2010 REPORT OFFICERS Corporate Louis P. Gentine Chairman & Chief Executive Officer Louis P. Gentine II (Louie) President & Chief Customer Officer Mark W. Rhyan Executive Vice President – Chief Operations Officer George H. Hoff Executive Vice President – Chief Financial Officer Karri J. Neils Senior Vice President – Human Resources Kristine M. Jankowski Senior Vice President – Innovation Administration Accounting Marcia L. Stanczyk Senior Vice President – Treasurer James J. Birenbaum Vice President – Controller Information Technology Suzanne M. Peterson Vice President – Information Technology Communications Barbara S. Gannon Vice President – Corporate Communication & Government Relations Operations Lee E. McCollum Vice President – Manufacturing Karl L. Linck Vice President – Engineering Dennis E. Roehrborn Vice President – Logistics Gary A. Vissers Vice President – Demand Planning Janet R. Raddatz Vice President – Quality Shawn R. Marcom Vice President – Procurement Sales and Marketing Food Service Kevin G. Delahunt President – Food Service Division Michael P. Sokol Vice President – Sales Food Ingredients Michael A. McEvoy President – Food Ingredients Group/Portionables Inc. Consumer Products Michael P. Pellegrino President – Consumer Products Division Mark D. Gumm Vice President – Sales Daniel “Chip” C. Schuman Vice President – Marketing Sargento Culinary Solutions David T. Vroom Senior Vice President & General Manager Sargento Culinary Solutions Innovation Cathryn Fritz-Jung Vice President – Research & Development Rod J. Hogan Vice President – New Business Development TABLE OF CONTENTS Letter to Stakeholders from Lou Gentine 04 Values and Corporate Culture 06 Community Commitment 12 Sustainability 16 Letter to Stakeholders from Louie Gentine 18 Consumer Products Division Update 20 Food Service Division Update 24 Food Ingredients Division Update 26 Culinary Solutions Division Update 28 Operations Division Update 30 Board Members 32 Lou’s LETTER Our unwavering commitment to leading the cheese industry is the driving force for our future success. That growth is evident with the launch of a new division focused on growing our footprint at deli counters in retail stores and the current expansion of our facilities. We recently broke ground on a major project involving a new building and an addition to our corporate headquarters. Within the next five to six years, we’ll need the extra space for a projected 120 new administrative employees. Even as we continue to grow, we are rooted in the fact that, together, we are a family. This is what makes Sargento a wonderful place to work and why the Milwaukee Journal Sentinel honored us At Sargento, we’re proud to say, “Our family’s as the “Top Workplace 2010.” passion is cheese.” Our passion for exceptional cheese is what drives us persnickety people to At Sargento, we value our former and current develop the products that our consumers have employees. One of our longtime family members come to love. But we don’t rest on our laurels. is retiring, and he’ll always be a part of the We’re committed to developing products and Sargento family. Hired by Leonard as a solutions that move the cheese industry forward, Divisional Sales Manager, Mike Gordy has and, as a result, the company continues to grow. worked at Sargento for 32 years. During his time with Sargento, he’s touched many parts of the Since 1953, Sargento has grown from a retail business, from Vice President of Sales, Director of storefront business in Plymouth, Wis., into a SAP Implementation, Senior Vice President of national leading marketer of quality cheese Operations, President of Consumer Products, products. We are recognized for our excellent Senior Vice President of New Channel products, family values and service to retail, Development to his latest role as President of foodservice and industrial customers. Food Ingredients. With dedication and expertise, we continue to set the pace for change in our industry. 04 Mike was never afraid to step outside of his comfort zone and embrace new challenges. In 2005, he was awarded the Founders Ring for his outstanding career service with Sargento and has served as president of the International Dairy-Deli Association. His “Southern-style” humor is well-known throughout the industry, as well as his love of fishing. We wish Mike only the best as he enters into retirement! Mike Gordy, former Vice President of Food Ingredients From the very beginning, my dad, Leonard Gen- tine, fostered a family-like culture and encouraged all of his associates to challenge the status quo and act in accordance with the highest ethics. Today, we encourage that same spirit among Sargento employees, and we are confident it will continue to catapult our business forward. Sincerely, Chief Executive Officer ThE SARgENTO Family The basis of the company culture at Sargento is simple, “Hire good people and treat them like family.” This corporate culture began under the late Leonard Gentine’s leadership, and today is as much a part of the culture as it was 30 years ago. Currently, more than 20 percent of our Wisconsin-based employees have worked at Sargento for more than 20 years, 100 employees for more than 30 years, and 10 have 40 or more years of service! 