Pilgrim's Pride Corporation · NASDAQ:PPC
Pilgrim's Pride — Investor Day (September 2017)
158 slides from Pilgrim's Pride's investor day presentation, Sep 20, 2017
Slide 1: PPC Investor Day
PPC Investor Day September 20, 2017 Pilgrim’s Pride Corporation (NASDAQ: PPC)
Slide 2: Cautionary Notes and Forward-Looking Statements
2 CAUTIONARY NOTES AND FORWARD-LOOKING STATEMENTS Statements contained in this presentation that share our intentions, beliefs, expectations or predictions for the future, denoted by the words “anticipate,” “believe,” “estimate,” “should,” “expect,” “project,” “plan,” “imply,” “intend,” “foresee”
Slide 3: Agenda: Management Presentations
3 AGENDA: MANAGEMENT PRESENTATIONS • 10:30-10:45 Welcome and Opening Remarks – Bill Lovette • 10:45-11:15 U.S. – Jayson Penn • 11:15-11:45 Mexico – Charles VonDerHeyde • 11:45-12:15 Moy Park – Janet McCollum • 12:15-12:20 Grains & Feed – Joe Waldbusser • 12:20-1:00 LUNCH BREAK • 1:00-1:30 On-line St
Slide 4: Pilgrim's: All about great taste
\) pilgrims: All about great taste.
Slide 5: Pilgrim's Progress on Delivering Our Vision to Be the Best
5 Shared on 9/20/17 PILGRIM’S PROGRESS ON DELIVERING OUR VISION TO BE THE BEST THROUGH OPERATIONAL EXCELLENCE & ACQUISITIONS Closing GAPS Expanding TARGET U.S. Focus
Slide 6: Pilgrim's: All about great taste
\) pilgrims: All about great taste.
Slide 7: Highlights of Our Business
7 HIGHLIGHTS OF OUR BUSINESS Shared on 9/20/17 Leading U.S. chicken producer with differentiated portfolio and diverse geography Balanced portfolio of fresh, prepared and value-added chicken products Broad, differentiated products to meet retail and foodservice customer demand growth Competitive ope
Slide 8: Our Vision and Strategy
8 OUR VISION AND STRATEGY Shared on 9/20/17
Slide 9: Our Vision and Strategy
9 OUR VISION AND STRATEGY Shared on 9/20/17
Slide 10: Strengthening Our Team
10 STRENGTHENING OUR TEAM Shared on 9/20/17 1,000 Applicants 146 Hires 70% Return Rate 8 MBAs with at least 10 years of leadership experience 82 hourly team members graduated and promoted to front line supervisors 65 Hires
Slide 11: Developing Our People
11 DEVELOPING OUR PEOPLE Shared on 9/20/17 People FIRST MBA Programs Way of Leading Elective Learning Program LEADERSHIP 100K HRS People Safety Food Safety/HACCP/ Animal Welfare Technical Training Summit BUSINESS KNOWLEDGE 157K HRS Zero-Based Budgeting Daily Work Routine Root Cause Analysis Checklis
Slide 12: Our Vision and Strategy
12 OUR VISION AND STRATEGY Shared on 9/20/17
Slide 13: A U.S. Market Share Leader in Ready-to-Cook
13 Source: Watt Poultry USA March 2017, PPC A U.S. MARKET SHARE LEADER IN READY-TO-COOK POUNDS Shared on 9/20/17 NEARLY CHICKENS IN THE U.S. COMES FROM
Slide 14: Our U.S. Footprint & Business Units
14 LARGE 8 + L B S RETAIL 6 - 7 L B S SMALL 4 - 5 L B S BUSINESS UNITS OUR U.S. FOOTPRINT & BUSINESS UNITS Shared on 9/20/17 C A S E R E A D Y S M A L L B R I D B I G B I R D / C O M M E R C I A L P R E P A R E D F O O D S F R E S H F O O D S E R V I C E P R O T E I N C O N V E R S I O N G N P HATCH
Slide 15: Culture and Configuration: Drive Ownership & Accountability
15 HOW Fresh Group P&L Case Ready BU P&L Big Bird BU P&L Small Bird BU P&L Fresh Foodservice BU P&L Plant Sales Manager Plant Operations Manager Plant Sales Manager Plant Operations Manager Plant Sales Manager Plant Operations Manager Plant Sales Manager Plant Operations Manager Combined Plant P&L •
Slide 16: Culture, Configuration, Capabilities at Work
16 CULTURE, CONFIGURATION, CAPABILITIES AT WORK Shared on 9/20/17 UNDERSTANDING of the market (customers/consumers) • Emerging opportunities • Competitors’ moves • Fact-based decisions ABILITY to attract/satisfy/delight valuable customers • Builds (creates) leading value • Develops & cultivates loya
Slide 17: Our Broad Portfolio Delivers Commodity Upside and Downside Protection
17 OUR BROAD PORTFOLIO DELIVERS COMMODITY UPSIDE AND MARKET DOWNSIDE PROTECTION Shared on 9/20/17 8+ Lbs. Live Weight Commodity Price Correlation Foodservice/Industrial 6 Lbs. Live Weight Program Pricing Retail/Consumer Brands 4 Lbs. Live Weight Contract Pricing Foodservice/Deli Par
Slide 18: Our Brands & Production Mix: Expanding Markets
18 B R A N D S OUR BRANDS & PRODUCTION MIX: EXPANDING MARKETS Shared on 9/20/17 M I X * * YE2016, U.S. only • Recent acquisitions expand our ability to deliver against underserved consumers, surprise and delight • Brands can gain share via differentiation, especially against Millennials
Slide 19: Diverse Channel Mix Drives Value to Key Customers
19 DIVERSE CHANNEL MIX DRIVES VALUE TO KEY CUSTOMERS; ADDRESSES MULTIPLE CONSUMER NEEDS Shared on 9/20/17 FOODSERVICE Cut-up Parts Boneless Skinless Wings Whole Chickens Par-fried, Breaded • Breasts/Other Boneless • Wings/Other Bone-In Fully Cooked • Breaded • Glazed • Roasted Fully Co
Slide 20: Our Vision and Strategy
20 OUR VISION AND STRATEGY Shared on 9/20/17
Slide 21: Our Key Customer Strategy Drives Growth and Loyalty
