BEST IDEA: LONG WHITEWAVE FOODS (WWAV)

Transcription

1 HOWARD PENNEY HANG 10 ON THIS WAVE BEST IDEA: LONG WHITEWAVE FOODS (WWAV) June 18, 2015 HEDGEYE 1

2 DISCLAIMER DISCLAIMER Hedgeye Risk Management is a registered investment advisor, registered with the State of Connecticut. Hedgeye Risk Management is not a broker dealer and does not provide investment advice for individuals. This research does not constitute an offer to sell, or a solicitation of an offer to buy any security. This research is presented without regard to individual investment preferences or risk parameters; it is general information and does not constitute specific investment advice. This presentation is based on information from sources believed to be reliable. Hedgeye Risk Management is not responsible for errors, inaccuracies or omissions of information. The opinions and conclusions contained in this report are those of Hedgeye Risk Management, and are intended solely for the use of Hedgeye Risk Management s clients and subscribers. In reaching these opinions and conclusions, Hedgeye Risk Management and its employees have relied upon research conducted by Hedgeye Risk Management s employees, which is based upon sources considered credible and reliable within the industry. Hedgeye Risk Management is not responsible for the validity or authenticity of the information upon which it has relied. TERMS OF USE This report is intended solely for the use of its recipient. Re-distribution or republication of this report and its contents are prohibited. For more details please refer to the appropriate sections of the Hedgeye Services Agreement and the Terms of Use at HEDGEYE 2

3 PLEASE SUBMIT QUESTIONS TO HEDGEYE 3

4 KEY POINTS A PORTFOLIO OF STRONG ON-TREND BRANDS WWAV is built on the strength of its brands, all of which hold a #1 or #2 position in their category. WWAV operates in on-trend categories that are front and center to todays consumer. The plantbased segment is largely under penetrated but is starting to gain broader consumer acceptance. WWAV is at the helm, and we are confident they will drive growth and penetration, while maintaining their share of the category. PLATFORMS BUILT FOR ACQUISITIONS WWAV has clear platforms that are built for acquisitions, Plant-based Foods and Beverages, Creamers, Premium Dairy, Organic Greens & Produce and now Plant-based Nutrition, all are capable of tack on acquisitions. They have proven they are actively looking, announcing a deal in every year since the spin-off from Dean Foods. STRONG EXPERIENCED MANAGEMENT AND BOARD In our research in the consumer space it is hard to find a Board of Directors with more relatable experience than WWAV s. Additionally, their management comes from their old parent company Dean Foods, which gives them strong experience to deploy in such a young company. HEDGEYE 4

5 ORIGINAL LONG THESIS STILL HOLDS TRUE

6 ORIGINAL LONG CALL ON 4/11/14 THEY HAVE BEEN EXECUTING ON OUR THESIS WE DON T SEE AN END TO THIS GROWTH IN SIGHT WWAV s on-trend category, volume growth and earnings potential are best in class In FY2014 WWAV experienced robust growth on the top and bottom line. We strongly believe that their brands are underpenetrated and have more room to run. Brands currently averaging below 30% household penetration across the board We believe margin expansion will continue, as the company benefits from fixed cost leverage, favorable product mix and increased internal manufacturing capabilities They made a big push in FY14 increasing operating margins by 90 basis points exceeding their goal of 75 basis points, while increasing marketing investments at double-digit rates. WWAV started off FY15 in Q1 with a strong 57 basis point improvement as they continue to leverage their supply chain manufacturing capabilities Horizon center-of-store expansion On track to deliver expectations, management is going with a strong beachhead approach to this launch, building it up in their highest ACV markets, and expanding outward from there Household penetration remains low As mentioned above, household penetration has plenty of room to grow as consumers are getting more and more focused on what they put in their bodies and the affect that has on the environment Continuously beating guidance It has been an impressive run, management has consistently raised guidance following positive performance (which they have every quarter), and still beating it out on a quarterly basis HEDGEYE 6

7 PERFORMANCE SINCE 4/11/14 UP ~83% SINCE OUR LONG CALL THERE IS STILL ROOM TO RUN Competitive Set: General Mills (GIS) Kraft Foods (KRFT) Nestle SA (NESN-CH) Hain Celestial (HAIN) Monster Beverage (MNST) Lifeway Foods (LWAY) Danone SA (BN-FR) (INDEX) WhiteWave Foods Company - Price (INDEX) Index:WWAV Comp Set - Price (INDEX) S&P Price Data Source: FactSet. HEDGEYE 7

8 ADDITIONS TO LONG THESIS DON T LET THESE ADDITIONS TAKE AWAY YOUR FOCUS ON THE ORIGINAL, BECAUSE THOSE STILL HOLD TRUE! Growth through acquisitions string of pearls approach Earthbound, So Delicious, Vega Who could be next? We have some ideas Geographic expansion JV in China is just the beginning through 2014 and into Q expanded distribution into Canada and Mexico, but is still largely underdeveloped South America is completely untapped! Brand creation You don t always have to buy brands to enter new categories Yulu, a premium Australian style yogurt offering, expanding reach within the fast growing yogurt category 4 Strength of management team I believe we understated what this means for the company in our original thesis, the experience that they carry can not be underestimated HEDGEYE 8

9 EXECUTIVE SUMMARY

10 COMPANY OVERVIEW The WhiteWave Foods Company is a consumer packaged food and beverage company that manufactures, markets, distributes and sells branded plant-based foods and beverages, coffee creamers and beverages, premium dairy products and organic produce throughout North America and Europe. WWAV also holds a 49% interest in a JV in partnership with Mengniu Dairy Company Limited that manufactures, markets, distributes and sells branded plant-based beverages in China under the Silk brand Three Reportable Segments: 1. Americas Foods & Beverages: Silk, So Delicious, Horizon Organic, Vega (pending), International Delight and Land O Lakes 2. Americas Fresh Foods: Earthbound Farm 3. Europe Foods & Beverages: Alpro and Provamel Headquartered in Denver, Colorado; 4,500 employees Very strong management team coupled by a small board (only six members) with industry experience, we believe this allows them to be nimble and act quickly, given there are not so many cooks in the kitchen Data Source: Company filings. HEDGEYE 10

11 BECOMING A GLOBAL COMPANY HEDGEYE 11

12 FINANCIAL SUMMARY SPENDING WISELY INVESTING IN THE FUTURE ($ in millions except per share information) General Mills (GIS) Financials Last Price (as of 6/17/2015) $48.98 % of 52 week high 98% Shares Outstanding 175 Market Capitalization $8,576 - Cash $31 + Debt $1,528 + Minority Interest $0 Enterprise Value $10,074 Fiscal Year End December 31, Mar '15 LTM Revenue $2,026 $2,289 $2,542 $3,437 $3,518 Growth (%) 13.0% 11.1% 35.2% 2.4% EBITDA $201 $218 $288 $406 $414 Margin(%) 9.9% 9.5% 11.3% 11.8% 11.8% Growth (%) 8.6% 31.8% 41.0% 2.0% Net Income $131 $111 $99 $140 $141 Growth (%) (15.0%) (11.0%) 41.6% 0.7% EPS $0.72 $0.74 $0.74 $0.99 $1.01 Growth (%) 2.8% 0.0% 33.8% 2.0% Data Source: Company filings, FactSet. Cash From Operations $241 $237 $185 $285 $281 Cash Flow Per Share $0.66 $0.87 $0.30 ($0.04) ($0.21) Free Cash Flow $114 $134 $53 ($8) ($38) Net Changes in Cash $23 ($28) $32 ($51) ($28) HEDGEYE 12

13 FY2014 REVENUE / SOP BY SEGMENT FY2014 Revenue by Segment FY2014 Segment Operating Profit Europe Foods & Beverages 15% Europe Foods & Beverages 14% Americas Fresh Foods 17% Americas Foods & Beverages 68% Americas Fresh Foods 13% Americas Foods & Beverages 73% $3,437 million FY2014 Net Sales $365 million FY2014 SOP Data Source: Company filings. HEDGEYE 13

