PLMA Investor Day

Monday, November 17, 2014

Forward-looking Statements
This presentation may contain forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that
do not relate solely to historical or current facts, and can generally be identified by the use of
words such as guidance, may, should, could, expects, seeks to, anticipates, plans,
believes, estimates, approximately, nearly, intends, predicts, projects, potential
promises or continue or the negative of such terms and other comparable terminology. These
statements are only predictions. The outcome of the events described in these forward-looking
statements is subject to known and unknown risks, uncertainties and other factors that may cause
the Company or its industrys actual results, levels of activity, performance or achievements to be
materially different from any future results, levels of activity, performance or achievement
expressed or implied by these forward looking statements. TreeHouses Form 10-K for the period
ending December 31, 2013 and other filings with the SEC, discuss some of the risk factors that
could contribute to these differences. You are cautioned not to unduly rely on such forwardlooking statements, which speak only as of the date made, when evaluating the information
presented during this conference call. The Company expressly disclaims any obligation or
undertaking to disseminate any updates or revisions to any forward-looking statement contained
herein, to reflect any change in its expectations with regard thereto, or any other change in events,
conditions or circumstances on which any statement is based.

Todays Agenda
Topic

Presenter

Financial Review

Tim Young

The Branding of Private Label

Sam K. Reed

Building The TreeHouse Brand Through Customer Intimacy

Chris Sliva

Following the Private Label Consumer

Rachel Bishop

Winning in Single Serve

Harry Overly

Flagstone Foods

Paul Lapadat

Center of Store Growth

Mike Axelrod

2015 Working Assumptions

Dennis Riordan
3

Financial Review

Tim Young
Vice President and Controller

September 2014 YTD Results

Nine months ended September 30
2014
2013

Sales
COGS
Gross Profit

$2,042,589
1,615,333
427,256

$1,633,606
1,294,603
339,003

Operating Expenses
Other Expenses
Pre-Tax Income
Income Taxes
Net Income

284,416
58,262
84,578
28,615
$55,963

212,486
35,908
90,609
26,405
$64,204

Fully Diluted Shares

39,259

37,353

$1.43

$1.72

$99,119

$82,503

$2.52

$2.21

Fully Diluted EPS

Adjusted Net Income
Adjusted EPS

September 2014 YTD Results

Sales
COGS
Gross Profit

Reported

Adjusted

Nine months ended September 30

2014
2013

Nine months ended September 30

2014
2013

$2,042,589
1,615,333
427,256
20.9%

$1,633,606
1,294,603
339,003
20.8%

$2,042,589
1,600,061
442,528
21.7%

$1,633,606
1,274,924
358,682
22.0%

Operating Expenses
Other Expenses
Pre-Tax Income
Income Taxes
Net Income

284,416
58,262
84,578
28,615
$55,963

212,486
35,908
90,609
26,405
$64,204

267,233
29,282
146,013
46,894
$99,119

206,384
36,098
116,200
33,697
$82,503

Fully Diluted Shares

39,259

37,353

39,259

37,353

$1.43

$1.72

$2.52

$2.21

Earnings Per Share

September 2014 Operating Segments

Nine months ended September 30
($ in thousands)

North American Retail Grocery

2014
2013
Inc/(Dec)
Net Sales
DOI
DOI %

Food Away From Home

2014
2013
Inc/(Dec)

Industrial & Export

2014
2013
Inc/(Dec)

$1,489,014

$1,163,733

28.0%

$284,633

$264,357

7.7%

$268,942

$205,516

30.9%

$230,901

$188,705

22.4%

$33,837

$35,888

-5.7%

$45,546

$38,038

19.7%

15.5%

16.2%

11.9%

13.6%

16.9%

18.5%

Strong topline growth, both organic and through

strategic acquisitions, complemented by operating
efficiencies. DOI margin improvement, however,
reflects the effect of recent acquisitions.
7

Volume Analysis Nine Months 2014

($ in thousands)
2013 Net sales

Retail
Grocery
$ 1,163,733 100.0%

Food Away
From Home
$ 264,357 100.0%

Industrial
& Export
$ 205,516 100.0%

Total
$ 1,633,606 100.0%

Volume / Mix
Pricing
Net from operations

64,483
(4,274)
60,209

5.5%
-0.4%
5.2%

(1,546)
1,139
(407)

