Supply Chain Metrics That Matter: A Focus on Food & Beverage Companies 2017

A Focus on Food &
Beverage Companies
A Seven-Year View of Progress on Supply Chain Excellence
11/30/2017
By Lora Cecere
Founder and CEO
Supply Chain Insights LLC
and Samuel Borthwick
Research Associate
Supply Chain Insights LLC
Supply Chain Metrics That Matter

Contents
Research
Disclosure
Executive Overview
A Closer Look at the Industry
Progress Versus Other Industries
A Closer Look at Food and Beverage Companies’ Growth
Value
Performance
Cash-To-Cash Cycles
Industry Focus
Recommendations
Conclusion
Appendix
Other Reports in This Series
About Supply Chain Insights LLC
About Lora Cecere
About Sam Borthwick
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Research
Supply Chain Metrics That Matter is a series of reports published throughout the year by Supply
Chain Insights LLC. Each report in the series is a deep analysis of supply chain performance within
an industry. This report focuses on the Food & Beverage manufacturing industry for the period of
2010-2016. Here we analyze the trade-offs to balance growth, profitability, cycles, and complexity.
Within the world of supply chain management, each industry is unique. It is dangerous to list all
industries in a spreadsheet and declare a supply chain leader. Instead, we believe supply chain
excellence needs to be evaluated based on a balanced portfolio of metrics, over time, by the peer
group. In this series of reports, we analyze the potential of a supply chain peer group, share insights
from leaders within each industry, and give recommendations based on general market trends.
Disclosure
Your trust is important to us. As such, we are open and transparent about our financial relationships
and our research process. This independent research is 100% funded by Supply Chain Insights.
These reports are intended for you to read, share, and use to improve your supply chain decisions.
Please share this data freely within your company and across your industry. All we ask for in return is
attribution when you use the materials in this report. We publish under the Creative Commons
License Attribution-Noncommercial-Share Alike 3.0 United States, and you will find our citation policy
here.

Executive Overview
The Food and Beverage industry is a crowded market with many players. While the competition is
intense, demand for healthy and fresh food products is high, and the industry is poised to grow in a
volatile economy. During tough economic times, consumers will cut spending on products they do not
need; however, they will not cut spending on food and beverages to the same extent.
The key to a competitive advantage is aligning and synchronizing the supply chain to manage
material spend in the face of ever-changing demand. Few do this well. Consumers want local and
fresh. They want brands they can trust. Traditional food manufacturing supply chains are in conflict,
offering packaged foods with long shelf lives.
To try to drive excitement, companies invested in line extensions, a variety of different flavors, sizes,
and variety packs, all causing supply chain difficulties for them. This complexity added cost,
increased demand volatility, and created uncertainty. As a result, companies struggle to anticipate
which flavor, or size, consumers will demand at a given time.
Consumers are fickle about what they eat. As a result, the Food and Beverage Industry arguably
sees more consumer shift in demand than any other industry. Thus it becomes crucial that food and
beverage companies implement outside-In processes. Becoming market-driven allows companies to
better sense shifts in demand.
The Food and Beverage industry is also heavily regulated, due to it being a potential risk to so many
consumers. The Food Safety Modernization Act dictates that companies must use approved suppliers
and perform due diligence in monitoring supplier activity. Product fraud in the Global Food and
Beverage industry has been extremely prevalent and presents a high-level risk to the company. Olive
oil containing motor oil or corn oil, and alcoholic drinks containing ethanol are examples of fraudulent
food products.
Traceability from supplier to consumer becomes ever more important for this industry to ensure
product authenticity, as well as establishing trust with the consumer. Smart labeling and track-and-
trace visibility are industry imperatives.
In Table 1, we take a closer look at the food industry within the larger network of the consumer value
chain. The food industry averaged growth of 4% over the period of 2010-2016. However, when the
rates of 2010 are compared to those of 2016, the rate of growth is up 10% globally. The beverage
industry—where companies are competing for consumers throats—has an even more pronounced
growth rate. Food and beverage are both growing at a faster rate than personal products (often

termed household products). However, due to rising commodity prices and increased complexity,
operating margin decreased 52% when 2016 is compared to 2010; and inventory turns, while
averaging 6.51 % for the period of 2010-2016, were down substantially versus 2010. Cash-to-cash
improvements were driven by an increase in Days of Payables versus improvements in receivables or
days of inventory.
Table 1. Overview of Industry Trends for the Period of 2010-2016
The impact of complexity, the increase in commodity costs, and shifts in consumer preferences are
significant, resulting in a steady decline in margin as shown in Figures 1 and 2.

Figure 1. Overview the Food Industry’s Trend for the Period of 2006-2016
The food industry was more resilient through the recession than the beverage industry.
Figure 2. Overview the Beverage Industry’s Trend for the Period of 2006-2016

In this report, we take a detailed look at elements of the metrics portfolio and then wrap up with
excerpts from annual reports to enable the reader to understand the “voice” of the industry. At the end
of the report are recommendations to drive supply chain improvement. We hope these reports can
help supply chain leaders to set reasonable targets and expectations for performance improvement.

