RubinBrown Food & Beverage Year in Review 2013

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YEAR IN REVIEW MIDDLE MARKET FOOD & BEVERAGE SECTOR

A Publication of RubinBrown LLP

Table of Contents

Topic

Page

M&A Activity Overview All Food & Beverage Deals……………………………………………………………………… 3 Most Acquisitive in 2012 and 2013…………………………………………………………… 4 Middle Market Deals…………………………………………………………………………… 5

Historical Economic Indicators…………...………...………………………………………………6

Current Economic Indicators……………………………………………………………………… 7

Public Equity Markets Food & Beverage Returns……………………………………………………………………… 8 Food & Beverage Valuation Multiples………………………………………………………… 9

Public Company Subsector Constituents

10 …………...……………………………………………

Contact Information…………………………………………………………………………………13

2

M&A Activity Overview: All Food & Beverage Deals

Slow Start to 2013 Food & Beverage Deal Activity In 2013, overall Food & Beverage deal volume decreased approximately 4.3% from 2012. Many deals were pulled forward into 2012, as investors feared an increase in the long-term capital gains tax rate beginning in 2013. This caused a spike in the number of transactions towards the end of 2012 (up 21.3% in Q4 2012), and a substantial decline in activity (down 20.6% in Q1 2013) during the first half of 2013. Food & Beverage M&A activity rebounded considerably during the second half of 2013. The second quarter of 2013 marked the low point for the year, with only 102 transactions taking place. Deal volume increased nearly 12.7% during the third quarter of 2013, followed by an additional increase of 7.8% in the fourth quarter. As illustrated in the chart to the right, strategic buyers once again outpaced financial buyers by a wide margin, as strategic buyers accounted for nearly 81.6% of all deals in 2013. The following page highlights the most acquisitive buyers during 2012 and 2013.

Strategic vs. Financial Deals

110 120 130 140

12 10

5

3

8

15

3

9 8

3

19

14 8

70 80 90 100 of Deals

13 10

14

30 40 50 60

# 

109

104

93

92 95 97

81 85

0 10 20 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Strategic Buyer Financial Buyer Anonymous Buyer

Source: Capital IQ Reflects all Food & Beverage transactions, regardless of size.

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M&A Activity Overview: Most Acquisitive in 2012 and 2013

Highlights • DS Waters of America was extremely active during 2013, acquiring 8 different companies with operations spanning bottling, distribution, and filtration of drinking water. • Diageo acquired 5 more companies (including both brewers and distillers) in 2013 , in addition to the 4 acquisitions it closed during 2012. • Cargill was once again active in 2013, acquiring 6 targets that operate in various stages of the farming supply chain. • Jackson Family Wines continued its trend of above- average deal activity in 2013, acquiring 5 more vineyards during the year . • After a relatively quiet 2012, Jimmy Sanders, Inc. closed 5 transactions during 2013, consisting primarily of seed and fertilizer companies.

Cargill, Incorporated Diageo plc DSWaters of America, Inc. ConAgra Foods, Inc. Jimmy Sanders, Inc. Jackson FamilyWines, Inc.

Foley FamilyWines Inc LandO Lakes Inc. CHS, Inc. Flowers Foods, Inc. The Coca‐ColaCompany Post Holdings, Inc. RaboAgriFinance, Inc. Golden State Foods Corporation , . h d VintageWine Estates, Inc. Gladstone Land Corporation S&WSeed Company LimoneiraCompany Darling InternationalInc. SazeracCompany, Inc. The Hain Celestial Group, Inc. ContinentalMills, Inc. DuckhornWine Company, Inc. PreceptWine Tree ouse Foo s, Inc.

Source: Capital IQ Based on all Food & Beverage transactions, regardless of size. 0 1

2

3

4

5

6

7

8

9

# of Acquisitions Made per Year 2012 2013

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M&A Activity Overview: Middle Market Deals

Middle Market Activity Mirrors Overall Deal Activity Based on a limited number of transactions that had transaction size information available, middle market M&A activity generally resembled that of the broader industry, as discussed on page 3 – with activity declining somewhat during the first half of 2013, and then rebounding over the remainder of the year. While middle market deal activity (where transaction size was available) declined slightly during the first quarter of 2013, the total number of deals closed in 2013 matched 2012, with quarterly deal frequency remaining in a relatively tight range of 22 to 28 transactions per quarter. The rebound beginning in the second quarter of 2013 signals that, despite a slight dropoff during the first quarter of the year, both the frequency and size of transactions were on pace with 2012 levels – the difference being that there was no threat of increased long-term capital gains tax rates to fuel deal activity, which might indicate that buyers are feeling ti i ti b t ll i diti i more op m s c a ou overa econom c con ons go ng forward.

