S&D Coffee and Tea Investor Day June 8, 2017
Safe Harbor Statements Forward Looking Statements: This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and applicable Canadian securities laws conveying management's expectations as to the future based on plans, estimates and projections at the time the Company makes the statements. Forwardlooking statements involve inherent risks and uncertainties and the Company cautions you that a number of important factors could cause actual results to differ materially from those contained in any such forward-looking statement. The forward-looking statements contained in this presentation include, but are not limited to, statements related to expected future operating results of the Company, anticipated market trends, and the execution of the Company s strategy. The forward-looking statements are based on assumptions regarding management's current plans and estimates. Management believes these assumptions to be reasonable but there is no assurance that they will prove to be accurate. Factors that could cause actual results to differ materially from those described in this presentation include, among others: (1) changes in estimates of future earnings; (2) expected synergies and cost savings are not achieved or achieved at a slower pace than expected; (3) integration problems, delays or other related costs; and (4) unanticipated changes in laws, regulations, or other industry standards affecting the companies. The foregoing list of factors is not exhaustive. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Readers are urged to carefully review and consider the various disclosures, including but not limited to risk factors contained in the Company's Annual Report in the Form 10-K for the year ended December 31, 2016. The Company does not, except as expressly required by applicable law, undertake to update or revise any of these statements in light of new information or future events. Non-GAAP Measures: The Company routinely supplements its reporting of GAAP measures by utilizing certain non-gaap measures to separate the impact of certain items from its underlying business results. In this presentation, we use non-gaap measures such as EBITDA, adjusted EBITDA, and adjusted free cash flow and certain ratios using these measures. Since the Company uses these non-gaap measures in the management of its business, management believes this supplemental information, including on a pro forma basis, is useful to investors for their independent evaluation and understanding of the business. Any non-gaap financial measures used by the Company are in addition to, and not meant to be considered superior to, or a substitute for, the Company's financial statements prepared in accordance with GAAP. In addition, the non-gaap financial measures included in this presentation reflect management's judgment of particular items, and may be different from, and therefore may not be comparable to, similarly titled measures reported by other companies. A reconciliation of these non-gaap measures may be found on www.cott.com. 1
Our Model HOW S&D COFFEE & TEA WINS WITH CUSTOMERS 3
Tenured, Experienced Management Ron Hinson President, Chief Executive Officer Ron Hinson has been with the Company for almost 39 years, having joined as a route sales representative in 1979. Mr. Hinson has been S&D s President and CEO since 2000. Carlos Lopez Executive Vice President-Sales & Marketing Carlos Lopez joined the Company in 2010 and has led national sales, corporate planning, and strategy efforts. Mr. Lopez maintains oversight of all Sales Divisions and Marketing, and Product Innovation Departments. Jack Robinson Executive Vice President & Chief Financial Officer Jack Robinson has been with the Company for over 15 years, having joined as Controller in 2001. Mr. Robinson is responsible for Accounting, Contract Management, Fleet, Beverage, Equipment, Global Sourcing, and the Sustainability functions of the organization. Brian Bradley Executive Vice President-Corporate Operations Brian Bradley has been with the Company for 29 years, beginning as a plant engineer and manufacturing supervisor. Mr. Bradley is responsible for Operations, Manufacturing, Engineering, Maintenance, Facilities, Quality Assurance, OTR, Logistics, Warehousing & Inventory Control, and IT. Tracy Ging Senior Vice President & Chief Commercial Officer Tracy Ging previously served as VP of Sustainability & Strategic Initiatives from 2012-2016. With nearly 20 years of coffee experience, Ms. Ging leads the Marketing and Product Innovation organizations, as well as Strategic Initiatives with the CEO. 4