-0.6%
0.4%
-0.2%

6,189
(979)
5,210

3.0%
-0.5%
2.5%

69,126
(4,114)
65,012

4.2%
-0.3%
4.0%

Acqs / rationalization
Foreign currency

275,863
(10,791)

23.7%
-0.9%

22,644
(1,961)

8.6%
-0.7%

58,492
(276)

28.5%
-0.1%

356,999
(13,028)

21.9%
-0.8%

2014 Net sales

$ 1,489,014 128.0%

$ 284,633 107.7%

$ 268,942 130.9%

$ 2,042,589 125.0%

TreeHouse Debt Capacity

Outstanding as
of 9/30/2014

Availability

Interest Rate

Expiration

Revolving Credit(1)

$654 mm

$235 mm(3)

L+120 bps(4)

May 2019

Term Loan(5)

$299 mm

L+175 bps

May 2021

Acquisition Term Loan

$199 mm

L+200 bps

May 2019

High Yield Notes

$400 mm

4.875% Fixed

Total Debt

March 2022

$1,552 mm(2)

Proforma leverage is expected to be less than 3.5 times debt to EBITDA at 12/31/14.
Notes:
(1) Entered into a new revolving credit agreement in May 2014, with an expiration date of May 2019
(2) Includes $10.8 million of tax increment financing and other debt
(3) Excludes outstanding letters of credit totaling $10.9 million that are issued but undrawn
(4) Applicable rate as of September 30, 2014

Growing Strong, Standing Tall

10

The Branding of Private Label

Sam K. Reed
Chairman, President & Chief Executive Officer

11

The Evolution of Private Label

It is not the strongest nor the most intelligent that

survives, it is the one most adaptable to change.

12

A Decade of Change
THEN

in Food

Baby Boomers

Consumer

Millennials

Generic

Products

OPP

NBE

3 Squares

Meal Occasions

Lite & Diet

Nutrition

Eco-friendly

in Grocery

in Technology

Premium Organic

Grazing
Phytochemicals

Social Responsibility "Locavores" & B4U

Super Centers

Stores

Aldi & Whole Foods

Private Label

Store Brands

Destination Brands

Shopping

Perimeter Racetrack

Center of Store
Coupons

Deals

Peapod

Convenience

AmazonFresh

Communication

Social Media

Mass Marketing

Apps

Meta Data
Allergens

in Private Label

NOW

Lowest Landed Cost

Cott & Ralcorp

Food Safety

GMOs

Competitive Advantage Value Without Compromise

Leaders

Perrigo &

13

The Evolving Private Label Family Tree

Premium

Destination
Brands

Premium Tiers
Value Added
Own Brands

Private Label
Generic
Product

14

TreeHouse Foods DNA

Brand

Brand Innovation

Customer
Marketing
Service

NBE Quality

Fast Follower

Lowest Cost
Product

15

Elements of THS Strategy

Our strategic construct is rooted in six fundamental tenets:

Customer brands and custom products provide an unparalleled opportunity for sustained
growth across the North American food and beverage industry.

Our Go-To-Market scheme is based upon a portfolio strategy of categories,

customers and channels designed to generate economic scale, customer preference
and financial premium.

It is our business system of partnership with strategic customers that brands THS as
offering value without compromise, thereby creating and sustaining our competitive
advantage.

Economic advantage in private label, unlike brands that rely upon a few large scale, market
wide elements, must be derived from a multitude of small scale, category and customer
differentials in product, pricing, cost and service.

Our financial imperative is to optimize long term shareholder value on a risk adjusted basis,
subject to fulfilling our obligations to others in the greater TreeHouse community.

Given that acquisitions fuel our growth, our culture must foster a collaborative ethic of
excellence across all functions, egalitarianism across all legacy predecessors and
organizational unity across diverse businesses.
16

THS Portfolio Strategy: 2005

Categories
Product Based
Profitability

Baby Boomers
Supermarkets
NBE
Lowest Cost
Growth
17

Growth Thru Innovation

Private Label Share of New Products in US Food & Drink
25,000

TreeHouse Era

35%
30%

20,000

25%
15,000

20%
15%

10,000

10%
5,000

5%

0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*

Number of New Products

Source: Mintel GNPD, as of August 2014
*2014 Year to date figure annualized

Private Label % of New Products

18

THS Portfolio Strategy: 2010

Customers
Private Label Strategy

Service Based

Frugal Consumers
Alternate Channels
Tiered Offerings
Cost To Serve
Collaboration
19

