WIXLIB

Small Craft Producers Have Been Growing WellNumber of Small ProducersNumber1500 The number of small craftdistillers as well as theirnumber of cases has beengrowing rapidly The number of small craftdistillers has grown almostsix-fold from 254 in 2011to 1,324 in 2016 The number of cases ofsmall craft distillers hasgrown from 205k 9L casesin 2011 to 749k 9L cases in2016 The average number ofcases of small craftdistillers has decreasedfrom 807 9L cases in 2011to 566 9L cases in 201638.5%CAGR100050025404158315981,0671,3242011 2012 2013 2014 2015 2016Cases of Small Producers9L Cases (000)80030.0%CAGR60040020020502362754345977492011 2012 2013 2014 2015 2016Average Number of Cases of Small Producers9L Cases-6.1%1,000CAGR50080756745952255956602011 2012 2013 2014 2015 2016Sources: TTB, Distiller Surveys, Team Analyses 201723

92% of the Business of Small Craft Producers TakesPlace in the Home StatesSources of Case Sales – Small U.S. Craft Spirits Producers,Domestic and Export 20169L Cases (000)74916Total U.S.businessExport65766 34% of the totalbusiness of smallcraft producerscomes from salesat the DSP Less than 10%of the totalbusiness comesfrom salesoutside the homestate431253Sales atDSP% oftotal U.S. 34%businessHomestate, butoutsidepremisesOther U.S.States58%8%Sources: TTB, ACSA, ADI, State ABC Boards, State Guilds, TeamAnalyses100% 20172%Totalbusiness102%24

Many Retailers and Wholesalers See Potential for CraftSpirits to Perform in Line or Better than Craft BeerCraft Spirits Will Perform in Line with Craft Beer OverTimePercent of RespondentsOff-Premise Retailers27On-Premise Retailers4722Wholesalers48530%2620%Not SureAgree301340%Don’t Agree3360%80% 100%Craft Spirits Will Become More Relevant to the SpiritsCategory than Craft Beer has Become for Beer CategoryPercent of RespondentsDon’t AgreeOff-Premise RetailersAgree22On-Premise Retailers3030Wholesalers48600%20%48221340%60%Not Sure Many retailers andwholesalers see thepotential for craftspirits to perform inline or better thancraft beer With craft beermarket sharecurrently over 12%in the U.S., the craftspirits market isexpected tocontinue to growrapidly2780% 100%Sources: WSWA Distributor Survey, ABL Retailer Survey, TeamAnalyses 201725

Craft is Still Small but Could Contribute Much MoreTowards Fragmentation in Future YearsU.S. Market Size Scenarios for 20209L Cases (millions)2016 – 2020CAGRsScenariosCraft beer market share today, 12.1%Growth with constant CAGR of previous 5 yearsreaching a 6.3% market share28.3Growth at ½ CAGR of previous 5 yearsreaching a 4.1% market share48.4%Distillers survey forecasted growth of 10.3%14.7Growth with a constant marketshare of 2020 ESources: IWSR, Team Analyses 201726

Employment in the U.S. Craft Industry Has Been onthe RiseAverage Full-Time Domestic Employees ofU.S. Craft Spirits Producers, 2014 – 2017FTEs12825,00010.59.210# of Full-Time Domestic Employees of U.S.Craft Spirits Producers, 2014 – 45,70825,0000020142015201620172014201520162017 Number of average FTEs has been increasing by almost 50% between 2014 and 2017 Approximately 66% of the employment is created at the production facility and the tasting roomoperations, and roughly 33% of the employment is generated in the field Total employment has surpassed the 19,500 mark in 2017Sources: Distiller Surveys, TTB, Team Analyses 201727

Investment in the U.S. Craft Industry Has Been onthe RiseAverage Investment* of U.S. CraftSpirits Producers, 2014 – 2017Total Investment* of U.S. CraftSpirits Producers, 2015 – 2016 Thousands350200700317.3300250 020145936002015201620172991892014201520162017 The average investment of a U.S. craft producer has been increasing by almost 14.6% from 276.8kin 2016 to 317.3k in 2017 Total investment has increased by 49% from 398m in 2016 to 593m in 2017Sources: Distiller Surveys, TTB, Team Analyses. *Investments forexpansions. 201728

