Jim Splinter Grocery Products
By Serving The New American Family 2
The Family Unit is Undergoing a Fundamental Shift 3
Income Polarization 60% of households 40% of households < $62K Per Year Household Income > Generational Shifts Ethnic Fragmentation 35% 30% 25% 20% 15% 10% 5% 0% Seniors (75+) Generation Share of Population (age in 2020) Boomers (56-74) Gen X (39-55) Gen Y (18-38) Emerging (<18) 2010 Share 2020 Share World Economic Purchasing Power (by 2015) HISPANIC AMERICANS 12 TH LARGEST ECONOMY AFRICAN AMERICAN 17 TH LARGEST ECONOMY Sources: U.S. Department of Commerce, Kantar Retail Analysis, and Nielsen 360 Conference 2012 4 ASIAN AMERICAN 27 TH LARGEST ECONOMY
Moms Today are Informed, Connected and Inspired 5
Serving the New American Family Appealing to inspired, busy, health conscious, and value conscious moms Products and packaging for smaller families and multicultural families Connect consumers to products using relevant, contextualized messages Engage consumers through correct mix of communication mediums 6
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Role of Protein Guides Innovation Sustained Energy EMOTIONAL Daily Protein Needs Success Lean Tissue Maintenance PROTEIN Mental Focus No Guilt Satiety 56g 46g FUNCTIONAL 8
Strategic Acquisitions 2005 2009 2010 2011 2013 9
Key Performance Targets Revenue Growth of 5% Organic Brand Building & Innovation 3% to 4% + Acquisition Enabling & Bolt-On 2% to 3% Operating Income Growth of 10% 10
Vision, Pillars & Strategic Imperatives Grocery Products: Leading in Protein-Strong Convenient Foods 38% Share Invest & Grow 47% Share Protect & Grow 4% Share Expand 16% Share Integrate & Grow Innovation Brand Equity Channel Development Cost & Margin Leadership Ethnic Capabilities Great People Source: Nielsen XAOC 52 Week Ending 4/27/13 11
Dollar Market Share -Microwave Meals- 38% 24% 5% Category Growth 2012-2013 17% 1% $525 million Category Hormel Foods Campbell s ConAgra Private Label Source: Nielsen XAOC 52 Week Ending 4/27/13 12
Microwave Meals Growth Platform Category Profile $525 million in sales Tray EQ. Baseline Growth of 8% Hormel Foods MW Tray HHP Trend 15 12.6 13.4 % HHP 10 5 3.1 4.7 6.9 10.2 10.5 10.9 11.5 12.1 0 04 05 06 07 08 09 10 11 12 13 Year New Items Brand Building Household Penetration Growth Source: Nielsen XAOC 52 W/E 5/25/13 13
14 Focus is on category growth, meal occasion expansion and diverse flavor options Driving Brand Growth, Elevating the Category New Varieties: Category Expansion Scalloped Potatoes Cheesy Potatoes SPAM and Macaroni and Cheese Key Strategies for Growth New SPAM Items
Vision, Pillars & Strategic Imperatives Grocery Products: Leading in Protein-Strong Convenient Foods 38% Share Invest & Grow 47% Share Protect & Grow 4% Share Expand 16% Share Integrate & Grow Innovation Brand Equity Channel Development Cost & Margin Leadership Ethnic Capabilities Great People Source: Nielsen XAOC 52 Week Ending 4/27/13 15
Dollar Market Share -Luncheon Meat- Dollar Market Share -Chili- 5% CAGR 2011-2013 $224 million Category 1% CAGR 2011-2013 $524 million Category SPAM brand Hormel Chili Dollar Market Share -Hash- 5% CAGR 2011-2013 Dollar Market Share -Stew- -3% CAGR 2011-2013 $100 million Category $90 million Category Mary Kitchen hash Dinty Moore brand 16
Legacy Core Growth Platform Category Profile $1.3 billion in sales 43% household penetration Growth through innovation Build brand equity Target occasional users New Items Brand Building Key Strategies for Growth 17
SPAM Goal: Activate Occasional Users Listen Talk See Believe 18
Marketing Investments 19
HORMEL Chili Increase Buy Rate w/ Occasionals Re-Engage Consumers Innovation Category Growth 35 30 Chili Category +4% Hormel Chili +15% 30.2 31.3 Millions (Pounds) Data Source: Nielsen 25 20 15 10 5 0 12.2 14.0 18.0 17.3 2012 4 WKS End 2/4/12 Hormel Chili 2013 4 WKS End 2/2/13 A/O Chili 20
