2010 Farm to Fork Report by GNP Company

The GNP Company Farm To Fork Report 2010

ON THE COVER:

The Hoesley Family Farm Near Fountain City, Wisconsin Bruce, Dana, Robert, James & Samantha Hoesley Part of our flock since 2003 The Hoesley kids swing from a massive shade tree—one of the many freedoms they love about country living. In the background, the old, weathered barn stands as a testament to a basic truth: the small, simple way of yesterday’s farming is gone, but the traditional values, commitment and care of the folks who choose to make their living off the land remain. For the kids’ parents, Bruce and Dana, that means being their own boss, raising their children the way they want to, teaching their children a strong work ethic, doing what’s right, being responsible for the land and their animals, and being able to enjoy nature just by walking out their front door. © 2011 JFC Inc.

May 2011

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Print only the pages you need Use high post-consumer recycled content paper Print on both sides of the page Print in black and white, instead of color Recycle the paper after use

Thanks for keeping our planet healthy and beautiful!

OUR JOURNEY BEYOND NOW Last year, we published our company’s first Farm To Fork Report in an effort to share our progress on a range of social, environmental, and practical business fronts. Today, I’m pleased to bring you our second annual report, which we’ve centered around the 4 core values of our business: people, planet, poultry, and progress. We’ve also included some background on our new company name, logo, vision, and mission, all of which will further our transformation to a company offering multiple brands with distinctive promises and transparency to consumers. The Year in Review 2010 was a great year. It began with my father and current chairman of the board, Don Helgeson, being named a 2010 Siehl Prize Laureate by the University of Minnesota’s College of Food, Agricultural and Natural Resource Sciences. From there, it evolved into a year of achievement, learning, record sales (in terms of volume), and profitability. And, while it’s usually the successes we celebrate, it’s what didn’t go as planned that yielded some of the year’s greatest dividends. Our key successes: • The completion of upgrades to our Processing Plant in Arcadia, Wis. — which brought to a close the last phase of a multiyear expansion of our Arcadia Operations. • Our participation in the road test of a new global framework that is part of the Greenhouse Gas Protocol Initiative, the completion of a Life Cycle Assessment (LCA) on a segment of our products, and Carbon Trust Certification for our Just BARE® line—accomplishments which I am particularly proud of as they were led by my son, Paul Helgeson. • Achieving Safe Quality Food (SQF) 2000 Level 2 certification at all of our processing facilities. Our greatest learning: • Not living up to our commitment of customer service excellence, which spurred a deep-dive assessment of our systems and the identification of a new path to improved performance. • The challenge of balancing the goals of package safety, functionality, and sustainability. In the pages that follow, I will let the people behind these initiatives share the deeper stories and the metrics we are using to define and drive our performance.

Our Focus Forward You’ll also learn from them what we’ll be focusing on in 2011. We were fortunate to have had a consecutive year of profitable growth, but we know how quickly that can change, especially in the highly competitive and volatile food industry. So we have to stay on top of our game. A challenge that most concerns me is the current food-forfuel issue, which is covered on page 32 in the Progress section. In closing, I am proud of what we achieved and learned in 2010 and am anticipating great things yet to come, as we, as a company, become more aware of our social responsibility and how, individually and collectively, we can create lasting positive change. Sincerely,

Michael Helgeson CEO / 3rd Generation Leader Utah Powder Skier

â&#x20AC;&#x153;Farming teaches kids responsibility and respect for the circle of life. They learn early on that the animals must be cared for ...no exceptions ...and about where our food comes from.â&#x20AC;? Laura Wieczorek, Minnesota Family Farm Partner Part of our flock since 1996

TABLE OF CONTENTS GNP COMPANY Our Transformation . . . . . . . . . . . . . . . . . . . . . . . . . 5 Our Values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

PEOPLE Social Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . 8 PEOPLE

Team Member Safety Engagement & Advocacy Longevity Our Giving Philosophy In Pursuit of Customer “WOW”

PLANET Environmental Stewardship . . . . . . . . . . . . . . . . . . 16 PLANET

Our Environment Our Footprint Commitment The Life Cycle of Leadership Achievements: Road Test, LCA, Carbon Trust Certification Heat Reclamation Project in Arcadia

POULTRY Care & Commitment . . . . . . . . . . . . . . . . . . . . . . . 22 POULTRY

Animal Welfare Commitment Product Performance Consumer-Driven Speed To Market Product Attribute Performance Consumer Satisfaction Truthful Labeling Product Recognition Food Safety Leadership The Packaging Balancing Act Meeting Our SQF 2000 Level 2 Certification Goal

PROGRESS Pursuit of Excellence . . . . . . . . . . . . . . . . . . . . . . . . 28 PROGRESS

2010 Sales Growth & Reach Process Excellence Continuous Improvement Commitment 2010 Continuous Improvement Performance Results 2010 Awards Food-for-Fuel Issue Completion of the Arcadia Plant Expansion

“I always liked animals...that’s another big reason I suppose I like farming so much.” Chris Kaminski, Wisconsin Family Farm Partner Part of our flock since 1995

GNP COMPANY’S TRANSFORMATION

In our 2009 report, we were in the early stages of our transition from a company offering a single premium brand of chicken to a multi-brand portfolio to meet the needs of a more diverse customer and consumer base. We’ve since developed a new company name, logo, vision, mission, and value framework, which we’re publicly sharing for the first time in this report. With these changes, we’re better able to express the human values we bring to each relationship in a manner that’s more meaningful and transparent. 5

WHO WE ARE A company with a

human touch.

