Eastside Distilling Investor Presentation March 2015

INVESTOR PRESENTATION
March 2015
Eastside Distilling, located on Portland’s famed
Distillery Row since 2008, is an established craft distiller
with a portfolio of innovative, award-winning products that
have proven themselves locally and are now poised for
nationwide distribution.
FORWARD LOOKING STATEMENTS
Except for historical informa3on contained herein, this presenta3on contains forward-­‐looking statements, which reflect the expecta3ons of management of Eastside Dis3lling, Inc. ("Eastside") with respect to poten3al future events. Forward-­‐looking statements consist of statements that are not purely historical, including any statements regarding beliefs, plans, expecta3ons or inten3ons regarding the future. Such forward-­‐looking statements include, but are not limited to comments regarding; (i) Eastside’s plans to become a na3onal spirits company; (ii) proposed changes in Eastside’s dis3lling, loca3on and new facility, and the impact that such changes will have on Eastside’s market posi3on, business opera3ons and ul3mate success; (iii) Eastside’s plan to establish a rela3onship with a leading distributor, partner, and/or agent which will enhance scalability, and sales and marke3ng efforts; (iv) Eastside’s product expansion, if any; (v) Eastside’s strategic growth plan for coming years, including accelera3ng the growth of spirits sold on a na3onal level; (vi) Eastside’s predic3ons of its na3onal growth poten3al of the sales of its products; (vii) Eastside’s marke3ng ini3a3ves, including a na3onal campaign featuring print, billboards, radio, television, and social media to build brand awareness and drive sales. These forward-­‐looking statements are subject to risks and uncertain3es that may cause actual results, performance or developments to differ materially from those contained in the statements. Actual results and the 3ming of events could differ materially from those an3cipated in the forward-­‐looking statements as a result of such risks and uncertain3es, which include, without limita3on; general economic condi3ons and economic uncertainty in the global markets; current and con3nuing trends in the spirits industry; con3nued demand for and success of Eastside’s products and reputa3on; unexpected increases in the price of raw materials or their reduced availability; Eastside’s ability to sustain its past growth or manage its future growth; Eastside’s ability to retain its key management personnel; con3nued protec3on of Eastside’s intellectual property; legal, regulatory, poli3cal and economic risks; the highly compe33ve market for spirits and other products proposed to be developed and launched by Eastside; Eastside’s inability to deliver its products to the market and to meet customer expecta3ons due to problems with its distribu3on system or other unan3cipated problems; Eastside’s failure to obtain any future financing it requires to fund and grow its business; Eastside’s inability to expand its sales or product lines; Eastside’s inability to generate growth of the sales of its current and future products; Eastside’s inability to penetrate and generate successful opera3ons on a na3onal level; and other risk factors. You are urged to consider these factors carefully in evalua3ng the forward-­‐looking statements contained herein and are cau3oned not to place undue reliance on such forward looking statements, which are qualified in their en3rety by these cau3onary statements. In addi3on, the use of comparables in this presenta3on are in no way indica3ve of Eastside’s future financial or opera3ng results or poten3al. Readers are cau3oned that the foregoing factors are not exhaus3ve. Forward-­‐looking statements in this presenta3on are made as of the date hereof and Eastside disclaims any intent or obliga3on to update publicly such forward-­‐looking statements. PRESENTATION DISCLAIMER
This presenta3on is not an offer to sell or a solicita3on of an offer to purchase securi3es by Eastside Dis3lling (“Eastside”). Any such offer or solicita3on, if any, will only be made by means of offering documents (e.g., prospectus, offering memorandum, subscrip3on agreement and or similar documents) and only in jurisdic3ons where permiTed by law. Certain informa3on contained herein has been provided by or obtained from third-­‐party sources and has not been independently audited or verified by Eastside. While Eastside has taken the appropriate steps to verify the accuracy of the informa3on contained, the company makes no representa3on or warranty, express or implied as to the accuracy or completeness of such informa3on contained in this document, and nothing contained in this document is, or shall be relied upon as, a promise or representa3on by Eastside. 2 A Premium Product