Growth Thru Customer Alignment

Private Label Food & Beverage Trends by Retailer

Percent Change in Average Price vs. YA

4%
3%

Min

Max

Units

-10.0%

+9.8%

Price

-2.5%

+3.2%

2%
1%
0%
-1%
-2%
-3%
-11%

=$1Bn in PL Sales

-9%

-7%

-5%

-3%

-1%

1%

3%

5%

7%

9%

11%

Percent Change in Units vs. YA

Source: IRI Market Advantage, Last 52 weeks ending 10/26/2014; Food & Beverage refers to the aggregation of the General Food and Beverage Departments

20

THS Portfolio Strategy: 2015

Consumers

Values & Lifestyle

Destination Brand Based

Millennials
Store Perimeter
B4U + Relevance
Store Brand Premium
Demographics
21

Growth Thru Acquisitions

Category Growth Trends

140%

Nuts, 124%

Percent Change in U.S. Dollar Sales

120%

100%

80%

UHT Soup, 66%

60%

40%

Packaged Food &

Drinks, 31%

20%

0%
2009

Source: Euromonitor

2010

2011

2012

2013

2014F

2015F

2016F

2017F

2018F

22

THS Portfolio Strategy: 2020

23

The THS Brand: Growth Thru Change

Single Serve Beverage
Growth & Plans

Net Sales in Millions

$400

$300

$200

$100

$0
2010

2011
Actual

2012

2013

Original Plan

2014
Fcst
Revised Plan

2015
Plan

2016
Plan
24

A Decade of Change
THS 2005 Portfolio
$700M Net Sales

THS Portfolio 2014 Pro Forma

$3.5Bn Net Sales
Cereals

Other

Beverage
Enhancers

Healthy Snacks

Pickles
40%
Growth
NDC

Pickles
100%
Value
Beverages

Soup

Aseptic & Other

60%
Value

Protenergy

Dry Dinners
Jams
Mexican & Other Salad Dressings
Sauces

25

A Decade of Growth
$5,500

THS Total Enterprise Value

$5Bn+

$5,000

TEV ($ in Millions)

$4,500
$4,000
$3,500

$3,000
$2,500
$2,000
$1,500
$1,000
$500
Jun-05 Apr-06 Feb-07 Dec-07 Nov-08 Sep-09 Jul-10 Jun-11 Apr-12 Feb-13 Dec-13 Nov-14

Note: Total Enterprise Value = Market Capitalization + Interest Bearing Debt + Preferred Stock Excess Cash
Source: CapitalIQ and internal data

26

The Branding of Private Label

Making THS the Home of Customer Brands

Growth

Simplification

Vision-Mission-Values

27

Growing Strong, Standing Tall

28

Building The TreeHouse Brand

Through Customer Intimacy
Chris Sliva
Executive Vice President, TreeHouse Foods &
President, Bay Valley Foods
29

Value Disciplines

Customer Intimacy

Value Disciplines

Product Leadership

Operational Excellence

30

BVF Business Model

Focuses on Customer Intimacy
Broadening Product
Portfolio
Growing
Centralized and
Customer-Focused
Capabilities
Strategic
Customers

Customer Intimacy

Efficient
Distribution

Marketing
Insights, Product
Development,
Category
Management

Quality, Food Safety,

Service
31

Strategic Customers
Garner the Most BVF Resources

Tactical
Collaboration

Strategic
Partner

Customized
Services
Product Differentiation

LOW

VOLUME

HIGH

CUSTOMERS

Commodity
Supplier

Strategic
Supplier

LOW
HIGH
GROWTH

Operational Efficiency

32

SKU Productivity is
Declining in the Food Industry

Velocity / SKU
(Index vs Baseline)

