Brought to you by: US Drinks Conference 2010 Translating Industry Trends Into Actionable Insights

Click to edit Master title style U.S. Drinks Conference 2010 Using Beer, Wine and Spirits category trends to make informed decisions on building your brands 2 Session Overview

Click to edit Master title style xxxxxxx U.S. Drinks Conference Agenda Macro Consumer Trends Impacting The Industry Total Beverage Alcohol Consumption Trends Spirits Category Consumption Trends Wine Category Consumption Trends Beer Category Consumption Trends Summary Of Key Takeaways

Click to edit Master title style U.S. Drinks Conference 2010 Macro Trends Impacting The U.S. Beverage Alcohol Industry 4

Click to edit Master title style U.S. Drinks Conference 2010 Macro Economic Trends The U.S. Economy Shifting Consumer Behavior U.S. Population Size And Growth Growing Ethnic Diversity Seeking Out New Drink Experiences Premiumization And Affordable Luxury 5 CREATE 1-5 NEW SLIDES

Click to edit Master title style U.S. Drinks Conference 2010xxxxxxx 6 The U.S. Economy Unemployment is beginning to go down but remains high at 9.6% and is expected to remain elevated for 2-5 years Mortgage foreclosures will continue to impact the housing market Tight credit is dampening consumer spending Consumers focus more on debt reduction and savings rather than over-indulgence Consumer confidence is improving marginally and spending is starting to improve Sources: U.S. Bureau Of Labor Statistics and Market Harmonics

Click to edit Master title style U.S. Drinks Conference 2010xxxxxxx 7 Shifting Consumer Behavior Frugality is fashionable and deals and value for the money are key Consumers drinking more at home to save money Consumers drinking more but trading down across all categories

Click to edit Master title style U.S. population over 300 million with legal drinking age consumers growing by 20 million every 10 years 8 U.S. Population Size And Growth 8 Sources: U.S. Census Bureau – Demographic Trends in the 20 th Century, Nov

Click to edit Master title style U.S. Drinks Conference Growing Ethnic Diversity The fast growing multi-ethnic population is fueling interest in new drink experiences from around the world such as Cachaça from Brazil and Pisco from Peru Sources: U.S. Census Bureau

Click to edit Master title style Consumers are actively seeking out new taste experiences across beer, wine and spirits through a wider selection of new and undiscovered brands, varietals and categories Seeking New Drink Experiences 10 U.S. Drinks Conference 2010 U.S. Drinks Conference

Click to edit Master title style Premiumization And Affordable Luxury 11 Consumers aspire to luxury across all segments with Premium Beverage Alcohol offering “Affordable Luxury” High-end Beverage Alcohol has grown to about 20% of category Everyday Luxury ItemsHigh-End Beverage Alcohol Beverage Alcohol High-end Market Share Source: DISCUS and Next Level Marketing Consumer Research

Click to edit Master title style Total Beverage Alcohol Trends U.S. Drinks Conference

Click to edit Master title style U.S. Drinks Conference 2010xxxxxxx 13 Data Sources The data in this presentation comes from the Beverage Information Group’s 2010 Liquor, Wine and Beer Handbooks. These Handbooks contain the most current and complete statistics on the Spirits, Wine and Beer categories.

Click to edit Master title style 2009 Total U.S. Beverage Consumption Source: B.I.G Handbook Advance 14 Beverage Alcohol ranks as the 4 th largest beverage type in the U.S. Market and sales have been flat during the recession

Click to edit Master title style Retail Sales Of $189 Billion 29 Volume Of 3.3 Billion 9L Cases 29 Spirits 5%Spirits 34% The U.S. market size is 3.3B 9L cases and $188B in retail sales Beer dominates consumption with an 85% volume share Spirits are much more important on a dollar share basis Total U.S. Beverage Alcohol Industry Billion 9L Cases $188 B Retail Sales 15 The B.I.G Liquor, Wine And Beer Handbooks

Click to edit Master title style U.S. Drinks Conference Volume Trends The B.I.G Liquor, Wine And Beer Handbooks Total Beverage Alcohol consumption fell by 1.8% driven by a 2.1% decline in Beer but led by growth in Wine and Spirits -2.1% -1.8% +0.8% +1.6%

Click to edit Master title style U.S. Drinks Conference The B.I.G Liquor, Wine And Beer Handbooks Total Beverage Alcohol sales dollar fell by 0.4% driven by Beer volume declines, Wine trade-down and Spirit trade-up -1.1% -0.4% -3.2% +1.9% 2009 Dollar Sales Trends

