About Mendocino Brewing Company

Mendocino Brewing Company, Inc. produces beer for the specialty ‘craft’ segment of the beer market. The company operates in two geographic markets, the United States and Canada (the ‘North American Territory’) and Europe (including Austria, Belgium, Denmark, Ireland, Italy, the Netherlands, France, Finland, Germany, Greece, Iceland, Liechtenstein, Luxembourg, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom (U.K.) (the ‘Foreign Territory’)). The company’s Foreign Territory operations are primarily in the U.K. The company’s operations in the North American Territory consist primarily of brewing and marketing proprietary craft beers, including Red Tail Ale, Blue Heron Pale Ale, Black Hawk Stout, Eye of the Hawk Select Ale, and White Hawk Original IPA; and a licensed international specialty beer, Kingfisher Premium Lager. For distribution in the North American Territory, the company brews its brands in its own facilities, which are located in Ukiah, California and Saratoga Springs, New York. In the North American Territory, the company distributes its products in majority of the states, the District of Columbia and Canada. The company’s operations in the Foreign Territory, which are conducted through its wholly-owned subsidiary, United Breweries International (U.K.) Limited (UBIUK) and UBIUK’s wholly-owned subsidiary, Kingfisher Beer Europe Limited (KBEL), consist primarily of the marketing and distribution of Kingfisher Premium Lager through Indian restaurants, chain retail grocers, liquor stores, and other retail outlets (such as convenience stores). The company holds a license, expiring in October 2018, from United Breweries Limited, an Indian public limited company to brew and distribute Kingfisher Premium Lager in certain areas of the Foreign Territory. The company’s beers sold in the Foreign Territory (except for beers sold in Germany) are brewed for the company under a subcontract with Heineken UK Limited (HUK). This contract expires in October 2018. KBEL is the distributor of Kingfisher Premium Lager to specialty restaurant trade distributors, liquor and convenience stores in the U.K., Ireland, and continental Europe, but does not physically distribute the company’s products to customers. KBEL contracts with HUK for distribution of the product in the Foreign Territory in exchange for a fee paid to HUK, except in Germany, where beers are manufactured and distributed pursuant to a separate contract with a different entity. In addition, KBEL sublicenses to HUK the exclusive right to sell Kingfisher Premium Lager to certain large retail customers, including, but not limited to, Sainsbury’s, Asda, and Tesco. Products The company produces various craft beers by using ingredients in its brewing process. For distribution in the North American Territory, the company brews 10 ales, 1 wheat beer, 2 lagers, 2 pilsners, and 4 stouts, all on a year-round basis; and 3 seasonal brews. All of these products are brewed at the company’s production facilities in Ukiah, California, and Saratoga Springs, New York. In the Foreign Territory, the company distributes Kingfisher Premium Lager. The company’s principal products are as follows: RED TAIL ALE, a full flavored amber ale, is the company’s major brand. It is available in 12 oz. 6-packs and 12-packs, half-barrel kegs, and 5 gallon kegs. BLUE HERON PALE ALE is a golden ale with a full body and a hoppy character. It is available in 12 oz. 6-packs and 12-packs, half-barrel kegs, and 5 gallon kegs. BLACK HAWK STOUT is a rich bodied stout with big traditional flavors. It is available in 12 oz. 6-packs, half-barrel kegs, and 5 gallon kegs. EYE OF THE HAWK SELECT ALE is a rich-bodied amber ale. It is available in 12 oz. 6-packs, half-barrel kegs, and 5 gallon kegs. WHITE HAWK ORIGINAL IPA is a hopped ale with a hoppy character and bold malt flavor. It is available in 12 oz. 6-packs and half-barrel kegs. KINGFISHER PREMIUM LAGER is a conventionally fermented specialty lager with a crisp taste. In the United States, Kingfisher Premium Lager is available in 12 oz. 6-packs, 22 oz. bottles, half-barrel kegs, and 5 gallon kegs, as well as on tap in a few pubs and Indian restaurants. In Canada, Kingfisher Premium Lager is available in 12 oz. 6-packs and 22 oz. bottles. Kingfisher Premium Lager is available year-round in 330ml and 660ml bottles in multi-packs, as well as in various keg sizes in the U.K., Ireland, and continental Europe. In the U.K., it is also available on tap in Indian restaurants. Distribution Methods In the North American Territory, the company’s products are sold through wholesale distributors to consumers at supermarkets, warehouse stores, liquor stores, taverns and bars, restaurants and convenience stores. The company’s products are delivered