# Dear fellow shareholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/consumer-defensive-packaged-foods/NYSE_HRL_2021/NYSE_HRL_2021.mmd` · pages 2-8_

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Dear fellow shareholders:

Few periods in our 130-year history can rival the roller-coaster ride of 2021. Many of the things we took for granted — well-stocked retail store shelves, on-time deliveries and fully staffed restaurants — were no longer guaranteed. Labor shortages, supply chain challenges and the costs of goods have all increased, creating an incredibly difficult operating environment.

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James P. Snee
Chairman of the Board, President
and Chief Executive Officer

As we navigated these challenges, we never wavered in our dedication to the safety of our team members, our responsibility to the communities in which we live and work, and our commitment to making the right investments in our future.

In this rapidly changing environment, we will continue to move ONWARD. This is a word that resonates with our team because it is what we have always done — and we know no other way. We move ONWARD with the same relentless focus on keeping our brands and businesses vibrant, healthy and growing. We move ONWARD with the largest acquisition in our company's history, the Planters \( ^{®} \)  snack nuts business. And finally, we move ONWARD with a set of industry-leading corporate social responsibility goals — our 20 By 30 Challenge.

## Business Dynamics

Our performance in fiscal 2021 is further proof Hormel Foods is well-positioned to deliver long-term growth. Our team increased net sales 19% for the year, growing sales in each business segment and in each channel where we compete, as demand for our products remained robust. We set numerous sales records, including reporting the two largest net sales quarters in our company's history. Perhaps most notable was the contribution from our foodservice team, whose steadfast commitment to the industry throughout the pandemic was rewarded during the rapid recovery this year. Our retail, deli and international teams also did well, outpacing their extremely strong performances in fiscal 2020. A key to achieving these results was our ability to increase prices across our entire portfolio, a testament to the power of our brands, the value of our direct sales force, and the trust customers, consumers and operators place in our products.

The team delivered earnings in line with last year despite difficult operating conditions. Indeed, our experienced management team leveraged our balanced business model and leading brands to offset many inflationary pressures. We saw steady improvement from our supply chain team throughout the year, as the team overcame upstream and downstream disruptions, labor shortages and inflation. We continued to benefit from the tireless work of this team and the new capabilities gained from our One Supply Chain and Project Orion initiatives.

## 2022 Path Forward

During our virtual investor update in October, we reported excellent progress on the strategic imperatives we outlined in 2019 and announced our 2022 Path Forward. These new initiatives not only build on our accomplishments since 2019, they reflect the positive business impact of the acquisition of the Planters \( ^{®} \)  snack nuts business and changes in consumer behavior since the start of the pandemic.

## Our imperatives are as follows:

First, we expect to expand our leadership position in the foodservice industry. We have an advantage in this area due to our portfolio of products, our solutions-based approach to selling and decades-long partnerships. We have been a leader throughout the pandemic and will continue to lead throughout the recovery. We expect to leverage the enviable scale of the Planters \( ^{®} \)  brand to increase our presence in the very important convenience store channel.

Second, we must protect and grow our core brands, which include SPAM \( ^{®} \) , SKIPPY \( ^{®} \) , Jennie-O \( ^{®} \) , Hormel \( ^{®} \)  Black Label \( ^{®} \)  and many other well-known names. Keeping our brands relevant and strong through investment and innovation is vital to our success. Our brands hold a No. 1 or No. 2 position in over 40 retail categories \( ^{®} \) , and we have numerous brands leading the way in foodservice.

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Third, we need to aggressively develop our global presence. Our international sales represent less than 10% of total company sales, and as a global branded food company, we realize the importance of bringing meaningful scale to this channel. We are confident we can do more, and we are making the necessary investments to succeed long term in this area.

Fourth, the Planters \( ^{®} \)  snack nuts business is the springboard to amplifying our scale in snacking and entertaining. We have had a presence in this area for many years, and with the addition of the Planters \( ^{®} \)  brand, we believe the snacking and entertaining sector is the next growth engine for the company. This category cuts across all segments and channels, and we are perfectly positioned to leverage our powerful and complementary portfolio of brands, including Planters \( ^{®} \) , Hormel Gatherings \( ^{®} \) , Herdez \( ^{®} \) , WHOLLY \( ^{®} \) , SKIPPY \( ^{®} \)  and Columbus \( ^{®} \)  in this space.

Fifth, we expect to enhance growth of our ethnic and food-forward portfolios. Today's consumers demand bold and authentic flavors, and we possess many leading brands that meet this need, including Herdez \( ^{®} \) , WHOLLY \( ^{®} \) , La Victoria \( ^{®} \)  and CHI-CHI'S \( ^{®} \) . Additionally, food-forward brands like Applegate \( ^{®} \) , Justin's \( ^{®} \) , Happy Little Plants \( ^{®} \)  and Hormel \( ^{®} \)  Natural Choice \( ^{®} \)  own differentiated positions in the categories in which we compete and have evolved to meet the changing needs and preferences of today's consumers and operators.

Finally, we must continue to transform our company to enable future growth. Our investments into Project Orion and One Supply Chain were paramount to enabling the team to successfully execute our strategies in the current operating environment. As we look forward, we must continue to modernize our organization through process improvement, innovation and technology to best meet the needs of all stakeholders, including our team members, customers, consumers and operators.

