Y
o
Y
)
11 Private & Confidential
Almost all of the growth in Canadian whisky is at the high end
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
2010 2011 2012 2013
Y
o
Y
G
r
o
w
t
h
i
n
V
a
l
u
e
Value
Premium
Super Premium /
Ultra Premium
Source: Distilled Spirits Council of the United States
12 Private & Confidential
Flavoured whiskies are also taking off
Source: Diageo, 2013 Investor Conference , 52 weeks ending Oct 12. 2013
53%
47%
% of Value Growth
Flavoured Non-Flavoured
Flavoured whiskies are only 10% of the U.S. whisky market today, but are
growing at 8-10x the rate of overall sales
13 Private & Confidential
What is driving these trends?
Pop Culture
Hollywood provided the initial spark for the whisky renaissance programs like Mad Men and Boardwalk Empire are doing
for brown spirits what Sex and the City did for vodka-based cocktails (cosmopolitans, martinis, etc.) last decade
Favourable Demographics
Whisky still under-indexes among women and multiculturals
It is the fastest-growing spirit among females and Hispanics
Premiumization
Consistent with the trend of consumers seeking affordable luxury and accessible premium products
People are increasingly willing to pay a higher price for something they view as legitimately unique
Product Innovation (Flavoured Whiskies)
Reinvigorating traditional whisky drinkers with new choices but also introducing the spirit to a whole new group of
consumers who previously did not drink it (particularly women and multiculturals)
One in five people trying flavoured whisky are new to the spirit
Changing Consumer Tastes & Preferences
People are drinking less, but drinking better
Consumers have a growing preference for spirits with a sense of authenticity and an interesting story to tell of heritage
and quality craftsmanship
Renewed interest in classic / retro cocktails which are predominantly based on brown-spirits (Manhattans, Old
Fashioneds, etc.)
14 Private & Confidential
Corby is well positioned to capitalize given its brand portfolio
Bronze Medal - Canadian Whisky Awards (2014)
Category Products
Awards
Premium
Super Premium
Canadian Whisky of the Year - Canadian Whisky Awards (2014)
Best Canadian Whisky - San Francisco World Spirits Competition (2013)
Canadian Whisky of the Year - Whisky Advocate (2013)
Gold Medal (90 points) - Beverage Testing Institute's International Review of Spirits Competition (2013)
World's Best Canadian Whisky - Whisky Magazine World Whiskies Awards (2014)
Gold Medal (93 points) - Beverage Testing Institute's International Review of Spirits Competition (2013)
Finalist (92 points) - Ultimate Spirits Challenge (2013)
15 Private & Confidential
Corby is well positioned to capitalize given its brand portfolio
Best Canadian Whisky, Double Gold Medal - San Francisco World Spirits Competition (2014)
Best Canadian Blended Whisky (13-20 years) - Whisky Magazine World Whiskies Awards (2014)
Gold Medal (90 points) - Beverage Testing Institute's International Review of Spirits Competition (2013)
Finalist (91 points) - Ultimate Spirits Challenge (2013)
Ultra Premium
Canadian Whisky of the Year - Whisky Advocate (2014)
Gold Medal - Canadian Whisky Awards (2014)
Gold Medal (93 points) - Beverage Testing Institute's International Review of Spirits Competition (2013)
Silver Medal - San Francisco World Spirits Competition (2014)
Gold Medal - San Francisco World Spirits Competition (2014)
Gold Medal - Canadian Whisky Awards (2014)
Flavoured
Flavoured Whisky of the Year - Canadian Whisky Awards (2014)
Silver Medal - San Francisco World Spirits Competition (2014)
Category Products
Awards
16 Private & Confidential
The U.S. whisky market is 4x the size of the Canadian market and growing significantly faster, particularly in the premium
and flavoured categories
Corby recognized this opportunity early and has worked aggressively to capitalize on it:
In July 2012, the company signed an agreement with Pernod Ricard USA to represent Corby brands in the U.S.
They set out to build a portfolio of products tailored to American consumers tweaking existing brands and
developing new ones within a twelve month time period
In September 2013, the company launched J.P. Wisers Rye, J.P. Wisers Spiced, J.P. Wiser's Deluxe and J.P.