105
100

102.4
100
96.2

95
91.1
90

87.5

86.4

85
80
75
2009

2010

2011

2012

2013

2014

TUS Multi-Outlet General Food and Beverage, Source: IRI

33

Focus on Top Customer Growth and Simplification

Are Yielding Improved SKU Productivity
118

120
114

Index vs Baseline

115
110

113

113

107

105
100

Velocity Per
SKU Produced

100
95
90
Q213 Q313 Q413 Q114 Q214 Q314
34

TreeHouse Drives Disproportionate

Private Label Growth

Share of Private Label Sales

40.00%

36.63%

35.00%

30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%

4.96%

THS Net Sales Share

Source: IRI General Food & Beverage last 52 weeks, ending 10/26/14

THS YOY Share of Growth

35

The TreeHouse Brand

Values

Enhancing our customers brands

through focus on their priorities

Simplification

Driving product brand and

category productivity

Growth

Delivering 7x fair share growth

rates in private label

36

Growing Strong, Standing Tall

37

Following The Private Label

Consumer
Rachel Bishop
Senior Vice President, Chief Strategy Officer

38

Slow Recovery in Consumer Sector

6%

Real US Personal Consumption Expenditures

4%

2%

0%

-2%

Q1'00
Q3'00
Q1'01
Q3'01
Q1'02
Q3'02
Q1'03
Q3'03
Q1'04
Q3'04
Q1'05
Q3'05
Q1'06
Q3'06
Q1'07
Q3'07
Q1'08
Q3'08
Q1'09
Q3'09
Q1'10
Q3'10
Q1'11
Q3'11
Q1'12
Q3'12
Q1'13
Q3'13
Q1'14
Q3'14

-4%

Total Personal Expenditures

Source: Bureau of Economic Analysis; Seasonally adjusted

Expenditures on Food at Home

39

Confidence Slowly Returns

Unemployment and Consumer Sentiment
18%

120
110
100

14%

90

12%

80
70

10%

60
8%

Consumer Sentiment

Unemployment Rates

16%

50

6%
Jan '00 Jan '01 Jan '02 Jan '03 Jan '04 Jan '05 Jan '06 Jan '07 Jan '08 Jan '09 Jan '10 Jan '11 Jan '12 Jan '13 Jan '14

Unemployed & Underemployed

Source: US Bureau of Labor Statistics; Survey Research Center: University of Michigan; Index March 1996 = 100

40

Consumer Sentiment

40

Generational Shift In Progress

Shifts in U.S. Population by Generation

Current Grocery Spend by Generation

% of U.S. Population (18 years of age +)

40%
35%

Millennials

Greatest
Generation
12.9%

30%

Millenials
21.9%

Gen X
25%
Boomers
20%
15%

$710+ Bn

Greatest
Generation

10%

Boomers
42.5%

Gen X
22.7%

5%
0%

Source: U.S. Census Bureau, includes only individuals aged 18 and older

Source: IRI, CSIA, Total U.S. Multi Outlet, last 52 weeks ending 6/15/2014

41

The New Definition of Premium

Consumers Define Premium
Quality
Ingredients

15% of consumers report that

they will increase usage of
premium brands in the next 12
months

89%

Makes Life
More
Convenient
Higher in
Price

64%

25%

Premium Branded
Source: IRI, Premium Products Primed to Perform, July 2014; IRI MarketPulse Survey Q2, 2014

42

Retailers Respond

43

TreeHouse Is Well Positioned

BFY
Premium
NBE
OPP

Soup &
Gravy

Dry
Dinners

Dressings Hot Cereal Beverages

Snacks

44

Practical Innovation

45

Practical Innovation

46

Practical Innovation

47

A Private Label Thanksgiving

48

Growing Strong, Standing Tall

49

Winning in Single Serve

Harry Overly
Chief Customer Officer
Bay Valley Foods
50

Sustainable Growth in Single Serve

Beverages
Existing
Customers

New Customers

Technology
Implementation

Usage Occasions

51

Single Serve Coffee Driving

Category Growth

IRI Market Advantage, Total US MULO, Latest 52 weeks ending Oct 26, 2014

52

Driving Growth Through Variety

Customer Brand Items Per Segment
COFFEE

CAPPUCCINO

HOT COCOA

CIDER

TEA

2
1

1
1
1

1
1
1

2
2

12

11

11

42%

23%

39%

31%

16

Customer
Brand Share

58%

Wegmans

Source: IRI Market Advantage | Single Cup Beverage | Latest 13 Week Pd Ending 09-28-14

1
6

13

53

Specialty Beverages Continue to Grow

Top 20
Retailer
Top Online
Retailer

#2 of ALL Single Serve items

French Vanilla Cappuccino Delivers

+37% Growth!