14 PRODUCT MIX OVER TIME Product Mix at Time of IPO Current Product Mix Plant-based Nutrition 3% Europe Plantbased Food and Beverages 16% North America Plant-based Food and Beverages 24% North America Premium Dairy 24% North America Coffee Creamers and Beverages 36% Organic Greens and Produce 16% EU Plant-based Food and Beverages 15% NA Plant-based Food and Beverages 20% Coffee Creamers and Beverages 28% Premium Dairy 18% $2,289 million FY2012 Net Sales $3,537 million FY2014E (1) Net Sales Data Source: Company filings. (1) FY2014 sales estimated to include acquisition of Vega (still pending). HEDGEYE 14

15 RECENT PERFORMANCE

16 Index Price 3-YEAR PRICE PERFORMANCE HANDILY BEATING THE COMPETITION SINCE IPO Competitive Set: General Mills (GIS) Kraft Foods (KRFT) Nestle SA (NESN-CH) Hain Celestial (HAIN) Monster Beverage (MNST) Lifeway Foods (LWAY) Danone SA (BN-FR) Performance Versus: Peers: % S&P 500: % /05/12 12/05/12 06/05/13 12/05/13 06/05/14 12/05/14 06/05/15 (INDEX) WhiteWave Foods Company (INDEX) WWAV Comp Set (INDEX) S&P 500 Data Source: FactSet. HEDGEYE 16

17 2-YEAR PRICE PERFORMANCE Index Price ONCE SETTLED INTO THE PUBLIC MARKETS THEY HAVEN T LOOKED BACK Competitive Set: General Mills (GIS) Kraft Foods (KRFT) Nestle SA (NESN-CH) Hain Celestial (HAIN) Monster Beverage (MNST) Lifeway Foods (LWAY) Danone SA (BN-FR) Performance Versus: Peers: % S&P 500: % 50 06/05/13 12/05/13 06/05/14 12/05/14 06/05/15 (INDEX) WhiteWave Foods Company (INDEX) WWAV Comp Set (INDEX) S&P 500 Data Source: FactSet. HEDGEYE 17

18 1-YEAR PRICE PERFORMANCE IN A CHOPPY CONSUMER ENVIRONMENT THEY APPEAR UNSCATHED Index Price Competitive Set: General Mills (GIS) Kraft Foods (KRFT) Nestle SA (NESN-CH) Hain Celestial (HAIN) Monster Beverage (MNST) Lifeway Foods (LWAY) Danone SA (BN-FR) Performance Versus: Peers: +39.4% S&P 500: /05/14 09/05/14 12/05/14 03/05/15 06/05/15 (INDEX) WhiteWave Foods Company (INDEX) WWAV Comp Set (INDEX) S&P 500 Data Source: FactSet. HEDGEYE 18

19 HISTORICAL SALES PERFORMANCE $5,000 $ in millions $4,500 $4,000 $4,118 $3,806 $3,500 $3,437 $3,518 $3,000 $2,500 $2,542 $2,000 $2,289 $2,026 $1,821 $1,500 $4,447 $1,000 $500 $0 FY2010 FY2011 FY2012 FY2013 FY2014 LTM - Mar '15 FY2015E FY2016E FY2017E Data Source: Factset, Hedgeye Research. (1) Excludes LTM Mar 15 period. HEDGEYE 19

20 ORGANIC VS REPORTED GROWTH CONSISTENT LOW DOUBLE-DIGIT ORGANIC GROWTH 40% 35% 30% 25% 20% 15% 10% 5% 0% 9% 9% 10% 10% 10% 10% 12% 12% 12% 36% 36% 11% 34% 34% 12% 11% 10% Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 13% Strong organic growth over time complimented by strategic acquisitions Another important thing to note here is that although they are acquiring big companies, it does not distract management from driving growth in their core business Sales YoY % Chg - Reported Sales YoY % Chg - Organic Data Source: Company filings. HEDGEYE 20

21 STRONG SALES LEADING TO MARGIN EXPANSION GROWING INTO THEIR FIXED ASSETS $2,306 Net Sales $2,542 ($ in millions) 18% CAGR $3,437 $3,809 Adjusted Operating Income $ % ($ in millions / % margin) $ % 29% CAGR $ % $ % As volumes accelerate, WWAV has been able to maximize utilization rates to gain leverage on their supply chain Squeezing out margin on a quarterly basis E (1) E (1) 11% Organic Growth Net Sales CAGR (2) 21% Organic Operating Income CAGR (2) Data Source: Company filings, Net sales is presented on a pro forma adj. basis for 2012; operating income is presented on a pro forma adj. basis for 2012 and on an adjusted basis for 2013 and (1) Estimated provided by Consensus Metrix. (2) Organic CAGR represents 2012 to HEDGEYE 21

22 HISTORICAL EBITDA PERFORMANCE $700 $600 $655 $500 $488 $569 $ in millions $400 $300 $288 $406 $414 $200 $201 $218 $100 $152 $0 FY2010 FY2011 FY2012 FY2013 FY2014 LTM - Mar '15 FY2015E FY2016E FY2017E Data Source: Factset, Consesnsus Metrix, Hedgeye Research. (1) Excludes LTM Mar 15 period. HEDGEYE 22

23 HISTORICAL EPS PERFORMANCE $1.80 $ in millions $1.60 $1.40 $1.37 $1.20 $1.15 $1.00 $0.99 $1.01 $0.80 $0.72 $0.74 $0.74 $0.60 $1.60 $0.40 $0.53 $0.20 $0.00 FY2010 FY2011 FY2012 FY2013 FY2014 LTM - Mar '15 FY2015E FY2016E FY2017E Data Source: Factset, Consensus Metrix, Hedgeye Research. (1) Excludes LTM Mar 15 period. HEDGEYE 23

24 MACRO ENVIRONMENT

25 UNIVERSITY OF MICHIGAN CONSUMER CONFIDENCE 120 U Mich Consumer Index 3 Month Moving Average 6 Month Moving Average /30/ /30/ /29/ /30/ /30/ /30/ /30/ /29/ /28/ /30/2014 Data Source: University of Michigan, FactSet. Updated on 6/16/2015. HEDGEYE 25

26 U.S. PERSONAL INCOME YOY SA US Personal Income 3 Month Moving Average 6 Month Moving Average Data Source: Bureau of Economic Analysis, FactSet. Updated on 6/16/2015. HEDGEYE 26

27 WWAV SENTIMENT

28 SHORT INTEREST SHORT INTEREST HAS RECEDED Data Source: FactSet. Updated on 6/16/2015. HEDGEYE 28

29 ANALYST RATINGS SELL-SIDE IS BULLISH, BUT BUY RATINGS ARE RETRACTING SLIGHTLY Data Source: FactSet. Updated on 6/16/2015. HEDGEYE 29

30 EARNINGS REVISIONS FY-1 EPS CONSENSUS ESTIMATE VS STOCK PRICE Data Source: FactSet. Updated on 6/16/2015. HEDGEYE 30

31 VALUATION 1 YEAR NTM EV/EBITDA NTM EV/EBITDA Multiple Current: 18.9x (6/15/15) High: 19.5x (5/27/15) Low: 13.8x (1/14/15) Average: 15.9x Data Source: FactSet. Updated on 6/16/2015. HEDGEYE 31