Wiser's 18 Year Old in 16 U.S. markets and introduced Lot 40 and Pike Creek at select on-premise accounts
Corby has made significant investments in advertising and promotion, including becoming the official spirits
sponsor of the 2014-15 ESPN Fantasy Football Season
Entering the U.S. A transformational opportunity
The combination of Corbys product positioning and Pernod Ricards
distribution muscle should allow J.P. Wisers to make significant inroads in
the U.S. market in a relatively short time frame
17 Private & Confidential
Volume Sold
(9L cases, 000s)
EPS Impact
(1)
EPS Accretion
(1)
100 $0.05 5.7%
200 $0.18 20.2%
300 $0.30 34.6%
400 $0.43 49.1%
500 $0.56 63.6%
600 $0.68 78.0%
700 $0.81 92.5%
The size of the prize
Top Canadian Whiskies Sold in the U.S.
(2)
Crown Royal 4.3mm (Diageo)
Black Velvet 2.0mm (Constellation Brands)
Canadian Mist 1.5mm (Brown-Forman)
Canadian Club 1.2mm (Beam)
Windsor Supreme 0.9mm (Beam)
Wisers out sells all of these
brands in Canada!
Even modest success in the U.S. market would yield significant earnings growth
Only 2.5% of the overall U.S. whisky market
(1) Based on Alignvest Capital internal assumptions
(2) Source: Impact Databank
18 Private & Confidential
J.P. Wiser's is prominently featured across all Pernod media: website, investor documents, marketing materials, etc.
From the press release announcing the U.S. launch of J.P. Wiser's:
There is no brand better positioned to capitalize on this phenomenal growth [in the U.S. whisky market] than J.P.
Wiser's North American Whisky
From the most recent earnings call:
this is why you see us developing Wisers and other North American Whiskies such a Pike Creek, Lot 40, etc.
solid growth for our key brands in the U.S., with the likes of Wisers and Olmeca
Innovation over the last year in the U.S. represented roughly 50% of our growth with the likes of J.P. Wisers Rye
The success of J.P. Wisers is clearly important to Pernod
23%
23%
21%
12%
6%
5%
10%
Market Share of the NAW Category
Diageo
Brown-Forman
Beam/Suntory
Sazerac
Heaven Hill
Constellation
Other
The whisky renaissance is a potential watershed moment for the
spirits industry and Pernod Ricard is at risk of missing out
80% of their revenue comes from white spirits, where
global sales fell in all price categories in 2013
Despite the success of Jameson, they are not even a top
six player in the U.S. whisky market
The lucrative Chinese ultra-premium spirits market is
suffering dramatically as a result of the crackdown on
personal spending and gifting by officials China is the
2
nd
largest market for them behind the U.S.
19 Private & Confidential
Craft whisky company started by Tom Bulleit who quit his successful law practice to revive his great-great-grandfathers
bourbon recipe acquired by Diageo in 2001
Sales have increased five-fold in the past three years
Bulleits share of the rye market has gone from 10% to 33% in just two years
Diageo has publicly stated that they believe this will be a million-case brand for them in the near future
Case Study 1: Bulleit (Diageo)
20 Private & Confidential
Jameson was acquired by Pernod Ricard in 1988 has since grown to become the #1 Irish Whisky brand in the world
with a 68% market share
24 consecutive years of growth, from 500K cases/year globally to 5 million
2013 sales volumes up 10% (17% by value)
Jameson has had disproportionate success in the United States a testament to the distribution/marketing strength of
Pernod Ricard USA
Case Study 2: Jameson (Pernod Ricard USA)
21 Private & Confidential
They already own 48% of the company (52% of the voting shares)
It fits the strategy based on recent actions and public statements:
July 2014: Pernod increases its stake in Avin tequila from 20% to 84%
April 2014: Pernod acquires Kenwood Vineyards:
We are open to tactical acquisitionsWe are looking at other potential assets but we are not open
to large transformative deals. Gilles Bogaert, Pernod Ricard CFO
June 2012: Pernod acquires the remaining 30% interest in its Pernod Ricard Korea Imperial joint venture
The acquisition is in line with Pernod Ricards business model to have full ownership, where
relevant, of our brands and distribution networks. Pierre Coppere, Pernod Ricard Chairman & CEO
If Wisers is deemed a commercial success in the U.S., Pernod would be better off buying out the minority
shareholders (in large part using Corbys existing cash and debt capacity) and keeping 100% of the upside for
themselves
Even at a substantial premium to the current share price, the deal would be very attractive
(1)
Pernod is the natural acquirer of Corby
(1) Based on Alignvest Capital assumptions.
Price Paid $25.00 $27.50 $30.00 $32.50 $35.00
% Premium 28.1% 41.0% 53.8% 66.6% 79.4%
EBITDA Multiple 13.6x 15.2x 16.8x 18.4x 20.0x
IRR to Pernod 39.2% 31.4% 26.0% 21.8% 18.5%
22 Private & Confidential
Historical Spirits M&A Transactions
(1) Source: Bloomberg.