## Capital Management

Our balanced business model provided protection against the unprecedented business dynamics we navigated during the year, allowing us to grow Hormel Foods while keeping our commitments to shareholders.

The business generated \(1 billion in cash from operations, and we invested \)232 million in capital projects. We opened a pizza topping expansion at our Burke manufacturing facility in Nevada, Iowa, this year. We also opened a new plant in Omaha, Nebraska, adding much needed capacity for Columbus \( ^{®} \)  charcuterie. We are excited about the progress we made on Phase 2 at that facility, which will give us the ability to produce more retail and foodservice pepperoni, one of our core products. Lastly, in October, we announced another capacity expansion for our SPAM \( ^{®} \)  family of products.

For the last several years, we have discussed our ambition and readiness to complete a large and transformational acquisition. We accomplished this goal in 2021 with the acquisition and successful integration of the Planters \( ^{®} \)  snack nuts business. Acquisitions remain an important part of our growth strategy, and we continue to evaluate a pipeline of deals in key strategic areas such as foodservice and international.

Finally, we returned a record amount of cash to our shareholders in the form of dividends totaling \(523 million in 2021. We also announced an increase of 6% to the dividend for fiscal 2022, representing the 56 \( ^{th} \)  consecutive year of dividend increases. The annualized rate is now \)1.04 per share.

## Senior Leadership and Board Member Changes

Fiscal 2021 was another year marked with many leadership retirements and advancements. Glenn Leitch, executive vice president of supply chain, announced his retirement in February, capping 25 years with the company. In addition to his

## Our 2022 Path Forward

## Six Strategic Priorities

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1.
Expand leadership in Foodservice

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2.
Protect & grow our core brands

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3.
Aggressively
develop our
global presence

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4.
Amplify scale
in snacking &
entertaining

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5.
Enhance growth
of our ethnic
& Food Forward
portfolios

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6.
Continue
to transform
our company

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## Our Evolution as an Uncommon Global Branded Food Company

Pre-2013
Meat-centric
company

• Pork and turkey

• Retail-focused

• Commodity-driven

2013-2019
Protein-centric
company

• Expanded beyond meat protein

• Strong growth from foodservice

• Derisked commodity profits

2020+
Global branded
food company

• Global

• Leading retail, deli and foodservice brands

• Food Forward

contributions as the former president of Jennie-O Turkey Store, Glenn will be remembered for his extraordinary and tireless leadership during the pandemic to ensure the safety of all team members. Mark Coffey succeeded Glenn and advanced to group vice president of supply chain, and Jen Ehresmann was named vice president of supply chain following Mark's promotion.

Donnie Temperley, vice president of Refrigerated Foods operations, and Tim Fritz, vice president of Grocery Products operations, both retired in April 2021. Donnie and Tim were with the company for nearly 40 years and were instrumental in creating a safe, innovative and highly valued plant operations enterprise. As part of the announced retirements, Clint Walters advanced to vice president of Refrigerated Foods operations, and John Forsythe advanced to the position of vice president of Grocery Products operations.

Additionally, Jeff Frank was appointed vice president of Grocery Products, Annemarie Vaupel advanced to vice president of foodservice marketing, and Paul Kuehneman and Eldon Quam advanced to assistant controllers.

After 43 years with the company, Jim Sheehan, executive vice president and chief financial officer, announced in October his plan to retire during the first quarter of fiscal 2022. Jim was the leading voice behind building a world-class financial, accounting and technology organization. One of his many lasting legacies was his vision for our groundbreaking Inspired Pathways program, which provides the opportunity of a free two-year college education to children of Hormel Foods employees.

Jacinth Smiley, who joined the company earlier in the year as group vice president of corporate strategy, will succeed Jim as executive vice president and chief financial officer. Jacinth brings over two decades of financial and accounting expertise, including significant long-term strategic planning experience in complex global organizations. Her experience will be especially important as the company continues its focus on growth in international markets. We also announced the retirement of Dakota Pippins from our Board of Directors. Dakota joined our Board in January 2001 and served for 20 years. We thank him for his valuable contributions and wish him the very best.

## ONWARD

Our evolution into an even better, stronger, more agile and more balanced global branded food company will continue in fiscal 2022 despite the ongoing challenging and dynamic environment. We expect to benefit near term from the numerous pricing actions we took across our leading brands, the investments we have made in increasing our capacity for high-growth categories, the scale and earnings power we gained from the acquisition of the Planters \( ^{®} \)  snack nuts business, our renewed focus on the snacking and entertaining category, and the progress we have made on our Project Orion and One Supply Chain initiatives to transform our company and position it for long-term growth. Additionally, we are taking action at Jennie-O Turkey Store to create a more demand-oriented, efficient and effective turkey portfolio that is better positioned to generate long-term growth, higher profitability and lower earnings volatility.

Moving ONWARD is in the DNA of our more than 20,000 inspired team members, and I remain confident in our ability to emerge from the pandemic as a stronger company. We are an uncommon global branded food company with the balanced business model and proven strategy to grow our company and continue our positive impact on the world well into the future.

To our team members: THANK YOU for everything you do.

To our shareholders: THANK YOU for your continued trust and support.

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## James P. Snee

Chairman of the Board, President and Chief Executive Officer

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