Weekly Update Monday, May 11, 2015 U.S

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Weekly Update Monday, May 11, 2015 U.S. Stocks Rise Sharply After Jobs Report Mary Burke U.S. stocks rose sharply Friday after the April employment report Partner showed an economy continuing to grow, but at a pace that investors 312.348.7081 [email protected] believe could keep the Federal Reserve from raising interest rates until late this year. William Whipple Partner The Dow Jones Industrial Average increased 0.9% on the week, 312.348.7076 finishing at 18,191. [email protected]

The S&P 500 grew 0.4% on the week, finishing at 2,116. Philip Zoloto Partner

312.348.7077 The NASDAQ Composite was flat on the week, finishing at 5,004 [email protected] (down 2.5% from its all-time high of 5,133).

Yield on the 10-year Treasury rose four basis points to 2.16%. Lakeshore Food Advisors, LLC 20 North Wacker Drive Crude oil climbed 0.4% on the week, ending at $59.39 per barrel. Suite 1701 Chicago, IL 60606 Corn futures were flat on the week, ending at $3.63 per bushel.

NASDAQ Highs: Mondelez, Willamette Valley Vineyards Lows: Keurig Green Mountain

NYSE Highs: J.M. Smucker, Syngenta, Yum! Brands Lows: Diageo, Treehouse Foods

Featured Stocks of the Week: Monsanto Company (MON) 10-year History Dean Foods (DF) 10-year History 160 120

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The Lakeshore Food Chain Price Price as Compared to Enterprise Value to Total Debt Price Compared to 52-Week Range YE: Forward LTM: to LTM Company Name 5/8/15 5/1/15 High Low 2014 2013 P/E Revenue EBITDA EBITDA Dow Jones Industrial Average 18,191 0.9% 18,289 15,855 2.1% 9.7% S&P 500 Index 2,116 0.4% 2,126 1,821 2.8% 14.5% NASDAQ Composite Index 5,004 (0.0%) 5,120 4,036 5.6% 19.8% Sector Average: 3.5% 14.7% 18191.10 INPUTS *Agrium Inc. $131.40 3.6% $146.51 $92.81 19.5% 35.2% 13.7x 1.19x 11.4x 2.9x American Vanguard Corp. 14.24 14.0% 15.42 9.50 22.5% (41.4%) 38.5 1.73 19.0 3.3 CF Industries Holdings, Inc. 310.86 5.6% 314.43 233.38 14.1% 33.4% 13.6 3.90 8.7 2.3 Intrepid Potash, Inc. 12.74 1.7% 17.64 10.92 (8.2%) (19.6%) 82.9 2.75 9.2 1.4 Monsanto Company 120.79 2.0% 128.79 105.76 1.1% 3.6% 19.2 4.22 14.7 1.9 The Mosaic Company 45.46 1.1% 53.83 40.32 (0.4%) (3.8%) 13.2 1.95 7.7 1.7 *Potash Corp. of Saskatchewan, Inc. 39.09 (1.1%) 47.10 35.25 (4.8%) 11.6% 17.0 4.55 10.0 1.5 Rentech Nitrogen Partners, L.P. 14.54 (4.5%) 17.71 8.75 38.3% (17.4%) 9.8 2.61 13.3 4.5 S&W Seed Company 4.64 1.9% 7.72 2.99 15.9% (33.3%) 210.7 2.14 282.6 NM *Syngenta AG 396.90 26.2% 411.80 273.20 24.0% 11.7% 23.6 2.56 13.4 1.3 Zoetis Inc. 45.90 2.9% 47.99 30.05 6.7% 40.4% 27.6 5.44 19.2 2.7 Sector Average: 12.2% (2.0%) 24.1x 2.76x 12.7x 2.4x

AGRICULTURAL EQUIPMENT *Ag Growth International Inc. $49.97 (4.7%) $57.99 $41.45 (11.6%) 11.9% 15.3x 1.98x 12.5x 2.5x AGCO Corporation 50.96 (1.5%) 57.46 41.56 12.7% (13.9%) 17.0 0.63 6.2 1.7 Art's-Way Manufacturing Co. Inc. 5.22 (8.7%) 7.08 4.27 0.2% (14.3%) NA 0.82 9.6 3.2 * Buhler Industries Inc. 5.45 (0.9%) 6.95 4.86 (8.9%) (23.2%) NA 0.68 15.4 6.0 CNH Industrial N.V. 8.68 (1.1%) 11.08 7.35 7.7% (23.5%) 16.6 1.07 11.1 9.1 Deere & Company 89.89 (1.6%) 94.79 78.88 1.6% (1.6%) 17.6 1.83 11.3 6.5 Lindsay Corporation 76.72 (2.2%) 90.30 73.01 (10.5%) (7.3%) 27.9 1.44 10.1 1.4 Titan Machinery, Inc. 14.29 (3.6%) 18.25 10.69 2.5% (19.8%) NM 0.53 15.2 12.5 Sector Average: (0.8%) (11.5%) 19.8x 1.12x 12.2x 3.0x

