Craft Breweries. Market Monitor Fall 2015 MOSS ADAMS CAPITAL LLC

Transcription

1 Market Monitor Fall 2015 MOSS ADAMS CAPITAL LLC

2 Contents Industry Update 3 Relevant Transactions 5 Public Company Stock Performance 7 Moss Adams Overview 9 2 MOSS ADAMS CAPITAL LLC

3 millions of barrels $ in millions Craft Beer Industry Snapshot The craft beer industry remains hot as we rapidly approach the 4,000 brewery mark, which will likely be hit by the end of the year. The historic record for most breweries is thought to be 4,311 in We will likely eclipse this mark by year-end as well. There has been a shift to off-premise sales as a growth driver for the larger regional craft breweries; increased competition from new local microbreweries is likely the cause. Significant investor appetite is apparent and has allowed for a much needed increase in capacity to help quench consumer demand. However, the number of acquisitions by the macro breweries may be numbered as they become content with their portfolio of craft and have what they need to reclaim lost shelf space. Craft Beer Sales Number of Breweries All others 38% 6.4 $4.9 Next 25 Largest 24% $5.7 $6.2 $ $7.9 D. G. Yuengling and Son Inc 14% Boston Beer Co 12% Sierra Nevada Brewing Co 5% New Belgium Brewing Co 4% Gambrinus 3% 10.7 $ $ $13.0 In 2014, the Brewer s Association updated the craft brewer definition which would have included 3.3 more barrels in $ $22.5 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 est $30 $25 $20 $15 $10 $5 $0 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 est # of Breweries Top 5 States by Breweries Per Capita (per 1,000 adults) California 431 Vermont 8.6 Washington 256 Oregon 7.4 Colorado 235 Colorado 6.1 Oregon 216 Montana 5.9 New York 181 Wyoming 5.3 5,000 4,000 3,000 2,000 1,000 0 Source: Brewers Association, Wall Street research and Moss Adams Capital analysis. 3 MOSS ADAMS CAPITAL LLC

4 Current Events Brewery Expansions Upcoming Events Planning to open a 420,000 barrel per year brewery location in the Western United States December 3 Brewbound Session San Diego, CA Opening 150,000 sq. ft. North Carolina brewery spring 2016 Opening $30 million Columbus, OH brewery in August 2016 January San Francisco Beer Week San Francisco, CA Building third brewery located in Azusa, CA to open in 2017 February 5-6 Extreme Beer Fest Boston, MA Announced 28,000 sq. ft. expansion of North Carolina brewery Announced $4 million brewery expansion to open spring 2016 May 1-7 Craft Brewers Conference & BrewExpo America Philadelphia, PA Announced $15 million expansion to increase production to 100,000 barrels per year May American Craft Beer Week Nationwide Announced brewery expansion to double production to 1 million barrels per year May American Craft Beer Fest Boston, MA Opening 100,000 brewery in Virginia Beach, VA Source: Beer Street Journal. 4 MOSS ADAMS CAPITAL LLC

5 Number of Announced Transactions Recent Transactions 2015 is on pace to maintain record activity reached in If the trend continues throughout the 4 th quarter, it will be close to, if not another record year in the craft brewery Announced Est. 1 Date Target Location Production Acquirer 11/16/15 Ballast Point Brewing & Spirits, Inc. San Diego, CA 300,000 barrels Constellation Brands Inc. 09/29/15 Dogfish Head Craft Brewery, Inc. Milton, DE 250,000 barrels LNK Partners (15% minority stake) 09/23/15 Golden Road Brewing Los Angeles, CA 45,000 barrels Anheuser-Busch Companies, LLC 09/10/15 Saint Archer Brewing Company San Diego, CA 35,000 barrels Tenth and Blake Beer Company 09/08/15 Lagunitas Brewing Company Petaluma, CA 800,000 barrels Heineken NV (50% stake) 07/16/15 Firestone Walker Brewing Co. Paso Robles, CA 272,000 barrels Duvel Moortgat nv 06/17/15 American Sky Brewing Co. Hudson, WI 1,200 barrels Lucid Brewing, LLC 03/27/15 Perrin Brewing Company, LLC Comstock Park, MI 20,000 barrels Oskar Blues Brewing Company 02/24/15 Full Sail Brewing, Inc. Hood River, OR 115,000 barrels Encore Consumer Capital 01/23/15 Elysian Brewing Company, Inc. Seattle, WA 54,000 barrels Anheuser-Busch InBev SA/NV 12/17/14 Founders Brewing Co. Grand Rapids, MI 207,000 barrels Mahou, S.A. (30% minority stake) 11/10/14 The Alpine Beer Company Alpine, CA 3,000 barrels Green Flash Brewing Co Capital Raise M&A Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q ) Estimated trailing 12 month production at the time of the announcement Source: S&P Capital IQ. 5 MOSS ADAMS CAPITAL LLC

