BMC State of the US Non Alcoholic Beverage Industry 2019

April 3, 2019
Beverage Industry
Liquid Refreshment Beverage
State of the Industry

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All data in this presentation is supplied by:

The Shifting Beverage Landscape
Agenda
Market Overview
Key Trends
Category Updates
Projections

Beverage Headlines
State of the Industry – The Good and the Bad
Total U.S. beverage market grew for fifth consecutive year in 2018, and saw slightly accelerated
growth over 2017
Carbonated soft drinks (CSDs) experienced improved performance in 2018 but declined slightly
for the 14th consecutive year
Bottled water widened its gap over CSDs as the largest beverage category in the U.S., driven
primarily by the single-serve PET segment
Niche categories continue to outperform traditional mass-market categories with exception of
bottled water
Wine and spirits led alcohol growth in 2018, and beer volume dipped slightly once again

Source: Beverage Marketing Corporation; Bureau of Economic Analysis, Department of Commerce, Department of Labor
The economy continues to move in a positive direction with improved GDP growth and lower
unemployment, a key to successful beverage market performance
Unemployment Rate
2000 – 2018
2017
2.8%
0.8%
3.1%
4.0%
-1.2%
4.0%
5.0%
2.3%
2.0%
2.6%
2.0%
0.9%0.8%
1.4%
3.5%
1.9%
1.2%
3.1%
3.2%
2.5%
2.2%
4.2%
3.5%
2.6%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2013 2014 2015 2016
4.0%
4.7%
5.8%
6.0%
5.5%
5.1%
4.6% 4.6%
5.8%
9.3%
9.6%
9.0%
8.1%
7.4%
6.2%
5.3%
4.9% 4.4%
3.9%
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 18
Quarterly GDP Change
2013 – 2018
2018

Annual U.S. Consumer Sentiment Index
1995 – 2018
Source: Thompson Reuters/University of Michigan
Consumer sentiment surpassed pre-recession levels in 2015 for the first time, and continued to
increase through 2018
92.2 93.6
103.2 104.6 105.8
107.6
89.2 89.6 87.6
95.2
88.6 87.3 85.6
63.8
66.3
72.6
68.0
76.4
79.2
84.1
92.9 91.8
96.8
98.4
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

P: Preliminary
Source: Beverage Marketing Corporation
-0.1%
1.1%
1.6%
2.0%
0.7%
1.1%
2013 2014 2015 2016 2017 2018P
U.S. Total Beverage Market
Volume Change
2013 – 2018P
The U.S. beverage market grew volume for the fifth consecutive year in 2018, and experienced
slightly accelerating growth

P: Preliminary
U.S. Total Beverage Market
Change in Volume and Wholesale Dollars
2013 – 2018P
Post-recession revenues have consistently outpaced volume growth in recent years, and did so
once again in 2018; trends toward premiumization and packaging mix shifts have contributed
-0.1%
1.1%
1.6%
2.0%
0.7%
1.1%
1.3%
1.8%
2.7%
2.3%
2.2%
1.5%
2.0% 2.1%
2013 2014 2015 2016 2017 2018P 13/18P CAGR
Volume Change Wholesale Dollar Change

P: Preliminary
Refreshment beverages have outperformed both traditional beverages and alcohol in recent years
U.S. Beverage Market
Volume Change
2017 – 2018P
1.8%
-0.7%
-1.0%
1.7%
2.3%
-0.6% -0.6%
-1.3%
Refreshment Beverages Beverage Alcohol Traditional Beverages Tap Water
2017 2018P
• Bottled Water
• CSD
• Energy Drinks
• Fruit Bevs
• RTD Coffee
• RTD Tea
• Sports Drinks
• VA Water
• Beer
• Spirits
• Wine
• Hot Coffee
• Hot Tea
• Milk

U.S. Liquid Refreshment Beverage Market
Volume Change
2018P
Traditional mass market categories have continued to struggle while niche categories have
experienced growth
• Bottled water is the primary exception of a mainstream category that has thrived
18.3%
7.4% 7.2%
5.0%
3.7%
-0.1% -0.6%
-2.2%
2.3%
Value Added
Waters
RTD Coffee Energy
Drinks
Bottled
Water
Sports Bevs RTD Tea CSDs Fruit Bevs TOTAL LRB
P: Preliminary