AGRIBUSINESS The Andersons, Inc. $42.91 (0.2%) $69.93 $38.65 (19.3%) (27.8%) 14.0x 0.41x 8.2x 4.5x Archer-Daniels-Midland Company 51.25 3.0% 53.91 41.63 (1.4%) 18.1% 15.1 0.47 8.3 1.6 Bunge Limited 89.91 1.3% 93.17 73.32 (1.1%) 9.5% 13.8 0.32 8.6 2.1 Darling Ingredients Inc. 14.09 2.8% 21.40 13.60 (22.4%) (32.5%) 22.9 1.13 7.8 4.2 * Gruma S.A.B. de CV 189.73 2.6% 209.00 119.60 20.6% 92.1% 19.8 1.82 12.0 1.5 Ingredion Incorporated 81.10 0.9% 87.20 69.94 (4.4%) 18.5% 14.1 1.32 9.0 2.7 Landec Corp. 14.25 (0.4%) 15.16 10.75 3.2% 17.6% 15.9 0.80 17.3 2.0 * Olam International Limited 2.00 (1.0%) 2.69 1.93 (1.0%) 30.3% 12.9 0.66 13.8 10.4 Omega Protein Corporation 12.71 0.7% 15.92 9.00 20.2% 3.4% 11.4 1.00 4.5 0.5 Sector Average: (0.6%) 14.3% 15.6x 0.88x 10.6x 2.4x

DIVERSIFIED FOODS B&G Foods Inc. $29.86 (1.8%) $34.63 $27.03 (0.1%) (11.9%) 19.8x 3.16x 14.9x 5.6x Campbell Soup Company 45.83 0.6% 48.31 40.60 4.2% 5.9% 19.2 2.17 12.1 2.6 ConAgra Foods, Inc. 37.51 2.6% 38.41 28.60 3.4% 11.3% 16.5 1.39 10.1 3.6 General Mills, Inc. 56.27 1.0% 57.73 48.32 5.5% 12.7% 18.8 2.51 13.7 3.3 The Hain Celestial Group, Inc. 60.63 (0.6%) 66.35 40.84 4.0% 33.6% 28.9 2.70 23.1 2.9 The J. M. Smucker Company 115.99 (0.7%) 118.83 95.60 14.9% 11.9% 20.5 2.91 13.7 1.9 Kellogg Company 63.61 (0.4%) 69.89 58.83 (2.8%) 4.2% 17.8 2.08 18.1 4.6 Kraft Foods Group, Inc. 86.04 1.6% 91.32 53.33 37.3% 59.6% 26.7 3.29 26.4 4.4 Lancaster Colony Corporation 89.48 (0.6%) 97.77 81.96 (4.4%) 1.5% 22.7 2.11 13.6 0.0 Mondelez International, Inc. 39.44 2.0% 39.58 31.83 8.6% 11.7% 21.9 2.43 15.9 3.7 * Nestlé S.A. 72.55 (0.5%) 77.00 64.15 (0.5%) 11.1% 21.4 2.66 9.6 1.2 Pinnacle Foods Inc. 41.03 1.5% 42.17 30.03 16.2% 49.4% 21.3 2.70 15.6 5.1 Post Holdings, Inc. 49.89 7.1% 52.21 30.94 19.1% 1.3% 56.7 1.61 12.9 8.4 SunOpta Inc. 12.27 0.7% 16.22 11.67 (10.8%) 15.5% 23.1 0.68 12.7 2.0 * Treehouse Foods, Inc. 73.55 (10.4%) 92.92 70.11 (14.0%) 6.7% 20.8 1.44 12.2 3.8 Unilever NV 39.43 0.9% 42.75 28.75 20.8% 34.7% 21.5 2.54 13.7 1.4 Sector Average: 6.3% 16.2% 23.2x 2.38x 13.5x 3.3x

Price Price as Compared to Enterprise Value to Total Debt Price Compared to 52-Week Range YE: Forward LTM: to LTM Company Name 5/8/15 5/1/15 High Low 2014 2013 P/E Revenue EBITDA EBITDA

ETHANOL Green Plains Inc. $31.55 1.7% $46.28 $20.31 27.3% 62.8% 15.8x 0.46x 5.8x 2.7x Renewable Energy Group, Inc. 8.77 (3.4%) 12.30 8.10 (9.7%) (23.5%) 45.0 0.33 6.1 3.7 Sector Average: 8.8% 62.8% 30.4x 0.46x 5.8x 2.7x

FRUIT & VEGETABLE Calavo Growers Inc. $50.17 (0.2%) $53.56 $29.59 6.1% 65.8% 26.4x 1.14x 19.5x 1.3x Fresh Del Monte Produce Inc. 37.37 1.2% 41.16 27.91 11.4% 32.0% NA 0.59 9.0 1.3 Seneca Foods Corp. 28.65 (0.5%) 32.65 25.06 6.0% (10.2%) NA 0.46 19.5 9.9 The WhiteWave Foods Company 46.10 4.9% 47.55 28.59 31.8% 101.0% 40.0 2.73 24.6 3.9 Sector Average: 13.8% 47.2% 33.2x 0.73x 16.0x 1.3x

