HOWARD PENNEY
HANG 10 ON THIS WAVE BEST IDEA: LONG WHITEWAVE FOODS (WWAV) June 18, 2015
HEDGEYE 1 DISCLAIMER DISCLAIMER Hedgeye Risk Management is a registered investment advisor, registered with the State of Connecticut. Hedgeye Risk Management is not a broker dealer and does not provide investment advice for individuals. This research does not constitute an offer to sell, or a solicitation of an offer to buy any security. This research is presented without regard to individual investment preferences or risk parameters; it is general information and does not constitute specific investment advice. This presentation is based on information from sources believed to be reliable. Hedgeye Risk Management is not responsible for errors, inaccuracies or omissions of information. The opinions and conclusions contained in this report are those of Hedgeye Risk Management, and are intended solely for the use of Hedgeye Risk Management’s clients and subscribers. In reaching these opinions and conclusions, Hedgeye Risk Management and its employees have relied upon research conducted by Hedgeye Risk Management’s employees, which is based upon sources considered credible and reliable within the industry. Hedgeye Risk Management is not responsible for the validity or authenticity of the information upon which it has relied.
TERMS OF USE This report is intended solely for the use of its recipient. Re-distribution or republication of this report and its contents are prohibited. For more details please refer to the appropriate sections of the Hedgeye Services Agreement and the Terms of Use at www.hedgeye.com
HEDGEYE 2 PLEASE SUBMIT QUESTIONS TO
HEDGEYE 3 KEY POINTS
A PORTFOLIO OF STRONG ON-TREND BRANDS WWAV is built on the strength of its brands, all of which hold a #1 or #2 position in their category. 1 WWAV operates in on-trend categories that are front and center to todays consumer. The plant- based segment is largely under penetrated but is starting to gain broader consumer acceptance. WWAV is at the helm, and we are confident they will drive growth and penetration, while maintaining their share of the category. PLATFORMS BUILT FOR ACQUISITIONS 2 WWAV has clear platforms that are built for acquisitions, Plant-based Foods and Beverages, Creamers, Premium Dairy, Organic Greens & Produce and now Plant-based Nutrition, all are capable of tack on acquisitions. They have proven they are actively looking, announcing a deal in every year since the spin-off from Dean Foods. STRONG EXPERIENCED MANAGEMENT AND BOARD 3 In our research in the consumer space it is hard to find a Board of Directors with more relatable experience than WWAV’s. Additionally, their management comes from their old parent company Dean Foods, which gives them strong experience to deploy in such a young company.
HEDGEYE 4 ORIGINAL LONG THESIS STILL HOLDS TRUE ORIGINAL LONG CALL ON 4/11/14 THEY HAVE BEEN EXECUTING ON OUR THESIS ― WE DON’T SEE AN END TO THIS GROWTH IN SIGHT
• WWAV’s on-trend category, volume growth and earnings potential are best in class ― In FY2014 WWAV experienced robust growth on the top and bottom line. We strongly believe that their brands are underpenetrated and have more room to run. Brands currently averaging below 30% household penetration across the board
• We believe margin expansion will continue, as the company benefits from fixed cost leverage, favorable product mix and increased internal manufacturing capabilities ― They made a big push in FY14 increasing operating margins by 90 basis points exceeding their goal of 75 basis points, while increasing marketing investments at double-digit rates. WWAV started off FY15 in Q1 with a strong 57 basis point improvement as they continue to leverage their supply chain manufacturing capabilities
• Horizon center-of-store expansion ― On track to deliver expectations, management is going with a strong beachhead approach to this launch, building it up in their highest ACV markets, and expanding outward from there
• Household penetration remains low ― As mentioned above, household penetration has plenty of room to grow as consumers are getting more and more focused on what they put in their bodies and the affect that has on the environment
• Continuously beating guidance ― It has been an impressive run, management has consistently raised guidance following positive performance (which they have every quarter), and still beating it out on a quarterly basis
HEDGEYE 6 PERFORMANCE SINCE 4/11/14
UP ~83% SINCE OUR LONG CALL ― THERE IS STILL ROOM TO RUN 200 Competitive Set: • General Mills (GIS) 183 180 • Kraft Foods (KRFT) • Nestle SA (NESN-CH) • Hain Celestial (HAIN) 160 • Monster Beverage (MNST) • Lifeway Foods (LWAY) 140 • Danone SA (BN-FR)
120 116
106 100
80
(INDEX) WhiteWave Foods Company - Price (INDEX) Index:WWAV Comp Set - Price (INDEX) S&P 500 - Price
Data Source: FactSet. HEDGEYE 7 ADDITIONS TO LONG THESIS DON’T LET THESE ADDITIONS TAKE AWAY YOUR FOCUS ON THE ORIGINAL, BECAUSE THOSE STILL HOLD TRUE! 1• Growth through acquisitions ― string of pearls approach • Earthbound, So Delicious, Vega ― Who could be next? We have some ideas…
2• Geographic expansion • JV in China is just the beginning ― through 2014 and into Q1 2015 expanded distribution into Canada and Mexico, but is still largely underdeveloped ― South America is completely untapped!
3• Brand creation ― You don’t always have to buy brands to enter new categories • Yulu, a premium Australian style yogurt offering, expanding reach within the fast growing yogurt category
4• Strength of management team • I believe we understated what this means for the company in our original thesis, the experience that they carry can not be underestimated HEDGEYE 8 EXECUTIVE SUMMARY COMPANY OVERVIEW
• The WhiteWave Foods Company is a consumer packaged food and beverage company that manufactures, markets, distributes and sells branded plant-based foods and beverages, coffee creamers and beverages, premium dairy products and organic produce throughout North America and Europe.
― WWAV also holds a 49% interest in a JV in partnership with Mengniu Dairy Company Limited that manufactures, markets, distributes and sells branded plant-based beverages in China under the Silk brand
• Three Reportable Segments:
1. Americas Foods & Beverages:
― Silk, So Delicious, Horizon Organic, Vega (pending), International Delight and Land O Lakes
2. Americas Fresh Foods:
3. Europe Foods & Beverages:
― Alpro and Provamel
• Headquartered in Denver, Colorado; 4,500 employees
• Very strong management team coupled by a small board (only six members) with industry experience, we believe this allows them to be nimble and act quickly, given there are not so many cooks in the kitchen Data Source: Company filings. HEDGEYE 10 BECOMING A GLOBAL COMPANY
HEDGEYE 11 FINANCIAL SUMMARY SPENDING WISELY ― INVESTING IN THE FUTURE ($ in millions except per share information) General Mills (GIS) Financials Last Price (as of 6/17/2015) $48.98 % of 52 week high 98% Shares Outstanding 175 Market Capitalization $8,576
- Cash $31 + Debt $1,528 + Minority Interest $0 Enterprise Value $10,074
Fiscal Year End December 31, 2011 2012 2013 2014 Mar '15 LTM Revenue $2,026 $2,289 $2,542 $3,437 $3,518 Growth (%) 13.0% 11.1% 35.2% 2.4% EBITDA $201 $218 $288 $406 $414 Margin(%) 9.9% 9.5% 11.3% 11.8% 11.8% Growth (%) 8.6% 31.8% 41.0% 2.0% Net Income $131 $111 $99 $140 $141 Growth (%) (15.0%) (11.0%) 41.6% 0.7% EPS $0.72 $0.74 $0.74 $0.99 $1.01 Growth (%) 2.8% 0.0% 33.8% 2.0%
Cash From Operations $241 $237 $185 $285 $281 Cash Flow Per Share $0.66 $0.87 $0.30 ($0.04) ($0.21) Free Cash Flow $114 $134 $53 ($8) ($38) Net Changes in Cash $23 ($28) $32 ($51) ($28)
Data Source: Company filings, FactSet. HEDGEYE 12 FY2014 REVENUE / SOP BY SEGMENT
FY2014 Revenue by Segment FY2014 Segment Operating Profit
Europe Foods & Europe Foods & Beverages Beverages 15% 14%
Americas Fresh Americas Fresh Foods Foods 13% 17% Americas Foods & Beverages Americas Foods 68% & Beverages 73%
$3,437 million FY2014 Net Sales $365 million FY2014 SOP
Data Source: Company filings. HEDGEYE 13 PRODUCT MIX OVER TIME
Product Mix at Time of IPO Current Product Mix Plant-based Nutrition 3%
Europe Plant- based Food and Beverages 16% Organic Greens North America and Produce Coffee Creamers 16% Coffee Creamers and Beverages and Beverages 36% 28% North America EU Plant-based Plant-based Food Food and and Beverages Beverages 24% 15% Premium Dairy 18% North America NA Plant-based Premium Dairy Food and 24% Beverages 20%
