1570 Del Monte 2006 Annual Report

Nourishing Families. Enriching Lives. Every Day. M Annual Report 2006 Mondays and Tues In the Kitchen: Making It Easy to Eat Your Vegetables (and Fruits, Too) Your parents told you to “eat your vegetables.” But they should have said “eat your fruits and vegetables—lots of them.” In fact, the latest federal Dietary Guidelines recommend 4.5 cups of fruits and vegetables every day. That’s about half a plate at every meal, and no consumer packaged foods company makes that easier and tastier to accomplish than Del Monte Foods, with our extensive portfolio of branded fruit, vegetable and tomato products. sdays and Wednesdays, Thu At School: Encouraging Healthy Eating Everywhere It’s one thing to prepare and serve a healthy, delicious dinner at home, but how do you ensure your children eat well at school? We’ve worked hard to innovate products that are convenient and portable as well as great tasting and nutritious. Our Del Monte Fruit Naturals, for example, provide a delicious, healthful serving of fruit in an easy-to-open, single-serving size package. Kids love each of the seven varieties (and so do adults). ursdays, Fridays, At Work: Eating Well on the Job Getting a healthy lunch can be a tremendous challenge in the workplace. That’s why we’ve introduced products designed for people on the go, most notably our successful line of StarKist Flavor Fresh Pouch tuna products for a low-fat, protein-packed and nutrient-rich entrée. Our StarKist Lunch To-Go or new StarKist Tuna Creations Lunch To-Go varieties—complete with relish, mayonnaise, crackers and a mint—and a Del Monte Fruit Cup snack provide a satisfying, delicious and healthy lunch. Saturdays, and At Play: Nourishing the Entire Family—Including Dogs and Cats Anyone who enjoys the companionship of a dog or cat knows that the bond between pets and people inspires devotion. Our many trusted pet food brands—including Meow Mix, Kibbles ’n Bits, 9Lives and others— have been nourishing dogs and cats for generations. We offer one of the most comprehensive lines of pet snacks in the industry, including Snausages and Pup-Peroni soft and chewy snacks and Milk-Bone and Meaty Bone biscuits for dogs as well as Pounce treats for cats. Our products enrich the connection between people and the pets they love. Sundays At Home: Bringing Families Back to the Table At Del Monte Foods, the phrase “nourishing families” refers to nutrition, of course. The foods of Del Monte are good for you (not coincidentally, our products taste great too). But there’s another dimension to nourishing: enriching family life. We believe there is no better way to make families stronger—to make family life richer—than enjoying a healthy, delicious meal together around the table. The people of Del Monte Foods focus on a compelling vision: Nourishing Families. Enriching Lives. Every Day. We nourish people by providing a vast array of healthy, high-quality foods, from our fruit, vegetable and tomato products to our broth and tuna products. We enrich lives by encouraging and enabling families to eat together with delicious products that offer conven- ience and speed-to-table as well as quality and nutrition. We offer a comprehensive line of food and snacks for pets—beloved, integral parts of a growing number of families. Our products play key roles in the lives of millions of American families every day. Brands for Every Member of the Family For People For Pets A key component of the Del Monte Foods story is the power of Our pet brands are also famous: Meow Mix, Kibbles ’n Bits, branded products. Our portfolio includes some of the country’s 9Lives, Milk-Bone, Pup-Peroni, Meaty Bone, Snausages and most recognized and cherished brands, including Del Monte, Pounce are familiar to American consumers—and the products StarKist, Contadina and College Inn. The equity of these brands they represent are wildly popular with dogs and cats. Like is driven by the quality of the product, nutritional value, and our people products, our pet products are delicious, and most importantly, the great taste. they celebrate the already powerful bond between pets and their families. 12. 13. Dear Fellow Stockholders “Del Monte Foods became a stronger company during Fiscal 2006 was a year of substantial accomplishment for Del Monte Foods. We made significant progress towards our forward-looking strategic objectives and achieved positive financial the course of fiscal 2006. In many ways, the scope and performance across all of our businesses. The Company successfully implemented its strategic plan, Project Brand, and consistent with that strategy, also significantly realigned its business importance of our accomplishments made it a transfor- portfolio through divestiture and acquisition activity. In addition, we implemented aggressive cost reduction initiatives and took pricing actions to mitigate the pressures of the current infla- mative year for the Company.” tionary cost environment. Del Monte Foods became a stronger company during