2014 CALIFORNIA MBAA TECHNICAL CONFERENCE

WEAVING A TAPESTRY

OF QUALITY AND INNOVATION

FOR TOMORROW’S BEER CONSUMER

David S. Ryder, MillerCoors October 25, 2014

The Advent of the N.E.O.

A Tour Guide to the Two Planets –

A YouTube Video….

How the World has Changed!

innovation the

Imperative

beer

Flat, Fractured & Fast…

An Evolving Landscape

• Flat Category - Wine/Spirits Shift

• Increased SKU/Brand Fragmentation

• Accelerating Craft & AP Growth

• Proliferation of “New” as better

Key Drivers of Change

• Rise of the NEO & Decline of Brand

• Millennials Thirst for Variety & Sweet

• Blurring Lines across Total Alc Bev

• Increasingly Latino Nation

Implications for MillerCoors

• Portfolio Transformation

• Brewing & Pack Complexity

• Excellence in Execution

Beer growth has stalled in recent years…

Source: Beer Institute

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%1

97

0

19

72

19

74

19

76

19

78

19

80

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

20

12

% Change Industry Shipment Volume

% Chg. Shipment Volume Linear (% Chg. Shipment Volume)

Beer making a dramatic shifts…

Source: Beer Marketer’s Insights

0%

10%

20%

30%

40%

50%

60%

70%

1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Beer Category Share by Segment

Below Premium Regular Premium Reg.

Light Above Premium

• Although total industry growth has been sluggish in recent years, the high end is

driving excitement, engagement, and opportunity in the category.

Prem Light

Above Prem

Below Prem

Prem Regular

Beer consumption in steady decline & shifting to TAB…

Source: Beer Institute and US Census Bureau

300

305

310

315

320

325

330

335

340

345

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Annual Beer Servings per Capita

550

555

560

565

570

575

580

585

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Annual TAB Servings per Capita

Beer

-12% since 1994

TAB

+2% since 1994

Beer is losing share, especially among Millennials…

Source: Beer Institute, Nielsen Homescan

52%

54%

56%

58%

60%

62%

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Beer’s Total Share of TBA Servings

72%

13%

15%

48%

23%

30%72%

13%

15%

Beer Wine Spirits

TBA Servings Distribution

Among Consumers Ages 21-34

Generation X – 1999 Millennials – 2012

Down

-9pts

Beer’s core 21-34 LDAC target is getting smaller…

20,000

21,000

22,000

23,000

24,000

25,000

26,000

27,000

Jan

-90

De

c-9

0

No

v-9

1

Oct-

92

Se

p-9

3

Au

g-9

4

Jul-

95

Jun

-96

Ma

y-9

7

Ap

r-9

8

Ma

r-9

9

Fe

b-0

0

Jan

-01

De

c-0

1

No

v-0

2

Oct-

03

Se

p-0

4

Au

g-0

5

Jul-

06

Jun

-07

Ma

y-0

8

Ap

r-0

9

Ma

r-1

0

Fe

b-1

1

Jan

-12

De

c-1

2

Total Employment - Men 21-34

US Recession Employment - Men 21-34

• There are roughly -2MM fewer

gainfully employed young 21-34

LDAC Men supporting the category

today vs. the early 1990’s.

• The drinking age population is aging

rapidly, and young 21-34 year old

LDAC men are increasingly in the

minority.

12.0%

13.0%

14.0%

15.0%

16.0%

17.0%

18.0%

19.0%

19

69

19

72

19

75

19

78

19

81

19

84

19

87

19

90

19

93

19

96

19

99

20

02

20

05

20

08

20

11

20

14

20

17

20

20

20

23

20

26

20

29

20

32

20

35

20

38

20

41

20

44

20

47

20

50

Men 21-34 Share of LDAC Population

Historical Projected

Source: US Bureau of Labor Statistics, US Census Bureau

And these Millennials are drinking much less beer…

Source: MillerCoors Behavioral Tracking Study (BTS)

-24%

+4% +10%

0

2

4

6

8

10

12

14

Age 21-35 Age 36-50 Age 51+

Beer

s per

Wee

k

Average Weekly Beer Consumption by Age

1992 2011-2

• Millennials are drinking -24% fewer

beers per week vs. the 1990s,

accounting for -3 fewer beers per

week (-156 less per year).

