Opportunities In Global Alternative Alcohol Beverages Markets

Transcription

1 -1- Opportunities In Global Alternative Alcohol Beverages Markets Prepared by Beverage Marketing Corporation For Friends Beverage Group, LLC (The Fun Wine Company) April 2017

2 Market Opportunities -2- CONTENTS Background and Context - The Global Alternative Alcohol Beverage Market ABA Market Analysis and Sizing U.S.A. China Brazil India Mexico

3 Background and Context -3- SUMMARY OF ALTERNATIVE BEVERAGE ALCOHOL Globally, the movement toward flavorful, non-traditional beer, wine and spirits adult beverages has been taking place over the past few decades A large part of the global population has rejected traditional beverage alcohol formats The movement to cocktails mixed drinks (spirits, wine, beer) supported the desire for flavored beverages Convenience and health trends (lower ABV) further created demand for flavored beverage alcohol (aka: Alternative Beverage Alcohol, or ABA ) The movement to these beverages in markets like the U.S. and China have reached scale U.S. is now at 25 million hectoliters of ABA China is at 12 million liters of spirits-based ABA The increasing influence of female consumers, who consume about 60-70% of ABA products, has driven much of the growth with males making up the balance of about 50% of female consumption Spirits and beer flavored beverages in single serve RTD formats have grown while wine has been passive. Now, flavored wine RTD s are positioned to expand the market

4 Background and Context -4- Since the 1970 s, the ABA market has been broadening the accessibility to traditional beer, wine, and spirits with sweeter and more flavorful options Broadening Wine & Spirits Accessibility SUMMARY OF TRENDS AND DRIVERS OVER THE YEARS Broadening Usage Occasions Widespread Blurring Between Categories 1970s 1980s 1990s 2000s 2010s Fortified Wines Wine Coolers RTD Cocktails FMBs Hard Cider & FMBs Boone s Farm Asti Spumanti Bartles & Jaymes Seagram s (Moved base from wine to malt) Bacardi Breezer JD s Country Cocktails Tropical Freeze Mike s Hard Smirnoff Ice (Blurring lines between Malt beverages and Spirits while leveraging beer distribution network) Angry Orchard Bud Light Ritas (Beer brewers entered ABA market with force) White Zinfandel Fruit Flavored Wines Arbor Mist Wild Vines FMBs Four Loko Sparks Moscato FMBs Zima (Caffeine/Energy) > 45 Female < 45 Female < 35 Female < 25 Female < 45 Male & Female Common-ground: sweeter flavored, masked alcohol, easy to drink, conveniently packaged alternative beverages

5 Background and Context Millions of 288-oz Cases -5- The ABA market has grown significantly since the 1980 s primarily on the popularity and endurance of the Flavored Malt Beverage Category ( FMB ). Wine coolers, once the dominant ABA, are now negligible Malt Coolers emerged due to tax and regulatory preference versus wine, not due to consumer preference U.S. ABA Market Volume with Adjusted* Alcohol Servings ABAs do not include low-abv spirits that primarily come in multi-serve sizes (e.g. Rum Chata 13%ABV, Malibu 20% ABV and Kahlua Pre-Mixed 12.5% ABV) these products are primarily drank without mixers 1987 ABA Vol.: 67.6 M Flav. Craft Beers 2002 ABA Vol.: M FMBs 2008 ABA Vol.: M Flav. Beers Frozen Cocktails 2014 ABA Vol.: M Hard Ciders 50 Wine Coolers Flavored/Sweet Wines RTD Cocktails 0 Note: Excludes Hard Cider, Flavored Craft Beer, and Flavored/Sweet Wines between ; *RTD Cocktails adjusted for higher alcohol content Source: Beverage Information Group/Adam s Handbooks, Beverage Marketing Corporation

6 Background and Context -6- Millions of 288-oz Cases ABA is expected to further grow in the USA at a CAGR of 5% for next 5 years as new product activity expands in other segments beyond cider and malt U.S. PROJECTED ABA WHOLESALE VOLUME (Projected) 300 << Historical Volume Projected Volume >> P CAGR +9.1% P CAGR +5.0% P 2016P 2017P 2018P 2019P Source: Beverage Marketing Corporation