06 STATEMENT OF Values AND Purpose Sargento is a family-owned cheese company dedicated to enhancing long-term stake- holder value. Sustained by an insatiable winning spirit, we are guided by our faith in God. Our central purpose is to be the best at responding to customer and consumer needs for cheese, cheese-based, and other culinary solutions. We will achieve this goal by exceeding expectations for innovation, service, quality, value, taste and convenience. We share the results of our success with those that contribute to that success. 07 CODE OF BUSInESS AND PERSOnAL Ethics In a world and society where the quest for material success can cause self-interest to obscure principle, we the people who comprise Sargento Foods Incorporated commit ourselves to these self-imposed standards in our individual and corporate endeavors. Our relationships with stakeholders (including our customers, employees, suppliers, stockholders and the communities we affect) will be guided by these assertions: We Will Be Legal We recognize the authority of legal constraints and our obligation to be in conformance with both the spirit and the letter of the law. We Will Be Moral In our public and private lives, we will strive to give precedence to that which is right over that which is merely expedience or convenient. We Will Be Honest To warrant the trust of all with whom we come in contact, we must ourselves be unflinchingly honorable in whatever we think, do or say. We Will Be Respectful Whatever our station in life may be, we will respect in others of all ranks those virtues and strengths of character which we collectively and individually endeavor to exemplify. We Will Be Responsible To each other and to those outside Sargento, we will strive to fulfill both the obvious and the unenforceable obligations we owe to all whom we serve and with whom we work. We Will Be Fair In regard to decision-making at all levels, we will strive for maximum objectivity and evenhandedness with all those whose lives we touch. 08 PLyMOuTh hEADquARTERS Expansion Our business has steadily been growing, so in late 2010, we broke ground on the expansion of our existing Plymouth, Wis., headquarters. This space will house the projected 120 new office and production employees over the next five to six years. The new building will be located between our current headquarters and the Leonard Gentine Center on the Plymouth Campus. We also are planning an addition to our headquarters, which will be used primarily for human resources and wellness facilities for an onsite nurse practitioner and physical therapist. 09 VALUES AND CORPORATE Culture Commitment to Employees Sargento Foods Inc. is focused on people, pride and progress. We were humbled when Milwaukee’s leading newspaper recognized Sargento as the number one place to work among large employers in Southeast Wisconsin in the “Top Workplaces 2010” survey. As simply stated by an employee, Sargento won the top spot because “It’s the people. Everybody’s friendly. We have a good time.” Sargento believes in putting the company’s values into practice, in the workplace and outside. Examples include: Work/Life Balance Community Service Sargento allows production workers a certain As a family-owned company, serving the amount of time each year to tend to family matters community is a core part of the Sargento culture. such as school events. For some positions, Employees contribute time and talent to a workers can have flexible schedules, telecommute variety of philanthropic endeavors, such as and job-share. Junior Achievement and youth sports. Social Financial The company sponsors a Christmas party for Sargento holds a meeting every year to explain employees, a Christmas luncheon for retirees the company’s financial situation and to discuss and an annual event to celebrate service mile- political and economic events affecting its stones. Employees also participate in a biannual performance. Employees receive profit-sharing summer picnic with their families and enjoy other bonuses when the company performs well. events such as golf, bowling and fishing outings. Sargento allocates an amount equal to 3 percent This commitment to fostering a family-like culture of pay into a retirement account for every is recognized by employees, “At each and every employee and will match up to 3 percent more event, the Gentine family is there with the employ- of employees’ contributions into their 401(k). ees” a worker wrote in a