Behind The Bottle

1. Behind The Bottle An Exploration of Trends in The Spirits Category |

2. Contents - Consumer Purchase Behavior - Gifting and Entertaining - Touchpoint Influence Best Practices | • Background and Objectives • Industry Overview • Research Results

3. Background, Objectives, Outcomes Through a combined Havas/Evolve Media research partnership, we wanted to deepen our knowledge of sentiment, decision-drivers and purchase behavior of the Spirits consumer to support targeting efforts, and enhance our understanding of the role of media touchpoint Business Outcomes Objectives • Inform communication strategies across consumer cohorts • Develop guidelines/best practices for communi-cation strategy across media channels • Develop tactics that drive trial and brand choice • Identify opportunities for increasing digital advertising campaign efficiency and effectiveness • Inform Creative messaging • Uncover trends in Spirits consumption • Understand the relationship between consumer behavior and brand adoption • Identify key drivers of seasonal gifting • Uncover the impact of each media touchpoint in the decision journey • Understand the role of digital media indriving consideration |

4. IndustryOverview |

5. Consistent YOYcategory growth 2015 vs 2014 4.1 % GrowthUp U.S. spirits supplier 2015 revenues $24.1B 3.4 % GrowthUp V 2.3 % V V GrowthUp | Volume growth up 2.3 % Revenue growth up 4.1 % Export volume growth up 3.4 %

6. Spirits is pulling share from the beer category 55.5 % 48.8 % 47.8 % 49.8 % 48.3 % 47.5 % 28.7% 33.3% 34.3% 34.7% 32.5% 35.4% 16.9% 15.7% 16.9% 17.0% 17.0% 17.0% 2000 2010 2012 2013 2014 2015 wine spirits beer | Source: DISCUS Distilled Spirits Council of the US – February 2015

7. Growing interest in Dark Spirits reflected in sales trend White Spirits Vodka, Gin, Rum, Tequilla Dark Spirits Bourbon, Rye, Whiskey %Change %Change 9-Liter Cases 9-Liter Cases 0.0% 100 MM 0.0% 58 MM 2010 2010 5% 1.1% 105 MM 58 MM 2011 2011 4.1% 110 MM 2.5% 59 MM 2012 2012 110 MM 1.4% 60 MM 3.4% 2013 2013 113 MM 63 MM 0.7% 2.3% 2014 2014 0.8% 114 MM 2.5% 65 MM 2015 2015 | Source: The Beverage Information & Insights Group, Liquor Handbook 2015/Mintel

8. Media investments have followed the shift to dark spirits Ad Spending (MM) Ad Spend ($00) $150 $130 $110 $90 $70 $50 $30 $10 $0 300 275 250 225 200 175 150 125 100 75 25 0 -$56MM -29% | Vodka -9% | Tequilas +$52 MM 14% | Rum Bourbon Whiskey 63% | -9% | Whiskey ScotchWhiskey 79% | Brandy & Cognac 78% | -12% | Gin 2011 2015 2011 2015 CanadianWhiskey 7% | 2014 2011 2012 2013 2015 White Spirits Brown Spirits | Source: Kantar Stradegy, 2011-2015

9. With the proliferation of smartphones, consumers have more access to each other and to new ideas % of Adults Who Own… In 2016, people spend 2 hours and 11 minutes MORE on digital media Than they did 5 years ago. 45% 2015 92% 2015 83% 2011 68% 2015 10% 2011 35% 2011 v Cellphone Smartphone Tablet | Source: Pew Research; eMarketer

10. 68% of Millennials Agree: “I like to experiment with new cocktails” |

11. We wanted to know more | • How are On-premise vs. off-premise experiences are impact brand choice? • What is the Opportunistic potential of Gifting and Entertaining? • Where are consumers finding inspiration and information? • How can brands win in this environment?

12. Executive Summary | • BRAND MATTERS-- There is a very high level of brand preference in the Spirits category both on and off premise. Implications for Spirits Brands; brands are built (and market share) before consumers/shoppers enter the premises. • AFICIONADOS BUILD BRAND AMBASSADORS -- Knowledge of spirits is rapidly becoming social currency, especially among Millennials, who will order name brands as a way of impressing others. Millennials are more interested in top shelf brands than other age segments. Implications for Spirits Brands; on location “intelligence” matters. • LIVING ROOM LOUNGE -- The high level of brand loyalty and preference for off-premise consumption is driving the movement to “bring the bar home” • GIVE THEM A REASON TO SPLURGE– Presentation, aesthetics and personalization trumps budget when purchasing a gift. Presentation matters.

