Investor Day 2007 - library.corporate-ir.netlibrary.corporate-ir.net/library/71/712/71258/items/264118/10... · Investor Day 2007 October 9, 2007. ... Farbest Foods, Inc. 280 +67

Jennie-O Turkey Store

Hormel Foods Corporation

Mike Tolbert, President

Investor Day2007

October 9, 2007


2007 Turkey Industry Ranking

CompanyMillion LW Lbs.

2007Changevs 2006

Butterball, LLC 1,375 +26Jennie-O Turkey Store 1,290 +25Cargill 961 EvenHouse of Raeford 250 EvenPerdue, Inc. 256 +7Virginia Poultry Growers Coop. 225 EvenFoster Farms 244 +21Bil Mar (Sara Lee) 220 EvenFarbest Foods, Inc. 280 +67Prestage Foods 236 +26Kraft Foods, Inc 213 +8 SURVEY TOTALS 7,151 307WATT PoultryUSA - Feb 07 (+4%)


New Competitive Environment

Butterball acquired by Maxwell Farms/Smithfield Foods; Aug 2006


Effect of Pounds Slaughtered on Price (2-year price cycles)

-0.6

-0.4

-0.2

0

0.2

0.4

0.6

0.8

95-97 97-99 99-01 01-03 03-05 05-07Live Weight Gain (Billion Lbs) Breast Meat Price Change ($/Lb)

Correlation used to equate to at least a $.10 lb change in breast meat prices for every 100 MM change in live lbs….is this a short term deviation, or have the market dynamics changed?


Live Production Expansion

6779

6043

3704

3077

2277 7096

6960

12591158

743507301231160

0

1000

2000

3000

4000

5000

6000

7000

8000

1975 1980 1985 1990 1995 2000 2005

Total Industry LW lbs JOF/TTS/J-OTS LW lbs

2005200019951990198519801975

17.7%16.6%11.0%8.4%8.1%7.5%7.0%J-OTS

5.2%3.9%3.0%3.5%2.7%2.4%TTS

11.5%7.0%5.4%4.6%4.8%4.6%JOF

MM LBSMM LBS


Macroeconomic Indicators

Cold storage up 3% vs last year and 1% under the 5-year averageTotal slaughter pounds, head killed and poult placements all up 4%Live weight per head flat versus year agoExport volume +5%, dollars +16%

Driven by Mexico and China

Industry continues to struggle with livability (-1.2%)


Livability Initiatives

Goal:Improve livability from 82% to 85%

improves bottom-line by $12 MM.

Four key processes have been identified that will provide improvements in livability.

BreedingHatchingBroodingFinishing


Local Feed Input Costs

-40-20

020406080

100120140160

CORNSOYMEALMEAT & BONEMEALFAT

8/20/2006

8/20/2007

%


Why did corn prices jump?

Ethanol usage growth

Accelerating Demand!

Grain Market Risk Management

0

5

10

15

20

25

30

35

2000 2006 2007 2008

% of corn crop used for Ethanol

19801982

19841986

19881990

19921994

19961998

20002002

20042006

2008*

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

6,000

Corn Used for Ethanol

MM

Bus

hels

Market RISK!


Outlook

2007 corn crop largest everCurrent price $3.43 per bushel

Market is already thinking of 2008What crops will get the acreage?

CornSoyWheat

Weather


Hormel’s Expectations forJennie-O Turkey Store

Generate Value-Added Volume Growth“Growth Area” of storeUnderdeveloped proteinReduce exposure to commodity swings

Improve Margin Contribution50 basis points per year improvement

Be Judicious with New Capital


Strategic Competencies Equal Industry Leadership

Focus on Turkey - production through marketplace as an efficient, lowest cost, highly integrated producerFocused Sales Force - concentrations in Deli, Retail, and Foodservice with specific expertise in each areaProduction Capabilities - multiple plants allow long production runs at high efficiencyAbility to Service Customers Nationally - high reliability, appropriate costs, and competenceAbility to Innovate - differentiated products that add value.