A Closer Look at the Industry
When we first started the research for the Supply Chain Metrics That Matter report series, we
believed that through the combination of an investment in technology, people, and process,
companies could drive improvement in inventory turns and operating margin as shown in Figure 3. As
will be seen in this report, this is not the case in the Food and Beverage industry.
Figure 3. Driving Performance Improvement
Among food and beverage companies, The Boston Beer Company (Boston Beer is the brewer of
Samuel Adams of other beer brands) and The Hershey Company (Hershey’s) are supply chain
leaders driving both performance levels higher than the industry peer group while also driving
improvement. However, most of the industry is at a stasis in metrics performance. Boston Beer
performed above the industry averages in all performance metrics showing that a small and focused
company can outperform.
To understand supply chain excellence, let’s look at year-over-year patterns in metric performance
through visualization via orbit charts. To understand an orbit chart, let’s examine Figure 4. The
performance of Boston Beer and Compañía Cervecerías Unidas SA (CCU) is charted year-over-year
at the intersection of inventory turns and operating margin (CCU is a similar beer manufacturer in
South America). The patterns are used to define supply chain excellence. As can be seen, the
average operating margin for Boston Beer for the period of 2004-2016 is 13%, while CCU is higher at
16%. Inventory turns for Boston Beer are 7.61 versus 3.85 for CCU. CCU has a slightly better

operating margin than Boston Beer, but since its inventory turns are significantly lower, it is held back
from making the path to the “Best Scenario.”
The most significant difference is the movement of Boston Beer towards the “best scenario” while
CCU is losing ground on operating margin.
Figure 4. Orbit Chart of Boston Beer and Compañía Cervecerías Unidas SA (CCU)
Orbit charts and their patterns tell the story. It is a tale of year-over-year metrics changes. The pattern
of continuous improvement makes Boston Beer the winner.

Patterns of supply chain metrics come in many different forms. Note that in Figure 5, both The Coca-
Cola Co. and PepsiCo have both regressed in their operating margin, yet both made improvements in
inventory turns.
Figure 5. Orbit Chart Comparison of The Coca-Cola Co. and PepsiCo
In a similar manner, note the patterns of General Mills, Inc. and Nestlé S.A. in Figure 6. While Nestlé
shows improvement, both companies show wide swings on the orbit chart, representing a lack of
consistency and the inability to be resilient. In this comparison, General Mills is the supply chain
winner.
Food and Beverage companies are often inconsistent as a result of such volatile consumer demand
and the lack of supply chain orchestration to translate consumer demand to supplier strategies.

Figure 6. Orbit Chart of General Mills, Inc. and Nestlé S.A.
Progress Versus Other Industries
The Supply Chains to Admire, and the Metrics That Matter, research rewards companies that show
improvement while outperforming their peer groups. Companies with tight upward patterns at the
intersection of the metrics are highlighted as winners, while companies with wide swings and
backward progression are penalized.
To help companies understand supply chain excellence through the insights of orbit chart
performance, we developed the Supply Chains to Admire analysis. An overview of the methodology is
shared in Figures 7 and 8, with a complete discussion in the full Supply Chains to Admire 2017
report. Companies within the Food and Beverage Industry that performed well enough to be
WINNERS in the 2017 Supply Chains to Admire included The Hershey Company and The Boston
Beer Company. Prior year award winners included Anheuser-Busch InBev and General Mills, Inc.

Within the industry, Hershey’s has done the best job in balancing performance, improvement, and
value.
Figure 7. Overview of the Supply Chains to Admire Analysis
Figure 8. The 24 Winners of the 2017 Supply Chains to Admire Analysis

A Closer Look at Food and Beverage
Companies’ Growth
In the last six years, consumers pushed back against big food. Growth slipped for both food and
beverage companies due to flagging trust issues with big food brands. While the consumer wanted
fresh, healthy and local, food and beverage companies focused on standardized and packaged
products. The focus is on healthier eating.
Growth during 2004-2006 was 9% and even increased slightly to 10% during the peak of the Great
Recession during 2007-2009. The industry finally saw a sharp decline during the 2010-2016 period
when growth fell to 4% for food manufacturers and 6% for beverage companies. While in many
industries there is a relationship between improvement and growth, this is not the case for these
manufacturers (higher levels of growth often help companies to drive faster levels of improvement).
Table 2. Growth and the Supply Chain Index in the Food Manufacturing Industry

Table 3. Growth and Supply Chain Index for Beverage Companies
The Supply Chain Index is a measure of supply chain improvement. The lower the score, the faster
the rate of metrics improvement at the intersection of inventory turns and operating margin, and
Return on Invested Capital and Growth. In many industries, growth and supply chain improvement
are tightly coupled. However, this is not the case in the Food and Beverage Industry. For more on the
Supply Chain Index, reference the Appendix.
Note that while Pulse Beverage had unprecedented Revenue Growth, they performed very poorly.

Value
Traditional supply chain leaders focus on costs, not on value. There is no industry-standard definition
for value. To try to drive change, here we share the results on two value metrics: market capitalization
and Price to Tangible Book Value. Overall, for the industry, the Price to Tangible Book Values are
low. Companies in the Food and Beverage industry vary a great deal in their valuations. Some
companies are niche companies and specialize in only one food product, while other companies like
General Mills are vertically integrated and retained higher market capitalization.
Table 4. Overview of Market Capitalization and Price to Tangible Book Value for Food Manufacturers

Table 5. Overview of Market Capitalization and Price to Tangible Book Value for Beverage Companies

Performance
While growth and Return on Invested Capital both fell drastically in the 2010-2016 period, the
remaining metrics have largely been a picture of consistency for all but growth.
As you scan Table 6 for the food industry, note that inventory turns and operating margin have
remained extremely stable over the 12-year range. Cash-to-cash increased four days when
comparing the post-recession period to the pre-recessionary timeframe. Much of this is due to the rise
in product and channel complexity.
Table 6. Company Overview and Performance for Food Manufacturers
The trends are similar in the beverage industry. Growth declines were met with a focus on cost-
cutting and improvements in labor productivity. The most dramatic decline is in asset utilization. In the
battle for the throat, companies increased product complexity and built global supply chains with an
inverse impact on Return on Invested Capital.