company evaluation. Health Opportunities Sargento has a nurse practitioner and a physical Sargento pays for college tuition for any full-time therapist present at its Plymouth headquarters and employee who pursues an associate, bachelor’s Kiel plant several days a week, and workers and or master’s degree, even if the schooling is not their families pay $10 per visit for routine care. directly linked to the job. 10 ThE SARgENTO Story With more than 1,500 employees, Sargento Foods Inc. is one of the largest privately-held cheese companies in the United States and a leading marketer of retail branded natural cheese, customized cheese products for foodservice and other food manufacturers, and meal solutions for delis. It began when Leonard Gentine, Sr. launched the Plymouth Cheese Counter in 1949, a deli and mail order gift house, from a small retail shop in Plymouth, Wis. Gentine observed frequent repeat orders for smaller-sized packaged Italian-style cheeses. To satisfy the growing demand for old-world quality cheeses, Sargento Cheese Company, Inc. was formed with the partnership of Gentine and Joseph Sartori in 1953. The company began by selling packaged Mozzarella, Provolone, Parmesan and Romano cheeses. Today, Sargento provides its customers with hundreds of varieties and forms of cheese, cheese products and cheese ingredients for other food processors, appetizers and snack foods. Sargento is dedicated to providing quality products for the convenience-conscious consumer and continues to explore, expand and excel. An employee who was hired in 1998 wrote anonymously about the effect of Sargento on his life: “Prior to joining Sargento, I hated going to work, and it took its toll on my family life…Being employed at Sargento has made my family stronger and appreciative for the finer things in life, because of Sargento’s beliefs in God, assisting those in need, and the willingness to go the extra mile. Because of that, it has made me a better person, and I have the Gentine and Sargento family to thank for that.” 11 COMMUnITy Commitment As a family-owned and operated company, the Sargento family values permeate throughout the entire organization. Supporting the community, especially where Sargento employees live, work and play, is an important part of the company’s culture. From CEO Lou Gentine to corporate employees and workers in the production facilities, the entire Sargento family is committed to doing their part to make a difference in the community. With numerous community initiatives in place, Sargento has identified two areas of focus: hunger and shelter. Sargento employees have donated countless hours of their time volunteering in the local community. In 1991 the Sargento Employees Caring About People, or SECAP, programs were formed to inspire positive change in the local area. “Thanks again for this very special donation (to the German Fest Run/Walk for Hunger). Your company is certainly one of the best in terms of supporting good causes! May God continue to bless you.” Brother Dave Schwab, Meal Director St. Ben’s Community Meal Program 12 FEEDINg ThE Hungry Sargento is dedicated to serving those less fortunate in the Greater Wisconsin community through its partnerships with organizations such as Feeding America, Welcome Table of Plymouth, Wis., and food pantries in Sargento facility communities. In 16 years, Sargento employees have served more than 66,000 meals to people in need through the St. Ben’s Community Meal Program, a central city Milwaukee church that provides free meals six nights a week. Every month, a different department within Sargento volunteers to participate, and more than 20 people offer their time to help. Volunteers cook a hot meal in the Sargento kitchen and deliver the meals to St. Ben’s in Milwaukee to serve to guests. Sargento provides 90 pounds of food to St. Ben’s at each Meal Program. And the signature dish –Sloppy Joes topped with Sargento Natural Cheddar Cheese– is always a popular meal on the menu. Touchdowns FOR ChARITy Through a partnership with the Green Bay Packers, Sargento continues to help fight hunger in the community. Sargento and the Packers teamed up more than seven years ago to support “Touchdowns for Charity,” a program that raises money for the Wisconsin Hunger Task Force. For every offensive touchdown scored by the Packers, Sargento donates $1,000 to support the Task Force’s programs. In addition, for every touchdown scored by a wide receiver or tight end, Sargento donates an additional $500 to Paul’s Pantry in Green Bay. To date, Sargento has donated more than $500,000 to combat hunger through the “Touchdowns for Charity” initiative. Habitat FOR Humanity In addition to hunger, Sargento is also committed to helping combat homelessness. In 2010, Sargento built its twentieth home in inner-city Milwaukee by providing building materials and