PROTEIN Cal-Maine Foods, Inc. $43.00 (5.5%) $48.31 $29.09 10.2% 42.8% 12.6x 1.23x 7.2x 0.2x Hormel Foods Corporation 55.97 1.2% 58.98 44.91 7.4% 23.9% 21.9 1.53 13.1 0.2 Industrias Bachoco S.A.B. de C.V. 57.08 4.8% 61.84 43.80 14.4% 41.7% 9.4 0.75 4.6 0.4 * JBS S.A. 16.52 6.3% 16.65 7.34 47.5% 88.4% 12.9 0.62 7.2 3.9 Pilgrim's Pride Corporation 24.78 (2.6%) 38.64 22.39 (24.4%) 52.5% 8.0 0.83 NM NM Sanderson Farms, Inc. 81.50 8.3% 103.90 74.25 (3.0%) 12.7% 7.7 0.61 3.4 0.0 Seaboard Corp. 3620.00 0.3% 4640.00 2350.38 (13.8%) 29.5% NA 0.58 7.2 0.3 Tyson Foods, Inc. 41.26 1.9% 44.00 34.90 2.9% 23.3% 11.3 0.60 9.6 3.1 Sector Average: 5.2% 39.4% 12.0x 0.66x 7.5x 1.2x

BAKING & INGREDIENTS * ARYZTA AG $61.05 (3.6%) $88.65 $57.85 (20.7%) (10.7%) 13.0x 1.43x 9.7x 3.9x Balchem Corp. 57.18 8.6% 69.92 48.89 (14.2%) (2.6%) 23.8 3.41 15.4 2.4 Flowers Foods, Inc. 22.69 0.8% 23.62 17.46 18.2% 5.7% 23.3 1.48 12.9 1.8 *Grupo Bimbo, S.A.B. de C.V. 41.90 1.7% 44.74 35.00 2.9% 4.2% 31.8 1.35 11.8 3.0 J&J Snack Foods Corp. 106.70 1.7% 115.63 88.95 (1.9%) 20.4% 26.3 2.01 13.1 0.0 *Kerry Group plc 64.84 (1.3%) 69.24 49.31 13.6% 28.4% 21.5 2.21 17.5 2.2 Krispy Kreme Doughnuts, Inc. 17.45 (3.4%) 22.32 14.82 (11.6%) (9.5%) 32.3 2.22 17.5 0.2 McCormick & Company, Incorporated 77.08 1.2% 78.70 64.92 3.7% 11.8% 21.9 2.61 15.4 1.9 *Tate & Lyle plc 6.04 1.3% 7.45 5.52 0.1% (25.4%) 16.2 1.16 8.7 2.1 Sector Average: (1.1%) 2.5% 23.4x 1.61x 11.9x 1.9x

CANDY, NUTS, & SNACKS Diamond Foods, Inc. $27.59 (1.0%) $33.72 $24.57 (2.3%) 6.8% NM 1.66x 16.5x 7.3x The Hershey Company 94.44 0.9% 111.35 87.88 (9.1%) (2.9%) 21.1 3.05 13.7 1.5 John B Sanfilippo & Son Inc. 50.22 (3.1%) 54.29 24.29 10.4% 103.5% 15.5 0.78 10.8 1.9 Rocky Mountain Chocolate Factory Inc. 12.83 (0.4%) 15.60 11.33 (2.2%) 10.5% NA 1.92 9.8 0.8 Snyder's-Lance, Inc. 29.76 0.3% 32.93 24.67 (2.6%) 3.8% 25.3 1.54 14.9 2.6 Tootsie Roll Industries Inc. 30.65 (2.5%) 34.90 25.27 3.0% (0.1%) 27.9 3.18 16.7 0.1 Sector Average: (0.1%) 23.0% 22.5x 2.27x 13.7x 1.4x

WINE & BEVERAGE Boston Beer Co. Inc. $251.29 2.9% $325.00 $208.82 (13.2%) 3.9% 32.4x 3.52x 16.5x 0.0x Brown-Forman Corporation 92.48 1.0% 97.97 81.89 5.3% 22.4% 27.3 6.65 20.0 1.0 The Coca-Cola Company 40.98 0.2% 45.00 39.06 (2.9%) (0.8%) 20.4 4.37 14.8 3.3 Constellation Brands Inc. 116.32 (0.7%) 121.92 78.49 18.5% 65.3% 24.0 4.97 16.6 4.1 *Cott Corporation 10.88 0.2% 12.52 6.66 35.8% 27.3% 83.6 1.16 13.0 8.5 Crimson Wine Group, Ltd. 9.80 5.4% 9.80 8.62 3.2% 10.9% NA 3.60 13.5 0.0 Keurig Green Mountain, Inc. 101.49 (12.7%) 158.87 95.02 (23.3%) 34.3% 25.8 3.40 13.6 0.5 Monster Beverage Corporation 128.47 (9.0%) 144.69 63.00 18.6% 89.6% 37.0 8.16 25.0 0.0 Jones Soda Co. 0.34 0.0% 0.55 0.27 (2.9%) (29.2%) NA 1.01 NM NM National Beverage Corp. 21.94 (2.1%) 27.32 15.42 (3.0%) 8.8% 21.6 1.53 11.8 0.2 Pepsico, Inc. 96.55 1.0% 100.76 85.36 2.1% 16.4% 21.2 2.48 13.4 2.5 Starbucks Corporation 49.78 (1.0%) 52.09 34.64 21.3% 27.0% 29.0 4.23 18.0 0.5 Willamette Valley Vineyards Inc. 6.52 (1.2%) 6.90 5.14 12.4% 3.7% NA 2.44 9.7 1.4 Sector Average: 5.5% 21.5% 32.2x 3.28x 14.6x 1.2x