$2,289 million FY2012 Net Sales $3,537 million FY2014E(1) Net Sales
Data Source: Company filings. (1) FY2014 sales estimated to include acquisition of Vega (still pending). HEDGEYE 14 RECENT PERFORMANCE 3-YEAR PRICE PERFORMANCE HANDILY BEATING THE COMPETITION SINCE IPO
300 Competitive Set: • General Mills (GIS) 279 • Kraft Foods (KRFT) • Nestle SA (NESN-CH) 250 • Hain Celestial (HAIN) • Monster Beverage (MNST) • Lifeway Foods (LWAY) 200 • Danone SA (BN-FR)
163 Performance Versus:
Index Price Index 150 • Peers: +102.17% 138 • S&P 500: +71.17%
100
50 06/05/12 12/05/12 06/05/13 12/05/13 06/05/14 12/05/14 06/05/15 (INDEX) WhiteWave Foods Company (INDEX) WWAV Comp Set (INDEX) S&P 500
Data Source: FactSet. HEDGEYE 16 2-YEAR PRICE PERFORMANCE
ONCE SETTLED INTO THE PUBLIC MARKETS THEY HAVEN’T LOOKED BACK
300 Competitive Set: • General Mills (GIS) 275 • Kraft Foods (KRFT) • Nestle SA (NESN-CH) 250 • Hain Celestial (HAIN) • Monster Beverage (MNST) • Lifeway Foods (LWAY) 200 • Danone SA (BN-FR)
Performance Versus:
Index Price Index 150 • Peers: +131.09% 130 • S&P 500: +111.54% 119 100
50 06/05/13 12/05/13 06/05/14 12/05/14 06/05/15 (INDEX) WhiteWave Foods Company (INDEX) WWAV Comp Set (INDEX) S&P 500
Data Source: FactSet. HEDGEYE 17 1-YEAR PRICE PERFORMANCE IN A CHOPPY CONSUMER ENVIRONMENT THEY APPEAR UNSCATHED
Competitive Set: 160 • General Mills (GIS) • Kraft Foods (KRFT) 150 • Nestle SA (NESN-CH) 145 • Hain Celestial (HAIN) 140 • Monster Beverage (MNST) • Lifeway Foods (LWAY) 130 • Danone SA (BN-FR)
120 Performance Versus: Peers: +39.4% Index Price Index • 110 108 • S&P 500: +34.26 104 100
90
80 06/05/14 09/05/14 12/05/14 03/05/15 06/05/15 (INDEX) WhiteWave Foods Company (INDEX) WWAV Comp Set (INDEX) S&P 500
Data Source: FactSet. HEDGEYE 18 HISTORICAL SALES PERFORMANCE
$5,000
$4,500 $4,447 $4,000 $4,118 $3,806 $3,500 $3,437 $3,518 $3,000
$2,500 $2,542 $2,289 $ in millions$ in $2,000 $2,026 $1,821 $1,500
$1,000
$500
$0 FY2010 FY2011 FY2012 FY2013 FY2014 LTM - Mar '15 FY2015E FY2016E FY2017E
Data Source: Factset, Hedgeye Research. (1) Excludes LTM – Mar ’15 period. HEDGEYE 19 ORGANIC VS REPORTED GROWTH CONSISTENT LOW DOUBLE-DIGIT ORGANIC GROWTH
40% • Strong organic 36% 36% growth over time 35% 34% 34% complimented by strategic 30% acquisitions 25% • Another important thing to note here 20% is that although 13% they are acquiring 15% 12% big companies, it 9% 10% 10% 10% 12% 12% does not distract 12% 11% 11% 10% 10% 10% 9% management from 5% driving growth in their core 0% Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 business Sales YoY % Chg - Reported Sales YoY % Chg - Organic
Data Source: Company filings. HEDGEYE 20 STRONG SALES LEADING TO MARGIN EXPANSION GROWING INTO THEIR FIXED ASSETS Net Sales Adjusted Operating Income • As volumes accelerate, WWAV ($ in millions) ($ in millions / % margin) $3,809 has been able to $369 $3,437 maximize utilization 9.7% $304 rates to gain
$2,542 8.8% leverage on their $2,306 supply chain $209 18% CAGR $173 8.2% • Squeezing out 7.5% 29% CAGR margin on a quarterly basis
2012 2013 2014 2015E(1) 2012 2013 2014 2015E(1)
11% Organic Growth Net Sales CAGR(2) 21% Organic Operating Income CAGR(2)
Data Source: Company filings, Net sales is presented on a pro forma adj. basis for 2012; operating income is presented on a pro forma adj. basis for 2012 and on an adjusted basis for 2013 and 2014. (1) Estimated provided by Consensus Metrix. (2) Organic CAGR represents 2012 to 2014. HEDGEYE 21 HISTORICAL EBITDA PERFORMANCE
$700
$655 $600
$569 $500 $488
$400 $406 $414
$300 $ in millions$ in $288
$200 $218 $201 $152 $100
$0 FY2010 FY2011 FY2012 FY2013 FY2014 LTM - Mar '15 FY2015E FY2016E FY2017E
Data Source: Factset, Consesnsus Metrix, Hedgeye Research. (1) Excludes LTM – Mar ’15 period. HEDGEYE 22 HISTORICAL EPS PERFORMANCE
$1.80
$1.60 $1.60 $1.40 $1.37 $1.20
$1.15 $1.00 $0.99 $1.01 $0.80 $ in millions$ in $0.72 $0.74 $0.74 $0.60 $0.53 $0.40
$0.20
$0.00 FY2010 FY2011 FY2012 FY2013 FY2014 LTM - Mar '15 FY2015E FY2016E FY2017E
Data Source: Factset, Consensus Metrix, Hedgeye Research. (1) Excludes LTM – Mar ’15 period. HEDGEYE 23 MACRO ENVIRONMENT UNIVERSITY OF MICHIGAN CONSUMER CONFIDENCE
120 U Mich Consumer Index 3 Month Moving Average 6 Month Moving Average
100
80
60
40
20
0 06/30/2005 06/30/2006 06/29/2007 06/30/2008 06/30/2009 06/30/2010 06/30/2011 06/29/2012 06/28/2013 06/30/2014
Data Source: University of Michigan, FactSet. Updated on 6/16/2015. HEDGEYE 25 U.S. PERSONAL INCOME YOY SA
11.00 US Personal Income 3 Month Moving Average 6 Month Moving Average
9.00
7.00
5.00
3.00
1.00
-1.00
-3.00
-5.00
Data Source: Bureau of Economic Analysis, FactSet. Updated on 6/16/2015. HEDGEYE 26 WWAV SENTIMENT SHORT INTEREST SHORT INTEREST HAS RECEDED
Data Source: FactSet. Updated on 6/16/2015. HEDGEYE 28 ANALYST RATINGS SELL-SIDE IS BULLISH, BUT BUY RATINGS ARE RETRACTING SLIGHTLY
Data Source: FactSet. Updated on 6/16/2015. HEDGEYE 29 EARNINGS REVISIONS FY-1 EPS CONSENSUS ESTIMATE VS STOCK PRICE
Data Source: FactSet. Updated on 6/16/2015. HEDGEYE 30 VALUATION 1 YEAR NTM EV/EBITDA
Current: 18.9x (6/15/15) High: 19.5x (5/27/15)
Low: 13.8x (1/14/15) Average: 15.9x NTM EV/EBITDA Multiple EV/EBITDA NTM
Data Source: FactSet. Updated on 6/16/2015. HEDGEYE 31 CREATION OF WWAV HOW DID WWAV COME TO BE?
• White Wave Inc. was founded in September 1977 by Steve Demos in Boulder, Colorado
― In 1976, after a trip to India, he was at a 76-day meditation retreat in California, where he came up with the idea to start a tofu company called White Wave. Shortly after, he got a $2,000 loan and rented 300 sq. ft. in Boulder, CO
― In 1978, soymilk was introduced and more than 20 years later in 2002 he sold the business to Dean Foods
• In 2001, Suiza Foods acquired Dean Foods assuming the Dean name, but Demos wanted nothing to do with Suiza demanding to be able to run his brand autonomously. This request was granted, but unexpectedly in 2005 Steve was fired. Many think he was more popular than the CEO and Chairman, so that may have led to his demise at the company
• WhiteWave Foods was formed by Dean Foods spinning off a select group of assets into an independent company in 2012
• In October 2012, WWAV completed their IPO on the NYSE
• In 2013, Dean Foods completed its spin-off of WhiteWave into an independent company in two transactions:
1. May 23, 2013, Dean distributed Class A & B shares to stockholders as a pro rata dividend
2. July 25, 2013, Dean Foods disposed of all of its remaining shares of WhiteWave capital stock in a registered public offering
• After the separation was complete, WWAV acquired three businesses; Earthbound Farms, So Delicious and Vega (pending)
Data Source: Hedgeye Research. HEDGEYE 33 THE CREATION OF WWAV A STRING OF PEARLS As part of Dean Foods Company Spin off As part of WhiteWave
(licensed)
(White Wave Inc) (Pending Approval)
2000 2002 2004 2009 2012 2013(1) 2014 2015
• Dean Foods did a great job in assembling a premier portfolio built for growth. The management at WhiteWave Foods has continued this tradition with very on-trend acquisitions in Earthbound Farm, So delicious and Vega (pending) ― These most recent acquisitions build out their portfolio with brands that are #1 in their respective segments. Additionally, they provide a stronger platform for more accretive acquisitions down the road
Data Source: Company Filings. (1) Announcement Year, closed in January 2014. HEDGEYE 34 THE WHITEWAVE FOODS COMPANY ACQUIRES EARTHBOUND FARM
Deal Overview Financials