• Older beer drinkers are consuming

more, but their weekly consumption

has still declined from the level it

had been in their 20’s and 30’s.

The Innovation Imperative…

Death from 1000 cuts…

Units

Aging population

Delayed family starts

Smaller households

Multicultural infants

Immigration

Job market Payroll taxes Income squeeze

Food stamps Gas prices

Weather impact

Higher prices/reduced

promotions

Alternative channels

Away-from-home

consumption

Prepared meals

Sequestration DIY movement

The Great Recession has hurt category volumes…

Sources: Beer Institute, US Bureau of Labor Statistics

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

Dec

-06

Mar

-07

Jun-

07

Sep-

07

Dec

-07

Mar

-08

Jun-

08

Sep-

08

Dec

-08

Mar

-09

Jun-

09

Sep-

09

Dec

-09

Mar

-10

Jun-

10

Sep-

10

Dec

-10

Mar

-11

Jun-

11

Sep-

11

Dec

-11

Mar

-12

Jun-

12

Sep-

12

Dec

-12

US Beer Shipments and Unemployment

Nat'l unemployment rate KBD unemployment rate Y/Y % Chng. in U.S. Beer Shipments (12MM)Unemployment - Men 21-34

• The recent recession was marked by especially high unemployment among men. Beer

volumes slow to recover, with male unemployment still close to 10%.

Unemployment remains a risk in key Beer states…

Sources: Beer Institute, US Bureau of Labor Statistics

The five worst

states for

unemployment

sell 10x as much

beer as the five

best.

Peak CAGR

Worst Unemployment 2007-2012

Arizona 10.8% -1.8%

California 12.4% -0.8%

Florida 11.4% -1.7%

Michigan 14.2% -1.0%

Nevada 14.0% -1.7%

Average 12.6% -1.2%

Total 2012 Volume 49 Million BBLs

Peak CAGR

Best Unemployment 2007-2012

Nebraska 4.9% 0.2%

New Hampshire 6.7% 0.1%

North Dakota 4.2% 3.6%

South Dakota 5.3% 0.9%

Vermont 7.2% 2.0%

Average 1.0%

Total 2012 Volume 4.5 Million BBLs

Highest Unemployment

Lowest Unemployment

Beer defied headwinds and rebounded in 2012…

Source: Beer Institute

0.3%

-2.0%

-0.6%

-1.3%

1.2%

-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2008 2009 2010 2011 2012

Annual Beer Category Shipment Growth

• Beer shipments reversed decline in 2012, swinging +3pts to a +1.2% growth.

• Category innovation and climbing prices in Wine and Spirits have led to a lower rate of

TBA share loss for beer.

-0.2%

-0.9% -0.9%

-1.1%

-0.4%

-1.3%

-1.1%

-0.9%

-0.7%

-0.5%

-0.3%

-0.1%

2008 2009 2010 2011 2012

Beer Category Share Change

50% of growth came from the bottom 11% of brewers…

Source: Beer Marketers Insights, and Nielsen Cross Channel

+1.2%+0.6%

+7.2%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

Total Industry Shipments Beer Institute STRs All Other Suppliers

2012 Beer Volume Growth

Yuengling +15%

Seagrams +45%

Mike’s +6%

Lagunitas +42%

Shiner +11%

Bells +27%

Shipyard +32%

CBA +6%

Guinness +5%

Abita +30%

Stone +24%

Brooklyn +22%…and hundreds more.

[208 Million BBLs] [186 Million BBLs] [22 Million BBLs]

Major Suppliers

• The shape of beer is rapidly changing, with smaller more localized brands driving

growth. Word of mouth increasingly important to building momentum.

“New” is a critical part of the changing TAB landscape…

5.0% 7.0% 7.0%

22.7% 21.2%

15.7%

Beer Wine Spirits Percent of Category Sales $ Percent of Category Items

Source: Nielsen Total U.S. All Outlets(Food/Drug/Mass/Liquor/Conv/Club/Dollar/Walmart) ; 3 years end 03-02-2013

*New Items consist of items w/sales > $1,000 in last 2 years combined, & $0 sales 3 years prior

~2,300

items ~5,300

items ~2,100

items

• Brands have lost power as an anchor for quality. The internet/mobile enables consumers

to share experiences, providing new items immediate credentials.