Table 7. Company Overview and Performance for Beverage Companies
When the Cash-to-Cash value is low, the need for working capital is reduced. In this period, while
most industries improved cash-to-cash, this was not the case for Food and Beverage.

Cash-To-Cash Cycles
Cash-to-cash is a compound metric that combines Days of Receivables, Days of Inventory, and Days
of Payables. The formula is:
𝐶𝑎𝑠ℎ − 𝑡𝑜 − 𝐶𝑎𝑠ℎ = 𝐷𝑎𝑦𝑠 𝑜𝑓 𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒𝑠 + 𝐷𝑎𝑦𝑠 𝑜𝑓 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 − 𝐷𝑎𝑦𝑠 𝑜𝑓 𝑃𝑎𝑦𝑎𝑏𝑙𝑒𝑠
In Tables 8 and 9 we share the impact of supply chain decisions on the components of cash-to-cash.
As seen, cash-to-cash components in beverage are 2X what they are for food manufacturers. In both
food and beverage manufacturing, inventory levels rose since 2010. This was partially offset by an
increase in Days of Payables.
Table 8. Impact on Cash-to-Cash Elements Food Manufacturing
Table 9. Impact on Cash-to-Cash Elements Beverage Manufacturing

Industry Focus
To get a flavor for the industry, we comb through annual reports to consolidate and share supply
chain related trends. This allows the reader to “hear the voice of the industry.”
What do we see? As growth in the industry slowed for branded food products, Food and Beverage
companies attempted to reduce costs by the elimination of waste, improving productivity and
minimizing packaging. These cost savings were channeled into sales and marketing efforts to try to
stimulate growth. These efforts had marginal success. Traditional sales and marketing programs lost
effectiveness with the digital consumer, and the shift in power to the retailer. Most companies focused
on saving money within functional silos but lacked visibility of total costs to orchestrate cost savings
cross-functionally to improve the bottom line. The result? Time to question traditional approaches.
2014
General Mills, Inc.
The operating environment for food manufacturers in 2014 was characterized by slow rates of sales growth in
developed markets, with better trends in the world’s emerging markets. In our core market — the United States
— retail food and beverage industry sales grew just 1.5 percent across channels tracked by Nielsen. This
compares to 3.5 percent average industry sales growth over the past five years. Input costs were a headwind
for most food companies during the year; in our case, input costs were up 4 percent.
Net sales for our International segment grew 4 percent in 2014 to $5.4 billion. Adjusted operating profit, which
excludes the effects of Venezuelan currency devaluation, also grew 4 percent to $535 million. Foreign
exchange translation reduced these reported sales and earnings growth rates; on a constant-currency basis,
International sales grew 8 percent and adjusted operating profit rose 10 percent. Net sales for our Latin
American region crossed the $1 billion threshold, with strong growth on the base business and a full year of
Yoki operations included in 2014. And sales in the Asia/ Pacific region grew 9 percent on a constant-currency
basis, powered by another year of double-digit sales growth in Greater China.
Our HMM efforts apply across all parts of our company. What started as an initiative in the U.S. is now fully
embraced throughout General Mills, including our International business and our joint ventures. We’ve found
ways to reduce the amount of packaging used for many of our products. This lowers raw material costs and
transportation costs, as less packaging means less weight to ship. We’ve reduced energy costs as we’ve
determined the optimal manufacturing run cycles for various cereal products. And at one of our mills, we burn
the oat hulls that are a byproduct of the milling process as an alternative source of energy for that facility.
Internationally, we’ve found cost synergies as we combine dairy purchasing for our international Yoplait yogurt
and Häagen-Dazs ice cream. And we’re bringing HMM to our Yoki business, re-engineering production,
packaging and scheduling to develop a more cost-efficient, high-performing manufacturing facility, while
maintaining high-quality, affordable products to meet consumer demand. We also partner with suppliers and
customers to find ways to reduce inventories and associated costs. Through efforts like these, we’ve achieved
$2 billion in cumulative savings from supply chain HMM in the past five fiscal years, and we remain on track to
reach our goal of a cumulative $4 billion in supply chain HMM savings for the decade ending in fiscal 2020.

