ANIMEX Introduction 2010 1 Corporate Animex; Smithfield Smithfield 100% Animex 100% AgriPlus 2 Smithfield Is the World’s Largest Pork Producer Rabobank, 2010. 3 Smithfield Basics Key facts Support to Animex Strategy: hogs + processed meat Large, exclusive breeder base Operations in the US, Europe, and Knowledge transfer China Financial backup NYSE listed Net sales FY 2010*: US$ 11bn, Smithfield Locations #3 worldwide, #1 in pork Net loss FY 2010: (US$ 101M) * FY 2010: April 2009-March 2010 4 Animex Is Poland’s Largest Meat Producer Nestle Net sales FY 2010*: 3,1 bn PLN 13 production plants 4x red meat 4x white meat 2x feed 1x chicken hatchery Net Sales [bn PLN] Danone * FY 2010: April 2009-March 2010 2x feather Employees: 7,700 Distribution in all channels Exclusive access to largest Polish breeder base (owned by Smithfield) All required quality certificates 5 Turnaround 1/2 . . 150 7 000 100 5 000 50 3 000 0 1 000 -50 -1 000 -100 PBT Sales -150 . -3 000 2001 - 2002 2003 - 2004 2005 - 2006 2007 - 2008 2009 - 2010 . 6 Turnaround 2/2 „Socialist-style” management Today’s management Independently managed production plants; operations and accountability on plant level; internal competition Centralized sales, cooperation and knowledge transfer between the plants; consolidation of logistics and finance, management by objectives Culture of survival and short-term sales maintainence Execution-oriented culture Customer is unimportant („they will come to us and buy anyway”) Customer focus, among other employing professional customer satisfaction surveys Maintain current sales, no ambition to develop sales and earnings Increasing sales volume; balanced product mix „Costs are inevitable”, „money comes and goes”; investing in „fancy things” Cost control, cost benchmarking, focus on existing assets’ payback; financial discipline , control of liabilities and receivables „Everybody has to have a job”, qualifications didn’t really matter Building high performance team 7 Investment in human capital INSEAD (France) – top management training Award „Investor in Human Capital” (received by only 10 companies in Poland) Human resources development Assessment Training Project development Master Academy (100 participants) Foremen Academy (in progress – planned 340 participants) Meat & Poultry Brown Belt Training Program, Iowa State University (17 managers participated) 8 Business Ethics, Smithfield Code of Conduct One of Smithfield’s most treasured assets is its reputation for integrity and fairness. Smithfield wants to be responsive to the concerns of the communities in which it operates and exercise the highest degree of honesty and integrity in its dealings with others . Therefore Smithfield has developed a Corporate Code of Conduct and Business Ethics, which is the basis of its and its subsidiaries operations. Animex employees are trained on the Code’s content and application. There is an Annual Certification Process in place which requires each employee on managerial position to certify they know the Code and are not aware of any breach of it by any employee. There is an Employee Ethics Hotline – toll free and anonymous – for reporting non-compliance with the Code. 9 Poland, our home market 10 Poland vs. US States Key Parameters „EU Europe” 27 states „Non-EU Europe” 27 states Kiruna, Sweden 1.100 mi Key facts about Poland: • Area: 121.000 sq mi (like New Mexico, #69 worldwide); Yekaterinburg, Russia 1.600 mi • Population: 38.5M (like California, #31 worldwide), Galway, Ireland 38% living in rural areas; 1.200 mi • GDP: $567 bln (like Illinois; #23 worldwide); • GDP per capita: $15.000 (#52 worldwide). Lisbon, Portugal 1.700 mi 11 Poland: A Country Becomes Wealthier Average Gross Salary [monthly, in PLN] Structure of Household Expenses [in per cent] 10% 10% 11% 12% 9% 10% 7% 7% 7% 4% 4% 7% 4% 4% 17% 17% 7% 43% 7% 41% 10% 4% 5% 11% 4% 5% 17% 18% 7% 7% 39% 37% 12% 12% 7% 4% 6% 18% 6% 34% 7% 11% 12% 12% Other 15% 15% 15% Transport & communication 8% 5% 5% 9% 5% 5% 9% 5% 6% 9% 5% 6% 20% 20% 21% 19% 20% 5% 5% 5% 6% 6% 6% 28% 28% 28% 28% 28% 27% 12% 14% 15% 15% 15% 14% 13% 13% 14% 14% 8% 5% 6% 8% 5% 5% 8% 5% 5% 8% 5% 5% 18% 20% 21% 6% 5% 31% 30% 13% 8% 4% 6% 22% 6% 34% Education & leisure Healthcare Furnishing, household equipment and routine maintenance of the house Rent, electricity, heating etc. Clothing & footwear Food & drink (non-alcoholic) 1995 GfK, 2010. 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 12 Meat Is The Largest Polish Food Market Meat and meat products ~30 bn PLN Alcohol Soft drinks Sweets Culinary Dairy Nielsen, Animex. 