Price Price as Compared to Enterprise Value to Total Debt Price Compared to 52-Week Range YE: Forward LTM: to LTM Company Name 5/8/15 5/1/15 High Low 2014 2013 P/E Revenue EBITDA EBITDA

DAIRY * Danone $63.89 (1.0%) $67.74 $49.84 17.3% 22.1% 21.7x 2.20x 13.9x 3.4x Dean Foods Company 16.28 (0.2%) 19.74 12.62 (16.0%) (5.3%) 20.9 0.26 12.5 3.5 Lifeway Foods Inc. 19.76 (2.9%) 22.38 12.34 6.6% 23.7% 47.6 2.74 42.5 1.2 *Saputo Inc. 35.65 (0.9%) 37.58 28.77 2.1% 47.3% 20.9 1.51 14.4 1.8 The WhiteWave Foods Company 46.10 4.9% 47.55 28.59 31.8% 101.0% 40.0 2.73 24.6 3.9 Sector Average: 2.5% 22.0% 21.2x 2.29x 13.6x 2.7x

WHOLESALE, FOOD SERVICE, & DISTRIBUTION Core-Mark Holding Company, Inc. $54.25 1.4% $71.51 $37.64 (12.4%) 42.9% 23.6x 0.15x 11.8x 0.4x Sysco Corporation 36.61 (1.5%) 41.45 35.50 (7.8%) 1.4% 19.0 0.50 10.2 3.2 United Natural Foods, Inc. 66.60 (1.6%) 83.91 58.04 (13.9%) (11.7%) 21.2 0.51 13.8 2.0 Sector Average: (11.3%) 10.9% 21.3x 0.51x 11.9x 1.8x

MASS MERCHANDISE & CLUB STORES Costco Wholesale Corporation $145.88 0.3% $156.85 $113.51 2.9% 22.6% 27.3x 0.54x 13.6x 1.1x Wal-Mart Stores Inc. 78.53 (0.1%) 90.97 72.50 (8.6%) (0.2%) 16.1 0.62 8.3 1.4 Sector Average: (2.8%) 11.2% NA 0.58x 10.9x 1.3x

DOLLAR STORES Dollar General Corporation $74.85 1.9% $76.99 $53.00 5.9% 24.1% 19.0x 1.32x 11.7x 1.3x Dollar Tree, Inc. 79.18 1.9% 84.22 49.69 12.5% 40.3% 22.6 1.88 12.7 0.6 Family Dollar Stores Inc. 78.94 0.5% 80.97 55.64 (0.3%) 21.5% 27.7 0.89 12.7 0.8 Fred's, Inc. 17.62 3.5% 19.47 13.07 1.2% (4.7%) 35.3 0.33 26.1 0.3 Sector Average: 4.8% 20.3% 26.2x 1.36x 12.4x 0.7x

TRADITIONAL RETAIL * Delhaize Group $72.39 0.4% $89.61 $47.86 19.8% 67.6% 14.1x 0.39x 6.9x 2.1x Fairway Group Holdings Corp.4.43(10.5%) 7.81 2.12 40.6% (75.6%) NM 0.51 NM NM Ingles Markets, Incorporated 42.26 (1.9%) 54.59 23.07 13.9% 55.9% 16.6 0.46 7.4 3.9 The Kroger Co. 71.79 2.4% 77.74 45.97 11.8% 81.6% 18.5 0.43 9.0 2.3 Roundy's, Inc. 4.81 (3.8%) 6.12 2.80 (0.6%) (51.2%) NM 0.21 7.0 5.5 SpartanNash Company 32.22 4.5% 32.73 19.16 23.3% 32.7% 16.5 0.23 8.0 2.6 SUPERVALU Inc. 9.00 1.8% 12.00 7.01 (7.2%) 23.5% 11.7 0.28 6.4 3.5 Village Super Market Inc. 32.54 (0.4%) 34.58 19.22 18.9% 4.9% 22.0 0.26 6.6 0.7 Weis Markets, Inc. 43.07 (2.4%) 51.91 38.23 (9.9%) (18.1%) NA 0.38 7.2 0.0 Sector Average: 12.3% 13.5% 16.6x 0.35x 7.3x 2.9x

SPECIALTY RETAIL The Fresh Market, Inc. $33.29 (5.6%) $42.12 $28.60 (19.2%) (17.8%) 18.0x 0.92x 8.5x 0.2x Natural Grocers by Vitamin Cottage, Inc. 23.58 (11.0%) 35.00 15.89 (16.3%) (44.5%) 33.6 0.96 11.7 0.5 Sprouts Farmers Market, Inc. 27.23 (14.3%) 38.45 26.34 (19.9%) (29.1%) 29.4 1.41 16.5 1.4 Whole Foods Market, Inc. 42.59 (11.6%) 57.57 36.08 (15.5%) (26.4%) 23.4 0.98 10.5 0.0 Sector Average: (17.7%) (29.4%) 20.7x 0.95x 10.3x 0.7x