• On January 2, 2014, WWAV completed its acquisition of Earthbound Farm for $600 • WWAV funded the acquisition with borrowings under existing credit facilities million, one month after the announcement in early December 2013 • Earthbound Farm offers a broad range of organic fresh foods such as salads and frozen fruits • $0.07 EPS accretion was expected at the time of the deal for 2014 Strategic Rationale — Pro forma leverage near ~3.2x at time of the deal • The business will be run by experienced industry professional Kevin Yost • Gives WWAV the two most popular gateways to enter organic category: • Majority owner Kainos Capital (formerly HM Capital Partners) originally acquired produce & dairy 80% of Earthbound in 2010 • Industry-leading brand, with significant consumer loyalty • Earthbound Farm was founded by Drew and Myra Goodman in 1984, and was led • Earthbound Farm is a perfect fit for WWAV, as they are both rooted in small by CEO Charles Sweat from 2009 to its sale in 2014 beginnings, and are both pioneers in the organic foods business Company Overviews • Significant potential for brand expansion across categories • Produces and distributes branded plant-based foods beverages, coffee • The transaction gives WWAV the top seat in the organic produce business in creamers and beverages, premium dairy products and organic produce the country, and it gives Earthbound Farm the ability to reach its original goal: throughout North America and Europe getting good organic food to as many people as possible • March 2015 LTM Sales: $3,518mm • EBITDA: $414mm (11.76% margin) Select Product Portfolio • HQ in Denver, CO; 4,500 employees • Founded in 2012 • Offers a broad range of market-leading organic produce options and other organic foods • January 2014 LTM net sales: $500mm • HQ: San Juan Bautista, CA • Founded in 1984 Data Source: Hedgeye Research, Company Filings, FactSet. HEDGEYE 35 THE WHITEWAVE FOODS COMPANY ACQUIRES SO DELICIOUS
Deal Overview Financials
• On October 31, 2014, WWAV completed its acquisition of So Delicious for $195mm • WWAV funded the acquisition through its cash balance and available credit
― The acquisition agreement was announced in early September 2014
• So Delicious offers a wide variety of non-dairy, plant-based alternatives. All products are 100% plant based and many are Non-GMO Project verified, gluten free Strategic Rationale and organic. Their product lines vary from coffee creamers and nut-based milks to frozen desserts and dairy free culinary products • Additional plant-based brand, that is transferable across categories
• So Delicious was founded in 1987 by Mark Brawerman • So Delicious is the leading plant-based ice cream brand, adding another number one brand to WWAV’s portfolio • Number one in dairy-free ice cream, dairy-free yogurt, and dairy-free creamer • Expands yogurt and creamers portfolio, So Delicious has well developed Company Overviews coconut & almond yogurts • Produces and distributes branded plant-based foods beverages, coffee • So Delicious is a perfect fit for WWAV, as they follow the same health creamers and beverages, premium dairy products and organic produce awareness initiatives, such as the Non-GMO Project. Both businesses offer throughout North America and Europe several organic products as well • March 2015 LTM Sales: $3,518mm • EBITDA: $414mm (11.76% margin) Select Product Portfolio • HQ in Denver, CO; 4,500 employees • Founded in 2012 • Offers a broad range of market-leading plant-based drinks, ice creams, frozen novelties and coffee creamers. • October 2014 LTM Net Sales: $115mm • HQ: Eugene, OR • Founded in 1987 Data Source: Hedgeye Research, Company Filings, FactSet. HEDGEYE 36 THE WHITEWAVE FOODS COMPANY AGREES TO ACQUIRE VEGA
Deal Overview Financials On June 10, 2015 WWAV announced that it has agreed to acquire Vega for $550 • • WWAV intends to fund the acquisition under its existing $1 billion revolving million in cash credit facility, which is virtually untapped • Vega offers a broad range of plant-based nutrition products ― primarily powdered shakes and snack bars ― containing nutrient dense, superfoods in the United States and Canada Enterprise Value Sales Multiple $550mm 5.50x • Vega majority owners were Charles Chang (founder) and VMG Partners ― VMG originally invested in 2012, acquiring a 30% stake • The transaction will be EPS neutral in 2015 and is expected to be at least $0.06 Strategic Rationale accretive to WWAV’s adjusted EPS in 2016, excluding certain transaction and other Vega is the leader in plant-based nutrition products, further bolstering related expenses • WWAV’s stable of #1 brands • Transaction expected to close in the 3Q FY15, subject to regulatory approvals and other customary closing conditions • This is a natural fit for WhiteWave’s portfolio and will allow for best practice sharing across both companies within the plant-based foods segment
Company Overviews • Allows WWAV to extend its plant-based offerings into nutritional supplements • Produces and distributes branded plant-based foods beverages, coffee creamers and beverages, premium dairy products and organic produce • Vega’s growth momentum, coupled by its attractive margin profile and related throughout North America and Europe financial benefits are cited by management as strong reasons to do the deal at this high of a multiple (5.5x sales) • March 2015 LTM Sales: $3,518mm • EBITDA: $414mm (11.76% margin) • HQ in Denver, CO; 4,500 employees Select Product Portfolio • Founded in 2012 • Offers a broad range of market-leading plant-based nutrition products including: powdered shakes, snack bars, seeds and dietary supplements • June LTM 2015 Net Sales: $100mm • HQ: Burnaby, BC • Founded in 2004 Data Source: Hedgeye Research, Company Filings, FactSet HEDGEYE 37 STRONG LEADERSHIP STRONG MANAGEMENT TEAM YOUNG EXECUTIVES LEADING THE COMPANY IN THE RIGHT DIRECTION
Gregg Engles: Chairman of the Board of Directors and CEO Kevin Yost: EVP and President, Americas Fresh Foods ―Former Chairman of the Board of Directors and CEO of Dean Foods ―Joined WhiteWave in 2014 to lead the Earthbound Farms business. Company (1994-2012). Serves on the Board of Trustees at Dartmouth Previously employed by Dean Foods Company, Saputo’s dairy foods division College, and on the Board of Directors of the Grocery Manufacturers and had a stint in consulting, where he led private equity-owned companies. Association. Edward Fugger: EVP, Strategy and Corporate Development Kelly Haecker: CFO ―Edward joined Dean Foods in 2004 as VP of Corporate Development, and ―Joined WhiteWave Foods Operating Company in 2006. Prior to WWAV Kelly through the spinoff in 2012 became part of the WWAV team. Prior to Dean held various senior level roles at The Gillette Company, Mother’s-Archway Foods he was an MD at Bear, Sterns & Co. Inc. Cookie Company and Specialty Foods Corp. Roger Theodoredis: EVP, General Counsel Blaine McPeak: EVP and President, Americas Foods & Beverages ―Roger Theodoredis joined WWAV in 2005 as a Senior Vice President and ―Joined WhiteWave Foods in 2007 as the President of Horizon Organic. General Counsel. Previously he was employed at Bristol-Myers Squibb, Before WWAV, Blaine worked for Kellogg’s and Sara Lee. during his time there he led counsel for Mead Johnson Nutrition, now its own standalone public company. Bernard Deryckere: EVP and CEO, Europe Foods & Beverages ―As part of the Alpro acquisition (he was the CEO), Bernard joined WWAV to Thomas Zanetich: EVP, Human Resources lead the European business. Director of Belgilux Association of Branded ―Tommy joined WhiteWave in 2006 as Senior Vice President, Human Products & Flemish Chamber of Commerce. President of the European Resources. Prior to WWAV he served as VP of HR for Kraft/Nabisco and Natural Soy Foods Manufacturers Association and the Belgian Food General Foods. Industry Federation.
With an average age of 53 this is a management team that still has time left in their career to create meaningful value.
Data Source: Company filings. HEDGEYE 39 BOARD OF DIRECTORS A BOARD WITH EXPERIENCE
Gregg Engles: Chairman of the Board of Directors and CEO Michelle Goolsby ―Former Chairman of the Board of Directors and CEO of Dean Foods ―On the board since 2012. Has been a partner of Greenmont Capital partners, Company (1994-2012). Serves on the Board of Trustees of Dartmouth which focuses on investments in the natural product category. Previously College, and on the Board of Directors of the Grocery Manufacturers held several senior management roles at Dean Foods from 1998 to 2008. Association. Mary Ellen Minnick Joseph Hardin: Lead Director ―On the Board since 2012. Current Partner of Lion Capital a private investment ―On the Board since 2012. Former Wal-Mart Executive, Dean Foods firm since 2008. Held several executive positions for The Coca-Cola Executive. Served on the Board of Dean Foods from 1998 to 2013. Company from 1983 to 2007. On the current BoD for Target Corporation, and the current Advisory Board of Heineken. Stephen Green ―On the Board since 2012. Corporate Finance GE Capital, Dean Foods BoD (1994 to 2013). The Active Network, Inc BoD (2001 to 2013). Current Board member of Caris Life Sciences.
Doreen Wright ―On the Board since 2012. Dean Foods BoD (2009-2013). Current Director of Crocs, and New Hope Arts. Served on several other BoD’s and has been in management.