21 OUR KEY CUSTOMER STRATEGY DRIVES GROWTH AND LOYALTY – TOTAL BUSINESS Shared on 9/20/17 2011 2012 2013 2014 2015 2016 2017
Slide 22: Delivering Higher Order Attributes to Meet Consumer Needs
22 DELIVERING HIGHER ORDER ATTRIBUTES TO MEET GROWING CONSUMER NEEDS Shared on 9/20/17 Grew 11% and 14% in dollars and volume vs. conventional at -4% and 1.9%, respectively. 2nd highest sales growth claim (28.7%), after organic (44%) 76% of retailers report success with converting shoppers 61% of co
Slide 23: Leading U.S. Certified Organic Chicken Supplier
23 LEADING U.S. CERTIFIED ORGANIC CHICKEN SUPPLIER • Controlled Atmosphere Gas Stunning • Automated White Meat Deboning • Automated Dark Meat Deboning • Higher Order Attributes Shared on 9/20/17
Slide 24: Integrating the Gold'n Plump Business Unit
24 INTEGRATING THE GOLD’N PLUMP BUSINESS UNIT Shared on 9/20/17 Cold Spring Plant Arcadia Plant Luverne Plant Arcadia Hatchery Arcadia Feed Mill and Elevator Gold’n Plump Barn owned by a Family Farm Partner ARCADIA PROCESSING PLANT Cold Spring Plant Arcadia Plant Luverne Plant Arcadia Hatchery Arcad
Slide 25: Our Vision and Strategy
25 OUR VISION AND STRATEGY Shared on 9/20/17
Slide 26: Our Methods to Achieve Operational Excellence
26 OUR METHODS TO ACHIEVE OPERATIONAL EXCELLENCE Shared on 9/20/17 • The “ZBB” for Labor (~ 55%-60% of Plant Cost) • 16 Full-time Industrial Engineers • Workload Analysis/Each Position • Create Perfect Staffing /Crewing • Daily Labor Performance Calculations • Tracking / Accountability Reports • Cal
Slide 27: Industry Factors
27 INDUSTRY FACTORS Shared on 9/20/17
Slide 28: Demand: Demographics & Economy
28 DEMAND: DEMOGRAPHICS & ECONOMY Shared on 9/20/17 +4.1% Projected pop. growth 52% Millennials & Younger United States: 2015 vs. 2020 43% Non- caucasian +16.5 Growth +10% Growth Sources: BLS, Census Bureau, FRED 59.62% 13.21% 1.25% 5.46% 0.23% 2.57% 17.66% Race Percentages (2015) White Black 39.89%
Slide 29: U.S. Per Capita Chicken Consumption Continues to Rise
29 U.S. PER CAPITA CHICKEN CONSUMPTION CONTINUES TO RISE Annual Pounds-Per-Person Chicken Consumption: 1960 to 2017 Projected Shared on 9/20/17 Source: USDA Last updated August 2017 Due to growth in retail and foodservice Millennials, Gen Z AND people (40-69) are consuming more chicken than consu
Slide 30: Demand: Domestic
30 DEMAND: DOMESTIC 45 65 85 105 Broiler Consumption Per Capita vs. Wholesale Price Consumption/Capita (Lbs.) Wholesale Composite Price (Cts/Lb.) Sources: USDA, IRI, NPD • Despite the upward trend of wholesale composite price broiler consumption per capita continues to grow. • Fresh chicken sales at
Slide 31: Demand: Exports
31 DEMAND: EXPORTS • US exports are becoming increasingly less reliant on the top export partners. • Despite an 8.6% YTD decrease in Mexico, US exports are up 3.7% for 2017 YTD. • USDA expects export volumes to increase in 2018 by 3.2%. Source: USDA, EMI Analytics 3.7% -8.6% -10.0% -8.0% -6.0% -4.0%
Slide 32: Continued Supply Growth in Line with Demand
32 CONTINUED SUPPLY GROWTH IN LINE WITH DEMAND Source: USDA • Industry has consistently grown since 2012. • 2012-2016 growth largely driven by a consistent increase in live weights. Shared on 9/20/17 Annual U.S. Chicken Produced (RTC Pounds) YOY Live Weight Change
Slide 33: Supply: Current Production
33 1,250,000 1,300,000 1,200,000 1,250,000 2,000,000 1,250,000 160,545,444 168,795,444 160,000,000 161,000,000 162,000,000 163,000,000 164,000,000 165,000,000 166,000,000 167,000,000 168,000,000 169,000,000 170,000,000 He a d p e r W e e k Production Expectations SUPPLY: CURRENT PRODUCTION • Through
Slide 34: Global Protein Trends
34 GLOBAL PROTEIN TRENDS Meat Consumption Forecast 14.3 15.1 16.4 17.3 18.1 19.9 20.0 20.7 22.8 22.1 23.4 25.2 25.0 26.0 27.0 27.0 28.3 29.4 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017E (MT in millions) Global Protein Exports Source: FAO – OECD, USDA: da
Slide 35: U.S. Industry Trends Remain Positive – Key Takeaways
35 U.S. INDUSTRY TRENDS REMAIN POSITIVE – KEY TAKEAWAYS Source: PPC Chicken industry growing in balance with demand Export market portfolio has greatly improved, creating more stable export platform SUPPLY Record global corn and soybean crops have created a global surplus, reducing input costs 2017
Slide 36: Pilgrim's: All about great taste
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Slide 37: Pilgrim's Mexico
PILGRIM’S MEXICO NY - SEP 20th, 2017 Charles VonDer Heyde
Slide 38: Agenda
+ Chicken Market - Food Market Value - Chicken Industry - Protein consumption + Pilgrim’s in Mexico - Main Data - Where we are - Chain Value - Products Portfolio - Market coverage - Main Customers + Business Objectives - Main business obj. - Our Philosophy - Our platform - Pilgrim’s University - Qua
Slide 39: Mexico Food, Meat and Chicken Industry Value
Alimentos procesados Market 27.2% 22.0% 10.5% 10.2% 9.2% 7.8% 5.9% 3.7% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% Chilled processed Frozen processed Canned Food Animal Feed Confectionery Others Seeds, Oils & Fat Dairy Meats Bakery Tortillas $ 130 BUSD MXP18.5/USD Estimated $
