William Blair 30 th Annual Growth Stock Conference June 2010
Forward-Looking Statements This presentation may contain forward-looking statements within the meaning of the safe harbor provisions of the Securities Litigation Reform Act of 1995. Terms such as expect, believe, continue, going forward, and grow, as well as similar comments, are forward-looking in nature. Actual results may differ from these forward-looking statements and the company can give no assurances that such expectations can be attained. Factors that could cause actual results to differ materially from the Company s expectation include: general business and economic conditions, competitive factors, raw materials purchasing, and fluctuations in demand. Please refer to the Company s Securities and Exchange Commission filings for further information. 2
Investment Highlights Becoming a leading brand in the broader functional foods sector through a robust product line-up beyond margarine spreads Well positioned to capitalize on the growing healthy foods market and trends like aging population, increasing obesity levels, and general awareness of health issues Only naturally trans fat free margarine on the market with patented technology Grown into the #2 player in the margarine category in just 10 years Virtual company model that generates significant free cash flow and has limited capital requirements Quality and experienced management team with promotional and brand building expertise 3
Growth Strategy Grow margarine spreads market share via three-tier strategy Use Smart Balance, Earth Balance, and BestLife brands, to appeal to a wider range of consumers Gain market share in other existing products National rollout of enhanced milk a category that is ten times larger than spreads Introduce new products Establish Smart Balance as an umbrella brand that creates crossover consumer loyalty and can support a broad number of products in various categories 4
Leverage Operating Model for Future Growth Create umbrella brands to support healthy living and to serve the health needs of target populations with great tasting food solutions Heart Health Diabetes Senior Nutrition Osteoporosis & Osteopenia Kids Nutrition Obesity BetterFor-You Foods Sports Nutrition Celiac Disease Lactose Intolerance 5
Updated 2010 Outlook Net sales growth in the 2% to 4% range for full-year 2010, compared to previous outlook for mid-teens growth Cash operating income* flat year-over-year for full-year 2010, compared to previous outlook for mid-teens growth For 2Q 2010, net sales decline in the 6% to 7% range For 2H 2010, net sales growth in the 5% to 10% range Updated outlook based on combined effects of Continued macroeconomic softness Consumer price sensitivity for premium products Heightened competitive promotional activity in spreads Slower than anticipated growth in new categories *Cash operating income excludes previously announced reorganization charges and potential impairment charges resulting from the updated outlook for 2010. **For additional details on the updated 2010 outlook, refer to the Company s press release dated June 14, 2010 6
Three Tier Brands Target Different Consumers Products in all segments of the spreads category Positioning Heart health, all natural ingredients Heart health Good health, weight management Consumer target Consumer seeking heart health and/ or natural ingredients Consumer seeking heart health Consumer seeking value and overall healthy products Demographics Younger skew Higher income Older skew Higher income Family Value Moderate income Pricing - typical base Super Premium $4.29 Premium $3.29 Value $2.29 79% 64% 48% Oil content 7
Market Share Continues to Grow Smart Balance Family of Spreads 52 Week Dollar Market Share Source: IRI U.S. Food, data through 5.13.10 8
Smart Balance HeartRight Spreads The first spread to incorporate heart-healthy long-chain Omega-3 fatty acids with cholesterol reducing phytosterols Patented blend that supports healthy cholesterol levels DHA/EPA & ALA Omega 3: Helps promote heart health Vitamin E: Potent antioxidant Phytosterols: Helps reduce cholesterol 9
Earth Balance Natural Buttery Spreads Natural ingredient profile Certified non-gmo ingredients Gluten free, lactose free, vegan No partially hydrogenated oils No artificially modified oils Largest distribution in health channel YTD shipments +30% 10
Bestlife Buttery Spreads First value brand with no partially hydrogenated oils No palm kernel oil Excellent source of Vitamin D Start shipping Q1 2010 Current distribution 45%, including Wal-Mart Buttery Spray 8oz Buttery Spread 15oz Buttery Spread With Extra Virgin Olive Oil 15oz Buttery Spread 45oz 11
