Investment Thesis
Outlook
We expect a typical packaged food company to increase sales 5%, grow operating income
5% and EPS/cash flow to increase 7-8% on an annual basis. Food stocks are rightfully
characterized as defensive investments although we note that relatively low cash flow
volatility combined with respectable earnings growth and a decent dividend yield argues for
some exposure to the group long term. We note commodity processors (agribusiness and
protein) are usually more volatile with less predictable growth rates and are often susceptible
to cycles, capacity utilization rates and levels of consolidation.
Industry Valuation
For packaged food, we typically rely upon the growth rates above tweaked for the individual
companies combined with traditional multiple analysis, DCF models (using a 9% cost of
capital) and IVCC (incremental economic profit). Our main methodology for price target
derivation is DCF models. When necessary or appropriate, we employ the other frameworks
listed above. For commodity processors, we look at cycles for the various businesses,
attempt to determine normalized or peak earnings, apply a 12-13x P/E multiple and calculate
the present value using a 9% cost of capital.
Industry Risks
Risks for a typical packaged food company include competition (branded, private label), input
costs (raw materials, packaging, transportation, energy), currency (various) and possible M&A
integration. For commodity processors, the same risks listed above are relevant but in
addition challenges such as disease, weather, and international trade disputes are of concern.

Table of Contents
Investment Thesis ............................................................................. 3
Outlook ....................................................................................................................................3
Industry Valuation......................................................................................................................3
Industry Risks...........................................................................................................................3
Archer Daniels Midland..................................................................... 4
Bunge.................................................................................................. 5
Campbell Soup .................................................................................. 6
ConAgra Foods .................................................................................. 7
Corn Products .................................................................................... 8
Dean Foods ........................................................................................ 9
Del Monte Foods ............................................................................. 10
Flowers Foods.................................................................................. 11
General Mills .................................................................................... 12
Heinz................................................................................................. 13
Hershey Foods ................................................................................. 14
Hormel Foods................................................................................... 15
J.M. Smucker ................................................................................... 16
Kellogg.............................................................................................. 17
Kraft Foods....................................................................................... 18
McCormick ....................................................................................... 19
Pilgrim’s Pride.................................................................................. 20
Sara Lee............................................................................................ 21
Smithfield......................................................................................... 22
Tyson Foods..................................................................................... 23
Wrigley ............................................................................................. 24