Slide 40: Protein Consumption in Mexico
SAGARPA : USDA SAGARPA : USDA • Chicken protein is recognized as the most healthy meat. • Most affordable. • Variety to prepare finished food. Market Protein Consumption in Mexico Mexico Per capita Consumption Chicken 4.0 49% 32.1 41.4 15.1 Pork 2.2 27% 18.0 23.1 15.9 Beef 1.7 21% 14.1 26.3 9.9 Othe
Slide 41: Agenda
+ Chicken Market - Food Market Value - Chicken Industry - Protein consumption + Pilgrim’s in Mexico - Main Data - Where we are - Chain Value - Products Portfolio - Market coverage - Main Customers + Business Objectives - Main business obj. - Our Philosophy - Our platform - Pilgrim’s University - Qua
Slide 42: Pilgrim's in México
Pilgrim’s in México +8 Million Weekly 6 Processing Plant 2 Value Added Plant 34 Distribution Centers Employees +10,500 26% Market Share Alimentos procesados Pilgrim’s Mexico Leading Poultry Producer SALES Fresh 95% VA 5% 42
Slide 43: Pilgrim's México Facilities
Pilgrim’s México facilities Processing Plants Distribution Centers Alimentos procesados Pilgrim’s Mexico Future DC North Complex Center Complex South Complex 43
Slide 44: Value Chain
Cadena de Valor Processed Chicken Processed Chicken Live Chicken Feed Mill Distribution Center Egg Breeders Chicken Hatcheries Chick Farms Live Chicken Processing Plants Fresh/VA Processed Chicken Customers Customers Customers Egg Grand Parents Value Chain Alimentos procesados Pilgrim’s Mexico From
Slide 45: Portfolio
Portfolio IQF: Individually Quick Frozen Live Wog Tray Pack IQF Ready to cook Fully Cooked Alimentos procesados Pilgrim’s Mexico 45
Slide 46: Customers & Channels
Customers & Channels LIVE CHICKEN WHOLESALERS RETAIL Channels Alimentos procesados Pilgrim’s Mexico QSR 46
Slide 47: Agenda
+ Chicken Market - Food Market Value - Chicken Industry - Protein consumption + Pilgrim’s in Mexico - Main Data - Where we are - Chain Value - Products Portfolio - Market coverage - Main Customers + Business Objectives - Main business obj. - Our Philosophy - Our platform - Pilgrim’s University - Qua
Slide 48: Business Objectives 2016/2020
Alimentos procesados Pilgrim’s Mexico 1)- Greater profitability of the industry in a sustainable way 3)- Enhance brand's portfolio value (brand equity) 2)- Increase market share Business Objectives 2016/2020 48
Slide 49: Our Platform to Do Business
+ Strong Culture based on our People Our Philosophy (Mission, Vision, Values) + Culture Deployment Internal communication system + Continue Training and Talent Development Pilgrim’s University + Innovation New product development/R&D center + Governance compliance Strong internal and external audit
Slide 50: Pilgrim's University
Alimentos procesados Pilgrim’s University Training for your future 50
Slide 51: Pilgrim's University Objectives
Alimentos procesados Objective A development strategy for all that holds the efficient execution of our management system and goals accomplishment. UP is an integral development system directed to all levels to strengthen people development and accomplish results, based on Company Leadership skills
Slide 52: Educational Offer
Alimentos procesados 3 DEGREES 1 POSTGRADUATE 9 STANDARD COURSES 8 OPTIONAL SUBJECTS Alimentos procesados Educational Offer Companies greatness stands in the size of their Leaders 52
Slide 53: Education with Human Value
7738 USERS EDUCATION WITH HUMAN VALUE + 45,000 TRAINING HOURS 53
Slide 54: PP Mex Strategy
Alimentos procesados PP Mex Strategy 1) People – Best people at the right position – Constant training – Empowerment 2) Process – Government and customers approvals/certifications. – Internal cross audit QA & FS Strategy 3) Objectives – Guarantee best and optimal quality. – Assure perfect quality wi
Slide 55: Agenda
+ Chicken Market - Food Market Value - Chicken Industry - Protein consumption + Pilgrim’s in Mexico - Main Data - Where we are - Chain Value - Products Portfolio - Market coverage - Main Customers + Business Objectives - Main business obj. - Our Philosophy - Our platform - Pilgrim’s University - Qua
Slide 56: Fresh Business Unit – Strategy
Alimentos procesados Fresh BU Fresh Business Unit – Strategy Biosecurity Decentralized Structure Empowerment Development and talent retention Diversified Distribution Portfolio of Products Innovation and Renovation 1- Greater profitability of the industry in a sustainable way 2- Increase market shar
Slide 57: Fresh BU Strategy Evolution
Alimentos procesados Fresh BU Historically, efforts were focused only on Business to Business Currently, efforts are evolving to focus on Business to Consumer & Shopper Strategy Strategy Evolution 57
Slide 58: Where We Want to Compete
Alimentos procesados PP Mex Strategy Where we want to compete? Branded Products We want to Increase our participation in Modern Channel with branded products that allow us to have more stable profitability and at the same time to develop our brands. Commodity Products Spot Market Modern Channel + Re
Slide 59: Portfolio Evolution
