Jennie-O Turkey Store
Michael D. Tolbert Vice President/President Jennie-O Turkey Store
Hormel Foods Corporation
Agenda
Industry Dynamics Progress Against Goals Strategic Planning Summary
Hormel Foods Corporation
Industry Dynamics
Hormel Foods Corporation
2005 Turkey Industry Ranking Million LW Lbs. 2004
Change Vs. 2003
Jennie-O Turkey Store
1,230
+30
Cargill, Inc. ConAgra (Butterball) Carolina Turkeys Pilgrim’s Pride Bil Mar (Sara Lee) Kraft (Louis Rich) Foster Farms, Inc. House of Raeford Perdue Farms, Inc.
1,011 830 725 474 300 300 240 239 236
-12 Even +20 -25 Even Even +3 -6 -3
Total Industry
6,923
-93 (-1.3%)
Company
Turkey Valley Processors - 80MM-200MM LW Lbs. Dakota Turkey Growers - 200MM-400MM LW Lbs.
Top 10 processors account for 78% of total volume
4 Hormel Foods Corporation
Per Capita Consumption Lagging 20
8000 17.6
7000
17.9
17.4
6779.3
6000
17.0 6959.8
6849.4
6043.2
12
10.3
4000
16 14
11.6
5000
18
10
8.3 3704.0
3000
8
3076.9
6 2000
2276.5 1158.6
1000 230.9
159.7
300.5
1229.1
743.0
507.0
4 2 0
0 1975
1980
Total Industry LW lbs.
1985
1990
1995
JOF/TTS/J-OTS LW lbs.
2000
Per Capita Consumption
1975
1980
1985
1990
1995
2000
JOF
4.6%
4.8%
4.6%
5.4%
7.0%
11.5%
TTS
2.4%
2.7%
3.5%
3.0%
3.9%
5.2%
J-OTS
7.0%
7.5%
8.1%
8.4%
11.0%
16.6%
Hormel Foods Corporation
2005 est.
2005 est.
17.9%
Value Added Component 6.0
Billion Pounds
5.0 4.0 3.0 2.0 1.0
52% 48%
51% 49%
56% 44%
1975
1980
1985
All Other Billion lbs.
1.18
1.58
Wholebird Billion lbs.
1.10
1.50
0.0
68% 32%
78% 28%
75% 25%
76% 24%
1990
1995
2000
2005
2.05
4.09
4.88
5.21
5.20
1.65
1.95
1.90
1.75
1.65
• Wholebird category contribution off 50% in volume since 1975. 6 Hormel Foods Corporation
% of Volume Not Wholebird
Value Added Component of Industry Driving Growth 100% 80% 60% 40% 52% 48%
51% 49%
56% 44%
68% 32%
78% 28%
75% 25%
76% 24%
1975
1980
1985
1990
1995
2000
2005
Industry Not W/B
52%
51%
55%
68%
72%
75%
76%
JO/TS Not W/B
44%
56%
65%
82%
85%
82%
86%
20% 0%
• Wholebird category contribution off 50% in volume since 1975. 7 Hormel Foods Corporation
Total Live Weight Slaughter 700 650 600
2003 2004 2005
Million 550 Lbs. 500 450 400 n a J
ar M
ay M
l u J
p e S
v o N
2005 total live weight slaughter is up .46% vs 2004… Hormel Foods Corporation
Poults Placed: 2004 - 2005 12 8 4 % Inc/Dec Yr over Yr
0 -4 -8 -12
2004
2005
Hormel Foods Corporation
/4
12
/6
11
/9
10
11
9/
14
8/
17
7/
19
6/
22
5/
24
4/
27
3/
27
2/
30
1/
1/
2
-16
Progress Against Goals
Hormel Foods Corporation
Jennie-O Turkey Store Goals • Manage our business to meet or beat the fiscal plan; 6% top-line, 11% bottom-line. • Leverage our new R&D Pilot Plant and Product Lifecycle Management process to expand sales of products introduced post 2000 to over $142MM. • Use the JENNIE-O TURKEY STORE brand to go after a premium position in whole birds. • Challenge our live production, operations, and distribution areas to work together to deliver a zero total annual cost increase (net of feed costs) between 2005 and 2006. • Raise the bar on food safety by implementing USDA-approved interventions on all of our ready to eat products … qualifying for “Level II” status.
