1 © John I. Haas, Inc. All rights reserved. Proprietary and confidential. Market & Crop Updates District New England Winter Technical Session Roy Johnson January 17-18, 2014 District New England Winter Technical Session Roy Johnson January 17-18, 2014

2 © John I. Haas, Inc. All rights reserved. Proprietary and confidential. World Beer Production – Calendar Years ,863 mill hl 1,863 mill hl 1,929 mill hl 1,929 mill hl +3.5% +63 mill +3.5% +63 mill ,951 mill hl 1,951 mill hl +1.2 % +22 mill +1.2 % +22 mill

3 © John I. Haas, Inc. All rights reserved. Proprietary and confidential. Top 10 Beer Producing Countries – Calendar Year (1,000 HL) Share of Total 25.1% China Country Ranking % USA % Brazil % Russia % Germany % Mexico 8. UK 9. Japan 10. South Africa Poland Source: Barth Report 490, , ,800 97,400 94,618 82,500 55,465 42,049 37,800 33,000

4 © John I. Haas, Inc. All rights reserved. Proprietary and confidential. Top 10 Breweries World Wide – Calendar Year Volume (mhls) Anheuser-Busch InBev Company Ranking Heineken SAB Miller Carlsberg China Resources Breweries Tsingtao Brewery Group Yanjing Grupo Modelo Kirin 54.0 Molson-Coors Source: Barth Report

5 © John I. Haas, Inc. All rights reserved. Proprietary and confidential. The World Beer

6 © John I. Haas, Inc. All rights reserved. Proprietary and confidential. The World Beer

7 © John I. Haas, Inc. All rights reserved. Proprietary and confidential. How Many Hops does it Take to “Hop“ the World Beers? The estimated amount of alpha brewers consumed in 2012 was 8,682 metric tons of alpha. Crop 2011 (used in brewing year 2012) had an average alpha yield of 10.3%. Therefore, it took 84,291 metric tons (185.8 million lbs) to hop all of the beers in the world. (Reference, the US produces about 65 million lbs) This translates into a little more than 0.1 lbs/bbl (0.043 kg/HL).

8 © John I. Haas, Inc. All rights reserved. Proprietary and confidential. The State of the World Hop Market Since 2008 (the year of the Hop Crisis), the world produced more hops than needed by the brewing industry. The theoretical accumulated surplus is a record 10,400 metric tons of alpha (more than an entire year of world alpha demand) and equates to approx. 230 million lbs.

9 © John I. Haas, Inc. All rights reserved. Proprietary and confidential. The World Alpha Balance

10 © John I. Haas, Inc. All rights reserved. Proprietary and confidential. The State of the World Hop Market So, why is the market actually quite lively with prices above the cost of production – in some instances, significantly above the cost of production? World beers use ~0.1 lbs/bbl, the craft brewing industry uses on average 1.2 lbs/bbl, more than 10 times the amount of hops than the average beer. If the top world brewing chart were not measured by beer but by hop usage, would the ranking change? No!

11 © John I. Haas, Inc. All rights reserved. Proprietary and confidential. But the No. 11 would be Boston Brewing Company! Boston Brewing produced ~2.5 million HL beer in 2012

12 © John I. Haas, Inc. All rights reserved. Proprietary and confidential. Outlook – Crop 2013 and Beyond The US craft brewing revolution has materially changed the world brewing landscape and has also particularly impacted the US hop industry. There are now unexpected opportunities to be captured......but with every opportunity come challenges.

13 © John I. Haas, Inc. All rights reserved. Proprietary and confidential. Opportunities & Challenges US hop growers find themselves now in the 6th consecutive year of high profitability. The same holds true for German growers and for most other growers around the world. Hop marketers and processors around the world have also benefitted financially from these last 6 years. Everyone has made money and is now investing into their facilities, people and various strategies. Change is going to happen faster. (During the survival years of 1996 to 2006, the hop industry stayed static, as there was no money to risk)

14 © John I. Haas, Inc. All rights reserved. Proprietary and confidential. The World Alpha Balance

15 © John I. Haas, Inc. All rights reserved. Proprietary and confidential. The Alpha Market While we expect the German crop to be down – especially in its alpha production, this is only temporary. The German alpha varieties are stronger alpha producers than CTZ, Summit, Apollo, Bravo, etc. and therefore, Germany will capture more of the world alpha market than ever before. (The world alpha market has been the main target market for the US). Germany is developing new flavor varieties such as Mandarina Bavaria, Huell Melon, Hallertaer Blanc.

16 © John I. Haas, Inc. All rights reserved. Proprietary and confidential Crop U.S.A. Grower yields of the early-harvested aroma varieties were down this season as anticipated and for the same reasons as described above, with shortfalls of 10% or greater depending upon the variety and volume share coming from baby fields. The resulting supply shortfall caused the aroma spot market to quickly rise to very high levels, ranging from $5.00/lb. for Willamette to $10.00/lb. for Centennial. Cascade, on the other hand, made a mid-harvest comeback with yields improving strongly. We estimated a total of approximately ,000 lbs of Cascade spots were available due to good yields and likely some open production. However, due to the additional, unexpected demand for 2013 crop Cascade by the Craft segment the spot market remained very competitive and led to prices between $ $10.00 per lb.

17 © John I. Haas, Inc. All rights reserved. Proprietary and confidential. Hop Market Outlook The hop market has been changing in the last two years. With the introduction of flavor hops; Cascade, Centennial, Galaxy, Citra, Chinook, Mosaic, Topaz and Sterling, dry hopping and higher hop giving rates used by large regional Crafts 1.2 pounds per barrel, compared to the major brewers who use one-tenth of a pound per barrel, have created pressure on all existing acreage. Farmers are requiring three year contracts to secure a particular variety, insure profitability and be able to prove to a bank, for crop advances, that they can pay back their loans. What does a brewer need to do to avoid shortages on the varieties they use? 1.To avoid bad moments by planning, talking often to your supplier and consider longer term contracts. 2.Establish a working mutual relationship and loyalty to your supplier and communicate your concerns, often. If circumstances change such as variety changes will they work with you. 3.The hop supply business has changed dramatically. If you are a transactional buyer, you’ll be left out in the cold when supplies are tight.

18 © John I. Haas, Inc. All rights reserved. Proprietary and confidential.

19 © John I. Haas, Inc. All rights reserved. Proprietary and confidential.

20 © John I. Haas, Inc. All rights reserved. Proprietary and confidential. Haas Innovation’s & Research Brewery 20

21 © John I. Haas, Inc. All rights reserved. Proprietary and confidential. Thank you for your attention Questions?