Portfolio Evolution Live Wog Wog Tray Pack IQF Alimentos procesados Pilgrim’s Mexico Fresh BU mainly focused on commodities Innovation focused on Customer & Consumer knowledge 59
Slide 60: Product Innovation Fresh BU
Alimentos procesados Product Innovation Fresh BU New Pack Image New thermoformed pack NATURAL LOW FAT MARINATED NEW MARINATED 8 Flavors 60
Slide 61: Products Innovation Fresh BU
Alimentos procesados Products Innovation Fresh BU New IQF line No Antibiotic Ever Line 1.5k BAG 700g BAG 5k BOX Feed with vegetable grains 61
Slide 62: Customer Evolution
Customer Evolution Alimentos procesados Pilgrim’s Mexico Basic Products - Commodities Public Markets Public Markets + Retail + QSR’s + Direct Sales 62
Slide 63: Brand Presence at POS
Brand Presence at POS Alimentos procesados Pilgrim’s Mexico 63
Slide 64: Agenda
+ Chicken Market - Food Market Value - Chicken Industry - Protein consumption + Pilgrim’s in Mexico - Main Data - Where we are - Chain Value - Products Portfolio - Market coverage - Main Customers + Business Objectives - Main business obj. - Our Philosophy - Our platform - Pilgrim’s University - Qua
Slide 65: One Pager Strategy
One Pager Strategy To be the number one choice for poultry value added products at each distribution channel and market segment. Winning aspiration Poultry ready to cook and ready to eat products. Providing the best value equation and differentiation to every market segment. Cost efficiency and inno
Slide 66: Value Added BU
Alimentos procesados Pilgrim’s Mexico Value Added BU Value Added 20,000 Tons/Year 90% growth over 2016 ($mxp) Premium We inspire you to give the best choice for your loved ones To provide the best food (flavor + Nutrition) to connect people. Value 60% VOLUME / 40% VALUE Best equation taste/price 40%
Slide 67: A Short but Successful Story VA BU
Alimentos procesados A short but successful story VA BU • VA Business Unit was born on June 15th 2016. • During 2016, we launched more than 30 new products in different channels; wholesale, retail and club stores. • Our portfolio grew from 30 to 60 SKU’s and Net sales increased 23%. • Pilgrim’s VA B
Slide 68: pilgrims SABOR .
Vv %, pilgrims SABOR . INCOMPARABLE * pilgrims b pilgrims pilgrims * Pea 5 _ Pilgrims 4 PECHUGA | pilgrims
Slide 69: 69
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Slide 70: The Blue Wave Keeps Expanding
The BLUE WAVE keeps expanding 70
Slide 71: pio eee Clee
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Slide 72: Market Segments: Frozen Chicken
Alimentos procesados Market Segments : Frozen Chicken Where to Play Ready to Cook Ready to Eat *$ : Value to client or distributor At least 30,000 Tons 90 USD Million At least 25,000 Tons 160 USD Million MDM Breast / Soy Filled Breast Pieces / Formed Ready Meals PRE M IU M V A LU E 72
Slide 73: The Playing Field of Every Brand
Alimentos procesados The Playing Field of every brand Where to Play Ready to Cook Ready to Eat MDM Breast / Soy Filled Breast Pieces / Formed Ready Meals RANCHO DORADO READY MEALS BRAND 73
Slide 74: Agenda
+ Chicken Market - Food Market Value - Chicken Industry - Protein consumption + Pilgrim’s in Mexico - Main Data - Where we are - Chain Value - Products Portfolio - Market coverage - Main Customers + Business Objectives - Main business obj. - Our Philosophy - Our platform - Pilgrim’s University - Qua
Slide 75: Research & Development IDEA Center Introduction
Research & Development IDEA CENTER INTRODUCTION 75
Slide 76: Operations: How We Do It
Alimentos procesados Operations How We Do It External Suppliers QA Production Sales Marketing Customer Accounting Supply Chain R & D 76
Slide 77: Operations: Our Process
Alimentos procesados Operations Our Process Decision filters definition A STAGE-GATE methodology” methodology helps us to evaluate business opportunities. “ 1 IDEATION 2 UNDERSTANDING THE OPPORTUNITY 3 CONCEPT DEFINITION 4 PRODUCT DEVELOPMENT 5 LAUNCHING DEVELOPMENT 6 LAUNCHING AND KPI´s CHECK Succe
Slide 78: Operations: Our Process – Ideation
Alimentos procesados Operations Our Process Red Box & AGA mkt R&D Suppliers Packaging Product Universities - Retailers - Wholesaler - QSR M K T RESEARCH WORKSHOPS CONTESTS COBRANDINGS 1. Brief 2. Ideation Session 3. Pool Ideas 4. First Filter 5. Economic validation and feasibility CONCEPTS 6. ENTER
Slide 79: Agenda
+ Chicken Market - Food Market Value - Chicken Industry - Protein consumption + Pilgrim’s in Mexico - Main Data - Where we are - Chain Value - Products Portfolio - Market coverage - Main Customers + Business Objectives - Main business obj. - Our Philosophy - Our platform - Pilgrim’s University - Qua
Slide 80: Veracruz Project
Alimentos procesados Operations VERACRUZ PROJECT Current Capacity: - Feed Mill (3,500 MT/Week) - Hatchery (650,000 Chicks/W) - 10- Broiler Farms (390,000 Chickens/W) 2018 Capacity Increase: - Feed Mill (+3,500 MT/Week) - Hatchery (+650,000 Chicks/W) - 11- Broiler Farms (+410,000 Chickens/W) - Future
Slide 81: Thank You
) pilgrims: Thank You
Slide 82: Pilgrim's: All about great taste
\) pilgrims: All about great taste.