6 Selected Deal Profiles Constellation Brands (NYSE: STZ) acquires Ballast Point Brewing & Spirits (San Diego, CA) November 16, 2015 Constellation Brands entered into an agreement to acquire Ballast Point Brewing & Spirits ( Ballast Point ) on November 16, 2015 for approximately $1 billion. The acquisition plans to be completed by the end of the calendar year and will be financed with cash and debt. Ballast Point, best known for its Sculpin IPA, is one of the leading craft brewers in the U.S., selling nearly 123,000 barrels in The brewery is expecting shipments to more than double in 2015, projecting sales of $115 million (8.7x EV/Revenue). Its incredible growth combined with its premium price point at $355 a barrel, helped Ballast point reach such a high transaction multiple. Constellation Brands, which owns brands such as Robert Mondavi Winery, Sky Vodka, and imports Mexican beers such as Corona, Modelo and Pacifico, will give Ballast Point cash for growth along with wider distribution network and stronger buying power for ingredients and equipment. Ballast Point started in the back of a home-brew supply store in 1992, didn t start selling beer commercially until 1996, and now ranks as the largest craft brewer in the U.S. The company produces more than 15 kinds of beer year-round as well as several craft spirits. LNK Partners (White Plains, NY) acquires 15% stake in Dogfish Head (Milton, DE) September 29, 2015 LNK Partners ( LNK) entered into an agreement to acquire a 15% equity stake in Dogfish Head Craft Brewery ( Dogfish Head ) on September 29, Dogfish Head, the country s 13 th largest craft brewery as of 2014, has over 20 different types of beers and is expecting to produce 250,000 barrels in The brewery plans on using the cash to help grow the company as the craft brewing market becomes more crowded with better funded competition. LNK is a New York based private equity firm that has previously invested in companies Niman Ranch, Performance Bicycle, Beachbody, Au Bon Pain and others. Although specifics of the transaction were not disclosed, LNK typically invests between $50- $150 million in a minority or majority equity stake. Part of the deal included LNK obtaining a seat on Dogfish Head s board of directors, which currently has 5 voting members. Sam Calagione, Dogfish Head founder, stated he hopes the investment will eventually fuel enough growth to repurchase LNK s 15% stake and remain a family-controlled business. Anheuser-Busch InBev (ENXTBR:ABI) acquires Golden Road Brewing (Los Angeles, CA) September 23, 2015 Anheuser-Busch InBev ( AB InBev ) signed an agreement to acquire Los Angeles based Golden Road Brewing ( GRB ) for an undisclosed amount on September 23 rd, 2015, and expects to close the transaction by the end of the year. Founded in 2011, Golden Road Brewing is the largest craft beer operator in L.A. County, expecting to sell 45,000 barrels of beer in The company distributes approximately 10 different beers with many more draft-only specialty beers. GRB will give AB InBev a foothold in the growing Los Angeles craft beer market, and will join AB InBev s growing portfolio of craft breweries including Goose Island Beer Co., Blue Point Brewing, 10 Barrel Brewing, and Elysian Brewing. AB InBev was impressed with what GRB had been able to accomplish in the past four years, and plans to keep their expansion plans moving forward. This plan includes adding several retail locations, including Orange County, Los Angeles International Airport and Grand Central Market (Los Angeles) by 2016,. Source: S&P Capital IQ. 6 MOSS ADAMS CAPITAL LLC

7 Continued Growth Leading to Increased Competition Not surprisingly, sales growth in the Craft Beer segment is expected to dwarf its counterparts, as well as the broader S&P 500 over the next 12 months. Sales from the large global breweries is expected to decline as a result of the growing popularity of craft beers and an improving economic environment that pushes consumers to higher-end beverages. However, as more and more local craft breweries come online, the increased competition hurts off premise sales (grocery and convenience stores) where drinkers have more choices. This is becoming evident in the two publically-traded craft brewers, Boston Beer Company (SAM) and Craft Brewers Alliance (BREW). However, these two companies are by no means indicative of the entire craft brew industry as a whole, which continues to thrive. Next 12 Months: Estimated Sales Growth Public Market Valuations 39.0x 8% 6.7% 34.0x 6% 5.7% 29.0x 4% 3.3% 24.0x 19.0x SAM 15.8x 2% 14.0x BREW 13.9x Large Breweries 0% 9.0x 13.5x S&P 500 (2%) (1.0%) SAM BREW Large Brewers S&P 500 Index 4.0x 10.6x Note: The and Major Breweries Indices are composed of the public companies included on page 8. Source: S&P Capital IQ. 7 MOSS ADAMS CAPITAL LLC

