State of the Craft Beer Industry

2013

Beer49%

Spirits34%

Wine17%

Beer55%

Spirits29%

Wine16%

Beer Continues to Lose Market Share to Wine and Spirits

2

Supplier $ Share (Billions) Beverage Alcohol Market Share

Servings (Billions)(1) Growth in Servings

$25.6 $26.3 $27.5 $28.5 $28.8 $28.6 $29.2

$16.0 $17.2 $18.2 $18.7 $18.7 $19.2 $19.9

$8.3 $8.6

$9.2 $9.4 $9.5 $9.8 $10.2 $49.9 $52.2

$54.9 $56.6 $57.0 $57.6 $59.2

2005 2006 2007 2008 2009 2010 2011

Beer Spirits Wine

66.2 66.9 67.8 68.2 66.9 65.7 65.1 63.1

34.9 36.2 37.5 38.0 38.5 39.1 40.2 42.6

17.0 17.6 18.3 18.4 18.5 18.7 19.2 20.3

118.2 120.8 123.7 124.5 123.9 123.6 124.6 126.0

2005 2006 2007 2008 2009 2010 2011 2015P

Beer Spirits Wine

2011 – 2015P

CAGR: 0.3%

Source: Beer Marketer’s Insights, DISCUS, IMPACT Spirits Databank. (1) Serving size: Beer – 12 oz; Spirits – 1.5 oz; Wine – 5 oz.

2000 2011

1.0%1.3%

0.5%

(1.8%) (1.8%)

(0.9%)

(3.1%)

3.6% 3.6%

1.1% 1.4%1.7%

2.7%

6.1%

4.0% 3.8%

0.4% 0.7%1.3%

2.5%

5.7%

2006 2007 2008 2009 2010 2011 2015P

Beer Spirits Wine

2005 – 2011 Absolute Growth: Beer:

Spirits:

Wine:

(1.7%)

15.0%

13.1%

Beer:

Spirits:

Wine:

2.2%

3.7%

3.4%

2005 – 2011 CAGRs

(0.9%)

(2.4%)

4.6%

(1.6%)

9.6%

(3.9%)

(2.3%) (1.0%)

2.8%

13.9%

Sub Premium Premium Super Premium Imports Craft

Despite U.S. Beer Industry Declines, Premium Beer Continues Strong Growth

3

109 108 104 101 99

46 47 48 46 44

29 28 26 27 27

9 9 9 1112

9 12 11 11 11

12 12 12 13 12

214 214 210 209 206

2007 2008 2009 2010 2011

Premium Sub Premium Imports Craft Super Premium Other

Source: Beer Marketer’s Insights, Brewers Association, Nielsen Company, and Demeter Group estimates.

2007 – 2011 CAGR 2009 – 2011 CAGR

Decreases in Premium and Sub Premium brands, typically

produced by large multi-national brewers, are driving the

downward trend in the overall Beer Industry

Mirroring consumer changes across the entire Beverage

Alcohol landscape, Premium / Luxury priced Beer is regaining

favor with the consumer

– Craft / Import / Super Premium Beer is an affordable

luxury

(Barrels in millions)

Premium Sub Premium Imports Craft Super Premium

U.S. Beer Industry Segmentation U.S. Beer Industry Growth by Segment

Craft is Premium Beer’s Fastest Growing Segment

4

Source: Beer Marketer’s Insights, Brewers Association, Nielsen Company, and Demeter Group estimates.