Slide 83: Introduction to Moy Park
Introduction to Moy Park September 20th 2017 Shared on 9/20/17
Slide 84: Moy Park at a Glance
Retail 59% QSR / Foodservice 32% Other 9% Total 2016A revenue: c£1.4bn Moy Park at a glance Product mix (% 2016A Revenues) Channel mix (% 2016A Revenues) Overview 1. Poultry volume produced based on DEFRA calculations using egg placings and average mortality rates. Moy Park production in May 2017 of
Slide 85: Our Products
Primary fresh and fresh added-value Multi-protein & meat free Ready-to-eat Coated Comprehensive product offering centred on poultry, convenience and meat free products Our products 85
Slide 86: Comprehensive Product Offering and Market Shares
Fresh primary Frozen Coated Ready to eat Fresh added value (fresh added value, RTC, BBQ, rotisserie) Fresh Coated Agr i- fr es h Fresh primary £1.55bn Frozen coated £365m Ready to eat £385m Fresh added value (primary added value, RTC, BBQ, rotisserie) £497m Fresh coated £283m Co n ve n ie n ce Produ
Slide 87: Our Businesses Today
Primary fresh Ready-to-eat Convenience & meat free UK & Ireland (75% of 2016A revenues) Continental Europe (25% of 2016A revenues) Retail Foodservice Other¹ 8% 92% Retail Foodservice Coated 76% 13% 11% 1. Other channel includes sales to agricultural customers and sales of poultry on the internationa
Slide 88: Our Strategy: Focus Together
VISION REVENUE & MARKET SHARE NEW BUSINESS & INTERNATIONAL FOODS EFFECTIVE EFFICIENT & SAFE ORGANISATION HIGH PERFORMING PEOPLE & TEAMS PROFITABILITY & CASHFLOW Become the best and most respected company in our industry, creating the opportunity of a better future for our team members Be a leading a
Slide 89: Moy Park Key Highlights
2 Trusted, long-term partner to leading European food retailers and foodservice customers 3 Attractive structural growth dynamics in a market of critical importance to customers and consumers 4 Fully integrated, well invested poultry production platform delivering industry leading technical excellen
Slide 90: Attractive Structural Growth Dynamics in UK Poultry
UK Produced 72% Imported 28% Critical category for retailers Strong health and wellness credentials Focus on provenance and British origin Rapid convenience segment growth 72% of poultry produced in the UK Source: Protein purchase volumes Kantar WorldPanel, 52 weeks to 18th June 2017. Import d
Slide 91: Consumer Perception of Chicken Health and Provenance
77% 75% 31% 25% 25% Chicken Fish Beef Lamb Pork Long term interest in health is soaring with chicken perceived as the healthiest fresh protein, and consumers caring more about provenance than any other food and drink category “In general, what types of protein do you consider to be healthy?” Source:
Slide 92: Leading UK Poultry Producer
One of the leading poultry producers in the UK and more than twice the size of the next largest competitor… consistently growing market share UK poultry by volume produced¹ (2017) Growth in Moy Park market share Note: A,B,C,D refer to competitors Source: Management estimates in conjunction with DEFR
Slide 93: Leading Positions in Higher Growth Convenience Categories
51% Other 49% Chilled ready-to-eat Chilled fresh coated Market growth (2013-17 CAGR) +6.9% +2.2% Market value (€bn) 1. Specific Global Data category used is “fast food”, which is synonymous with QSR. Source: Global Data, July 2017 UK QSR market¹ Market growth (2013-17 CAGR) Market value (€bn) Market
Slide 94: Insight and Innovation Capability
26 75 2011A 2017A Consumer insights capabilities support innovation and food development, helping deliver a large variety of new products for all different meal occasions over the last 10 years and further supported by our embedded chefs Food Development Innovation & Insight Headcount c50 new employ
Slide 95: Innovation Drivers
Innovation drivers • Market and consumer needs are evolving • Retailers are looking for differentiation • Need to differentiate ourselves from competitors • Consumer are looking for products that meet their changing needs • Process innovation to enhance efficiency Overall market trends Rise of conve
Slide 96: Trusted, Long-Term Partner to Leading Retailers and Foodservice
Trusted, long-term partner to leading European food retailers and foodservice customers Retail 59% QSR / Foodservice 32% Other 9% Total 2016A revenue: c£1.4bn Key customers R e ta il F o o d s e rv ic e Moy Park has long standing relationships with its retail and foodservice partners who trust us to
Slide 97: Risk Management
Risk management Feed Ingredients Packaging Meat Commodity Pricing Models Residual Risk to be Fixed Price 7% Customer Rolling Cost Models 46% of raw material spend is covered by pricing models that enable cost movements to be passed through 46% cost passed throug h Customer models are utilised exte
Slide 98: Fully Integrated Poultry Supply Chain