For Every Taste…
www.eastsidedis3lling.com 3 Premium Barrel-Aged Bourbon
Burnside Bourbon
Is aged in oak barrels for 4 years, and it’s 96 proof, not the 80 proof of most compe3tors. The end result is a smooth, mellow taste that makes this the preferred bourbon whiskey for mixed drinks, or for sipping straight or on the rocks. It won a Gold Medal in the MicroLiquor Spirit Awards, and another from the pres3gious Beverage Tas3ng Ins3tute. Oregon Oaked
Burnside Bourbon
Produced in limited quan33es, is aged for an addi3onal 90 days in heavy-­‐charred Oregon oak barrels, giving it caramel and vanilla undertones that make it sweeter and even smoother than Burnside Bourbon. Winning a Silver Medal at the San Francisco World Spirits Compe33on two years ago, this is a bourbon that’s beyond premium – think of it as “ultra premium.” 4 Distinctive Whiskeys
Cherry Bomb Whiskey
Marionberry Whiskey
Combines handcraeed small-­‐batch whiskey with a blast of real Oregon cherries to produce rich flavor and a deep red color. In addi3on to winning a Gold Medal from the pres3gious American Wine Society, it was awarded a Gold Medal for taste and a Silver Medal for package design in the MicroLiquor Spirit Awards. Achieves its dis3nc3ve taste and aroma by combining Oregon marionberries (hybrid blackberry) with premium aged whiskey. It was awarded two Silver Medals in the 2014 MicroLiquor Spirit Awards, one for taste and the second for package design. 5 Below Deck Rums
Below Deck Silver Rum
Below Deck Spiced Rum
Eastside’s original rum is a clean, smooth and slightly sweet rum that’s perfect in any cocktail or on the rocks. Double-­‐dis3lled from molasses and infused with exo3c spices, won a Triple Gold Medal (highest honor awarded) for taste and a Bronze Medal for package design in the MicroLiquor Spirit Awards. This is in addi3on to a Silver Medal from the pres3gious Beverage Tas3ng Ins3tute. www.eastsidedis3lling.com 6 Below Deck Rums (cont.)
Below Deck Coffee Rum
Below Deck Ginger Rum
Is double-­‐dis3lled and infused with coffee flavors from Arabica beans roasted at award-­‐winning Portland Roas3ng. It won a Silver Medal at the San Francisco World Spirits Compe33on by a judging panel of expert spirits tasters. Is infused with natural ginger to create a unique, zesty taste that turns an ordinary Mojito into something very special. www.eastsidedis3lling.com 7 Portland Potato Vodka This premium vodka tastes so smooth that the American Wine Society awarded it a Silver Medal. Not to be outdone, the pres3gious Beverage Tas3ng Ins3tute awarded it a Gold Medal and gave it the Ins3tute’s coveted Best Buy ra3ng as well. What makes Portland Potato Vodka so special? Unlike most mass-­‐produced vodkas, it’s dis3lled from potatoes rather than grain. This means that in addi3on to its smooth character, this premium vodka is gluten-­‐free. www.eastsidedis3lling.com 8 Continuous Innovation
Eastside Dis3lling produces a wide range of dis3lled spirits to suit every taste. In addi3on to its award-­‐winning core brands, the company will con3nue to create a number of strategic seasonal and limited-­‐edi3on products in 2015: !  Con3nued growth and innova3on in the whiskey category !  Small batch gin to be added to our product pormolio !  Development of new product offerings and various limited edi3on spirits offering unprecedented value through the technical innova3on that is Eastside’s unique strength While all Eastside dis3lled spirits are unique, each is carefully branded to make it instantly iden3fiable to a growing base of intensely loyal customers. In addi3on to recognizable branding, all Eastside spirits have three things in common… 9 Master Crafted for Superior Taste
! 
Eastside products are master craeed from natural ingredients using proprietary recipes for superb quality and taste ! 
Every boTle of Eastside spirits is produced to exac3ng standards so each sip meets our customers expecta3ons ! 
Eastside spirits are created with passion. We are con3nuously innova3ng and seeking new ways to create & deliver the very best products in the marketplace Master Dis2ller Melissa Heim ensuring the highest quality goes into every bo;le of Eastside Spirits 10 Eastside’s Sales Are Growing!
! 
Eastside is con3nuously innova3ng, seeking new ways to create & deliver the very best products in the marketplace — and customers can't seem to get enough of them ! 
And having drama3cally-­‐increasing sales in a fast-­‐growing industry is the key to building shareholder value… ! 