Variety is the key driver in motivating new purchases…

Source: Nielsen Household Panel, Survey (April 2013); Total U.S.

2%

10%

13%

20%

23%

23%

26%

28%

32%

More high calorie options

More sweet products

More education on styles and …

More low calorie options

More ability to mix and match …

Broader availability

More trial packages

More seasonal offerings

More flavor options

What would increase your interest in purchasing Upscale Beer?

Leading to a crazy complex TAB Shopping experience…

Source: Nielsen Scantrack: Food/Drug/Mass/Club; 52 Weeks Ending 4/27/13, Beer: 52 Weeks Ending 4/20/13

193 214

380

209 225

387

Beer Spirits Wine

Avg # Category Items per Store All Outlet (excluding Convenience)

April 2012 April 2013

“New” sales fragmentation is imbalanced by Craft…

Below Premium 2.5%

Premium1.4% Super

Prem 2.5%

Imports 13.2%

FMB's 9.6%

Ciders 5.0%

Craft, 65.5%

% of New Items

• Craft brands represent 66% of new items, but only 18% of new item dollars.

Below Premium4.2%

Premium11.7%

Super Prem 33.7%

Imports 6.2%

FMB's 24.9%

Ciders 1.7%

Craft 17.5%

% of New Item Dollars

Source: Nielsen Total U.S. All Outlets(Food/Drug/Mass/Conv/Liquor/Club/Dollar/Walmart); 52 w/e 03-30-2013; Dollars

Over 575,000 opportunities to sell Beer in America…

• Beer selling outlet growth led by OFF-PREMISE chains.

On-Premise share loss accelerated during 2012…

Source: Beer Institute

0% 5% 10% 15% 20% 25% 30% 35%

Other Off-Prem

Drug

Other On-Prem

Mass

Restaurant

Bar/Tavern

Grocery

Liquor

C-Store

2012 Volume Share

2012 Share by Channel

-0.30% -0.20% -0.10% 0.00% 0.10% 0.20% 0.30% 0.40%

Other Off-Prem

Drug

Other On-Prem

Mass

Restaurant

Bar/Tavern

Grocery

Liquor

C-Store

2012 Volume Share % Chng.

2012 Share % Chng.

• The recent acceleration in On-Premise’s category share loss has been driven by

Bar/Tavern, with Mass & Drug pulling from Liquor in the Off-Premise.

2012 Volume Share Chng.

191,667,807

195,788,518 4,074,770 471,091 322,162

(- 747,312)

Case Vol YA AP New Items

Prem New Items

BP New Items

Existing Items

Case Vol

Contribution to Category Growth

Above Premium Beer Dominating Growth… • 100% of category growth and 30% of bbls, increasing +10pts in 10 years (+2pts in 2012).

• ABI driving 100% growth via Super Premiums (63% share) via Platinum and Black Crown.

• Driven by spirit trends ( ABV, flavor variety/intensity), localization, and Latino imports.

• Pegged to grow from 60M to 74M bbls by 2017 (+4% CAGR), driven by Craft (+11%).

99% 11% 8% -18%

*existing volume

decline driven by BP

AP fueled by Super Premium (ABI) & Adjacencies…

0%

8%

-4%

4% 12%

-1%

15%

2%

0%

5%

29%

18% 17%

75%

Premium Below Premium

Imports DM SupPrem

Crafts FMB's Ciders

Annual % Change – Dollars

2009 2012

Source: Nielsen All Outlets (Food, Drug, Conv, Liquor, Mass, Club, Walmart, Military) Annual 2012 (Dollars)

Total Category: +4.7%

Millennials driving Above Premium shift…

• Craft now approaching 10% of beer category volume, up nearly 6pts in 6 years.

• Hoppy and Seasonals fastest growing segments (+27%), representing 51% of volume.

• As of March 2013, there were 2,360 breweries in the US, up +63% vs. 2007.

• There are another 1,300 breweries slated to come online in the next 24 months.

Craft revolution accelerating and here to stay…

Source: Brewers Association

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Craft Segment Share

US brewery footprint is not yet saturated…

Source: Brewers Institute

0

2

4

6

8

10

12

14

16

18

20

2004 2005 2006 2007 2008 2009 2010 2011 2012

Breweries per Million LDACs by Region

Pacific

Great Lakes

Central

Northeast

Southeast

Most parts of the country have space for additional breweries.

