1. Andrew Peller Limited (ADWa.TO)
October 2016
Presented by: Blake Klasios, Govind Sharma, Anthony Marini, Jiani Hou, Matthew Han

2. McMaster Investment Council
Agenda
Industry Overview
Company Overview
Investment Thesis
Valuation
Risks & Catalysts
Q&A
October 2016
McMaster Investment Council

3. I
Industry Overview

4. Notes & Key Industry Terms
Key Terms
VQA (Vintners Quality Alliance)
A stringent quality-assurance program dedicated to high quality and authenticity made under systems in British Colombia and Ontario
VQA wine meets the following standards:
Made from 100% fresh Ontario/BC grapes, No water added
Finished wines are evaluated by an expert panel and a laboratory analysis is conducted
Premiumization
A movement in favour of more expensive exclusive merchandise
Range of Wines:
Ultra-premium wine : wines priced between $25.00 – $49.99 per 750-ml bottle
Premium Wine: wines priced between $12.00 – $14.99 per 750-ml bottle
Types of Wines:
1. Ice wine: A dessert wine created from grapes that are frozen while they are on the vine
2. Varietal Wine: A varietal wine is made from the same type of grape
a. In North America, a wine is considered varietal if it’s 75% one type of grape
3. Blended Wine: Wines that consist of at least 40-50% of one type of grape and a smaller mix of two or more other grapes
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McMaster Investment Council

5. Industry Overview – Industry Snapshot
Key Drivers
Revenue
$7.36 bn
Annual Growth ( )
4.0%
Wine sales growth (2013/2014 – 2014/2015)
4.1%
Growth in volume of Canadian wine sold (2013/2014 – 2014/2015)
6.3%
Growth in volume of imported wine (2013/2014 – 2014/2015)
2.7%
Regulations in Ontario
Aging Population Growth
Consumer Spending
Wine Demand
Trends
October 2016
McMaster Investment Council

6. Industry Overview – Wine Making Process
Harvesting
Processing
Aging
Bottling
Distribution
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McMaster Investment Council

7. II
Company Overview

8. Company Overview – Company Snapshot
Company Summary
Andrew Peller Limited. is Canada’s second largest producer and marketer of quality wines as at March 31, 2016.
Company’s products are sold predominantly in Canada with a focus on export sales for its icewine and personal winemaking products.
The Company imports wines from major wine regions around the world to blend with domestic wine to craft value priced brands.
The Company owns and operates Vineyards Estate Wines, Aisle 43 and Wine Country Vintners, independent wine retailers in Ontario.
Company Snapshot
Company Market Share(%)
Ticker
ADWa.TO
Stock Price
$11.90
Revenue
$307 million
Mkt Cap
$499.92M
P/E
22.86
Div Yield
1.45%
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9. Company Overview – Historical Performance
Company Stock Performance
On Feb 23, 2016, the company announced agreement with Jalger Limited to purchase shares for cancellation 100,000 class A non-voting shares of the company.
On August 10, 2016, Andrew Peller Limited Reports Continued for the three months ended June 30, Sales rose 5.8%.
On September 13, 2016, Andrew Peller Limited announced that its shareholders approve Three-for-One Stock Split.
On June 2, 2016 the Company’s Board of Directors approved a 9% increase in common share dividends for Shareholders.
On December 3, 2015, the Company announced that it had been awarded “Canadian Wine Producer of the Year” by the International Wine and Spirit Competition (“IWSC”).
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10. Company Overview – Management Overview
John E. Peller
President, Director Executive Board
John E. Peller has been serving as the Chief Executive Officer, President, and Director of the company since He has been the company’s Director since 1989.
Anthony M. Bristow
Peter B. Patchet
Colin Campbell
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11. III
Investment Thesis