Contact InformationFor more information on the data and analysis included in this presentation, please contactAlexandra S. CloughGATHER PRalexandra@gatherpr.com516 428 7210Brandy RandThe IWSRbrandy@theiwsr.com646 830 2616 2017Harry Kohlmann, Ph.D.Park Street Companiesinfo@parkstreet.com305 967 744029

Appendix Project Background and Craft Spirits Definition Craft Spirits – Selected Other Survey Results 201730

Project Background and Craft Spirits Definition

Craft Spirits Data Project - Industry Wide CollaborationTeaming up for a common causeThe American Craft Spirits Association, International Wine and Spirits Research, and ParkStreet teamed up in 2015 to launch the Craft Spirits Data Project (the “Project”), a researchinitiative with the goal of providing a solid and reliable fact base for evaluating performanceand trends in the U.S. craft spirits industry Major industry stakeholders such as theTTB, NABCA, WSWA, and ABL havecommitted resources to help the Project The fact base helps all stakeholders tomake their respective investment casesand vastly improve an understanding ofthe full impact at the local, regional, andfederal level The Project is set-up to provide aconsistent fact base for all stakeholderson an ongoing basis. Update reports willbe published annually 201732

Project Background and Research Methodology The project serves to: Quantify the number, size, and impact of craft spirits producers in the U.S. Create a deeper understanding of the U.S. craft spirits landscape among four key groups: DSPs,wholesalers, retailers, and consumers Provide findings on craft supplier best practices and success factors The following information was collected (all information was collected with the assurancesof full confidentiality): Data on craft distiller production size and patterns, sources of revenue, and the category’s overalleconomic impact within the spirits industry Data on craft spirits business size, patterns, and outlook on the wholesaler and retail levels (both onand off-premise) Input on craft spirits brand perceptions Things to remember: When estimating the number of producers behind the U.S. craft spirits production, the Project teamrelied on a combination of official data released by regulatory authorities, survey data, other industrydata sources both national (e.g., NABCA, ACSA) and regional (e.g., guilds), as well as interviews andteam assessments using the craft distiller definition In the accompanying data sets, the team assumes independent ownership as having equal or morethan a 75% equity stake and/or operational control of the DSP. The team has set up a process thatasks industry members to notify the ACSA of all ownership or strategy changes away from craft so thechanges can be reflected accordingly in the database 201733

Project Organizer: American Craft SpiritsAssociation (ACSA)The American Craft Spirits Association (ACSA)is the only registered non-profit tradeassociation representing the U.S. craft spiritsindustry. Its mission is to elevate andadvocate for the community of craft spiritsproducers. Membership in ACSA is open toanyone.ACSA is governed by a Board of Directorselected by the eligible voting members of theAssociation. Voting members must beindependent, licensed distillers (DSPs) annuallyremoving fewer than 750,000 proof gallonsfrom bond (the amount on which a federalexcise tax is paid.)ACSA was founded in 2013 by 23 foundingcraft distillers. 201734

Project Partners: IWSR and Park StreetThe IWSR is the leading source of data and analysis on thebeverage alcohol market. IWSR is the longest-runningresearch company specializing exclusively in globalalcoholic drinks. The IWSR’s comprehensive databasequantifies the global and local market of wine, spirits, beer,cider and prepared cocktails by volume and value, andprovides insight into short- and long-term trendsPark Street delivers productivity-enhancing and cost-savingback-office solutions, advisory services, and workingcapital to more than 4,500 alcoholic beverage brands fromthe U.S. and around the world. Established in 2003, thecompany provides a fast and reliable conduit to the U.S.and E.U. markets and a cost-effective operating platform.Park Street works with suppliers at all stages of growthand its clients range from entrepreneurial craft distillers tomulti-brand global portfolios 201735