Hormel Foods Corporation
Strategic Foundation
Food Safety
Cost Leadership
Hormel Foods Corporation
Product and Brand Innovation
Supply Chain Expertise
Value-Added Tonnage Growth CAGR 6.7% 475 450 425 400 375 350 325 300 275 250 225 200 2002
* 53-week year Hormel Foods Corporation
2003
2004*
2005
Continued Success in New Product Development CAGR 65% 120 100 80 60 40 20 0 $MM
2001
2002
2003
2004
15
45
70
110
Hormel Foods Corporation
New Product Development Through Quarter 3 2005 100
+13%
80 60 40 20 0 $MM
Hormel Foods Corporation
2004
2005
75
85
Strategic Planning
Hormel Foods Corporation
Jennie-O Turkey Store Mission Jennie-O Turkey Store is in the food business. We market great-tasting food products made primarily from turkey. We work to delight consumers and customers with our products and service. Our Team is the leader in the turkey industry because we are the best at managing all segments of our supply chain from the consumers’ eating experience back to the egg. 17 Hormel Foods Corporation
Hormel’s Expectations for Jennie-O Turkey Store • Generate Value-Added Volume Growth ¾ “Growth Area” of store ¾ Underdeveloped protein ¾ Reduce exposure to Commodity swings
• Improve Margin Contribution ¾ 50 basis points per year improvement ¾ Attain positive EVA
• Be Judicious with New Capital 18 Hormel Foods Corporation
Strategic Competencies Equal Industry Leadership • Focus on Turkey from production through marketplace as an efficient, lowest cost, highly integrated producer with emphasis on heavy tom production. • Production Capabilities based on multiple plants, which allow long production runs at high efficiency with infrequent changeovers, with redundancy. • Focused Sales Force with separate concentrations in Deli, Retail, and Foodservice with specific expertise in each area. • Ability to Service Customers Nationally with high reliability, appropriate costs, and competence. • Ability to Innovate with differentiated products that add value. 19 Hormel Foods Corporation
Expand Retail Fresh Internal Shipments From 2002 Through Projected 2005 Jennie-O Turkey Store® Fres h Tray Pack Growth
2002
Hormel Foods Corporation
2003
2004
CAGR 6%
2005 Proj.
Expand Distribution Nationally, Especially on Varieties Outside of Lean Ground Traypack Segment JOTS Traypack Lean Ground Breast Ground Italian Dinner Sausage Breakfast Sausage Burger Patties AC Nielsen 52 Weeks Ending 09/24/2005
Hormel Foods Corporation
$ Vol % ACV % Chg % ACV Chg 12.8 49.7 5.1 18.0 44.8 5.6 12.2 37.9 5.5 18.7 40.0 5.3 3.7 35.0 1.2 4.4 36.0 2.1
Continue to Introduce New Products
Hormel Foods Corporation
Retail Division Market Strategy: Expand Value-Added Whole Birds • Introduce value-added whole bird • Drive cost out of existing whole bird commodity business • Determine if we are obtaining the best pricing available
Hormel Foods Corporation
Drive Innovation and Revenue in the Whole Bird Complex • Building ACV Distribution and Acceptance • Expanding Product Offerings • Impressive Q1 Media/PR Campaign
Hormel Foods Corporation
Innovation “Jennie-O had taken something old and made it new. But where had that idea come from? Was it a team? A committee? A lone turkey genius? Those of us whose only interaction with such innovations is at the point of sale have a naïve faith in human creativity; we suppose that a world capable of coming up with turkey in a bag is capable of coming up with the next big thing as well – a healthy cookie, a faster computer chip, an automobile engine that gets a hundred miles to the gallon. But if you’re the one responsible for those bright new ideas there is no such certainty. You come up with one great idea, and the process is so miraculous that all you do is puzzle over how on earth you ever did it…” THE NEW YORKER, September 5, 2005 By: Malcolm Gladwell 25 Hormel Foods Corporation
Deli Division Market Strategy: Expand Deli Rotisserie • Develop marketing programs to support new and existing distribution • Continue to secure distribution with high potential customers • Continue the development of a “pre-cooked” bone-in product offering
Hormel Foods Corporation
Deli Market Strategy: Rotisserie Market Strategy: EXPAND • Deli Rotisserie is a billion dollar market, primarily chicken • People buy rotisserie turkey to have the leftovers • Research seems to indicate a turkey offering appears to build the category • Can be sold cold out of deli case • We have the largest line, flavors, etc. • Develop a “fresh” strategy for bone-in and boneless 27 Hormel Foods Corporation
Deli Division Market Strategy: Expand Value-Added Premium-Tier Products • Gain distribution & take share from others • Flavor and variety expansion • Emphasize brand through re-packaging
Hormel Foods Corporation
Foodservice Division Market Strategy: Expand Commercial and Non-Commercial Business • Continue to pursue national account business at appropriate margins • Develop products to satisfy new and existing needs (Examples: bacon, burgers, and appetizers) • Expand school business • Expand product offerings Hormel Foods Corporation
Develop Products to Satisfy New and Existing Needs Cajun Fried Turkey
Turkey Medallions Hormel Foods Corporation
Premium Turkey Burgers
Peppered Turkey Bacon
Expand School Business 2000: 1 State, Texas 15 customers 2005: 20 States, 1,515 customers CAGR 70%
Commodity Processing State Contracts 2005-2006 ME
WA OR
MT
MN
ID
SD
VTNH NY
WI MI
PA
IA NE NV UT
AZ
10,000
ND
WY
CA
12,000
CO
IL KS OK
NM
MO
OH WV
IN
KY
AR
NJ DE
RI
8,000 6,000
VA NC
TN
MS AL TX
MD
MA CT
4,000
SC
2,000
GA
LA FL
0 2001
Hormel Foods Corporation
'02
'03
'04
05 est.
'06 est.
Summary
Hormel Foods Corporation
Summary • The success of Jennie-O Turkey Store can be attributed to: ¾ Low cost and vertical integration ¾ Market and channel expertise ¾ Singular focus on expanding the turkey protein to everyday/all meal occasion through great taste, innovation, and adding value
• Our strategies have us positioned to expand the turkey protein, the Jennie-O Turkey Store brand, and enterprise accomplishments going forward 33 Hormel Foods Corporation