• The Pacific Region currently has nearly twice the US average number of breweries per LDAC consumer.

• To match the Pacific Region’s per capita rate, the Southeast Region would need to add over 700

breweries.

900,931

572,262 566,788

313,887 255,280

119,873 69,010 48,406 41,066 38,740

0

200000

400000

600000

800000

1000000

Barr

el

Vo

lum

e

Top Brand Franchises

+4% -18% +25% +46% -9% +67% N/A +17% +9314% -4%

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

2009 2010 2011 2012 LATEST 52

WEEKS

Barr

el

Vo

lum

e

FMB Year Over Year Growth

FMBs accelerating behind Sweeter taste profile…

0% 20% 40% 60% 80% 100%

Drug

Convenience

Grocery

% ACV Selling

2011

2012

Source: Nielsen Scantrack, US XAOC/Conv YTD w/e 4/20/13

• FMB growth and share of TAB is accelerating, expanding +25% in 2012 to roughly 6M bbls.

• ABI Rita’s, Mike’s, and Twisted Tea dominate, now representing over 50% of segment.

• Driven by sweeter/variety seeking, spirit trends/ABV, and expanded distribution.

• Expected to reach 10.0M bbls by 2017 (+13% CAGR), hitting a 5% beer share equivalent.

(500)

(400)

(300)

(200)

(100)

-

100

200

300

400

500

Premium Lights by BrandPremium Light Growth by Brand

Premium Lights lost half a million barrels in 2012...

Sources: Nielsen Cross Channel, Beer Marketers Insights, OneView, and MillerCoors ACT

-1.1%

-0.6%

-1.2%

-1.0%

-0.8%

-0.6%

-0.4%

-0.2%

0.0%

$ Shr Mlt/Cdr Case Shr Mlt/Cdr

PL Share Performance

• Brand health tracking over 2012 shows declining communication awareness and relevance metrics

among major Premium Lights.

• Coors Light stands alone in growth, leveraging a consistent cold & refreshing positioning.

Tho

usa

nd

s o

f B

arre

ls

(1,200)

(1,000)

(800)

(600)

(400)

(200)

-

200

400

600

Premium Regular by BrandPremium Regular Growth by Brand

Premium Regular brands following divergent paths…

Sources: Beer Marketers Insights, OneView

• Budweiser accounting for nearly 85% of declines, continuing a decade of trends.

• Yuengling’s growth is being driven largely by distribution & still only in 40% of US mkts.

• Coors Banquet gaining momentum through distribution, discovery, and CL halo.

Tho

usa

nd

s o

f B

arre

ls

(500)

(400)

(300)

(200)

(100)

-

100

200

300

400

Below Premium by BrandBelow Premium Growth by Brand

Th

ou

san

ds

of

Bar

rels

Economy Growth by Brand

A few hopeful spots in Economy…

Sources: Beer Marketers Insights, OneView

• The few growing brands seem to be benefiting from the Now-Stalgia and Co-Creation macro

trends that are fueled regionally by Millennial anti-establishment hipsters.

Cider Exploding…

Sources: Nielsen Cross Channel, *Beer Institute – Projection based on YTD volume thru October

0% 10% 20% 30% 40% 50% 60% 70% 80%

Grocery

Convenience

Drug 2011 2012

% ACV Distribution

+81%

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

2011 2012*

Cider Category Volume

• US cider volume grew +81% in 2012 to 700K bbls (84% domestic / 26% import).

• Angry Orchard hit leadership 49% share in <18 mos. despite slow distribution & low ATL support.

• Category fueled by craft momentum, sweeter/variety seeking, and gluten-awareness trends.

• Cider forecast to hit 3.0M bbls by 2017 (+34% CAGR), achieving a 1.5% beer share equivalent.

Consumers are blurring the lines…

Products blurring the lines…

Pouches crossing lines…

$190 MM

Source: Nielsen Total U.S. All Outlets(Food/Drug/Mass/Conv/Liquor/Club/Dollar/Walmart) 52 WE 03-02-2013

How the World has Changed!

innovation the

Imperative

beer