The Coca-Cola Co.
First, we are making targeted, disciplined investments in our brands and our future. In 2014, this meant
ramping up our spending to build our brands—including a double-digit increase in media spend—and focusing
on our strongest, most promising opportunities. We also announced strategic investments in Keurig Green
Mountain, Inc. and Monster Beverage Corporation and expanded our venture with Select Milk Producers, Inc.
With the first, we’re developing Keurig Kold,2 a revolutionary new pod-based system that will enable people to
produce Coca-Cola and many of our other delicious beverages at home, starting in late 2015. Meanwhile, our
expanded partnership with Monster will strengthen our position in the fast-growing energy drinks category. And
we introduced fairlife3 ultra-filtered milk in select U.S. cities, preparing for a national rollout of the value-added
dairy brand in early 2015. Second, we brought an added emphasis to revenue and profit growth, starting with
more distinct and clearly segmented roles for our markets. In emerging markets, we’re striving to grow mostly
via greater volume to drive awareness and build our brands. In developing markets, we know ideal growth
takes a balance of volume and pricing. In developed markets, we see price/mix as our most powerful growth
lever. As part of our focus, we announced that revenue growth would be added as a metric in the Company’s
incentive plans starting in 2015. Third, we began to refocus on our core business model of building brands and
leading an unmatched global system of bottling partners. For 2014, this meant accelerating the refranchising
process in North America—transferring ownership of Company-owned bottling territories back into the hands of
independent operators. By year-end, we had moved about 5 percent of U.S. bottler-delivered volume to new
and existing bottling partners. We expect this pace to double in 2015 and double again in 2016. In addition, we
worked with bottling partners in key markets to position our system for more robust future growth. For 2014,
this included announcing a significant new investment in Coca-Cola Amatil Indonesia as well as the formation
of a next-generation operating model with Coca-Cola Beverages Africa. Both of these vibrant and populous
markets will help fuel our growth. Fourth, we aggressively stepped up our productivity efforts. While we had
already announced a plan to deliver cost savings to invest in our brands and business, we took action in 2014
to increase this to $3 billion in incremental annualized savings by 2019. About half of these savings will come
from being more efficient in the way we make and distribute our beverages. Roughly a third will come from
reducing operating expenses. The rest will come from marketing, where we’ve designed more effective and
efficient global campaigns. Fifth, we began streamlining and simplifying our operating model. This includes
reducing the size of our group-level organizations around the world, standardizing our operating approach and
key processes across business units and forming a single business unit in Western Europe, where we
previously had three. Overall, these steps will allow us to speed decision making and enhance our local market
focus—both of which will help unlock growth. We’ll also have a more nimble organization, one better equipped
to outpace the change in our industry.
The Boston Beer Company
We are happy to report to you that 2014 was another record year. We sold 4.1 million barrels of beer and cider
in all 50 states and about 30 countries. Our sales soared 22%; our annual sales for 2014 were $903 million.
Think about that, just five years ago in 2009, our sales were $415 million. We more than doubled that in 2014.
While more than 3,000 craft breweries operated in the U.S. last year, we continue to be the leading craft
brewer in the U.S. because of the support from our 1,300 employees, our distributors, and of course, our
drinkers.
The combination of the recent growth in the Company’s business and product complexity, its increased hiring
of new employees, and greater reliance on its own breweries, continues to heighten the challenges presented
by the Company’s operations. Beginning in the second half of 2013, the Company had product shortages and
service issues and the Company’s supply chain struggled under the increased volume and experienced

increased operational and freight costs, as it reacted. In 2013 and 2014, the Company significantly increased
its packaging capabilities and tank capacity to address these challenges. There can be no assurance that the
Company will effectively manage such increasing complexity without experiencing future planning failures,
operating inefficiencies, insufficient employee training, control deficiencies or other issues that could have a
material adverse effect on the Company’s business and financial results. The growth of the Company, changes
in operating procedures and increased complexity have required significant capital investment. The Company
to date has not seen operating cost leverage from these increased volumes, and there is no guarantee that it
will.
In the United States, where approximately 96% of its beer is sold, the Company sells its beer to independent
beer Distributors for distribution to retailers and, ultimately, to drinkers. Although the Company currently has
arrangements with approximately 350 wholesale Distributors, sustained growth will require it to maintain such
relationships and possibly enter into agreements with additional Distributors. Changes in control or ownership
within the current distribution network could lead to less support of the Company’s products. No assurance can
be given that the Company will be able to maintain its current distribution network or secure additional
Distributors on terms favorable to the Company.
ConAgra Foods
2014 was a combination of progress and challenges for ConAgra Foods. Importantly, it was our first full fiscal
year integrating and operating the Ralcorp business, a transformative acquisition we completed in FY13. While
our overall comparable EPS of $2.171 was short of our original goal due to challenges in each of our
segments, we made progress in a number of areas, and we have important profit improvement initiatives
underway to improve results for FY15 and beyond. In FY14, we: • Generated in excess of $1.5 billion in cash
flows from operations. • Repaid over $600 million of debt and are on track to achieve our debt repayment goals
by the end of FY15. • Generated significant productivity, synergies and other savings which more than offset
inflation.
During fiscal 2014, we announced our Supply Chain and Administrative Efficiency Plan, or SCAE Plan, which
was an expansion of the scope of the plan to integrate Ralcorp. The SCAE Plan includes steps to optimize the
entire organization’s supply chain network and to improve selling, general and administrative effectiveness and
efficiencies, as well as our continuing evaluation of plans for the integration of Ralcorp and related restructuring
activities. The successful design and implementation of the SCAE Plan presents significant organizational
design and infrastructure challenges and in many cases will require successful negotiations with third parties,
including labor organizations, suppliers, business partners, and other stakeholders. 8 In addition, the SCAE
Plan may not advance our business strategy as expected. Events and circumstances, such as financial or
strategic difficulties, delays, and unexpected costs may occur that could result in our not realizing all or any of
the anticipated benefits or our not realizing the anticipated benefits on our expected timetable. If we are unable
to realize the anticipated savings of the SCAE Plan, our ability to fund other initiatives may be adversely
affected. Any failure to implement the SCAE Plan in accordance with our expectations could adversely affect
our financial condition, results of operations and cash flows. In addition, the complexity of the SCAE Plan will
require a substantial amount of management and operational resources. Our management team must
successfully implement administrative and operational changes necessary to achieve the anticipated benefits
of the SCAE Plan. These and related demands on our resources may divert the organization’s attention from
existing core businesses, integrating financial or other systems, have adverse effects on existing business
relationships with suppliers and customers, and impact employee morale. As a result our financial condition,
results of operations or cash flows may be adversely affected.

