Grocery Products Segment
Investor Day Presentation
Ron Fielding, Executive VP – Grocery Products
Scott Aakre, Vice President – Grocery Products Marketing
Our products are generally found in the center of the
supermarket…
The segment’s legacy brands have been complemented by a
series of acquisitions and joint ventures…
1995
1996
2006
And most of our top-line growth over this time frame can be
attributed to this direction…
$1,000.0
CAGR%
Net Revenues CAGR = 3.0%
$ MM
$800.0
13.9%
$600.0
$400.0
1.4%
$200.0
$0.0
1997
1998
1999
2000
2001
Historical Grocery Cores
2002
2003
2004
2005
2006 2007E
Acquisitions/Joint Ventures
Our focus is now being re-balanced to address our “franchise
players”; by adding more relevant options…
Otherwise, market share1 will be increasingly difficult to protect,
especially from private label…
Private Label
CAGR %
Share PP
’05-’07 [Volume]
‘05
‘07
Canned Chili
-1.0
11.2
12.1
Canned LM
1.4
5.2
5.9
MW Meals
-6.2
1.5
0.8
Canned Stew
-4.3
12.5
13.4
Salsa
1.7
19.7
20.9
Canned Hash
1.9
19.5
22.7
Chunk Meats
5.6
19.3
21.2
Olive Oil
30.2
14.8
19.1
1
52 week Nielsen ending 8-25-07.
And our strong price premiums will be more challenging to
maintain…
By Most Popular Size
Average Retail
Private Label
% Variance
HORMEL Chili
$1.26
$0.93
+35.5%
SPAM
$2.23
$1.34
+66.4%
DINTY MOORE
$2.38
$1.81
+31.5%
HORMEL/VF Chunk Chicken
$1.79
$1.32
+35.6%
CHI CHI’S Salsa
$2.23
$1.85
+20.5%
HORMEL Corned Beef Hash
$2.23
$1.46
+52.7%
52 week Nielsen ending 8-25-07.
Ensuring that our “franchise players” remain relevant to customers
and consumers is a key focus area...
1967
Our strategic orientation deals directly with this need…
… Protect and grow our business by…
† Focusing resources
† Leveraging category leadership positions
† Driving
Driving brand
relevancy
Brand
Relevancy
† Fixing or exit under-performing businesses or categories
… Pursue optimum “QUALITIVITY” [quality + productivity] by…
† Balancing cost/quality needs
† Building a business system that simultaneously lowers cost, improves quality
and/or extends packaging, product formulation options
… Pursue acquisitions that…
† Add scope, scale and/or capability
† Deliver 20% pre-tax margins
† Have potential for growth, category leadership
And we believe meaningful innovation will drive consumer traffic
back to the center of the store once again …
% Share of Market
Recent consumer marketing efforts have reignited our chili business
despite price increases/tough competition…
50.0%
45.0%
40.0%
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
30.4%
32.5%
11.4%
10.9%
2005
2006
1
STAGG Brand
1Core
Western Markets
34.0%
11.5%
2007
HORMEL Brand
Investments in new packaging, product forms and advertising
are driving brand health…
Spending efficiencies are derived from our new HORMEL
brand umbrella campaign…
There is a broad effort against the advancement of our #1
franchise player…
SPAM Singles has been key to opening up new doors [households]
and is now rolling nationally…
Returning
to SPAM
Franchise
32%
NEW to
SPAM
Franchise
68%
Source: Spectra Data
Singles Buyer
Index
Category Buyer
Index
Age Under 35
110
90
Age 55 and over
83
119
Income $50K - $75K
150
114
Income $70K+
129
78
Affluent
141
90
1 Member HH
109
82
The DINTY MOORE franchise is also making solid moves towards
increasing relevancy…
New/better products, clear brand messaging and focus on
flavor/health will fuel CHI-CHI’S growth…
Authentic and leading Mexican brands1 round out our
portfolio…
1
HERDEZ Corporation is a joint venture company formed between Grupo HERDEZ
and Hormel Foods in 1996
Herdez commercials
Mexico’s #1 salsa brand appeals to a broad consumer audience…
Unit Share
Share Position1
Mountain Region
17.6%
#1
Pacific Region
11.1%
#3
HERDEZ Salsa
1
12 week Nielsen ending 8-25-07. (1) excludes private label
In the mid 1980s, Hormel Foods envisioned product solutions
that were ultra convenient;
25 years later we reached the tipping point!
Microwave vision video
Our new HORMEL COMPLEATS line solves the consumer need
for REAL FOOD, REAL FAST
; Complete meal, no need to
add any sides.
REAL MEAL
; Comfort foods that leaves
you filled up.
; More filling than soup.
; Faster than frozen.
REAL FAST
; Hot food; ready in 90
seconds; done in 10
minutes.
Our current branding efforts highlight important product
attributes…
New Hormel
Brand Mark
Complete Meal
“Use a Fork”
Speed
Improved
Appetite Appeal
The added focus and resource deployment is driving growth…
Tonnage Up 38.6% v. YAG
CAGR = 55.5%
2004
2005
2006
2007E
Today’s COMPLEATS line includes a broad variety of traditional
meals…
All key measures1 continue to move in a positive direction…
2004
2005
2006
2007 LE
Consumption ($MM)
15.8
23.5
35.5
47.1
Distribution (%ACV)
54.5
67.2
82.0
90.0
Velocity ($/MM)
19.0
23.0
28.0
32.0
Share (PP)
13.1
18.0
22.9
27.6
HH Penetration (%)
n/a
4.2
6.0
8.5
Buying Rate (volume/yr.)
n/a
4.0
4.2
4.6
Avg. # Items
4.3
5.5
5.9
14.0
1
ACNielsen latest 52 weeks, does not include WAL*MART, alternate channels
We have launched consumer communication targeting the
“right now” lunch occasion
Target:
hardworking men &
women
Situation:
10 minute “right now”
meals
Competitive frame:
sandwich, soup and
frozen entrees
Benefits:
faster + more complete +
more filling
Compleats
commercials
Line segmentation is under development and is key to
continued growth…
Segmentation Targets:
Ethnic
10
Traditional
8
Healthy
6
4
2
Larger Portions
0
Seniors
Kids
Teens
Breakfast
Early next year we will launch a variety of products that
promote healthy lifestyles…
… Under 250 calories
… Under 10 grams fat and less
than 3 grams saturated fat.
No trans fats.
… Preservative Free
… Sodium 600 mg
… 20 grams of Protein
… Meets USDA guidelines for
Health Lifestyle
Launch Date February 2008
Significant capability/capacity is being developed to support our
microwave meals growth…
Rochelle,
Rochelle,
Illinois
Illinois
Beloit,
Beloit,
Wisconsin
Wisconsin
Plainview,
Plainview,
Minnesota
Minnesota
MW
MW
Meals
Meals
New
NewFocus
Focus
Plant
Plant
Tucker,
Tucker,
Georgia
Georgia
A solid execution of our strategy will deliver steady growth in
segment profitability…
45%
25%
40%
Gross Margin %
30%
15%
25%
20%
10%
15%
10%
5%
5%
0%
0%
2001
2002
2003
2004
2005
2006
2007
Fiscal Year
Gross Margin %
Segment Profit %
2008
Segment Profit %
20%
35%
Grocery Products
Q&A