Eastside closes out 2014 with a more than 250% increase in holiday season sales over previous year www.eastsidedis3lling.com 11 Spirits Continue Their Strong Growth as Well
Liquor now comprises 35.2% of alcohol sales in the U.S., wine accounts for 17% and beer 47.8%. A surge in exports, improved marke3ng support, various legaliza3on of Sunday liquor sales, new flavors and an improving economy, among other factors, fueled a 4% increase in liquor sales to $23.1 billion in 2014. 12 Distilled Spirits Are The Fastest
Growing Segment
! 
In recent years, sales of alcoholic beverages have increased faster than popula3on growth, with dis3lled spirits outpacing both beer and wine !  In addi3on to solid growth, dis3lled spirits have shown remarkable resilience 13 The Remarkable Resilience of
Distilled Spirits
!  FACT #1: Dis3lled spirits have never lost market share at any 3me during the last 13 years! !  FACT #2: Dis3lled spirits never experienced a dip in sales during the 2008-­‐2009 economic downturn! 14 Craft Distillers Are The Biggest Winners
While overall sales of dis3lled spirits have experienced a compound annual growth rate in excess of 5.5% for more than a decade, the biggest growth has come from premium products made by crae dis3llers like Eastside… ! 
Mass-­‐produced spirits: 5.5% annual sales growth ! 
Premium craC spirits: 7.6% annual sales growth 15 Eastside is a Victim
of Its Own Success
! 
Eastside Dis3lling is currently able to produce a maximum of 6,400 cases per year at its 2,500 square foot dis3llery, and is able to sell virtually everything it makes ! 
The company faces the sort of enviable ‘problem’ that every company wishes it had: it can’t produce enough to keep up with demand 16 Eastside’s New
Distillery
Eastside has secured a new facility that when fully opera3onal will be capable of producing up to 1 million cases per year ̶ vastly surpassing its exis3ng capacity while becoming the largest crae dis3llery in the Pacific Northwest. 17 The DisHllery Becomes a Showplace In addi3on to producing the company’s products, the new dis3llery has the poten3al to generate “extra” income through: !  Tas3ng room and lounge to sample spirits !  Private par3es !  In store boTle and merchandise sales !  Concerts, food tas3ng events !  Private VIP memberships !  But it’s more than a hip Tas3ng Room, it’s a place where we are “in-­‐touch” with our customers, listening and sharing to help us con3nue to make award-­‐winning products These revenues could cover a substantial percentage of the new
distillery’s overhead. That might sound like a tall order, but…
18 Up to $95,000 Per Month in “Extra” Income
Eastside has generated as much as $95,000 in a single month from the tas3ng room at its current dis3llery. The new much larger dis3llery has the poten3al to generate a much higher income stream. And, of course, this revenue is in addi2on to what the new dis3llery’s increased produc3on could enable Eastside to make… www.eastsidedis3lling.com 19 Launches Innovative Retailing
Eastside’s new Clackamas Town Center store is Oregon’s first retail tas3ng room for spirits in a mall loca3on, maximizing the direct-­‐to-­‐customer experience “When we think about innova2on, this is what it’s all about. I applaud Eastside Dis2lling for crea2ng new ways to improve the buying experience.” — Commissioner Révoal of the Oregon Liquor Control Commission
Dec 22, 2014 20 Market Validation
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Eastside has created a pormolio of premium award-­‐winning spirits each with unique branding, flavor profiles and sales trac3on in the marketplace. ! 
Demand for Eastside’s award-­‐winning spirits is growing rapidly across the Pacific Northwest with new points of sale consistently being added. ! 
With its new 1 Million case capacity produc3on facility, Eastside is posi3oned to meet growing customer demand as its na3onal sales & marke3ng campaign launches. ! 
