Weekly Update Monday, June 18, 2018

Stocks End Down As Investors Look Past U.S.-China Trade Disputes.

U.S. stocks closed lower on Friday as investors looked past signs of escalating Mary Burke

Partner Washington-Beijing trade tensions, an issue that is seen as a major potential headwind. President Donald Trump approved tariffs on about $50 billion of 312.348.7081 Chinese goods, marking the latest escalation in the trade dispute. [email protected]

The Dow Jones Industrial Average decreased 0.9% on the week, William Whipple finishing at 25,090. Partner 312.348.7076 The S&P 500 remained unchanged on the week, finishing at 2,779. [email protected]

The NASDAQ Composite gained 1.3% on the week, finishing at 7,746.

Lakeshore Food Advisors, LLC

Yield on the 10-year Treasury declined one basis during the week, 20 North Wacker Drive ending at 2.92%. Suite 1701 Chicago, IL 60606 Crude oil decreased 2.3% on the week, ending at $64.24 per barrel.

Corn decreased 4.5% on the week, ending at $3.61 per bushel.

NASDAQ Highs: BJ's Restaurants Inc., Cal-Maine Foods, Inc., Central Garden & Pet Company, The Cheesecake Factory, Coffee Holding Company Inc., Dunkin’ Donuts, John B. Sanfilippo & Son Inc., Noodles & Company Lows: Papa John's Pizza, Rocky Mountain Chocolate Factory

NYSE Highs: Boston Beer Company, Brinker International, CF Industries, Chipotle Mexican Grill Inc., Diageo plc, Domino's Pizza, The Mosaic Company, Pinnacle Foods Inc., Shake Shack, Sysco Corporation, Zoetis Inc., Lows: Coca-Cola FEMSA

Featured Stocks of the Week: Treehouse Foods Inc. (NYSE: THS) 10-Year History Pilgrim’s Pride Corp. (NASDAQ: PPC) 9-Year History 200 40 35 150 30 25 100 20 15 50 10 5 0 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

The Lakeshore Food Chain

12/31/2017 12/31/2016

Price Price as Compared to Enterprise Value to Total Debt Price Compared to 52-Week Range YE: Forward LTM: to LTM Company Name 6/8/18 6/1/18 High Low 2017 2016 P/E Revenue EBITDA EBITDA

Dow Jones Industrial Average 25,317 2.8% 26,617 21,236 2.4% 28.1% 24.0x S&P 500 2,779 1.6% 2,873 2,410 3.9% 24.1% 17.1 NASDAQ Composite Index 7,646 1.2% 7,689 6,089 10.8% 42.0% NA Sector Average: 5.7% 31.4%

AGRICULTURAL LAND HOLDINGS

Farmland Partners Inc. $8.70 1.9% $9.89 $7.15 0.2% (22.0%) 79.1x 21.67x 31.4x 14.8x Gladstone Land Corporation 12.72 (0.3%) 14.29 11.10 (5.3%) 13.2% NA 18.23 26.8 16.5 Limoneira Company 25.06 1.5% 26.06 19.62 11.9% 16.5% 38.2 3.93 24.4 5.8 Sector Average: 2.3% 2.5% 19.1x 14.61x 27.5x 12.4x 25316.50 INPUTS

American Vanguard Corporation $23.75 7.7% $24.00 $17.00 20.9% 24.0% 28.1x 2.03x 15.2x 1.7x CF Industries Holdings, Inc. 43.18 6.7% 45.00 26.51 1.5% 37.2% 41.4 4.17 14.0 3.9 DowDuPont Inc. 69.49 5.0% 77.08 61.27 (2.4%) NA 16.0 2.64 13.4 2.6 FMC Corporation 88.64 0.4% 98.70 71.43 (6.4%) 56.7% 14.0 4.27 16.7 3.7 Intrepid Potash, Inc. 4.69 2.9% 5.31 2.03 (1.5%) 125.5% 34.0 5.19 19.4 1.9 The Mosaic Company 29.46 6.5% 29.63 19.23 14.8% 0.4% 18.2 2.07 11.6 3.8 * Nutrien Ltd. 52.53 3.4% 54.04 42.64 NA NA 20.5 6.71 29.4 7.3 S&W Seed Company 3.35 (4.3%) 4.40 2.90 (14.1%) (27.2%) NM 1.63 61.8 20.4 The Scotts Miracle-Gro Company 87.04 5.5% 110.12 76.60 (18.6%) (8.9%) 20.2 2.73 14.9 4.9 Zoetis Inc. 86.78 1.6% 87.39 59.50 20.5% 62.1% 27.8 8.33 21.9 2.4 Sector Average: 0.1% 33.3% 24.5x 3.61x 17.4x 3.2x

AGRICULTURAL EQUIPMENT

* Ag Growth International Inc. $44.62 0.0% $46.78 $36.32 4.9% 14.1% 18.7x 1.87x 13.3x 5.1x AGCO Corporation 63.68 (1.0%) 75.95 58.12 (10.8%) 10.1% 15.6 0.80 8.9 2.9 Art's-Way Manufacturing Co., Inc. 2.75 (1.8%) 5.45 2.00 (7.8%) (19.1%) NA 0.75 NM NM * Buhler Industries Inc. 2.99 7.4% 3.77 2.78 (13.7%) (9.4%) NA 0.46 41.5 16.1 CNH Industrial N.V. 11.49 (2.2%) 15.65 10.87 (14.3%) 32.2% 15.6 1.39 12.7 8.7 Deere & Company 157.12 2.4% 175.26 112.87 0.4% 52.5% 14.8 2.72 16.8 7.8 Lindsay Corporation 100.97 0.7% 103.03 83.57 14.5% 35.3% 22.4 2.04 18.5 2.0 Titan Machinery Inc. 17.49 1.6% 25.09 11.68 (17.4%) 20.0% 38.0 0.62 18.0 10.0 Sector Average: (5.5%) 17.0% 20.8x 1.33x 18.5x 7.5x