History of Sustained Growth 1927 S&D Coffee, Inc. is founded by Roy Davis, Sr. and Lawrence Switzer as a provider of fresh roasted coffee to regional grocers. 1960 s Roy Davis, Jr. succeeds his father as President and CEO, and refocuses the Company s strategy from a grocery-based business to a broader, routebased foodservice and OCS provider. 1990 s S&D continues its rapid growth, focusing on national chain restaurants and convenience retailers while de-prioritizing OCS. 1970 S&D relocated to a new facility in Concord, NC (present day site), quadrupling capacity. 1979 Current CEO, Ron Hinson, joins the Company as a route sales representative in Asheville, NC. 2000 Facility expansion in warehousing and packaging lines, establishing direct sourcing of tea. The S&D Story 1995 Major expansion and investment in roasting capacity to support growth with large-scale, national chain accounts Roy Davis, Jr. assumes Chairman of the Board, retiring previous posts, appointing Ron Hinson as President & CEO. 2007 S&D adds a new state-of-the-art tea blending facility to expand capacity. 2010 Despite national recession, S&D continues to enjoy record-setting growth. 2009 S&D acquired licensing and intellectual property rights to the Toddy Company, gaining access to cold-brew extraction techniques and exclusive rights to produce at commercial scale. 2012 S&D finishes the renovation of its headquarters and acquires new facility to position for further growth, adding the potential to double capacity. 2011 Roy Davis Jr. passes away and Ron Hinson becomes Chairman of the Board, President & CEO. 2016 Acquired by Cott Corporation 2017 & Beyond S&D is well positioned to capitalize on recent investments to sustain growth. For 90 years, S&D has proactively invested in capabilities and capacity to stay at the leading edge of the coffee and tea industry, and has made significant investments to position the Company for rapid growth. 5
National Distribution Platform S&D s National Footprint S&D combines 3 distribution operations to achieve national coverage: 1. National Accounts (Commissary Sales) Higher Volume & Lower Gross Margin 2. Direct Store Delivery ( DSD ) (Route Sales) Lower Volume & Higher Gross Margin 3. Fulfillment Convenient and cost effective for low volume Sales Breakdown by Distribution For Calendar Year 2016 Millions) in $) Net Sales Commissary $446 Route $110 Fulfillment $2 Total $558 Direct Route & Third-Party Distribution Top S&D Customers Distribution Centers S&D Warehouse Locations Sysco OpCo Embedded AEs 6
Strong Partnerships with Blue-Chip Customers S&D maintains longstanding relationships with blue-chip customers across a variety of end-markets, including restaurants, hospitality, and convenience stores ( C-Stores ). The Company sells its products to more than 24,000 blue-chip customers nationwide. Largest supplier to key national foodservice and convenience store chains. S&D s top customers have purchased from the Company for more than 11 years on average. 7
Dominant in QSR & C-Store Channels S&D has significant opportunity to expand in existing & new channels. Sales by Customer Groups-2016 Non-Commercial, 8% Food & Bev. Manufacturers, 3% Casual Dining, 6% Distributor, 10% QSR and Fast Casual, 49% C-Store, 24% 8
Strategic Process to Drive Growth S&D is well positioned to strategically pursue key growth opportunities that leverage the Company s industry-leading reputation and capabilities and have the potential to drive significant long-term growth. 1 Capitalize on Current Pipeline 2 Expansion of Product Offerings Robust pipeline of potential new business Increased demand for specialty drinks and coffee extracts 5 Pursue Strategic Acquisitions Potential to expand the Company s product set and market reach. 3 Further Penetration of Current End-Markets Growing segments of food and beverage manufacturing and distribution 4 Expand Strategic Partnerships S&D aligned with the largest quickservice restaurants ( QSR ),C-Stores, and foodservice distribution customers in the US 9