2015
General Mills, Inc.
General Mills net sales for the fiscal year ended May 31, 2015, declined 2 percent to $17.6 billion, as
unfavorable foreign exchange offset the benefits of a 53rd week in the fiscal year and six months of
incremental contribution from the Annie’s, Inc. (Annie’s) organic foods business we acquired in October 2014.
Excluding the impact of foreign exchange, our net sales increased 1 percent in fiscal 2015.* Total segment
operating profit declined 4 percent to $3.0 billion. On a constant-currency basis, total segment operating profit
declined 2 percent.
For the past several years, we have been increasing our productivity and efficiency to offset input cost inflation
and fuel our consumer-first initiatives. Input cost inflation has been averaging 4 to 5 percent over the past five
years, and we expect costs to remain inflationary for the foreseeable future. Holistic Margin Management
(HMM) is our company-wide initiative to use productivity savings, mix management and price realization to
offset input cost inflation, protect margins and generate funds to reinvest in sales-generating activities. Thanks
to HMM actions that helped drive savings in our cost of sales, we’ve been able to hold our gross margin
relatively steady for the past eight years. This period was marked by significant volatility of input costs from
year to year and a change in our product mix as we acquired new businesses. To ensure we remain
competitive in the marketplace, we took additional actions in fiscal 2015 to increase our efficiency. Project
Century is our effort to streamline our North American supply chain. Project Catalyst is focused on increasing
our organizational effectiveness across our U.S. businesses. And in June, we launched Project Compass to
increase organizational effectiveness within our International business segment. We also are making changes
to policies and practices that reduce overhead expense across the company. Combined, these initiatives
generated $75 million in cost savings in fiscal 2015, and we expect to achieve $285 million to $310 million in
cost savings in fiscal 2016.
The Coca-Cola Co.
Creating value for our Company and customers looks different in different countries, and we did a good job
segmenting our markets to drive revenue growth in 2015. While we still have more to do, we were encouraged
by our results. Globally, price/mix rose 2 percent as did volume, helping increase organic revenue 4 percent.
We also gained worldwide value share in our industry.
As we took steps to rebuild our growth momentum, we knew we needed to invest in more and better marketing
while also increasing our financial flexibility. To these ends, we increased our efficiency and productivity while
reducing costs. Part of the solution was “zero-based work”—a way of looking at our business that starts from
the assumption that organizational budgets start at zero and must be justified annually, not simply carried over
at levels established in the previous year. We also cut spending on non-media marketing like in-store
promotions. And we found new savings in our supply chain around the world. Overall, we were able to realize
more than $600 million in productivity improvement in 2015, which we used to invest further in our brands and
business and also to return to our shareowners. For the future, we’re working to drive productivity and
continuous savings across our Company and system. We see productivity not as an event or series of events
but as an ongoing, day-by-day process of becoming stronger, leaner and ultimately better.
Few industries have changed more rapidly in recent years than the nonalcoholic beverage industry. Evolving
consumer tastes and preferences, coupled with sweeping innovations in the retail and supply chain
landscapes, have created an environment in which speed, precision, and empowered employees determine
who wins in the marketplace. To seize this opportunity, we took steps to reshape our business. We looked

hard at our operating structure and identified areas where we could be faster, smarter and more efficient. We
removed a layer of functional management and connected our regional business units directly to headquarters.
We streamlined a number of important internal processes and removed roadblocks and barriers that inhibited
us from being as effective and responsive as we knew we could be.
More than 700 new craft breweries opened in 2015, bringing the total number of independent U.S. breweries to
more than 4,000. In 1985, only 100 beers were present at the Great American Beer Festival, compared to
more than 3,500 beers in 2015. As a company, we have the enormous benefit of having been at the forefront
of the many cycles of the American craft beer revolution for 32 years. We have ridden the rapids of brisk
expansion before. Twenty years ago, we saw the entire industry hit a rough patch that lasted for nearly seven
years, and we adapted as necessary. We continued to focus on our core of great, delicious craft beers. Those
changes have also taught us the importance of remaining nimble, adapting, and constantly innovating across
all of our brands. Above all, we have learned that we must remain true to our core mandate: always do what’s
best for the beer.
The Company purchases a substantial portion of the raw materials used in the brewing of its products,
including its malt, hops, barley and other ingredients, from a limited number of foreign and domestic suppliers.
The Company purchased most of the malt used in the production of its beer from one major supplier during
2015. Nevertheless, the Company believes that there are other malt vendors available that are capable of
supplying part of its needs. The Company is exposed to the quality of the barley crop each year, and significant
failure of a crop would adversely affect the Company’s costs. The Company predominantly uses Noble hops
for its Samuel Adams lagers. Noble hops are varieties from several specific growing areas recognized for
superior taste and aroma properties and include Hallertau-Hallertauer, Tettnang-Tettnanger, Hersbruck-
Hersbrucker and Spalt-Spalter from Germany and Saaz-Saazer from the Czech Republic. Noble hops are rare
and more expensive than most other varieties of hops. Traditional English hops, namely, East Kent Goldings
and English Fuggles, and/or United States hops are used in most of the Company’s ales. The demand for hops
grown in the United States has grown due to the success and growth of craft brewers and the popularity of
beer styles that include hops grown in the United States. Certain United States hops are in tight supply, and
prices have risen for both spot purchases and forward contract pricing, accordingly. The Company enters into
purchase commitments with several hops dealers, based on the Company’s projected future volumes and
brewing needs. The dealers then contract with farmers to meet the Company’s needs. However, the
performance and availability of the hops, as with any agricultural product, may be materially adversely affected
by factors such as adverse weather or pests. Further, the use of fertilizers and pesticides that do not conform
to United States regulations, the imposition of export/import restrictions (such as increased tariffs and duties)
and changes in currency exchange rates could result in increased prices. The Company attempts to maintain
up to a two years supply of essential hop varieties on-hand in order to limit the risk of an unexpected reduction
in supply. The Company stores its hops in multiple cold storage warehouses to minimize the impact of a
catastrophe at a single site. Hops and malt are agricultural products and therefore many outside factors,
including weather conditions, farmers rotating out of hops or barley to other crops, government regulations and
legislation affecting agriculture, could affect both price and supply.
ConAgra Foods
Management's primary objective for fiscal 2015 was stabilization and recovery. Fiscal 2015 performance
reflected increased volumes in the Consumer Foods and Commercial Foods segments, primarily due to the
extra week in the fiscal year. Private Brands performance continued to reflect weak volumes and margin
pressures resulting from an intense bidding environment and executional challenges. We generated operating