WHAT WE DO We listen. To each other, our customers, and consumers so we can best meet needs and expectations.

We lead. By providing consistent,

quality chicken for America’s tables and achieving excellence through continuous improvement and product innovation.

We thrive. By balancing the needs of our business with those of our people, partners, animals, community, and planet.

“We’re proud that our chicken products and recipes are the cornerstone for nutritious, low-fat, high-protein meals essential to human health and wellness.” Michael Helgeson, CEO / 3rd Generation Leader

PEOPLE

OUR VALUES GUIDE OUR ACTIONS Our operating principle is simple: to thrive by balancing the needs of our economic progress with those of our people, poultry and planet. It’s what POULTRY we call the 4P’s of our values—all interdependent elements where the health and well-being of one rely on the vitality of the other three.

PLANET

PROGRESS

PLANET

POULTRY

PROGRESS

Nearly every resource we rely on comes from nature, so maintaining a healthy, thriving eco-system is critical to our survival as a species and company. We’re committed to minimizing our environmental impact through energy, water, and waste reduction, as well as the pursuit of ongoing process improvements that sustain the quality of our natural resources.

We’re acutely aware that consumers entrust us daily with their health and well-being as well as that of their families. And that awareness is what drives us to make no compromises when it comes to the care of our chickens or our promise of safe, relevant, transparent, and truthfully labeled products.

Thriving businesses share a passion for excellence within their own processes, operations, and greater communities. To that end, our success yields more than just a financial return for our shareholders; it helps us provide prosperity for our team members, business partners, their families, and the communities in which we all, collectively, live and work.

PEOPLE We are passionate about what we do and guided by a strong work ethic and commitment to doing things right. Our strong relationships with team members, family farm partners, customers, valued suppliers, and our communities are what make our business thrive. Our extended community benefits from our support of socially responsible efforts like hunger relief, community development, families in crisis, and increasing awareness of agriculture’s role in our society. We gauge our performance as it relates to our most valued resource and asset, people, by these key measures: team member safety, engagement, advocacy, longevity, and our giving philosophy.

TEAM MEMBER SAFETY: PRIORITY #1 Team member safety is paramount. Reducing the number of workplace illnesses and injuries requires the commitment of each team member and a focus on behavior-based safety. This focus has helped foster safety in the workplace. Our performance is competitive within our industry, but we’re driven by the belief that even one injury is too many. Key 2010 safety strategies included safety accountability and engagement, ergonomics, fleet safety, and regulatory compliance.

“Behavior-based safety is a process that gives team members the ability to identify and choose a safe behavior over an unsafe one. Focusing on individuals, their environment, and their behavior is what prevents accidents.” Peggy Brown Human Resources Director/Cub Scout Den Leader

2010 SAFETY RECOGNITION We were honored with three safety awards in 2010 for performing better than the overall industry average incident and injury rates at our two Minnesota processing plants.

2010 Joint Poultry Industry Safety & Health Council Honor Award and Merit Award: Given to our Cold Spring and Luverne processing

facilities, respectively. The awarding council represents about 95% of the nation’s poultry products and workers. Just 48 were awarded in 2010, so our facilities’ safety performance ranks highly considering there are about 185 chicken processing facilities, nationwide.

2010 Governor’s Meritorious Achievement Safety Award: Received

by our Cold Spring Processing Plant. This was one of just 148 awards given statewide.

Evaluative criteria used: injury statistics over multiple years; a demonstrated, strong commitment of management; employee involvement; and unique and innovative programs that contribute to improved safety and health.

THE COMPONENTS OF BEHAVIOR-BASED SAFETY

ENVIRONMENT

PEOPLE BEHAVIOR

ENGAGEMENT & ADVOCACY TEAM MEMBER ENGAGEMENT In 2010, we conducted an Engagement Survey to learn how we can improve our leadership, teamwork, and communication. We scored better than 70% of the other organizations surveyed on our overall engagement score. We are continuing to find ways to further foster team member confidence and commitment. Another study is planned for year-end to measure our progress. Here are some additional measurements worth noting:

Training In 2010, 94.5% of our team members received training in these areas: food safety, people safety, supervisory effectiveness, Six Sigma and Lean continuous improvement tools, animal welfare, and others designed to enhance business understanding.

EMPLOYEE SUGGESTION PROGRAM (ESP) PARTICIPATION & RESULTS NUMBER OF SUGGESTIONS RECEIVED

SUGGESTIONS ADOPTED

945

COMPANY SAVINGS

351

“We offer short lead times and even same-day order add-ons with as little as 2 hours time before shipment, which is nearly unheard of for fresh, perishable products.”

$267,884

$34,100

CUSTOMER SERVICE EXCELLENCE = ADVOCACY Service excellence is ingrained in our company’s DNA. So when our service levels fell short in 2010, we took action. This included making significant changes to our processes and renewing our focus on perfect order. (See page 15 for the full story.) Following is our 2010 performance against the measures we watch to make sure we’re meeting our service goals.