Note: All numerical values including # weeks and # eggs represent average expectations. Fully integrated poultry supply chain – that delivers traceability, quality, efficiency 50 year partnership with Aviagen F e e d M il ls Excellence in bio-security and food safety Farming, nutritional and
Slide 99: Fully Integrated, Well Invested Production Platform
Fresh processing UK added-value processing EU added-value processing Grandparent breeding grounds Ballymena Dungannon Craigavon Dublin Anwick Ashbourne Grantham Huntingdon Peterborough Marquise Hénin- Beaumont Orleans Schagen Long-term relationship with 800+ farmers 7 hatcheries and 3 feed mills
Slide 100: Commitment to Food Safety, Welfare and Quality
Strong commitment to food safety, welfare and quality standards Best in Class antibiotic stewardship Best in Class agri- infrastructure and welfare KPI measures Best in Class campylobacter performance Best in Class food security Best in Class research & horizon scan Determination Accountability Team
Slide 101: Track Record of Strong and Sustained Earnings Growth
£1,394m £1,422m £1,442m £1,437m 2013 2014 2015 2016 £66m 5.2% £81m 6.3% £98m 7.0% £115m 8.1% 2013 2014 2015 2016 Track record of strong and sustained earnings growth Revenue (£m, FYE December) Adjusted EBITDA1 (£m, FYE December) Adjusted for Corporate Charges, Exceptional Items & SOX Costs Source: C
Slide 102: Significant Capital Investment in Capacity and Efficiency
Recent key strategic projects Increase fresh slaughter capacity & efficiencies − c£36m investment increasing capacity by c1m birds per week Increase hatchery capacity −New state-of-the-art hatchery in Newark commissioned in September 2017 delivering c2.4m chicks per week − Ashbourne hatchery ext
Slide 103: Operational Excellence – The 'Being the Best' Programme
• Strong track record of cost reduction, with US $50m of net improvements targeted over next two years • Fundamental principles: – Established Governance programme – Identification of ‘best’ performance versus ‘average’ performance – the gap – Target setting to close % of the gap – the goal – Rigoro
Slide 104: Operational Excellence – Future Opportunities
Future Opportunities £38m [$50m] ACT PLAN DO CHECK Operational Excellence – The ‘Being the Best’ programme £19 m £11 m £8m Factory Operations Agriculture Procurement Target Area Value Yield & Giveaway £10m Productivity £9m New Hatchery £5m Agriculture £6m Sourcing £5m Specification £3m Total £38m To
Slide 105: Our Strategy: Focus Together
VISION REVENUE & MARKET SHARE NEW BUSINESS & INTERNATIONAL FOODS EFFECTIVE EFFICIENT & SAFE ORGANISATION HIGH PERFORMING PEOPLE & TEAMS PROFITABILITY & CASHFLOW Become the best and most respected company in our industry, creating the opportunity of a better future for our team members Be a leading a
Slide 106: Pilgrim's: All about great taste
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Slide 107: Cash Corn Omaha, NE
107 CASH CORN OMAHA, NE Shared on 9/20/17 Source: USDA-WASDE 3.580 3.130 3.220 4.090 2.900 4.110 3.370 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 1/ 8 1/ 22 2/ 5 2/ 19 3/ 5 3/ 19 4/ 2 4/ 16 4/ 30 5/ 14 5/ 28 6/ 11 6/ 25 7/ 9 7/ 23 8/ 6 8/ 20 9/ 3 9/ 17 10 /1 10 /1 5 10 /2 9 11 /1 2 11 /2 6 12 /1 0 12 /2 4 US D
Slide 108: Cash Soybean Meal Decatur, IL
108 CASH SOYBEAN MEAL DECATUR, IL Source: USDA-WASDE 346.700 285.600 297.900 263.200 413.300 396.500 200 250 300 350 400 450 500 1/ 8 1/ 22 2/ 5 2/ 19 3/ 5 3/ 19 4/ 2 4/ 16 4/ 30 5/ 14 5/ 28 6/ 11 6/ 25 7/ 9 7/ 23 8/ 6 8/ 20 9/ 3 9/ 17 10 /1 10 /1 5 10 /2 9 11 /1 2 11 /2 6 12 /1 0 12 /2 4 US D / T o
Slide 109: August Temps One of the Coolest on Record
109 AUGUST TEMPS ONE OF THE COOLEST ON RECORD Average Temperature (F): Departure from Mean: Aug 1-Aug 30, 2017 SOURCE: Midwestern Regional Climate Center, cli-MATE: MRCC Application Tools Environment, Generated at 9/12/17 12:27:38 PM CDT Shared on 9/20/17
Slide 110: Driest Areas of Belt Receive the Best Rains
110 DRIEST AREAS OF BELT RECEIVE THE BEST RAINS % of Normal Precip: Over 30 Days Ending 12 UTC/Sept. 6, 2017
Slide 111: US Corn Stocks Remain in Surplus
111 US CORN STOCKS REMAIN IN SURPLUS • US corn yield projected at 169.9 bushels/acre vs market estimates of 167.9 • US stocks projected at 59.3 million tons on par with 2016/17 Shared on 9/20/17
Slide 112: Soybean Stocks Increasing Despite Demand
112 SOYBEAN STOCKS INCREASING DESPITE DEMAND • US soybean yield projected at 49.9 bushels/acre vs market estimates of 48.7 • US and global stocks projected to increase in 17/18 despite growing Chinese import demand Shared on 9/20/17
Slide 113: Pilgrim's: All about great taste
\) pilgrims: All about great taste.
Slide 114: Observations & Opportunities
114 OBSERVATIONS & OPPORTUNITIES • Pilgrim’s is a fantastic opportunity • The audacity to think bigger. Deliver brands and provide retailers with solutions for all their Poultry needs, from Private Label to branded options • Cross-pollination and expansion of great ideas across organization • Create
Slide 115: Winning: The Best Value Equation