Among traditional beverages, only coffee continues to show growth thanks to the success of single-
cup brewers, popularity of coffee cafes, and RTD innovations like cold-brew
-2.5%
-2.1%
1.1%
-0.6%
Tea Less RTD Milk Coffee Less RTD TOTAL TRADITIONAL
U.S. Traditional Beverage Market
Volume Change
2018P
P: Preliminary

P: Preliminary
When tap water consumption declines, consumption of commercial beverages increases
• Tap water consumption declined only modestly in 2018
Estimated Tap Water
Volume Growth
2000 – 2018P
-0.5%
-6.4%
-3.8%
-5.0%
-9.0%
-11.1%
-2.4%
22.6%
19.4%
1.4%
5.2%
-2.5%
6.0%
-0.2%
-4.3%
-9.2%
1.7%
-1.3%
'00/01 '01/02 '02/03 '03/04 '04/05 '05/06 '06/07 '07/08 '08/09 '09/10 '10/11 '11/12 '12/13 '13/14 '14/15 '15/16 '16/17 '17/18(P)

P: Preliminary
U.S. Beverage Market
Volume Share by Category
2013 – 2018P
Bottled water is the biggest volume share gainer, while CSDs have been the largest share loser over
the last five years. Most other categories have had only modest share shifts
Bottled Water 16.5%
Bottled Water 22.0%
CSDs 21.1%
CSDs 19.3%
Coffee 10.7%
Coffee 11.1%
Beer 10.5%
Beer 9.9%
Milk 9.8%
Milk 8.6%
Tea 6.0% Tea 5.8%
Fruit Bevs 5.3% Fruit Bevs 4.7%Sports 2.3% Sports 2.5%Wine/Spirits 1.7% Wine/Spirits 2.3%Energy 0.9%
Energy 1.2%VA Water 0.7%
VA Water 1.1%
Tap/Others 14.5% Tap/Others 11.5%
2013 2018P

Decade Comparison
2008 – 2018P
Which Categories Gained, Which Lost Volume?
5.0%
3.4%
7.6%
2.1%
3.1%
10.9%
-2.3%
-1.5%
1.3%
Category Millions of Gallons 2008/18P CAGR
379
4,031
-2,014
-754
123
192
292
492
5,321
Total LRB
CSD
Fruit Beverages
RTD Coffee
Value-Added Water
Sports Drinks
Energy Drinks
RTD Tea
Bottled Water
Bottled water gained the most volume over the last 10 years while CSDs lost the most
P: Preliminary

U.S. Liquid Refreshment Beverage Market
Calories Per Capita Per Day
1990 – 2018P
212.5
251.6
263.0
243.7 238.0 230.3
222.7 214.8 211.7 207.6 204.1 200.6 200.3 200.0 200.5 197.2 195.5
1990 1995 2000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018P
People want healthier refreshment; caloric intake from refreshment beverages has been steadily
declining over the last decade
• The growth of bottled water and lower-calorie options have contributed to the caloric decline, along with a
concerted push by the industry
P: Preliminary

P: Preliminary
One surprise in 2018 has been the flattening out of diet carbonated soft drink volume, driven by
new zero sugar entries
• Improvements in diet sweeteners and product relaunches have helped improve diet performance
U.S. Carbonated Soft Drink Market
Share by Type
Regular
70.8%
Regular
74.0%
Diet
29.2%
Diet
26.0%
2013
2018P
YEAR 2013/14 2014/15 2015/16 2016/17 2017/18P 13/18P CAGR
Regular 0.8% -0.1% 0.4% -0.8% -1.0% -0.1%
Diet -5.4% -5.2% -4.1% -2.8% 0.7% -3.4%

Heightened consumer demand for healthier refreshment and variety
Legislation and messaging from government and regulatory agencies
Tax threats aimed at reducing consumption
Negative commentary from medical studies, and subsequent negative press
Increasingly crowded marketplace with stream of competitive products and categories emerging
Overall performance of the CSD category is in some ways remarkable considering the head winds
the category faces