RESTAURANTS Bob Evans Farms, Inc. $45.86 3.9% $60.15 $42.28 (10.4%) (9.3%) 27.1x 1.14x 13.8x 4.1x Brinker International, Inc. 55.29 (1.7%) 63.40 43.83 (5.8%) 19.3% 16.1 1.42 9.4 2.1 The Cheesecake Factory Incorporated 50.69 0.3% 55.13 42.00 0.8% 5.0% 22.1 1.21 10.3 0.4 Chipotle Mexican Grill, Inc. 633.82 (0.0%) 727.97 490.55 (7.4%) 19.0% 35.0 4.38 20.9 0.0 Darden Restaurants, Inc. 63.96 (0.0%) 70.38 43.56 9.1% 17.6% 22.2 1.40 13.1 2.2 DineEquity, Inc. 97.61 2.5% 114.23 74.93 (5.8%) 16.8% 16.2 4.79 12.5 5.7 Jack in the Box Inc. 92.31 5.8% 99.99 53.16 15.4% 84.5% 30.1 2.70 14.8 2.0 McDonald's Corp. 98.23 0.4% 103.78 87.62 4.8% 1.2% 20.2 4.00 11.6 1.5 Panera Bread Company 184.36 0.6% 186.47 142.41 5.5% 4.3% 29.0 1.88 12.3 0.3 The Wendy's Company 11.08 9.2% 11.50 7.61 22.7% 27.1% 32.5 2.62 13.2 3.7 Yum! Brands, Inc. 89.88 (2.2%) 94.13 65.81 23.4% 18.9% 24.7 3.16 15.2 1.3

Sector Average: 6.3% 21.4% 21.7x 1.94x 12.6x 2.3x

Notes: * Denotes local currency. Source: Capital IQ. Summary multiples adjusted for extraordinary and non-recurring items; outliers excluded from mean calculation.

Major Indices (1-year & 12-year History)

S&P 500 Dow Jones Industrial Average 2,250 19,000 2,100 17,000 1,950 1,800 15,000 1,650 1,500 13,000

1,350 11,000 1,200 1,050 9,000 900 7,000 750 600 5,000

Months/Years Months/Years

1-year 12-year 1-year 12-year

10-year Treasury CBOE Market Volatility Index – VIX 7.0 80

70 6.0 60 5.0 50

4.0 40

30 3.0 20 2.0 10

1.0 0

Months/Years Months/Years

1-year 12-year 1-year 12-year

Lakeshore Sector Indices vs. S&P 500 (1-year Only)

130

125

120

115

110

105

100

80 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15

S&P 500 Inputs & Agribusiness Diversified Foods Protein Baking & Ingredients Grocery

Food For Thought…

Partner Column Written By Philip Zoloto Retail Outlets I recently reviewed the results of The Packer’s 2015 Fresh Store Formats Consumers Pick As Trends Survey. Since 1983, The Packer has sponsored 32 Their Primary Place to Buy Produce major consumer studies to track trends in the purchases and 2013 2014 2015 consumption of fresh produce. The results would indicate that domestically, we are trying to eat healthier diets Conventional Supermarket 44% 39% 38% consisting of more fresh foods. Today I will share some key Chain Superstore 25% 27% 27% takeaways from the report. Warehouse Store 5%6%8% Specialty Market 7% 7% 11% Chain Discounter 5% 6% 5% Economy Boosts Produce Spending Farmers Market 11% 10% 8% Following the 2008 recession, many consumers traded down Source: The Packer Fresh Trends 2015 in the grocery store to conserve money. This is evidenced by

Fresh Trends survey results from six years ago where 64% of My Takeaway: My partners and I have written in the past survey respondents acknowledged that they had changed about the “death” of the traditional retailer in grocery. I their shopping habits due to financial concerns. This year, for believe the falloff in conventional supermarket produce sales the first time in six years, the majority of respondents said that is driven as much by the failure of stores to truly differentiate finances had less of an impact on grocery purchases. More in produce as it is the increase in other shopping options. If a than three-quarters of respondents to the survey said they are conventional grocery store can build a truly compelling buying a larger variety of fresh produce today than they did produce program, it’s a huge competitive advantage in the 20 years ago, and almost as many said they are eating more marketplace. produce now than one year ago.

My Takeaway: Let’s face it - it’s expensive to eat healthy. It’s Organic Has Gone Mainstream cheaper to take your family to McDonald’s for dinner than to According to USDA’s Economic Research Service, “Organic shop the perimeter of the grocery store and prepare food at products are now available in nearly 20,000 natural food stores home. Anything that can be done to lower the cost of fresh and nearly three out of four conventional grocery stores.” produce is going to bring more of the fringe customers into Access to organic products has resulted in increased that part of the grocery store. purchases as shown in the chart below.