2010 PERFECT ORDER PERFORMANCE ORDER FILL CASE FILL ON-TIME DELIVERY

Brian Roelofs Director of Sales & Service

TOTAL REWARDS PAID FOR PARTICIPATION

ORDER ACCURACY

ACTUAL GOAL

88.4% >90% 97.4% >99% 99.4% >99% 99.8% ANNUAL IMPROVEMENT

ENGAGEMENT & ADVOCACY

(continued)

THE VOICE OF OUR CUSTOMERS We regularly survey our customers to understand what’s most important to them and how we can serve them better. Here’s what we learned from our 2010 survey:

2010 CUSTOMER SATISFACTION WITH FIELD SALES TEAM* RESPONSIVENESS KNOWLEDGE OF POULTRY CATEGORY FREQUENCY OF CONTACT

90 % 91 % 91 %

SATISFIED TO VERY SATISFIED

2010 OVERALL CUSTOMER PERCEPTIONS*

Percent of customers who AGREED/STRONGLY AGREED with the following statements regarding our company.

91% 87% 86% 84% 84%

Provides high-quality service Is a supplier I recommend Easy to do business with Works hard to satisfy Offers innovative products

75%

Is best in class Provides innovative solutions Provides leading category management**

68% 67% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

* SOURCE: Online Customer Satisfaction Survey, ClearData Research, July 2010 **The optimization of pricing, promotion, shelving and assortment to maximize customer profitability and shopper satisfaction. Requires collaborative, joint business planning between retailer and manufacturer.

“A simple definition for brand advocacy is consumer love. We measure it by whether a consumer has actually recommended us to a coworker, family member or friend. We build it by making sure we’re living up to our brand promise and having relevant and meaningful relationships with each consumer. That means connecting face-to-face as well as on Facebook.” Julie Berling Director of Brand Advocacy Power Runner

ENGAGEMENT & ADVOCACY

(continued)

CONSUMER BRAND LOYALTY & ADVOCACY Since 1986, we’ve conducted research to measure the impact of our consumer engagement. Loyalty and advocacy are our key measures. Following are results for Gold’n Plump®, our company’s flagship brand, as measured in the Minneapolis/St. Paul market.

• Loyalty: 95% of consumers say Gold’n Plump is the “first and

only” or “first brand I’d use” versus competitive brands at 81%.

• Advocacy: 55% of consumers said they’ve actually recommended

Gold’n Plump to a coworker, family member or friend.

CONSUMER INTERACTION & ENGAGEMENT We strive to bring a human touch to every consumer interaction and to respond to consumer inquiries in the same day they’re received. Following are 2010 statistics for our consumer care team: nearly 5,500 total individual interactions consisting of 1,246 consumer calls, 2,004 emails, 61 letters, and 2,180 promotional requests.

LONGEVITY Longevity is one measure of our ability to build and maintain positive relationships.

TEAM MEMBERS More than 35% of our team members have been with us for at least 10 years, many 20 to 30 years. Average median tenure in the food industry is 4.7 years.* We reward employee longevity with recognition programs and key anniversary celebrations. *SOURCE: U.S. Department of Labor - Bureau of Labor Statistics

Milestone anniversaries are celebrated at 1, 3, 5, and 10 years—and every 5 years thereafter. In 2010, 30 team members celebrated 30 years with our company; four, 35 years; and two, 40 years.

TEAM MEMBER LONGEVITY YEARS

5-10 11-15 16-20

>20

# of Team Members

263 185

232

112

FAMILY FARM PARTNERS Our breeder/pullet (egg-laying chickens) farm partners have been with us, on average, for 11 and 28 years in the Arcadia and St. Cloud areas, respectively. More than 60% of our broiler (chickens raised for market) partners have been raising chickens for us for 20+ years (detailed breakout in table below).

FAMILY FARM PARTNER LONGEVITY YEARS

< 5

6-10

11-19

20-29

30-39

40+

TOTAL

# of Farm Partners

233

OUR GIVING PHILOSOPHY Since our company’s inception in 1926, the Helgeson family has been committed to giving back, earning us the distinction as a Minnesota Keystone Company for donating 5% of our pre-tax profits to charitable causes each year for more than 20 years.

2010 DONATION SUMMARY

• Total Value of Charitable Donations: over three-quarter million dollars • Hunger Relief/Families in Crisis Donations: 2 million meals’ worth of chicken, equaling a retail

value of nearly half a million dollars

2010 SPONSORSHIPS In 2010, we expanded sponsorships for our brands to allow deeper, one-to-one engagement with consumers. Sponsorships were chosen with relevant causes and formats that would foster meaningful connections. Following are a few with specific community causes.

The Gold’n Plump® Brand

HUNGER RELIEF & FAMILIES IN CRISIS

• Gilbert Brown Foundation • Minnesota Zoo - Year of the Farm • Minnesota State Fair/4-H Poultry

• • •

50.1%

COMMUNITY DEVELOPMENT

% BY 40.5% SECTOR

Prince and Princess Competition Second Harvest Heartland Food & Fund Drive Second Harvest Heartland Pallet of the Month Club Scouting for Food

The Just BARE® Brand

• Nice Ride Minnesota:

Minnesota’s First Bike-Sharing Program

• Mahtomedi Community Garden Project

2.0%

7.4% EDUCATION

INDUSTRY

GIVING: BY SECTOR AND VALUE FINANCIAL

Hunger Relief & Families in Crisis

$ 212,440.98 53,534.62 14,122.00 165.00

Totals

$ 280,262.60

Community Development

Education Industry

CHICKEN

TOTAL

$ 97,189.92 2,885.55 915.00 382,485.97

$ 309,630.90 56,420.17 15,037.00 382,650.97

$ 483,476.44

$ 763,739.04

IN PURSUIT OF CUSTOMER “WOW” For the past few years, Tim Wensman and Brian Roelofs have honed in on creating authentic value for our customers by 1) implementing a Good-Better-Best portfolio strategy and 2) transforming our organization from one focused on selling to one centered on our customers’ total business. But in early 2010, their focus changed to the more basic consumer absolute of achieving perfect order. Perfect order is a measure that calculates the error-free rate during the life of an order. But as supply chains vary, so do the metrics that determine what is perfect. We define perfect order as:

• Order accuracy (the right product) • Order fill/case fill (in the right quantity) • On-time delivery (at the right time)

FOCUS FORWARD

•

Achieving Customer “WOW”

“In early 2010, our order fill rate dropped below our 90% target. We didn’t live up to our promise of service excellence, and that was absolutely unacceptable,” explains Tim. On the positive side, our shortcoming spurred three separate Kaizen events around the areas of demand, supply, and planning systems—all of which yielded great learning and insights, resulting in organizational changes that better align our processes with the expectations of our customers. With service levels back on track, Brian and his team have refocused their energies on adding customer value with improved business management skills, a rewards-based trade strategy, and leading category management.

KAIZEN EVENT DEFINED Kaizen (pronounced ki-zen) is a Japanese word commonly used to indicate the long-term betterment of something or someone. The term Kaizen is used in two ways: the first meaning continuous improvement, the second meaning a group of methods to improve work processes. Our events focused on the latter.

Tim Wensman Executive VP of Customer Processes, Tireless Volunteer

Brian Roelofs Director of Sales & Service/Avid Hiker

PLANET Nearly every resource we rely on comes from nature, so maintaining a healthy, thriving eco-system is critical to our survival as a species and company. Throughout our operations, we’re committed to measuring and reducing our environmental impact. However, we realize that our operations account for just a portion of our environmental footprint. Therefore, we are studying our value chain to identify areas where we have the ability to influence positive change. We gauge our performance as it relates to the planet in these key areas: energy, water, and waste reduction.

OUR ENVIRONMENT In 2010, our company conducted a Life Cycle Assessment (LCA) to measure the environmental impacts of our products across their entire value chain. The study revealed that significant environmental impacts fall outside of our direct operational control. Following is a breakdown of where the greenhouse gas emissions occur throughout the life cycle.

• 35% of greenhouse gas emissions occur “upstream” and are related to growing corn and

other feed ingredients.

• 37% come from areas we directly control like the energy used in our barns, feed mills,

and processing facilities, and from materials used for packaging.

• 28% occur “downstream” after our products are shipped to customers and include

activities like distribution, retail, cooking and disposal.

While the above measures are for our Just BARE® boneless skinless breast fillets, the results are similar to what one would see for our other product lines and our company overall. Our environmental mission: find ways to lessen the environmental impacts of the areas we directly control, while proactively involving stakeholders to help expand our influence in the areas we don’t control.

THE LIFE CYCLE OF GNP PRODUCTS PROCESSING PACKAGING

POULTRY GROWOUT

MATERIAL PROCESSING

DISTRIBUTION & RETAIL

CHICKEN LITTER

USER

RAW MATERIALS

DISPOSAL LANDFILL

NATURAL ENVIRONMENT

INCINERATION

Growing the corn and other ingredients to make our chicken feed accounts for

* as measured for Just BARE® boneless skinless breast fillets

35%

of our product’s greenhouse gas emissions.*

OUR FOOTPRINT COMMITMENT Within our operations, we work diligently to reduce our environmental impact in 3 main areas: energy, water, and waste.

ENERGY As the chart indicates, we saw improvements over 2009 in terms of the intensity of our electric, natural gas, diesel and LP gas usage. However, we have more work to do. Some projects that contributed to these savings include heat exchangers, lighting retrofits, and the replacement of electric motors.

WATER Though the intensity of our 2010 water use went up versus 2009, nearly all of the water used during processing is reclaimed, cleaned and returned to the environment through our advanced water treatment facility, which is presently being upgraded with state-of-the-art technology.

Water is essential for ensuring food safety through proper cooling and cleaning, and it’s a source of enjoyment for us in our pastimes. Regulatory and process changes can cause variability in usage year to year. Bruce Hoesley, Wisconsin Family Farm Partner Part of our flock since 2003

2010 vs 2009 ENERGY & WATER USAGE*

INTENSITY CHANGE

ELECTRIC NATURAL GAS DIESEL LP GAS WATER

–1.50% –7.50% –1.30% –14.20% +2.70%

*Based on INTENSITY of use. INTENSITY is calculated by dividing total volume used by finished unit for sale. For us, that’s per finished pound of chicken.

Each month, our power reduction team meets to identify possible ways to reduce energy—using Lean and continuous improvement principles.

“Growing crops is a key area where we can influence positive change. By collaborating with stakeholders, including our own family farm partners, we can discover creative, effective ways of lowering the environmental impacts relating to the growing of feed crops.” Paul Helgeson Sustainability Manager

The vinyl material used for our billboard ads was recycled into user-friendly messenger bags (shown) and reusable totes. 19 WASTE REDUCTION We took some small steps in reducing waste in 2010 but have some big ideas moving forward. This year’s improvements included the following:

• A new linerless label for Just BARE® that doesn’t require a release liner or peel-away backer

versus traditional liner-style labels. A good change, but not good enough, so we’ll keep diligently researching new material options.

• A commitment to using materials made of post-consumer waste for all of our marketing

products—from sales collateral to the plastic case dividers used in supermarket meat cases.