32 CREATION OF WWAV

33 HOW DID WWAV COME TO BE? White Wave Inc. was founded in September 1977 by Steve Demos in Boulder, Colorado In 1976, after a trip to India, he was at a 76-day meditation retreat in California, where he came up with the idea to start a tofu company called White Wave. Shortly after, he got a $2,000 loan and rented 300 sq. ft. in Boulder, CO In 1978, soymilk was introduced and more than 20 years later in 2002 he sold the business to Dean Foods In 2001, Suiza Foods acquired Dean Foods assuming the Dean name, but Demos wanted nothing to do with Suiza demanding to be able to run his brand autonomously. This request was granted, but unexpectedly in 2005 Steve was fired. Many think he was more popular than the CEO and Chairman, so that may have led to his demise at the company WhiteWave Foods was formed by Dean Foods spinning off a select group of assets into an independent company in 2012 In October 2012, WWAV completed their IPO on the NYSE In 2013, Dean Foods completed its spin-off of WhiteWave into an independent company in two transactions: 1. May 23, 2013, Dean distributed Class A & B shares to stockholders as a pro rata dividend 2. July 25, 2013, Dean Foods disposed of all of its remaining shares of WhiteWave capital stock in a registered public offering After the separation was complete, WWAV acquired three businesses; Earthbound Farms, So Delicious and Vega (pending) Data Source: Hedgeye Research. HEDGEYE 33

34 THE CREATION OF WWAV A STRING OF PEARLS As part of Dean Foods Company Spin off As part of WhiteWave (licensed) (White Wave Inc) (Pending Approval) (1) Dean Foods did a great job in assembling a premier portfolio built for growth. The management at WhiteWave Foods has continued this tradition with very on-trend acquisitions in Earthbound Farm, So delicious and Vega (pending) These most recent acquisitions build out their portfolio with brands that are #1 in their respective segments. Additionally, they provide a stronger platform for more accretive acquisitions down the road Data Source: Company Filings. (1) Announcement Year, closed in January HEDGEYE 34

35 THE WHITEWAVE FOODS COMPANY ACQUIRES EARTHBOUND FARM Deal Overview On January 2, 2014, WWAV completed its acquisition of Earthbound Farm for $600 million, one month after the announcement in early December 2013 Earthbound Farm offers a broad range of organic fresh foods such as salads and frozen fruits $0.07 EPS accretion was expected at the time of the deal for 2014 Pro forma leverage near ~3.2x at time of the deal The business will be run by experienced industry professional Kevin Yost Majority owner Kainos Capital (formerly HM Capital Partners) originally acquired 80% of Earthbound in 2010 Earthbound Farm was founded by Drew and Myra Goodman in 1984, and was led by CEO Charles Sweat from 2009 to its sale in 2014 Company Overviews Produces and distributes branded plant-based foods beverages, coffee creamers and beverages, premium dairy products and organic produce throughout North America and Europe March 2015 LTM Sales: $3,518mm EBITDA: $414mm (11.76% margin) HQ in Denver, CO; 4,500 employees Founded in 2012 Offers a broad range of market-leading organic produce options and other organic foods January 2014 LTM net sales: $500mm HQ: San Juan Bautista, CA Founded in 1984 Data Source: Hedgeye Research, Company Filings, FactSet. Financials WWAV funded the acquisition with borrowings under existing credit facilities Strategic Rationale Gives WWAV the two most popular gateways to enter organic category: produce & dairy Industry-leading brand, with significant consumer loyalty Earthbound Farm is a perfect fit for WWAV, as they are both rooted in small beginnings, and are both pioneers in the organic foods business Significant potential for brand expansion across categories The transaction gives WWAV the top seat in the organic produce business in the country, and it gives Earthbound Farm the ability to reach its original goal: getting good organic food to as many people as possible Select Product Portfolio HEDGEYE 35

36 THE WHITEWAVE FOODS COMPANY ACQUIRES SO DELICIOUS Deal Overview On October 31, 2014, WWAV completed its acquisition of So Delicious for $195mm Financials WWAV funded the acquisition through its cash balance and available credit The acquisition agreement was announced in early September 2014 So Delicious offers a wide variety of non-dairy, plant-based alternatives. All products are 100% plant based and many are Non-GMO Project verified, gluten free and organic. Their product lines vary from coffee creamers and nut-based milks to frozen desserts and dairy free culinary products So Delicious was founded in 1987 by Mark Brawerman Number one in dairy-free ice cream, dairy-free yogurt, and dairy-free creamer Company Overviews Produces and distributes branded plant-based foods beverages, coffee creamers and beverages, premium dairy products and organic produce throughout North America and Europe March 2015 LTM Sales: $3,518mm EBITDA: $414mm (11.76% margin) HQ in Denver, CO; 4,500 employees Founded in 2012 Offers a broad range of market-leading plant-based drinks, ice creams, frozen novelties and coffee creamers. October 2014 LTM Net Sales: $115mm HQ: Eugene, OR Founded in 1987 Data Source: Hedgeye Research, Company Filings, FactSet. Strategic Rationale Additional plant-based brand, that is transferable across categories So Delicious is the leading plant-based ice cream brand, adding another number one brand to WWAV s portfolio Expands yogurt and creamers portfolio, So Delicious has well developed coconut & almond yogurts So Delicious is a perfect fit for WWAV, as they follow the same health awareness initiatives, such as the Non-GMO Project. Both businesses offer several organic products as well Select Product Portfolio HEDGEYE 36

37 THE WHITEWAVE FOODS COMPANY AGREES TO ACQUIRE VEGA Deal Overview On June 10, 2015 WWAV announced that it has agreed to acquire Vega for $550 million in cash Vega offers a broad range of plant-based nutrition products primarily powdered shakes and snack bars containing nutrient dense, superfoods in the United States and Canada Vega majority owners were Charles Chang (founder) and VMG Partners VMG originally invested in 2012, acquiring a 30% stake The transaction will be EPS neutral in 2015 and is expected to be at least $0.06 accretive to WWAV s adjusted EPS in 2016, excluding certain transaction and other related expenses Transaction expected to close in the 3Q FY15, subject to regulatory approvals and other customary closing conditions Company Overviews Produces and distributes branded plant-based foods beverages, coffee creamers and beverages, premium dairy products and organic produce throughout North America and Europe March 2015 LTM Sales: $3,518mm EBITDA: $414mm (11.76% margin) HQ in Denver, CO; 4,500 employees Founded in 2012 Offers a broad range of market-leading plant-based nutrition products including: powdered shakes, snack bars, seeds and dietary supplements June LTM 2015 Net Sales: $100mm HQ: Burnaby, BC Founded in 2004 Data Source: Hedgeye Research, Company Filings, FactSet Financials WWAV intends to fund the acquisition under its existing $1 billion revolving credit facility, which is virtually untapped Enterprise Value Sales Multiple $550mm 5.50x Strategic Rationale Vega is the leader in plant-based nutrition products, further bolstering WWAV s stable of #1 brands This is a natural fit for WhiteWave s portfolio and will allow for best practice sharing across both companies within the plant-based foods segment Allows WWAV to extend its plant-based offerings into nutritional supplements Vega s growth momentum, coupled by its attractive margin profile and related financial benefits are cited by management as strong reasons to do the deal at this high of a multiple (5.5x sales) Select Product Portfolio HEDGEYE 37

