PREPARED BY LEPRINO FOODS

Transcription

1 THE VALUE PROPOSITION OF CHEESE & INNOVATION PREPARED BY LEPRINO FOODS FOR THE NATIONAL FROZEN PIZZA INSTITUTE February 28, 2011

2 LEPRINO S GLOBAL FOOTPRINT 11 Plants in the U.S. and U.K. Construction underway on LFC s 12 th and largest plant in Greeley, CO LFC Asia Hub in Singapore now open

3 WE BUILT OUR BUSINESS AROUND PIZZA Top pizza cheese supplier in the U.S. since the early 1960s Exclusive supplier to many of the top pizza chains in the world Leading pizza cheese supplier to: Regional/local chains and independents Specialty and broad line distributors Supplier-of-choice for retail frozen and fresh take n bake pizza brands Known for helping our customers successfully develop and launch new pizza concepts

4 DAIRY MARKET UPDATE Allison Specht Leprino Foods Dairy Economist com February 28, 2011

5 CME BLOCK PRICE HISTORICAL & FORECAST January 2001 December 2011 $2.50 Actual Annual Average $2.00 Blo ock Price $1.50 $1.00

6 Blo ock Price CME BLOCK PRICE HISTORICAL & FORECAST January 2001 December 2011 $2.50 $2.00 $1.50 Actual Annual Average Forecast $1.00

7 WHAT S GOING ON IN International Markets

8 U.S. VS. WORLD CHEDDAR PRICE JANUARY 2005 FEBRUARY 2011 $2.50 $2.25 Dolla ars per Pound $2.00 $1.75 $1.50 $1.25 $1.00 $0.75 $0.50 Oceania Cheddar Price U.S. CME Block Price

9 U.S. DAIRY TRADE AS A PERCENT 14.0% 12.0% OF MILK PRODUCTION (TOTAL SOLIDS BASIS) Exports Imports 12.8% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 3.7% 27% 2.7% 2.9%

10 2009 WORLD DAIRY EXPORTS (MARKET SHARE, ME BASIS) New Zealand d(27.1%) EU 27 (26.8%) United States (11.5%) Australia (8.2%) Argentina (3.5%) Egypt (2.2%) Switzerland (1.9%) Uruguay y( (1.8%) Ukraine (1.7%) Belarus (1.1%) All Others (14.2%)

11 2009 WORLD DAIRY IMPORTS (MARKET SHARE, ME BASIS) China (7.5%) Mexico (5.4%) Russia (5.1%) Japan (4.5%) United States (4.4%) Algeria (3.9%) EU 27 (3.5%) Saudi Arabia (3.5%) Canada (3.1%) Indonesia (3.1%) All Others (55.8%)

12 MILK POWDER IMPORTS CHINA Metric To ons 450, , , , , , , ,000 50, Rest of World New Zealand China accounted for 26.7% of New Zealand s milk powder exports. Source: GTIS/Global Trade Atlas

13 INTERNATIONAL SITUATION on Pounds s) Exp ports (Milli Monthly US Cheese Exports January 2006 December 2010 Milk production reports from around the world are mixed. New Zealand expected to be up 1 1.5% year over year. Australia expected to be on par with last year. EU outlook for upcoming season is not strong Cooperatives Working Together will be an export only program. U.S exported 4% of cheese p production in 2010.

14 SUPPLY U.S. Dairy Supply Outlook

15 COMMODITY PRICES ARE RISING

16 CURRENT FEED SITUATION JANUARY 2005 JANUARY 2011 $450 $6.50 $400 $ $350 r bushel Dollars pe $4.50 $3.50 $2.50 $300 $250 $200 $150 $100 Dollars per ton $1.50 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Corn Soybean Meal Alfalfa Hay $50

17 DAILY FEED PRICE BY MONTH JANUARY 2005 JANUARY 2011 $6.00 $5.00 w/day $/Co $4.00 $3.00 $2.00 $1.00 $

18 US ALL MILK PRICE JANUARY 2005 JANUARY 2011 $22.00 $20.00 per cwt Dollars $18.00 $16.00 $14.00 $12.00 $

19 INCOME OVER FEED COST JANUARY 2005 JANUARY 2011 $12.00 Dollars per Cow per Da ay $10.00 $8.00 $6.00 $4.00 $2.00 Estimated Breakeven Line $

20 US MILK COWS JANUARY 2005 JANUARY ,400 9,300 Head 1,000 9,200 9,100 9,000 8,900 8,

21 HEIFER AVAILABILITY JANUARY 2002 JANUARY 2011 Heifers Exp pected to Calve 3, % 3, % 3, % 2, % 2, % 2, % 2,800 2, % 2, % 2, % 2, % Heifers Expected to Calve Heifers Expected to Calve as a Percent of Cows Calved Heife ers as a Perc cent of Cow ws Calved

22 U.S. MILK PRODUCTION YEAR OVER YEAR PERCENT CHANGE 40% 4.0% 3.0% r Year Chan nge Year Ove 2.0% 1.0% 0.0% 1.0% 2.0% 3.0% 30% 4.0%

23 9% 7% 5% 3% 1% 1% 3% 5% 7% 9% Dec 09 Feb 10 Apr 10 Jun 10 Aug 10 Oct 10 Cheddar Total Cheese

24 U.S. COLD STORAGE HOLDINGS JANUARY 2006 DECEMBER Pounds Million Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Natural American

25 DEMAND U.S. Dairy Demand Outlook

26 DEMAND SITUATION Pizza wars aided growth in mozzarella utilization in Retail sales boosted by heavy promotions in early Concern that current price levels will clip demand in US economic growth is lagging behind other countries.