Jennie-O Turkey Store Initiatives

Leverage new R&D Pilot Plant and Product Lifecycle Management process to expand sales of new products Use the JENNIE-O TURKEY STORE brand to go after a premium position in whole birds.Challenge live production, operations, and distribution areas to deliver a zero total annual cost increase (net of feed costs) between 2007 and 2008.Raise the bar on food safety by implementing USDA-approved interventions on all ready to eat products …qualifying for “Level II” status.


Agristats Heavy Tom Cost per Live Wholesome Pound

Difference: $.01/lbValue: $10.3 MM

$0.40

$0.38

$0.38

$0.38

$0.39

$0.39

$0.40

$0.40

Industry Jennie-O Turkey Store

Dol

lars

per

Liv

e W

hole

som

e L

b.

Heavy Tom>40 lb Live WeightJune 2006 - May 2007


Value Added vs Commodity Net Sales Split

* Restated to 52-week

64%65% 64%

68% 70%

36% 35% 36% 32% 30%

$0$100$200$300$400$500$600$700$800$900

$1,000

2003 2004* 2005 2006 2007 est.

Value Added Commodity

-10.1%9.6%9.4%-2.4%Commodity8.9%4.2%13.8%6.1%Value Added

200620052004*2003

-0.3%8.6%

2007 est.

Percentage of Growth Over Previous Year


Retail and FoodserviceTotal Burger Volume

2003 2004 2005 2006 2007 est.MM LBS MARGIN PER LB


Portfolio

Healthier alternatives to traditional offerings

Retail, FoodserviceGround turkeySausages and BratsBurgersBaconFranks

Deli, FoodserviceMultiple 98% fat free optionsLow sodium/No salt added, sliced


Oven Ready Boneless& Bone-In Breasts

Fully Cooked Turkey Brats

Fully CookedTurkey Meatballs

Fully CookedTurkey Sausages

Crunchy Dogs

Ongoing Emphasis on Innovation and Healthy Alternatives

PREP CHEF™

ARTISAN ROASTED™Turkey Breast

Scooby Doo Franks


2003 2004 2005 2006 2007 est.

Continued Success inNew Product Development

CAGR29%


Communication

Television

National Print

Online


The Biggest Loser Promotional Video


Health and WellnessConsumer Spectrum

Mid-Level46%

Uninvolved29%

Core25%

No Diet,Not Active

20%

No Diet,Active

9%

Small Portions,

Active13%

Own Diet,Active

22%

Right Foods,Active11%

Diets,SupplmtActive +

9%

Diets,Organics Active +

16%


Fresh Tray Pack & MarinatedCreative Brief

GET Engaged cooks

TO Use Jennie-O Turkey Store products to expand their cooking repertoire

BY SAYING You won’t believe what you can do with turkey when you use Jennie-O Turkey Store fresh products.


Fresh Communications Support

POPPrint

Sampling Program

Online

TV

Health Club Program


“Mannequin”


Fresh Tray Pack & Marinated Advertising


Oven Ready Communications Support

TV POPPrint

Trade Online

ViralPR


“Aprons Away”


Oven Ready TV Creative

“Aprons Away” :30 Spot

Message: Oven Ready Turkey liberates you from the hassles of preparing a Thanksgiving turkey


“Turkey Wrestling”


Value Added Price Increases0.

02 0.03

0.11

0.13

0.02

0.07

0.08

0.17

0.03

0.02

0.05

0.16

0.02

0.05 0.09

0.15

$0.00

$0.02

$0.04

$0.06

$0.08

$0.10

$0.12

$0.14

$0.16

$0.18

Retail Foodservice Deli Value Added

Q1 Q2 Q3 2008


Summary

Profitability in 2008 will improve based on full year impact of price increases implemented in 2007.

Ongoing commitment to margin integrity and pricing leadership isparamount!

Our strategies have us positioned to expand the turkey protein, the JENNIE-O TURKEY STORE brand, and enterprise accomplishments going forward

Low cost and vertical integrationMarket and channel expertiseSingular focus on expanding the turkey protein to everyday/all meal occasion through great taste, innovation, and adding value.


Jennie-O Turkey Store

Q&A

Documents

Investor Day 2007 - library.corporate-ir.netlibrary.corporate-ir.net/library/71/712/71258/items/264118/10... · Investor Day 2007 October 9, 2007. ... Farbest Foods, Inc. 280 +67