cash flows of approximately $1.47 billion from continuing operations and repaid $1.1 billion of debt during fiscal
2015. Subsequent to fiscal 2015, on June 30, 2015, we announced our plan to exit the Private Brands
operations. Our plans for creating long-term value will center on a more aggressive approach to driving margin
improvement through selling, general and administrative expense reductions, supply chain efficiencies, and
other projects. It also focuses on growing our Consumer Foods and Commercial Foods segments, as well as
balanced capital allocation.
In April 2014, we completed the sale of a small snack business, Medallion Foods, for $32.0 million in cash. The
business results were previously reflected in the Private Brands segment. We reflected the results of these
operations as discontinued operations for all periods presented. In September 2013, we completed the sale of
the assets of the Lightlife® business for $54.7 million in cash. The business results were previously reflected in
the Consumer Foods segment. We reflected the results of these operations as discontinued operations for all
periods presented.
We previously announced a plan for the integration and restructuring of the operations of Ralcorp, optimization
of the entire Company's supply chain network, manufacturing assets, and dry distribution and mixing centers,
and improvement of selling, general and administrative effectiveness and efficiencies, which we refer to as the
Supply Chain and Administrative Efficiency Plan (the "SCAE Plan"). Although we announced on June 30,
2015, our intent to exit the Private Brands business, a divestiture of our Private Brands operations may not
occur in a timely manner or at all. We will continue to implement portions of the SCAE Plan, including work
related to optimizing our supply chain network and pursue cost reductions through our selling, general and
administrative functions and productivity improvements.
2016
General Mills, Inc.
Fiscal 2016 net sales declined 6 percent to $16,563 million and decreased 2 percent on a constant-currency
basis. Operating profit of $2,707 million was 30 percent higher than fiscal 2015. Total segment operating profit
was $3,000 million, 1 percent lower than fiscal 2015 and 1 percent higher on a constant-currency basis. In
fiscal 2016, net earnings attributable to General Mills were $1,697 million, up 39 percent from $1,221 million in
fiscal 2015, and we reported diluted EPS of $2.77 in fiscal 2016, up 41 percent from $1.97 in fiscal 2015. Fiscal
2016 results include restructuring-related charges, a net gain from divestitures, and gains from the mark-to-
market valuation of certain commodity positions and grain inventories. Fiscal 2015 results include
restructuring-related charges, an indefinite-lived intangible asset impairment charge, tax impacts from the
repatriation of historical foreign earnings, losses from the mark-to-market valuation of certain commodity
positions and grain inventories, integration costs resulting from the acquisition of Annie’s, and the impact of
Venezuela currency devaluation. Diluted EPS excluding these items affecting comparability totaled $2.92 in
fiscal 2016, up 2 percent from $2.86 in fiscal 2015. Diluted EPS excluding certain items affecting comparability
on a constant-currency basis increased 5 percent compared to fiscal 2015 (see the “Non-GAAP Measures”
section below for a description of our use of measures not defined by GAAP).
Project Century (Century) began in fiscal 2015 as a review of our North American manufacturing and
distribution network to streamline operations and identify potential capacity reductions. In the second quarter of
fiscal 2016, we broadened the scope of Project Century to identify opportunities to streamline our supply chain
outside of North America. As part of the expanded project, we approved a restructuring plan to close
manufacturing facilities in our International segment supply chain located in Berwick, United Kingdom and East
Tamaki, New Zealand. These actions affected approximately 285 positions. We expect to incur total
restructuring charges of approximately $41 million relating to these actions, of which approximately $20 million