Project Supporters: Broad Industry CollaborationTTB: Provided Beverage Spirits Producers and Bottlers by Average Taxable Removals;agreed to change annual reporting moving forward to enable consistent fact basisWSWA: Assisted in wholesaler survey design and execution with membersABL: Assisted in on- and off-premise retailer survey design and execution withmembersNABCA: Provided in-depth view of craft distillers using control state data 201736

What Constitutes a Craft Spirit? There is no universally accepted definition of craft spirits in the industry, and the expression “craftspirit” is not protected in any way Given the positive trends for craft spirits from a consumer perspective (e.g., premium to other spirits,rising demand), there is a natural incentive for brands to utilize craft spirits cues and positionthemselves as a craft spirit The industry has responded with different definition attempts based on criteria for the producer of thecraft spirit including production steps at the location, ownership and operational control of thedistillery, subscription to an ethics code based on honesty and transparency, production methodology,and size of production Many of the criteria used or suggested by industry members would require a formal certification orpeer approval process in order to be used as a universal base for quantification purposes As long as a universally accepted craft spirits certification or approval that could be used as anindustry wide criteria remains unavailable, the quantification has to rely on certain verifiablequantitative metrics which are complemented by estimates to bridge gaps Looking at the manufacturer, size of production, ownership/control, and production specifics arecriteria that could possibly be measurable and verifiable. However, the consistent collection of thedata is not without barriers and could be very cumbersome, which suggests the potential use of apragmatic approach U.S. craft spirits, as defined pragmatically for the purposes of the research, are distilled spirits thatare produced in the U.S. by licensed producers that have not more than 750,000 proof gallons (or394,317 9L cases) removed from bond, market themselves as craft, are not openly controlled by alarge supplier, and have no proven violation of the ACSA Code of Ethics 201737

Craft Distillers by Size – Classification DefinitionRange of gallonsremoved frombond annually*Large craftdistillerMedium-sizecraft distillerSmall craftdistiller100,001 –750,00010,001100,0001- 10,000Sources: TTB, Team Analyses’ *Assuming on average 80 proof alcoholcontent; for purposes of the analysis removed from bond equals sales 2017Range of 9L casesremoved frombonds annually*52,577 394,3175,259 –52,5761 - 5,258Characteristics Often nationallydistributed If negative cash flow,then by choice infavor of investment Often regionallydistributed Often still cashflow negative Often only locallydistributed If no on-premisebusiness, typicallycash flow negative38

Craft Spirits - Selected Other Survey Results

Industry Recommendations for Craft SpiritsProducers from Retailers, On-PremiseOn-premise Retailer Suggestions toCraft Spirits Producers% Agree81%Provide more resources for tastingsProvide better cons. pull strategies53%Provide better training of your staff54%Provide better branding56%Focus efforts on fewer products61%Improve quality of products61%50%Visit your outlet more frequentlyIncrease # of different productsSources: ABL Retailer Surveys, Team Analyses8% 2017 On-premise retailerssuggest that producersinvest more resourcesagainst the consumer, bothin terms of tastings, otherconsumer pull strategies,and branding Investments in staff trainingas well as more frequentmarket visits are also highlyrecommended From a product perspective,on-premise retailersrecommend a focus onfewer products and higherquality40

Industry Recommendations for Wholesalers fromRetailers, On-PremiseOn-premise Retailer Suggestions toWholesalers% Agree71%Offer better deal pricingProvide more background on brands63%82%Conduct special promotions in outletBring supplier to account/provide story55%67%Provide more POS materialFocus efforts on fewer productsConduct more buybacks at outletSources: ABL Retailer Surveys, Team Analyses47%39% 2017 On-premise retailers suggestthat wholesalers invest moreresources against the accounts– Better deal pricing– Special promotions in theaccounts– More buybacks (to a smallerdegree) Investments in staff training aswell as more frequent marketvisits by the craft spiritsproducer are also highlyrecommended From a product perspective, onpremise retailers recommend afocus on fewer products41