AGRIBUSINESS

* AGT Food and Ingredients Inc. $12.08 (1.3%) $22.34 $11.38 (24.7%) (55.7%) 23.4x 0.63x 24.5x 12.6x The Andersons, Inc. 33.90 1.0% 38.05 29.60 8.8% (24.2%) 17.2 0.55 12.2 7.2 Archer-Daniels-Midland Company 44.85 2.4% 46.25 38.59 11.9% (1.8%) 14.0 0.54 11.5 3.6 Bunge Limited 69.17 (1.0%) 83.20 63.87 3.1% (4.2%) 10.9 0.38 17.4 7.1 Darling Ingredients Inc. 18.99 1.8% 19.50 15.44 4.7% 47.1% 27.7 1.33 8.5 4.0 * Gruma, S.A.B. de C.V. 11.03 0.6% 13.52 10.05 (13.2%) (13.7%) 15.2 1.61 10.0 1.8 Ingredion Incorporated 111.96 0.8% 146.28 107.77 (19.9%) (10.4%) 13.8 1.60 8.6 1.5 Landec Corporation 14.25 0.4% 14.95 11.42 13.1% 3.3% 22.4 0.83 16.8 2.2 * Olam International Limited 1.66 1.1% 1.87 1.42 9.0% 21.4% 14.1 0.64 12.9 9.4 Sector Average: (0.8%) (4.2%) 17.6x 0.90x 13.6x 5.5x

DIVERSIFIED FOODS

B&G Foods, Inc. $29.40 3.9% $41.00 $22.00 (16.4%) (32.9%) 14.1x 2.33x 12.0x 6.4x Campbell Soup Company 34.05 2.3% 57.47 32.63 (29.2%) (43.7%) 13.7 2.45 10.0 5.0 Conagra Brands, Inc. 37.74 2.2% 39.53 32.16 0.2% (4.6%) 16.8 2.36 12.4 2.6 General Mills, Inc. 42.91 0.7% 60.69 41.01 (27.6%) (30.5%) 13.9 2.25 10.8 3.0 The Hain Celestial Group, Inc. 28.30 9.3% 45.61 25.41 (33.2%) (27.5%) 22.5 1.25 14.3 2.9 The J. M. Smucker Company 102.52 (3.5%) 133.38 96.13 (17.5%) (19.9%) 12.1 2.21 9.7 2.9 Kellogg Company 63.71 (0.2%) 74.28 56.40 (6.3%) (13.6%) 14.4 2.33 10.1 2.9 The Kraft Heinz Company 58.47 1.4% 92.54 54.11 (24.8%) (33.0%) 15.4 3.89 12.3 3.9 Lancaster Colony Corporation 130.45 3.8% 135.86 113.34 1.0% (7.7%) 25.3 2.82 17.0 0.0 Mondelez International, Inc. 39.78 0.6% 46.54 37.42 (7.1%) (10.3%) 15.9 2.94 14.2 3.9 * Nestlé S.A. 74.50 (1.9%) 87.62 74.03 (13.4%) 3.6% 18.5 2.71 13.1 1.5 Pinnacle Foods Inc. 64.49 1.1% 64.77 52.25 8.4% 20.7% 21.8 3.28 15.7 4.2 Post Holdings, Inc. 82.00 5.5% 88.93 70.66 3.5% 2.0% 16.3 2.23 12.2 7.2 SunOpta Inc. 8.08 (2.0%) 10.44 6.17 4.6% 13.4% NM 0.99 22.3 8.3 TreeHouse Foods, Inc. 49.61 2.1% 87.22 36.35 0.3% (31.3%) 22.1 0.83 9.4 4.6 Unilever N.V. 55.77 (0.1%) 61.52 49.55 (1.1%) 35.1% 20.1 2.79 14.8 2.4 Sector Average: (9.9%) (10.6%) 17.5x 2.35x 12.5x 3.6x

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Price Price as Compared to Enterprise Value to Total Debt Price Compared to 52-Week Range YE: Forward LTM: to LTM Company Name 6/8/18 6/1/18 High Low 2017 2016 P/E Revenue EBITDA EBITDA

ETHANOL

Green Plains Inc. $20.45 (1.7%) $23.70 $15.60 21.4% (26.6%) 94.4x 0.56x 16.4x 10.7x Pacific Ethanol, Inc. 3.00 (7.7%) 7.50 2.75 (34.1%) (68.4%) NM 0.21 17.5 12.5 Renewable Energy Group, Inc. 18.10 2.5% 18.15 9.50 53.4% 86.6% 3.3 0.39 4.0 1.4 Sector Average: 13.6% (2.8%) 3.33x 0.38x 10.2x 6.1x

FRUIT & VEGETABLE

Calavo Growers, Inc. $85.10 (4.9%) $98.85 $65.75 0.8% 38.6% 26.6x 1.39x 20.6x 0.3x Fresh Del Monte Produce Inc. 43.48 (2.6%) 52.64 43.02 (8.8%) (28.3%) 13.4 0.71 12.0 3.2 Lamb Weston Holdings, Inc. 65.68 2.4% 68.70 42.58 16.4% 73.5% 22.4 3.60 15.1 3.4 Seneca Foods Corporation 27.05 0.9% 36.60 26.45 (12.0%) (32.5%) NA 0.54 16.9 10.9 * Total Produce plc 2.59 (0.1%) 3.02 2.35 (15.8%) 24.7% 18.0 0.28 9.9 2.3 Sector Average: (3.9%) 15.2% 20.1x 1.30x 14.9x 2.3x