7 Background and Context -7- GLOBAL ALCOHOL CONSUMPTION TRENDS WITH 60-70% FEMALE PARTICIPATION Because females all over the world are generally increasing their consumption of alcohol, their preferences for lighter, sweeter and carbonated (low alcohol) drinks have become more clear Female Participation is Increasing Historically, men have been far more likely to drink alcohol than women. However, the global drinking landscape is shifting, with rates of alcohol use beginning to converge among men and women. The participation of women in developed countries is high, with significant increases in participation occurring in developing countries Female and Other Consumers are Seeking Alternatives that are Easy-to-Drink There is an intersection of two macro trends: Alcohol will grow in developing countries and female drinkers will continue to seek out easier-to-drink alcohol alternatives. In wealthier countries, fewer alcohol consumption abstainers result in a smaller gap between male and female consumption levels. As developing countries expand, this gap also decreases. Easier-to-drink ABA s are on the rise as female drinkers react strongly to lighter, sweeter and carbonated (low) alcohol beverages that are unlike bitter beers, sour wines and heavy spirits

8 Background and Context -8- FEMALES PREFER SWEETER BEVERAGES TO BITTER ONES WITH FEW BRANDS CATERING TO THEM APPROPRIATELY, THE OPPORTUNITY IS RIPE Biological Differences Between Men and Women Underpin ABA s Universal Appeal Yet, Few Brands Target Female Drinkers The success of ABA s could be because of a biologic difference between male and female drinkers. Most women have more taste buds than men, which gives them a substantial edge when savoring the flavors, aromas, and complexities of beverages. Women are also more sensitive to sweet and bitter flavors*. This may explain why 75% of white wine is consumed by women. Research from Yale University has found that about 35% of women (and only 15% of men) can call themselves tasting superstars, which means they identify flavors such as bitter, sweet, and sour more strongly than others While few brands can claim to exclusively serve the female drinker, women do consider the pinkification of beer a condescending response to feminine beverage trends. Brands that speak to female consumers on their terms in respectful and authentic ways tend to win * =

9 Background and Context -9- The growing importance of Alternative Beverage Alcohol* segments is driven by their universal appeal to predominantly female drinkers GLOBAL ALCOHOL CONSUMPTION TRENDS AND FEMALEPARTICIPATION Female Participation Is Driving Growth in ABA Segments The expansion of drinkers in developing markets and the maturation of traditional alcohol segments in the developed markets has led to newer segments emerging. These newer segments blur the lines between beer, wine and spirits resulting in ABA* that have collectively grown over the past three decades to become a meaningful slice of the industry Female-driven ABA s Collectively Capture a Meaningful Share of Total Alcohol ABA s offer Universal Appeal in Diverse Global Markets With many sub-segments*, ABA s cater to primarily women who seek out lighter, easier to drink beverage alcohol alternatives. Whether it be through frozen pouches in the summer, flavored beers in the winter, hard soda s, malt based beverages or ciders throughout the year, the ABA segment thrives. (In the U.S., the combined segments account for an equivalent of 7.1% of total Beer volume, or ~201 million cases (288oz equivalent).) Even in China, and especially in India, where male per capita alcohol consumption dwarfs that of female drinkers, the amount of ABA s consumed by women is on the rise, especially for global travelers and working women. As alcohol steadily becomes more socially acceptable in these developing markets, so does the appeal of ABA s * = RTD Cocktails, Wine Coolers, Flavored/Sweet Wines, Wine Beverages/Cocktails, FMBs, Hard Ciders, Flavored Beers, Flavored Craft Beers, Frozen (Pouch) Cocktails

10 Background and Context -10- CONCLUSIONS As Alternative Beverage Alcohol ABA, a.k.a. Flavored Beverage Alcohol, continues to evolve, Friends Beverage Group is perfectly positioned to satisfy this evolving consumer need with its FUN WINE -- a product that is refreshing and in a convenient format that consumers around the world especially females and millennials desire In association with a strong local player, FRIENDS FUN WINE has a potential to penetrate 2-5% of the Female Legal Drinking Age (LDA) consumers in each country, in addition to normal male consumption equivalent to 50% of female consumption

11 Market Analysis and Sizing -11- The Friends Fun Wine brand can satisfy the latent demand among female drinkers within the ABA market with its multi-benefit product range in several large markets THE FRIENDS COMPANY OPPORTUNITY AND FIT Multi-Dimensional Benefits Anchor Friends across Selected Markets Friends is in a unique positon to leverage its core proposition to cater to the female ABA drinker. Besides superior product delivery, the packaging format is suitable for a broader range of occasions and at an ABV and serving size that promotes responsible enjoyment. Added to this is the universally recognized trademark name and associated conviviality. With an affordable price per serving, it invites consumers to give it a try Offering a Sizeable Opportunity Consumer-driven modeling suggests that the size of the opportunity for the combined markets of India, Brazil, China, and the U.S.A. ranges from ~4M-~17M cases (288oz EQ) with ~6m to ~8M considered the base case