will be cash. We recorded $30.0 million of restructuring charges relating to these actions in fiscal 2016. We
expect these actions to be completed by the end of fiscal 2018.
The Coca-Cola Co.
2016 was a pivotal and productive year in our journey, as we accelerated the transformation of our Company
into a higher-margin business focused on creating value, building our brands and meeting our consumers’
evolving needs. For the year, we grew organic revenue in our core business (the Company’s consolidated
operations excluding Company-owned bottling operations) 4 percent, and we grew comparable currency
neutral income before taxes (structurally adjusted) 8 percent on a consolidated basis. We also returned
approximately $8.4 billion to you, our shareowners, through dividends and net share repurchases.1 500+ New
Products Along the way, we strengthened our brand portfolio with more and better marketing, product and
packaging innovation and targeted acquisitions. And we rolled out more than 500 new products.
The role of consumer brands is changing rapidly. Even as brands continue to help people meet their everyday
needs, consumers now expect brands they love to help solve broader challenges and make the world a better
place. For example, people today want to live more sustainably— and do so, in part, through what they buy.
When we source, manufacture and distribute sustainably while strengthening our communities, we bring new
shine to our brands and new value to our business.
The top ten craft brewers, including Samuel Adams, account for more than a third of total craft beer sold and
the next 120 account for another 35% of the U.S. craft beer market. Approximately 20% of craft beer brewed in
the U.S. is made by much smaller breweries and tap rooms with hyper-local distribution. While few if any of
these brands will achieve broad distribution, they are brewing good beer, and they are relevant in their own
cities and towns. At the other end of the size spectrum, we see the world’s biggest foreign-owned brewers
continuing to buy small, American craft brewers, removing their independent craft ownership, and adding them
to their enormous global portfolios of brands. These changes in the competitive landscape have impacted our
growth rates in 2016. The good news is we have weathered challenging times before, and we have been
successful in learning how to navigate choppy seas. First, we stay true to our mission: to create long-term
profitable growth by offering the highest quality products to the U.S. beer drinker. We have tripled our size
since 2004, and we believe we can return to growth because we have the people, products, and passion to do
it. Not all growth is about increased sales. In 2016 we challenged ourselves to work more effectively and
efficiently. We have been growing internally with improved systems, building a new senior management team,
and a continuing commitment to innovation.
The alcoholic beverage industry is regulated by federal, state and local governments. These regulations
govern the production, sale, and distribution of alcoholic beverages, including permitting, licensing, marketing
and advertising. To operate its production facilities, the Company must obtain and maintain numerous permits,
licenses and approvals from various governmental agencies, including but not limited to, the Alcohol and
Tobacco Tax and Trade Bureau, the Food and Drug Administration, state alcohol regulatory agencies and
state and federal environmental agencies. Governmental entities may levy various taxes, license fees, and
other similar charges and may require bonds to ensure compliance with applicable laws and regulations. The
federal excise tax on malt beverages is $18 per barrel, on hard cider (with alcohol by volume of 7% or less) is
$0.226 per gallon, on hard cider (with non-qualifying fermentable fruits) is $1.07 per gallon, and on artificially
carbonated wine (hard cider with high CO2 levels) is $3.30 per gallon. States levy excise taxes at varying rates
based on the type of beverage and alcohol content. Failure by the Company to comply with applicable federal,
state or local laws and regulations could result in higher taxes, penalties, fees, and suspension or revocation of

permits, licenses or approvals. While there can be no assurance that any such regulatory action would not
have a material adverse effect upon the Company or its operating results, the Company is not aware of any
infraction affecting any of its licenses or permits that would materially impact its ability to continue its current
operations.
ConAgra Foods
We use many different commodities such as wheat, corn, oats, soybeans, beef, pork, poultry, and energy.
Commodities are subject to price volatility caused by commodity market fluctuations, supply and demand,
currency fluctuations, external conditions such as weather, and changes in governmental agricultural and
energy policies and regulations. Commodity price increases will result in increases in raw material, packaging,
and energy costs and operating costs. We may not be able to increase our product prices and achieve cost
savings that fully offset these increased costs; and increasing prices may result in reduced sales volume,
reduced margins, and profitability. We have experience in hedging against commodity price increases;
however, these practices and experience reduce, but do not eliminate, the risk of negative profit impacts from
commodity price increases. We do not fully hedge against changes in commodity prices, and the risk
management procedures that we use may not always work as we intend.
Our ability to make, move, and sell our products is critical to our success. Damage or disruption to our supply
chain, including third-party manufacturing or transportation and distribution capabilities, due to weather,
including any potential effects of climate change, natural disaster, fire or explosion, terrorism, pandemics,
strikes, government action, or other reasons beyond our control or the control of our suppliers and business
partners, could impair our ability to manufacture or sell our products. Failure to take adequate steps to mitigate
the likelihood or potential impact of such events, or to effectively manage such events if they occur, particularly
when a product is sourced from a single supplier or location, could adversely affect our business or financial
results. In addition, disputes with significant suppliers, including disputes regarding pricing or performance,
could adversely affect our ability to supply products to our customers and could materially and adversely affect
our product sales, financial condition, and results of operations.
We previously announced a plan for the integration and restructuring of the operations of Ralcorp Holdings,
Inc. ("Ralcorp"), optimization of the entire Company's supply chain network, manufacturing assets, and dry
distribution and mixing centers, and improvement of selling, general and administrative effectiveness and
efficiencies, which we refer to as the Supply Chain and Administrative Efficiency Plan (the "SCAE Plan").
Although the divestiture of the Private Brands business was completed in the third quarter of fiscal 2016, we
will continue to implement portions of the SCAE Plan, including work related to optimizing our supply chain
network and pursue cost reductions through our selling, general and administrative functions and productivity
improvements. The SCAE Plan also includes plans announced in the second quarter of fiscal 2016 to realize
efficiency benefits through a combination of reductions in selling, general and administrative expenses and
enhancements to trade spend processes and tools.