PROTEIN

Cal-Maine Foods, Inc. $49.35 5.4% $50.45 $33.40 11.0% 11.7% 16.3x 1.59x 19.1x 0.1x Hormel Foods Corporation 36.21 1.2% 38.00 29.75 (0.5%) 4.0% 19.4 2.11 14.4 0.6 Industrias Bachoco, S.A.B. de C.V. 54.20 (2.0%) 67.61 53.00 (5.4%) 10.6% 12.0 0.61 5.0 0.7 *JBS S.A. 2.34 (2.5%) 2.85 1.57 (20.9%) (33.1%) 6.2 0.43 6.0 4.7 Nathan's Famous, Inc. 88.70 1.3% 100.90 52.90 17.5% 36.7% NA 4.40 16.1 5.1 Pilgrim's Pride Corporation 20.27 4.1% 38.39 19.25 (34.7%) 6.7% 6.6 0.66 5.2 2.0 Sanderson Farms, Inc. 104.01 6.4% 176.43 96.80 (25.1%) 10.4% 17.9 0.60 4.4 0.0 Seaboard Corporation 3,811.50 (6.4%) 4,690.00 3,725.50 (13.6%) (3.6%) NA 0.64 10.4 1.9 Tyson Foods, Inc. 70.75 3.9% 84.65 58.36 (12.7%) 14.7% 10.8 0.90 8.8 2.5 Sector Average: (9.4%) 6.5% 12.7x 1.33x 8.8x 2.0x

BAKING & INGREDIENTS

* ARYZTA AG $15.40 (1.7%) $39.43 $14.25 (60.7%) (64.7%) 14.9x 0.76x 7.6x 6.4x Balchem Corporation 99.21 1.4% 99.93 70.23 23.1% 18.2% 33.3 5.42 22.7 1.4 Flowers Foods, Inc. 20.79 4.9% 22.82 16.80 7.7% 4.1% 18.9 1.32 11.6 1.9 *Grupo Bimbo, S.A.B. de C.V. 1.74 (7.4%) 2.33 1.70 (21.5%) (23.7%) 15.6 0.96 8.2 2.9 J&J Snack Foods Corp. 147.28 3.0% 157.33 124.10 (3.0%) 10.4% 29.4 2.30 16.0 0.0 * Kerry Group plc 106.14 1.8% 111.63 86.66 (5.5%) 48.1% 26.0 2.71 20.4 2.1 McCormick & Company, Incorporated 103.48 3.0% 111.46 90.25 1.5% 10.9% 20.8 3.69 18.6 5.3 *Tate & Lyle plc 9.01 (0.4%) 10.00 7.00 (5.2%) 3.2% 13.6 1.29 7.5 1.3 Sector Average: (7.9%) 0.8% 21.6x 2.31x 14.1x 2.7x

CANDY, NUTS, & SNACKS

Bridgford Foods Corporation $14.51 (3.9%) $21.55 $11.05 15.6% 27.6% NA 0.68x 9.6x 0.0x The Hershey Company 91.77 2.0% 115.82 89.10 (19.2%) (11.3%) 16.8 3.07 12.4 2.4 John B. Sanfilippo & Son, Inc. 68.61 0.8% 71.10 54.32 8.5% (2.5%) 16.9 0.99 12.5 1.4 Rocky Mountain Chocolate Factory, Inc. 10.87 (3.6%) 12.60 10.78 (7.7%) 6.7% NA 1.59 9.3 0.4 Tootsie Roll Industries, Inc. 29.20 0.3% 37.48 27.45 (17.4%) (22.1%) NA 3.71 19.8 0.1 Sector Average: (4.0%) (0.3%) 16.8x 2.0x 12.7x 0.9x

PET FOOD AND PRODUCTS

Central Garden & Pet Company $42.75 5.2% $43.30 $30.26 9.8% 29.2% 21.4x 1.26x 12.9x 3.3x Freshpet, Inc. 23.30 4.3% 24.45 14.10 23.0% 129.6% NM 4.96 83.1 0.6 Sector Average: 9.8% 79.4% 21.4x 3.11x 12.9x 2.0x

