# Dear Shareholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/consumer-defensive-packaged-foods/NASDAQ_CENT_2021/NASDAQ_CENT_2021.mmd` · pages 2-8_

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Dear Shareholders, Colleagues, Customers and Partners,

I would like to begin by recognizing the more than 7,000 employees who make up Central Garden & Pet. Fueled by our mission to lead the future of the Pet and Garden industries, our teams have navigated these challenging times with passion and perseverance. Thanks to their strong execution, Central delivered its second consecutive record year with double digit growth on the top and bottom line and earnings per share.

## 2021

Consumer demand for pet and garden supplies remained strong as new consumers found comfort and joy in adding pets to their families and investing in beautifying their gardens. Net sales for fiscal year 2021 increased 23% to \(3.3 billion, driven by organic growth in both segments and our four recent acquisitions – Hopewell Nurseries, Green Garden, DoMyOwn and D&D. Thanks to our pricing agenda and productivity initiatives, we were able to offset most of the supply chain pressures and inflationary headwinds that have rippled through companies in a broad range of sectors. We are pleased that our gross margin held largely in line with the prior year. Operating income increased 29% and, despite rising input costs and heightened investment spending, we improved our operating margin 40 basis points to 7.7%. We delivered diluted earnings per share on a GAAP basis of \)2.75, an increase of 25% over the prior year.

Both of our operating segments performed well. Net sales for the Pet segment improved 13% as we continue to see traction in long-term consumer trends such as humanization, premiumization and health & wellness. About 35% of pet parents have adopted a new pet since the beginning of the pandemic, and almost half of these adoptions were driven by Millennials and Gen Z, often spending more on their beloved pets than older generations. Net sales for the Garden segment rose 38%, largely driven by our recent acquisitions and strong organic growth. Today, about one-third of all gardeners are Millennials, and they are hitting their prime spending years, which suggests future growth for our industry.

In addition to our robust financial performance, 2021 was also the first full fiscal year our teams began to implement our Central to Home strategy. While there is more work to be done to unlock our full potential, I am encouraged by our early progress across all five of our strategic pillars.

## Consumers

In support of our quest to build and grow brands consumers love, we made meaningful investments into consumer insights, digital marketing, brand building and innovation to drive long-term organic growth. We remain focused on strengthening our brand foundations and developing new content and creative campaigns across our key brands.

## Customers

As we march toward our goal to win with winning customers and channels, we are proud to share that the Home Depot recently named Bell Nursery the Outdoor Garden Supplier of the Year. For over 25 years, Bell has been supplying live plants and goods to the Home Depot. Bell currently maintains the second-largest greenhouse footprint in the United States with over 16 million square feet.

As much as the COVID-19 pandemic has disrupted all our lives, it has also been a catalyst for the shift to online and we are excited about the progress we've made to enhance our digital capabilities and increase our business with prepulay online and omnichannel customers. In our Pet business, eCommerce now represents 22% of net sales.

## Central

Our third pillar is focused on fortifying the Central footprint through a strong portfolio strategy as well as acquisitions and ventures. Over the last twelve months, we proudly welcomed four businesses into the organization. Each of these companies presents a unique opportunity, positioning us for continued growth in core and adjacent categories while also adding new capabilities. Further, our Central Ventures platform recently invested in three innovative and promising pet start-ups.

## Cost

In our efforts to reduce costs to improve margins and fuel long-term growth, we invested in expanding capacity and automation in many of our business units and have pursued cost reduction opportunities to achieve scale advantages across the company's supply chain.

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## Culture

Our culture pillar is dedicated to our passionate and resilient employees. We recently refreshed our company values. Created by leaders across the company, they comprise six simple values: "We do the right thing." "We strive to be the best." "We are entrepreneurial." "We win together." "We grow every day." and "We are passionate." We believe having a strong set of values provides a foundation for employee engagement and strengthens how we all work together.

In addition to bringing many talented new hires into our management teams, we have also made some great additions to our Board of Directors. In the last twelve months, we welcomed Brendan Dougher, Daniel Myers, Courtnee Chun and most recently Lisa Coleman as new directors.

## 2022

Looking ahead, we are closely monitoring and responding to the increasing inflation and supply chain disruptions being felt by businesses around the globe. We are keenly focused on further expanding our manufacturing capacity, improving service levels and investing wisely in strategic growth levers to drive long-term organic growth. And, as always, we continue to pursue acquisitions to build scale in core categories, enter adjacent categories and add capabilities.

There's no doubt that fiscal 2022 will prove to be another challenging year, and yet, I am confident in our team's ability to deliver in this environment.

Sincerely,

![](images/3_0.jpg)

Tim Cofer

Chief Executive Officer