12 Market Opportunities -12- Contents Background and Context Market Analysis and Sizing USA China Brazil India

13 Market Analysis and Sizing - USA -13- Modern ABA s in the U.S. cover a broader and deeper pool of drinkers, occasions and flavors which are set to continue as the market evolves CONSUMPTION IN CONTEXT With one of the most advanced ABA markets, the U.S. continues to redefine the category through flavor and format innovation. If fluorescent colors and basic flavors dominated ABA s in the 2000 s then natural and sophisticated flavors are making their way in the 2010 s. This has fueled the consumer appetite for a variety across a wider spectrum of social occasions and in turn fuels more innovation As the market continues its fast evolving nature, Wine-based ABA s have attracted strong interest. By taking advantage of positive trends in wine, growing female drinker demographic, and sweeter flavor profiles, Friends has an opportunity to convert dissatisfied and experimental drinkers in key global markets.

14 Market Analysis and Sizing - USA Consumption/ Fem Drinker PA Based on modest female consumer penetration rates, Friends Fun Wine has the opportunity to capture between 30.3 MM to MM servings per annum in the US, and an additional 50% from male participation Based on modest 2% to 5% penetration rates and only 8 to 16 servings per female per year Excludes male participation in the brand which could add 50% more volume FRIENDS VOLUME OPPORTUNITY IN USA* Scenarios of: # Female Drinkers Converted x Average Volume Consumed in 000 of Servings 140, , ,000 80,000 60, Servings 60, ,068 60,534 40,000 20, ,214 30,267 6,053 12,107 12,107 3,027 6,053 8 Servings 0.50% 1% 2% 5% 10% Share of Female Drinkers Friends Wine 0.5% 1% 2% 5% 10% 8 Servings 3, , , , , Servings 6, , , , , Share Fem Alc: 8 Srv 0.01% 0.01% 0.02% 0.06% 0.12% Share Fem Alc: 16 Srv 0.01% 0.02% 0.05% 0.12% 0.23% -14- Source: DrinkTell, BMC Strategic Associates Analysis *Assume female LDA base is: 75,667,615

15 Market Analysis and Sizing - USA -15- Liters of Pure Alcohol The Legal Drinking Age (LDA) female population in the U.S. is estimated at 120 million with 76 million that consume alcohol. The average female consumer of alcohol consumes 12.3 liters of pure alcohol (there are 67 servings of Friends in a liter of pure alcohol) US Alcohol per Capita by Gender (15+) Consumption - Drinkers Metric US Target Market Female LDA Population 120,107, Abstainers % 37.0% Total LDA Female Drinkers 75,667, Source: UN Population Prospects Report 2015, BMC Strategic Associates Analysis Male Female Total Source: WHO Global status report on alcohol and health bal_alcohol_report/msb_gsr_2014_2.pdf?ua=1

16 Market Analysis and Sizing - USA -16- Although hard cider has had a presence in the USA it was not until the large companies entered with force in 2011 that the segment began to grow rapidly FACTORS OF HARD CIDER S SUCCESS Massive Push from Majors The large companies have invested significant promotional energy and money into promoting a very small segment in recent years that has grown a mere 20 million cases in five years, nearly $60 million was spent on advertising in 2014 Hip Marketing Shift Historically dominated by imported hard ciders that focused on folksy/traditional messaging and packaging; the leading brands today present a hipper image appealing to men Flavor Extensions The appeal of flavor and variety has arrived in hard cider with brands unveiling flavor extensions and even seasonal variations Sort-of Healthy Halo Although not low in calories or sugar, hard cider is gluten free (unless it is added during the process or added flavor) which appeals to gluten-free consumers Wine is once again the focus area as flavored wine beverages in single-serve format is the next growth leg for ABA

17 Market Analysis and Sizing - USA MM Liters -17- Flavored Malt Beverages (the FMB s) grew in the USA 8.8% CAGR ( ) to reach MM L by 2015 Cider has also performed extremely well, growing at a +39.1% CAGR to MM L Flavored Malt Beverage & Hard Cider Volume (MM Liters) 1, CAGR FMBs +8.8% Cider +39.1% Source: GlobalData, BMC Strategic Associates Analysis