volunteer labor. Sargento was the first Southeast Wisconsin company to “blitz build” two houses for Habitat for Humanity in 1991. Each year, a few dozen employees spend a paid week working for Habitat for Humanity instead of working at Sargento. Employees aren’t required to use their personal days and are paid, like any other day on the job, for their community service. SECAP Singers Made up of more than 120 employees, family members and retirees, the SECAP Singers is a volunteer-based organization that uses Sargento family talents to bring joy and celebration to the community. For 19 years, the SECAP Singers have performed year-round, putting on spring, summer and holiday shows. The singers perform at nursing homes, assisted living facilities and community events, including up to 15 shows during the winter to spread holiday cheer. In addition to their holiday performances, they donate stockings filled with gifts for each guest at the show and decorate a three-foot live tree that is planted at the Sargento headquarters in the spring. The singers are such a hit that they’ve even created a DVD to leave behind for the residents! “The SECAP Singers are the highlight of our year. In fact, they’ve become like rock stars around here. Our senior citizens want to invite their entire families to see them sing, and they talk about it for days after the performance.” Shary Fogle Sheboygan Senior Community SOCIAL Responsibility Each year, Sargento hosts a United Way drive, the company’s signature fundraising campaign. The majority of employees contribute financially during the annual United Way Fund Drive, with a 50-cent on the dollar match by Sargento. In 2010, the Sargento family donated a total of $441,633 to support the United Way. Other community volunteer initiatives include: • Weekly Jeans Day, in which employees donate $5 each to the charity of the week for the privilege of wearing jeans that day • Juvenile Diabetes Research Walk, chaired in 2010 by CFO George Hoff, which raised $180,000 • Participation in American Cancer Society Walk/Run events, which consistently raise significant funds exceeding corporate goals Sandy Lange, JDRF Sheboygan Outreach Manager; Payton DeZwarte, Sargento JDRF Walk Youth Ambassador, with his mom Holly (a Sargento employee) and George Hoff, Corporate Chair of 2010 Sheboygan JDRF Walk. 15 COMMITMEnT TO Sustainability Overview Sustainability is defined as meeting our current needs without compromising the ability of future generations to meet their needs. This is executed with balance between social responsibility, environmental stewardship and sustainable economic returns. Our customers turn to Sargento for not only great tasting cheese, but for the wholesomeness of the food we provide. Sustainability is consistent with our stakeholder concept, so we make decisions not only based on the impact on stockholder return but also on the influence it will have on employees, customers, suppliers and the community. Given our industry and values, the company focuses on the following areas: » Energy » Packaging » Building Methods » Transportation » Suppliers » Asset Utilization » Wastewater » Storm Water » Compliance Programs » Water Usage » Solid Waste » Recycling/Repurposing From the product manufacturing facilities to our corporate offices, best practices in energy efficiency, carbon reduction and water reuse can be found throughout the company’s safe and streamlined operations: • Reduced new construction warehouse lighting cost by Environmental Stewardship Compatible Social Responsibility 24 percent with self-dimming, occupancy-sensored lighting. Sustainability • Wastewater discharge in North Sioux City reduced by 78 percent in Biological Oxygen Demand. Viable Equitable • Slice line packaging material reduced by 10 percent. • Wastewater discharge in Hilbert reduced by 62 percent in Economic Viability Biological Oxygen Demand. We are committed to ongoing excellence in sustainability and will continue to look for ways to improve in the future. This is not done to receive recognition from others but to be good stewards of resources and provide stakeholder value. 