# Dear fellow shareholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/consumer-defensive-packaged-foods/NYSE_HRL_2017/NYSE_HRL_2017.mmd` · pages 2-8_

---

Dear fellow shareholders:

While the markets proved challenging and fiscal 2017 did not unfold as expected, this was the second most profitable year in our company's history. Record commodity price volatility in the pork and turkey markets negatively impacted our ability to deliver key results, yet we continued to transform our business through innovative new items, capital investments in value-added capacity, and strategic acquisitions and divestitures. I am confident in our path forward as we live out our purpose statement: Inspired People. Inspired Food. \( ^{™} \) 

As we look to the future, six strategic imperatives will allow us to sustain industry-leading sales and earnings growth. First, we will continue evolving toward a broader food company. Subsequent to the end of fiscal 2017, we acquired Columbus \( ^{®} \)  Craft Meats, giving us a strong presence in the advantaged premium deli category. This acquisition serves as a catalyst for uniting all our deli businesses into one group, creating better alignment to drive growth. While meat-based products will always be core to Hormel Foods, over the last six years, we have expanded our non-meat offerings with brands such as Wholly Guacamole \( ^{®} \) , Muscle Milk \( ^{®} \) , Evolve \( ^{®} \) , Skippy \( ^{®} \) , and Justin's \( ^{®} \) . By broadening our portfolio, our products will be located where the consumer is shopping.

Second, we will accelerate growth in the foodservice channel. Our foodservice product portfolio is perfectly positioned to meet the needs of the foodservice operator with innovative, pre-sliced or pre-cooked products made with ingredients you can find at home. To support growth in the foodservice channel, we acquired Fontanini Italian Meats and Sausages, a Chicago-based company specializing in authentic, premium Italian meatballs and sausages for the foodservice industry. Additionally, we announced the expansion of our plant in Witchita, Kansas, to support sales growth of Hormel \( ^{®} \)  bacon products.

<--- Page Split --->

![](images/3_0.jpg)

## Becoming a broader food company

Our acquisitions of the Wholly Guacamole \( ^{®} \) , Skippy \( ^{®} \) , Muscle Milk \( ^{®} \) , Justins \( ^{®} \) , and Columbus \( ^{®} \)  brands help us become a broader food company.

Third, we will become a more global food company. While only 6 percent of our company's sales come from outside the United States, we are focused on increasing our international presence. Our recent investment in a state-of-the-art production facility in Jiaxing will double our production capacity in China and allow us to produce SPAM \( ^{®} \)  products in-country for the first time. We also made our first acquisition in South America. Ceratti \( ^{®} \) , a premium deli meats brand headquartered in Brazil, will help drive sales and earnings growth while serving as a platform for future acquisitions in South America.

Fourth, fiscal 2017 was a testament to the importance of our balanced business model. One of our largest segments,

Jennie-O Turkey Store, saw earnings decline 25 percent, yet strong performances in Refrigerated Foods and Grocery Products were able to offset most of the declines resulting in total company net earnings down only 5 percent. Reducing earnings volatility is important to better enable us to deliver consistent earnings growth.

Fifth, we will continue to divest non-strategic assets. In 2017, we divested the Farmer John \( ^{®} \)  and Saags \( ^{®} \)  brands in addition to our live hog production operations. Doing so removed a significant source of earnings volatility while enhancing company profitability. Going forward, we will carefully evaluate our assets and divest those not meeting our growth goals.

Finally, we will modernize our supply chain. The tremendous growth our company achieved over the last ten years has created increased complexity. By streamlining our operations through the reduction or elimination of less strategic costs, we better position the Company to deliver efficient, profitable growth in the years to come. In line with this initiative, we announced the construction of a new Jennie-O Turkey Store plant in Melrose, Minnesota. By replacing an existing facility and expanding our Austin, Minnesota, plant we will create efficiencies necessary to better compete in today's marketplace.

## Dividends

Fiscal 2018 will mark the 52nd consecutive year we have increased our dividend, a record matched by few other companies. Effective in fiscal 2018, our new dividend will be $0.75 per share, a 10 percent increase over fiscal 2017.

## Corporate responsibility

Being a leading corporate citizen is important. We continued our legacy of supporting philanthropic causes such as hunger and disaster relief, education, and local community support with cash and product contributions. As in prior years, we maintained our commitment to improving nutritional and educational programming for children and families in Guatemala through Project Spammy.

Our dedication to being a responsible company was recognized by many organizations. We received a perfect score on the Human Rights Campaign's Corporate Equality Index, were

![](images/3_1.jpg)

Una Bella Differenza \( ^{®} \) 

## Foodservice

The acquisition of the Fontanini \( ^{®} \)  brand will enable us to continue to grow our competitively-advantaged foodservice business.

<--- Page Split --->

ranked #8 on the 100 Best Corporate Citizens by Corporate Responsibility Magazine, were recognized by Forbes as one of the World's Best Employers, and were listed as one of the 50 Best Companies to Sell For by Selling Power Magazine.

## Board member and senior management changes

The Company announced a number of retirements and advancements of senior leaders throughout the Company. In February, the Company announced the retirement of Larry Lyons, senior vice president of human resources, after almost 40 years of valued service to the Company. Succeeding Larry, Janet Hogan joined Hormel Foods and was named senior vice president of human resources, bringing a wealth of experience leading human resource functions for several large companies.

![](images/4_0.jpg)

## Becoming more global

The acquisition of the Ceratti \( ^{®} \)  brand and the completion of our new Jiaxing, China, plant will allow our International business to deliver above average growth this next year.

In February, the Company also announced the retirement of

Bryan Farnsworth, senior vice president of supply chain, with 36 years of experience with the Company in many roles, most notably his leadership in food safety. Subsequent to Bryan's retirement, Mark Coffey advanced to senior vice president of supply chain and Mark Morey advanced to vice president of affiliated.

Jim Anderson, assistant controller, retired in May after 40 years of service in many finance and accounting functions. In August, Stephen Koven joined Hormel Foods in the newly created role of vice president of digital experience. Stephen brings extensive digital marketing expertise to this role.

## Outlook

We are optimistic as we look to fiscal 2018. The earnings power we are creating with acquisitions, major capital investments in value-added capacity, a supply chain reorganization, the union of the Grocery Products and Specialty Foods segments, and an intense focus on strategic cost management sets us up for renewed earnings growth in 2018 and beyond.

We remain committed to keeping the Company in a strong financial position while continuing to make further strategic investments to enhance our position in the food space. While we anticipate continued commodity market volatility, we remain confident our balanced business model will help offset any short-term market challenges. Our path forward is clear and I believe we are well positioned for success in 2018 and beyond.

I would like to thank our more than 20,000 inspired employees worldwide for the commitment to our cultural beliefs, most notably Safety First and Results Matter. The perseverance each employee showed during a challenging year is what sets Hormel Foods apart from the industry.

I also want to extend a personal thanks to Jeff Ettinger. Jeff concluded his role as chairman of the board in November after a distinguished career. During Jeff's tenure, the Company significantly increased revenues, net earnings, dividends, and shareholder value. Jeff is a personal and professional mentor to me and many others at Hormel Foods and his positive impact will be felt for years to come. I wish Jeff and LeeAnn all the best in the future.

![](images/4_1.jpg)