Globalization of Agriculture: An Ownership and Market Perspective. Ken Sullivan March 7, 2017

Transcription

1 Globalization of Agriculture: An Ownership and Market Perspective Ken Sullivan March 7, 2017

2 History and Context

3 3 $14BN COMPANY THAT OPERATES IN 23 U.S. STATES AND 5 COUNTRIES Smithfield s vertically integrated platform provides an unparalleled level of traceability and food safety 3 1 Hog Production 2 Fresh Pork World s Largest Hog Producer: ~21 million hogs globally Smithfield raises pigs on approximately 3,900 company-owned, leased, and contract hog farms globally. Additionally, plants purchase hogs from independent hog producers. World s Largest Pork Processor: ~37 million hogs globally 17 fresh meat processing plants globally, including 13 plants which also have packaged meats production Top Producer of Packaged Pork: ~3.5 billion pounds globally 28 plants dedicated to packaged meats production globally Packaged Meats 4 More than $14 Billion in Annual Sales We provide leading retailers, restaurants, and foodservice companies with respected brands and innovative products Customers and Consumers Note: Includes volume information of Smithfield s two joint ventures in Mexico

4 4 SMITHFIELD IS THE LEADING PORK PLAYER IN THE U.S. MARKET #1 U.S. HOG PRODUCER #1 U.S. PORK PROCESSOR #1 U.S. PACKAGED PORK COMPANY OTHERS 61% 15% 6% 5% 4% 3% 3% 3% 5% 5% 8% OTHERS 18% 18% 26% 20% 4% 6% OTHERS 25% 7% 8% 18% 16% 16% More than 2x size of next largest competitor Proprietary breeding stock enables Smithfield to market highly differentiated pork products U.S. leader by wide margin #1 supplier to export from the U.S. #1 Supplier to retail and foodservice Brands ranked #1 in numerous product categories Note: Per Successful Farming 2016, National Hog Farmer 2016, IRI 52 weeks ending 10/02/16, Nielsen Perishables Group 52 weeks ending 10/01/16. Represents % market share per segment.

5 5 13 KEY BRANDS PLAYING TO DEMOGRAPHICS AND REGIONAL PREFERENCES OF KEY CONSUMER SEGMENTS Pricing Segmentation Among Core Brand Portfolio Family Value Mainstream Premium

6 20% 19% 17% 16% 14% 12% 10% 6 U.S. PACKAGED MEATS SEGMENT IS #1 ACROSS SEVERAL RETAIL & FOODSERVICE CATEGORIES U.S. Packaged Pork Foodservice (1) 34% 30% 29% 28% 23% 17% #1 #1 #1 #1 #1 #2 Bacon Fresh Pork Ham BBQ Breakfast Sausage Hot Dogs U.S. Packaged Pork Retail (2) 41% 32% #1 #1 #1 #2 #2 #3 #2 #2 #2 Ham Marinated Pork Bacon Hot Dogs Cooked Dinner Sausage BBQ Dry Sausage Portable Lunches Deli Meats 1. Represents % market share per category. Westport Consulting Group Represents % market share per category by brand. Information Resources, Inc. (IRI) 52 weeks ending 10/02/16 and Nielsen Perishables Group 52 weeks ending 10/01/16.

7 7 SMITHFIELD S CUSTOMERS ARE THE WHO S WHO OF MAJOR RETAILERS, FOODSERVICE AND RESTAURANTS Retailers Foodservice Restaurants

8 The Transaction -- WH Group and Smithfield

9 9 SMITHFIELD: A STRATEGIC PART OF WH GROUP S LEADING GLOBAL PLATFORM 73.3% 100% #1 #1 #1 UK Poland Romania Shuanghui Development Smithfield Joint Venture Note: #1 market position in Poland in packaged meat SKUs per Nielsen Retail Audit 9 months ended November #1 Hog Producer and Processor in Romania per CCC report on slaughtered & classified hogs in 2016.

10 10 TAKING ADVANTAGE OF SYNERGY OPPORTUNITIES FOR SMITHFIELD AS PART OF WH GROUP Strategic Rationale Leverage vertically integrated business model to supply ractopamine-free pork to China 1 Direct sale of fresh pork in China Chilled and frozen U.S. Pork Arbitrage fresh pork trade to maximize profits Imported Fresh Pork 2 Use in production of Shuanghui packaged meats 3 Use in production of Smithfield high-end packaged meats Preferred supplier of U.S. high-quality raw materials Reduce domestic supply to improve and stabilize profitability Western style ham, bacon, sausage, etc.

11 Exports are Critical for U.S. Pork Industry

12 SIGNIFICANT GROWTH SINCE 2000 US Pork Exports 12

13 50% OF ALL THE PORK IN THE WORLD IS CONSUMED IN CHINA Key Export Markets 13

14 14 PEDV EXAMPLE: 5% REDUCTION IN HARVEST HAD 50% IMPACT TO HOG PRICES Pork prices are inelastic: Reduced supply has significant impact to hog prices 1LHN4^1 *July 2014 Hog Futures Price up 52% in 11 months 3/24/2013-8/11/2014 (UTC) Price USc Lbs Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Q Q Q Q Q Q Auto

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