16 Geothermal units are placed in “Lake Lou” to provide efficient heat for the new building under construction on our Plymouth campus. Environmental Responsibility Statement The environment affects all Sargento stakeholders - our employees, customers, suppliers and the community. As responsible citizens, we recognize that we affect our environment. Therefore, we will continuously improve our business practices to incorporate advances in knowledge and technology as they relate to our environment. Sargento employees have always demonstrated a sincere and conscientious desire to take environmentally sound actions. The following principles, which are included in our employee manual, guide our employees to operate, construct, develop, procure and manage in an environmentally responsible manner. We will strive to: Develop products using procured ingredients and materials that are good environmental choices for stakeholders’ health, safety and quality needs. Select and maintain suppliers that support and are willing to work with us in being responsible, environmental citizens. Manufacture and distribute our products with a minimum of energy consumption and waste generation. Design, build and maintain facilities that operate to minimize environmental impact. Educate our stakeholders on how they, individually and collectively, impact our environment by providing information on alternative environmental choices. Maintain a proactive approach in pursuit of compliance with environmental rules and regulations using evolving technology. Louie’s LETTER we can improve their lives, whether it’s through convenience or healthier options. For example, our corporate development chefs continue to search for the next big trend in the kitchen, while others in our research and development team focus on health and wellness with our Better for You products. In addition, the introduction of our online Idea Center has made it easier for our business partners to develop customized cheese products at the convenience of their desktops. The four divisions within Sargento are the drivers of our growth: Consumer Products, Food Ingredients, Food Service and Culinary Solutions. As a result of the work in these areas, Sargento is the best selling brand of natural sliced cheese in America and serves seven out of the My family’s innovative spirit began in 1953 top-10 and 14 out of the top-25 chain restaurants when the company was founded. Shortly after, in the United States. Sargento continues to chart my grandfather and a couple of his close friends new paths in the deli and grocery industry and is invented the vacuum packaging process to expanding our reach into the frozen food industry. preserve freshness and became the first company Recent innovations from our team include: to market shredded cheese and sliced natural cheese. Years later, we became the first cheese • Launching a line of Reduced Sodium natural marketer to introduce zippered re-sealable cheeses, the only one of its kind in the dairy packaging, and a few years ago, we co-developed section, which we expect will continue to the Slide-Rite Advanced Closure System for grow as experts in the food industry call for our shredded cheese packages. consumers to lower their salt intake. Innovation is the heart of our culture, and we • Becoming an industry leader in portion- know it will continue to fuel our growth at controlled cheese and various sauces. Sargento. Our marketing and innovation team continues to closely monitor trends throughout • Listening to our customers to learn that the food, cheese and dairy industries, and we pride helping them identify wholesome foods in ourselves on listening to our customers for ways their refrigerators would make it easier for 18 them to eat more healthfully. As a result, we With more than 50 years of experience under our developed our new Sargento Fridge Packs, belts, we are just as excited about cheese today which help keep cheese snacks front and as my grandfather was when he founded the center in the refrigerator. company in 1953. Through it all, people come first at Sargento. We continue to hire good people • Trailblazing our way through customized and treat them like family. Our passion, coupled foodservice solutions and innovations. with our commitment to culture, will continue to fuel our growth for many years to come. • Breaking into complete meals for retail and grocery delis. Sincerely, Louie Gentine President and Chief Customer Officer Lou Gentine accepts the “Economic Driver of the Year” award from the Sheboygan County Economic Development Corporation In addition, we are proud that our growth continues to fuel our local economy. My dad, Lou Gentine, was recently named “Economic Driver of the Year” by the Sheboygan County Economic Development Corporation, an honor that recognizes a business owner or company that is an integral driver to the economic development of Sheboygan County. COnSUMER Products Consumer Products built further momentum around a robust line of natural cheeses, available in snacks, slices and shreds, by continuing its tradition of innovation and record sales. With more than 4.5 percent growth in cheese sales in 2010, Sargento continues to be consumers’ number one choice for real cheese in the dairy case. From Better for you products to the traditional shredded cheese offerings, Sargento Consumer Products Division fulfills consumers’ every need with delicious, all natural cheeses in a variety of styles and varieties. Retail Sales: Continued Success The Consumer Products Division had a successful year across the shreds, slices and snacks lines. As consumers seek real, natural cheeses in the dairy case, Sargento cheese is the clear choice. We’re proud to say that awareness of our quality products continues to grow exponentially. A few ways Sargento is moving forward as an industry leader: • Sargento is the number one brand of natural sliced cheese and number two brand of refrigerated cheese snacks. • We are driving the greatest growth in the sliced natural varieties. • Sargento has grown distribution and narrowed our gap to competitors over the last two years. 