115 Alimentos procesados Winning By providing the BEST consumer/customer value equation— better than our competitors…sustainably and profitably. THE BEST VALUE EQUATION Shared on 9/20/17
Slide 116: Our Consumer Segmentation Drives Innovation; Delivers Value
116 OUR CONSUMER SEGMENTATION DRIVES INNOVATION; DELIVERS VALUE Cooking Avoiders Protein Seekers Convenience Seekers Family Pleasers Inspiration Seekers SOURCE: Protein Consumer Segmentation Study - TNS and The Futures Company – Fall 2015 - n =5,000 Shared on 9/20/17
Slide 117: Brands Fill Different Consumer Needs
117 BRANDS FILL DIFFERENT CONSUMER NEEDS LESS HEALTH SOURCE: Protein Consumer Segmentation Study – TNS and The Futures Company – Fall 2015 - n =5,000 Shared on 9/20/17
Slide 118: For Usage and Attitudes
118 …FOR USAGE AND ATTITUDES SOURCE: Protein Consumer Segmentation Study – TNS and The Futures Company – Fall 2015 - n =5,000 Shared on 9/20/17
Slide 119: Brand Strategies Align with Consumers
119 Fortify Home Gain Market Share Better Fresh, Straightforward, Fun with a Bit of Attitude Wholesome fresh chicken and better-for-you value-added products for trusted convenience Eating Occasions National Expansion Best Simple, Empowering, Inspirational Premium quality fresh chicken with leading h
Slide 120: Sustainable Competitive Advantage
120 Alimentos procesados Sustainable competitive advantage Differentiation Production Efficiency • Deep and holistic understanding of customers • Intensive brand building • Jealous guarding of customers • Commitment to Frugal Innovation • Systemic understanding of costs / costs drivers • Relentless
Slide 121: Feature Importance Scores
121 9.8% 3.9% 3.8% 3.6% 3.5% 3.5% 3.4% 3.3% 3.3% 3.3% 3.2% 3.1% 3.1% 3.0% 2.9% 2.8% 2.8% 2.7% 2.7% 2.6% 2.5% 2.5% 2.5% 2.5% 2.4% 2.4% 2.3% 2.3% 1.9% 1.8% 1.7% 1.7% 1.6% 1.6% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% FEATURE IMPORTANCE SCORES Chart shows the RANGE of each feature’s impact on purchase-- ca
Slide 122: Capabilities: Support Core Capabilities to Win
122 Alimentos procesados Capabilities Deep Unde rs ta n di n g of C on su m e rs C reati n g a n d Bu ild in g B ra n d s Inno v at in g R & D Technolo g y * St rate g ic alli a nce s w it h C u stomer s a n d Sup p lie rs G loba l E x pe rti se & K now - H o w SUPPORT CORE CAPABILITIES TO WIN Share
Slide 123: Frugal Innovation = Improving Product Quality at More Accessible Price Points
123 FRUGAL INNOVATION = IMPROVING PRODUCT QUALITY AT MORE ACCESSIBLE PRICE POINTS • Value is often misinterpreted as “Managing Pricing” or “Cost of Goods” • Use of the word ‘value’ revolves around the “price/benefit” relationship offered to consumers, shoppers and customers • The relationship that n
Slide 124: Creating Market Value: 3W's
124 CREATING MARKET VALUE: 3W’S • Different people value different things • Managing “fair value” for a brand requires a clear understanding of ─ WHO you are targeting ─ WHAT they value within the category in which the brand is operating ─ WHY they value it (what NEEDS does it address) WHO WHAT Wher
Slide 125: Points of Parity, Difference & Irrelevance
125 • The development of product, price and activation strategies are not developed in isolation, but also recognize how they work together to influence value • The purpose of each lever is to understand how the product, price or activation can work together to create value for the consumer POINTS O
Slide 126: People: Critical to Winning/Becoming the Best
126 Alimentos procesados People Deep Unde rs ta n di n g o f Cons u m e rs C reati n g a n d Building B ra nd s Inno v at in g R & D Technology * Str a tegic all ia n ces w ith C u stomer s a n d Sup p lie rs G lo b a l Expe rti se & Know - Ho w CRITICAL TO WINNING/BECOMING THE BEST “Become the best
Slide 127: Digital Strategy
127 DIGITAL STRATEGY MAKE THEM AWARE DRIVE CONSIDERATION MAKE THEM ACT Local Targeting – reach a specific audience in a defined area (zip, geo, etc.) Brand Affinity Targeting – reach a specific audience based on behaviors and locations associated w/ your brand Proximity Targeting – engage your audie
Slide 128: Location-Based Media: Geo-Fencing Pilots
128 LOCATION-BASED MEDIA: GEO-FENCING PILOTS Shared on 9/20/17
Slide 129: Just BARE Digital Marketing Strategy
129 Just BARE Digital Marketing Strategy TARGETING • Demo • Market Protein Seekers Inspiration Seekers Shared on 9/20/17
Slide 130: Gold'n Plump Digital Marketing Strategy
130 TARGETING • Demo • Market Gold’n Plump Digital Marketing Strategy Cooking Avoiders Family Pleasers Convenience Seekers Shared on 9/20/17
Slide 131: On-line/Digital Grocery
131 https://www.cnbc.com/2017/01/30/online-grocery-sales-set-surge-grabbing-20-percent-of-market-by-2025.html https://www.cnbc.com/2017/06/21/dont-worry-wal-mart-amazon-buying-whole-foods-is-just-a-drop-in-the-bucket.html ON-LINE/DIGITAL GROCERY Shared on 9/20/17
Slide 132: Pilgrim's: All about great taste
\) pilgrims: | All about great taste. ;
Slide 133: Our Vision and Strategy
133 OUR VISION AND STRATEGY Shared on 9/20/17
Slide 134: Our Vision – How Do We Track It?