8 Selected Public Company Valuations ($U.S. in millions, except per share amounts) Company Name 11/20/15 TTM Data EV Multiple Share 52 Week Market Enterprise EBITDA TTM TTM NTM Price High - Low Cap Value Sales EBITDA Margin Sales EBITDA Sales NTM EBITDA Major Breweries Anheuser-Busch InBev SA/NV $ $ $91.20 $202,115 $248,554 $44,899 $17, % 5.5x 14.4x 5.5x 14.0x SABMiller plc , ,467 15,555 4, % 7.2x 23.8x 7.3x 18.6x Heineken NV ,103 64,470 22,143 4, % 2.9x 13.7x 2.9x 12.2x Molson Coors Brewing Company ,320 19,951 3, % 5.4x 29.7x 5.5x 14.4x Asahi Group Holdings, Ltd ,512 17,796 15,442 1, % 1.2x 10.4x 1.2x 10.5x Carlsberg A/S ,499 18,964 9,726 1, % 1.9x 9.9x 2.0x 10.1x Kirin Holdings Company, Limited ,915 20,140 18,528 2, % 1.1x 8.5x 1.1x 9.4x Tsingtao Brewery Company Limited ,599 5,201 4, % 1.2x 14.2x 1.2x 12.4x United Breweries Limited ,907 4, % 5.4x 39.3x 4.8x 33.1x Beijing Yanjing Brewery Co., Ltd ,722 3,622 1, % 1.8x 13.3x 1.8x 12.6x Sapporo Holdings Ltd ,703 3,559 4, % 0.8x 10.6x 0.8x 9.8x Median $18,964 $9,726 $1, % 1.9x 13.7x 2.0x 12.4x Boston Beer Co. Inc. $ $ $ $2,743 $2,609 $963 $ % 2.7x 12.8x 2.6x 12.8x Craft Brew Alliance, Inc % 0.9x 13.7x 0.8x NA Median $1,393 $582 $ % 1.8x 13.2x 1.7x 12.8x Note: NTM figures are based on the median estimate of Wall St. analysts. Source: S&P Capital IQ. 8 MOSS ADAMS CAPITAL LLC

9 Moss Adams at a Glance Leadership through Experience and Results Moss Adams Capital LLC Investment banking and strategic advisory services Focus on privately owned and family-held companies Mergers and acquisitions Private debt & equity placements Mezzanine capital Due Diligence preparation & advisory Dedicated industry specialists Moss Adams LLP 100+ years old Founded in 1913 Largest accounting firm headquartered in the western U.S. 2,200 employees in 27 offices Fully integrated accounting, tax, and business advisory firm Middle-market specialists The Moss Adams Advantage: Discrete, highly leverageable transaction resources and services International Presence Major market affiliates throughout the U.S. and more than 100 countries around world 9 MOSS ADAMS CAPITAL LLC

10 Moss Adams Capital Overview Full Service Middle Market Investment Bank Corporate Finance Capital Placement Equity and Debt Merger and acquisition advisory Strategic alternatives assessment Exclusive sales and divestitures Strategic planning Management buy-outs Recapitalizations Fairness opinions Restructuring and special situations advisory Highlights and Accomplishments Completed over 250 transactions Access to key decision-makers among institutional investor universe Coverage of relevant strategic partners Average of 20 years of investment banking experience among senior leaders Comprehensive Industry Coverage Aerospace, Defense & Government Services Consumer, Retail & Apparel Industrials / Niche Manufacturing Real Estate, Lodging & Leisure Automotive & Dealer Services Food, Beverage & Agriculture Infrastructure & Construction Technology, Communications & Media Business & Marketing Services Healthcare Services & Products Paper, Plastics, & Packaging Transportation & Logistics 10 MOSS ADAMS CAPITAL LLC

11 Global Reach Moss Adams is a founding member of Praxity, AISBL, a global alliance of independent accounting firms. In addition to its deep, direct international relationships, Praxity provides access and trusted advisory expertise worldwide. North America United States, Canada Europe Austria, Belgium, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Hungary, Ireland, Italy, Jersey, Latvia, Lithuania, Luxembourg, Malta, Monaco, Netherlands, Norway, Poland, Portugal, Romania, Russia, Slovakia, Spain, Sweden, Switzerland, Turkey, United Kingdom, Ukraine Asia China, Indonesia, Japan, South Korea, Malaysia, Singapore, Taiwan, Thailand, Vietnam Latin America and Caribbean Argentina, Brazil, Cayman islands, Chile, Colombia, Mexico, Puerto Rico, Uruguay, Venezuela Middle East and Indian Subcontinent India, Israel, Lebanon, Pakistan, United Arab Emirates Africa Algeria, Angola, Benin, Botswana, Cameroon, Cape Verde, Djibouti, Egypt, Ghana, Ivory Coast, Lesotho, Madagascar, Mauritius, Morocco, Senegal, South Africa, Tunisia, Zambia Australasia Australia, New Zealand 11 MOSS ADAMS CAPITAL LLC

12 Representative Food & Beverage Transactions 12 MOSS ADAMS CAPITAL LLC

13 Contact Us Contributing Authors: Tyler Dale Vice President (949) Bradley Erhart Associate (949) James Parr Analyst (949) Moss Adams Capital LLC 2040 Main Street Suite 900 Irvine, CA Third Avenue Suite 2800 Seattle, WA Richard Anderson Managing Director (949) Robert Miranda Vice President (949) Andrew Suen Vice President (949) Wiley Kitchell Managing Director (206) Harman Wales Managing Director (206) James Rothenberger Vice President (206) Scott Porter Vice President (206) MOSS ADAMS CAPITAL LLC