18 Market Analysis and Sizing - USA -18- MM Liters While ABA s have grown rapidly, Beer has declined while traditional wine and spirits have experienced modest growth VOLUME BY ALCOHOL TYPE (MM LITERS) 30, CAGR 25,000 24,569 24,268 Beer/ Cider -0.2% 20,000 15,000 10,000 5,000 2,828 3,208 Spirit +2.1% - 1,700 1, Wine +2.1% Source: DrinkTell, BMC Strategic Associates Analysis

19 Market Analysis and Sizing - USA -19- L per Capita Per capita alcohol consumption in the USA has grown at a moderate pace of 0.5% CAGR Beer declined with a negative Compound Annual Growth Rate (CAGR) of - 0.7% Spirits grew +1.6% and Wines at +2.4% CAGR in the same period ALCOHOL CONSUMPTION PER CAPITA BY SEGMENT (L PURE ALCOHOL) Total CAGR +0.5% Beer Spirits -0.7% +1.6% Wine +2.4% All types Beer Wine Spirits Source: BMC Strategic Associates Analysis, Note: The difference in per capital consumption rates with WHO relates to calculation. This rate is based on total U.S. population while the WHO is based on 15 and older population number; however, in either case per caps are understated as Legal Drinking Age (LDA)is 21 in U.S. and should not be calculated using lower age demographics. These charts include these age groups to reflect how the source produces them. In BMC calculations, on page 15, the per caps of WHO were used but only LDA was used to calculate potential market opportunity.

20 Market Analysis and Sizing - USA -20- Discriminatory tax and distribution regulation in the U.S. limited the growth of single serve spirit-based Ready to Drink beverages (RTD), favoring malt-based RTDs regulated as beer instead of spirits although spirits based RTD s and wine based RTD s are on the rise SINGLE SERVE RTD SPIRITS IN THE USA Category holds a limited market within the U.S., mainly due to a majority of states requiring by law that all spirit-based beverages not be sold in grocery or c-stores, in addition to higher excise taxes However, some brands have produced single-serve RTD beverages and found success, among these are Kahlua s line of cocktails and Jose Cuervo Margaritas. Spirit-based pre-mixed drinks generally have an ABV similar to wine, in the 10% range Sales are limited by placement of RTD single serves in the spirits section versus the beer aisle Most single serve RTD beverages that are marketed to emulate popular cocktails, are instead made from a malt base, i.e. Bud Light MixxTails Pre-mixed beverages, which do have a spirit base, are primarily produced in larger sized ready to serve (RTS) packaging, with offerings from brands like Bacardi Rum and 1800 Tequila

21 Market Opportunities -21- Contents Background and Context Market Analysis and Sizing USA China Brazil India

22 Market Analysis and Sizing China -22- Liters per Capita China s per capita alcohol consumption grew by a +4.6% CAGR Beer +5.2% and Spirits +4.6% drove the total volume trend Wines grew more slowly at +1.4% ALCOHOL CONSUMPTION PER CAPITA BY SEGMENT (L PURE ALCOHOL) Total CAGR +4.6% Spirits +4.6% Beer +5.2% All types Beer Wine Spirits Wine +1.4% Source: BMC Strategic Associates Analysis, Note: The difference in per capital consumption rates with WHO relates to calculation. This rate is based on total U.S. population while the WHO is based on 15 and older population number; however, in either case per caps are understated as Legal Drinking Age (LDA)is 21 in U.S. and should not be calculated using lower age demographics. These charts include these age groups to reflect how the source produces them. In BMC calculations, on page 25, the per caps of WHO were used but only LDA was used to calculate potential market opportunity.

23 Market Analysis and Sizing China -23- MM Liters Total Beer Volume Growth in China was moderate at +1.8% CAGR ( ) Spirits grew at +7.1% and Wines at 1.9% CAGR over the same period Volume by Alcohol Type (MM Liters) CAGR 60,000 50,000 45,394 50,613 Beer/ Cider +1.8% 40,000 30,000 20,000 10, ,000 7,300 1,453 1, Spirit Wine +7.1% +1.9% Source: DrinkTell, BMC Strategic Associates Analysis

24 Market Analysis and Sizing China MM Liters -24- Flavored Alcohol Beverages (spirits-based) in China grew 15.6% CAGR ( ) to reach 11.8 million liters by 2015 FLAVORED ALCOHOL BEVERAGE (SPIRITS-BASED) VOLUME (MM LITERS) Flavored Alcohol Beverage CAGR +15.6% Source: GlobalData, BMC Strategic Associates Analysis