12. Investment Thesis I – Ontario’s Retail Wine Network
New legislation allowing for the sale of wine in Ontario grocery stores
150 new stores to be opened up this year
Ontario is looking to have 300 of its 1500 grocery stores to be selling alcohol instore
As a market leader in wine, ADW products will get more shelving than other wines
Marketplace Trends
Popularity of Wine
Overall consumption of wine in ADW’s markets increased by 3.0%
ADW owns and operates 100 well-positioned independent retail locations
Aging consumer population, who favour more sophisticated wines, likely to buy more expensive wines
Health benefits of drinking (red wines and anti-oxidants)
Shift in more young consumers choosing wine as their alcohol of preference
Aging consumer population, who favour more sophisticated wines, likely to buy more expensive wines
Wine beats out beer in this age group, added health benefits of drinking red wine (anti –oxidants)
New legislation allowing the selling of alcohol at grocery stores will greatly benefit Andrew Peller as they are Canadian wine leaders and this will increase their retail network
Wine sales have been constantly rising, they will be further affected by the new legislation
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13. Investment Thesis II – Strong Market Position
Organic Growth
Attributed to the strong Canadian wine market and effective marketing efforts
14.4% market share of the total Canadian wine market share
Introduction of new products and new variety of packaging
Expansion on premium and ultra-premium VQA wines such as those in the Wayne Gretzky Estate
Continuing Dividend Growth
Lower dividend yield but one that has been consistently increasing
Board of Directors approved the implementation of a (DRIP) for Class A shares
Does not actually increase the value of the company but is a good signal to shareholders
Provides shareholders with a cost ­effective method to increase their investment in the company
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14. Investment Thesis III – Extension of Product Line
Partnership with Wayne Gretzky Estates
Long-term partnership with Wayne Gretzky Estates
Began construction of Wayne Gretzky Estate Winery and Distillery (NOTL)
Introduction of Whisky and Ciders through the Wayne Gretzky brand
2011
2016
2017+
Whisky and Cider Growth
Benefit from Tourism
Whisky
Cider
Opening Spring 2017
Spirit Market = $2B+
Whisky Market = $640M+
+2.8% Growth from previous year
23,000 SqFt
Beer & Cider Market = $1B+
+4.6% Growth from previous year
Winery, Craft Distillery, Barrel Aging Cellars, Tasting Rooms, Retail, Hospitality Facilities
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15. IV
Valuation

16. Valuation – DCF Analysis
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17. Valuation – DCF Analysis
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18. Valuation – DCF Analysis
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19. Valuation – Comparable Analysis
North American Wine & Spirits Industry – Target Peer Group
North American Alcohol Industry – Broader Industry
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20. V
Risks & Catalysts

21. Risks & Catalysts – Risks
Competition from Cheap Imports
Dependency on Grape Suppliers
The Canadian wine market is subjected to unfair targeting by low-priced imported wines from other regions and countries.
Mitigation: Andrew Peller Ltd. and other members in the Canadian wine industry are working together with Canadian government to rectify these unfair trade practices.
If the company’s vineyards experience natural disasters, they may not secure a sufficient supply of grapes, leading to decreased production of wine products
Mitigation: The Government of Ontario has agreed in conjunction with the Ontario Grape Growers Marketing Board to temporarily increase blending of imported wines, which would enable the Company to continue supplying products to the market.
Foreign Exchange Risk
Risk of Packaging Production
Foreign exchange risk exists on the purchases of bulk wine and concentrate that are primarily made from US dollars, Euros, and Australian dollars.
Mitigation: The Company’s strategy is to hedge approximately 50 – 80% of its foreign exchange requirements throughout the fiscal year and to regular review its on-going requirements. They have entered into a series of foreign exchange contracts as a hedge against movements in US, Euro, and Australian dollar exchange rates.
The largest component of packaging of wine is glass, of which there are few domestic or international suppliers (only one commercial supplier of glass in Canada that fits the Company’s specifications)
Mitigation: Andrew Peller Ltd. has taken steps to reduce dependence on domestic glass suppliers through development of relationships with several international producers of glass.
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22. Risks & Catalysts – Catalysts
Changes in Liquor Regulation
With the changes in liquor regulations in Ontario, up to 150 grocery stores across the province will be permitted to sell wine by 2025
The Company’s products will hugely benefit from the increased visibility and access to the brand products
New Winery and Distillery
Analyst Coverage
Earnings report or news report
There is development of a new winery and distillery in Niagara
This will increase production capacity of the Company to match the increasing consumer demand
Potential for tourism revenue
No current analyst reports and/or information on Andrew Peller Ltd., which is expected to change with company expansion and longevity
These reports and analysis will help to increase knowledge, awareness, and visibility of the company to investors
Lead to increased share prices
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23. Questions?