CIDER MARKET TRENDS EXECUTIVE SUMMARY: 2017

IMPORTANTThis public summary is a highlight view of USACM’s first annual cider market report in partnership with Nielsen, a global measurement and data analytics company that provides a complete and trusted view of consumers and markets worldwide.

This executive summary report DOES NOT include the data summary tables. The detailed market data summary tables are a protected USACM member benefit. The data report can be accessed on the USACM website after logging in with your member credentials.

For assistance updating your membership or retrieving your membership login credentials, please email membership@ciderassociation.org.

p. 4-5 Director’s Introductionp. 6-7 Executive Summary: 2017p. 8 Diving Deeper: Off-Premise Regional Trendsp. 9 Diving Deeper: On-Premise Regional Trendsp.10 APPENDIX A: Off-Premise Configurationsp.11 APPENDIX B: On-Premise Configurationsp.12 APPENDIX C: Off-Premise Marketsp.13 APPENDIX D: On-Premise Marketsp.14 APPENDIX E: Data report definitions

TABLE OF CONTENTS

Special thanks to Liz Hough, Eric Lewandowski and Cider Culture for the beautiful photography featured in this report.

THE NEED: Cider is easily lost in the grand shuffle of the beverage category. Taxed like wine and often sold like beer, the lack of identity in the marketplace doesn’t just hurt sales of cider—it makes it difficult to collect accurate, relevant data detailing the current nature of the market. Un-nuanced trends get reported to the media and distributors. The result is a very misleading picture about cider’s growth. This problem impacts cider makers big and small. The industry needs data—to raise capital, to promote our successes, and to pitch to distributors and retailers. As the national trade association for the cider industry, USACM is responding to this need.

THE SOLUTION: Through a partnership with Nielsen, a global measurement and data analytics company that provides a complete and trusted view of consumers and markets worldwide, we will provide scan data of on- and off-premise cider sales as a benefit to our members moving forward. We will also be using this data to advocate on the behalf of the category with both lawmakers, distributors and the media.

What will the report entail?

Members will receive an annual report that includes year-over-year data for a 52-week period ending on or near December 30. The report will contain:

• An executive summary detailing high level regional and national trends, broken down by national and regional brands (in aggregate) (members-only).

• An excel spreadsheet containing YOY macro-data for off-premise sales of beer,

flavored-malt beverages and cider, both nationally and regionally (members-only).

• An excel spreadsheet containing YOY micro-data for off-premise sales of cider, broken down by national and regional brands (in aggregate), both nationally and regionally and highlighting trends with packaging size and flavors (members-only).

• An excel spreadsheet containing YOY on-premise sales of cider, broken out by chains and independents as well as metro markets for Boston, Chicago, Dallas, Denver, Los Angeles and New York. This spreadsheet also looks at trends for draft versus packaged in the cider segment and compares cider trends with the beer and flavored malt beverage categories. (members-only)

What scan data is included in the Nielsen findings?

Nielsen’s off-premise data is sourced through partnerships with convenience stores, Whole Foods, Walmart, Target, BJ’s Club, Sam’s Club, Dollar General, Family Dollar, and other select liquor retailers, mass merchandisers, drug stores and grocery stores.

Nielsen’s on-premise data is sourced through partnerships with eating establishments and drinking establishments, both chains and independently-owned. It includes information from establishments considered Fine Dining, Casual Dining, Polished Casual, Fast Casual, Quick Service Restaurant, Neighborhood Bar, Casual Nightclub, Sports Bar, Premium Nightclub, Adult Entertainment, Irish Pub, Premium Bar, and Country Western.

DIRECTOR’S INTRODUCTION

4

Which regional markets are included?

USACM worked collaboratively to select markets that (a) represented a diverse geographical area and (b) had sufficient data to be reliable. Our initial agreement with Nielsen included data for 24 markets. We selected the following for the off-premise reports:

• SOUTH: Virginia, North Carolina, Florida, Georgia

• EAST: New York City, New England, Upstate New York

• MIDWEST: Chicago, Ohio, Indiana, Michigan

• NORTHWEST: Washington, Oregon, Idaho

• MOUNTAIN/WEST: Arizona, California, Nevada, Texas, Los Angeles

Regional markets are also defined for the South, the East, the Midwest, the Northwest and the Mountain/West regions. Appendix B includes specific details on these markets.

For on-premise reports, reliable and sufficient market data helped define which markets would be included in the report. The data is segmented for Boston, Chicago, Dallas, Denver, Los Angeles and New York..