• Repurposing our billboard vinyls (these are the large vinyl sheets onto which ad images are

printed) into eye-catching messenger bags for our sales personnel and reusable tote bags for consumer giveaways.

• Providing our plant waste to Mississippi Topsoils who composts it with wood and yard refuse

to create nutrient-rich, natural-based potting soil, planting mix, and compost products.

FOCUS FORWARD

• • • •

Solar Energy Project LED Lights in Barns = Less Energy Consumption Pursuit of More Sustainable Packaging Reusable Pallets

THE LIFE CYCLE OF LEADERSHIP Paul Helgeson, the son of current CEO Michael Helgeson, learned about the poultry industry watching and listening to his father and grandfather. Yet he found his passion not just in the poultry industry but in the underpinnings of what makes a sustainability-focused company thrive. His vision: to help the company his great-grandfather founded lead the poultry industry in social responsibility, environmental sustainability, and profitability. Working closely with Doug Connell, Director of Quality and Continual Improvement, Paul has helped forge specific goals to evoke positive changes throughout the entire supply chain. In fact, he’s helping to drive our company’s new 4P value framework, and to develop measures that will guide our way.

Featured Accomplishments of 2010:

• Being one of more than 60 companies worldwide to participate in the World

Resources Institutes road testing of a new standard that will measure the greenhouse gas (GHG) emissions of individual products. Our Just BARE boneless skinless breast fillets were the focus for this test.

• The completion of a Life Cycle Assessment (LCA) for the company’s Just BARE®

brand and attaining Carbon Trust Certification. We are one of the first U.S.- based companies to certify our products and place our carbon footprint reduction commitment on every Just BARE package.

• Supporting wind energy through the purchase of renewable energy certificates

(also commonly called renewable energy credits or RECs) for all the electricity we use in the production of our Just BARE line.

You can learn more about these accomplishments in the Sustainability section of our Just BARE website at justbarechicken.com.

Paul Helgeson Sustainability Manager 4th Generation Helgeson Biking Enthusiast Paul on a Nice Ride MN bike. Learn more at niceridemn.org.

HEAT RECLAMATION PROJECT AT OUR ARCADIA PROCESSING PLANT In 2010, the Arcadia production facility evaluated a system that would capture waste heat from our compressors in the plant and use it to preheat incoming water. A feasibility study was conducted by Rhode Brothers from Plymouth, Wis. and the Wisconsin FOE (Focus on Energy). Based on the positive findings of the study, the system was installed.

“With the old system, we wasted all the heat generated by the compressors. The new system captures nearly 90% of this wasted heat. It will cost nearly a half million dollars but will pay for itself in annual energy savings within 2 years.”

The system is now operational. Heat is recovered from our compressor system at a rate of 4,800,000 BTU’s/ hour. Estimated annual energy savings:

$178,000

This project received the 2010 BUILD Wisconsin Award by The Associated General Contractors of America and was awarded an FOE grant in 2010.

Greg Tacheny Project Engineering Manager Avid Traveler

POULTRY We’re acutely aware that consumers entrust us daily with their health and well-being as well as that of their families. And that awareness is what drives us to make no compromises when it comes to the care of our chickens or our promise of safe, relevant, transparent, and truthfully labeled products. We gauge performance as it relates to poultry by these key measures: animal welfare, the ability to deliver products that meet consumers’ needs, speed to market, product satisfaction and recognition, truthful labeling, and food safety assurance.

ANIMAL WELFARE COMMITMENT Ensuring Humane Care: We follow Animal Welfare Guidelines as established by the National Chicken Council (NCC), industry experts and university scientists, and routinely validate our performance against the established NCC Animal Welfare Audit Checklist. Furthermore, we enforce a policy of zero tolerance for any deliberate inhumane treatment from hatching through euthanization. Some of the areas we measure and monitor through our Active Grower Management Program to ensure the proper care and handling of our broiler (meat chickens) and breeder (egg-laying chickens) flocks:

• Demonstration of skilled, knowledgeable and conscientious caretaking by growers, field

• • • •

• •

service technicians and our staff veterinarian Chicken behaviors within the barns Quality and nutritional levels of our chicken feed Conditions within our technologically advanced, environmentally controlled, cage-free barns Proper function of handling and transport equipment/adherence to standards from hatchery through processing Humane euthanization practices* Annual animal welfare training

*We abide by and comply with all USDA regulations and the National Chicken Council Animal Welfare standards for humane slaughter. This includes humanely rendering the chickens unconscious prior to them being euthanized. To do this, we use the electrical method established and approved by the USDA.

HUMANELY RAISED AN ANIMAL RIGHT AND CONSUMER REQUIREMENT

79% of consumers rated knowing that the meat products they buy come from animals that have been humanely raised as “Very or Extremely Important.” SOURCE: 2010 Dish on Chicken Consumer Panel Study

Rebecca (left) & Nancy Filla, Minnesota Family Farm Partner Part of our flock since 1993

FOCUS FORWARD

• •

Ongoing Animal Welfare Improvements Continued Enhancement of our Active Grower Management Program • Happy and Healthy Chicken Research Project

PRODUCT PERFORMANCE CONSUMER-DRIVEN Developing products that are relevant, safe, and on-target for consumers requires ongoing insight and dedicated resources. A key source of insight is our Dish on Chicken (DOC) Panel. DOC Statistics:

• Nearly 1,000 strong • 8 studies conducted in 2010—ranging from product packaging

to animal welfare

• Extremely low churn rate of <1% versus typical 7% natural churn Consumer Relevance: 61% of our customers said they were “satisfied to very satisfied” in terms of the relevancy of our new products for their shoppers.*

SPEED TO MARKET

• Cycle Time: Using Lean and Six Sigma continuous improvement tools, cycle-time was

reduced by 4 weeks for our products over 2009.