Small, Nimble, experienced group of board members ready to carry this company forward
Data Source: Company filings. HEDGEYE 40 PORTFOLIO BUILT FOR CONSUMERS MISSION PREDICATED ON PUTTING THE CONSUMER FIRST
Nutritious Convenient
CHANGING THE WAY Innovative THE WORLD Flavorful EATS FOR THE BETTER
Great Responsibly Tasting Produced
Data Source: Company filings. HEDGEYE 42 SIGNIFICANT POTENTIAL IN HOUSEHOLD PENETRATION LARGE CATEGORY LEADING BRANDS While WWAV’s brands are well known, they are still largely under penetrated across the U.S. 36% 31% 28% 14%
Organic Organic Plant-based Flavored Milk Packaged Beverages Coffee Salad Creamers
Data Source: Company filing. Household Penetration IRI and Nielsen Panel Data, Coffee Creamers includes Half & Half, Dairy and non-dairy creamers. HEDGEYE 43 WWAV BY BUSINESS SEGMENT AMERICAS FOODS & BEVERAGES PLANT-BASED FOODS AND BEVERAGES, COFFEE CREAMERS AND BEVERAGES, PREMIUM DAIRY Overview Organic Net Sales Growth(1)
• Within the segment there are three sub segments: Plant-based foods $650 11% 12% 10% 10% & beverages (Silk and So Delicious), Organic dairy (Horizon), Coffee $600 10% 10% 10% 10% 11% creamers (International Delight, Land O Lakes) all of which hold a #1 $550 10% 8% or #2 position in the category $500 8% 9% • Utilize nine manufacturing facilities and three co-packers in the U.S., $450 8% in 2014 70% of product volume was manufactured internally $ in millions $400 7% $350 6% Consumers are starting to focus more on what they are putting in • $300 5%
their bodies, with the recent acquisition of Vega, WWAV is one step Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 Growth Net Sales Organic closer to having a plant-based item for every occasion Organic Net Sales Organic Net Sales Growth Products Management Commentary “We recently began expanding the Horizon brand beyond the dairy case with great-tasting healthy kids' meals and snacks that moms can feel good about.” –Gregg Engles, CEO
“The strategic rationale of this [Vega] acquisition is compelling… [it] provides us with an entry into the high- growth nutritionals category.” –Gregg Engles, CEO
Data Source: Company filings. (1) Excludes Vega financials. HEDGEYE 45 PLANT-BASED FOODS AND BEVERAGES
Overview Reported Net Sales Growth
• Deep heritage at both of these brands, Silk founded in 1977 $220 25% and So Delicious in 1987, acquired in 2002 and 2014, 21% 20% respectively $200 20% 15% • The category is far beyond soy, which is where it found its $180 14% 13% 14% 14% 13% 15% roots, now in cashews, almonds, coconuts, etc. $160 9% • Silk #1 market leader in plant-based beverages: 10%
$ in millions $140 ― 74% share of soy $120 5%
― 51% share of nut-based Growth Net Sales Organic 65% share of coconut $100 0% ― Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 • So Delicious the #1 market leader in dairy-free yogurts and dairy-free ice cream Plant-based Food and Beverages Net Sales YoY Change Products Management Commentary
“[We] believe plant-based foods and beverages are a significant global opportunity that is in the early stages of broad consumer acceptance, which we view as a vast opportunity for future growth” –Gregg Engles, CEO
“Our plant-based beverages are all non-GMO, gluten-free, with fewer calories and fat” –Gregg Engles, CEO
Data Source: Company filings. Nielsen xAOC brand and market share positions as of the 13 weeks ended 3.28.15. HEDGEYE 46 POWER OF SILK
PLANT-BASED BEVERAGES OLD FORMAT = $800/SQUARE FT NEWFUTURE FORMAT = GROWTH $1,300 SQ FT OPPORTUNITIES HOUSEHOLD PENETRATION
+13 • Targeting milk households pts
+4 • Adding new consumer targets pts 31%
27% • Broadening usage occasions 24% 21% 18% • Expanding categories 2010 2011 2012 2013 2014
Data Source: Company filings. Household penetration IRI & Nielsen Panel Data, 2015 CAGNY Presentation. HEDGEYE 47 FROZEN DESSERT GROWTH OPPORTUNITIES
Frozen Ice Cream and Novelties Dairy-Free % of Category 2014 Growth Rates
7.5% 15%
Sizeable growth potential
0.6% 0%
Total milk Total frozen ice Dairy Dairy-free cream and novelties
Data Source: Nielsen xAOC calendar year 2014. HEDGEYE 48 SO DELICIOUS ― STRONG PRESENCE ACROSS CATEGORIES
Dairy-Free Frozen Dairy-Free Drinks Dairy-Free Yogurt
Data Source: Pictures taken on 6/12/14 at Whole Foods in White Plains, NY. HEDGEYE 49 COFFEE CREAMERS AND BEVERAGES
Overview Reported Net Sales Growth
• International Delight was the first flavored, non-dairy liquid creamer, established in 1980 and acquired in 1997 13% $300 12% 14% 11% • In addition to International Delight and Land O Lake, So Delicious 10% 11% 11% 12% 9% 9% and Silk participate in this category as a brand expansion $250 10% 8% Strong even growth has been seen in the business over the last $200 • 5% few quarters after a tough Q2 FY14 6% $ in millions $150 4% • The introduction of Dunkin’ Donuts creamers in Q1 2014 have 2%
been performing well and they continue to innovate on the $100 0% Growth Net Sales Organic business by adding new flavors Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 Coffee Creamers and Beverages Net Sales YoY Change Brands | Products Management Commentary “Our creamers platform has delivered double-digit compound annual growth over the past couple of years behind volume growth in the refrigerated flavored creamer category” –Gregg Engles, CEO
“Our International Delight brand has been bringing the coffee house experience to people where they want it and customizing how they want it.” –Gregg Engles, CEO Data Source: Company filings. HEDGEYE 50 PREMIUM DAIRY
Overview Reported Net Sales Growth Horizon Organic practically started the organic dairy movement over 20 • 15% years ago, and then was acquired by Dean Foods in 2004 $200 16% 13% 13% 14% • #1 organic dairy brand ― 4x the next closest competitor $180 • Recently this segment has been hit with supply issues given the high 12% $160 demand and long lead teams to creating organic cows 8% 8% 10% 7% Resulting in WWAV having to take pricing, but that hasn’t $140 8% ― 6% hampered growth as consumers are willing to pay a premium 5% 6% $ in millions $120 As you see to the right, pricing has been the main contributor to 4% ― 4% growth in the recent top line performance
$100 Growth Net Sales Organic 2% • Leveraging the brand beyond dairy starting in 2014, launching mac n’ cheese, fruit snacks and lunch box pouches. To date, these products $80 0% Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 have seen strong results but not making a meaningful impact to the bottom line yet Premium Dairy Net Sales YoY Change
Brand | Products Management Commentary
“Our premium dairy platform has delivered double-digit top- line growth over the past few quarters, as demand for organic milk is at historical highs.” –Gregg Engles, CEO
“Horizon participates in growth categories. It holds a strong leadership position in the vibrant organic milk category.” –Gregg Engles, CEO
Data Source: Company filings. Nielsen xAOC brand position as of 3.28.15. HEDGEYE 51 AMERICAS FRESH FOODS ORGANIC GREENS AND PRODUCE Overview Reported Net Sales Growth • Earthbound Farm was acquired in January 2014 5% Expanded WWAV’s presence on the perimeter of the store in the $155 6% • 3% produce section $150 4% • Earthbound Farms holds the #1 market share in organic packaged 2% $145 0% salad, where there is strong category growth (14% YoY) versus the total -3% $140 -2% salad category (11% YoY), organics share of the total now stands at 25% $135 -4% • Recent performance has been hampered due to weather conditions in $ in millions -8% -6% the Southwest, and WWAV choosing not to ship sub par product $130 -8% $125 -10%
Since acquisition, WWAV has continued to take costs out of the Growth Net Sales Organic • Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 business and increase profit margins • The WWAV team is also working on implementing SAP by 2H FY15, Organic Greens and Produce Net Sales % Change which will add greater efficiencies Products Management Commentary
“Earthbound is the largest organic produce brand in North America with a leading 54% share in branded organic packaged salads.” –Gregg Engles, CEO
“Earthbound Farm[’s] mission is [to] make healthy, fresh food simple and accessible.”–Gregg Engles, CEO
Data Source: Company filings. HEDGEYE 52 AMERICA – FRESH FOODS
U.S. ORGANIC PACKAGED SALAD AS A % ORGANIC PACKAGED SALAD RETAIL SALES OLD FORMAT = $800/SQUARE FT NEW FORMATOF =TOTAL $1,300 SQSALAD FT CATEGORY ($MM, grocery) $938 (% grocery) 24% 23% $803 20%
$655 18%
$578 + 17% CAGR 16% $489
2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 Earthbound Farm remains the leading brand in organic packaged salad
Data Source: Company filings. Nielsen US Food – 52 weeks ended early January 2009-2015. HEDGEYE 53 EUROPE FOODS & BEVERAGES PLANT-BASED FOOD AND BEVERAGES Overview Constant Currency Net Sales Growth
• Plant-based foods and beverages, which include Alpro and Provamel $140 23% 23% 25% (intended for organic items only) brand beverages using soy, almond, 21% $130 19% 19% coconut, hazelnut, rice and oat based ingredients $120 18% 20% • Alpro started focused on soy based beverages and then branched out to $110 13% yogurts and creams $100 12% 15% $90 • Only pan-European dairy-free brand $80 7% 10% • Latest pillar for growth has been growing outside of soy $ in millions $70 $60 5% Like almonds, coconuts, hazelnuts, rice
― $50 Growth Net Sales Organic As you can see on the chart to the right, the growth in Europe is robust and $40 0% • Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 expected to last. From the low amount of sales, you can see that penetration is still low and has room to grow Reported Net Sales Organic Constant Currency Net Sales Growth Products Management Commentary “Alpro has a vision of a world where more of what we eat comes directly from plants, because we know that plant-based foods [are] not only good for the planet, but also good for the people, and besides that, we were able to develop these products to be even more delicious than their dairy alternatives.” –Bernard J. P. Deryckere, President-Europe