17%

14%

6%

5%

3%

30%

8%

6%

11%

Import Beer

Prem. Beer

Super Prem. Beer

Below Prem. Beer

FMB's

Current Drinkers

Drinking More

Wine

Spirits

New Craft

Drinkers

214 214210 209

206210

8.5 8.9 9.510.7

12.313.7

2007 2008 2009 2010 2011 2012P

U.S. Beer Industry U.S. Craft Beer Industry

Whereas Beer as an industry has decreased at a CAGR of (0.3%)

from 2007 to 2012P, Craft has grown at 10% annually

– 13% Craft growth from 2010 to 2011 and 12% growth

projected from 2011 to 2012P

– After 3 years of industry decline, the overall Beer Industry

is expected to increase in 2012P

– AB InBev (47%) and MillerCoors (28%) together represent

75% of the U.S. Beer Industry

Craft Beer is projected to represent nearly 15% of the Beer

Industry by 2020 at current growth rates

– Craft’s growth is driven by current beer drinkers drinking

more Craft as well as consumers of other beverage alcohol

trading into Craft

(Barrels in millions)

U.S. Beer Industry Components of Craft Beer Growth

5 of 10 Fastest Growing Brands are Craft

5

(1) Thousands of 2.25 gallon cases. Source: Beer Marketer’s Insights, Brewers Association, Nielsen Company, Technomic, and Demeter Group estimates.

Commentary

Craft Beer, despite thinly resourced

marketing and sales departments relative to

larger brewers, holds 5 brands in Beer’s top

10 fastest growing brands

– Aggressively hopped Craft Beer (Dale’s,

Lagunitas IPA, New Belgium Ranger IPA,

Sierra Nevada Torpedo Extra IPA, etc.)

in high demand

– Fast growing brewers are investing in

expanding their production footprint as

well as additional capacity in core

market

6

“Exaggerated”

Traditional mild pale / American

lagers at Premium – Sub Premium

price points

Marquee beer giants’ legacy brands

and traditional sub-brands (Bud

Light, Miller Light, Coors Light)

Craft Answers Consumer Demand for Extreme Flavor & High-Alcohol Content

“Originals” “Revisionists” “Extremists”

Premium – Super Premium line

extensions leveraging legacy brand

name while varying type, flavoring,

and calorie count

Super Premium independent Craft

brands / incognito Craft brands (Blue

Moon, Shock Top, Leinenkugel)

identifying strongly with a sense of

place, personality, or specific

product

Unique, hoppy, seasonal, flavored

IPAs, porter, stout, pilsner, black &

tan, rye, wheat beer, etc.

Super Premium independent Craft

brands producing extreme /

adventurous / intense Craft Beer

Innovative brewing, double portions of

hops, barrel fermenting / aging, bottle

fermenting, fruit infusing, large format

bottles

Additional Beer types: imperial stout,

double IPA, sour ale, smoked porter etc.

Experimentation with Beer–Wine hybrids

7

By Definition, Craft Drinkers are Explorers with Non-Linear Taste Preferences

Increasing Flavor / Intensity

“Revisionists” “Extremists”

Growth in Number of Craft Breweries Driven by “Extremists”

8

Overview

New Craft Breweries are

experimenting with

uncommon ingredients and

techniques, driving industry

innovation

Craft breweries have

increased 12% in 2011 with

strong growth coming from

states east of the Mississippi

– Over 30% of 2011

growth is from 5 states,

4 of which are east of

the Mississippi

20

+5

8

(1)

136

+13

124

+3

18

(1)

34

+4

25

+4

23

+4

32

+5

12

+0

130

+12

34

+4

59

+11

9

+0

18

+3

16

+1

5

+1

2

+1

8

+0

6

+2

44

+4

24

+2

36

+8

75

+3

54

+5

2

+0

6

+2 22

+1

44

+5

16

+1

47

+11 24

+1

10

+2

47

+0 43

+8

102

+17

42

+5

5

(1)

93

+16

72

+13

33

+2

20

+1

9

(2)

24

+3 17

+1 42

+0 6

+2 15

+1 26

+6 D.C.

5

+1

268

+23

(1) High growth states show an increase of over 10 breweries and a percentage increase over 20%. Source: Brewers Association.

High Growth States

State

Increase in

Breweries

%

Increase

Michigan 17 20%

Pennsylvania 16 21%

New York 13 22%

North Carolina 11 23%

Texas 11 23%

>100 50 - 100 25-49 10 - 24 <10

Large Craft Brewers Expanding Geographic Footprints

9

New Belgium – Building new 150,000

sq. ft. brewery on 17.5 acres in

Ashville, North Carolina. Initial

capacity of 400,000 barrels and

space for additional growth.