25 Market Analysis and Sizing China -25- Liters of Pure Alcohol China s LDA female population is estimated at MM in a country where only 28.9% of women drink, and at low per cap volumes Alcohol per Capita by Gender (15+) Consumption - Drinkers Metric Chinese Target Market Female LDA Population 535,131, Abstainers % 71.1% Total LDA Female Drinkers 154,653, Source: UN Population Prospects Report 2015, BMC Strategic Associates Analysis Male Female Total Source: WHO Global status report on alcohol and health lobal_alcohol_report/msb_gsr_2014_2.pdf?ua=1

26 Market Analysis and Sizing China Consumption/ Fem Drinker PA Based on modest female consumer penetration rates, Friends Fun Wine has the opportunity to capture between 24.7 MM to MM servings per annum in China Excludes male participation in the brand which could add 50% more volume Based on modest 2% to 5% penetration rates and only 8 to 16 servings per female per year Friends Volume Opportunity in China* Scenarios of: #Female Drinkers Converted x Average Volume Consumed ( 000 Servings) 300, , , , , , , ,723 50, ,489 61,861 24,745 12,372 6,186 12,372 24, % 1% 2% 5% 10% Share of Female Drinkers Friends Wine 0.5% 1% 2% 5% 10% 8 Servings 6, , , , , Servings 12, , , , , Share Fem Alc: 8 Srv 0.01% 0.01% 0.02% 0.06% 0.12% Share Fem Alc: 16 Srv 0.01% 0.02% 0.05% 0.12% 0.24% -26- Source: DrinkTell, BMC Strategic Associates Analysis *Assume female LDA base is: 154,653,819

27 Market Analysis and Sizing China -27- IN CHINA, CITIES ARE BECOMING MORE COSMOPOLITAN, WHICH IS AN ENVIRONMENT WHERE FEMALE ALCOHOL CONSUMPTION IS BECOMING A POPULAR TREND. WINE IS GROWING IN POPULARITY WITH WOMEN. CONSUMPTION IN CONTEXT Until the 21 st Century, few Chinese women drank and young Chinese mostly abstained. Alcohol is generally associated with business and social interactions, not a pub culture. Women have since begun to drink in small quantities and with their parents. Drinking patterns are changing where traditional roles are also changing: a rise in the number of women who consume alcohol especially wine has expanded the China market. Overall, Chinese consumers are increasingly willing to try new varieties of alcoholic beverages....chinese women appear to have primarily embraced wine, largely because it reflects their aspirational lifestyles. In addition, many consumers believe that drinking wine is good for one s health and that it promotes beautiful skin.

28 Market Analysis and Sizing China -28- The same trends are occurring in China with the expansion of Flavored Beverage Alcohol as Alternative Beverage Alcohol is taking hold like in the U.S. Alhambra Lemon Shandy 0.9% ABV Red Stripe Burst Raspberry Flavoured Beer 4.75% ABV Strongbow Cider comes in multiple flavors 5% ABV Mikes Authentic Summer Shandy Lemon Flavored Beer 4.2% ABV Fosters Radler Lime and Ginger 2% ABV Masquerido Tequla and Mojito Flavored Beer 5% ABV Bachata Cuban Beer Rum Flavored Beer 5.3%ABV Hello Kitty Fruit flavored beers in multiple flavors 2.3% - 2.8% ABV And now, a new beverage category

29 Market Analysis and Sizing - China -29- In order for ABA s to take hold in China, it is important that product placement, messaging and quality is consistent with expectations. SUMMARY OF KEY ATTRIBUTES European wine is known for high quality and consistency which provides product credibility to Friends Recent failures such as Rio is due to its desire to push product availability at the expense of quality. Similar actions have decimated brands in the past As a result of Rio s recent challenges, the opportunity for a brand with strong credentials to satisfy emerging demand exists As in other markets, building a category requires patience and commitment to long term brand success With penetration levels of only 0.5% of female consumers representing only.01% of total beverage alcohol consumption, Friends would achieve sales of between 6.0 and 12.0 million cans. This would equal only 5% of the average per capital consumption of wine for the 0.5% of women that engaged in Friends

30 Market Analysis and Sizing - China -30- FRIENDS FUN WINE is perfectly positioned to satisfy consumer needs with a product that is refreshing and in a convenient format Chinese consumers especially women and millenials desire In association with a major Chinese beverage producer, FRIENDS FUN WINE has a potential to penetrate 2-5% of the female consumers in China within 5 years. Using modest per capita consumption rates of 8 to 16 servings, the opportunity is about 24.7 MM to MM cans. This excludes male consumption which is estimated at an additional 50% of total female consumption.