Click to edit Master title style U.S. Drinks Conference The B.I.G Liquor, Wine And Beer Handbooks Five Year Category Growth Rates Over the last five years, Spirits and Wine consumption have grown much faster than Beer consumption U.S. Drinks Conference 2010

Click to edit Master title style U.S. Drinks Conference The B.I.G Liquor, Wine And Beer Handbooks On Vs. Off-Premise Case / Dollar Sales Across all categories on-premise does about 25% of cases and off-premise does 75% but dollar sales are split equally 23% 20% 25% 53% 44% 48% 80% 77% 75% 47% 56% 52%

Click to edit Master title style U.S. Drinks Conference The B.I.G Liquor, Wine And Beer Handbooks The Off-premise channel is now the key growth driver for Beer, Wine and Spirits as today’s cash conscious consumers have shifted towards more at home consumption On And Off-Premise Growth Trends -3.3% -5.9% -0.1% +3.2% +2.6% -3.9%

Click to edit Master title style U.S. Drinks Conference 2010 Spirit Category Trends 21

Click to edit Master title style Distilled Spirits Sales Trend Spirit consumption has grown steadily to a record level of 188,630 million 9-liter cases with 1.6% growth in 2009 Source: Adam’s 2008 Advance The B.I.G Liquor Handbook (Thousands 9-Liter Cases) 22

Click to edit Master title style U.S. Drinks Conference Top 10 Markets For Spirits CA TX FL IL NY NJ MA The top 10 states account for 60% of U.S. Spirits volume OH VA The B.I.G Liquor Handbook MI PA

Click to edit Master title style Imported Vs. Domestic Volume Share Domestics Spirits account for 60% of volume with Imports making up 40% and both showing growth in 2009 U.S. Drinks Conference The B.I.G Liquor Handbook (Thousands 9-Liter Cases)

Click to edit Master title style Imported Vs. Domestic Spirits Trend Prior to the Recession, Imports were driving Spirits category growth with both continuing to grow U.S. Drinks Conference The B.I.G Liquor Handbook +5.4% +1.1% +5.0% +2.1% +2.3% -1.4% +2.0% +1.8%

Click to edit Master title style U.S. Drinks Conference 2010 Spirit Volume And Share By Category 26 Vodka dominates the Spirits category with a 31% volume 31.0% 13.3% 10.7% 10.6% 8.3% 6.0%5.9% 5.5% 4.7% 3.4% 0.6% The B.I.G Liquor Handbook

Click to edit Master title style Spirits Growth By Category U.S. Drinks Conference Irish Whiskey, Vodka, Rum and Tequila continue to be the key growth driving spirits categories The B.I.G Liquor Handbook +5.9% +1.6% +0.2% -3.6% +1.1% +0.1% +0.9% -0.6% -1.0% -2.4% +13.0%

Click to edit Master title style 28 Top 25 Spirit Brand Trends 28 The B.I.G Liquor Handbook (Thousands 9-Liter Cases)

Click to edit Master title style Wine Category Trends U.S. Drinks Conference

Click to edit Master title style U.S. Drinks Conference 2010 Wine Consumption Trend Wine consumption has grown steadily posting 0.8% growth in 2009 to reach a record level of 296,960 million 9-liter cases. The B.I.G Wine Handbook (Thousands 9-Liter Cases) 30

Click to edit Master title style U.S. Drinks Conference Top 10 Markets For Wine CA TX FL IL NY NJ MA WA The top 10 states account for 60% of U.S. Wine volume OH VA The B.I.G Wine Handbook

Click to edit Master title style Imported Vs. Domestic Volume Share Domestics Wine accounts for 75% of volume with Imports making up 25% and declining slightly in 2009 U.S. Drinks Conference The B.I.G Wine Handbook (Thousands 9-Liter Cases )

Click to edit Master title style Imported Vs. Domestic Wine Trend Prior to the Recession, Imports were driving Wine category growth but they have declined for the past two years U.S. Drinks Conference The B.I.G Wine Handbook (Thousands 9-Liter Cases) +5.6% +2.7% +7.3% +2.9% -1.7% -2.2% +2.9% +1.8%

Click to edit Master title style Source: Adam’s 2008 Advance. Volume Stated On A Thousands Of 2.25-gallon Cases Basis. Wine Consumption By Type U.S. Drinks Conference 2010 U.S. Drinks Conference The B.I.G Wine Handbook (Thousands 9-Liter Cases ) Table Wines represent over 91% of U.S. Wine consumption and they continued to show growth of almost 1% in 2009