Data Source: Company filings. HEDGEYE 54 KILLING THE COMPETITION IN EUROPE STRONG FOOTHOLD IN DAIRY-FREE • Alpro is the only pan-European plant- based brand 43% 40% 38% • Alpro has a commanding position in Europe within the dairy-free segment. We would also like to point out our Hedgeye Consumer Staples Best Idea as a short (HAIN) is second to 7% 6% last on this list, but 3% 2% 2% we weren’t surprised 1% by that 2012 2013 2014 1 2 3 4 5 6
Data Source: Company filings, Nielsen Plant-Based EU9 Nielsen MAT P04 2015; EU9 includes UK, Germany, Belgium, the Netherlands, Spain, Italy, Sweden, Portugal and France. HEDGEYE 55 JOINT VENTURE
NOT CONSOLIDATED, BUT WORTH NOTING AS IT WILL BE A MEANINGFUL DRIVER OF GROWTH IN THE FUTURE
Overview Great Partner with a Big Market to Capture
• Joint venture with Mengniu Dairy Company Limited, a leading player in the Chinese dairy industry formed in January 2014 Ownership • WWAV invested $47mm to ramp up the project • JV will manufacture, market and sell a range of nutritious products in 51% China starting with Silk branded non-dairy milk • Officially launched product in late December 2014 ― Almond & Walnut-based beverages in trial stage • Do not expect this business to contribute meaningfully yet • First time expanding outside of North America and Europe 49% • A lot of room to grow internationally, this JV will be very interesting to follow as they help to develop the dairy-free segment in Asia Products Management Commentary “We believe China is a great long-term opportunity for WhiteWave with a sizeable consumer base, increasing income levels, and preference towards high-quality foods.” –Gregg Engles, CEO
“This is a startup business and it will naturally take time to develop. But growth in the plant-based beverages category in China remains robust.” ―Gregg Engles, CEO
HEDGEYE 56 LOOKING FORWARD PLANNING FOR FUTURE GROWTH
$325 - $350 million in capital expenditures planned for full year 2015
1• Investments in additional capacity • Adding lines in existing facilities to support internal production complete ownership of product
2• Plant Improvements • Improving lines and processes to maximize efficiency margin expansion
3• New R&D facility • Consolidating all R&D functions under one roof in Denver, CO improved innovation capabilities
4• Support future growth beyond 2016 • For a company this big to grow at this rate is impressive, must inject more cash to support growth
Data Source: Company filings, Hedgeye research. HEDGEYE 58 NEW PRODUCT INNOVATION IS A CORE COMPETENCY WHITEWAVE HAS PROVEN THAT THEY ARE INNOVATORS Brand Extensions Into New Categories Brand Creation
• Over the course of FY14 • Relaunching silk dairy-free • Expanding Salad offerings • Internally created brand introduced multiple center- yogurt to include different mixes New emerging Aussie-style yogurt segment of-store products to the and value added salad • Dairy-free is a very marketplace: • bowls 10g of protein underdeveloped segment • Organic/Gluten-free mac & of yogurt category, <1% As well as growing out a Manufactured internally at new Dubois, PA cheese, fruit snacks, • • frozen line of fruits, facility cracker and lunch box Improved packaging, • vegetables and smoothie pouches formula, and now internally Focused retail rollout mixes • All are meeting manufactured • Launched in January 2015 expectations •
Data Source: Company filings, Hedgeye research. HEDGEYE 59 WWAV IS IN THE EARLY STAGES OF A PRODUCT LIFE CYCLE GOOGLE SEARCH TRENDS FURTHER SUPPORTS OUR THESIS THAT INTEREST IN PLANT- BASED FOODS HAS ONLY REALLY STARTED TO TAKE OFF WITH MAINSTREAM CONSUMERS IN THE LAST FEW YEARS “Almond Milk” “Plant Based”
2005 2007 2009 2011 2013 2015 2005 2007 2009 2011 2013 2015 “Vegan Protein” “Non GMO”
2005 2007 2009 2011 2013 2015 2005 2007 2009 2011 2013 2015 Data Source: Google search trends. HEDGEYE 61 PLANT-BASED PRODUCTS ON THE CUSP OF BROAD ACCEPTANCE
WWAV’s Status on the Curve
2012-2014 2014-2025 2025-2040 Beyond
PLANT-BASED PRODUCTS ARE JUST REACHING THE GROWTH STAGE OF THEIR PRODUCT LIFE CYCLE Consumers are really starting to cling to the idea that plant-based alternative diets are healthier and better for the environment. Some smaller companies are capitalizing and WWAV is leading the pack. Our view is that this market is very much in the introduction/growth stage and has a long runway to reach maturity.
Data Source: Hedgeye research. HEDGEYE 62 M&A POSSIBILITIES WHO COULD THEY ACQUIRE TO GROW CONTINUATION OF THE STRING OF PEARLS APPROACH KIND Snacks Fage Justin’s Quorn
• Granola and Bar producer, • Acquisition of Fage would • Nut butter would be a perfect • HQ in the UK with a strong presence in would be a great new product make for a larger international addition to the product line the U.S. platform for WWAV, and add to presence in the fast growing • This would undoubtedly give WWAV a $50-$100mm in sales, their growing center-of-store • more robust European business, and a Greek yogurt category generating triple digit growth great compliment to the Alpro brand portfolio • ~$650mm in sales • Entry into the meat alternatives • Justin’s nut butters are very on- segment • ~$200mm in FY2013 Sales trend and corporate cultures • Currently owned by Exponent PE, would be a perfect match acquired for £205mm in 2011
Hampton Creek thinkThin Amy’s Kitchen Blue Buffalo
• Hampton Creek is big on the • thinkThin is a very popular • Perfect for expansion into the • Just filed IPO paper work, so egg scene right now, and is a product among consumers, organic frozen foods category may be difficult timing small powerhouse in the plant- and has great distribution Huge growth potential High quality pet food is a fast based segment • • • On-trend product growing market • Over $300mm in sales • Culture wise would be a Similar cultural values • With nearly a $1 billion in sales perfect fit, and the products • 70% of organic frozen foods • it would be transformational are amazing, but the valuation market share could be prohibitive
Data Source: Hedgeye research. HEDGEYE 64 CAN THEY FINANCIALLY SUPPORT M&A? THAT DEPENDS ON THE SIZE OF THE DEAL RIGHT NOW
Pro Forma Net Debt / EBITDA for Vega Acquisition
( figures in Millions except multiples) Actuals as of LTM 03/15 Actual Pro Forma Cash $31 FY2015E $70
Revolving Credit 16 Includes Vega 566 Term Loans (Adj.) 990 990 Notes/Bonds 500 500 Net Long Term Debt 1,506 2,056 Net Debt $1,475 $1,986
EBITDA 414 FY2015E 488 Net Debt/EBITDA 3.57x 4.07x
Historical Net Debt / EBITDA Multiple 2010 2011 2012 2013 2014 Avg. Net Debt / EBITDA 2.41x 3.92x 3.26x 1.95x 3.61x 3.03x
Pro Forma Net Debt / EBITDA as if Another Deal was Executed this Year Deal Value (mm) $100 $200 $300 $400 $500 Pro Forma Net Debt / EBITDA 4.27x 4.48x 4.68x 4.89x 5.09x
Data Source: FactSet. HEDGEYE 65 WHO COULD BUY WWAV?
Comparable Transactions Who Could Buy WWAV?
$ in Millions Announced Enterprise Enterprise Value / LTM Date Target Acquirer Value Revenue EBITDA ($ in millions) Market Cap Enterprise Value Net Debt / EBITDA 6/10/2015 Vega WhiteWave Foods $550 5.50x n/a Coca-Cola $175,460 $200,776 1.61x 6/9/2015 Garden Fresh Gourmet Campbell's $231 2.31x n/a 5/26/2015 Applegate Farms Hormel Foods $775 2.28x n/a PepsiCo $138,800 $162,455 1.58x 3/25/2015 Kraft Heinz $54,524 3.00x 15.00x 2/3/2015 Big Heart Pet Brands J.M. Smuckers $5,800 2.52x 12.89x General Mills $32,934 $44,531 2.31x 11/14/2014 Garden Protein Pinnacle $154 2.69x n/a 10/14/2014 So Delicious WhiteWave Foods $195 1.70x n/a Danone $41,205 $49,943 2.04x 9/8/2014 Annie's General Mills $821 3.95x 27.37x 7/2/2014 Hillshire Tyson $8,550 2.14x 16.70x Nestle $235,100 $251,905 0.65x 6/30/2014 Cytosport Hormel $450 1.22x 15.00x 5/22/2014 Ragu & Bertolli Mizkan Group $2,150 3.47x n/a Kellogg's $22,169 $29,789 2.54x 3/6/2014 KIND Snack Foods VMG $729 3.70x 15.30x 12/9/2013 Earthbound Farm Organic WhiteWave Foods $600 1.20x 8.00x 12/9/2013 Dymatize Enterprises Post Holdings $380 1.95x 12.39x 12/9/2013 Golden Boy Foods Post Holdings $301 1.95x 13.91x 8/12/2013 Wishbone Pinnacle $580 3.05x 8.92x 8/2/2013 Premier Nutrition Post Holdings $180 1.33x 10.00x Possible Valuation Range 6/10/2013 Pirate Brands B&G Foods $195 2.29x 10.26x 5/23/2013 Plum Organics Campbell's $249 2.68x n/a 5/9/2013 Hearthside Foods Post Holdings $158 2.26x 8.78x (Updated on 6/17/15 at the close) 2/14/2013 Heinz 3G $27,169 2.30x 14.10x Price / Sales Multiple 1/3/2013 Skippy Hormel $700 1.89x n/a Premium/Discount (12.3%) (8.2%) (4.1%) 0.0% 20.5% 41.0% 61.5% 9/5/2012 Snack Factory Snyder's Lance $340 2.13x n/a $49 2.14x 2.24x 2.34x 2.44x 2.94x 3.44x 3.94x 2/15/2012 Pringles Kellogg's $2,695 1.80x 11.09x $3,018 $36.85 $38.57 $40.29 $42.02 $50.63 $59.25 $67.87 $3,268 $39.90 $41.77 $43.63 $45.50 $54.83 $64.16 $73.49 Mean 2.47x 13.31x Median 2.29x 12.89x $3,518 $42.95 $44.96 $46.97 $48.98 $59.02 $69.07 $79.11 Sales Min 1.20x 8.00x $3,768 $46.01 $48.16 $50.31 $52.46 $63.22 $73.98 $84.74 Max 3.95x 27.37x $4,018 $49.06 $51.35 $53.65 $55.94 $67.41 $78.89 $90.36
Data Source: Hedgeye, FactSet. HEDGEYE 66 ORGANIC GROWTH STRATEGY THINK LOCAL, BE GLOBAL
OLD FORMAT = $800/SQUARE FT NEW FORMAT = $1,300 SQ FT STAY LOCAL Being an organic health food company, WhiteWave must appeal to the local, anti- corporate consumer to keep their core consumer base intact
GROWTH As is natural for any successful company, WhiteWave has to remain dominant in the food industry by continuing to create shareholder value
HEDGEYE 68 WHAT CAN BE DONE?