38 STRONG LEADERSHIP

39 STRONG MANAGEMENT TEAM YOUNG EXECUTIVES LEADING THE COMPANY IN THE RIGHT DIRECTION Gregg Engles: Chairman of the Board of Directors and CEO Former Chairman of the Board of Directors and CEO of Dean Foods Company ( ). Serves on the Board of Trustees at Dartmouth College, and on the Board of Directors of the Grocery Manufacturers Association. Kelly Haecker: CFO Joined WhiteWave Foods Operating Company in Prior to WWAV Kelly held various senior level roles at The Gillette Company, Mother s-archway Cookie Company and Specialty Foods Corp. Blaine McPeak: EVP and President, Americas Foods & Beverages Joined WhiteWave Foods in 2007 as the President of Horizon Organic. Before WWAV, Blaine worked for Kellogg s and Sara Lee. Bernard Deryckere: EVP and CEO, Europe Foods & Beverages As part of the Alpro acquisition (he was the CEO), Bernard joined WWAV to lead the European business. Director of Belgilux Association of Branded Products & Flemish Chamber of Commerce. President of the European Natural Soy Foods Manufacturers Association and the Belgian Food Industry Federation. Kevin Yost: EVP and President, Americas Fresh Foods Joined WhiteWave in 2014 to lead the Earthbound Farms business. Previously employed by Dean Foods Company, Saputo s dairy foods division and had a stint in consulting, where he led private equity-owned companies. Edward Fugger: EVP, Strategy and Corporate Development Edward joined Dean Foods in 2004 as VP of Corporate Development, and through the spinoff in 2012 became part of the WWAV team. Prior to Dean Foods he was an MD at Bear, Sterns & Co. Inc. Roger Theodoredis: EVP, General Counsel Roger Theodoredis joined WWAV in 2005 as a Senior Vice President and General Counsel. Previously he was employed at Bristol-Myers Squibb, during his time there he led counsel for Mead Johnson Nutrition, now its own standalone public company. Thomas Zanetich: EVP, Human Resources Tommy joined WhiteWave in 2006 as Senior Vice President, Human Resources. Prior to WWAV he served as VP of HR for Kraft/Nabisco and General Foods. With an average age of 53 this is a management team that still has time left in their career to create meaningful value. Data Source: Company filings. HEDGEYE 39

40 BOARD OF DIRECTORS A BOARD WITH EXPERIENCE Gregg Engles: Chairman of the Board of Directors and CEO Former Chairman of the Board of Directors and CEO of Dean Foods Company ( ). Serves on the Board of Trustees of Dartmouth College, and on the Board of Directors of the Grocery Manufacturers Association. Joseph Hardin: Lead Director On the Board since Former Wal-Mart Executive, Dean Foods Executive. Served on the Board of Dean Foods from 1998 to Stephen Green On the Board since Corporate Finance GE Capital, Dean Foods BoD (1994 to 2013). The Active Network, Inc BoD (2001 to 2013). Current Board member of Caris Life Sciences. Michelle Goolsby On the board since Has been a partner of Greenmont Capital partners, which focuses on investments in the natural product category. Previously held several senior management roles at Dean Foods from 1998 to Mary Ellen Minnick On the Board since Current Partner of Lion Capital a private investment firm since Held several executive positions for The Coca-Cola Company from 1983 to On the current BoD for Target Corporation, and the current Advisory Board of Heineken. Doreen Wright On the Board since Dean Foods BoD ( ). Current Director of Crocs, and New Hope Arts. Served on several other BoD s and has been in management. Small, Nimble, experienced group of board members ready to carry this company forward Data Source: Company filings. HEDGEYE 40

41 PORTFOLIO BUILT FOR CONSUMERS

42 MISSION PREDICATED ON PUTTING THE CONSUMER FIRST Nutritious Convenient Innovative CHANGING THE WAY THE WORLD EATS FOR THE BETTER Flavorful Great Tasting Responsibly Produced Data Source: Company filings. HEDGEYE 42

43 SIGNIFICANT POTENTIAL IN HOUSEHOLD PENETRATION LARGE CATEGORY LEADING BRANDS 14% 28% 31% 36% While WWAV s brands are well known, they are still largely under penetrated across the U.S. Organic Milk Organic Packaged Salad Plant-based Beverages Flavored Coffee Creamers Data Source: Company filing. Household Penetration IRI and Nielsen Panel Data, Coffee Creamers includes Half & Half, Dairy and non-dairy creamers. HEDGEYE 43

44 WWAV BY BUSINESS SEGMENT

45 AMERICAS FOODS & BEVERAGES PLANT-BASED FOODS AND BEVERAGES, COFFEE CREAMERS AND BEVERAGES, PREMIUM DAIRY Overview Organic Net Sales Growth (1) Within the segment there are three sub segments: Plant-based foods & beverages (Silk and So Delicious), Organic dairy (Horizon), Coffee creamers (International Delight, Land O Lakes) all of which hold a #1 or #2 position in the category Utilize nine manufacturing facilities and three co-packers in the U.S., in % of product volume was manufactured internally Consumers are starting to focus more on what they are putting in their bodies, with the recent acquisition of Vega, WWAV is one step closer to having a plant-based item for every occasion $ in millions $650 $600 $550 $500 $450 $400 $350 $300 11% 10% 10% 10% 10% 10% 10% 8% 8% Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 Organic Net Sales Organic Net Sales Growth 12% 11% 10% 9% 8% 7% 6% 5% Organic Net Sales Growth Products Management Commentary We recently began expanding the Horizon brand beyond the dairy case with great-tasting healthy kids' meals and snacks that moms can feel good about. Gregg Engles, CEO The strategic rationale of this [Vega] acquisition is compelling [it] provides us with an entry into the highgrowth nutritionals category. Gregg Engles, CEO Data Source: Company filings. (1) Excludes Vega financials. HEDGEYE 45

46 PLANT-BASED FOODS AND BEVERAGES Overview Reported Net Sales Growth Deep heritage at both of these brands, Silk founded in 1977 and So Delicious in 1987, acquired in 2002 and 2014, respectively The category is far beyond soy, which is where it found its roots, now in cashews, almonds, coconuts, etc. Silk #1 market leader in plant-based beverages: 74% share of soy 51% share of nut-based 65% share of coconut So Delicious the #1 market leader in dairy-free yogurts and dairy-free ice cream $ in millions $220 $200 $180 $160 $140 $120 $100 21% 20% 15% 14% 13% 14% 14% 13% 9% Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 Plant-based Food and Beverages Net Sales YoY Change 25% 20% 15% 10% 5% 0% Organic Net Sales Growth Products Management Commentary [We] believe plant-based foods and beverages are a significant global opportunity that is in the early stages of broad consumer acceptance, which we view as a vast opportunity for future growth Gregg Engles, CEO Our plant-based beverages are all non-gmo, gluten-free, with fewer calories and fat Gregg Engles, CEO Data Source: Company filings. Nielsen xaoc brand and market share positions as of the 13 weeks ended HEDGEYE 46

47 POWER OF SILK PLANT-BASED BEVERAGES HOUSEHOLD PENETRATION OLD FORMAT = $800/SQUARE FT +13 pts +4 pts 31% NEW FORMAT = $1,300 SQ FT FUTURE GROWTH OPPORTUNITIES Targeting milk households Adding new consumer targets 18% 21% 24% 27% Broadening usage occasions Expanding categories Data Source: Company filings. Household penetration IRI & Nielsen Panel Data, 2015 CAGNY Presentation. HEDGEYE 47

48 FROZEN DESSERT GROWTH OPPORTUNITIES Dairy-Free % of Category Frozen Ice Cream and Novelties 2014 Growth Rates 7.5% 15% Sizeable growth potential 0.6% 0% Total milk Total frozen ice cream and novelties Dairy Dairy-free Data Source: Nielsen xaoc calendar year HEDGEYE 48

49 SO DELICIOUS STRONG PRESENCE ACROSS CATEGORIES Dairy-Free Frozen Dairy-Free Drinks Dairy-Free Yogurt Data Source: Pictures taken on 6/12/14 at Whole Foods in White Plains, NY. HEDGEYE 49