31 Market Opportunities -31- CONTENTS Background and Context Market Analysis and Sizing USA China Brazil India

32 MM Liters Market Analysis and Sizing - Brazil Total Beer Volume in Brazil grew at +4.0% CAGR ( ) Spirits declined -0.5% and Wines remained flat in the same period VOLUME BY ALCOHOL TYPE (MM LITERS) 16, CAGR 14,000 13,448 Beer/ Cider +4.0% 12,000 10,634 10,000 8,000 6,000 4,000 2, Spirit -0.5% Wine 0.0% Source: DrinkTell, BMC Strategic Associates Analysis -32-

33 Market Analysis and Sizing - Brazil -33- Brazil s per capita alcohol consumption has remained flat Beer grew at +2.4% CAGR Spirits declined -2.9% and Wines -1.0% CAGR basis over the same term ALCOHOL CONSUMPTION PER CAPITA BY SEGMENT (L PURE ALCOHOL) Total CAGR 0.0% 6.00 Liters per Capita Beer +2.4% Spirits -2.9% All types Beer Wine Spirits Source: BMC Strategic Associates Analysis, Wine -1.0% Note: The difference in per capital consumption rates with WHO relates to calculation. This rate is based on total U.S. population while the WHO is based on 15 and older population number; however, in either case per caps are understated as Legal Drinking Age (LDA)is 21 in U.S. and should not be calculated using lower age demographics. These charts include these age groups to reflect how the source produces them. In BMC calculations, on page 35, the per caps of WHO were used but only LDA was used to calculate potential market opportunity.

34 Millions of Liters -34- Market Analysis and Sizing - Brazil Flavored Alcohol Beverages (spirits-based) grew 4.8% CAGR ( ) to reach 72.2 million liters by 2015 Flavored Alcohol Beverage (spirits-based) Volume (MM Liters) Flavored Alcohol Beverage CAGR +4.8% Source: GlobalData, BMC Strategic Associates Analysis

35 Market Analysis and Sizing - Brazil -35- Liters of Pure Alcohol Brazil s LDA female population is estimated at 80.5 million who consume 8.9 liters of pure alcohol per capita a year Brazilian Alcohol per Capita by Gender (15+) Consumption - Drinkers 25 Brazilian Target Market Metric Female LDA Population 80,472,177 Abstainers % 53.2% Total LDA Female Drinkers 37,660,979 5 Source: UN Population Prospects Report 2015, BMC Strategic Associates Analysis 0 Male Female Total Source: WHO Global status report on alcohol and health global_alcohol_report/msb_gsr_2014_2.pdf?ua=1

36 Market Analysis and Sizing - Brazil -36- Consumption/ Fem Drinker PA Based on modest female consumer penetration rates, Friends Fun Wine has the opportunity to capture between 6.0 MM to 30.1 MM servings per annum in Brazil Excludes male participation in the brand which could add 20% more volume Based on modest 2% to 5% penetration rates and only 8 to 16 servings per female per year Friends Volume Opportunity in Brazil * Scenarios of: #Female Drinkers Converted x Average Volume Consumed ( 000 Servings) 70,000 60,000 50, Servings 60,258 40,000 30,000 20,000 10, ,129 12,052 15,064 3,013 6,026 1,506 3,013 6,026 30,129 8 Servings 0.50% 1% 2% 5% 10% Share of Female Drinkers Friends Wine 0.5% 1% 2% 5% 10% 8 Servings 1, , , , , Servings 3, , , , , Share Fem Alc: 8 Srv 0.01% 0.01% 0.02% 0.05% 0.10% Share Fem Alc: 16 Srv 0.01% 0.02% 0.04% 0.10% 0.20% Source:DrinkTell, BMC Strategic Associates Analysis *Assume female LDA base is: 37,660,979

37 Market Analysis and Sizing - Brazil -37- As the middle-class and upper-class continues its rise in Brazil so does the scaled ABA market with female drinkers, whose increasing participation is accelerating CONSUMPTION IN CONTEXT A research study released in April 2013 showed that alcohol consumption has increased 31.1% in 6 years, having a special increase among women and young people.* Diageo sales, with strong-selling FAB Smirnoff Ice, considers Brazil a key market, which has seen consistent growth in recent years. As most Wines are imported the cost per serving tends to be higher comparatively to beer or certain FAB s Tourism also has a role in alcohol consumption in Brazil. Carnival alone draws in 1 million tourists who consume 400 million liters of beer alone** * **