Investment support is in place to finance the first phase of the Company’s aggressive growth strategy. Eastside Dis3lling (ESDI), as a publicly listed company, is posi3oned to access addi3onal growth capital through the capital markets. 21 The Opportunity
!  Demand in the crae spirits marketplace is growing more rapidly than in the tradi3onal spirits market. !  Based on its strong regional success as an early-­‐to-­‐market provider of award-­‐winning premium crae spirits, Eastside is posi3oned to scale na3onally. !  Eastside Dis3lling (ESDI) is an exci3ng Public Company in the emerging crae spirits category and as such represents a unique opportunity for investors to par3cipate in this rapidly-­‐emerging market category. 22 Projected National Roll-Out
23 Focusing On The “Liquor Control States”
While Eastside plans to distribute its innova3ve premium spirits throughout the country, it will be paying par3cular aTen3on to the 18 so-­‐called “liquor control states.” In these 18 states, dis3lled spirits are sold through state-­‐
owned and operated stores, oeen referred to as ABC (Alcohol Beverage Control) stores. Doing business directly with these states not only simplifies the sales process, it increases likelihood of 3mely payment as the company sells to the control states on a net-­‐30 basis. 24 7 Reasons to Invest 1.  Demand for craP spirits is disrup3ng the tradi3onal marketplace, crea3ng major opportunity: A powerful trend is occurring in the spirits market, which is being disrupted by growing demand for new craP offerings. Retailers, distributors and brokers are now ac3vely seeking out new crae offerings to bring to market. 2.  Innova3ve award-­‐winning products: Eastside is ahead of the demand for craP spirits trend with its innova3ve, early-­‐to-­‐market pormolio of core brands. The company has established a reputa3on for crea3ng and delivering award-­‐winning carefully-­‐craeed spirits while remaining compe33ve. 3.  Proven success in the marketplace: Eastside has achieved solid trac3on in the marketplace with increasing customer demand across numerous points of sale throughout the Pacific Northwest. 25 7 Reasons to Invest (cont.)
4.  Opera3onal capability and expanded capacity: Eastside’s new 1 Million case capacity produc3on and tas3ng room facility provides the space required for rapid and con3nued growth. Economies of scale are an addi3onal benefit of the new facility. 5.  Posi3oned to scale: The plamorm for rapid expansion is in place. Eastside has established a strong opera3onal founda3on with proven & growing customer demand and the capability to consistently produce and deliver quality across its product lineup. 6.  An aggressive market expansion strategy to grow sales: Aligned with industry leading experts, Eastside is ready to roll out a mul3-­‐faceted sales and marke3ng campaign to build brand awareness and drive sales at both the state and na3onal level. 7.  ESDI, a new public company: As a new public company in the exci3ng craP spirits category, ESDI offers investors the unique poten3al to profit from powerful market trends. 26 27 Management Team Steven Earles, CEO & Board Director Steven joined the Eastside team in 2009 as CEO and is responsible for Eastside's day-­‐to-­‐day opera3ons as well as overseeing the company's Brand development and financial strategy. Steven is commiTed to maximizing long-­‐term value, ensuring a balanced pormolio of growth ini3a3ves, and maintaining the high level of integrity and transparency . With over two decades of execu3ve experience Steven has orchestrated the development and building of one of the largest land development companies in Southern California overseeing 400 employees as well as playing a key role in numerous successful start-­‐up companies. MarHn Kunkel, Chief MarkeHng Officer & Board Director Prior to joining Eastside, Mar3n most recently served as Vice President of Player Development/Casino Marke3ng with the Hard Rock Hotel Casino in Las Vegas, NV. He has spent over 23 years in the luxury brand segment of the gaming and hospitality industry in execu3ve level management and marke3ng posi3ons. In addi3on, Mar3n has been involved in the successful opening of several major luxury Hotel/Casinos on the Las Vegas Strip. Mar3n brings his exper3se of brand building affluence to the Eastside execu3ve team serving as the Chief Marke3ng Officer. www.eastsidedis3lling.com 28 Key Personnel Lenny Go\er, Founder & Board Director Lenny was born in Wisconsin and graduated from the University of Wisconsin Madison with a Bachelor of Science in Economics. He has lived in Portland, Oregon since 1991 where he worked in the booming manufacturing and tech industry. In 2008 he started Eastside Dis3lling with a passion for great spirits and recognized the poten3al growth of his brand in the burgeoning crae spirits movement. In the last 5 years his