Percentage of Consumers Who More Produce = More Shopping Trips "Typically Buy" Organic Produce Consumers want the freshest produce possible as evidenced by shopping habit trends. Slightly more than one-third of 2010 14% consumers shop for fruit and vegetables four times a month, 2014 26% while a little less than one-third shop at least that often but not 2015 31% every day. Nine percent of those surveyed said they shop for produce daily. Source: The Packer Fresh Trends 2015

My Takeaway: The more times per month people go to the My Takeaway: If you are ignoring organic as a fad, you are grocery store to buy produce, the more opportunities exist to missing out. Price remains the biggest constraint to organic sell them something else. Seems like a good thing for produce purchases, although prices have become more everyone in the food supply chain. reasonable in recent years as supplies of organic produce have become more available nationwide. I believe that as prices continue to come down, more produce purchases will shift to Choices, Choices, Choices organic. As a country, we are going to the store a lot to buy produce, but where we buy it is changing. Have a good week.

Food For Thought…

Diversification Drives Tyson Higher. Tyson Foods Inc. ADM 1Q Earnings Rise On Strong Soybean Sales. Archer (NYSE: TSN) reported a 10.5% increase in sales last quarter to Daniels Midland Co. (NYSE: ADM) announced first quarter $10.0 billion, and profit grew to $310 million (from $213 earnings of $493 million, an 84.6% jump from last year’s million a year ago). Helping Tyson push higher, operating period due to improved performance in its soybean margins in the chicken segment rose to 11.7%, and the pork processing operations. Soybean crushing results for the segment saw operating margins of 8.2%. The prepared foods quarter were the strongest in the company’s history with segment (which includes the acquired Hillshire portfolio) had record volumes in Europe and North America driven by quarterly operating margins of 8.4%. Meat exports slowed strong U.S. and global demand for soybean-based animal feed, during the quarter (due to the port strike and bird flu while improved marketing by South American farmers helped concerns), however management expects the impacts of these to improve origination results. As a result, operating profits events to diminish over the next 2-3 months. in the oilseeds segment more than tripled to $483 million from $153 million last year. Operating profits in the agricultural In its report, Tyson provided an update on the Hillshire services sector increased 36.6% to $194 million, while corn integration. The company achieved $77 million of synergies in processing operating profits slid 49.4% to $127 million due to the last quarter (ahead of the targeted $250 million for weakness in ADM’s ethanol business. Revenue declined FY2015). Tyson now expects total annual synergies to top 15.3% to $17.31 billion. $600 million in FY2017, up from $500 million earlier. Some of these savings have come from combining infrastructure and moving production of certain products to other facilities. Last Strong Dollar, Weak Demand Pressure Kellogg’s Revenue. July, Tyson closed three of its prepared foods facilities (located Kellogg Co. (NYSE: K) reported net sales of $3.56 billion in the in Iowa, New Mexico, and New York) as part of this plan. first quarter, a 5.0% decline from the prior year period due the impact of the stronger U.S. dollar on foreign sales and Tyson Foods (TSN) 10-year History sluggish domestic demand for breakfast cereals and other 50 packaged foods. Earnings for the quarter declined 44.1% to 45 $227 million, largely due to one-time expenses. Comparable 40 sales in the U.S. Morning Foods segment (products such as 35

30 Frosted Flakes and Pop-Tarts) declined 2.9% from last year,

25 while U.S. Snacks segment (products such as Cheez-It crackers

20 and Keebler cookies) comparable sales dropped 1.1%. 15 Operating profit for the two segments, which accounted for 10 45.8% of first quarter sales, declined 2.4% to $207 million. 5 Kellogg’s total operating profit was $384 million, down 37.5% 0 from last year. 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Whole Foods Reports Record 2Q Sales, Announces New Post Swings To Profit On Acquisitions, Estimates Larger Store Format. Whole Foods Market, Inc. (NASDAQ: WFM) Bird-Flu Impact. Post Holdings Inc. (NYSE: POST) announced second quarter sales of $3.6 billion, a 10% increase announced second quarter earnings of $30.5 million, from last year – a second quarter record. Comparable store compared to a loss of $18.3 million in the prior year period as sales on a constant currency basis increased 3.6% as the a number of acquisitions last year propelled revenue. number of transactions increased 0.8% and basket sizes grew Revenue more than doubled to $1.05 billion with the help of 2.8%. Earnings increased 11.3% to $158 million. Additionally, the acquisitions of PowerBar energy bars and Michael Foods Whole Foods announced plans to launch a sister chain of Inc., with net sales increasing 3.8% on a comparable basis. smaller stores offering organic and natural foods aimed at Post also provided more information on chickens at one of its winning over millennial shoppers. Whole Foods management suppliers testing positive for avian flu, now estimating that said the new format would be “hip,” “cool,” and “high-tech,” 14% of its supply has been affected (up from an earlier and its stores would be smaller and less costly to operate than estimate of 10%). Revised guidance for the remainder of fiscal its traditional outlets. The company is currently signing leases 2015 includes $20 million in costs related to bird flu. and will share more specifics about the stores this summer.