Middle Market Transaction Activity

$1,000.0 

30 

$900.0 

29 

$800.0 

28 

$700.0 

27 

$600.0 

26 

$500.0 

25 

alue ($millions)

$400.0 

24 

$300.0 

23 

Enterprise V

$200.0 

22 

$100.0 

21 

$‐

20 

Q1  2012

Q2  2012

Q3  2012

Q4  2012

Q1  2013

Q2  2013

Q3  2013

Q4  2013

Source: Capital IQ Reflects transactions with implied enterprise values between $10 million and $1 billion. Min EV Average EV Max EV # of Deals

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Historical Economic Indicators

Highlights • The macro economy has continued its recovery following the Great Recession, with many consumer-based metrics showing marked improvement since the market bottomed in late 2008/early 2009. • As disposable personal income levels have rebounded, so too have consumer confidence and personal expenditures per capita on food. As economic conditions continue to improve domestically, industry participants should expect to see a return to pre-recession level spending on food. • Producer prices have continued their upward trend over the last decade, with Food and Beverage manufacturing prices exhibiting average annual growth rates of 3.4% and 2.3%, respectively.

Consumer Confidence Index

Producer Price Index

120

210

Food Manufacturing Beverage Manufacturing

200

100

190

80

180

60

170

40

160

20

150

140

0

Source: The Conference Board

Source: US Bureau of Labor Statistics (BLS)

Di

bl P l I sposa e ersona ncome Per Capita

P l C ersona onsump on xpen ures er Capita on Food ti E dit P

$2,700

$39,000

$38,000

$2,650

$37,000

$2,600

$36,000

$2,550

$35,000

$2,500

$34,000

$2,450

$33,000

$2,400

$32,000

$2,350

$31,000

Source: U.S. Bureau of Economic Analysis (BEA)

Source: U.S. Bureau of Economic Analysis (BEA)

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Current Economic Indicators

Highlights • After consumer confidence reached a post-recession high in June 2013, it finished the year down slightly, which coincided with a slight decline in disposable personal income per capita over that time. • Despite slight softening in consumer confidence and disposable personal income per capita, personal consumption expenditures on food closed the year strong, finishing 2.7% above the April 2013 low. • Consumer spending on dining out continues to increase, with expenditures on dining out increasing from 45.9% to 49 5% of total food . expenditures over the last decade. Over the same period, the split between full service and fast food restaurants has remained relatively unchanged.

Consumer Confidence Index

Food Sales by Outlet

85

Other Away fromHome 11.1%

80

75

Fast Food Restaurants 17.8%

70

65

At Home 50 5% .

60

55

Full Service Restaurants 20.6%

50

Source: The Conference Board

Source: USDA Economic Research Service

Di

bl P l I sposa e ersona ncome Per Capita

P l C ersona onsump on xpen ures er Capita on Food ti E dit P

$2,640

$37,200

$37,000

$2,620

$36,800

$2,600

$36,600

$2,580

$36,400

$36,200

$2,560

$36,000

$2,540

$35,800

$2,520

$35,600

Source: U.S. Bureau of Economic Analysis (BEA)

Source: U.S. Bureau of Economic Analysis (BEA)

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Public Equity Markets: Food & Beverage Returns

Food & Beverage Index Experiencing Continued Growth, Outperforms Market The S&P Food & Beverage Select Index continues to see record growth and outsized returns, with the index value reaching an all time high of 3,384 on December 31, 2013. These gains come amid strong performances from overall U.S. public equity markets, as the S&P 500 index also reached an all time high on the last day of the year. While the industry demonstrates pro-cyclical behavior, its performance has outpaced the broader market over the past year, achieving total returns approximately 37% higher than the S&P 500. The Beverage Companies subsector index (see pages 10-12 for subsector constituents) had remarkably strong overall performance over the course of the year, outperforming the next closest Food & Beverage subsector index, Food Production Companies, by approximately 122.0%. In fact, 6 of the companies in the Beverage Companies subsector index achieved annual returns in excess of 45.0%. The Food Production Companies subsector index also outperformed the S&P 500 index, with an annual return of nearly 29.6%, while the Agriculture/Food Production Ingredients subsector index slightly underperformed with an annual return of 23.2%.