• Frequency of New Product Introduction: 78% of our customers said they were “satisfied to very

satisfied” with our performance ; 55% rated us as “better than/much better than” our competitors.*

2010 PRODUCT ATTRIBUTE PERFORMANCE

Percent of CUSTOMERS who rated us BETTER THAN/MUCH BETTER THAN our STRONGEST competitors.

65% 64% 62% 61% 58% 55% 54% 51% 45% 42%

Shelf Life Piece Size Consistency Product Quality Package Quality Appearance Trim Provides Desired Health Attributes Freshness Shrink Product Selection

0% 10% 20% 30% 40% 50% 60% 70% * SOURCE: Online Customer Satisfaction Survey, ClearData Research, July 2010

PRODUCT PERFORMANCE

(continued)

CONSUMER SATISFACTION In our 2010 Consumer Tracking Study for Gold’n Plump®, we asked the advocates of our brand (those consumers who have recommended us) what the top influencing factors were for recommending us. Here’s what they said:

• • • • • •

Consistent high quality A brand/company I trust Product variety Raised by family farmers Package integrity Local company

TRUTHFUL LABELING We work hard to ensure our products are accurately and truthfully labeled. That’s why, for the past several years, we’ve been part of the Truthful Labeling Coalition (TLC). It consists of truly all natural chicken manufacturers, several consumer activist groups, and consumers from all 50 states.

PRODUCT RECOGNITION Just BARE® Boneless Skinless Thighs were named a Top 125 Best Packaged Foods For Women ’10 winner by Women’s Health Magazine.

FOOD SAFETY LEADERSHIP Providing safe food to consumers isn’t a new concept, rather it is a long-standing value initiated by E.M. Helgeson, our company’s founding father. We have documented standard operating procedures (SOP’s) for every critical process and conduct real-time monitoring to ensure compliance. What is new for 2010 is our achievement of Safe Quality Food (SQF) 2000 Level 2 certification at all of our processing facilities. Read the full story on page 27.

The TLC’s purpose: to stop the misleading use of the ‘All Natural’ label that USDA currently allows. Learn more at truthfullabeling.org

THE PACKAGING BALANCING ACT If you ask Tracy Miller what the main goal is for our packaging, she’ll tell you that first and foremost, it’s making sure our chicken is safe and wholesome for consumers. Followed by these additional goals (not in order of priority):

• Being sure the package can withstand the rigors of

production, transport, and storage

• Minimizing consumer handling of raw product • Maximizing the view of the quality of the product inside • Making our products more convenient to use (based on

•

consumer needs for speed, portion sizes, food storage, and lifestyles) Reducing impact on the environment

Accomplishing all of these goals is a constant and challenging balancing act. “There are lots of more sustainable materials for packaging out there, but much of it won’t survive the production process or provide the barrier of protection needed for food safety,” Tracy says. “But we remain committed to finding better solutions for consumers and our environment.” Tracy and the product development team will continue to pursue the goals with consumer safety leading the way.

Tracy Miller Director of Product Development Horse Enthusiast

FOCUS FORWARD

•

Continued Product and Packaging Evolution

SAFE QUALITY FOOD 2000 LEVEL 2

MEETING OUR 2010 SQF 2000 LEVEL 2 CERTIFICATION GOAL In last year’s report, we noted that we would be Safe Quality Food (SQF) 2000 Level 2 certified by the end of 2010. We met that goal in December. According to Ann Voigt, this initiative began in 2009 with training and ended in late 2010 with all three of our facilities earning certification. But that’s the simple version. “This achievement took tremendous effort and emphasis company-wide,” she says. “By working collaboratively, we determined how all of our facilities can work together better, defined the best ways of doing things, and created consistency from plant-to-plant—all critical to producing safe quality food.” What customers and consumers should know: the set of standards required for certification is based on the best manufacturing practices worldwide—for all food products not just poultry. And today, we don’t just talk SQF; we live it. In fact, we’re already conducting monthly reviews to keep us on task every day and prepare us for our annual recertification at the end of 2011. Learn more at: http://www.sqfi.com/suppliers/certification-steps/

FOCUS FORWARD

•

Defining the Next Generation of Quality and Safety

What is the SAFE QUALITY FOOD Program? A quality program recognized by the Global Food Safety Initiative (GFSI), an organization representing over 70% of food retail revenue worldwide and managed by the Food Marketing Institute (FMI). There are two SQF Codes: SQF 1000 for farmers/producers and SQF 2000 for food manufacturers/distributors. What does Level 2 Certification Mean? A food safety risk analysis of the product and its associated processes has been completed to identify the hazards and the actions taken to eliminate, prevent, or reduce their occurrence.

Ann Voigt Food Safety Systems Manager, CQA Weekend Baker

PROGRESS Thriving businesses share a passion for excellence within their own processes, operations, and greater communities. To that end, our success yields more than just a financial return for our shareholders; it helps us provide prosperity for our team members, business partners, their families, and the communities in which we all, collectively, live and work. We gauge our performance in the area of progress by these key measures: the vitality of our people, planet, and poultry value areas; our growth and reach; our customer recognition; our ability to continuously improve; and the awards we receive.