Heard on the Street…

Dean Foods Announces Plan To Consolidate Brands. Last Syngenta Rejects Unsolicited $45 Billion Takeover Offer week, Dean Foods Co. (NYSE: DF) announced plans to From Monsanto. In a move that would have combined two consolidate its 31 milk brands to just one – DairyPure. Dean, of the largest global agricultural seed companies in the world, which has an estimated 36% market share in the U.S. milk Monsanto Co. (NYSE: MON) made a takeover offer valued at market is supporting the launch with a national advertising $45 billion for Swiss agrochemical giant Syngenta AG (NYSE: plan (regional brand names will be alongside the DairyPure SYT), only to be promptly rejected. Syngenta said the name, at least for now). The regional brands came to be as proposed deal “fundamentally undervalues” the company, Dean led a 15-year long acquisition spree of regional dairy and believes the offer also significantly underestimated the processors. The company often opted to leave brands in place regulatory risks the deal would face. Together, Monsanto, the after an acquisition to avoid consumer confusion. world’s largest seller of agricultural seeds, and Syngenta, the leading pesticide marketer in terms of sales, have Dean’s decision comes after years of preparations by now approximately 45% of the global market for seeds. The CEO Gregg Tanner. The company has focused on updating agricultural giants have combined annual revenue of $31 facilities to meet the same food-safety standards, and also to billion and combined market value of about $88 billion (prior have a similar product offering. And, the decision to push one to a big jump in their share prices on Friday following the national brand has already been tested by Dean, with its announcement). Monsanto offered to pay Syngenta 449 Swiss TruMoo labeled products, which now account for $700 million francs ($486.20) per share, with roughly 45% of the payment in of annual sales. DairyPure will be on a larger stage though – cash, plus assumed liabilities, implying an enterprise value of sales for the new brand over the next year are expected to be about 43.1 billion francs (or approximately 16.4x EBITDA). approximately $2.5 billion.

Mars Shows Support For Added Sugar Labels. Mars Inc., U.K. Turkey Processor To Open VA Facility. Kelly Turkeys maker of M&M’s and Snickers, in a letter submitted to USA (the U.S. arm of Kelly Turkeys U.K.) announced last government officials last week, is showing support for a week its intent to construct a new turkey processing facility in proposal by U.S. regulators to include measurements of added Albemarle County, VA. The facility, which will cost $1.4 sugar on nutrition labels for food, as well as guidelines by the million, will be able to process 10,000 turkeys annually once World Health Organization and the U.S. Dietary Guidelines completed. The company is well regarded in the U.K., having Advisory Committee recommending that people should limit been voted the “Best Turkey” in the U.K. for eight consecutive added sugar to 10% of their daily calories. The mandatory years. The U.S. company plans to produce and process only labeling proposals have faced significant opposition by big turkeys raised in Virginia. food companies, who believe that breaking out added sugar could be misleading to consumers and that the additional nutritional information rarely influences consumer behavior. McDonald’s Continues Restructuring Plan. Last week, Despite the opposition, many companies are taking steps to McDonald’s announced more details of its planned global address consumer concerns about the healthiness of their restructuring plan, which intends to boost performance by products, including removing artificial flavors and coloring. being more responsive to changing customer demands. As such, the company is reorganizing its global business into four segments; U.S. operations, “international lead markets” such Cargill Completes Expansion At Ottumwa Facility. Cargill as Australia and the U.K., “high-growth markets” such as recently completed a $25 million expansion at its Ottumwa, IA China and Poland, and “foundational markets”. The goal is to pork processing plant, which will double that facility’s bacon group markets with similar dynamics and challenges together, production capabilities. The facility employs 2,300 people, as opposed to the prior structure based on geographic and can harvest up to 19,000 hogs daily. Cargill also proximity. The company also plans to accelerate its sale of announced last week that’s its new $29 million feed mill company owned locations, calling for the divestiture of 3,500 located nearby in Hedrick, IA is complete and fully locations by 2018, up from the previous plan to sell 1,500. If operational. The facility will produce approximately 350,000 successful, approximately 90% of McDonald’s locations would tons of feed annually. Cargill works with over 100 hog be franchise owned, up from 81% currently. producers in the Hedrick area.

M&A

The market, and more specifically the food industry, continues U.S. Quarterly M&A Activity to monitor the proposed merger of Sysco Corp. (NYSE: SYY) ($ in millions) and US Foods Inc. The two companies and the FTC started $450,000 3,000 their federal court battle Tuesday with the judge indicating 400,000 that how he interprets the food-distribution marketplace will 2,500 be the key factor in deciding whether to block the planned $3.5 350,000 billion merger of the two largest U.S. foodservice distributors. 300,000 2,000

The FTC aimed to portray the two companies as being in a 250,000 league of their own compared to regional, local and specialty 1,500 200,000 distributors and indicated that national customers as well as local food-service businesses will be harmed. The companies 150,000 1,000 argued the market is large and extensive, with more than 100,000 500 15,000 businesses competing to distribute food to restaurants 50,000 and other customers. They contended restaurants use a 0 0 variety of suppliers and would take their business elsewhere if 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 the merged companies raised prices. The judge acknowledged Transaction Values Transaction Count the challenge of analyzing the merger as the two companies Source: Thomson Reuters. sell so many different types of products and services. The judge also contemplated how to factor in wholesale cash-and- A noteable recent transaction is Alltech’s acquisition of Ridley carry stores such as Restaurant Depot, where restaurants and (TSX: RCL) for 9.7x EBITDA forming a global leader in animal other businesses can purchase goods at competitive prices. health and nutrition with revenues exceeding $1.6B.