to retail outlets by independent distributors whose principal business is the distribution of beer, and in some cases other alcoholic beverages, and who typically also distribute various national beer brands. Together with the company’s distributors, it markets its products to retail outlets and rely on the company’s distributors to provide regular deliveries, to maintain retail shelf space, and to oversee timely rotation of inventory. The company also offers various ales and lagers directly to consumers at a tasting room attached to the Saratoga Springs brewery in New York and at its ale house in Ukiah, California. In the Foreign Territory, the company’s products are distributed primarily through Indian restaurants by restaurant trade distributors and also through supermarkets, liquor stores, and licensed shops and convenience stores. The majority of its restaurant sales are through the company’s on-tap draft installations. Distribution and retailing of products in Canada involves a range and varied degree of government control through provincial liquor boards. The company distributes its products through provincial liquor control boards or independent distributors, as required in each province. Suppliers The company’s major suppliers in North America are Great Western Malting Co., Yakima, WA, and Canada Malting Company, Montreal, Canada (malt); Hop Union LLC, Yakima, WA and S.S. Steiner Inc., New York, NY (hops); Gamer Packaging Inc., Minneapolis, MN (bottles and crowns); Alliance Packaging, Seattle, WA, and Buckeye Corrugated, Syracuse, NY (cartons); Graphic Packaging International, Vancouver, WA and Keystone Paper and Box Company, Inc., South Windsor, CT (carriers); and DWS Printing Associates, Bay Shore, NY (labels). The company’s major supplier for the Foreign Territory is HUK, which supplies on a contract basis all of its products that are sold in the Foreign Territory. Seasonality The company’s product sales are seasonal, with the first and fourth quarters (year ended December 2015) historically being the slowest and the rest of the year typically having stronger sales. Sales and Marketing The company markets its products through various promotional programs with its distributors and wholesalers. Trademarks The company has the United States federal trademark registrations on the principal register of the United States Patent and Trademark Office for various marks, including MENDOCINO BREWING COMPANY word mark (Reg. No. 2,441,141), RED TAIL ALE word mark (Reg. No. 2,032,382), RED TAIL design mark (Reg. No. 2,011,817), BLUE HERON PALE ALE design mark (Reg. No. 2,011,816), EYE OF THE HAWK SELECT ALE word mark (Reg. No. 1,673,594), YULETIDE PORTER word mark (Reg. No. 1,666,891), PEREGRINE GOLDEN ALE word mark (Reg. No. 2,475,522), HOPLAND BREWERY word mark (Reg. No. 2,509,464), BLACK EYE ALE word mark (Reg. No. 2,667,078), BLACK HAWK STOUT word mark (Reg. No. 3,205,652), BLUE HERON word mark (Reg. No. 3,818,385), HONEY AMBER ROSE design mark (Reg. No. 3,276,229), REVOLUTION X (Reg. No. 3,237,471), ORGANIC PIONEERS (Reg. No. 3,339,179), THE OFFICIAL BEER OF PLANET EARTH (Reg. No. 3,339,151), YOSEMITE (Reg. No. 4,064,887), and CATCH 22 (Reg. No. 3,814,885). The company uses the BLUE HERON word mark (Reg. No. 3,818,385) under a concurrent use agreement with Bridgeport Brewing Company, which gives the company the right to use the BLUE HERON word mark throughout the United States with the exception of Oregon, Idaho, Washington, and Montana. Bridgeport Brewing Company, the other concurrent use party, has the right to use the BLUE HERON word mark in those states. The company claims common law trademark rights in and to various marks, such as TALON BARLEY WINE ALE word mark, TALON BARLEY WINE ALE design mark, TRAINWRECK word mark, HELLTOWN word mark, and BUTTE CREEK BREWING word mark. The company owns the trademark CARMEL BREWING COMPANY and any other variation of the same as previously used by Carmel Brewing Company and claim common law trademark rights in and to all such marks. Governmental Regulation The company is licensed to manufacture and sell beer by the Departments of Alcoholic Beverage Control in California and New York. A federal permit from the United States Treasury Department, Alcohol and Tobacco Tax and Trade Bureau allows the company to manufacture fermented malt beverages. The company’s production operations must also comply with the Occupational Safety and Health Administration’s workplace safety and worker health regulations and comparable state laws. The company’s Ukiah ale house is regulated by the Mendocino County Health Department, which requires an annual permit and conducts spot inspections to monitor compliance with applicable health codes. History Mendocino Brewing Company, Inc. was founded in 1982.