13. What We Learned? | • On and off premise brand preference • How entertaining and gifting affect spirits choices • Key consumer influences and touchpoints

14. Location Bias? Depends on the Spirit… Does location put consumers in the mood for specific spirits? Results from our study suggest that there is such a thing as location bias. While all spirits are consumed everywhere, certain types tend to be consumed more heavily in certain environments. After Dinner Cordial Gin: Cognac: 162Index At a bar/nightclub 147 Index At a restaurant 125 Index At a home 57Index Special Occasion/Event 40 Index At a bar/nightclub 75 Index At a restaurant Bars: Gin, Irish Whiskey Restaurants: After Dinner Cordials Home: Cognac To Read: Gin drinkers are 62% more likely to drink Gin at a bar/nightclub vs other locations Q3: Where did you drink these beverages in the past 30 days? | Source: Havas/Evolve Spirits Study 2016

15. Brand Matters: High level of brand preference in spirits category Brand choice for personal consumption slightly outpaces on-premise preference Brand Preference Brand Preference Brand Agnostic Brand Agnostic Off-Premise On-Premise 17% 28% 83% 72% 30% 20% 80% 70% 28% 12% 72% 88% 37% 16% 63% 84% 22% 17% 83% 78% 22% 17% 78% 83% 15% 24% 76% 85% 16% 29% 84% 71% 28% 21% 79% 72% 26% 26% 74% 64% | Source: Havas/Evolve Spirits Study 2016

16. Personal favorites |

17. On premise While brand selection begins before entering – nearly half of patrons can be influenced on premise 52% Typically Order Prefer Specific Brand or Top Shelf Not Picky 28% 20% Bartender/ Server Recommendation Q4: When ordering drinks while out at a bar, restaurant or nightclub, what type of brands do you typically order/ | Source: Havas/Evolve Spirits Study 2016

18. Millennials rely on server recommendationsmore than other cohorts When it comes to driving trial among brand agnostics, Servers and Bartenders are more likely hold sway over Millennials relative to older cohorts- regardless of the type of spirit. That doesn’t mean that older generations aren’t open to suggestion.. Index: Boomers ++ Gen X (35-54) Millennial (21-34) v v v 240 210 180 150 120 90 60 30 0 - • Millennials: Vodka, Rum, Bourbon, Scotch, Single Malt, Irish Whiskey, Cognac • GenX: American Whiskey, Canadian Whiskey • Boomers: Tequila Scotch Whiskey Irish Whiskey Tequila Base: Rely on server recommendations | Source: Havas/Evolve Spirits Study 2016

19. Millennials more interested in impressing peers than other cohorts I sometimes order a premium brand name just to impress my peers (% agree) Millennial Boomer Gen X 11% 20% 28% Q17: On scale of 1 to 5, with 1 being the highest, how much do you agree with the following statements? | Source: Havas/Evolve Spirits Study 2016

20. Going for the Best: Millennials more interestedin top shelf brands than older generations Total Millennials (21-34) Gen X (35-54) Boomers ++ Typically Orders Top Shelf Brands (on premise) 40 30 20 10 0 Vodka Gin Tequila Rum Bourbon Scotch American Canadian Single Irish Cognac After Whiskey Whiskey Whiskey Whiskey Malt Liquor Q4: When ordering drinks while out at a bar, restaurant or nightclub, what type of brands do you typically order? | Source: Havas/Evolve Spirits Study 2016

21. Buying in Store Consumers decision to purchase are more defined; opportunity exists for more in-store activation 61% Typically Order I Buy Preferred or Premium Brand 23% Not Picky 15% Rely on Store Assoc. Recommendation Q6: When purchasing for yourself to drink at home, what do you typically buy? | Source: Havas/Evolve Spirits Study 2016

22. Top shelf brands see less generationalbias for off-premise consumption Top Shelf Preference Strongest for Vodka and Tequila Total Millennials (21-34) Gen X (35-54) Boomers ++ Typically Purchase Top Shelf Brands to Drink at Home Irish Gin Single Malt Rum Bourbon Scotch Tequila Vodka Cognac After Dinner Whiskey Whiskey Whiskey Brandy Cordial Q6: When purchasing for yourself to drink at home, what do you typically buy? | Source: Havas/Evolve Spirits Study 2016