27 U.S. NONFARM EMPLOYMENT JANUARY 1980 JANUARY 2011 )150, , , , , , Months 36+ Months 48 Months All Employees (Thousands) 90,000 80,000 Jan 80 Aug 81 Mar 83 ct 84 May 86 Nov 87 Jun 89 Jan 91 Aug 92 Mar 94 ct 95 May 97 Nov 98 Jun 00 Jan 02 Aug 03 Mar 05 ct 06 May 08 Nov Months O O O Source: Bureau of Labor Statistics

28 GROSS DOMESTIC PRODUCT 6 (GDP) CHANGE QUARTERLY, % Cha ange from Prior Quart ter Source: Bureau of Economic Analysis

29 CHANGE IN PERSONAL CONSUMPTION EXPENDITURES CONTRIBUTION TO US GDP QUARTERLY, % Chan nge from Prior Qua rter Source: Bureau of Economic Analysis

30 U.S. TOTAL CHEESE COMMERCIAL DISAPPEARANCE ADJUSTED FOR IMPORTS AND EXPORTS JANUARY 2009 DECEMBER Year Average 1000 Million Pounds Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

31 SO WHAT S MY CHEESE GOING TO COST? Forecast in Review

32 CME 40# CHEDDAR BLOCKS Month 2008 Actual 2009 Actual 2010 Actual 2011Actual/ Forecast Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Average $ $ $ $1.6820

33 KEY MARKET DRIVERS IN 2011 International demand has absorbed U.S. inventory overhang. Significant U.S. cheese export commitments through mid- year. Price levels should help keep some cows in production that would have otherwise left. Price levels will result in decreased domestic demand. Result is lower prices in second half of Predicting close to the same average annual price of $ just a shift in timing. Presuming Oceania s new production season displaces U.S. export demand in the second half.

34 FROZEN PIZZA WILL THRIVE QUALITY & INNOVATION

35 THE QUALITY OF REAL QUALITY OF REAL

36 CONSUMERS KNOW IT! The REAL Seal has 91% consumer awareness and 78% of consumers are familiar with it 53% 25% 9% 13% Not at all familiar with Have seen but am not sure what htit' it's for and what htit means Have seen and am somewhat htsure what htit' it's for and what it means Have seen and am very sure what htit' it's for and what ht it means

37 WHAT IT STANDS FOR Consumers believe the REAL Seal stands for very positive product attributes 2% Authentic 77% 2% High Quality 68% 7% Less Processed 57% Disagree Strongly (Not at all what symbol embodies for me (1,2)) 5% Old Fashioned 27% Good Tasting 22% 56% Agree Strongly (Very much what symbol embodies for me (6,7))

38 WORD ASSOCIATIONS Not Artificial The REAL Seal is most Wholesome 0.33 strongly associated with Natural 0.33 not artificial, Genuine 0.3 Quality 0.26 wholesome, and Authentic 0.26 natural Fresh 0.16 Better for You Healthy Good Tasting Trustworthy Dependable Credible Safe Net (% of times included as best minus times Included as opposite)

39 PURCHASE INTENT The REAL Seal is Trust and Confidence consumers will pay for How likely l is it that t you would purchase a product with the REAL Seal on it instead of a similar product without it? 37% Definitely Not Impact 25% 21% 11% 1% 2% 2% % Definitely Impact

40 CLEANER LABEL Imitation LFC Solution Which label does Mom really want? Topping Blend (Mozzarella Cheese Substitute [Water, Palm Oil, Casein, Modified Food Starch, Non Fat Dry Milk, Sodium Aluminum Phosphate, Lactic Acid, Sodium Citrate, Salt, Potassium Chloride, Natural Flavor, Sorbic Acid (as a preservative), Artificial Color, Vitamin and Mineral Supplement (Magnesium, Oxide, Dicalcium Phosphate, Zinc Oxide, Riboflavin [Vitamin B2], Electrolytic Iron, Folic Acid, Pyridoxine Hydrochloride [Vitamin B6], Niacinamide, Thiamine Mononitrate [Vitamin B1], Cyanocobalamin [Vitamin B12], Vitamin A Palmitate)] Mozzarella Cheese (Pasteurized Milk, Cultures, Salt, Enzymes), Modified Food Starch, Nonfat Milk, Whey Protein Concentrate.

41 ECONOMICS THAT WORK Cost Increase of moving to Real can be offset by other Wins Cost Increase vs. Analog Lift from Real Seal or Claims Margin from Real Pricing Power Potential Total Portfolio Cost Savings

42 QUALITY & INNOVATION EXECUTIVE SUMMARY Key historical success drivers: Innovation & Quality Improvement Gained share for years vs. QSR and other Pizzas Growth has slowed due in part to QSR Pizza Wars and eroded price advantage Key to the future is more of what made you great Re-ignite both Innovation and Quality Innovation and the Real Seal can help make it happen

43 FROZEN PIZZA CATEGORY Growth definitely slowed in the back half of 2010

44 A MODEL FOR INNOVATION & COLLABORATION A collaborative approach that starts with a business challenge and ends with a co-developed solution

45 TWO TOOLS THAT MAY HELP US GET BACK ON TRACK Innovation Quality Leprino and your suppliers might be able to help The Real Seal can definitely help

46 THANK YOU!