WINE & BEVERAGE

The Boston Beer Company, Inc. $259.15 1.6% $263.35 $128.70 35.6% 52.6% 35.2x 3.33x 17.0x 0.0x Brown-Forman Corporation 52.97 (4.7%) 59.58 37.71 (3.6%) 47.4% 29.1 8.98 26.5 2.3 The Coca-Cola Company 43.95 1.9% 48.62 41.45 (4.2%) 6.0% 20.8 6.39 18.0 4.5 Constellation Brands, Inc. 227.28 2.0% 236.62 176.21 (0.6%) 48.2% 23.4 7.07 16.4 3.7 * Cott Corporation 15.97 (1.3%) 17.55 13.63 (4.5%) 41.1% 43.1 1.45 12.1 4.7 Craft Brew Alliance, Inc. 19.70 0.5% 20.40 16.50 2.6% 16.6% 46.3 1.85 20.4 0.6 *Diageo plc 36.51 0.7% 37.34 29.94 (0.9%) 40.1% 46.3 1.85 20.4 0.6 Crimson Wine Group, Ltd. 9.31 0.6% 11.35 8.97 (12.7%) (0.6%) NA 3.62 30.0 3.3 Dr Pepper Snapple Group, Inc. 120.52 0.5% 126.65 83.23 24.2% 32.9% 23.0 3.87 17.1 2.9 Monster Beverage Corporation 55.48 7.7% 70.22 47.61 (12.3%) 25.1% 31.6 8.66 23.4 0.0 Jamba, Inc. 9.95 (2.3%) 10.71 6.76 23.4% (3.4%) NA 2.05 41.0 0.0 Jones Soda Co. 0.28 0.0% 0.53 0.25 (23.3%) (37.8%) NA 0.93 NM NM National Beverage Corp. 100.04 6.8% 129.82 83.78 2.7% 95.8% 26.4 4.77 21.2 0.0 PepsiCo, Inc. 102.49 2.2% 122.51 95.94 (14.5%) (2.0%) 17.9 2.63 13.3 3.4 Starbucks Corporation 56.60 (0.5%) 62.48 52.58 (1.4%) 1.9% 21.9 3.51 15.2 1.3 Willamette Valley Vineyards, Inc. 8.17 (0.8%) 8.86 7.70 (1.0%) 2.0% NA 2.68 11.1 1.7 Sector Average: 0.6% 22.9% 30.4x 3.98x 20.2x 1.9x

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Price Price as Compared to Enterprise Value to Total Debt Price Compared to 52-Week Range YE: Forward LTM: to LTM Company Name 6/8/18 6/1/18 High Low 2017 2016 P/E Revenue EBITDA EBITDA

DAIRY

* Danone SA $75.63 (1.7%) $84.83 $73.53 (10.0%) 19.0% 17.0x 2.31x 12.5x 4.4x Dean Foods Company 9.71 1.4% 18.71 8.14 (16.0%) (55.4%) 14.7 0.23 5.6 2.9 Lifeway Foods, Inc. 6.48 22.5% 10.75 4.76 (19.0%) (43.7%) NA 0.91 41.1 2.4 *Saputo Inc. 32.25 (6.7%) 36.72 30.15 (10.5%) (8.8%) 21.2 1.53 14.1 1.3 Sector Average: (13.9%) (22.2%) 17.6x 1.25x 18.3x 2.7x

WHOLESALE, FOOD SERVICE, & DISTRIBUTION

The Chefs' Warehouse, Inc. $26.45 (4.7%) $30.32 $11.85 29.0% 67.4% 34.4x 0.77x 16.6x 5.1x Core-Mark Holding Company, Inc. 20.49 5.4% 38.20 17.10 (35.1%) (52.4%) 16.9 0.11 14.3 5.0 Performance Food Group Company 35.30 (1.1%) 36.55 25.40 6.6% 47.1% 21.2 0.28 13.0 3.3 SpartanNash Company 25.19 (3.0%) 31.59 16.32 (5.6%) (36.3%) 10.6 0.20 7.6 3.5 SUPERVALU INC. 20.45 8.7% 29.12 13.60 (5.3%) (37.4%) 10.6 0.19 5.9 4.4 Sysco Corporation 66.15 1.1% 66.51 48.85 8.9% 19.5% 19.6 0.74 13.8 3.0 United Natural Foods, Inc. 39.85 (14.0%) 52.69 29.53 (19.1%) (16.5%) 11.7 0.25 7.2 1.4 US Foods Holding Corp. 37.26 2.2% 37.65 25.43 16.7% 35.6% 17.4 0.48 12.2 3.8 Sector Average: (0.5%) 3.4% 17.8x 0.38x 11.3x 3.7x

MASS MERCHANDISE & CLUB STORES

Costco Wholesale Corporation $203.76 3.4% $204.01 $150.00 9.5% 27.3% 27.3x 0.64x 15.0x 1.1x Walmart Inc. 84.36 1.7% 109.98 73.13 (14.6%) 22.0% 17.3 0.57 8.8 1.4 Sector Average: (2.5%) 24.7% 22.3x 0.61x 11.9x 1.3x

DOLLAR STORES

Dollar General Corporation $94.90 6.3% $105.82 $65.97 2.0% 28.1% 15.2x 1.17x 11.4x 1.2x Dollar Tree, Inc. 82.63 1.7% 116.65 65.63 (23.0%) 7.1% 14.4 1.08 9.1 1.9 Sector Average: (10.5%) 17.6% 14.8x 1.12x 10.3x 1.5x

TRADITIONAL RETAIL

* Ahold Delhaize $23.43 2.0% $23.62 $17.31 6.4% 10.8% 13.2x 0.42x 6.4x 2.1x Ingles Markets, Incorporated 28.85 0.2% 37.95 20.75 (16.6%) (40.0%) 10.5 0.36 6.1 3.7 The Kroger Co. 25.36 3.8% 31.45 19.69 (7.6%) (26.5%) 12.2 0.29 7.2 3.2 Village Super Market, Inc. 28.93 (0.6%) 30.31 21.95 26.2% (6.4%) NA 0.24 6.3 0.8 Weis Markets, Inc. 54.00 (2.2%) 57.82 31.26 30.5% (19.2%) NA 0.39 8.2 0.1 Sector Average: 7.8% (16.3%) 12.0x 0.34x 6.8x 2.0x

SPECIALTY RETAIL

Natural Grocers by Vitamin Cottage, Inc. $11.10 (0.7%) $11.73 $4.79 24.3% (6.6%) 42.4x 0.37x 7.1x 1.4x Sprouts Farmers Market, Inc. 21.35 (1.2%) 28.29 17.55 (12.3%) 12.8% 17.3 0.68 9.8 1.5 Sector Average: 6.0% 3.1% 29.9x 0.53x 8.4x 1.4x