Recommendations
In evaluating supply chain performance, it is important to look at trends within a peer group over time.
Here we looked critically at the Food and Beverage industry for the period of 2010-2016. A focus on
procurement, cost containment, and continuous improvement drove the industry.
As shown in the orbit chart reviews, few companies delivered on a balanced scorecard. As a result,
the industry is stuck, and even going backward, in growth, while maintaining the status quo in other
metrics. As companies study supply chain excellence and corporate performance, we recommend
that supply chain leaders:
1) Build a Guiding Coalition to Drive Improvement Based on Industry-Specific Data.
Organizations should benchmark companies within an industry. Each industry has unique rhythms
and cycles. As a result, supply chain excellence analysis needs to be within an industry.
2) Understand Supply Chain Potential and Orchestrate Trade-offs on the Effective Frontier. The
supply chain is a complex system, with interrelated metrics, and nonlinear relationships. Supply
chain leadership teams should analyze the total portfolio of metrics and study progress at the
intersections of the Effective Frontier. Growth has the highest correlation to market capitalization.
Companies with higher performance are using more advanced analytics to plan outcomes and
design the supply chain.
Figure 9. The Supply Chain Effective Frontier
3) Apply Systems Theory. Teams should evaluate performance over time to understand
improvement while realizing they are managing a complex system. The functions should be aligned
to a balanced portfolio of metrics representing the Effective Frontier, while functional metrics should
be focused on improving reliability (e.g., first-pass yield, hands-free orders, and supplier quality,
etc.).

4) Focus on Building Value Networks. While many of these companies could be a powerbroker in
the industry to redefine outside-in processes, all companies are accepting the limitations of the
inside-out supply chain. They operate functional silos with a traditional supply paradigm. The
traditional focus of Lean is not sufficient. This is an opportunity for the industry.
5) Learn from Other Industries. Use a Steady Hand/Focused Leadership to Drive Improvement.
To make the necessary improvements, companies today must move past an “ERP-centric view”
and build outside-in processes with a focus on value-based outcomes. Network design, supply
chain planning, and revenue management are opportunities for process excellence. The Food
manufacturers industry should turn to the high-tech industry to benchmark and drive innovation.
Conclusion
The story of the Food and Beverage industry is a story of shifts in consumer demand and an industry
that failed to sense and adapt. While growth levels fell, supply chain leaders focused on reducing
costs and improving inventories in the face of complexity. The fact that most of the metrics
maintained consistency in the face of falling volumes is a testament to their hard work.

Appendix
The Supply Chain Index is a measurement of supply chain improvement. Companies outperforming
their peer groups will drive improvement at a slower rate than a lower performing company. As a
result, we find that supply chain leaders are usually above their peer group in performance, in the
upper 2/3 of the Supply Chain Index. Companies with low Supply Chain Index scores are usually
driving improvement, but are new on the journey. As a result, the rate of change in Supply Chain
Improvement is quicker than that of a more mature company.
As shown in Table A, Del Monte, Hormel and Pinnacle Foods are driving improvement at a faster rate
than the peer group.
Table A. Performance Factor Analysis on the Supply Chain Index for Food Manufacturers

In Table B, we show the calculations for the factors for the Supply Chain Index for beverage
companies. Overall, wine companies are driving faster improvement than beer or soft drink
companies.
Table B. Performance Factor Analysis on the Supply Chain Index for Beverage Companies

Other Reports in This Series
Supply Chain Metrics That Matter, A Focus on Food Manufacturing
Published June 2016
Supply Chain Metrics That Matter a Focus on Food and Beverage Manufacturing
Published June 2015
Supply Chain Metrics That Matter a Focus on Consumer Manufacturing
Published by Supply Chain Insights in June 2015
Supply Chains to Admire 2017
Published by Supply Chain Insights in June 2017
These reports and additional information on the Supply Chain Metrics That Matter methodology are
available at our Supply Chain Insights website.

About Supply Chain Insights LLC
Founded in February 2012 by Lora Cecere, Supply Chain Insights LLC is in its sixth year of operation.
The Company’s mission is to deliver independent, actionable, and objective advice for supply
chain leaders. If you need to know which practices and technologies make the biggest difference to
corporate performance, we want you to turn to us. We are a company dedicated to this research. Our
goal is to help leaders understand supply chain trends, evolving technologies, and which metrics
matter.
About Lora Cecere
Lora Cecere (twitter ID @lcecere) is the Founder of Supply Chain Insights LLC and
the author of popular enterprise software blog Supply Chain Shaman currently read
by 15,000 supply chain professionals. She also writes as a Linkedin Influencer and
is a contributor to Forbes. She has written five books. The first book, Bricks Matter,
(co-authored with Charlie Chase) published in 2012. The second book, The
Shaman’s Journal 2014, published in September 2014; the third book, Supply
Chain Metrics That Matter, published in December 2014; the fourth book, The
Shaman’s Journal 2015, published in August 2015, the fifth book, The Shaman’s Journal 2016,
published in June 2016 and the sixth book, The Shaman’s Journal 2017, published in July 2017.
With over 14 years as a research analyst with AMR Research, Altimeter Group, and Gartner
Group and now as the Founder of Supply Chain Insights, Lora understands supply chain. She has
worked with over 600 companies on their supply chain strategy and is a frequent speaker on the
evolution of supply chain processes and technologies. Her research is designed for the early adopter
seeking first mover advantage.
About Sam Borthwick
As a Research Associate, Samuel Borthwick analyzes balance sheet and income
statement data for the Supply Chains to Admire Report along with the monthly
Metrics That Matter series. A recent graduate of Purdue University, majoring in
Supply Chain Management, Sam loves data. He lives in Indianapolis, Indiana
where he enjoys playing tennis and spending time with his family.

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