Bestlife Brand Strategy Smart Balance has an exclusive global license to use the Bestlife brand in virtually every food & beverage category CONCEPT Create portfolio of Bestlife food and beverage products, with lifestyle positioning beyond heart healthy LAUNCH Introduce Bestlife Buttery Spreads and Spray to play in untapped $.6 billion value segment EXPANSION Enter additional food and beverage categories, mostly sublicensed, based on fit with Bob Greene nutrition plan and consumer needs 12
Bestlife Brand and Bob Greene Bob Greene is Oprah s personal trainer and nutrition and fitness expert Author of books on diet, fitness, and nutrition over 10 million copies sold Created the Best Life healthy lifestyle program includes eliminating trans fats and reducing saturated fats from dairy Best Life seal of approval on 22 brands in 22 categories - $3.5 billion in retail sales 1 1. Source: IRI 13
Bestlife Media Strategy Target Media at confluence of most likely early adopters and most efficient spend Start with Best Life opt-ins and move through balance of Oprah media platforms Oprah Show 50MM Oprah.com 20MM O Magazine 3.5MM Best Life Opt-Ins 1.5MM 14
Dairy Initiative Driven by Milk Exceptional benefits and great taste: Enhanced Milks: Varieties that include an excellent source of DHA/EPA Omega-3s, Antioxidant Vitamin E and even plant sterols Sour Creams: An excellent source of Vitamins A, D & E and DHA/ EPA Omega-3s as well as a good source of calcium Expanding across U.S. in 2010 Milk in 63% distribution through May 15
Healthy Premium Milks Outpacing Category Enhanced milk fastest growing segment in 2009 due to the introduction of Smart Balance milk 2009 Avg % Change % Change Items/Store '09 vs '04 '09 YTD vs PY Milk Category 110.9 9% 4% Healthy Premium Segment 62.3 38% 7% Enhanced Milk 4.5 206% 61% Organic Milk 16.3 103% (5%) Soy Milk 23.4 29% 1% Lactose-free Milk 12.2 8% 5% Source: IRI, U.S. Food 16
Smart Balance Milks Lead Category in Florida New Note: Special Request is a registered trademark of Farmland Dairies, LLC. Over The Moon is a registered trademark of Dean Intellectual Property Source, Inc. Simply Smart is a registered trademark of H.P. Hood, LLC. Source: IRI, Florida, FY 12.27.09 17
And Captured up to a 10% Share in Northeast Note: Special Request is a registered trademark of Farmland Dairies, LLC. Over The Moon is a registered trademark of Dean Intellectual Property Source, Inc. Simply Smart is a registered trademark of H.P. Hood, LLC. Source: IRI, NY+ NE, FY12.27.09 18
Smart Balance spreads have a loyal core of heavy users who will be key to building out new categories SB Spread User Base SB Categories Consumed % Consumers 1 72% 2 20% 3 6% 4 2% Heavy users: >6 SB lbs/yr Medium users: 4-6 SB lbs/yr Light users: <3 SB lbs/yr Expansion Opportunity
Increasing Items Per Store Building a larger footprint in number of items and categories is essential to meeting long-term goals Net Sales ($M) Avg Number of Items per Store Source: IRI, Company filings & estimates 20
Plans for 2010 Objective: Increase average items per store by 4 to 25 Three Tier Spreads Strategy Introduce Smart Balance spreads with calcium and vitamin D and update graphics Launch Bestlife brand spreads Expand distribution of Earth Balance and Smart Balance HeartRight brands Dairy Expansion Expand enhanced milk distribution nationally Complete distribution of sour cream Test market single serve milk Product Development Test olive oils in upstate New York Develop next wave of products for 2011 21
Progress in Developing Innovation Platform Assembled experienced and deep management team Built infrastructure for growth in multiple categories Developed functional foods innovation pipeline Strengthened unique, cash-generating virtual model Established retail relationships and expanded distribution Drove core share growth and increased brand awareness Simplified capital structure and refinanced debt Launched strategic initiative in dairy aisle 22
Creating Financial Flexibility Fourth Quarter 2009 refinancing Higher acquisition, capital spending limits Two-year $25 million stock repurchase authorized Lower financial covenant thresholds Leverage under 2X Second Quarter 2010 Organization Realignment Lower cash general & administrative costs One time charge of $3.0 to $3.5 million Ongoing supply chain productivity program Cumulative $10 million savings through 2010 23
Investment Highlights Becoming a leading brand in the broader functional foods sector through a robust product line-up beyond margarine spreads Well positioned to capitalize on the growing healthy foods market and trends like aging population, increasing obesity levels, and general awareness of health issues Only naturally trans fat free margarine on the market with patented technology Grown into the #2 player in the margarine category in just 10 years Virtual company model that generates significant free cash flow and has limited capital requirements Quality and experienced management team with promotional and brand building expertise 24