TRADITIONAL RESTAURANTS

Brinker International, Inc. $47.90 9.9% $48.17 $29.50 23.3% (3.3%) 13.0x 1.10x 8.2x 3.2x The Cheesecake Factory Incorporated 54.06 3.9% 59.04 38.34 12.2% (9.7%) 19.2 1.09 10.2 0.6 Darden Restaurants, Inc. 91.45 3.3% 100.11 76.27 (4.8%) 25.8% 17.6 1.54 11.8 1.0 Dine Brands Global, Inc. 65.32 4.2% 81.78 36.71 28.8% (15.2%) 11.5 4.09 12.1 6.9 Jack in the Box Inc. 84.78 5.4% 108.55 79.23 (13.6%) (24.1%) 20.2 2.33 10.5 2.9 McDonald's Corporation 168.91 6.1% 178.70 146.84 (1.9%) 38.8% 21.7 7.23 16.1 3.1 The Wendy's Company 17.72 10.1% 17.76 13.57 7.9% 31.1% 30.8 5.20 16.8 7.0 YUM! Brands, Inc. 83.18 1.6% 88.07 70.90 1.9% 31.3% 24.8 6.06 17.8 4.8 Sector Average: 6.7% 9.3% 19.9x 3.58x 12.9x 3.7x

HIGH-GROWTH RESTAURANTS

Bojangles', Inc. $14.85 1.0% $17.35 $11.35 25.8% (20.4%) 20.5x 1.23x 9.7x 2.2x Chipotle Mexican Grill, Inc. 453.38 3.4% 468.04 247.52 56.9% 20.2% 49.1 2.65 25.4 0.0 El Pollo Loco Holdings, Inc. 10.90 2.3% 14.85 9.05 10.1% (11.4%) 15.7 1.23 8.3 1.4 The Habit Restaurants, Inc. 9.85 11.3% 17.45 8.11 3.1% (42.9%) NM 0.64 9.0 0.7 Noodles & Company 9.45 11.2% 9.95 3.35 80.0% 130.5% 204.5 1.00 14.8 2.1 Papa Murphy's Holdings, Inc. 5.51 (0.5%) 6.50 3.50 2.4% 30.6% 17.6 1.76 7.3 3.9 Potbelly Corporation 12.85 (2.7%) 13.75 10.60 4.5% (0.4%) 35.1 0.70 8.7 0.0 Shake Shack Inc. 65.18 8.3% 65.47 30.12 50.9% 82.1% 113.2 4.70 29.6 0.3 Wingstop Inc. 54.41 8.4% 55.86 29.54 39.6% 83.9% 63.9 16.51 42.7 5.3 Zoe's Kitchen, Inc. 9.35 3.5% 17.65 8.59 (44.1%) (61.0%) NM 0.70 11.2 2.4 Sector Average: 22.9% 21.1% 65.0x 3.11x 16.7x 1.8x Notes: * Denotes local currency. Source: Capital IQ. Summary multiples adjusted for extraordinary and non-recurring items; outliers excluded from mean calculation.

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

S&P 500 Dow Jones Industrial Average

3,000 30,000 2,750 27,500 2,500 25,000 2,250 22,500 2,000 20,000 1,750 17,500 1,500 15,000 1,250 12,500 1,000 10,000 750 7,500 500 5,000

Months/ Years Months/ Years

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

10-year Treasury CBOE Market Volatility Index – VIX

6 80

70 5 60 4 50

3 40

30 2 20 1 10

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

120

110

100

90

80

70 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 S&P 500 Inputs & Agribusiness Diversified Foods Protein Baking & Ingredients Grocery

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Food For Thought…

Partner Column PepsiCo's Recent Bare Foods Acquisition seeks to Written By William W. Whipple strengthen the health foods segment of their product portfolio. Health Foods will operate independently although they will Belated Happy Father’s Day to all the DADS! report to Frito-Lay. Healthy Snacks is set to grow at 5.1% through 2025, reaching $32B. Expect further M&A as the Smucker’s Suffering From No Growth in packaged food healthy snacks space is heavily fragmented which makes plus, hydroponic acquisition/industry is struggling. At least consolidation a likely opportunity and the company seeks to margins have held - Smucker continues to be a good cash flow redeploy cash. generator. The stock trades at a forward P/E of 12.1x and PEG of 0.9x. Smucker’s, a victim of the macro challenges faced by PepsiCo shares have retreat over the past several months, packaged food giants - lacks a reason to invest. Where’s the falling from $120, to $96/share. PepsiCo has traded between 16- turnaround? 30x earnings since FY18, averaging 20x earnings. PepsiCo shares are running 18x FY18 earnings vs. 27x peer average.

Significantly Tightening In U.S. Grain Balance Sheet- Pepsi trades at 13x EBITDA, which is again a heavy discount to according to June USDA monthly report - particularly corn and the industry average of ~20x. The company's net/EBIT margins soybeans. The USDA projects YOY ending-stocks declining - of 7.6%/16.4% are well below the industry norm. Pepsi's 25% for corn, 23% for soybeans, and 12% for wheat once again dividend, yields 3.6%! Is PepsiCo’s FY18 earnings multiple of – wow! 18x attractive?