Equity Performance by Index

Equity Performance by Subsector

80%

80%

S&P 500 Index

S&P 500 Consumer Staples Sector Index

65.7%

30% 40% 50% 60% 70% 10% 20%

30% 40% 50% 60% 70% 10% 20%

Food Production Companies

S&P Food & Beverage Select Industry Index S&P 500 Index

Beverage Companies

Agriculture/Food Production Ingredients

36.1%

29.6%

26.4%

26.4%

26.9%

23.2%

-10% 0%

-10% 0%

Source: Capital IQ

Source: Capital IQ

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Public Equity Markets: Food & Beverage Valuation Multiples

Valuation Multiples At Record Highs Valuation metrics for the S&P Food & Beverage Select Index improved considerably over the past year, with its average EV/EBITDA multiple improving nearly 32.0% (from 8.2x to 10.8x) over the course of the year. The S&P Food & Beverage Index average EV/EBITDA multiple reached a record high of 11.1x during August 2013, and finished the year down slightly from that high. Increases in both the industry and the S&P 500 in the past year reflect additional consumer spending and increased confidence in the economic recovery. The impressive returns earned by the Beverage Companies subsector index (as discussed on the previous page) led to EV/EBITDA multiple expansion of approximately 54.0% (from 12.7x to 19.5x) for the index over the course S ( %) of the year. This exceeded the level of multiple expansion for the &P 500 20.4 as well as the Food Production Companies (8.8%) and Agriculture/Food Production Ingredients (5.7%) subsector indices.

Highlights • S&P Food & Beverage industry valuation multiples reached 5 year highs in Q3 • S&P Food & Beverage multiple expansion outpaced the broader market, with EV/EBITDA multiples expanding 32% in 2013. 2013.

EV / EBITDA (LTM)

EV / EBITDA (LTM)

25 0x .

25 0x .

S&P 500 Index

S&P 500 Consumer Staples Sector Index

Food Production Companies

S&P Food & Beverage Select Industry Index S&P 500 Index

20.0x

20.0x

19.5x

Agriculture/Food Production Ingredients Beverage Companies

16.1x

15.0x

15.0x

11 5x .

13.4x

10.8x

10.3x

10.0x

10.0x

10.3x

5.0x

5.0x

Source: Capital IQ

Source: Capital IQ

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Public Company Subsector Constituents: Food Production Companies

Projected Revenue Growth (NTM)

EBITDA Margin (LTM)

EBITDA Margin (NTM)

Enterprise

Revenue (LTM)

EBITDA (LTM)

Revenue (NTM)

EBITDA (NTM)

EV/Revenue (LTM)

EV/EBITDA (LTM)

EV/Revenue (NTM)

EV/EBITDA (NTM)

Company Name B&G Foods Inc .

Value Market Cap

2 664 6 $ 2, .

1 812 4 $ 1, .

$

687 1 6 . 535.6 879.8 448.9 840.2 186.7 691.5 519.4 743.0 200.3

$

178 0 1 .

25 9% 807 8 $ . 8 . 17.0% 548.3 15.3% 904.5 14.6% 522.6 4.8% 861.9 12.9% 224.5 4.9% 733.6 6.1% 548.6 7.3% n/a 7.9% 262.1 13.6% 108.4 4.1% n/a 16.9% 40.6 4.0% n/a -2.1% n/a 25 9% 904 5 $ . 9 . -2.1% 40.6 10.2% 505.7 7.9% 548.3

17 6% 209 1 $ . 2 . 2.4% n/a 2.8% 142.6 16.4% 86.5 2.6% 114.5 20.2% 33.9 6.1% 45.1 5.6% n/a

25 9% 3 9x . .

15 0x . 20.7x 11.5x 18.2x 29.1x 29.7x 15.1x 11.7x 18.4x 21.3x 15.2x 10.6x 6.0x

3 3x . 3.4x 1.7x 2.3x 1.4x 3.2x 0.7x 0.7x

12 7x .

Tootsie Roll Industries Inc. J&J Snack Foods Corp.

1,881.2 1,549.7 1,195.6 1,176.4

1,938.1 1,654.7

91.0

n/a

3.5x

n/a

134.5

15.8% 1.8x 16.6% 2.7x 13.3% 1.4x 15.1% 3.8x 6.1% 0.7x

10.9x 13.8x 10.3x 21.1x 11.3x

Boulder Brands, Inc. Diamond Foods, Inc.