Click to edit Master title style Source: Adam’s 2008 Advance. Volume Stated On A Thousands Of 2.25-gallon Cases Basis. Table Wine Consumption By Varietal U.S. Drinks Conference 2010 U.S. Drinks Conference Chardonnay, Cabernet and Merlot combine for 54% of U.S. Wine consumption by All Other Varietals represent opportunity at 24% 35 The B.I.G Wine Handbook

Click to edit Master title style Top 25 Domestic Table Wine Brands U.S. Drinks Conference 2010 U.S. Drinks Conference The B.I.G Wine Handbook (Thousands 9-Liter Cases)

Click to edit Master title style U.S. Drinks Conference The top 10 countries account for 96% of U.S. Imported Wine sales Wine Import Trends By Country The B.I.G Wine Handbook: Source U.S. Department Of Commerce

Click to edit Master title style Top 25 Import Wine Brand Trends U.S. Drinks Conference 2010 U.S. Drinks Conference The B.I.G Wine Handbook (Thousands 9-Liter Cases )

Click to edit Master title style Beer Category Trends U.S. Drinks Conference

Click to edit Master title style U.S. Drinks Conference Beer Consumption Trend After three years of growth, Beer declined by 2.1% in 2009 to 2.9 Billion 2.25 Gallon Cases The B.I.G Beer Handbook (Millions of 2.25-Gallon Cases)

Click to edit Master title style U.S. Drinks Conference Top 10 Markets For Beer The top 10 states account for 53% of total U.S. Beer volume The B.I.G Beer Handbook

Click to edit Master title style Imported Vs. Domestic Volume Share Domestics Beer dominates at 87.5% of volume with Imports declining by 6.9% in 2009 U.S. Drinks Conference The B.I.G Beer Handbook ( Gallon Cases)

Click to edit Master title style Imported Vs. Domestic Beer Trend Prior to the Recession, Imports were driving Beer category growth but they have declined for the past two years U.S. Drinks Conference The B.I.G Beer Handbook +12.1% -0.2% +3.6% +0.9% -1.2% -6.9% +0.9% -1.4%

Click to edit Master title style Domestic Beer Consumption By Type U.S. Drinks Conference 2010 U.S. Drinks Conference Source: Adam’s 2008 Advance. Volume Stated On A Thousands Of 2.25-gallon Cases Basis. Domestic Light is the largest segment with a 52.8% share but Super Premium/Craft is the fastest growing segment The B.I.G Beer Handbook ( Gallon Cases) 44

Click to edit Master title style Top 25 Domestic Beer Brand Trends U.S. Drinks Conference 2010 U.S. Drinks Conference The B.I.G Beer Handbook ( Gallon Cases) 45

Click to edit Master title style U.S. Drinks Conference The top 10 countries account for 96% of U.S. Imported Beer sales The B.I.G Beer Handbook ( Gallon Cases) Beer Import Trends By Country

Click to edit Master title style Top 25 Import Beer Brand Trends U.S. Drinks Conference 2010 U.S. Drinks Conference The B.I.G Beer Handbook ( Gallon Cases) 47

Click to edit Master title style Summary Of Key Takeaways U.S. Drinks Conference

Click to edit Master title style Summary Of Key Takeaways The U.S. Beverage Alcohol market is very large and highly profitable at 3.3B 9L cases and $189B in retail sales Despite the slow economy, there is still growth in the U.S. Beverage Alcohol industry and the future outlook is strong Macro trends in the U.S. market are very favorable to the continued growth of the Beverage Alcohol industry Consumers are trading down consistent with past recessions but the premium end always recovers and is already doing so On-premise recovery is key to future growth and trade-up as the economy recovers U.S. Drinks Conference

Click to edit Master title style Key Implications U.S. Drinks Conference The number of new product launches has decreased during the recession increasing interest in new brands. Consumers and retailers are interested in discovering and experiencing new products across all categories Consumers are seeking value more than ever opening brand building opportunities in all price segments Over half of Beer, Wine and Spirit volume is concentrated in the top 10 states so focus brand launches in key markets Building beverage brands in the U.S. requires a disciplined, hands on, long-term approach but it can be done

Click to edit Master title style 51 Mike Ginley, Partner Next Level Marketing 1330 Post Road East Westport, CT USA Thank You 51 U.S. Drinks Conference 2010