38 Market Opportunities -38- Contents Background and Context Market Analysis and Sizing U.S.A. China Brazil India Mexico

39 Market Analysis and Sizing - India -39- Liters India s per capita alcohol consumption is driven by Spirits, which comprise 50% share of total alcohol by vol. Spirits grew at 8.9% CAGR while Beer grew +8.2%, off a lower base. Wines grew from a tiny base ALCOHOL CONSUMPTION PER CAPITA BY SEGMENT (L PURE ALCOHOL) Liters per Capita Total Spirits CAGR +8.9% +8.9% All types Beer Wine Spirits Beer Wine +8.2% 0.0% Source: BMC Strategic Associates Analysis, Note: The difference in per capital consumption rates with WHO relates to calculation. This rate is based on total U.S. population while the WHO is based on 15 and older population number; however, in either case per caps are understated as Legal Drinking Age (LDA)is 21 in U.S. and should not be calculated using lower age demographics. These charts include these age groups to reflect how the source produces them. In BMC calculations, on page 42, the per caps of WHO were used but only LDA was used to calculate potential market opportunity.

40 Market Analysis and Sizing - India MM Liters -40- Flavored Alcohol Beverages (spirits-based) grew 14.2% CAGR (nearly 3x the pace of Spirits) to reach 8.9 MM liters by 2015 FLAVORED ALCOHOL BEVERAGE (SPIRITS-BASED) VOLUME (MM LITERS) CAGR Flavored Alcohol Beverage +14.2% Source: GlobalData, BMC Strategic Associates Analysis

41 Market Analysis and Sizing - India -41- MM Liters Total Spirits Volume growth in India has slowed to +4.9% CAGR ( ) Beer grew at +6.8% and Wines at 10.3% over the same period VOLUME BY ALCOHOL TYPE (MM LITERS) 09/15 CAGR 3,000 2,740 Spirit +4.9% 2,500 2,000 1,500 2,060 1,410 2,094 Beer & Cider +6.8% 1, Wine +10.3% Source: DrinkTell, BMC Strategic Associates Analysis

42 Market Analysis and Sizing - India -42- Liters of Pure Alcohol India s LDA female population is estimated at million in a country where women have a very high rate of abstaining. Female drinkers are concentrated in key states and cities. Indian Alcohol per Capita by Gender (15+) Consumption - Drinkers Metric Indian Target Market Female LDA Population 315,696,796 Abstainers % 95.2% Source: Total LDA Female Drinkers 15,153,446 UN Population Prospects Report 2015, BMC Strategic Associates Analysis 0 Male Female Total Source: WHO Global status report on alcohol and health global_alcohol_report/msb_gsr_2014_2.pdf?ua=1

43 Market Analysis and Sizing - India Consumption/ Fem Drinker PA Based on modest female consumer penetration rates, Friends Fun Wine has the opportunity to capture between 2.4 MM to 12.1 MM servings per annum in India Excludes male participation in the brand which could add 50% more volume Based on modest 2% to 5% penetration rates and only 8 to 16 servings per female per year Friends Volume Opportunity in India* Scenarios of: #Female Drinkers Converted x Average Volume Consumed ( 000 of Servings) Servings 24, ,123 6,061 4,849 2,425 1, ,212 2, % 1% 2% 5% 10% 12,123 8 Servings Share of Female Drinkers Friends Wine 0.5% 1% 2% 5% 10% 8 Servings , , , , Servings 1, , , , , Share Fem Alc: 8 Srv 0.00% 0.01% 0.02% 0.04% 0.08% Share Fem Alc: 16 Srv 0.01% 0.02% 0.03% 0.08% 0.15% -43- Source: DrinkTell, BMC Strategic Associates Analysis *Assume female LDA base is15,153,446

44 Market Analysis and Sizing - India -44- The nascent Indian alcohol market shows potential in key pockets where male and some female drinkers can and do enjoy alcohol beverages CONSUMPTION IN CONTEXT India s nascent alcohol market is dominated by men drinking spirits. Only 20% of population have ever tried alcohol*, which means current abstainers make up 85% of Indians. Regulations and geographical bias plays a major role in the Indian market s development. Legal Drinking Age ranges from 18 to 27 years old in different locales. Some municipalities, like Manipur and Gujarat, ban alcohol altogether. Consumption in Kerela, Bombay and Delhi do however capture a large share of total consumptions and this is likely to expand to other key cities and states like the Punjab** Destinations like Kerala are key to the success of anew brand in India, which offers access to global travelers and wealthy visitors. * = ** =