950.7 580.8 727.9 470.1 365.6 269.9 257.5 261.2

65.5 40.4 24.2 33.7 31.9 54.4 15.8 12.5

Annie's, Inc.

716.8 509.2 372.3 328.9 291.4 267.4

Calavo Growers Inc. Farmer Brothers Co.

n/a n/a

0.7x 0.4x

n/a n/a

John B Sanfilippo & Son Inc.

n/a

n/a

n/a

Inventure Foods, Inc. Lifeway Foods Inc. Bridgford Foods Corp.

30.9% 24.1 17.8% 14.2

9.2% 1.5x 13.1% 2.9x

1.1x 2.5x

12.1x 18.9x

92.0

80.9 68.8 54.0 17.3

87.6 71.0 48.1 17.6

129.0

5.3 6.5 5.5

n/a

n/a

n/a n/a n/a n/a

0.6x 1.8x 0.4x 1.2x

n/a

n/a n/a n/a n/a

Rocky Mountain Chocolate Factory

38.4

5.7% n/a

1.7x

Golden Enterprises Inc.

138.1

n/a n/a

n/a n/a

9.7x

n/a n/a

Tofutti Brands Inc.

15.0

(0.3)

-55.4x

M i

ax mum

2 664 6 $ , .

1 938 1 $ , .

$

879 8 8 .

$

178 0 1 .

30 9% 209 1 $ . 2 . 2.4% 14.2 11.6% 83.8 6.1% 65.8

25 9% 3 9 . . x 6.1% 0.4x 14.4% 1.8x 14.2% 1.5x

29 7

. x

3 4

. x

21 1

. x

Minimum

17.3

17.6

15.0

(0.3)

-55.4x 11.8x 15.1x

0.7x 2.0x 1.7x

10.3x 13.9x 12.4x

Mean

745.0 372.3

634.2 365.6

409.7 448.9

46.6 31.9

Median

$ in millions Source: Capital IQ Includes Food Production Companies with LTM Revenue less than $1 billion.

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Public Company Subsector Constituents: Beverage Companies

Projected Revenue Growth (NTM)

EBITDA Margin (NTM)

EBITDA Margin (LTM)

EBITDA (NTM)

EV/Revenue (LTM)

EV/EBITDA (LTM)

EV/Revenue (NTM)

EV/EBITDA (NTM)

Enterprise

Revenue (LTM)

EBITDA (LTM)

Revenue (NTM)

Company Name

Value Market Cap

Boston Beer Co Inc . . National Beverage Corp. Craft Brew Alliance, Inc.

3 029 6 $ 3, .

3 072 7 $ 3, .

$

686 7 6 . 652.6 176.9

$

136 2 1 .

19 8% 819 7 $ . 8 . 12.2% 661.2 6.4% 195.8 -0.7% 45.5 -3.2% n/a 7.8% n/a 9.6% n/a 22.9% n/a -0.8% 147.4 -0.8% 28.5 22.9% 819.7 $ -3.2% 28.5 7.3% 316.3 7.1% 171.6

19 4% 162 5 $ . 1 . 1.3% n/a 10.7% 18.5 28.4% 2.0

19 8% 4 4x . .

22 2x . 11.9x 28.1x

3 7x . 1.4x 1.6x 2.4x

18 6x .

942.4 318.6 109.2 102.6

934.0 311.0 102.8

79.4 11.3

n/a

1.4x

n/a

9.5% 1.8x 4.4% 3.1x

17.2x 54.6x

REEDS, Inc.

35.5 37.4 92.6 71.0 13.5

(0.2) (1.2)

-461.0x -85.1x

Castle Brands Inc.

84.8 63.2 20.7 30.4 32.4 11.3

n/a n/a n/a n/a

n/a n/a n/a n/a

n/a n/a n/a n/a n/a

2.7x 0.9x 0.5x 2.6x 0.2x

n/a n/a n/a n/a

n/a n/a n/a n/a n/a

Primo Water Corporation Crystal Rock Holdings, Inc. Willamette Valley Vineyards Inc. Coffee Holding Company, Inc.

81.3 38.8 34.6 30.0 25.0

7.2 6.8 3.1

11.2x

5.7x

11.2x -28.6x -173.3x

134.0

(1.0) (0.1)

10.0% n/a 63.7% 1.7 63.7% 162.5 $ 1.3% 1.7 22.2% 46.2 15.0% 10.3

0.2x 0.9x 3.7x 0.2x 1.7x 1.5x

Truett-Hurst, Inc.