What about other channels?

We recognize that the Nielsen data is not inclusive of every channel in which cider is sold, and that this report only paints a partial picture of nuanced cider trends. USACM will be conducting its annual membership survey again this summer. It’s important that our members complete our survey so we can gather information on tasting rooms sales and other information not captured by Nielsen. Combined with the Nielsen data, we can begin to paint an accurate picture of the market, which allows us to better advocate for it.

Does Nielsen have your UPCs?

Nielsen’s cider data is getting better and better, and you can help it continue to improve. Please send a digital (or actual) copy of your product’s labels, back and front, to both:• npcimages@nielsen.com • danny.brager@nielsen.com

We are excited to pass this data onto our members. If you have ideas on how we can use this data to support the industry, please reach out to us. Likewise, if you have any questions, please let us know. Happy number crunching!

Michelle McGrathExecutive Director, USACM

5

For both on- and off-premise, while national brands account for 75% of category sales, regional brands are gaining share, now driving roughly 25% of the category’s sales.

OFF-PREMISE On the surface, the cider category was down -3.8% for off-premise sales in 2017 ($469,420,544) compared to 2016. However, a deeper look at the data reveals that while national brands (defined in Appendix A) were collectively down (-11.5% at $351,113,065), regional and local brands (referred to as regional from here on) increased sales by 30% ($118,307,479) and volume by 32.2%.

The overall trend of declines in total cider sales is slowing, offset by regional growth.

In addition to the observed sales gains in regional cider brands, these brands also

gained distribution (2.1% ACV, see Appendix E for definition of ACV).

Total category growth in the off-premise category was -10.2% for 2016 compared to -3.8% for 2017. Nielsen and others have suggested this might be a correction of course for the cider category.

PACKAGING Cans continue to grow in popularity for the category. Off-premise sales of cider in four-packs

are up 32% in 2017 while six-packs are up 52%. Sales of cider in four-packs ($29,974,536) are twice as large ($14,686,466) as six-packs in the off-premise channels. Bottles declined for single-use and multi-packs in off-premise sales.

FLAVORS The most remarkable flavor trend is the nearly 50% increase in off-premise sales of non-apple/non-pear flavored ciders for regional brands. This growth offset the national brand decline in this subcategory (-12.2%), leaving non-apple/non-pear flavored ciders as the only positive-growth area for all cider brands combined (11.3%).

ON-PREMISE Total cider sales in eating establishments were $499,047,314 and in drinking establishments were $305,117,107 (see Appendix D for definitions of eating and drinking channels).

Total on-premise cider sales dipped 3.7% in 2017. Declines were observed for both

BIG PICTURE: Regional

brands are growing and

sustaining their position.

EXECUTIVE SUMMARY

6

the national (-4.7%) and regional brands (-.07%). For chain premises, national brands saw lesser declines than regional brands. For independent premises, the pattern is reversed—national brands saw greater declines than regional brands.

DRAFT On-premise draft cider sales took a dip in 2017, declining 4.2%. However, if you look at the regional brands, they only declined 1.1% in draft sales. These brands increased

a dramatic 54.6% in draft sales for 2016, so a decline of only 1.1% demonstrates these brands relative holding of their position in the draft category.

PACKAGED For regional brands, there was no decline of packaged cider’s on-premise sales; national brands decreased 3.7%.

There were pockets of subcategory growth for packaged on-premise sales. Both non-apple/non-pear flavored cider and packaged regional ciders grew at drinking establishments (versus eating establishments), 2% and 3.5%, respectively.

DISTRIBUTION Cider distribution in on-premise channels increased 0.8% in 2017. However, regional brands increased distribution 4.9% for draft and 5.2% for packaged. When you break the data down further you see that the growth in distribution for regional brands was driven by drinking establishments more than eating establishments.

7

REGIONAL TRENDS Although general trends of negative-growth for national brands and positive-growth for regional brands were observed across all geographical regions in 2017, regional differences exist. Most notably is growth in the South and the Northwest (NW) for regional brands (37.4% and 38.4%, respectively). Although the total market was smallest for the NW region, it was the only region where regional brand sales exceeded national brand sales.

Differences in the East and Midwest regions are also worth highlighting. In the East, the national brands’ decline rate was roughly half that of the other regions. In the Midwest, regional cider sales only grew by 8.6%--remarkably less than growth in this category for the other four USACM regions. STATE TRENDS Fourteen states were selected for evaluation based on geographic positioning and reliable market data. Included were Virginia, North Carolina, Florida, Georgia, Ohio, Idaho, Michigan, Washington, Oregon, Idaho, California, Nevada, Arizona and Texas.