EMPHASIZE SUPPORT FOR LOCAL FAMILY FARMING 1 Not only do people want great tasting healthy food products, they want to know where they came from as well. This is a large part of the company’s current marketing strategy, and it must remain a strong point as it expands.
STAY SUSTAINABLE 2 Sustainability is an increasingly pertinent issue in the food industry, especially in competition for organic health food customers. WhiteWave is active in their efforts to reduce waste, greenhouse gas emissions, and water usage, while also taking initiative in other sustainability measures.
SHARE THE VISION 3 WhiteWave is an environmentally responsible health food company, as must be their acquired subsidiaries and brands. Earthbound Farm, So Delicious and Vega share these values, and represent a proper start to the company’s M&A track record.
HEDGEYE 69 COMMODITIES THE ORGANIC SUPPLY CHALLENGE
LAND DEVELOPMENT RATES 1 37% of America’s developed land has been converted from functional farmland in the past 30 years, which translates to 24 million acres of lost farmland since 1982. The trend has not slowed, as 50 acres of farm and ranch land are lost hourly to developments still today.
ORGANIC CERTIFICATION PROCESS 2 The USDA requires that conventional farms adopt and maintain organic practices for a period of three years before selling their products as “organic.” Certification requires a rigorous application and inspection process.
HIGH COST OF CONVERSION 3 Certification fees vary with different operations and can cost thousands of dollars, but conversion entails huge opportunity costs that farmers would have to endure. Farmers can’t charge organic prices until completion of their certification. Additionally, there are inspection, application, and annual renewal fees.
Data Source: Hedgeye research, USDA. HEDGEYE 71 PROMISING OUTLOOK ORGANIC FOOD IN THE MARKET POWERFUL INCENTIVES OLD FORMAT = $800/SQUARE FT NEW FORMAT = $1,300 SQ FT
$40 5.0% $35 4.5%
$30 4.0% $25 3.5% The USDA will reimburse up to 75% of certification $20 3.0% costs through the USDA Organic Certification Cost- $15 2.5% Share Program. $10 2.0% Net Sales (billions) $5 1.5% Organizations such as American Farmland Trust and $0 1.0% Farmland LP offer affordable solutions to aspiring 2011 2012 2013 2014 organic farmers, and have been helping conversions
US Organic % Total Food Market Share for decades.
Each year, organic food sales gain more of the total Government spending on organic agriculture food market share. increased immensely with 2014 Farm Act.
Data Source: Hedgeye research, USDA. HEDGEYE 72 WWAV DOING ALL THE RIGHT THINGS
OLD FORMAT = $800/SQUARE FT NEW FORMAT = $1,300 SQ FT
WWAV’s Horizon Organic WWAV shares the vision Producer Education of its customer base by (HOPE) program was partnering with several created in 2001 to assist GMO fighting farmers in transitioning to organizations to promote organic, and to provide transparency in the food general support for family industry farms
Data Source: Hedgeye research. HEDGEYE 73 ALMOND SOURCING
WHILE TOTAL ALMOND PRODUCTION VALUE GROWTH SLOWS, ALMOND PRICES ARE AT AN ALL TIME HIGH FROM $1.79 IN 2010 TO $3.50 IN 2014 (18.3% CAGR). THE DROUGHT HAS CAUSED 40% OF LARGE (>600 ACRES) ALMOND OLD FORMAT = $800/SQUARE FT NEW FORMAT = $1,300 SQ FT OPERATIONS TO DELAY ACREAGE EXPANSION. OUR PRICE INCREASE EXPECTATIONS ARE IN LINE WITH MANAGEMENT’S, AND WE BELIEVE IN MANAGEMENT’S ABILITY TO OFFSET THESE PRICES WITH COST SAVINGS INITIATIVES. WITH A 70% MARKET SHARE OF PLANT BASED DRINKS, DEMAND FOR ALMONDS WILL REMAIN STRONG. Almond Production by Crop Year (Aug-July) 250 13.9% 16% 13.3% 14% 200 12%
10%
150 5.9% 8% 3.8% 6% 100 4% YoY Growth
Millions Pounds 2% 50 (1.7%) 0% -2% 0 -4% 2010 2011 2012 2013 2014
CROP YEAR Data Source: Almond Board of California, Hedgeye. HEDGEYE 74 USDA ORGANIC CORN VS. CME CORN PRICES OFF HISTORICAL HIGHS, PRICE SPREAD WIDENING $18 $12 Price Spread $16 Current: $8.85 (6/14/2015) $10 $14 Max: $10.38 (8/10/2014) $12.50 $8 $12 Min: $0.20 (10/10/2010) Average: $5.19 $10 $6
$8 $4 $6 $3.65 $2 $4 $0 $2
$0 -$2
Price Spread CME USDA Organic (Price Spread on right axis, USDA Organic and CME on Left Axis) USDA reported on 6/15/15 that recent surveys indicate 73% of corn crop is in good or excellent condition, compares to 74% last week and 76% in the same week last year.(1)
Data Source: Mercaris, USDA, CME. (1) USDA, figures as of June 14, 2015, data collected weekly and reported on the first business day of every week after 16:00 ET. HEDGEYE 75 TOTAL US ORGANIC CORN IMPORT VOLUMES
1,200,000
1,000,000
800,000
600,000 Bushels
400,000
200,000
0 January February March April May June July August September October November December 2012 2013 2014 2015 IMPORTS FOR ORGANIC CORN ARE AT ALL TIME HIGHS For the month of April 2015, total Organic Corn imports reached 1,131,771 bushels, an increase of 5% versus prior month and 2095% versus prior year. Year to date, total imports have reached 2,830,773 bushels which is an increase of 878% versus last year. If the current pace continues throughout the year, imports could reach 22,646,184 bushels. Data Source: Mercaris. HEDGEYE 76 ORGANIC CORN IMPORT VOLUMES BY COUNTRY PAST 12 MONTHS
India 2.4% Greece Netherlands 0.1% 12.2%
Canada 8.4% Bulgaria 0.1% Romania Argentina 48.5% 5.7%
Turkey 22.5%
IN THE PRIOR 12 MONTHS, THE TOP 3 EXPORTING COUNTRIES TO THE U.S. FOR ORGANIC CORN WERE ROMANIA, TURKEY AND NETHERLANDS
Data Source: Mercaris. HEDGEYE 77 MONTHLY AVERAGE ORGANIC CORN IMPORT PRICES
$16 30% 25% $14 $13.00 20% $12 15%
$10 10% 5% $8 0% $6 -5% US$ per US$ per Bushel $4 -10% -15% $2 -20% $0 -25%
FOB Origin Price Freight Cost Average Monthly Change
IMPORT PRICES TRENDING DOWN Organic Corn import prices in April decreased modestly by 9.22% from March from $11.72/bu to $10.64/bu. Import prices are 16.48% below prices at the same time last year.
Data Source: Mercaris. HEDGEYE 78 2014/2015YTD AVERAGE ORGANIC CORN IMPORT PRICES
2014 2015 YTD
$16 $18 $14 $13.08 $16
$12 $14 $12.88 $12 $10 $10 $8 $8 $6 $6 US$ per US$ per Bushel US$ per US$ per Bushel $4 $4 $2 $2 $0 $0
FOB Origin Price Freight Cost FOB Origin Price Freight Cost
For CY14, the average import price for Organic Corn delivered to the U.S. (including CIF) was $12.97/bu which is $0.11/bu lower than the average domestic price of $13.08/bu as reported to Mercaris. Delivered prices from the largest exporting country, Romania, were $11.74/bu (which includes all CIF charges). FOB origin prices in Romania were $10.33/bu. In terms of total delivered cost, Romania was the lowest cost importing country at $11.74/bu.