23. Top shelf brands rule at the bar; preferred brands are brought home Brand Preference Brand Preference Brand Agnostic Brand Agnostic Off-Premise On-Premise 28% 30% 28% 17% 72% 83% 72% 28% 30% 20% 28% 72% 70% 80% 37% 28% 28% 12% 88% 72% 22% 37% 16% 84% 63% 22% 22% 17% 83% 78% 24% 29% 17% 22% 83% 78% 28% 28% 15% 24% 85% 76% 26% 28% 29% 16% 84% 71% 21% 28% 72% 79% 64% 26% 74% 26% 28% 72% 74% Q4 & 6: When (…), what type of brands do you typically order/purchase | Source: Havas/Evolve Spirits Study 2016

24. Consumption behavior implications The high degree of brand preference in the Spirits category may pose a challenge to increasing market share. Conversion may be difficult, but the payoff is worth it. Bars are a great place for top shelf discovery, but Brand Agnostic consumers may need prior familiarity with the brand before deciding to try it. Server and bartender recommendations have a relatively low influence over brand discovery, except among Millennials who tend to rely on server suggestions especially for Brown Spirits. Knowledge of spirits is rapidly becoming social currency among Millennials, who will order name brandsas a way of impressing others. Servers can take the role of social currency “bankers” by helping to educate customers on brand differentiation. The high level of brand loyalty and preference for off-premise consumption, especially among Millennials, is driving the movement of the Living Room Lounge, ie bringing the bar experience home. |

25. What We Learned? | • On and off premise considerations • How entertaining and gifting affect spirits choices • Key consumer influences and touchpoints

26. 39% have given spirits as a gift More common among younger, affluent and multicultural segments % havepurchased spirits for gifts Less than100K Millennial21-34 Boomers55+ Income of100K+ EmergingAffluent White Non-Hispanic Gen X35-54 Multicultural 50% 48% 46% 44% 42% 40% 38% 36% 34% 32% 30% 48% 45% 44% 43% 42% 38% 37% 30% Q5: In the past year, did you purchase any of the following beverages in the store for your own personal needs or give a gift? | Source: Havas/Evolve Spirits Study 2016

27. Spirits interest spikes in Q4 holiday season | Source: Google

28. Brand Name is Primary Factor in Driving Purchase All Use Average Primary Purchase Drivers Secondary Purchase Drivers Tertiary Purchase Drivers • Recommendation from friend/family • Low Price/Value • Bottle/ Package Design • High Price • Brand Name • Tried and True/Favorite Brand 1 2 3 Q10: In addition to taste, which are your THREE most important factors you consider when choosing an alcohol brand | Base: Total Respondents (n=1605)

29. But for gifting and entertaining, other factors affect brand selection Top 5 factors when purchasing… Q10: In addition to taste, which are your THREE most important factors you consider when choosing an alcohol brand to… | Base: Total Respondents (n=1605)

30. At home, experience and value trump experimentation. Brand name is less important Top 5 factors when purchasing… Q10: In addition to taste, which are your THREE most important factors you consider when choosing an alcohol brand to… | Base: Total Respondents (n=1,605)

31. At home, brand name and origin matter more to boomers. Value and mixability matter more to millennials. Millennial (21-34) Gen X (35-54) Boomers ++ Most important factors when purchasing for myself for drinking in my home 61% 57% 49% 47% 39% 39% 32% 29% 35% 19% 15% 11% 9% 9% 8% Tried and true / Favorite brand Brand Name Country of Origin Low Price / Value Mixability Q10: In addition to taste, which are your THREE most important factors you consider when choosing an alcohol brand to… |

32. Personal favorites |

33. When entertaining, brand is more important. Spirits must please the crowd and be versatile (mixable) Top 5 factors when purchasing… Q10: In addition to taste, which are your THREE most important factors you consider when choosing an alcohol brand to… | Base: Total Respondents (n=1,605)

34. For entertaining, price and mixability matter to Millennials more than older segments Brand matters to Millennials, but when entertaining, additional levers such as price and mixability factor into the purchase decision Millennial (21-34) Gen X (35-54) Boomers ++ Most important factors when purchasing for guests/entertaining 55% 48% 47% 44% 43% 35% 35% 26% 23% 22% 16% 14% 11% 10% 8% Tried and true / Favorite brand Brand Name Low Price / Value Mixability Bottle / Package design | Source: Havas/Evolve Spirits Study 2016

35. Parties = stock the bar |

36. When gifting spirits, image matters Top 5 factors when purchasing… Q10: In addition to taste, which are your THREE most important factors you consider when choosing an alcohol brand to… | Base: Total Respondents (n=1,605)