the course of fiscal 2006. In many Richard G. Wolford ways, the scope and importance of our accomplishments made it a transformative year for Chairman of the Board, President and the Company. Chief Executive Officer While our numbers have already been announced, I am pleased to highlight some of our financial results. Gross profit, for example, increased by 5.5%, and gross margin improved by 50 basis points. Operating income also improved during the year, despite the pressure of infla- tionary costs that has affected Del Monte Foods for the past two years. The Company contin- Fiscal 2006 Financial Highlights ued to generate strong cash flow. We put that cash to work in several ways, by investing in our brands and products, of course, but also by returning cash to stockholders by paying our first Results of Operations quarterly dividend since going public in 1999 and through the buyback of $125 million of Del Monte Foods common stock. ( In millions, except per share data ) Fiscal 2006 Critically, fiscal 2006 was a year of significant progress for Project Brand, the strategic plan we Net sales $ 2,998.6 Operating income 304.8 launched a year ago with the goal of building a branded, top-tier consumer packaged foods Net income* 169.9 company. Brands are critical to the success of Del Monte Foods. They provide a powerful plat- Diluted earnings per common share* $ 0.83 form for innovation; consumers will try new products that are extensions of brands they know and trust. Moreover, strong brands give us leverage with retailers and consumers; they are pow- *Includes discontinued operations erful assets that enable us to grow our business and increase our margins. Project Brand is improving our ability to take advantage of the strengths of our brands and the powerful consumer trends that are driving our business. Growth in sales and profitability is the key to enhanced stockholder value, and Project Brand is how we are getting there. Significantly, we made solid progress against each of Project Brand’s core initiatives: Portfolio Optimization. First, we continued to strategically focus our business on higher- growth, higher-margin categories in our current portfolio and through acquisition and divestiture activities. These steps are closely aligned with key consumer trends driving our businesses. During fiscal 2006, we divested our soup and infant feeding businesses and announced agree- ments for two significant acquisitions that enhanced our pet portfolio, Meow Mix cat food and 14. 15. Milk-Bone dog snacks (both transactions closed in the first quarter fiscal 2007). These two Alignment with Consumer Trends acquisitions dramatically increase our presence in the growing pet food and snacks markets, and their well-known brands are a good complement to our existing pet portfolio. As a result Another objective for our Company is to improve our ability to capitalize on consumer trends. of these acquisitions, pet products will represent approximately 40% of our total sales. Our strategy reflects the reality of what’s going on in the American consumer marketplace, Portfolio realignment, from merger and acquisition activity as well as our tightened focus on especially the two powerful dynamics that are driving our business: the growing focus on higher-growth, higher-margin businesses, is clearly aimed at improving financial performance. health and wellness and the increasing number of people with pets. We believe Del Monte Foods is uniquely positioned to capitalize on the many opportunities ahead. Brand-Driven Innovation. Second, we continued to seek—and achieve—brand-driven innovation. Some of our more notable consumer product innovations in fiscal 2006 include three A number of factors, including obesity, diabetes and heart disease, as well as an aging pop- new flavors of our Fruit Naturals, the introduction of StarKist Tuna Fillets (an extension of our ulation, are leading to a heightened interest in healthy eating. We believe Del Monte Foods tuna pouch products, named a winner in the 2006 “Best in Foods” competition by Health enjoys a competitive advantage because our products, supported by the Del Monte and magazine), as well as organic tomatoes and vegetables. For pets, we introduced Meaty Bone StarKist equities, enable consumers to lead a healthy lifestyle. In fact, approximately 90% of Denta-Delicious snacks (which clean dogs’ teeth and taste great), Kibbles ’n Bits Homestyle Beef, our Del Monte branded products are all natural and preservative free. Our fruit, vegetable Pizza Flavored Canine Carryouts and Snausages Roverolis. and tomato products, along with our low-fat and protein-rich tuna products, make it easy for American families to eat well. We promote the health benefits of our products through Cost and Asset Streamlining. We also worked in fiscal 2006 to make Del Monte Foods more initiatives like our Del Monte Daily Program (“Half a Plate Makes You Whole™”) and its streamlined and efficient.

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