Expected completion in Q1 2015.

Estimated cost: $100 -$175 million.

Currently available in 28 states.

Expanding distribution to include

Alaska and Louisiana in Q2 2013.

Sierra Nevada – Building new

brewery in Mills River, North

Carolina (12 miles south of Asheville)

with initial capacity of 300,000

barrels and space for additional

growth. 184 acre land parcel will

include production facility,

restaurant, gift shop, and riverfront

/ mountain recreation areas.

Expected completion in 2014.

Currently available in all 50 states.

Lagunitas – Converting a

300,000 sq. ft. steel

fabrication plant in Chicago,

Illinois into a second brewery

with capacity of 600,000

barrels and to be built as

“exact copy” of Petaluma

facility. A taproom is also

planned for the site.

Expected completion in mid-

2013. Estimated cost: $15 –

$25 million. Currently

available in 35 states.

Goose Island (AB InBev) -

Outsourcing a portion of its brewing

operations to an AB plant in

Baldwinsville, New York and New

Hampshire’s Redhook Ale Brewery

(part of Craft Brew Alliance, in

which AB holds a stake) to achieve

national distribution by Q1 2013.

D.G. Yuengling & Son –

Expansion of production

facility purchased in

1999 by approximately

40%; further expansion

of existing facilities in

Pennsylvania. Estimated

Capital Expenditure in

next 24 months: $100

million. Currently

available in 15 states.

Source: Press releases and news articles as of January 30, 2013.

Big Beer is Brewing Craft-Like Brands Utilizing “Back of House” Assets / Resources

10

Parent

Company

Craft Beer

Incubator

Select

Brands

Formed in 2008 with the merger of leading Pacific

Northwest craft brewers Widmer Brothers Brewing

and Redhook Ale Brewery

– Merged with Kona Brewing Company in 2011

– Sold majority stake in Fulton Street Brewery

(Goose Island) to AB-InBev in 2011

AB-InBev owns 32% of company and acts as

nationwide distributor

>700,000 barrels sold in 2012P

Craft and import division of MillerCoors developed in

August 2010

– Yearly double digit growth since formation

Acquired minority interest in Terrapin Beer Company

in October 2011

Acquired Crispin Cider Company in February 2012

Acquired Franciscan Well Brewery in January 2013

(AB Craft-Like Brand)

(AB Craft-Like Brand)

Craft is Reshaping the Way Beer is Marketed from “Brand” to “Style” like Wine

11

Commentary New Merchandising of Beer by Style

Style (instead of brand) is becoming the more

important aspect of consumer choice,

especially among Millennials

– The consumer chooses style first (Pale,

Ale, IPA, Wheat, etc.) and then chooses

brand within style (Sierra Nevada,

Lagunitas, Blue Moon, etc.)

Craft is enabling producers to dialogue with

retailers about maintaining and expanding

shelf space to prevent further erosion from

Wine and Spirits

Retailers are beginning to merchandise beer

by style, just as they merchandise wine by

varietal

Cider and Flavored Malt Beverages (FMBs) are

further expanding Beer’s retailer shelf space

Pale

Ale

IPA

Wheat

Beer

Optimism for Reaching Craft Drinkers from Multiple Angles Explains M&A in Cider

12

Overview Top Players

Cider Market Growth Cider M&A

Depletions (Million Cases)

Rank Brand Company 2010 2011 % Growth

1 C&C Group(1) 1.5 2.0 32%

2 Heineken 0.7 0.8 17%

3 C&C Group(2) 0.7 0.7 (5%)

4 C&C Group 0.5 0.6 23%

5 MillerCoors 0.1 0.3 160%

Date Target Buyer Enterprise Value ($ mm)