Does this mean the end of the 5-year Bear-Market? Global demand desires U.S. crops! Prices should adjust up! H-E-B Building New H-E-B Brand Snack Manufacturing Plant in Houston because the region is the company’s fastest- growing tortilla market. The plant will produce H-E-B-branded Flowers Foods, The Classic Packaged Food Company, tortilla chips and is expected to open in mid-2019. The plant with great brand awareness caught in the private-label represents a continuation of the retail move to Private-Label movement. Flower’s Nature's Own brand is the #1 loaf bread branded products. brand, Wonder bread has an incredible 98% consumer awareness and Dave's Killer Bread is ranked the #1 organic bread, plus Tastykake snacks is a highly-recognized iconic Bungee Delaying Its Brazilian Sugar Milling IPO, citing Philly brand. Flowers 16% market share is second only to Bimbo current market conditions - the price of sugar is at a three-year Bakeries' Sara Lee at 30%. low, from India’s bumper harvest. Additionally, China announced retaliatory tariffs on the U.S. sugar, which dropped Flowers Foods generates nearly half of its revenue from prices further. branded breads. Top 10 customers account for over half of their sales with Walmart at 20% while Flowers continues to roll-up the organic bread market. Branded growth remains non- John Deere announced a 15% dividend increase at the end of existent. Company EBITDA runs just over 12%. Company pays May – wow. I totally missed Deere earnings – thought the farm a 3.5% dividend! With the largest retail customers wishing to sector was still struggling badly. (John Deere is like CF increase private-label sales, expect more headwinds for Flowers Industries, where I missed the China fertilizer plant closings.) Foods.

Lidl Has Discovered How To Take Share with repeat customers. Their base is 40% from regular grocery, 49% shop at other discounters, 52% shop hyper-markets and 66% do some shopping at warehouse clubs.

Lidl spends 5% on employee wages vs 10+% at other stores plus Lidl’s focus is private-label products. Lidl is not going to plunge the industry into chaos but they are a hard price competitor like Aldi, and appear to have secured a repeat base of business. Have a good week!

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Food For Thought…

Coca-Cola Sees Ways For Sales To Climb In Changing Specialty Foods Sales Surge To Record $140.3B In 2017. The Landscape. The Coca-Cola Company (NYSE: KO) is focusing specialty food sales market segment is growing, with an 11% its efforts on expanding variety in its product offerings as the increase between 2015 and 2017. The segment eclipsed $140.3 demand for sugary beverages decreases. Coca-Cola is billion last year. This trend is spanning all generations, with employing tools such as reformulation, package downsizing, 60% or more of each generation currently buying these clean labels, and brand-related transactions to grow. premium products. Consumers are demanding healthier, more transparent products with clean labels, and firms have certainly One such brand-related transaction success story is Jugos del responded. Valle, a juice company popular in Mexico and Brazil that Coca- Cola acquired in 2006. Since then, Coca-Cola has expanded Legacy companies have acquired smaller, start-up companies Jugos del Valle’s platform to reach all major Latin American that offer more on-trend products. In addition, grocers are markets. Its platform is now worth 5x more than what it was looking to grow in this segment by offering more specialty acquired for, growing by an average of 17% per year. foods and ramping up foodservice and their private label products. Phil Kafarakis, president of the Specialty Foods Another such story is Innocent Drinks, a smoothie drink Association, summed up the industry trend, stating, company acquired by Coca-Cola in 2013. Since then, it has “Consumers of all ages are embracing specialty foods and grown to be the number one smoothie brand in the U.K. and the making purchases everywhere they happen to be.” number one chilled juice brand across all of Europe. Its revenue has tripled since acquisition. Coca-Cola will continue to work to create even more brand-related acquisition success stories as it Low Price Growth Signals Tight Financial Times For diversifies its offerings and caters to a rapidly changing market. Grocery. Food prices increased slightly in May compared to a year ago, but besides price increases of 2.3% for meat, poultry, fish, and eggs, prices fell for everything else. Independent Grocers, Optimistic Despite Slow Growth For 2017. Independent grocers are remaining optimistic despite a This change is negatively affecting retailers in a big way. 0.6% decrease in sales in 2017 compared to 2016. A recent study Retailers will likely want to raise prices to compensate for ever- indicated that dollar sales declines, flat margins, and higher increasing overhead costs but are unable to because of expenses have hurt these grocers. intensifying competition from heavy discounters such as Walmart and Aldi. Growing competition has been the main issue for independent grocers. Large, incumbent firms such as Walmart (NYSE: WMT) Logistical issues related to a recent spike in transportation costs and Kroger (NYSE: KR) offering low prices and growing e- have also hurt retailers. In addition, a potential tariff increase on commerce options have seen success lately. Moreover, the imported aluminum and steel could make manufacturing cans growing popularity of discounters, such as Aldi, has hurt more costly. The combination of all of these factors paints a independent grocers. Lastly, there’s Amazon (NASDAQ: rather pessimistic view of the future for grocery retailers, and AMZN), who owns 18% of the online grocery market with its innovations will likely need to be employed to turn things acquisition of Whole Foods. around going forward.

Independent grocers can perhaps best stay afloat by focusing on carefully managing inventory, product assortment and Senate Farm Bill Proposal Passes In Committee. The Senate margins, keeping inventory turnover high, and minimizing Agriculture Committee overwhelmingly voted to approve an shrinkage. Additionally, future growth for these grocers can be updated farm bill in a 21-1 vote. The bill is more or less a achieved by striving to stand out as eat-in destinations, as well continuation of the current farm bill, which was passed in 2014. as focusing on offering high customer care. This helped the bill be approved rather seamlessly, compared to the House’s farm bill which failed last month. Upon questioning about recent industry changes, president and CEO of NGA Peter Larkin commented, “…Independent grocers The Senate proposal mandates funding for two organics have faced industry shifts and challenges in the past and have programs: the Organic Certification Cost Share Program and the proven resilient. They are entrepreneurs of the industry and Organic Agriculture Research and Extension Initiative. In have the ability to experiment and adjust as needed to meet addition, the bill legalizes hemp as an agriculture product, their shoppers’ needs.” which should create a lucrative new market for the industry.