#7 of ALL Single Serve

#13 of ALL Grocery

Top 5
Retailer

#5 of ALL Single Serve Items

Top 5
Retailer

#7 of ALL Single Serve Items

#1 Private Label SS item

Top 5
Retailer

#1 Private Label SS item

Source: IRI Market Advantage, Single Cup CAPPUCCINOS, Total US - Multi Outlet, Latest 52 Week Pd ending 09-28-14

54

TreeHouse Continues to Lead

TreeHouse partnered with key retailers to establish strongest Private Label shares since
program inception

Private Label Single Cup Coffee: Unit Share

US MULO
Regional Grocer A
Regional Grocer B

Brand Suppliers

9.9

PL Manufacturer

5.0

THS Supplied

6.8

Regional Grocer C

37.2

Regional Grocer D

32.0

Customers Win with TreeHouse

IRI Market Advantage, Latest 52 w/e 3.30.14

55

SolutionDelivered
Replicate Taggant Technology
Consumer Exploration
Product & Process Design
Operational Efficiency & Quality Validation
Commercialize

TreeHouse Launched the ONLY NBE Technology Solution

ON Schedule!
56

Innovation Driving Growth

57

Growing Strong, Standing Tall

58

Flagstone Foods

Paul Lapadat
Chief Executive Officer, Flagstone Foods

59

Agenda

Company History / Vision

Category Overview
Innovation
Retail Partnerships
Platform for Future Growth

60

Flagstone Foods Introduction

Company History
1962

Amport Foods is the #1 private label dried fruit manufacturer and marketer in the U.S. with a
broad line-up of healthy snacks and leadership position in perimeter of the store snacking.

1973

Anns House of Nuts was established as a family business and is now the #1 private label trail mix
manufacturer and marketer in the world with a broad line up of snack nuts and other wholesome
snacks.

2010

November 2010 Gryphon Investors acquired Anns House of Nuts and Amport Foods to create a
$390MM healthy snacks company focused on store brands.

2012

Announced parent company name change to Flagstone Foods in July 2012 in conjunction with
relocating its headquarters to St. Paul, MN while the company realized double-digit growth.

2014

Acquired by TreeHouse Foods on July 29 creating a new platform for growth!

61

Flagstone Vision

To build a large scale healthy snacks company that will be the preferred
supplier and partner of the retail trade and be distinguished by our:
Broad range of high quality, better-for-you snack products

Focus on store brands and control brands

Product innovation leadership

Value-added category management with insights and analytics

62

Healthy Snacking Is a Growth Sector

Healthy snacks represents the fastest growing space in all of food, particularly in private label
Flagstone is responsible for the growth of private label outpacing brands in healthy snacks

Healthy Snacks

Private Label Healthy Snacks

Total Food Industry

($ in billions)

($ in billions)

($ in billions)

$8.0

$2.5

$500

$6.9

$7.0

$7.1

$6.4
$6.0

$2.1
$1.9

$2.0

$400
$362

$1.8

$5.9

$381

$390

$396

2011

2012

2013

$1.6

$5.5
$1.5

$1.5

$300

$5.0

$4.0

$1.0
2009 2010 2011 2012 2013

$200
2009 2010 2011 2012 2013

Note: Healthy snacks includes snack nuts, trail mix and dried fruits
Source: Nielsen

2010

63

Flagstone Core Categories Overview

Flagstone participates in categories with sizable PL presence, with significant runway to gain share
Snack Nuts

Trail Mix

Dried Fruit

Total Market

$6,539

$986

$718

$8,243

CAGR (11 13)

7%

8%

1%

7%

CAGR (13 18)

7%

7%

4%

7%

Market Size ($MM)

25%

30%
Branded Share
Private Label Share

33%

54%
70%

46%

75%

67%

64

Organic Growth Through Innovation

Track record of driving organic growth by leading with category innovation:
Bring consumer packaged goods branded mindset and talent to Private Label

Leverage shopper insights from variety of sources including custom research

Rapidly develop & prototype new brands, new products, new packaging and new categories
Best speed to market from idea to shelf

Shopper
and
Customer
Insights

New Item
Prototyping
and
Feedback

Customer
Innovation
Pipelines:

New Brands
New Products
New Packaging
New Categories

Sustainable
Top and
Bottom Line
Growth

65

Innovation Platforms
Recent Flagstone Product Innovation
Natures Harvest Brand
Creation