Wholesaler Dollars Per Gallon Indexed to 2000
2018
Absolute Price
$4.43
$1.27
100 101 102 103 105 109 111
117 122 126 128 131 135 137 139 143 145 148 152
100 98 92 87 83 80 79 76 74 71 70 70 69 67 67 66 66 65
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018P
CSD PET Single Serve Bottled
Modest pricing increases in carbonated soft drinks coupled with significant pricing declines in
bottled water have contributed to respective category performances
P: Preliminary

P: Preliminary
PET Single Serve
66.9%
PET Single Serve
69.7%
1-2.5 Gallon
10.1%
1-2.5 Gallon
8.4%
HOD
12.3%
HOD
10.2%
Self-Serve Refill
8.2%
Self-Serve Refill
7.1%
Domestic
Sparkling
2.7%
Domestic
Sparkling
5.8%
Imports
1.6%
Imports
1.9%
2013
2018P
The single-serve water segment continues to drive overall category growth and accounts for two-
thirds of total volume
• Domestic sparkling was fastest growing segment in 2018 off a small base
• In the last five years, all category segments experienced increased volume
U.S. Bottled Water Market
2013 – 2018P
Volume, Share and Growth by Segment
SEGMENT PET 1-2.5 GALLON HOD
SELF-SERVE
REFILL
DOMESTIC
SPARKLING
IMPORTS TOTAL
5-YR CAGR 7.6% 2.9% 3.0% 3.7% 30.3% 10.9% 6.8%

Sparkling water is on fire – fastest growing segment in the bottled water category

Similar to craft soda, from a small base, enhanced waters of all types are now proliferating and
gaining traction in all parts of the country
• These premium value, craft type waters are adding additional benefits to consumers’ water experience beyond
vitamins and minerals
Enhanced Waters
Alkaline Water Plant WaterEssence Water Space Age Water

Projected Water & CSD Growth
Millions of Gallons
2013 – 2023P
CSDs
10-Yr CAGR: -0.7%
Enhanced Water
Flavored Water
Bottled water became the leading beverage catetgory in the U.S. on a volume basis in 2016,
surpassing CSDs and widened its volume gap subsequently
• As CSDs continue to decline and bottled water continues to grow, the gap between the two categories is only
likely to widen even more
• On a dollar basis, CSDs continue to be larger than bottled water, however
p: Preliminary; P: Projected
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
2013 2014 2015 2016P 2017 2018p 2019P 2020P 2021P 2022P 2023P
Bulk, HOD, Vended, Sparkling, Imported Waters
Premium Retail PET Waters

HPP Juice
Cold Brew Coffee
Plant-based Water
Kombucha
Select Offerings and Categories of Today’s Emerging Beverages
Coconut Water
A host of emerging categories have entered the market in recent years and most boast health and
wellness attributes and/or promise specific functional benefits

2019 Liquid Refreshment Beverage Projections
P: Projected
Volume Growth Retail Dollar Growth
LRB CATEGORY 2019P
Value-Added Water 13.0% ~ 14.0%
RTD Coffee 6.2% ~ 7.0%
Bottled Water 4.2% ~ 5.0%
Energy Drinks 5.8% ~ 6.6%
Sports Drinks 3.0% ~ 4.0%
RTD Tea 0.3% ~ 1.0%
Carbonated Soft Drinks -0.7% ~ -0.2%
Fruit Beverages -2.0% ~ -1.0%
TOTAL 1.2% ~ 2.0%
LRB CATEGORY 2019P
Value-Added Water 16.0% ~ 17.0%
RTD Coffee 8.2% ~ 9.0%
Bottled Water 6.8% ~ 7.5%
Energy Drinks 5.4% ~ 6.4%
Sports Drinks 4.0% ~ 5.0%
RTD Tea 2.3% ~ 3.1%
Carbonated Soft Drinks 0.3% ~ 1.0%
Fruit Beverages -1.0% ~ 0.0%
TOTAL 1.8% ~ 2.6%
Among refreshment beverages, the strongest growth is projected for bottled water, value-added
water, energy drinks and RTD teas and coffees
• CSDs, milk and fruit beverages will need to innovate and provide healthier options to rekindle growth

Thank You
• Strategic Associates
• Research
• Advisors
ghemphill@beveragemarketing.com
mbellas@beveragemarketing.com
Beverage Marketing Corporation

BMC State of the US Non Alcoholic Beverage Industry 2019

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