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Heard on the Street…

Albertsons’ Rite Aid Purchase Facing Push Back. After a bid SuperValu Proposes Corporate Structure Change. SuperValu from Albertsons to purchase Rite Aid was unanimously Corp. (NYSE: SVU) most recently announced it desires to approved by boards at both companies, Rite Aid has seen reorganize as a holding company in order to more effectively shareholders push back against the agreement as they want a operate its wholesale and retail businesses separately. higher sale price. The root of the pushback is the claim that the Eventually, the company’s intention includes selling off the pharmacy benefit manager, EnvisionRx, makes Rite Aid more retail businesses and other assets. This will allow the company valuable than Albertsons. If Rite Aid shareholders are able to to better segregate liabilities for its retail and wholesale gain traction with their pushback, they may be able to pressure business, allowing the company more strategic and financial Albertsons to raise its offer to close the deal. flexibility. Overall, this will generate an estimated $300 million tax benefit over the next 15 years. This move is likely to do little to appease the company’s activist investor, Blackwells Capital, IMCD To Acquire E.T. Horn. IMCD, distributor of specialty who recently proposed six nominees for the company’s board chemicals and food ingredients, has agreed to acquire 100% of of directors. the outstanding shares of E.T. Horn Co. based in La Mirada, California. IMCD, based in the Netherlands, will pay for E.T. Horn Co. from available cash and existing facilities. E.T. Horn Lakeside Foods Agree To Acquire Vegetable Maker. Lakeside Co. is a specialty chemicals distributor focused on human food Foods, a supplier of frozen and canned foods, food service and and nutrition as well as coatings, construction, plastics, industrial segments, has reached an agreement to acquire Good personal care, animal nutrition, nutraceuticals, and other Eats Food Co. Good Eats Food Co. is based out of Fayetteville, specialties with revenues of $267 million for 2017. The company AR, and manufacturers canned beans under the Ser!ous Bean has about 200 employees and primarily supplies the West and Co. brand and frozen vegetable products under the Ruthie’s Southwest regions of the United States. “Horn is a leading Twisted Harvest brand. Financial details of the transaction were specialty distributor in the U.S. with an excellent reputation,” not disclosed. This is the second transaction this Spring for said Marcus Jordan, president of IMCD Americas. “There is a Lakeside, which acquired Riverside Foods, a WI-based very good fit between Horn and our current U.S. organization, producer of cheese appetizer, specialty frozen vegetable, and and we are convinced that we can jointly offer exciting seafood products for the food service industry. Lakeside Foods opportunities to our staff, suppliers and customers. Our is a strategic fit for Good Eats Food as Lakeside has sourcing, combined businesses are excellently positioned to achieve manufacturing, product development, and logistics experience, accelerated growth on a national U.S. basis through our which allows Good Eats to focus more on trends, consumer specialist market focused teams.” insights, and the development of new innovative products.

Kroger To Pull Out Of Raleigh-Durham Market. The Quiznos Bought By Investment Firm. Investment firm High Cincinnati-based supermarket is set to close all 14 stores in the Bluff Capital Partners acquired QCE, LLC, parent company of Raleigh-Durham area. Kroger Mid-Atlantic has said that they Quiznos toasted sandwich chain. Financial terms of transaction plan to sell all 14 stores, with 10 stores already under contract: weren’t disclosed. Following the deal, Susan Lintonsmith will one store to Food Lion, one store to Crunch Fitness, and eight continue as CEO and president under the investment firm based stores to Harris Teeter “After an evaluation of the market for a in San Diego, California. Last year, as the company closed more time period, we have decided to close our stores in the highly than 100 units, U.S. systemwide sales fell to $148.8 million in competitive Raleigh-Durham market. While we have had some fiscal 2017, down from $195.2 million in 2016. Today, Quiznos success, we have not been able to grow our business the way we has approximately 800 locations in 32 countries. High Bluff would like in this market,” Kroger Mid-Atlantic President Jerry Capital Partners specialize in the acquisition of consumer-facing Clontz said. The closings will affect about 1,500 employees, brands and companies that present transformed opportunities. more than half of whom are part-time. “We’re making every Operating partner for High Bluff Capital Partners, Gerry Lopez, effort to assist our associates in finding employment,” Clontz stated, “Quiznos is an iconic brand with strong awareness and stated. “We will offer job fairs and job placement services to attractive upside in the sandwich segment,” and, “We are associates. Our associates also have access to our employee excited about the acquisition. We have the commitment, assistance programs to help them manage through this industry knowledge and flexible capital to build on recent process.” The 14 stores are slated to close in August. successes and drive future, sustainable growth.”