All states experienced negative growth for national brands and positive growth for regional brands.

Idaho and Texas saw outstanding growth in their regional cider sales, increasing 63.9% and 58.8% respectively for 2017. Michigan (1.6%), Florida (3.5%), Nevada (8.1%) saw single digit growth of regional cider sales. This growth is notably lower than the 14-state average of 33%. All other states saw at least double digit increases.

For additional information on off-premise state trends, including changes in volume and price, please refer to the members-only annual report after logging into www.ciderassociation.org.

DIVING DEEPER: OFF-PREMISE REGIONAL TRENDS

Percent change in off-premise cider sales in 2017 versus 2016 for the 5 USACM regions. Data is divided by national and regional brands. Regions are defined in Appendix B.

8

DIVING DEEPER: ON-PREMISE REGIONAL TRENDSREGIONAL TRENDS On-premise regional trends are broken down by six major metropolitan markets where reliable and accurate measurement is possible: Boston, Chicago, Dallas, Denver, Los Angeles, and New York.

Chicago and Dallas saw significant growth in regional brand sales. Chicago saw growth in all on-premise segment subcategories,

whereas Dallas’s growth was largely driven by a 9% increase in draft sales of regional brands.

Elsewhere, regional and national trends imitate each other, except for a slight up-tick in regional sales for New York City.

For additional on-premise regional trends, such as flavor performance by market, please see the USACM member data report.

9

APPENDICES A-ERefer to the following appendices when reviewing the

members-only Nielsen data report.

The data report can be accessed on the USACM website after logging in with your member credentials.

For assistance updating your membership or retrieving your membership login credentials, please email

membership@ciderassociation.org.

10

MACRO CONFIGURATIONS

BEER/FMB/CIDER: Total “Beer” view, including all beer categories, flavored malt beverages, and cider -BEER Includes all beer segments -FLAVORED MALT BEVERAGES -CIDER MICRO CONFIGURATIONS NATIONAL CIDER BRANDS: Includes all brands owned by MillerCoors, Boston Beer, Anheuser Busch InBev, Vermont Cider and Heineken REGIONAL CIDER BRANDS: Includes all remaining brands (i.e. those NOT owned by National Brand parent companies)

Characteristics are coded based on what is listed on the packaging of a product. Alcohol by Volume is divided into three major groupings. -Cider ABV <5% -Cider ABV 5-6% -Cider ABV >6%

Packaging configurations: -BOTTLE -CAN -Rem. Packaging Type (Remianin Package Type: Includes items that are sold in Kegs or Pouches) -6PK -12PK -1PK -4PK

Remaining Packaging Configurations Size groupings were created in partnership with the USACM. The report is focused on the most prominent sizes, including 750mL bottles. Sizes are fluid ounce based so the appropriate conversion is provided when necessary. -Cider 12 Fluid Oz -Cider 16 Fluid Oz -Cider 22 Fluid Oz -Cider 25.35 Fluid Oz (750 mL) -Cider All Other Fluid Oz

Flavors:Characteristics are coded based on what is listed on the packaging of a product. These flavor groupings refer to items that have overtly listed their flavors on the package. -Cider Apple Flavor -Cider Pear Flavor -Cider All Other Flavor

APPENDIX A: Off-premise report configurations

11

APPENDIX B: On-premise report configurations

MACRO CONFIGURATIONS

-PREMISE CATEGORIES: Includes Chain, Independent, Eating, Drinking-BEER/FMB/CIDER: Total "Beer" view, includes beer, flavored malt beverages, and cider-BEER: Includes all beer segments-BEER DRAFT -BEER PACKAGED -FLAVORED MALT BEVERAGES -CIDER -CIDER DRAFT -CIDER PACKAGED

MICRO CONFIGURATIONS

FALVOR SUBGROUP: Includes Apple, Pear and all other remaining flavorsNATIONAL CIDER BRANDS: Includes all brands owned by MillerCoors, Boston Beer, Anheuser Busch InBev, Vermont Cider and Heineken REGIONAL CIDER BRANDS: Includes all remaining brands (i.e. those NOT owned by National Brand parent companies)

12

APPENDIX C: Off-premise MarketsTotal US - All Nielsen Measured Off-Premise OutletsxAOC includes Grocery, Drug, Mass Merchandiser (e.g Target), Walmart, BJ's Club, Sam's Club, Dollar General, Family Dollar; Select Liquor Markets/Retailers

