by Supplier

Largest Growing Spirits Brands in 2012
Over 55% of the Industry’s dollar growth has been driven
by the 6 of the Top 10 largest suppliers
Diageo
20%
Other
44%
Beam
10%
Sazerac
9%
Constellation
Brands
4%
Pernod
Ricard
6%
Brown
Forman
7%
Source: IRI 52 Weeks Ending December 2, 2012.
9
Global Spirits Companies Acquiring Market Makers, Typically in Emerging Markets
Acquired
Acquired
Acquired
December 2011
Acquired
February 2011
(Sichuan
Swelfun)
March 2012
September 2012
Acquired
January 2013
Acquired
Acquired
June 2011
Pending
Acquired
Acquired
August 2011
August 2012
10
Within the U.S., Beam is the Intriguing M&A Target, Especially for Pernod & Bacardi
Pernod Ricard Current
Bacardi Current
(Market Share % / Portfolio Overview)
(Market Share % / Portfolio Overview)
Diageo
Beam
Cocktails
3%
10%
Pernod Ricard
8%
Bacardi
8%
Brown-Forman
Rum
12%
Sazerac
6%
3%
Heaven Hill
3%
Constellation
3%
Vodka
34%
2%
Bacardi
19%
Sazerac
Heaven Hill
3%
Constellation
Tequila
6%
Cocktails
5%
Campari
3%
3%
Constellation
3%
2%
Moet Hennessey
2%
2%
Vodka
22%
18%
8%
Brown-Forman
7%
Sazerac
Rum
7%
Vodka
24%
11
Cocktails
5%
Gin
4%
Other
1%
Whiskey
33%
Cordials
7%
6%
Campari
3%
Heaven Hill
3%
Constellation
Cordials
10%
Source: IRI 52 Weeks ending December 2, 2012.
26%
Pernod Ricard
3%
William Grant & Sons
Whiskey
9%
Bacardi
Other
2%
Whiskey
39%
Gin
7%
6%
3%
Rum
50%
6%
Diageo
26%
Campari
Gin
7%
(Market Share % / Portfolio Overview)
Diageo
7%
Other
3%
Bacardi Pro Forma with Beam
(Market Share % / Portfolio Overview)
Brown-Forman
Tequila
4%
8%
Heaven Hill
William Grant & Sons
Whiskey
24%
Cordials
6%
7%
Sazerac
Pernod Ricard Pro Forma with Beam
8%
8%
Brown-Forman
Gin
14%
Bacardi
10%
Pernod Ricard
Cordials
13%
Pernod Ricard
26%
Beam
Other
2%
7%
Campari
William Grant & Sons
Diageo
26%
Tequila
7%
3%
William Grant & Sons
2%
Moet Hennessey
2%
Vodka
19%
Rum
24%
At the Same Time, Major Wineries Increasingly See Spirits as an Adjacency
Company
Select Brands
Commentary
 Continuing spirits legacy of E. & J. Brandy, Gallo
launched New Amsterdam Gin in 2007 and New
Amsterdam Vodka in 2011
 Launched Family Camarena Tequila in 2010
 Launched Shellback Caribbean Rum in 2012
(Producer)
 Launched Cupcake Vodka in 2011 and flipflop Rum and
Big House Bourbon in 2012, extending successful Wine
brands into Spirits
 Housed under “Underdog Wine & Spirits,” The Wine
(Producer)
Group’s Millennial-focused division
 Acquired CRUZ Tequila in 2012 and developed
Trinchero Family Estates Spirits division
 Signed agreement with Tres Agaves Tequila in 2012 to
import, sell, and market Tequila and non-alcoholic
mixes
(Producer)
 Formed separate Spirits division in 2009
 Launched 2011 joint venture with Adult Beverage
Company (Chocolate Milk, Limeade) with equity stake
(Distributor)
 2011 core initiative to build Spirits division with focus
on acquiring small amounts of equity in distributed
Spirits brands
– Sold equity stake in Skinnygirl Margarita to Beam
(Distributor)
in 2011
(Realized)
12
Demeter Group Recent Transactions (December 2010 – 2012)
Acquired by
Acquired by
$850 million
Acquired by
Completed Transaction Value
Acquired by
15
Acquired by
Completed
Transactions
Acquired by
67%
Completed Transactions
in Beverage Alcohol
Acquired by
Acquired by
Acquired by
Acquired by
Private Placement
Acquired by
Has Acquired
Acquired by
Joint Venture With
13
71%
36%
Transactions Marketed
to Fewer Than 5
Potential Buyers
Transactions
Marketed to
1 Buyer
Demeter Group Recent Beverage Alcohol Transactions
March 2011
May 2011
December 2010
July 2012
Acquired By:
Beam Global Spirits & Wine
Acquired By:
Crimson Wine Group
Acquired By:
Fiji Water
Acquired By:
Constellation Brands
September 2012
August 2012
June 2012
June 2012
May 2012
August 2011
Acquired By:
E. & J. Gallo Winery
Acquired By:
E. & J. Gallo Winery
Acquired By:
Accolade Wines
Acquired By:
E. & J. Gallo Winery
Acquired By:
Precept Wines
Acquired By:
Fiji Water
14
Jeff Menashe
Chief Executive Officer
menashe@demetergroup.net
220 Halleck Street, Suite 110
San Francisco, CA 94129
(415) 632-4400
www.demetergroup.net
15