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M&A U.S. M&A Activity Since 2016 ($ in billions) $500 3,700

450 3,600 400 3,500 350 300 3,400 250 3,300

200 3,200 150 3,100 100 Number of Transactions of Number Aggregate Transaction Value Transaction Aggregate 50 3,000 0 2,900

Aggregate Transaction Value Number of Transactions Recent U.S. Food & Agribusiness M&A Activity ($ in millions)

Enterprise Enterprise Value / Date Target Acquirer Value Revenue EBITDA Target Description Tenth and Blake Beer Company (Molson Top Shelf Beverages, Inc. produces kombucha from whole leaf green tea, ginger, organic evaporated 6/6/2018 Top Shelf Beverages, Inc. n/a n/a n/a Coors Brewing) cane juice, and live kombucha cultures. Molson Coors Brewing Company 6/6/2018 Bhakti Chai LLC n/a n/a n/a Bhakti Chai LLC produces and sells concentrates, ready-to-drinks, and artisan teas. (NYSE:TAP)

6/5/2018 The Chill Group Inc. Life On Earth, Inc. (OTCPK:LFER) n/a n/a 11.00x The Chill Group Inc. manufactures non-alcoholic beverages.

Tecumseh Poultry, LLC, doing business as MBA Poultry LLC, produces and processes chicken in the 6/4/2018 Tecumseh Poultry, LLC Tyson Foods, Inc. (NYSE:TSN) n/a n/a n/a United States.

6/1/2018 New England Confectionery Company, Inc. Round Hill Investments, LLC $17.3 n/a n/a New England Confectionery Company, Inc. manufactures and markets confectionery products.

5/31/2018 Great Life Petfood, LLC Barkstrong, LLC n/a n/a n/a Great Life Petfood, LLC manufactures pet food.

5/30/2018 Infused Edibles LLC Cannabis Consortium, Inc. 4.3 n/a n/a Infused Edibles LLC produces candy.

5/29/2018 Vetscience LLC Manna Pro Products, LLC n/a n/a 12.0 Vetscience LLC produces organic and natural food supplements and treats for dogs and cats.

5/29/2018 Wild Calling Pet Foods, LLC Barkstrong, LLC n/a n/a n/a Wild Calling Pet Foods, LLC produces and sells pet food.

5/29/2018 Manna Pro Products, LLC Morgan Stanley Private Equity 330.0 n/a 11.0 Manna Pro Products, LLC manufactures and markets animal feeds for animal health and nutrition.

5/29/2018 Pret A Manger JAB Holding Co. 2000.0 1.72x n/a A leading company in the ready-to-eat food market.

Assets of Cutter CMS, LLC comprises cytoplasmic male sterility conversions of corn inbred lines 5/24/2018 Assets of Cutter CMS, LLC Gro Alliance LLC n/a n/a n/a business used as females in seed production.

5/18/2018 Rogue Creamery Savencia SA (ENXTPA:SAVE) n/a n/a n/a An artisan cheesemaker specializing in blue cheese.

5/18/2018 Keynes Bros., Inc. The Mennel Milling Company n/a n/a n/a Operates a grain milling company.

Medical Cannabis Payment Solutions, Inc. SpeedyGrow engages in hemp production and processing activities and SpeedyVeg manufactures 5/17/2018 SpeedyGrow/SpeedyVeg n/a n/a n/a (OTCPK:REFG) organic soil nutrients. Zipfizz Corporation engages in the production and distribution of energy and sports drink tubes in the 5/17/2018 Zipfizz Corporation KUC Holding 80.0 n/a 5.7 United States. W J Pence Company Inc., Ritt, Beyer & Weir, W J Pence Company Inc., Mueller Yurgae Associates Great Lakes, and BWW Sales, Inc. provide food 5/17/2018 Impact Group n/a n/a n/a Inc. and Impact Sales & Associates brokerage and and grocery retailing services. Carolina Beverage Group LLC operates as a co-packing producer for national and international 5/16/2018 Carolina Beverage Group LLC Cold Spring Brewing Company n/a n/a n/a beverage brands. Bartlett and Company, Inc., an agri-business company, engages in grain merchandising, flour milling, 5/16/2018 Bartlett and Company, Inc. Savage Industries, Inc. n/a n/a n/a feed manufacturing, and cattle feeding business.

Haliimaile Pineapple Co. Ltd., doing business as Maui Gold Pineapple Company, produces and sells 5/16/2018 Haliimaile Pineapple Co. Ltd. LeVecke Corporation n/a n/a n/a pineapples for customers in the United States and internationally. Poultry Rendering and Blending Assets of Poultry Rendering and Blending Assets of American Proteins, Inc. comprises poultry rendering and 5/15/2018 American Proteins, Inc. and AMPRO Products, Tyson Foods, Inc. (NYSE:TSN) 850.0 n/a n/a blending assets. Inc.

5/14/2018 Lakeside Poultry Ranch, Inc. Dawn Food Products, Inc. n/a n/a n/a Lakeside Poultry Ranch, Inc., doing business as Lakeside Bakery Supplies, distributes bakery products.

5/13/2018 North Landing Ltd. P/F Bakkafrost (OB:BAKKA) n/a n/a n/a North Landing Ltd. imports and distributes farm-raised atlantic salmon.

Source: S&P; Capital IQ.

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

Soybeans Sugar $20.00 $0.40 18.00 16.00 0.30 14.00 12.00 10.00 0.20 8.00 Dollars per Bushel per Dollars

6.00 Pound per Dollars 0.10 4.00 2.00 0.00

Months/Years Months/Years

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

Cattle Milk

$1.80 $0.30

1.60 0.25

1.40 0.20 1.20 0.15 1.00 Dollars per Pound per Dollars Dollars per Pound perDollars 0.10 0.80

0.60 0.05

Months/Years Months/Years

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

Cotton Oil $2.50 $160

2.00 130

1.50 100 er Barrel p

1.00 70 Dollars Dollars per Pound Dollars per 0.50 40

0.00 10

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 Yajahira M. Cordova at 312.348.7075 or [email protected].

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