MARKET NAME NIELSEN MARKETS INCLUDED

STATES COMPRISING USACM REGIONS

1 USACM South 

Arkansas xAOC - NC, Louisiana xAOC, Mississippi xAOC, Alabama xAOC, Tennessee xAOC, North Carolina xAOC, North Carolina Conv, South Carolina xAOC, Total Wine & More South Carolina, West Virginia xAOC - NC, Total Wine & More Delaware, Maryland xAOC, Washington DC Food, Georgia xAOC, Total Wine & More Georgia, Florida Conv, Florida Liquor, Florida xAOC, Total Wine & More Virginia, Virginia Conv, Virginia xAOC, Atlanta Convenience, Total Wine & More North Carolina, WFM Florida

Arkansas, Lousiana, Mississippi, Alabama, Tennessee, N. Carolina, S. Carolina; W. Virginia, Delaware, Maryland, Wash DC, Georgia, Florida, Virginia

South 2 Virginia Virginia xAOC; Total Wine and More VA; Virginia ConvenienceSouth

3N Carolina

N Carolina xAOC; N Carolina Convenience; Total Wine & More North Carolina

South 4 Florida Florida xAOC; Florida Liquor; Florida Convenience; WFM FloridaSouth 5 Georgia Georgia xAOC; Atlanta Convenience

6 USACM East 

Vermont xAOC - NC, New Hampsire xAOC - NC, Maine xAOC - NC, Rhode Island xAOC - NC, Connecticut xAOC, Total Wine & More Connecticut, New Jersey Liquor, New York State xAOC, Pennsylvania xAOC, Boston Liquor, New England Convenience, Upstate NY Conv, WFM North Atlantic, WFM Northeast

Vermont, N Hampshire, Maine, Massachusetts, R Island, Connecticut, New Jersey; New York, Pennsylvania

East 7 New York City NY City Food; NY City LiquorEast

8New England Maine xAOC; New Hampshire xAOC; Vemont xAOC;

Connecticut xAOC; Boston Liquor; New England Convenience; Total Wine & More Connecticut; WFM North Atlantic

East9

Upstate NY Buffalo/Rochester Food; Albany Food; Syracruse Food; Upstate NY Convenience

10

USACM Midwest Minnesota xAOC + Select Liquor, Iowa xAOC - NC, Missouri xAOC, Wisconsin xAOC, Illinois xAOC, Michigan Conv, Michigan xAOC, Indiana xAOC, Kentucky xAOC, Ohio xAOC, Ohio State Conv, Total Wine & More Missouri, Belmont Bev, Crown Liquors, Payless Liquors

Minnesota, Iowa, Missouri, Wisconsin, Illinois, Michigan, Indiana, Kentucky, Ohio

Midwest 11 Chicago Chicago Food; Chicago DrugMidwest 12 Ohio Ohio xAOC; Ohio ConvenienceMidwest

13Indiana

Indiana xAOC; Indiana selected Liquor ChainsLiquor chains - Belmont Bev; Crown; Payless (no Indiana specific TAs)

Midwest 14 Michigan Michigan xAOC; Michigan Convenience

15USACM Northwest

Total Wine & More Washington, Washington xAOC, Oregon xAOC, Idaho xAOC - NC, Seattle Conv, Beverages & More Wash, Portland Conv, WFM Pacific Northwest

Washington, Oregon, Idaho

Northwest 16 Washington Washington xAOC; Seattle Convenience; Selected Liquor chains Liquor chains - BevMO WA Total Wine and More WANorthwest 17 Oregon Oregon xAOC; Portland ConvenienceNorthwest 18 Idaho Idaho xAOC

19 USACM Mtn/West

Beverages & More California, California xAOC, Total Wine & More California, Total Wine & More Nevada, Nevada xAOC, Montana xAOC - NC, Wyoming xAOC - NC, Utah xAOC - NC, Arizona xAOC, Beverages & More Arizona, Total Wine & More Arizona, Colorado xAOC, Denver Liquor, New Mexico xAOC - NC, South Dakota xAOC - NC, Nebraska xAOC - NC, Kansas City Food, Oklahoma xAOC - NC, Texas xAOC, Total Wine & More Texas, Total Specs Corp, Goody Goody, Total Gabriels, Twin Liquors, Dallas/Ft Worth Conv, Houston Conv, San Antonio Conv, Remaining Texas Conv, Phoenix Conv, Los Angeles Conv, San Francisco Conv, Lee's Liquor, WFM Northern California, WFM Southern Pacific