134 OUR VISION – HOW DO WE TRACK IT? Shared on 9/20/17
Slide 135: Our Vision - Market Value
135 OUR VISION - MARKET VALUE Shared on 9/20/17
Slide 136: Our Vision - Total Shareholder Return
136 OUR VISION - TOTAL SHAREHOLDER RETURN $658 $274 *$100 invested on 12/25/11 in stock or 12/31/11 in index, including reinvestment of dividends. Indexes calculated on month-end basis. Peer Group includes Hormel Foods Corp, Sanderson Farms Inc. and Tyson Foods Inc. Copyright© 2017 Russell Investmen
Slide 137: Our Vision – Operational Benchmarks
137 OUR VISION – OPERATIONAL BENCHMARKS 2011: PPC below AVG Co 2013: PPC better than AVG Based on Agristats C/lb profit Vision: The Best 2015: PPC Top Third Shared on 9/20/17
Slide 138: Progress Report – Growth in the U.S. and Abroad
138 $5,656 $5,971 $6,336 $6,784 $7,027 $6,784 $6,358 $6,853 2010 2011 2012 2013 2014 2015 2016 2017 LTM U.S. Domestic PROGRESS REPORT – GROWTH …BOTH in the U.S. and Abroad 6 Years of Significant Growth … Note: 2012 sales adjusted to 52 weeks. $1,226 $1,565 $1,632 $1,627 $1,556 $1,396 $1,574 $3,531 2
Slide 139: Relentless Pursuit of Operational Excellence
139 RELENTLESS PURSUIT OF OPERATIONAL EXCELLENCE >$1.0B cumulative operational improvements ’11–’16 2016 impacted by portfolio mix changes $174M targeted for 2017 Commitment at every level; using ZBB 2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016 -1.2c/lb. -0.4c/lb. -0.8c/lb. -1.4c/
Slide 140: Management of SG&A
140 MANAGEMENT OF SG&A De-layering: Closer to customers Shared Service Center with JBS Zero-Based Budget $0 $50 $100 $150 $200 $250 $300 $350 $400 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Reduced, Sustainable SG&A Levels 2.5%-3.0% 4.7% Source: PPC ($ in millions) Shared on 9/20/17
Slide 141: Progress Report – Results
141 PROGRESS REPORT – RESULTS …and Profitability Growing Volume… 2010 2011 2012 2013 2014 2015 2016 2017 LTM PF Volume $482 ($147) $398 $810 $1,352 $1,214 $899 $1,192 2010 2011 2012 2013 2014 2015 2016 2017 LTM PF Adj. EBITDA ($ in millions) (MM lbs.) Note: 2012 Lbs. adjusted to 52 weeks as fiscal 2
Slide 142: Progress Report – Free Cash Flow
142 PROGRESS REPORT – FREE CASH FLOW $250 $350 $750 $880 $826 $480 2011 2012 2013 2014 2015 2016 Close Management of working capital Strong Cash Flow generation Net debt / LTM EBITDA 1.1X as of June 2017 Significant room for growing the company Cash Flow Generation ($ in millions) Source: PPC Shar
Slide 143: Growing Through Investing in Our Business
143 GROWING THROUGH INVESTING IN OUR BUSINESS Source PPC Strong Free Cash Flow generation has enabled us to direct more capital spending towards identified projects with rapid payback and structural projects. $1B invested in the last 6 years New strategic projects will support key customers grow
Slide 144: Growing in U.S. Through Acquisitions – GNP
144 GROWING IN U.S. THROUGH ACQUISITIONS – GNP Cold Spring Plant Arcadia Plant Luverne Plant Arcadia Hatchery Arcadia Feed Mill and Elevator Gold’n Plump Barn owned by a Family Farm Partner ARCADIA PROCESSING PLANT Cold Spring Plant Arcadia Plant Luverne Plant Arcadia Hatchery Arcadia Feed Mill and
Slide 145: Growing in Mexico
145 GROWING IN MEXICO Diversified product mix from commodity to prepared branded products, including premium Pilgrim’s brand Geographic Diversity Product Diversity Growth Opportunity New complex in Veracruz – starting with 100K live chicken/week growing to 500K in 2 years Strong player in cent
Slide 146: Growing in Mexico, Cont.
146 GROWING IN MEXICO, CONT. Acquisition in Mexico at end of Q2 2015: – Initial estimate of $30MM in synergies – Actual synergies of $50MM and the acquired asset is performing at the same level as the legacy – Cross-learning and benchmarking benefiting both new and legacy asset results Shared on 9/2
Slide 147: Growing into Different Geographies
147 GROWING INTO DIFFERENT GEOGRAPHIES Value Creation Capital Structure Synergy opportunities of $50MM Yields, productivity and sourcing Immediately accretive to EPS $10c/ share based on current results and full acquisition in debt $25c/share expected for 2018 based on capturing 50% of
Slide 148: Creating a Stronger Portfolio
148 CREATING A STRONGER PORTFOLIO Europe 19% US 65% Export 3% Mexico 13% 2017 LTM PF Sales $10,384mm(1) Pro Forma Sales by Geography Fresh 65% Prepared/ Value-added 27% Export and Other 8% Pro Forma Sales by Product 2017 LTM PF Sales $10,384mm(1) Note: 1. 2017 LTM Pro forma sales comprised of $8,436
Slide 149: Our Vision - Better Future for Team Members
149 • Better, more stable results: Variable compensation • Healthy company growing and creating new opportunities • Attract the best teams, suppliers, partners, customers and investors • Pride of being the BEST! OUR VISION - BETTER FUTURE FOR TEAM MEMBERS! Shared on 9/20/17
Slide 150: Pilgrim's: All about great taste
\) pilgrims: | All about great taste. ;
Slide 151: Pillars to Support Our Strategy
151 PILLARS TO SUPPORT OUR STRATEGY PEOPLE QUALITY MAINTENANCE ENVIRONMENT METHOD Shared on 9/20/17
Slide 152: Safe People – A Condition/Results & Methods
152 SAFE People – A Condition/Results & Methods The safety of our team members is a condition. We continually outperform the industry AND expect continuous improvement. Occupational Health and Safety Programs Safety Leadership Committee Training and Education Prevention Audits Corrective
Slide 153: Our Team, Our Communities
153 At Pilgrim’s, we: • Understand the responsibility that comes with being a major employer in rural America • Work hard to contribute to the well-being of these communities by providing gainful employment opportunities and maintaining a sustainable workforce. Our TEAM, our COMMUNITIES Shared on 9/
Slide 154: Energy, Water & Emissions
154 From 2010-2015, we outperformed 8 out of 9 of our 2010 goals, reducing: • energy use by 28% • water use by 34% • greenhouse gas emissions by 33% ENERGY, WATER & EMISSIONS STRONG Team Strong Results: ENVIRONMENT Our sustainable and solid financial results came from the outstanding engagement of
Slide 155: Environment: Waste & Packaging
155 From 2010 to 2015, we: • reduced our solid waste by 44% • increased our recyclable packaging by 40% • reduced our packaging per unit of production by 25% STRONG Team Strong Results: ENVIRONMENT, cont. WASTE & PACKAGING Shared on 9/20/17
Slide 156: Pilgrim's: All about great taste
\) pilgrims: All about great taste.
Slide 157: Pilgrim's Progress on Delivering Our Vision to Be the Best
157 Shared on 9/20/17 PILGRIM’S PROGRESS ON DELIVERING OUR VISION TO BE THE BEST THROUGH OPERATIONAL EXCELLENCE & ACQUISITIONS Closing GAPS Expanding TARGET U.S. Focus
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