products have won numerous flavor and design awards. Melissa Heim, Master DisHller Mel has found her true calling in crae dis3lling. The Portland na3ve joined Eastside Dis3lling in the summer of 2012 aeer comple3ng her appren3ceship and successful s3nt as Head Dis3ller at Rogue Dis3llery and Public House in Portland's Pearl District. She is one of a few female dis3llers in the American crae dis3lling movement and the first female to masterfully tame the s3lls west of the Mississippi. Mel’s liberal arts educa3on fuels her passion for the ar3s3c intricacies, history and philosophy of dis3lla3on and is apparent in her modest yet highly decorated pedigree. One can find Mel with her crew tending to the numerous barrels, sampling new blends, reci3ng proper whiskey nomenclature or doing what she loves best of all: crea3ng world class spirits. www.eastsidedis3lling.com 29 Key Personnel Gregory Nordstrom, NaHonal Sales Manager Gregory Nordstrom is a results-­‐driven professional and comes to Eastside with 20 years of senior sales experience. With an enthusias3c and genuinely friendly a|tude, Gregory radiates a sincere passion for delivering value and benefits to his customers. This has been prevalent in all aspects of his career. From founder and managing partner of Nordstrom Management group LLC, a business consul3ng and advisory group for the auto industry, to numerous successful start-­‐up companies. Consistently challenging himself, Gregory’s tac3cal approach adds to his years of experience in team building, brokering rela3onships, crea3ng partnerships and mee3ng or exceeding sales targets. Carrie Earles, Chief Branding Officer Carrie grew up in the rural high desert of Southern California surrounded by mountain vistas and sunshine. Growing up in a naturally beau3ful se|ng ac3vated her apprecia3on for visual imaging and its importance in delivering concepts. Carrie’s passion was quickly applied to her work as a na3onal retail management member. Her ability to conceptualize trends strategically with utmost care and also bring merchandise exposure to mul3ple demographics is why she serves as Eastside’s Chief Branding Officer. Carrie collaborates with all company departments to deliver and develop Eastside’s appearance as a whole organiza3on. She is relied upon to keep a pulse on the spirits industry’s highly nuanced marketplace and maintain Eastside’s branding relevance. www.eastsidedis3lling.com 30 Key Personnel Veronica Rohweder , OperaHons Manager Veronica came to Eastside with one goal in mind and that was to assist with the company’s growing success to the highest degree. Her mul3-­‐faceted background is paved with one managerial achievement aeer the next and for that she was specifically sought to fill the posi3on as head of opera3ons. She approaches her job with the aTen3on and fervidness of a true Oregonian; with a considerate style and admira3on of the crae and its rela3ve fac3ons. Veronica is responsible for the development, design, opera3on, and improvement of the systems that create and deliver Eastside’s products. In addi3on, she ensures that business opera3ons are efficient and effec3ve, resources are properly regulated, distribu3on of goods to customers are orderly and that mul3ple divisions coordinate and func3on to the highest standard. She is a celebrated asset of the Eastside team and her goal aTainment record is prized and of the highest value. www.eastsidedis3lling.com 31 Corporate Information
PUBLIC COMPANY INFORMATION Stock Symbol: ESDI Exchange: OTC:QB Cusip: 277802104 Shares Outstanding 45,512,500 LEGAL Indeglia & Carney LLP 11900 Olympic Boulevard, Suite 770 Los Angeles, California 90064 Phone 310.982.2720 | Fax 310.982.2719 www.indegliacarney.com AUDITOR BMP – Burr Pilger Mayer 600 California Street, Suite 600 San Francisco, California 94108 Phone 415.421.5757 | Fax 415.288.6288 www.bpmcpa.com CORPORATE ADDRESS 1805 SE Mar3n Luther King Jr. Boulevard Portland, Oregon 97214 Phone 971.888.4264 | Fax 866.554.0271 www.eastsidedis3lling.com INVESTOR RELATIONS Liolios Group 20371 Irvine Avenue, Suite A-­‐100 Newport Beach, California 92660 Phone 949.574.3860 | Fax 949.574.3870 www.liolios.com TRANSFER AGENT Pacific Stock Transfer 4045 South Spencer Street, Suite 403 Las Vegas, Nevada 89119 Phone 702.361.3033 | (800) 785.PSTC | Fax 702.433.1979
www.pacificstocktransfer.com 32 SOURCES: ! 
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Dis3lled Spirits Counsel 2013 Industry Review [New York City — February 4, 2014] U.S. Beverage Alcohol Forum [U.S. Beverage Alcohol Trends, authored by Mike Ginley] Market-­‐Line [Spirits, Liqueurs And Other Spirituous Beverages — Market Report — Analysis and Forecast to 2020] Demeter Group, Investment Bank [State of the Spirits Industry — 2013] GuestMetrics [Diving into the World of Crae Spirits, Strong Growth likely to Con3nue — July 2013] 33