For CY15, the average import price for Organic Corn delivered to the U.S. (including CIF) was $11.68/bu which is $1.20/bu lower than the average domestic price of $12.88/bu as reported to Mercaris. Delivered prices from the largest exporting country, Romania, were $10.71/bu (which includes all CIF charges). FOB origin prices in Romania were $9.36/bu. In terms of total delivered cost, Romania was the lowest cost importing country to the U.S. at $10.17/bu. Data Source: Mercaris. HEDGEYE 79 USDA ORGANIC SOYBEANS VS. CME SOYBEANS PRICES OFF HISTORICAL HIGHS, PRICE SPREAD WIDENING $35 Price Spread $25 Current: $15.52 (6/14/2015) $30 Max: $20.88 (6/8/2008) $24.96 $20 $25 Min: $1.67 (10/10/2010)
Average: $10.14 $15 $20
$15 $10 $9.34 $10 $5 $5
$0 $0
Price Spread USDA Organic CME (Price Spread on right axis, USDA Organic and CME on Left Axis) USDA reported on 6/15/15 that recent surveys indicate 67% of soybean crop is in good or excellent condition, compares to 69% last week and 73% in the same week last year.(1)
Data Source: Mercaris, USDA, CME. (1) USDA, figures as of June 14, 2015, data collected weekly and reported on the first business day of every week after 16:00 ET. HEDGEYE 80 TOTAL US SOYBEAN IMPORT VOLUMES
1,200,000
1,000,000
800,000
600,000 Bushels 400,000
200,000
0
2012 2013 2014 2015
SOYBEAN IMPORTS OUTPACING THE PREVIOUS THREE YEARS For the month of April 2015, total Organic Soybean imports reached 1,096,029 bushels, an increase of 8% versus prior month and 99% versus prior year. Year to date, total imports have reached 3,154,414 bushels which is an increase of 160% versus last year. If the current pace continues throughout the year, imports could reach 25,235,312. Data Source: Mercaris. HEDGEYE 81 ORGANIC SOYBEAN IMPORT VOLUMES BY COUNTRY PAST 12 MONTHS
Canada 6.9% Argentina 6.8%
Ukraine 14.0% India 43.9% Kazakhstan 3.2% Uruguay 0.1% Russia China 0.4% 17.9% Hong Kong 0.1%
Netherlands Uganda Turkey Romania 1.4% 0.1% 2.8% 2.5%
IN THE PRIOR 12 MONTHS, THE TOP THREE EXPORTING COUNTRIES TO THE U.S. FOR ORGANIC SOYBEANS WERE INDIA, CHINA AND UKRAINE.
Data Source: Mercaris. HEDGEYE 82 MONTHLY AVERAGE ORGANIC SOYBEAN IMPORT PRICES
$30 6%
$24.22 4% $25 2%
$20 0%
$15 -2%
-4% $10 US$ per US$ per Bushel -6% $5 -8%
$0 -10%
FOB Origin Price Freight Cost Average Monthly Change
Organic Soybeans import prices in April increased slightly by 0.41% from March from $22.04/bu to $22.13/bu. Import prices are 8.93% below prices at the same time last year.
Data Source: Mercaris. HEDGEYE 83 2014/2015YTD AVERAGE ORGANIC SOYBEAN IMPORT PRICES
2014 2015 YTD
35 50
30 45
25 40 20 35 30 15 25 10 20 US$ per US$ per Bushel 5 15 0 US$ per Bushel 10 5 0
FOB Origin Price Freight Cost FOB Origin Price Freight Cost Source: Mercaris Source: Mercaris
For CY14, the average import price for Organic Soybeans delivered to the U.S. (including CIF) was $24.65/bu which is $1.47/bu lower than the average domestic price of $26.12/bu as reported to Mercaris. Delivered prices from the largest exporting country, India, were $23.78/bu (which includes all CIF charges). FOB origin prices in India were $21.61/bu. In terms of total delivered cost, Ukraine was the lowest cost importer at $22.90/bu.
For CY15, the average import price for Organic Soybeans delivered to the U.S. (including CIF) was $22.51/bu which is $2.94/bu lower than the average domestic price of $25.45/bu as reported to Mercaris. Delivered prices from the largest exporting country, India, were $22.11/bu (which includes all CIF charges). FOB origin prices to India were $19.79/bu. In terms of total delivered cost, Romania was the lowest cost importing country to the U.S. $20.44/bu. Data Source: Mercaris. HEDGEYE 84 WWAV VS. HAIN TOP LINE COMPARISON
OLD FORMAT = $800/SQUARE FT NEW FORMAT = $1,300 SQ FT
LTM LTM 2011 2012 2013 2014 Mar '15 2011 2012 2013 2014 Mar '15 Income Statement Income Statement Net Sales $2,026 $2,289 $2,542 $3,437 $3,518 Net Sales $1,130 $1,378 $1,735 $2,154 $2,574 % Growth 11.3% 13.0% 11.1% 35.2% % Growth 23.2% 21.9% 25.9% 24.1% Gross Income $685 $804 $908 $1,156 $1,191 Gross Income $320 $373 $467 $552 $583 % Margin 33.8% 35.1% 35.7% 33.6% 33.9% % Margin 28.3% 27.1% 26.9% 25.6% 22.6% % Growth 12.1% 17.4% 13.0% 27.3% % Growth 27.2% 16.8% 25.2% 18.1% SG&A $551 $660 $702 $861 $888 SG&A $213 $228 $276 $311 $348 % of Sales 27.2% 28.8% 27.6% 25.0% 25.2% % of Sales 18.8% 16.6% 15.9% 14.5% 13.5% Growth as % of sales (5.5%) 5.9% (4.2%) (9.3%) 0.8% Growth as % of sales 0.8% (11.9%) (4.0%) (9.2%) (6.5%) EBIT $133 $144 $206 $295 $303 EBIT $107 $145 $191 $241 $235 % Margin 6.6% 6.3% 8.1% 8.6% 8.6% % Margin 9.5% 10.5% 11.0% 11.2% 9.1% % Growth 54.6% 8.1% 43.0% 43.5% % Growth 33.5% 35.5% 31.7% 26.0% EBITDA $201 $218 $288 $406 $414 EBITDA $131 $175 $231 $289 $291 % Margin 9.9% 9.5% 11.3% 11.8% 11.8% % Margin 11.6% 12.7% 13.3% 13.4% 11.3% % Growth 32.4% 8.6% 31.8% 41.0% % Growth 32.6% 33.7% 31.8% 24.9%
Data Source: FactSet. HEDGEYE 86 WWAV VS HAIN WWAV HAIN 40% OLD FORMAT = $800/SQUARE FT 14% 40%NEW FORMAT = $1,300 SQ FT 14% 36.4% 13.0% 35.6% 35.8% 12.6% 12.5% 12.7% 12.5% 34.8% 35.5% 35.1% 34.1% 34.2% 33.9% 12.1% 35% 32.9% 33.1% 35% 11.7% 12% 12% 10.7% 30% 30% 10% 10% 9.1% 9.0% 9.1% 28.7% 28.1% 27.2% 27.6% 27.8% 25% 9.5% 25% 26.5% 27.0% 8.7% 8% 25.1% 25.3% 24.7% 8% 8.0% 8.9% 23.5% 20% 7.7% 7.6% 7.8% 20% 6.9% 6.8% 6.8% 6% 6% 15% 15% 5.6% 4% 4% 10% 10%
2% 2% 5% 5%
29.9% 27.9% 29.0% 29.6% 27.8% 26.4% 25.3% 26.1% 24.7% 24.2% 26.1% 17.3% 16.6% 15.5% 16.3% 16.1% 14.7% 14.6% 15.1% 14.4% 12.9% 13.0% 0% 0% 0% 0% Q3 FY12 Q4 FY12 Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 Q2 FY15 Q3 FY15
WWAV SG&A as % of Sales WWAV Gross Margin WWAV Operating Margin HAIN SG&A as % of Sales HAIN Gross Margin HAIN Operating Margin LTM Feb '15 LTM Mar '15 FY Dec '14 LTM Mar '15 FY Dec '14 FY Dec '14 GIS KRFT NESN-CH MNST LWAY BN-FR Average (1) SG&A as a % of Sales 18.9% 13.2% 30.4% 31.9% 19.9% 32.9% 23.2% Gross Margin 34.1% 30.7% 48.1% 55.6% 23.7% 47.2% 37.0% Operating Margin 15.2% 17.4% 15.0% 23.7% 3.7% 12.9% 13.2% Data Source: Hedgeye, FactSet. (1) Average includes WWAV and HAIN. HEDGEYE 87 WWAV FIRST IN-CLASS BRAND PORTFOLIO
• 9 Brands
• All brands are number 1 or number 2 in their respective categories
(licensed) • Very well- known names recognized (pending approval) globally
HEDGEYE 88 HAIN PORTFOLIO LACKS EXCITEMENT
• ~60 Brands
• No clear product emphasis or niche
• Weak brand recognition
HEDGEYE 89 HEDGEYE COMMENTARY
BULLISH BEARISH OLD FORMAT = $800/SQUARE FT NEW FORMAT = $1,300 SQ FT
1• All brands are #1 or #2 in their primary category •1 HAIN is not an organic company!