50 COFFEE CREAMERS AND BEVERAGES Overview Reported Net Sales Growth International Delight was the first flavored, non-dairy liquid creamer, established in 1980 and acquired in 1997 In addition to International Delight and Land O Lake, So Delicious and Silk participate in this category as a brand expansion Strong even growth has been seen in the business over the last few quarters after a tough Q2 FY14 The introduction of Dunkin Donuts creamers in Q have been performing well and they continue to innovate on the business by adding new flavors Brands Products $ in millions $300 $250 $200 $150 $100 12% 11% 10% 13% Management Commentary Our creamers platform has delivered double-digit compound annual growth over the past couple of years behind volume growth in the refrigerated flavored creamer category Gregg Engles, CEO 9% 5% 9% 11% 11% Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 Coffee Creamers and Beverages Net Sales YoY Change 14% 12% 10% 8% 6% 4% 2% 0% Organic Net Sales Growth Data Source: Company filings. Our International Delight brand has been bringing the coffee house experience to people where they want it and customizing how they want it. Gregg Engles, CEO HEDGEYE 50

51 PREMIUM DAIRY Overview Reported Net Sales Growth Horizon Organic practically started the organic dairy movement over 20 years ago, and then was acquired by Dean Foods in 2004 #1 organic dairy brand 4x the next closest competitor Recently this segment has been hit with supply issues given the high demand and long lead teams to creating organic cows Resulting in WWAV having to take pricing, but that hasn t hampered growth as consumers are willing to pay a premium As you see to the right, pricing has been the main contributor to growth in the recent top line performance Leveraging the brand beyond dairy starting in 2014, launching mac n cheese, fruit snacks and lunch box pouches. To date, these products have seen strong results but not making a meaningful impact to the bottom line yet $ in millions $200 $180 $160 $140 $120 $100 $80 15% 13% 13% 8% 8% 7% 6% 5% 4% Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 Premium Dairy Net Sales YoY Change 16% 14% 12% 10% 8% 6% 4% 2% 0% Organic Net Sales Growth Brand Products Management Commentary Our premium dairy platform has delivered double-digit topline growth over the past few quarters, as demand for organic milk is at historical highs. Gregg Engles, CEO Horizon participates in growth categories. It holds a strong leadership position in the vibrant organic milk category. Gregg Engles, CEO Data Source: Company filings. Nielsen xaoc brand position as of HEDGEYE 51

52 AMERICAS FRESH FOODS ORGANIC GREENS AND PRODUCE Overview Earthbound Farm was acquired in January 2014 Expanded WWAV s presence on the perimeter of the store in the produce section Earthbound Farms holds the #1 market share in organic packaged salad, where there is strong category growth (14% YoY) versus the total salad category (11% YoY), organics share of the total now stands at 25% Recent performance has been hampered due to weather conditions in the Southwest, and WWAV choosing not to ship sub par product Since acquisition, WWAV has continued to take costs out of the business and increase profit margins The WWAV team is also working on implementing SAP by 2H FY15, which will add greater efficiencies Products $ in millions $155 $150 $145 $140 $135 $130 $125 Reported Net Sales Growth 5% Management Commentary Earthbound is the largest organic produce brand in North America with a leading 54% share in branded organic packaged salads. Gregg Engles, CEO Earthbound Farm[ s] mission is [to] make healthy, fresh food simple and accessible. Gregg Engles, CEO -8% -3% Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 Organic Greens and Produce Net Sales 3% % Change 6% 4% 2% 0% -2% -4% -6% -8% -10% Organic Net Sales Growth Data Source: Company filings. HEDGEYE 52

53 AMERICA FRESH FOODS ORGANIC PACKAGED SALAD RETAIL SALES OLD FORMAT = $800/SQUARE FT ($MM, grocery) $803 $655 $938 U.S. ORGANIC PACKAGED SALAD AS A % OF TOTAL SALAD CATEGORY NEW FORMAT = $1,300 SQ FT (% grocery) 23% 20% 18% 24% $ % CAGR 16% $ Earthbound Farm remains the leading brand in organic packaged salad Data Source: Company filings. Nielsen US Food 52 weeks ended early January HEDGEYE 53

54 EUROPE FOODS & BEVERAGES PLANT-BASED FOOD AND BEVERAGES Overview Constant Currency Net Sales Growth Plant-based foods and beverages, which include Alpro and Provamel (intended for organic items only) brand beverages using soy, almond, coconut, hazelnut, rice and oat based ingredients Alpro started focused on soy based beverages and then branched out to yogurts and creams Only pan-european dairy-free brand Latest pillar for growth has been growing outside of soy Like almonds, coconuts, hazelnuts, rice As you can see on the chart to the right, the growth in Europe is robust and expected to last. From the low amount of sales, you can see that penetration is still low and has room to grow Products $ in millions $140 $130 $120 $110 $100 $90 $80 $70 $60 $50 $40 7% 13% 19% 12% 19% Management Commentary Alpro has a vision of a world where more of what we eat comes directly from plants, because we know that plant-based foods [are] not only good for the planet, but also good for the people, and besides that, we were able to develop these products to be even more delicious than their dairy alternatives. Bernard J. P. Deryckere, President-Europe 18% 21% 23% 23% Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 Reported Net Sales Organic Constant Currency Net Sales Growth 25% 20% 15% 10% 5% 0% Organic Net Sales Growth Data Source: Company filings. HEDGEYE 54

55 STRONG FOOTHOLD IN DAIRY-FREE 38% KILLING THE COMPETITION IN EUROPE 40% 43% 7% 6% 3% 2% 2% % Alpro is the only pan-european plantbased brand Alpro has a commanding position in Europe within the dairy-free segment. We would also like to point out our Hedgeye Consumer Staples Best Idea as a short (HAIN) is second to last on this list, but we weren t surprised by that Data Source: Company filings, Nielsen Plant-Based EU9 Nielsen MAT P ; EU9 includes UK, Germany, Belgium, the Netherlands, Spain, Italy, Sweden, Portugal and France. HEDGEYE 55

56 JOINT VENTURE NOT CONSOLIDATED, BUT WORTH NOTING AS IT WILL BE A MEANINGFUL DRIVER OF GROWTH IN THE FUTURE Overview Joint venture with Mengniu Dairy Company Limited, a leading player in the Chinese dairy industry formed in January 2014 WWAV invested $47mm to ramp up the project JV will manufacture, market and sell a range of nutritious products in China starting with Silk branded non-dairy milk Officially launched product in late December 2014 Almond & Walnut-based beverages in trial stage Do not expect this business to contribute meaningfully yet First time expanding outside of North America and Europe A lot of room to grow internationally, this JV will be very interesting to follow as they help to develop the dairy-free segment in Asia Products Great Partner with a Big Market to Capture Ownership 51% 49% Management Commentary We believe China is a great long-term opportunity for WhiteWave with a sizeable consumer base, increasing income levels, and preference towards high-quality foods. Gregg Engles, CEO This is a startup business and it will naturally take time to develop. But growth in the plant-based beverages category in China remains robust. Gregg Engles, CEO HEDGEYE 56

57 LOOKING FORWARD

58 PLANNING FOR FUTURE GROWTH $325 - $350 million in capital expenditures planned for full year Investments in additional capacity Adding lines in existing facilities to support internal production complete ownership of product Plant Improvements Improving lines and processes to maximize efficiency margin expansion New R&D facility Consolidating all R&D functions under one roof in Denver, CO improved innovation capabilities Support future growth beyond 2016 For a company this big to grow at this rate is impressive, must inject more cash to support growth Data Source: Company filings, Hedgeye research. HEDGEYE 58

59 NEW PRODUCT INNOVATION IS A CORE COMPETENCY WHITEWAVE HAS PROVEN THAT THEY ARE INNOVATORS Brand Extensions Into New Categories Brand Creation Over the course of FY14 introduced multiple centerof-store products to the marketplace: Organic/Gluten-free mac & cheese, fruit snacks, cracker and lunch box pouches All are meeting expectations Relaunching silk dairy-free yogurt Dairy-free is a very underdeveloped segment of yogurt category, <1% Improved packaging, formula, and now internally manufactured Expanding Salad offerings to include different mixes and value added salad bowls As well as growing out a frozen line of fruits, vegetables and smoothie mixes Internally created brand New emerging Aussie-style yogurt segment 10g of protein Manufactured internally at new Dubois, PA facility Focused retail rollout Launched in January 2015 Data Source: Company filings, Hedgeye research. HEDGEYE 59