Veggie
Segment

Unsalted Segment

Organic & Better For

You Segments

66

Innovation Platforms
Recent Flagstone Product Innovation
Premium Snack Bar
Segment

Seasoned
Almond Segment

Licensing /
Co-Branding Segment

On The Go Packaging
Forms

67

Partnering with Top Retailers

68

Flagstone Is a Platform for Growth

1) Flagstone competes in high growth categories
Categories continuing to see robust growth in the latest 52 weeks:
Private Label Nuts +10.9%
Private Label Trail Mix +9.3%

Private Label Dried Fruit +4.4%

2) Categories are highly responsive to innovation

Lead with innovation at key retailers and increase share of shelf

Flagstone is organized internally to facilitate innovation and growth

3) Platform Company ready for acquisitions

Infrastructure already in place for add-on acquisitions
Aligned M&A strategy and actively working M&A targets

69

Growing Strong, Standing Tall

70

Center of Store Growth

Michael Axelrod
Chief Operating Officer
Bay Valley Foods
71

Overall Real Growth in U.S. Grocery is Stagnant

Total Grocery

$714

Billions

$699

$774

$771

$760

$740

245

2009

248

2010

250

2011
Dollar Sales

250

2012

251

2013

251

52 w/e 4/12/14

Unit Volume

Source: Nielsen, Total U.S. All Outlets Combined (plus Convenience), All Departments, All Brands (UPC), % Change, 52 week periods vs. year ago

72

Areas of Growth Exist

Private Label
Private label has achieved 18.7% growth since 2009 to reach $112 Bn while
brands grew only 8.3% over the same time period.

Winning Customers
Over the course of the last 6 years, many customers have struggled, but others
have managed to deliver consistent growth above the consumer price index.

Category Innovation
While overall growth has been limited, certain categories have been able to
succeed at the expense of others through innovation, often led by new market
entrants.
Nielsen Strategic Planner, Total U.S. All Outlets Combined (xAOC), 52 weeks ending 12/26/2009 vs. 52 weeks ending 4/12/2014, UPC coded

73

3 Keys to Driving Growth

Health & Wellness

Value

Convenience

74

Pockets of Growth in the Center of the Store

Milk &
Creamers

Fresh
Bread

Cottage
Cheese &
Sour Cream

Butter &
Margarine

Pkgd
Milks &
Modifiers
Carbonated Soft
Drinks

Non
Carbonated Soft
Drinks

Sports &
Energy
Drinks

Drink
Mixes

Bakery

Spices &
Seasonings

Baking
Mixes

Baking
Supplies

Shortening & Oil

Juices
RTD
Coffee &
Tea

Eggs

Bottled
Water

Sugar &
Sweeteners

Candy

Yogurt

Dessert
Syrups &
Toppings

Pudding &
Dessert
Mixes
Jams /
Jellies /
Spreads
Dressings
&
Toppings
Soup &
Gravy

Broth

Rfg Dough &

Baked Goods

Condiments &
Sauces

Rfg
Desserts

Cheese

Baby Food
Snacks
Cereals

Pickles /
Olives /
Relishes
Cookies
Ethnic
Foods
Crackers
Pasta

Dry Beans
& Grains

Gum

Source: IRI, Market Advantage, Total U.S. Multi Outlet, volume growth in units, CY2011 vs. CY 2013

Breakfast
Foods

Coffee

Baked
Beans

Rfg Meals

Rfg Dips &

Condiments

Canned
Meat &
Seafood
Canned
Fruit
Fresh
Produce

Snack
Nuts &
Seeds
Dried
Fruit

SS
Dinners &
Mixes

Rfg Meats

Tea

Rfg
Beverages

Canned
Veget2011-2013 CAGR
ables
>3.0%
1.0 to 3.0%
-1.0 to 1.0%
-1.0 to -2.0%
<-2.0%

75

The Soup Opportunity

Condensed Wet Soup ($1.6B, -4.5%)
VOLUME
(UNITS)

25%

25%

RTS Soup ($1.9B -1.8%)

Broth $0.9B (+4.6%)