37. Gifting conveys an image |

38. Gift packaging more important to millennials vs. older generations Most important factors when purchasing for a gifting Millennial (21-34) Gen X (35-54) Boomers ++ 58% 47% 44% 39% 37% 30% 29% 19% 18% Brand Name Tried and true / Favorite brand Bottle / Package design | Source: Havas/Evolve Spirits Study 2016

39. Compared to other categories, whiskey and Cognac are most likely to be gifts Q5: In past year, did you purchase any of the following beverages in the store for your own personal needs or to give a gift? | Base: Total Respondents

40. Gifts more likely to carry high price point When it comes to the amount consumers will spend on Spirits, gifts are meant to impress. More people will spend $30 or more on a gift than they will for themselves or for entertaining % Spent $30 or more on a bottle Among consumers who… 50% 53% 67% Purchased for Entertaining Purchased for Themselves Purchased for a Gift | Source: Havas/Evolve Spirits Study 2016

41. Gift occasions reduce price sensitivity among lower income “Low price/value” is top 3 consideration $100K+ Income (B) 20% 20% 20% 17% <$100K Income (A) 32% 20% 28% For Myself Entertaining Gifting Q10: In addition to taste, which are your THREE most important factors you consider when choosing an alcohol brand to… | Source: Havas/Evolve Spirits Study 2016

42. Gifting conveys an image |

43. Holiday season implications 1 2 3 4 5 | Brand matters. Brand name is #1 factor for gifting and entertaining in the spirits category. Personal recommendations are crucial. Recommendations from friends/family are important in all use occasions. With personal consumption, factors related to personal taste, value, and authenticity are most important (tried and true/favorite brand, price, and country of origin). When entertaining, mixabilityis a top consideration, especially for Millennials who tend to serve up cocktails over straight drinks. When giving a gift, package design and the appearance of the bottle matter more. Price matters less, even for lower income consumers. Source: Havas/Evolve Spirits Study 2016

44. What We Learned? | • On and off premise considerations • How entertaining and gifting affect spirits choices • Key consumer influences and touchpoints

45. Planning against spheres of influence Content Publishing Promotions TV/Video Content CRM Paid Social Word of Mouth Branded Events Programmatic Organic Social Advertising Search Partnerships Influencer Consumer Mobile PR Tools and Apps Cause Marketing User-Generated CULTURAL Networks Create Relevancy COMMUNITY Networks Build Trust PERSONAL Networks Drive Action and Stay Connected |

46. Inspiration begins before entering the store or restaurant Experience is part of the inspiration DIGITAL Search, digital newsletters, mobile apps, social media WOM Recommendations from Family, friend or co-worker ON PREMISE Restaurants, Bars or Nightclubs TRADITIONAL TV, Print, Radio IN STORE Retail 24% 29% 42% 44% 59% Q16: Which would you consider your top three touchpointsto get ideas and recommendations about what spirits to buy? | Source: Havas/Evolve Spirits Study 2016

47. Inner circle has most influence Spirit Drinkers Media WOM Recommendations from Family, friend or co-worker 59% WOM is particularly influential for: …also rely on: • Boomers 67% • 30% In Store • 18% Traditional • 44% On Premise • 41% Digital Q16: Which would you consider your top three touchpointsto get ideas and recommendations about what spirits to buy? | Source: Havas/Evolve Spirits Study 2016

48. On premise experiences motivate experimenting ON PREMISE Restaurants, Bars or Nightclubs 44% On Premise is particularly influential for: …also rely on: • Affluent 51% • Gen X 47% • Emerging Affluent 46% • 59% WOM • 39% Digital • 28% In Store • 17% Traditional Q16: Which would you consider your top three touchpointsto get ideas and recommendations about what spirits to buy? | Source: Havas/Evolve Spirits Study 2016

49. Digital encourages conversation, experimenting and reinforces the experience 45% agree: If an article I read on the Internet is relevant to me, it doesn't matter whether the article is written by the publisher of the website or an advertiser. (48% of Millennials) Top 3 Touchpoints DIGITAL Search, digital newsletters, mobile apps, social media 42% Digital is particularly influential for: …also rely on: • Millennial 62% • Gen X 48% • Lower income <$100K 52% • Emerging Affluent 63% • 53% WOM • 32% O Premise • 20% Traditional • 16% In Store Q16: Which would you consider your top three touchpointsto get ideas and recommendations about what spirits to buy? | Source: Havas/Evolve Spirits Study 2016

50. Digital discovery focused around food and cooking content DIGITAL (search,digital newsletters, mobile apps, social media) Q16: Which would you consider your top three touchpoints to get ideas and recommendations about what spirits to buy? |