Industry Recommendations for Producers fromRetailers, Off-PremiseOff-premise Retailer Suggestions toCraft Spirits Producers% AgreeProvide more resources for tastings82%Provide better cons. pull strategies74%Provide better training of your staff78%Provide better branding for propositions61%Focus efforts on fewer products48%Improve quality of products46%Visit outlet more frequentlyIncrease number of different productsSources: ABL Retailer Surveys, Team Analyses39% Off-premise retailers suggestthat producers invest moreresources against the consumer,both in terms of tastings, otherconsumer pull strategies andbranding Investments in staff training aswell as more frequent marketvisits are also highlyrecommended From a product perspective, offpremise retailers recommend afocus on fewer products andhigher quality4% 201742

Industry Recommendations for Wholesalers fromRetailers, Off-PremiseOff-premise Retailer Suggestions toWholesalers% AgreeProvide more background on brands75%Conduct special promotions in outlet87%Offer better deal pricing75%Provide more POS material75%Bring supplier to account / providestoryConduct more buybacks at outletFocus efforts on fewer productsSources: ABL Retailer Surveys, Team Analyses71%50%50% 2017 Off-premise retailers suggest thatwholesalers invest in providing morebackground on the brands as well asmore frequent market visits by thecraft spirits producer Off-premise retailers also recommendhigher investments against theaccounts– Special promotions in theaccounts– Better deal pricing– More POS material– More buybacks (to a smallerdegree) From a product perspective, offpremise retailers recommend a focuson fewer products43

Craft Spirits Industry View from Wholesale TierPerspectiveWholesaler View on Craft Spirits Industry% AgreeCraft spirits are a fad0%0%Craft spirits are successful as the consumer taste preferences areunderserved by incumbent spirits suppliersWithin 10 years the majority of the leading craft spirits producerswill be owned by leading spirits suppliersBrand fragmentation in the U.S. spirits market will continue toaccelerate73%53%80% Wholesalers see the distilled spirits market continuing on the pathway to amore fragmented marketplace and believe that craft spirits are not a fad The majority of wholesalers believe that the majority of craft spirits producerswill be acquired by larger suppliersSources: WSWA Wholesaler Surveys, Team Analyses 201744

Industry Recommendations for Craft SpiritsProducers from WholesalersWholesaler Suggestions to Craft SpiritsProducers% Agree80%Provide better consumer pull strategies93%Visit the market more frequentlyProvide better branding for theirpropositions94%93%Provide better training of the salesforceProvide larger funds for consumertastings80%73%Improve the quality of their productsFocus their efforts on fewer products/narrower product line-up76%71%Provide more POS materialEngage supplementary sales resources inthe market (e.g., broker)Provide larger incentives for your salesforce/better programmingIncrease the number of differentproducts/widen the product line-up33%53%7%Sources: WSWA Wholesaler Surveys, Team Analyses 2017 Wholesalers recommend higherinvestments against the consumer– Consumer pull strategies– Better branding– Consumer tastings Wholesalers also recommend higherinvestments against the trade– Market visits– Training of salesforce– More POS material– Supplementary sales resources inmarket– More programming From a product perspective,wholesalers recommend fewerproducts and higher quality45

Industry Recommendations for Craft SpiritsProducers from WholesalersIf you were a craft producer, wherewould you try to spend more time?% AgreeSelling product in market80%Making products in distillery7%Raising capital5%Back-officeOther0%8%If you were a craft producer, which typeof accounts would you target first?% AgreeIndependentoff-premise,20%Chain offpremise,7% Educating consumer, retailer, and salesforce. Engage with all tiers and insurea clear consumer platform Making the product as well as tellingthe story in the market Creating consumer pull/developingrelationships with key gatekeepers Wholesalers recommend craft spiritsproducers to increase their time in themarket Wholesalers believe that craft spiritproducers should initially targetindependent on-premise accountswhen coming to market, thenindependent off-premise account

2.6% in Volume U.S. craft currently has an estimated market share of 2.6% in cases, up from 1.0% in 2011 U.S. craft is clear