10/23/2012 Vermont Hard Cider Company C&C Group $305

6/21/2012 Redwood Cellars DB Breweries —

6/8/2012 Stasseen Heineken —

2/6/2012 Crispin Cider Company MillerCoors —

11/8/2011 Hornsby's Pubdrafts C&C Group 28

4/12/2011 M.H. Zeigler & Sons LiDestri Foods —

1/26/2010 Fox Barrel Cider Company Crispin Cider Company —

11/30/2009 Gaymer Cider Company C&C Group 74

11/5/2009 Devon Cider Company Aston Manor Brewery —

Source: Euromonitor, Impact Databank, press releases & industry research. (1) Vermont Hard Cider Company (Woodchuck brand) acquired by C&C group in 2012. (2) Hornsby’s Pubdrafts

acquired by C&C Group in 2011.

5.7 million case cider market estimated to rise at an 11% CAGR

by volume through 2016

– Cider drawing drinkers away from Wine (typically female

consumer) vs. eating into Beer sales

– Leads innovation and creativity into new Beer / Wine /

Spirits mixed category (Blue Moon’s Impulse Beer / Wine

hybrid, and Pernod Ricard’s ABSOLUT Tune Vodka / Wine)

Established Beer players making inroads with new Cider brands

(Boston Beer’s Angry Orchard, AB-InBev’s Michelob Ultra Light

Cider, MillerCoors’ acquisition of Crispin Cider)

$217 $238 $268

$304

$364

$449

$521

$595

$659

$718 $769

2006 2007 2008 2009 2010 2011 2012P 2013P 2014P 2015P 2016P

($ in millions)

Craft M&A May Be Tempered by Returns Global Brewers Attain in Emerging Markets

13

Commentary

Big Beer’s current focus is on high

returns in emerging markets; only when

global returns cool off will U.S. Craft /

Premium Beer brands be interesting

acquisition targets

Current global interest allows current

Craft brands to develop beachheads

and gain scale / expand geographic

distribution while Big Beer is focused

overseas

– At this point, many Craft /

Premium brands will be attractive

targets for both Big Beer as well as

domestic Craft brewers of scale

◦ National scalability /

brand appeal will factor

significantly into which

Craft brands are acquired

Source: Canadean.

2012 – 2016 Projected Compound Annual Growth Rate

>4% 3% - 4% 2% - 3% <2%

+4.6%

+3.5%

(0.6%)

0.0%

+3.8%

+2.9%

(0.5%) 1

4 2 3

Rank Brewer

2011 Barrels

(Thousands)

1 AB / In-Bev 300,600

2 SAB Miller 190,310

3 Heineken 182,243

4 Carlsberg 101,132

Demeter Group Recent Transactions (December 2010 – 2012)

14

Acquired by

Acquired by

Acquired by

Acquired by

Acquired by

Acquired by

Acquired by

Acquired by

Has Acquired

Acquired by

Joint Venture With

Acquired by

Acquired by

Private Placement

Transactions Marketed

to Fewer Than 5

Potential Buyers

$850 million

Completed Transaction Value

15

Completed

Transactions

71% 36%

Transactions

Marketed to

1 Buyer

67%

Completed Transactions

in Beverage Alcohol

Acquired by

Demeter Group Recent Beverage Alcohol Transactions

15

July 2012

Acquired By:

Constellation Brands

May 2011

Acquired By:

Crimson Wine Group

March 2011

Acquired By:

Beam Global Spirits & Wine

December 2010

Acquired By:

Fiji Water

September 2012

Acquired By:

E. & J. Gallo Winery

August 2012

Acquired By:

E. & J. Gallo Winery

June 2012

Acquired By:

Accolade Wines

June 2012

Acquired By:

E. & J. Gallo Winery

May 2012

Acquired By:

Precept Wines

August 2011

Acquired By:

Fiji Water

Jeff Menashe

Chief Executive Officer

menashe@demetergroup.net

220 Halleck Street, Suite 110

San Francisco, CA 94129

(415) 632-4400

www.demetergroup.net