Recent U.S. Food & Agribusiness M&A Activity ($ in millions) Enterprise Enterprise Value / Date Target Acquirer Value Revenue EBITDA Target Description

5/5/2015 PlantBioTech Miller Chemical & Fertilizer n/a n/a n/a Provides plant growth regulators, soil conditioners, seaweed fertilizers, and related products. 5/4/2015 Earlville Farm Iroquois Valley Farms n/a n/a n/a Comprises a 177-acre dairy farm.

5/1/2015 Gold Standard Baking Tricor Pacific Capital n/a n/a n/a Produces thaw-and-serve baked goods.

5/1/2015 Hiller Incorporated The Kroger Co. of Michigan n/a n/a n/a Operates a chain of supermarkets in Michigan.

5/1/2015 Bella Nashville FM Bakery n/a n/a n/a Operates a bakery.

4/30/2015 Insight Beverages Kerry Group n/a n/a n/a Engages in the development, manufacture, and marketing of custom beverages.

4/30/2015 Let's Yo! U-Swirl International n/a n/a n/a Owns and operates a chain of frozen yogurt stores in the United States.

4/30/2015 Gerland Corporation Lewis Food Town n/a n/a n/a Owns and operates supermarket locations in Houston.

4/30/2015 AgroFresh Boulevard Acquisition Corp. 1,447.5 n/a n/a Engages in the manufacture and marketing of ethylene management systems for produce and floral industries to maintain and deliver fruits, vegetables, and flowers. 4/29/2015 Fiesta Mart Acon Investments n/a n/a n/a Operates as a food retail stores in the United States, Brazil, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Mexico, Chile, and Belize. 4/23/2015 Ridley Inc. Alltech CAD 522.7 0.77x 9.7x Engages in the commercial animal nutrition business in North America.

4/22/2015 Prospect Enterprises, Inc., Seafood Division Santa Monica Seafood Company n/a n/a n/a Seafood Division Assets includes the business operations processing and Assets distributing seafood. 4/21/2015 Three Jamba Juice Franchises Fantex n/a n/a n/a Three Jamba Juice Franchises comprises juice stores and are located in the United States. 4/21/2015 A-Treat Bottling Company Individual Investor n/a n/a n/a Produces and sells flavored soft-drinks.

4/21/2015 Paqui SkinnyPop Popcorn n/a n/a n/a Produces gourmet tortillas and tortilla chips.

4/20/2015 Tartine Bakery Blue Bottle Coffee Company n/a n/a n/a Operates as a bakery and café.

4/20/2015 Iglo Group Nomad Holdings Ltd. EUR 2,600.0 1.73x 8.5x Manufactures and markets branded frozen foods.

4/15/2015 Prefered Brands International Kagome Co. 114.6 n/a n/a Produces ready-to-eat Indian entrees, Asian noodles, and rice products.

4/14/2015 8 Pico Convenience Stores in South Central Texas Sunoco LP n/a n/a n/a Comprises 8 convenience stores.

4/13/2015 Henry H. Ottens Manufacturing Co. International Flavors & Fragrances n/a n/a n/a Produces and supplies flavors.

4/13/2015 Marketplace Foods Coborn's n/a n/a n/a Operates a grocery store.

4/9/2015 Etherton Sales & Merchandising Acosta n/a n/a n/a Distributes perishable products.

Source: Capital IQ.

Commodities Overview (1-year & 12-year History)

Corn Wheat $9.00 $12.00 8.00 11.00 10.00 7.00 9.00 6.00 8.00 7.00 5.00 6.00 4.00 5.00 3.00 4.00 Dollars per Bushel per Dollars Dollars per Bushel 3.00 2.00 2.00 1.00 1.00

Months/Years Months/Years

1-year 12-year 1-year 12-year

Lean Hogs Chicken – Broilers 1.40 $1.20 1.10 1.20 1.00 1.00 0.90 0.80 0.80 0.70 0.60 0.60 Dollars per Pound per Dollars 0.40 Pound per Dollars 0.50 0.20 0.40

Months/Years Months/Years

1-year 12-year 1-year 12-year

Cheese Gold 2.60 $2,100 2.40 1,800 2.20 2.00 1,500 1.80 1,200 1.60 1.40 900 1.20 600

Dollars per Pound per Dollars 1.00

Dollars per Troy Ounce Troy per Dollars 300 0.80 0.60 0

Months/Years Months/Years

1-year 12-year 1-year 12-year

Broiler price based off spot closing price. All other commodity prices are based off the closing price of their respective nearby futures contract.

Sources: Thomson Financial Data Securities, Capital IQ, Reuters, Edgar Online, Wall Street Journal, Barron’s, New York Times, Bloomberg, Chicago Tribune, Denver Post, MarketWatch, USDA, The Economist, BusinessWeek, Food Institute, Food Business News, Supermarket News, LPC, Company Press Releases. The information contained in this publication is compiled using publicly available news/media sources and industry-specific sources that Lakeshore Food Advisors, LLC (“LFA”) believes to be reliable, but the accuracy and completeness of which LFA cannot guarantee.

Please send your feedback and comments to Martin Gembis at 312.348.7078 or [email protected].