1%
6%

20%

75%

Eating Cans
Units (MM)
Y/Y Growth

752
-4.5%

75%

99%

Cooking CansCTN
502
-4.5%

1
14%

94%

31%

33%

69%

67%

80%

Value Cans

CTN

CANS

CARTON

992
-1.8%

37

226
-11.0%

295
15.7%

19%

Private Label Share

Brand Share
Source: IRI MULO latest 52 weeks ending 8/24/14; Internal Analysis

Opportunity Areas
76

Convenience - Broth and RTS Soup

US Retail Share of Soup Segments for Carton Packaging Format
% soup segment share (units)

100%

90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1995

Broth

RTS Soup

2000

2005

2010

2015

2020

2025

2030

Source: IRI Market Advantage Unit share data for 2011-2014 (Actual); Projections from 1997-2010 based on Nielsen AOCx historical CAGR rates (Estimated); Projections from 2015-2030
based upon Euromonitor growth CAGR rates (Estimated)

77

Health & Wellness PL Soup

Private Label Organic Soup
% of Total Organic Soup (Sales $)

20%
18.9%

19.2%

18%
16.3%
16%

15.8%

15.0%

14%
12.3%
12%

10%
CY '09

CY '10

CY '11

CY '12

CY '13

LTM '14

Sources: IRI, Market Advantage, Total US Multi Outlet, Latest 52 weeks as of 9/29/14
Soup categories include all sub-categories as defined by IRI.

(1)

78

BVF is Well Positioned to Win with Soup

Critical Enablers

Description

Category
Management

Innovation

Operational
Excellence

A full line of products in all segments

Strategic customer/channel segmentation/ targeting

Industry leading innovation, design, R&D, and food safety

Agility/flexibility to support growth and innovation

End-to-end supply chain built for lowest cost

79

Growing Strong, Standing Tall

80

2015 Working Assumptions

Dennis Riordan
Executive Vice President and Chief Financial Officer

81

2015 Working Assumptions

Highest sales growth will come from hot beverages, snacks,
and new soups and broths.
Legacy categories will continue to grow modestly, despite
challenging food industry run rates.
Input cost changes are not expected to be significant in
total, but there will be variability in certain commodities.
We will need to address the probability of wider
movements (up or down) as the year progresses.

82

2015 Working Assumptions

Recent acquisitions will have lower than average gross
margins more than 700 bps lower than Legacy:
Year to Date Gross Margins:
Nine Months ended:

2014

2013

Total Company As Reported

20.9%

20.8%

Total Company As Adjusted

21.7%

22.0%

Nine Months 2014

Legacy
Acquired
Total

Nine Months 2013

Legacy
Acquired
Total

Net Sales

$ 1,672,146

$ 370,442

$ 2,042,588

$ 1,612,021

$ 21,584

$ 1,633,605

Gross Margins

$ 385,942

$ 56,585

$ 442,527

$ 354,820

$ 3,862

$ 358,682

Gross Margin %

23.1%

15.3%

21.7%

22.0%

17.9%

22.0%

Above financial data is derived from previously disclosed information in filings, earnings releases and calls

83

2015 Working Assumptions

We expect to apply the synergistic and operational
expertise of our legacy business to the new acquisitions,
although due to the higher raw material content, the impact
may be less in the better-for-you snacks business.
We still anticipate 100 bps of margin improvement from
our on-going business next year, driven by simplification
programs and reducing low volume / low margin SKUs

84

2015 Working Assumptions

2015 SG&A spending:
Possible increase in IT spending to address the conversion of recent
acquisitions and continued roll out to legacy locations
Expect SG&A leverage to very modestly increase as a percent of net sales in
2015
Stock Compensation expense will increase by about 1/3 due to earnings
growth of the company and additional participants from acquisitions

Interest rates will rise only slightly in 2015 due to anticipated

high-yield issuance and general market conditions
Tax rates should be a the high end of the historic average of
about 34% - 35% due to the increased mix of US income
85

2015 Working Assumptions

Shares
Share count grows each year in the last week of June due to normal
annual grants
There is very little effect on average shares outstanding until Q3 and Q4
With the additions of new participants from acquisitions, the new
grants will likely grow by 1/3 compared to historic growth

Insider Selling
We are approaching the 10 year anniversary of the Company, so
insiders have to sell options due to their 10 life
Original grants were larger than normal annual grants, so expect more
sales over the next six months
Management still retains a substantial stake in the Company

86

Growing Strong, Standing Tall

87