17.4

5.9% 1.4x

14.9x

Maximum Minimum

3,029.6 $

3,072.7 $

$

686.7

$

136.2

19.8% 4.4x 4.4% 0.2x 9.9% 1.9x 7.7% 1.6x

28.1x

54.6x 14.9x 26.3x 17.9x

25.0

11.3

13.5

(1.2)

-461.0x -65.8x

Mean

471.2

466.3

191.8

24.1

Median

91.9

74.0

81.8

4.9

8.4x

$ in millions Source: Capital IQ Includes Beverage Companies with LTM Revenue less than $1 billion.

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Public Company Subsector Constituents: Ingredients Companies

Projected Revenue Growth (NTM)

EBITDA Margin (NTM)

EBITDA Margin (LTM)

EV/Revenue (LTM)

EV/EBITDA (LTM)

EV/Revenue (NTM)

EV/EBITDA (NTM)

EBITDA (NTM)

Revenue (NTM)

Enterprise

Revenue (LTM)

EBITDA (LTM)

Company Name

Value Market Cap

Limoneira Company

$

420 2 4 . 304.5 243.7 226.7 123.1

$

353 9 3 . 282.7 253.5 171.8

$

84 9 8 . 95.3

$

8 2 8.

9 6% 89 6 $ . 8 . 19.9% 106.2 25.6% 238.3 35.7% n/a 2.6% n/a -4.5% 60.8 35.7% 238.3 $ -4 5% 60 8 . 6 . 14.8% 123.7 14.8% 97.9

5 5% 11 4 $ . 1 . 11.4% n/a -1.3% 58.0

12 7% 5 0x . .

51 5x . 16.0x

4 7x . 2.9x 1.0x

36 9x .

Alico Inc.

19.0 61.8

n/a

3.2x

n/a

Omega Protein Corporation Griffin Land & Nurseries Inc.

241.5

24.3% 1.0x

3.9x

4.2x

25.5

9.1 8.7

n/a n/a

n/a n/a

n/a n/a

8.9x 0.4x

24.9x 14.2x -45.4x 51.5x -45 4x . 10.8x 15.1x

n/a n/a

n/a n/a

MGP Ingredients Inc. S&W Seed Company

92.7 80.8

332.3

87.7

43.0

(1.9)

41.3% 3.6

6.0% 2.0x

1.4x

24.2x

Maximum Minimum

$

420.2

$

353.9

$

332.3

$

61.8

41.3% 58.0 $ -1 3% 3 6 . 3. 14.2% 24.3 8.5% 11.4

24.3% 8.9x 6 0% 0 4x . . 14.3% 3.4x 12.7% 2.6x

4.7x 1 0x . 2.5x 2.2x

36.9x

87 7 .

80 8 .

25 5 .

(1 9) ( .

4 2x .

Mean

234.3 235.2

205.9 212.7

137.1

17.5

21.8x 24.2x

Median

90.1

8.9

$ in millions Source: Capital IQ Includes Agricultural Products Companies with LTM Revenue less than $1 billion.

Capital IQ Screen Criteria Used Throughout This Publication: 1. M&A Transactions: • Industries: Food Products and Beverages

• Geographic Location of Buyer and/or Target: United States of America • M&A Closed Date: 1/1/2012 – 12/31/2013 2. Public Companies: • Industries: Packaged Foods and Meats, Beverages, and Agricultural Products • Geographic Location: United States of America

• Total LTM Revenues: < $1.0 billion • Exchanges: Major US Exchanges

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Contact Information

Tim Farquhar, CFA, CPA Partner Valuation Services Group

Dale Lash, CFA Partner Valuation Services Group Denver 303.952.1261 dale.lash@rubinbrown.com

St. Louis 314.290.3281 tim.farquhar@rubinbrown.com

Ben Barnes, CPA

Sunti (Sunny) Wathanacharoen

Partner-in-Charge Mergers & Acquisitions Services Group St. Louis 314.678.3531 ben.barnes@rubinbrown.com Jim Mather, CPA Partner-in-Charge Manufacturing & Distribution Services Group St. Louis 314.290.3470

Partner Business Advisory Services Group Kansas City 913.499.4462 sunti.wathanacharoen@rubinbrown.com Ryan Meesey, CFA Manager Business Advisory Services Group St. Louis 314.290.3454

jim.mather@rubinbrown.com

ryan.meesey@rubinbrown.com

Rick Feldt, CPA Partner Business Advisory Services Group

St. Louis 314.290.3220 rick.feldt@rubinbrown.com

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