60 WWAV IS IN THE EARLY STAGES OF A PRODUCT LIFE CYCLE

61 GOOGLE SEARCH TRENDS FURTHER SUPPORTS OUR THESIS THAT INTEREST IN PLANT- BASED FOODS HAS ONLY REALLY STARTED TO TAKE OFF WITH MAINSTREAM CONSUMERS IN THE LAST FEW YEARS Almond Milk Plant Based Vegan Protein Non GMO Data Source: Google search trends HEDGEYE 61

62 PLANT-BASED PRODUCTS ON THE CUSP OF BROAD ACCEPTANCE WWAV s Status on the Curve Beyond PLANT-BASED PRODUCTS ARE JUST REACHING THE GROWTH STAGE OF THEIR PRODUCT LIFE CYCLE Consumers are really starting to cling to the idea that plant-based alternative diets are healthier and better for the environment. Some smaller companies are capitalizing and WWAV is leading the pack. Our view is that this market is very much in the introduction/growth stage and has a long runway to reach maturity. Data Source: Hedgeye research. HEDGEYE 62

63 M&A POSSIBILITIES

64 WHO COULD THEY ACQUIRE TO GROW CONTINUATION OF THE STRING OF PEARLS APPROACH KIND Snacks Fage Justin s Quorn Granola and Bar producer, would be a great new product platform for WWAV, and add to their growing center-of-store portfolio ~$200mm in FY2013 Sales Acquisition of Fage would make for a larger international presence in the fast growing Greek yogurt category ~$650mm in sales Nut butter would be a perfect addition to the product line $50-$100mm in sales, generating triple digit growth Justin s nut butters are very ontrend and corporate cultures would be a perfect match HQ in the UK with a strong presence in the U.S. This would undoubtedly give WWAV a more robust European business, and a great compliment to the Alpro brand Entry into the meat alternatives segment Currently owned by Exponent PE, acquired for 205mm in 2011 Hampton Creek thinkthin Amy s Kitchen Blue Buffalo Hampton Creek is big on the egg scene right now, and is a small powerhouse in the plantbased segment Culture wise would be a perfect fit, and the products are amazing, but the valuation could be prohibitive thinkthin is a very popular product among consumers, and has great distribution On-trend product Similar cultural values Perfect for expansion into the organic frozen foods category Huge growth potential Over $300mm in sales 70% of organic frozen foods market share Just filed IPO paper work, so may be difficult timing High quality pet food is a fast growing market With nearly a $1 billion in sales it would be transformational Data Source: Hedgeye research. HEDGEYE 64

65 CAN THEY FINANCIALLY SUPPORT M&A? THAT DEPENDS ON THE SIZE OF THE DEAL RIGHT NOW Pro Forma Net Debt / EBITDA for Vega Acquisition ( figures in Millions except multiples) Actuals as of LTM 03/15 Actual Pro Forma Cash $31 FY2015E $70 Revolving Credit 16 Includes Vega 566 Term Loans (Adj.) Notes/Bonds Net Long Term Debt 1,506 2,056 Net Debt $1,475 $1,986 EBITDA 414 FY2015E 488 Net Debt/EBITDA 3.57x 4.07x Historical Net Debt / EBITDA Multiple Avg. Net Debt / EBITDA 2.41x 3.92x 3.26x 1.95x 3.61x 3.03x Pro Forma Net Debt / EBITDA as if Another Deal was Executed this Year Deal Value (mm) $100 $200 $300 $400 $500 Pro Forma Net Debt / EBITDA 4.27x 4.48x 4.68x 4.89x 5.09x Data Source: FactSet. HEDGEYE 65

66 WHO COULD BUY WWAV? Comparable Transactions Who Could Buy WWAV? $ in Millions Announced Enterprise Enterprise Value / LTM Date Target Acquirer Value Revenue EBITDA 6/10/2015 Vega WhiteWave Foods $ x n/a 6/9/2015 Garden Fresh Gourmet Campbell's $ x n/a 5/26/2015 Applegate Farms Hormel Foods $ x n/a 3/25/2015 Kraft Heinz $54, x 15.00x 2/3/2015 Big Heart Pet Brands J.M. Smuckers $5, x 12.89x 11/14/2014 Garden Protein Pinnacle $ x n/a 10/14/2014 So Delicious WhiteWave Foods $ x n/a 9/8/2014 Annie's General Mills $ x 27.37x 7/2/2014 Hillshire Tyson $8, x 16.70x 6/30/2014 Cytosport Hormel $ x 15.00x 5/22/2014 Ragu & Bertolli Mizkan Group $2, x n/a 3/6/2014 KIND Snack Foods VMG $ x 15.30x 12/9/2013 Earthbound Farm Organic WhiteWave Foods $ x 8.00x 12/9/2013 Dymatize Enterprises Post Holdings $ x 12.39x 12/9/2013 Golden Boy Foods Post Holdings $ x 13.91x 8/12/2013 Wishbone Pinnacle $ x 8.92x 8/2/2013 Premier Nutrition Post Holdings $ x 10.00x 6/10/2013 Pirate Brands B&G Foods $ x 10.26x 5/23/2013 Plum Organics Campbell's $ x n/a 5/9/2013 Hearthside Foods Post Holdings $ x 8.78x 2/14/2013 Heinz 3G $27, x 14.10x 1/3/2013 Skippy Hormel $ x n/a 9/5/2012 Snack Factory Snyder's Lance $ x n/a 2/15/2012 Pringles Kellogg's $2, x 11.09x Mean 2.47x 13.31x Median 2.29x 12.89x Min 1.20x 8.00x Max 3.95x 27.37x ($ in millions) Market Cap Enterprise Value Net Debt / EBITDA Coca-Cola $175,460 $200, x PepsiCo $138,800 $162, x General Mills $32,934 $44, x Danone $41,205 $49, x Nestle $235,100 $251, x Kellogg's $22,169 $29, x Possible Valuation Range (Updated on 6/17/15 at the close) Price / Sales Multiple Premium/Discount (12.3%) (8.2%) (4.1%) 0.0% 20.5% 41.0% 61.5% $ x 2.24x 2.34x 2.44x 2.94x 3.44x 3.94x $3,018 $36.85 $38.57 $40.29 $42.02 $50.63 $59.25 $67.87 $3,268 $39.90 $41.77 $43.63 $45.50 $54.83 $64.16 $73.49 $3,518 $42.95 $44.96 $46.97 $48.98 $59.02 $69.07 $79.11 $3,768 $46.01 $48.16 $50.31 $52.46 $63.22 $73.98 $84.74 $4,018 $49.06 $51.35 $53.65 $55.94 $67.41 $78.89 $90.36 Sales Data Source: Hedgeye, FactSet. HEDGEYE 66

67 ORGANIC GROWTH STRATEGY

68 THINK LOCAL, BE GLOBAL OLD FORMAT = $800/SQUARE FT NEW FORMAT = $1,300 SQ FT STAY LOCAL Being an organic health food company, WhiteWave must appeal to the local, anticorporate consumer to keep their core consumer base intact GROWTH As is natural for any successful company, WhiteWave has to remain dominant in the food industry by continuing to create shareholder value HEDGEYE 68

69 WHAT CAN BE DONE? 1 EMPHASIZE SUPPORT FOR LOCAL FAMILY FARMING Not only do people want great tasting healthy food products, they want to know where they came from as well. This is a large part of the company s current marketing strategy, and it must remain a strong point as it expands. 2 STAY SUSTAINABLE Sustainability is an increasingly pertinent issue in the food industry, especially in competition for organic health food customers. WhiteWave is active in their efforts to reduce waste, greenhouse gas emissions, and water usage, while also taking initiative in other sustainability measures. 3 SHARE THE VISION WhiteWave is an environmentally responsible health food company, as must be their acquired subsidiaries and brands. Earthbound Farm, So Delicious and Vega share these values, and represent a proper start to the company s M&A track record. HEDGEYE 69