13 Our products and brands 14 Categories, Products Hot-Dog (trade & consumer form) 15 Categories, Products Dried-Smoked Sausage, Traditional Sausage (trade & consumer form) 16 Categories, Products Smoked Products (trade & consumer form) 17 Categories, Products Smoked Products (trade & consumer form) 18 Categories, Products Canned Products (trade & consumer form) 19 Categories, Products Convenience Food (trade & consumer form) fresh & frozen 20 Categories, Products Fresh & Semi Meats (trade & consumer form) 21 Exclusive Access To Largest Polish Hog Base Contract Procurement Smithfield Procurement 22 Production, Procurement, Quality RED MEAT Slaughter: Slaughter: Cattle: 54 K heads Chicken: 37,4 mln heads Hog: 1,9 mln heads Goose: 1,1 mln heads Turkey: 36,8 K tons Livestock procurement : WHITE MEAT Appr. 1.000 contract farmers Quality systems Livestock procurement : Contract farmers (92%) Positive List System (Japanese) PSQ (implementation in progress) Own production of broiler birds (80%) Own production of feed (44%) Traceability Complete traceability compliant with UE requirements Quality systems GHP GMP HACCP 23 Broad and Diversified Portfolio Red meat, white meat Nielsen, 2010. Leader in hypermarkets Brands valued by both customers and consumers Fresh meat and poultry Marinates and other culinary meats Deli meats, cold cuts Canned meats Ready meals, convenience food Packed meats for self-service, „unpacked” meats for deli counter Pork, beef, veal, chicken, turkey, goose Fresh meat, semi-processed, processed Leadership in Packed Deli Meats Animex Brands Strategic brands – Krakus, Morliny, Yano Regional brands (Poland only) Private label products Strong marketing support 24 Animex Brand Portfolio Product, Price, Positioning Brand Product Range Price Segment Limited range: Dry sausages, deli hams, canned meat, pate, smoked products; predominantly red meat Semi-processed/ culinary meats Premium Image / Positioning Traditional, top quality, something special Claim: „Deli meats as they used to be” TV Extended range: Hot dogs, all types of deli; red and increasingly white meat Semi-processed/ culinary meats Convenience food Premium / Mainstream Wide range: All types of deli, white meat only Convenience food Canned pate Mainstream / Economy Widest range: All types of deli, red and white meat Semi-processed/ culinary meats Convenience food Canned meat Mainstream / Economy Modern, innovative, convenient, for the demanding consumer Claim: „Never enough fun” TV Good value for money, always something for every consumer Claim: „The best for everyday shopping” No particular positioning 25 Animex Brand Portfolio Consumer Perception and Brand Strength Awareness: Four within Top 6 Brands 92% Any Animex brand Sokołów (umbrella) 81% Morliny 66% Krakus 61% Morlinki 49% Indykpol (umbrella) 47% Berlinki 45% Distinct Ownership of Quality Morliny - ++ - Dry sausages ++ - - Kabanosy ++ - - Form ed - ++ ++ Pate - - Sm oked, ham s Hot dogs Trad. sausages Nine of ten Polish consumers know at least one of Animex’ brands. Four of six top recognized brands belong to Animex. Sokołów is the best recognized single consumer brand. Salam i - - ++ ++ - ++ - In consumers’ view, ... Krakus makes the best dry sausages and kabanosy; Morliny make the best hot dogs; Producer #1 scores on sausages and salami; Consumer research, 2010. Producer Sokołów 1 Producer Indykpol2 Krakus There is no brand that „owns” hams and smoked products. 26 Leadership in Retail Chains (1/2) Category Ownership in Dry Sausage and Hot Dogs Total Packed Deli Meats Dry Sausages Hot Dogs Nielsen, 2010. 27 Leadership in Retail Chains (2/2) Packed Deli Meats Value Share Between 25% and 40% Total Chain 1 Chain 3 Nielsen, 2010. Chain 4 28 Private Label Development Annual Turnover With Poland’s Largest Retailer +60% +68% +65% +33% FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 29 Export customers – long-term relations USA – Krakus ham Seven Eleven Japan – hot dogs Lipari Jewel Wal-Mart Germany – Yano canned products Aldi Rewe Edeka Japan – pork loin, bellies IKEA UK – processed meat, Morliny brand Tesco UK Morrison’s ASDA Iceland Denmark – hot dogs, sausages, hams Netto Coop SuperGros Lithuania - hot dogs, sausages Maxima 30 Animex export approvals We have export permissions for more than 70 important countries of the world. European Union – all plants Other European countries Japan – all red meat plants, Dębica, Opole, Iława South Korea – all red meat plants, Iława Vietnam – all plants Hong Kong – Szczecin, Starachowice, Ełk, all white meat plants Ivory Coast – all red meat plants, Iława Ghana – all red meat plants Congo – all red meat plants, Iława USA – Szczecin, Starachowice, Morliny Canada – Ełk, Morliny, Iława Mexico – Starachowice, Iława Central & South America Africa North America Asia Switzerland – Starachowice, Morliny, all white meat plants Turkey – Dębica Norway - Morliny Cuba – Starachowice Guatemala - Iława Nicaragua - Iława Columbia - Iława Australia & Oceania Australia - Iława New Zealand – Szczecin, Iława 31 Thank you for your attention 32