Continued Growth in Core Coffee & Tea Coffee & Tea remain growth categories and the basis for new beverage innovation. Diversified mix of coffee and tea products, Including specialty (higher quality) and sustainable products that appeal to current consumer interest Coffee and tea are also driving new beverage innovation, including Toddy Cold Brew Coffee and Specialty Hot Teas (Pyramid Bags) 2016 Sales Mix Historical Mix by Product Category 100% Liquid, 5% All Other, 14% 90% 80% 70% 14% 15% 14% 14% 13% 2% 3% 3% 5% 5% 12% 13% 12% 11% 11% Tea, 11% Coffee, 69% 60% 50% 40% 30% 72% 69% 71% 69% 71% 20% 10% 0% 2013 (A) 2014 (A) 2015 (A) 2016 (A) 2017 (P) 10 Coffee Tea Liquid All Other
Diverse Portfolio of Products Coffee Tea Extracts Equipment Innovations 11
Track Record of Successful New Product Launches Fast entrant into new packaging/ product types Hundreds of new products launched since 2012 Continuous investment in product pipeline 12
Cold Brew Coffee Emerging High awareness among coffee drinkers Attractive to younger consumers Expands coffee day parts Premium product = Premium margin S&D proprietary cold brew technology 13
Growth in Specialty Teas The U.S. tea market is projected to experience a 4% CAGR over the next 5 years*. Redesigned flavored tea program with four new flavors Launched pyramid tea in 2017 with national QSR customer; in discussions with national C-Store customer Introduced clear tea urn dispenser to showcase premium tea Ltd. : Source * Mintel Group, 14
Financial Summary S&D continues with strong & consistent growth. S&D has experienced strong and consistent growth since 1927, and achieved over $550 million of revenue and $40 million of adjusted EBITDA in 2016. From 2013 to 2016, the Company expanded net revenue from $500 million to over $550 million, representing a CAGR of 4%, and expects to continue its strong growth of 3+% annually. S&D has grown its roast and ground coffee volume from 106 million in 2013 to 117 million in 2016, and is installing an additional roaster in 2017 with the capacity to add 20 million pounds annually. 190 Sustained Growth in Core Products 170 Coffee Pounds in Millions 150 130 110 90 70 50 2013 2014 2015 2016 2017 P 15
Route & National Foodservice 5 Year Growth Revenue Trend Route based business is consistent and stable while growth is focused on distributed customers. Coffee volume growth was greater than 3.5% annually from 2013 to 2016. Revenue volatility reflects movement in the coffee market as the commodity cost varies over time. By managing the price to cost formula, gross profit is consistent over a range of the coffee market. $700 Millions) in $) $600 $500 $400 77% $300 72% 72% 74% 74% $200 $100 28% 28% 26% 26% 23% $0 2013 (A) 2014 (A) 2015 (A) 2016 (A) 2017 (P) Route Distributor 16
Financial Update Dramatic Growth in Innovative Products Liquid concentrates and liquid coffees and teas, including cold brew concentrates, are taking off, generating 5% of sales in 2016. 1,200 Liquid Gallons 1,100 1,000 900 Thousands 800 700 600 500 400 300 200 2013 2014 2015 2016 2017 P 17
Facilities & Capacities S&D s corporate campus is comprised of Current Capacity four facilities with two dedicated coffee facilities & a tea facility one extract & ingredient facility And nearly 750,000 sf of operations & admin. facilities. Coffee Roasting 135-145 million lbs. All run by 750 non-union, well-tenured labor force. Summary of S&D Facilities Tea Blending 40-45 million lbs. Main Facility Commercial Pk. West Winds Ramdin Court 255,850 SF 160,000 SF 85,000 SF 65,000 SF 175,000 SF Liquid Extract 1.8-2 million gallons (16-19 million lbs.) 18
Investments in Growth In 2017, the Company is investing capital to increase productive capacity in core coffee. Installation of a new roaster in the existing main plant, with a potential additional roaster in 2018 at the West Winds facility, together increasing roasting capacity by 40 million annual pounds. Investments in liquid production are also planned to expand our cold brew production capacity. Projected Capital Expenditures ($15-20 million annually in 2017-2020) total) as ) a percent of annual Growth Capital Expenditures 52% * Coffee - Roasting and Processing Packaging - Production Liquid - Plant Production Facilities - Improvements 18% Maintenance Capital Expenditures 31% IT - and Infrastructure Manufacturing - Equipment 69% 82% 48% * Facilities - Infrastructure Customer - Beverage Equipment 2015 (A) 2016 (A) 2017 (P) * 2017 Growth Expenditures increased due to installation of new roaster and liquid productive capacity. 19
Closing Remarks S&D has the right model to continue to grow The future is extremely exciting 20