Vision, Pillars & Strategic Imperatives Grocery Products: Leading in Protein-Strong Convenient Foods 38% Share Invest & Grow 47% Share Protect & Grow 4% Share Expand 16% Share Integrate & Grow Innovation Brand Equity Channel Development Cost & Margin Leadership Ethnic Capabilities Great People Source: Nielsen XAOC 52 Week Ending 4/27/13 21
Dollar Market Share -Mexican Foods- 14% 11% 2.8% CAGR 2011-2013 4% 5% 2% 2% $9.9 billion category Pepsico (Tostitos) Gruma (Mission) General Mills (Old El Paso) Campbell s (Pace) B&G (Ortega/Las Palmas) Source: Nielsen XAOC 52 Week Ending 4/13/13 22
Leading brand of salsa and tortillas- Eastern United States Leading brand of salsa and sauces- Western United States Leading brand of authentic salsa #1 Selling mole & nopalitos- United States #1 Share of peppers- Western United States Dairy/Deli Hispanic/Mexican Leading hot sauce & tomato sauce brands- Mexico Frozen Grocery Leading brand C-store & Club Channels Produce #1 Guacamole- United States 23
Innovation Cooking Sauces: Roasted Pasilla Chile, Tomatillo Verde, Red Guajillo Chile, Traditional Chipotle Mexican Snacking Destination Set 24
Innovation Varieties: Egg, Bacon, Hash Browns, & Cheese Egg & Sausage Triple Play Breakfast Egg & Sausage Chimichangas Egg, Bacon, Cheese & Jalapeno Varieties: Mini Chicken and Beef Tacos Grilled Chicken Quesadilla Chipotle Chicken & Cheese Flautas Taquitos Fajita Bites 25
Innovation 26
Vision, Pillars & Strategic Imperatives Grocery Products: Leading in Protein-Strong Convenient Foods 38% Share Invest & Grow 47% Share Protect & Grow 4% Share Expand 16% Share Integrate & Grow Innovation Brand Equity Channel Development Cost & Margin Leadership Ethnic Capabilities Great People Source: Nielsen XAOC 52 Week Ending 4/27/13 27
Strategic Fit of SKIPPY Growing value-added non-meat protein Adds earnings stability/margin accretion Extendibility into other on-trend categories Relatively easy to integrate and manage Fit to current protein portfolio # 2 brand position and the # 1 share in natural Levers center store core competency 28
Strong Business Fundamentals U.S. Peanut Butter Equivalent Units Category Growth U.S. Peanut Butter $ Category Growth + 30.4% equivalent units in millions Growth: + 4.5% 55.4 + 3.3% 57.2 + 1.0% 56.6 in billions Growth: $1.4 + 2.3% $1.5 + + 8.6% $1.6 $2.0 53.0 2009 2010 2011 Latest 52 Weeks Source: AC Nielsen. $ and EQ Volume Share is TTL U.S. All Outlets, 2009 Annuals 52 weeks ending September 29, 2012 2009 2010 2011 Latest 52 Weeks 29
Growing Consumption Trends Annual Peanut Butter Eating Occasions in the U.S. Peanut Butter Sandwich Usage is Very Stable Per capita 27 28 28 27 27 30 Peanut Butter 25 2005 2006 2007 2008 2009 2010 2011 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 5 12 Years 1984-2012 Source: The NPD Group s National Eating Trends Service, 2011 30
U.S. Peanut Crop Dynamics PEANUT PRODUCTION (billions of lbs.) 6.10 Market is returning to historical norms after 2011/2012 aberration HISTORIC HISTORIC PEANUT PEANUT PRICES PRICES FOB FOB SHELLING SHELLING PLANT PLANT Average Price $0.47 $1.08 3.70 4.20 3.70 2009A 2010A 2011A 2012E Current Market $0.50 - $0.55 Source: National Agricultural Statistics Service (NASS), Agricultural Statistics Board, USDA, August 3, 2012. 31
FUN Embody the sheer joy of being a kid HEALTH-CONSCIOUS Focus on healthy lifestyles and kid nutrition ICONIC Stay relevant in pop culture FAMILY-ORIENTED Know our consumer and what is important to them FORWARD-THINKING Offer on-trend variants, such as Naturals TASTE-DRIVEN Recognize that taste is king in the foods business ENTREPRENEURIAL Seek to win differently $ 32
Our innovation approach to spreads will follow a process similar to our MegaMex Foods JV 33
The End 34