2010 SALES GROWTH & REACH Over the years, we’ve strategically built our customer base to diversify the product portfolio and improve the mix of products we sell. This helps us balance production and maintain profitability—both critical to our ability to grow. These customers fall into the Retail/Deli, Foodservice and Industrial segments of the market. Customers range from national distributors to regional independent retailers and foodservice operators. A few highlights from the year:

Customer Recognition

• 2010 Unified Grocers Perishable Vendor of the Year Award given for product quality and

•

service excellence. 2010 Strength of Service Award from Associated Retail Stores awarded to our company and our broker, Rodon Foods.

Customer Growth

• Record year in terms of sales volume • National growth with some of our long-standing customers • Expanded distribution of our antibiotic-free offerings in both retail and foodservice

2010 SALES:

HISTORICAL GROWTH* OF REVENUE AND DRESSED POUNDS

•

REVENUE

•

DRESSED POUNDS

*Approx. 5 year averages over past 20 years

$400

400

$350

350

$300

300

$250

250

$200

200

$150

150

$100

100

$50

$0 (IN MILLIONS)

0 POUNDS 1990

1995

2000

BUSINESS SEGMENT

RETAIL

DELI

FOODSERVICE

INDUSTRIAL / EXPORT *Does not include surplus sales so percentages will not equal 100%

DISTRIBUTION AREA FOODSERVICE RETAIL & DELI

• •

2005

2010

(IN MILLIONS)

NET SALES NET SALES DOLLARS* POUNDS*

38.58% 15.93% 20.63% 16.97%

18.71% 13.17% 15.50% 20.86%

$300 MILLION

RECORD-HIGH, 360 MILLION LBS. OVER THE LAST 3 YEARS WE HAVE GROWN

OVER THE PREVIOUS 3 YEARS 29

PROCESS EXCELLENCE CONTINUOUS IMPROVEMENT (CI) COMMITMENT We strive for process excellence using Lean Manufacturing and Six Sigma approaches for both process and product improvement. Peak process performance is maintained through ongoing measurement and real-time, data-driven decision-making. Ongoing, company-wide training infuses Lean and Six Sigma learning across the organization and provides advanced Green and Black Belt certification.

2010 CI PERFORMANCE RESULTS Number of Projects • Lean = 52 • Six Sigma = 16 • ESP (Employee Suggestion Program) Ideas Adopted = 351 • Company-wide Savings = $2.9 million Top Improvements: 1. Broiler Barn Lighting Project. Changing from incandescent to florescent bulbs has proven to reduce electrical demand per barn by 33%. Estimated annual savings: $500,000 per year. 2. Arcadia By-products Tanker Reduction. Decreased tanker demand by 20%. Estimated annual savings: $100,000. 3. Feed Ingredient Efficiency Project in Arcadia. Altered ingredient size requirements during milling to form a “non-traditional” pellet. This improved digestibility by the chickens and cut energy use at the mill. Estimated energy savings each year: $88,000. 4. Reducing Defects Through Lean. Effectively improved bone-in thigh capacity by reducing defects and mis-cuts. Estimated annual savings: over $215,000. 5. Bird Livability. Boosted the health and livability of our breeder (laying) hens by improving air ventilation. Estimated yearly savings: over $80,000.

CI GOAL: To harness and apply the power of all three CI tools throughout our company PROBLEM-SOLVING

SIX SIGMA

LEAN

Structured method to resolve day-to-day breakdowns in manufacturing or service processes for improved:

Reducing defects and variations for greater:

Improving efficiency and cycle times for:

THE RESULTS

RELIABILITY, UP-TIME & SERVICE

STABILITY, ACCURACY, PROCESS CONTROL & QUALITY

IMPROVED SPEED & EFFICIENCY

THE METRICS

Customer Satisfaction, High Team Member Engagement, Process Control, Leading Quality & Safety Assurance, Lower Environmental Footprint

THE TOOLS

2010 AWARDS Here is a summary of our most notable awards for the year.

• 2010 Siehl Prize given to Don Helgeson, Chairman of the Board and

past Chief Executive Officer, for Agribusiness from the University of Minnesota for his lifetime achievement and contributions to Minnesota agriculture.

• 2010 Joint Poultry Industry Safety & Health Council Honor Award Don Helgeson Chairman of the Board Advocate of Agriculture

and Merit Award given to our Cold Spring and Luverne processing facilities, respectively. The awarding council represents about 95% of the nation’s poultry products and workers. Just 48 were awarded in 2010, so our facilities’ safety performance ranks highly considering there are about 185 chicken processing facilities, nationwide.

• 2010 Governor’s Meritorious Achievement Safety Award received by our Cold Spring

Processing Plant. This was one of just 148 awards given statewide.

• 2010 United Way Campaign’s Chairman’s Award of Excellence for outstanding 2010 campaign

results.

• 2010 Unified Grocers Perishable Vendor of the Year Award given for product quality and

service excellence.

• 2010 Strength of Service Award from Associated Retail Stores awarded to our company

and our broker, Rodon Foods.

• Just BARE® Boneless Skinless Thighs were named a Top 125 Best Packaged Foods For

Women ’10 winner by Women’s Health Magazine.

• 2010 BUILD Wisconsin Award for our Heat Reclamation Project by The Associated General

Contractors of America.