70 COMMODITIES

71 THE ORGANIC SUPPLY CHALLENGE 1 LAND DEVELOPMENT RATES 37% of America s developed land has been converted from functional farmland in the past 30 years, which translates to 24 million acres of lost farmland since The trend has not slowed, as 50 acres of farm and ranch land are lost hourly to developments still today. 2 ORGANIC CERTIFICATION PROCESS The USDA requires that conventional farms adopt and maintain organic practices for a period of three years before selling their products as organic. Certification requires a rigorous application and inspection process. 3 HIGH COST OF CONVERSION Certification fees vary with different operations and can cost thousands of dollars, but conversion entails huge opportunity costs that farmers would have to endure. Farmers can t charge organic prices until completion of their certification. Additionally, there are inspection, application, and annual renewal fees. Data Source: Hedgeye research, USDA. HEDGEYE 71

72 PROMISING OUTLOOK ORGANIC FOOD IN THE MARKET OLD FORMAT = $800/SQUARE FT POWERFUL INCENTIVES NEW FORMAT = $1,300 SQ FT $40 5.0% $35 4.5% Net Sales (billions) $30 $25 $20 $15 $10 4.0% 3.5% 3.0% 2.5% 2.0% The USDA will reimburse up to 75% of certification costs through the USDA Organic Certification Cost- Share Program. $5 $ US Organic % Total Food Market Share 1.5% 1.0% Organizations such as American Farmland Trust and Farmland LP offer affordable solutions to aspiring organic farmers, and have been helping conversions for decades. Each year, organic food sales gain more of the total food market share. Government spending on organic agriculture increased immensely with 2014 Farm Act. Data Source: Hedgeye research, USDA. HEDGEYE 72

73 WWAV DOING ALL THE RIGHT THINGS OLD FORMAT = $800/SQUARE FT NEW FORMAT = $1,300 SQ FT WWAV shares the vision of its customer base by partnering with several GMO fighting organizations to promote transparency in the food industry WWAV s Horizon Organic Producer Education (HOPE) program was created in 2001 to assist farmers in transitioning to organic, and to provide general support for family farms Data Source: Hedgeye research. HEDGEYE 73

74 ALMOND SOURCING WHILE TOTAL ALMOND PRODUCTION VALUE GROWTH SLOWS, ALMOND PRICES ARE AT AN ALL TIME HIGH FROM $1.79 IN 2010 TO $3.50 IN 2014 (18.3% CAGR). THE DROUGHT HAS CAUSED 40% OF LARGE (>600 ACRES) ALMOND OLD FORMAT = $800/SQUARE FT NEW FORMAT = $1,300 SQ FT OPERATIONS TO DELAY ACREAGE EXPANSION. OUR PRICE INCREASE EXPECTATIONS ARE IN LINE WITH MANAGEMENT S, AND WE BELIEVE IN MANAGEMENT S ABILITY TO OFFSET THESE PRICES WITH COST SAVINGS INITIATIVES. WITH A 70% MARKET SHARE OF PLANT BASED DRINKS, DEMAND FOR ALMONDS WILL REMAIN STRONG. Millions Pounds % Almond Production by Crop Year (Aug-July) 13.3% 13.9% (1.7%) 3.8% 16% 14% 12% 10% 8% 6% 4% 2% 0% -2% -4% YoY Growth Data Source: Almond Board of California, Hedgeye. CROP YEAR HEDGEYE 74

75 USDA ORGANIC CORN VS. CME CORN PRICES OFF HISTORICAL HIGHS, PRICE SPREAD WIDENING $18 $16 $14 $12 $10 Price Spread Current: $8.85 (6/14/2015) Max: $10.38 (8/10/2014) Min: $0.20 (10/10/2010) Average: $5.19 $12.50 $12 $10 $8 $6 $8 $6 $4 $2 $0 $3.65 $4 $2 $0 -$2 Price Spread CME USDA Organic (Price Spread on right axis, USDA Organic and CME on Left Axis) USDA reported on 6/15/15 that recent surveys indicate 73% of corn crop is in good or excellent condition, compares to 74% last week and 76% in the same week last year. (1) Data Source: Mercaris, USDA, CME. (1) USDA, figures as of June 14, 2015, data collected weekly and reported on the first business day of every week after 16:00 ET. HEDGEYE 75

76 TOTAL US ORGANIC CORN IMPORT VOLUMES 1,200,000 1,000, ,000 Bushels 600, , ,000 0 January February March April May June July August September October November December IMPORTS FOR ORGANIC CORN ARE AT ALL TIME HIGHS For the month of April 2015, total Organic Corn imports reached 1,131,771 bushels, an increase of 5% versus prior month and 2095% versus prior year. Year to date, total imports have reached 2,830,773 bushels which is an increase of 878% versus last year. If the current pace continues throughout the year, imports could reach 22,646,184 bushels. Data Source: Mercaris HEDGEYE 76

77 ORGANIC CORN IMPORT VOLUMES BY COUNTRY PAST 12 MONTHS India 2.4% Greece 0.1% Netherlands 12.2% Bulgaria 0.1% Canada 8.4% Argentina 5.7% Romania 48.5% Turkey 22.5% IN THE PRIOR 12 MONTHS, THE TOP 3 EXPORTING COUNTRIES TO THE U.S. FOR ORGANIC CORN WERE ROMANIA, TURKEY AND NETHERLANDS Data Source: Mercaris. HEDGEYE 77

78 MONTHLY AVERAGE ORGANIC CORN IMPORT PRICES US$ per Bushel $16 $14 $12 $10 $8 $6 $4 $2 $0 $ % 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% -25% FOB Origin Price Freight Cost Average Monthly Change IMPORT PRICES TRENDING DOWN Organic Corn import prices in April decreased modestly by 9.22% from March from $11.72/bu to $10.64/bu. Import prices are 16.48% below prices at the same time last year. Data Source: Mercaris. HEDGEYE 78

79 2014/2015YTD AVERAGE ORGANIC CORN IMPORT PRICES YTD US$ per Bushel $16 $14 $12 $10 $8 $6 $4 $2 $0 $13.08 US$ per Bushel $18 $16 $14 $12 $10 $8 $6 $4 $2 $0 $12.88 FOB Origin Price Freight Cost FOB Origin Price Freight Cost For CY14, the average import price for Organic Corn delivered to the U.S. (including CIF) was $12.97/bu which is $0.11/bu lower than the average domestic price of $13.08/bu as reported to Mercaris. Delivered prices from the largest exporting country, Romania, were $11.74/bu (which includes all CIF charges). FOB origin prices in Romania were $10.33/bu. In terms of total delivered cost, Romania was the lowest cost importing country at $11.74/bu. For CY15, the average import price for Organic Corn delivered to the U.S. (including CIF) was $11.68/bu which is $1.20/bu lower than the average domestic price of $12.88/bu as reported to Mercaris. Delivered prices from the largest exporting country, Romania, were $10.71/bu (which includes all CIF charges). FOB origin prices in Romania were $9.36/bu. In terms of total delivered cost, Romania was the lowest cost importing country to the U.S. at $10.17/bu. Data Source: Mercaris. HEDGEYE 79