Year Acquirer Target Enterprise Value ($mm) EV/LTM EBITDA
2014 Suntory Holdings Beam 15,888 20.1x
2013 Campari Forty Creek 186 14.5x
2012 Beam Pinnacle Vodka 605 20.9x
2012 Diageo United Spirits 956 17.7x
2011 Asahi Independent Liquor 1,300 14.0x
2011 Gruppo Campari Sagatiba 26 13.0x
2011 Diageo Mey Icki 2,100 9.9x
2009 Campari Wild Turkey 575 12.0x
2009 United Spirits Ltd. Shaw Wallace 71 30.6x
2008 Pernod Ricard Vin & Spirit (Absolut) 8,894 23.5x
2005 Pernod/FO Allied Domecq 17,795 13.3x
2005 LVMH Glenmorangie 604 23.3x
2004 Bacardi Grey Goose 2,235 25.0x
2004 Diageo The Chalone Wine Group 255 17.8x
Average 18.3x
Median 17.8x
Historical Trailing Multiples for Spirits Transactions Over the Last Decade
(1)
23 Private & Confidential
Corby trades at a significant discount to spirits peers
If Corby traded at the peer group average forward EBITDA multiple one
year from now, it would imply a $31 share price (56% upside)
Spirits Industry Comps
($ in millions) EV/EBITDA
Market Cap Net Debt EV LTM 2014 2015
Diageo
44,593 15,673 60,266 15.0x 14.0x 13.1x
Pernod Ricard
23,466 12,289 35,755 14.1x 13.9x 12.8x
Brown Forman
18,692 622 19,314 18.5x 18.1x 16.7x
Davide Campari
3,212 1,257 4,468 14.5x 12.2x 10.9x
Remy Cointreau
2,728 629 3,356 19.3x 17.7x 15.6x
Castle Brands
273 13 286 NMF NMF NMF
Average 15,494 5,080 20,574
16.3x 15.2x 13.8x
Corby Spirit and Wine
572
(108) 464
11.4x 11.0x 9.5x
24 Private & Confidential
U.S. investors appear to have caught on to this secular
story, but Canadian investors are none the Wiser
80
100
120
140
160
180
200
220
240
R
e
l
a
t
i
v
e
S
h
a
r
e
P
r
i
c
e
P
e
r
f
o
r
m
a
n
c
e
(
1
-
Y
e
a
r
,
N
o
r
m
a
l
i
z
e
d
)
ROX-N (+128%)
BF/B-N (+32%)
BEAM-N (+27%)
CSW/A-T (-1%)
Which of these looks out of place?
25 Private & Confidential
Are we missing something here?
Corby Castle Brands
Market Cap $572mm $273mm
Net Debt (Cash) ($108)mm $13mm
Enterprise Value $464mm $286mm
C2014E EBITDA
(1)
$42.2 mm $538k
C2015E EBITDA
(1)
$48.5 mm $1.0mm
C2014E FCF
(1)
$31.5mm ($6.1mm)
C2015E FCF
(1)
$38.0mm ($4.5mm)
Core Whisky Brand J.P. Wisers Jeffersons
LTM Global Volume 861k 32k
LTM U.S. Volume 72k (estimated) <32k
U.S. Distributor(s) Pernod Ricard Network of independent
distributors
Sources: Bloomberg, company filings.
(1) Corby data based on Alignvest Capital estimates. Castle Brands data based on analyst estimates.
26 Private & Confidential
Corby is a great business that we would be happy to own as a standalone entity given its stable revenues, high margins,
low capital requirements, strong free cash flow generation and high barriers to entry
The North American Whisky renaissance is a real and potentially transformative opportunity for the company that is being
essentially ignored by the market given its status as a Canadian mid-cap company with a relatively small float, limited
institutional following, and effectively no research coverage.
As we see it, the range of logical outcomes is bounded by two extremes:
1. The N.A. whisky renaissance continues and Wisers is successfully able to penetrate the U.S. market
Advertising expenditures grow modestly, revenue growth accelerates dramatically, free cash flow explodes
We believe the company could be worth more than double the current share price in 3 years (with
optionality on an acceleration of the return via a Pernod takeout in the interim)
2. The U.S. launch of J.P. Wiser's is a complete failure
Revenue growth reverts to slightly above the Canadian spirits market, SG&A drops significantly as a result
of lower advertising and promotion expense; perhaps there is modest multiple compression (the long-term
average EBITDA multiple is ~10x)
We see limited downside (less than 10%)
Summary
Heads we win, tails we dont lose
27 Private & Confidential
Please drink responsibly
(and if you do, please choose Wisers!)