2• Compact and simplified product offering, fitting into a •2 Only 30% of their brands are actually organic clear organic health food niche •3 Growth plan is clearly dependent on acquisitions, 3• Simplified business More revenue than Hain because their base business as a whole is not growing Celestial with 85% less brands to support current valuations
4• Although trading at a high valuation there are many •4 Furthermore, we do not consider HAIN a takeover catalysts including fundamentally strong performance target, imagine successfully rolling these brands into and M&A that will propel further growth an organization like GIS, KRFT, K or MDLZ…very unlikely 5• Strong management and board with a track record and plan for success
HEDGEYE 90 FINANCIALS COGS COGS AS A % OF SALES
$800 68% ― WWAV has
67.1% effectively managed $700 66.6% 67% their COGS line as 66.4% 66.2% 66.0% they grow the 65.8% $600 65.8% 65.7% 65.7% 65.7% 66% business
64.9% 65.0% 64.8% 64.7% $500 64.5% 65% ― Notching it lower on 64.1% a YoY basis $400 63.6% 64% consistently, after seeing a large $300 63% acceleration going into FY14 $200 62% ― In the future we $100 61% predict there will be
$0 60% a deceleration of Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 COGS as a % of FY13 FY13 FY13 FY13 FY14 FY14 FY14 FY14 FY15 FY15E FY15E FY15E FY16E FY16E FY16E FY16E FY17E sales COGS COGS as a % of Sales
Data Source: Consensus Metrix. HEDGEYE 92 GROSS MARGIN
$400 37% 36.4% ― The yearly ski $350 35.9% 36% 35.5% slope is showing 35.3% 35.1% $300 34.9% 35.0% signs of 35% 34.4% steepening 34.2% 34.3% 34.3% 34.2% $250 34.0% 33.8% 34% 33.5% ― As management 33.4% $200 has been 32.9% 33% effectively $150 managing their 32% $100 supply chain, they are realizing 31% $50 the benefits
$0 30% We are predicting Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 ― FY13 FY13 FY13 FY13 FY14 FY14 FY14 FY14 FY15 FY15E FY15E FY15E FY16E FY16E FY16E FY16E FY17E strong gross Gross Profit % Margin margin trends
Data Source: Consensus Metrix. HEDGEYE 93 SG&A
SG&A AS A % OF SALES ― Exactly what you want to see here $300 30%
28.9% ― SG&A as a % of 29% $250 28.1% sales is coming 28% down nicely,
$200 27.0% closer to industry 27% averages in the 26.1% 25.6% $150 25.5% 26% high teens 25.3% 25.1% 25.0% 24.9% 24.9% 24.6% 25% ― Expect to see $100 24.4% 24.1% management 23.7% 24% 23.1% integrating their $50 22.9% 23% acquired businesses and $0 22% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 streamlining FY13 FY13 FY13 FY13 FY14 FY14 FY14 FY14 FY15 FY15E FY15E FY15E FY16E FY16E FY16E FY16E FY17E costs SG&A SG&A as a % of Sales
Data Source: Consensus Metrix. HEDGEYE 94 OPERATING MARGIN (EBIT)
$140 15% ― Management doing what they 14% $120 do 13% ― Filling up
$100 12% capacity and 11.2% 11.2% improving their 10.6% 10.6% 11% $80 fixed asset 10.1% 9.6% 9.7% 10% leverage 9.3% 9.3% 9.1% $60 9.0% ― WWAV will begin 8.5% 8.6% 9% 8.2% to see margin 7.8% 7.8% $40 7.5% 8% acceleration as they integrate 7% $20 Vega, and get 6% Earthbound on
$0 5% SAP among other Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 FY13 FY13 FY13 FY13 FY14 FY14 FY14 FY14 FY15 FY15E FY15E FY15E FY16E FY16E FY16E FY16E FY17E things
EBIT % Margin
Data Source: Consensus Metrix. HEDGEYE 95 EBITDA
$180 20%
$160 18% ― Increasing on a YoY basis $140 16% consistently 14.7% $120 14.3% 14.2% 13.7% 13.8% 13.3% 14% ― Again speaks to 12.8% 12.8% 12.5% $100 12.1% 12.3% managements 11.7% 11.7% 12% 11.1% 11.0% 11.2% operating 10.7% $80 discipline 10% $60
8% $40
$20 6%
$0 4% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 FY13 FY13 FY13 FY13 FY14 FY14 FY14 FY14 FY15 FY15E FY15E FY15E FY16E FY16E FY16E FY16E FY17E
EBITDA % Margin
Data Source: Consensus Metrix. HEDGEYE 96 VALUATION PUBLIC TRADING COMPS
Diluted Shares Equity Enterprise LTM EBIT EBITDA EV/ NTM EV/ Company Name Price Outstanding Value Value Sales Margin Margin EBIT EBITDA WhiteWave Foods $48.98 175 $8,577 $10,074 $3,518 8.6% 11.8% 32.97x 19.02x General Mills $55.25 596 $32,929 $43,645 $17,615 15.2% 18.5% 16.34x 12.08x Hain $65.26 103 $6,696 $7,474 $2,574 9.1% 11.3% 31.82x 16.97x Kraft $85.46 590 $50,438 $59,292 $18,195 17.4% 19.6% 18.69x 15.70x Monster Beverage $132.25 170 $22,503 $21,493 $2,556 23.7% 24.7% 35.46x 19.75x
Mean 14.8% 17.2% 27.1x 16.7x Median 15.2% 18.5% 31.8x 17.0x
Data Source: FactSet. Data gathered on 6/17/15. HEDGEYE 98 VALUATION
WhiteWave Foods Company $ 48.98 EARNINGS AND VALUATION SUMMARY SUMMARY FINANCIALS VALUATION FY ends Dec. NTM 2015E 2016E 2017E NTM FY2015E FY2016E Stock Price $ 48.98 Hedgeye EPS $1.25 $1.15 $1.37 $1.60 Consensus (mm) $3,437.0 $3,818.4 $4,172.4 Shares Outstanding 175.12 % Chg YoY 15% 19.0% 17.0% % Chg YoY 11.1% 9.3% Market Cap $ 8,577.2 Consensus $1.23 $1.13 $1.35 $1.57 EBITDA $525.60 $488.1 $569.3 Net Debt $ 1,497.1 % Chg YoY 13.4% 18.9% 16.5% % Chg YoY 17.8% 16.6% Enterprise Value $ 10,074 Variance % 1.4% 1.5% 2.0% EBITDA Margin* 15.3% 12.8% 13.6% P/E 38.2X 41.6X 34.8X 29.6X EV/EBITDA 19.2X 20.6X 17.7X NTM EBITDA $ 525.6 NTM EV/EBITDA 19.2x INVESTMENT POSITIVES INVESTMENT NEGATIVES NTM EPS $ 1.23 1) #1 or #2 Brands in all the categories they compete in 1) Commodity/FX price risk NTM P/E 39.7x 2) On-trend categories 2) Overpaying for acquisitions 3) Strong management team 3) Increased competition 1X Turn $ 3.00 4) Great M&A prospects in the pipeline 4) Valuation Upside/Downside 6.1%
Source: Factset, Company Filings & Hedgeye ©HEDGEYE RISKMANAGEMENT *Consensus EBITDA Margin
Data Source: Hedgeye. FactSet. HEDGEYE 99 VALUATION
2016 EV/EBITDA Multiple 18.50x 19.15x 19.15x 19.16x 19.16x 19.17x 19.32x 19.47x 19.62x 19.77x 19.92x 20.07x $526 $47.02 $48.96 $48.98 $48.99 $49.01 $49.02 $49.47 $49.92 $50.37 $50.82 $51.27 $51.72 $536 $48.13 $50.11 $50.13 $50.14 $50.16 $50.17 $50.63 $51.09 $51.55 $52.01 $52.47 $52.93 $547 $49.26 $51.28 $51.30 $51.32 $51.33 $51.35 $51.82 $52.28 $52.75 $53.22 $53.69 $54.16 $558 $50.42 $52.48 $52.50 $52.51 $52.53 $52.54 $53.02 $53.50 $53.98 $54.46 $54.93 $55.41 $569 $51.60 $53.70 $53.72 $53.73 $53.75 $53.77 $54.25 $54.74 $55.23 $55.72 $56.20 $56.69 EBITDA $598 $54.60 $56.81 $56.83 $56.85 $56.86 $56.88 $57.39 $57.91 $58.42 $58.93 $59.44 $59.95 $628 $57.76 $60.08 $60.10 $60.12 $60.14 $60.15 $60.69 $61.23 $61.77 $62.30 $62.84 $63.38 $659 $61.08 $63.51 $63.53 $63.55 $63.57 $63.59 $64.15 $64.72 $65.28 $65.85 $66.41 $66.98 $692 $64.56 $67.12 $67.14 $67.16 $67.18 $67.20 $67.79 $68.38 $68.97 $69.57 $70.16 $70.75
BEAR BASE BULL -4% 10% 44%
Data Source: Hedgeye. FactSet. HEDGEYE 100 WHAT WE THINK ABOUT THE POTENTIAL RISKS BOTTOM LINE IS THESE “ISSUES” ARE NOTHING THAT MANAGEMENT CAN’T HANDLE, BUT THE RISKS REMAIN Competition FOREX Commodities • Increased competition from • Foreign exchange rates will • WWAV’s growth is the driver branded and Private Label continue to affect the business of this concern as they expand internationally • This is a real concern of ours • Availability of almonds, in the long-term, obviously • Although this will affect organic milk and organic with faster growing reported numbers it’s important salad remain concerns as the to look at constant currency to categories, new entrants are business grows get a read on the business going to emerge
Capacity M&A • With a business growing this fast, • Potential of an M&A deal especially the European business gone awry in the low 20%’s it can be tough to keep up with capacity and plan • Not very likely give the appropriately methodical nature in which • Management has announced WWAV acquires companies, $325-$350 million in capex for and the past experience FY15 to combat this issue. management has
Data Source: HEDGEYE 101 GAME PLAN FOR YOUR INVESTMENT
1-3 YEAR TIME TABLE
We suggest a long term play on this stock, as minor bumps in the road could cause price drops given the current high expectations / valuation. But do not let your mind stray from the long term prospect this company provides you. We at Hedgeye strongly believe this company will either double in size (via organic growth / sizeable acquisitions) or be acquired in the next 2-3 years. Both would be great from a return perspective.
HEDGEYE 102 THANK YOU, FOR MORE INFORMATION CONTACT: [email protected] (203) 562-6500
HEDGEYE 103