80 USDA ORGANIC SOYBEANS VS. CME SOYBEANS PRICES OFF HISTORICAL HIGHS, PRICE SPREAD WIDENING $35 Price Spread $25 $30 $25 Current: $15.52 (6/14/2015) Max: $20.88 (6/8/2008) Min: $1.67 (10/10/2010) $24.96 $20 $20 Average: $10.14 $15 $15 $10 $9.34 $10 $5 $5 $0 $0 Price Spread USDA Organic CME (Price Spread on right axis, USDA Organic and CME on Left Axis) USDA reported on 6/15/15 that recent surveys indicate 67% of soybean crop is in good or excellent condition, compares to 69% last week and 73% in the same week last year. (1) Data Source: Mercaris, USDA, CME. (1) USDA, figures as of June 14, 2015, data collected weekly and reported on the first business day of every week after 16:00 ET. HEDGEYE 80

81 TOTAL US SOYBEAN IMPORT VOLUMES 1,200,000 1,000, ,000 Bushels 600, , , SOYBEAN IMPORTS OUTPACING THE PREVIOUS THREE YEARS For the month of April 2015, total Organic Soybean imports reached 1,096,029 bushels, an increase of 8% versus prior month and 99% versus prior year. Year to date, total imports have reached 3,154,414 bushels which is an increase of 160% versus last year. If the current pace continues throughout the year, imports could reach 25,235,312. Data Source: Mercaris. HEDGEYE 81

82 ORGANIC SOYBEAN IMPORT VOLUMES BY COUNTRY PAST 12 MONTHS Argentina 6.8% Canada 6.9% Kazakhstan 3.2% Uruguay 0.1% Russia 0.4% Hong Kong 0.1% Ukraine 14.0% China 17.9% India 43.9% Uganda 0.1% Turkey 2.8% Netherlands 1.4% Romania 2.5% IN THE PRIOR 12 MONTHS, THE TOP THREE EXPORTING COUNTRIES TO THE U.S. FOR ORGANIC SOYBEANS WERE INDIA, CHINA AND UKRAINE. Data Source: Mercaris. HEDGEYE 82

83 MONTHLY AVERAGE ORGANIC SOYBEAN IMPORT PRICES US$ per Bushel $30 $25 $20 $15 $10 $5 $0 $ % 4% 2% 0% -2% -4% -6% -8% -10% FOB Origin Price Freight Cost Average Monthly Change Organic Soybeans import prices in April increased slightly by 0.41% from March from $22.04/bu to $22.13/bu. Import prices are 8.93% below prices at the same time last year. Data Source: Mercaris. HEDGEYE 83

84 2014/2015YTD AVERAGE ORGANIC SOYBEAN IMPORT PRICES YTD US$ per Bushel US$ per Bushel Source: Mercaris FOB Origin Price Freight Cost Source: Mercaris FOB Origin Price Freight Cost For CY14, the average import price for Organic Soybeans delivered to the U.S. (including CIF) was $24.65/bu which is $1.47/bu lower than the average domestic price of $26.12/bu as reported to Mercaris. Delivered prices from the largest exporting country, India, were $23.78/bu (which includes all CIF charges). FOB origin prices in India were $21.61/bu. In terms of total delivered cost, Ukraine was the lowest cost importer at $22.90/bu. For CY15, the average import price for Organic Soybeans delivered to the U.S. (including CIF) was $22.51/bu which is $2.94/bu lower than the average domestic price of $25.45/bu as reported to Mercaris. Delivered prices from the largest exporting country, India, were $22.11/bu (which includes all CIF charges). FOB origin prices to India were $19.79/bu. In terms of total delivered cost, Romania was the lowest cost importing country to the U.S. $20.44/bu. Data Source: Mercaris. HEDGEYE 84

85 WWAV VS. HAIN

86 TOP LINE COMPARISON OLD FORMAT = $800/SQUARE FT NEW FORMAT = $1,300 SQ FT LTM LTM Mar ' Mar '15 Income Statement Income Statement Net Sales $2,026 $2,289 $2,542 $3,437 $3,518 Net Sales $1,130 $1,378 $1,735 $2,154 $2,574 % Growth 11.3% 13.0% 11.1% 35.2% % Growth 23.2% 21.9% 25.9% 24.1% Gross Income $685 $804 $908 $1,156 $1,191 Gross Income $320 $373 $467 $552 $583 % Margin 33.8% 35.1% 35.7% 33.6% 33.9% % Margin 28.3% 27.1% 26.9% 25.6% 22.6% % Growth 12.1% 17.4% 13.0% 27.3% % Growth 27.2% 16.8% 25.2% 18.1% SG&A $551 $660 $702 $861 $888 SG&A $213 $228 $276 $311 $348 % of Sales 27.2% 28.8% 27.6% 25.0% 25.2% % of Sales 18.8% 16.6% 15.9% 14.5% 13.5% Growth as % of sales (5.5%) 5.9% (4.2%) (9.3%) 0.8% Growth as % of sales 0.8% (11.9%) (4.0%) (9.2%) (6.5%) EBIT $133 $144 $206 $295 $303 EBIT $107 $145 $191 $241 $235 % Margin 6.6% 6.3% 8.1% 8.6% 8.6% % Margin 9.5% 10.5% 11.0% 11.2% 9.1% % Growth 54.6% 8.1% 43.0% 43.5% % Growth 33.5% 35.5% 31.7% 26.0% EBITDA $201 $218 $288 $406 $414 EBITDA $131 $175 $231 $289 $291 % Margin 9.9% 9.5% 11.3% 11.8% 11.8% % Margin 11.6% 12.7% 13.3% 13.4% 11.3% % Growth 32.4% 8.6% 31.8% 41.0% % Growth 32.6% 33.7% 31.8% 24.9% Data Source: FactSet. HEDGEYE 86

87 WWAV VS HAIN 40% WWAV OLD FORMAT = $800/SQUARE FT 35.6% 35.8% 34.8% 35% 36.4% 35.5% 35.1% 32.9% 34.1% 34.2% 33.1% 33.9% 14% 12% HAIN 40% NEW FORMAT = $1,300 SQ FT 12.1% 35% 12.6% 12.5% 10.7% 13.0% 12.7% 12.5% 11.7% 14% 12% 30% 25% 20% 15% 5.6% 6.9% 6.8% 6.8% 7.7% 8.7% 7.6% 8.0% 9.5% 8.9% 7.8% 10% 8% 6% 30% 25% 20% 15% 9.1% 26.5% 28.7% 28.1% 27.0% 9.0% 25.1% 27.2% 27.6% 27.8% 9.1% 23.5% 25.3% 24.7% 10% 8% 6% 10% 4% 10% 4% 5% 2% 5% 2% 0% 29.9% 27.9% 29.0% 29.6% 27.8% 26.4% 25.3% 26.1% 24.7% 24.2% 26.1% Q3 FY12 Q4 FY12 Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 0% 0% 17.3% 16.6% 15.5% 16.3% 16.1% 14.7% 14.6% 15.1% 14.4% 12.9% 13.0% Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 Q2 FY15 Q3 FY15 0% WWAV SG&A as % of Sales WWAV Gross Margin WWAV Operating Margin HAIN SG&A as % of Sales HAIN Gross Margin HAIN Operating Margin LTM Feb '15 LTM Mar '15 FY Dec '14 LTM Mar '15 FY Dec '14 FY Dec '14 GIS KRFT NESN-CH MNST LWAY BN-FR Average SG&A as a % of Sales 18.9% 13.2% 30.4% 31.9% 19.9% 32.9% 23.2% Gross Margin 34.1% 30.7% 48.1% 55.6% 23.7% 47.2% 37.0% Operating Margin 15.2% 17.4% 15.0% 23.7% 3.7% 12.9% 13.2% Data Source: Hedgeye, FactSet. (1) Average includes WWAV and HAIN. (1) HEDGEYE 87

88 WWAV FIRST IN-CLASS BRAND PORTFOLIO 9 Brands All brands are number 1 or number 2 in their respective categories (licensed) (pending approval) Very wellknown names recognized globally HEDGEYE 88

89 HAIN PORTFOLIO LACKS EXCITEMENT ~60 Brands No clear product emphasis or niche Weak brand recognition HEDGEYE 89