45 Volume Sales of Flavored Alcohol Beverages (spirits-based) by Country (except US, where Flavored Malt Beverages are shown) 1, * US CAGR +8.8% Millions of Liters Brazil China India +4.8% +15.6% +14.2% Brazil India China USA * Flavored Malt Beverage Source: GlobalData and BMC Strategic Associates -45-

46 Market Opportunity -46- Contents Background and Context Market Analysis and Sizing Australia India China Mexico

47 Market Analysis and Sizing - Mexico -47- MM Liters Total Beer Volume in Mexico grew at +2.0% CAGR ( ) Spirits increased +4.9%, and Wines increased +8.5% in the same period Volume by Alcohol Type (MM Liters) 6,533 6,467 6,730 6,861 6,741 6,910 7,373 Beer/ Cider CAGR +2.0% Spirit Wine +4.9% +8.5% Source: Canadean, BMC Strategic Associates Analysis

48 Market Analysis and Sizing - Mexico -48- Mexico s per capita alcohol consumption has increased by +0.5% CAGR Beer also grew at +0.3% CAGR Spirits increased +3.0% and Wines +6.7% CAGR basis over the same term Alcohol Consumption per Capita by Segment (L pure alcohol) Total CAGR +0.5% Beer +0.3% Liters per Capita All types Beer Wine Spirits Spirits Wine +3.0% +6.7% Source: BMC Strategic Associates Analysis, Global Data,

49 Millions of Liters -49- Market Analysis and Sizing - Mexico Flavored Alcohol Beverages (spirits-based) grew 5.6% CAGR ( ) to reach million liters by 2015 Flavored Alcohol Beverage (spirits-based) Volume (MM Liters) CAGR Flavored Alcohol Beverage +5.6% Source: GlobalData, BMC Strategic Associates Analysis

50 Market Analysis and Sizing - Mexico -50- Liters of Pure Alcohol Mexico s LDA female population is estimated at 21.6 million who consume 5.7 liters of pure alcohol per capita a year Mexican Alcohol per Capita by Gender (15+) Consumption - Drinkers Mexican Target Market Metric Female LDA Population 46,668,000 Abstainers % 53.7% Total LDA Female Drinkers 21,607,284 Source: UN Population Prospects Report 2015, BMC Strategic Associates Analysis Male Female Total Source: WHO Global status report on alcohol and health global_alcohol_report/msb_gsr_2014_2.pdf?ua=1

51 Market Analysis and Sizing - Brazil -51- Consumption/ Fem Drinker PA Friends has the opportunity to capture 3.5 to 34.5 MM servings PA in Mexico by targeting women alone and capturing modest per cap and penetration levels, particularly given the low penetration of wine Targeting women alone Capturing modest per cap and penetration levels Men could add 5%-20% further still Friends Volume Opportunity in Mexico* Scenarios of: #Female Drinkers Converted x Average Volume Consumed ( 000 Servings) 40,000 30, Servings 27, , ,000 10, , , , , , , , Servings 17, % 4% 6% 8% 10% Share of Female Drinkers Friends Wine 2% 4% 6% 8% 10% 8 Servings 3, , , , , Servings 6, , , , ,571.7 Share Fem Alc: 8 Srv 0.02% 0.04% 0.06% 0.08% 0.10% Share Fem Alc: 16 Srv 0.04% 0.08% 0.12% 0.16% 0.20% Source:DrinkTell, BMC Strategic Associates Analysis *Assume female LDA base is: 37,660,979

52 Market Analysis and Sizing - Brazil -52- In spite of heavy taxation and challaenging access to market, emerging products are gaining traction, as consumers seek variety in packaging, flavor and value Consumption in Context * Alcohol consumption continues to increase as consumers enter LDA and economic conditions stabilize. Diageo, Brown Forman, Bacardi and Campari dominate the Mexican flavored alcohol market. Wine consumption per capita is one of the lowest of any OECD country: Most wine is imported and fairly expensive; significant opportunity for fun wine to penetrate the market; As such, penetration assumptions are more aggressive than those in other markets; Beer and spirits have traditionally dominated the market. Spirits consumption has undergone a significant premiumization, with tequila and whisky leading the way. Tourist destinations are over-indexed in terms of alcohol beverage consumption; fun wine could play a significant role in such markets.