“Since I could walk…I dreamed of having a farm and being able to make a living with my wife and family… [I’d like to be remembered as] somebody that took care of the land and did his part to feed the country.” Bill Wuertz Minnesota Family Farm Partner (pictured here with his daughter, Abbie)

Part of our flock since 2000

THE FOOD-FOR-FUEL ISSUE OUR POSITION: As a food company, we do not support the use of food for fuel. To clarify, we do not oppose ethanol; we are simply proponents of using other non-food sources. We believe the use of food for fuel is a significant, underlying factor to skyrocketing production costs and food inflation, which negatively impacts our industry and, ultimately, our consumers. Over the course of 2011, we will be actively sharing our stance and seeking a workable solution.

A FEW FACTS

40% = ETHANOL

USDA estimates that corn used for ethanol will hit a record five billion bushels in 2010-11, or 40% of the U.S. corn supply.

The government-subsidized ethanol industry is diverting acreage to corn for fuel production that could be used for other types of crops. This is resulting in increased prices for corn and other grains: corn prices up 53% in 2010, wheat up 47% and rice now at its highest level in two years.

CORN 53%

WHEAT 47%

Meat prices rose 9.2% in February 2011 over February 2010, and are expected to continue to rise even higher, both domestically and globally.

PRICES 9.2%

Meanwhile, worldwide food demand is expected to double by the year 2050. Each year, demand continues to rise. These trends will further drive millions of people into poverty and starvation. Corn prices at the time this report was published were at record high levels, resulting in tremendous cost pressure on the livestock and poultry industries which will lead to food inflation.

FOOD DEMAND

BY 2050

THE COMPLETION OF ARCADIA PLANT

Mandy Korpal Arcadia Plant Manager Apostle Islands Kayaker

EXPANSION

In late 2010, construction was completed at the company’s processing plant in Arcadia, Wisconsin, bringing to a close a multiyear expansion, which had been ongoing since we purchased the complex in 1993. Years of steady improvements have tripled the plant’s production capacity and made the Arcadia Operation a critical force in improving our company’s cost structure, competitiveness, and ability to serve our growing deli and foodservice businesses. “This expansion was a tremendous team effort—touching nearly every one at some point,” says Mandy Korpal. Bill Petz agrees, describing the achievement as remarkable. “The team member and community support over the years has made all the difference,” he adds. Today’s total regional impact of the company’s Arcadia operations is significant (see chart for comparison to 1993).

1993

NOW

Local corn purchases

1.5 million bushels

3.9 bushels

Local farm family partners (contract growers)

170

Farm family partner payments

$2.2 million

$9.8 million

Number of team members (employees)

280

500

$4.4 million

$23.8 million

Total payroll

Total Production Capacity 320,000 chickens/week

•

FOCUS FORWARD

970,000 chickens/week *up to 1,000,000/week during peak demand

Completion of Remaining Grower Barns in Arcadia • The Cold Spring Waste Water Treatment Expansion, Target: June 2011

Bill Petz Director of Arcadia Operations Montana Zip-Liner

Chicken is Americaâ&#x20AC;&#x2122;s favorite meat. Annual U.S. chicken consumption per person rose to 82.2 pounds in 2010 and is expected to grow to 84 pounds in 2011. By comparison, beef declined to 59.6 pounds and pork to 47.7 pounds. SOURCE: USDA - March 2011

ARCADIA OPERATIONS BRAND ADVOCACY & MARKETING CONTINUOUS IMPROVEMENT CUSTOMER CARE & SERVICE FINANCIAL MANAGEMENT-CORPORATE FINANCIAL MANAGEMENT-CUSTOMER PROCESSES HUMAN RESOURCES INFORMATION SYSTEMS & STRUCTURE LIVE STRATEGIES & PROCESSES

2010

PLANT OPERATIONS PRODUCT DEVELOPMENT QUALITY RESEARCH & DEVELOPMENT SALES

FARM TO FORK TEAM

SUPPLY PLANNING

Don Helgeson

Mike Helgeson

Steve Jurek

Chairman of the Board

Chief Executive Officer

Executive Vice President Executive Vice President Operations & Administration Customer Processes

Tim Wensman

LEARN MORE: Visit gnpcompany.com or talk to one of our experts. Get contact information for anyone on our Farm To Fork Team from our Human Resource Generalist, Darla Stellmach, at dstellmach@goldnplump.com. P.O. Box 1106 | St. Cloud, MN 56302-1106 | 320-251-3570 | gnpcompany.com

Todayâ&#x20AC;&#x2122;s American farmer feeds about 155 people worldwide. In 1960, that number was 25.8. Less than 1% of U.S. population claim farming as an occupation. SOURCE: Farmers Feed US & EPA

Ken & Janell Halama, Wisconsin Family Farm Partner Part of our flock since 2004

FOOD FOR THOUGHT

Agriculture employs more than 24 million American workers (17% of the total U.S. work force).

Todayâ&#x20AC;&#x2122;s American farmer feeds about 155 people worldwide. In 1960, that number was 25.8. SOURCE: Farmers Feed US

Less than 1% of the 285,000,000 people in the U.S. claim farming as an occupation (and about 2% actually live on farms). The number of farms in the U.S. is about two million.

The U.S. farmer is the most productive in the history of the world.

Food is more affordable in the United States than in any other developed country in the world.

There is a definite trend toward fewer farms producing an increasing share of agricultural products in this country.

In spite of many challenges, U.S. agriculture is uniquely positioned to provide for the food and fiber needs of a growing world community. SOURCE: EPA www.epa.gov