California, Nevada, Montana, Wyoming, Utah, Arizona, Colorado, New Mexico, North Dakota, South Dakota, Nebraska, Kansas, Oklahoma, Texas

Mtn/West 20 Arizona Arizona xAOC; Phoenix Convenience; Selected Liquor chains Liquor chains - BevMO AZ Total Wine and More AZMtn/West

21California California xAOC; LA Convenience; S.F. Convenience; Selected

Liquor chainsLiquor chains - BevMO CA; Total Wine and More CA

Mtn/West 22 Nevada Nevada xAOC; Lees Liquor; Total Wine and More NVMtn/West

23Texas Texas xAOC; Texas selected Liquor Chains; Convenience - Dallas,

Houston, San Antonio, Rem TexasLiquor chains - Specs; Ttl Wine & More TX; Goody Goody; Gabriels, Twin Liquor

Mtn/West 24 Los Angeles LA Food, LA Drug, LA Convenience

Total U.S.

13

APPENDIX D -

Total On Premise US Fine Dining, Casual Dining, Polished Casual, Fast Casual, Quick Service Restaurant, Neighborhood Bar, Casual Nightclub, Sports Bar, Premium Nightclub, Adult Entertainment, Irish Pub, Premium Bar, Country Western

ChainIncludes all outlets that are part of one brand: one same ownership and management

IndependentIncludes all self-managed outlets

EatingFine Dining, Casual Dining, Polished Casual, Fast Casual, Quick Service Restaurant

DrinkingNeighborhood Bar, Casual Nightclub, Sports Bar, Premium Nightclub, Adult Entertainment, Irish Pub, Premium Bar, Country Western

MARKET NAME Major Markets Major Markets State Regions

1 Boston Total (eating + drinking - Chain + Independent) Massachusetts New England2 Chicago Total (eating + drinking - Chain + Independent) Illinois East North Central3 Dallas Total (eating + drinking - Chain + Independent) Texas West South Central4 Denver Total (eating + drinking - Chain + Independent) Colorado Mountain5 Los Angeles Total (eating + drinking - Chain + Independent) California Pacific6 New York Total (eating + drinking - Chain + Independent) New York Mid Atlantic

Total U.S.

Channel

Tenure

14

APPENDIX E -

FACT NAME FACT DEFINITION ADDITIONAL NOTES$ Dollar Sales$ % Change vs Yr Ago The percentage increase or decrease in dollar sales versus year agoEQ Volume Equivalized Volume Sales EQ Volume is Equivalized to the Case (266oz)EQ % Change vs Yr Ago The percentage increase or decrease in equivalized volume sales versus year ago EQ Volume is Equivalized to the Case (266oz)

Avg 72oz EQ Price Average Price per 72 ozFor the USACM we have equivalized price to 72oz (6 pack x 12oz)

Avg 72oz EQ Price Change vs Yr Ago The absolute increase or decrease in average price per 72 oz versus year agoFor the USACM we have equivalized price to 72oz (6 pack x 12oz)

% ACV where Dist Change vs Yr Ago - Beer/FMB/Cider

A measure of the breadth of distribution for a product where it can LEGALLY BE SOLD that is weighted by the amount of all commodity volume that is accounted for by the legal stores that carry the product in question

$ Share The portion of dollar sales that each product line holds for Total CiderEQ Volume Share The portion of equivalized volume sales that each product line holds for Total Cider

FACT NAME FACT DEFINITION ADDITIONAL NOTES$ Dollar Sales$ % Change vs Yr Ago The percentage change in dollar sales versus year ago$ share Product share of their category e.g share of draft beer is shared to total beer$ PP Chg YAEQ Volume Equivalized Volume Sales EQ Volume is Equivalized to the Case (288oz)EQ % Change vs Yr Ago The percentage change in equivalized volume sales versus year ago EQ Volume is Equivalized to the Case (288oz)288oz EQ share Product share of their category e.g share of draft beer is shared to total beerAvg 16oz EQ Price Average Price per 16 ozAvg 16oz EQ Price Change vs Yr Ago The absolute change in average price per 16 oz versus year agoTDP Numbers of outlets where the product is distributed (Total Distribution Point)TDP % Change vs Yr Ago The percentage change in outlets versus year ago

Share values are to Total Cider

OFF-PREMISE REPORTS

ON-PREMISE REPORTS

15