20 Awards At Sargento, we pride ourselves on the exceptional taste and quality of our cheeses, but are always pleased when others recognize it as well. In 2010, Sargento Reduced Sodium Colby-Jack Sliced Cheese was recognized by Women’s Health magazine as one of the top 125 Best Packaged Food products in the dairy category. Self magazine included Sargento Reduced Fat Mozzarella Shredded Cheese as part of its recommended weight-loss grocery list. In addition, John Bottomley, senior director of retail merchandising, was one of three people inducted into the debut of the national Frozen & Refrigerated Foods’ Refrigerated Food Hall of Fame. 21 COnSUMER Products Innovative Product Lines Food, packaging and marketing innovations continue to play integral roles in the Sargento Consumer Products Division. This year we introduced Reduced Sodium natural cheeses, which offer 25 percent less sodium and the same great Sargento taste. Sargento is the only national brand offering a reduced sodium cheese in the dairy case. This product fills a significant void with consumers, regulators and health groups increasingly watching sodium intake. Since the beginning, Sargento has listened to its customers’ needs by offering high-quality, convenient products in shreds, snacks and slices. The company capitalized on the demand for individually-sized Italian-style products by selling packaged Mozzarella, Provolone, Parmesan and Romano cheeses. We currently provide an array of flavorful offerings: Bistro Blends Sargento offers our exceptional cheeses combined with natural herbs and seasonings through our Bistro Blends line. Customers can punch up their pasta with the Italian Bistro Blends or add a kick to their enchiladas with the Taco variety. Artisan Blends The Sargento family admires Artisan cheese makers who use pure, local ingredients and centuries-old techniques to create cheese in the old-world tradition. We proudly unite with our artisan partners, The Burnett Dairy Cooperative, El Regalo, Maple Leaf Cheese Cooperative, Roth Kase USA and Zanetti Family Cheese, to bring unmatched flavors to everything from fondue to frittatas. 22 Better For You: Reduced Fat and Reduced Sodium We know that today’s consumers are keenly aware of the link between diet and health, and our Better for You line of products is helping to make this a reality. With Sargento Reduced Sodium and Reduced Fat natural cheeses, consumers don’t have to compromise taste or texture – and they can get their favorite cheese products in the format and packaging they want. We currently offer the following Better For You options: • Reduced Fat Natural Cheese Snacks: Light String, Colby-Jack Sticks and Sharp Cheddar Sticks • Reduced Fat Shredded Cheese: 4 Cheese Italian, 4 Cheese Mexican, Colby-Jack, Mild Cheddar, Mozzarella, Sharp Cheddar • Reduced Fat Sliced Cheese: Colby-Jack, Medium Cheddar, Pepper Jack, Provolone, Swiss • Reduced Sodium Natural Cheese Snacks: Colby-Jack, String Cheese, Mild Cheddar • Reduced Sodium Shredded Cheese: Mild Cheddar, Mozzarella • Reduced Sodium Sliced Cheese: Colby-Jack, Provolone, Pepper Jack Marketing Growth To further expand the Consumer Products Division’s marketing communications plan, Sargento added two partners – Grey New York and GolinHarris – as its Agencies of Record for advertising and public relations, respectively. In partnership with other agencies, the team is continuing to evolve the marketing communications plan around real, authentic natural cheeses. FOOD Service Sargento Food Service produces cheese products that are customized to the specifications of popular restaurant chains throughout the nation, including: » Custom shreds and slices » Premium breaded appetizers » Culinary sauces » Hard Italian cheeses Sargento is a leader in the industry, serving seven out of the top-10 and 14 out of the top-25 chain restaurants in the United States. The foodservice team prides itself on being able to solve problems for its customers in order to drive business – whether that entails incorporating cheese flavors in a wide variety of dishes, serving on culinary advisory boards, or serving on cross-functional customer panels for some of America’s greatest restaurant companies. Comprised of a collaborative team, the Food Service Division has vast knowledge of consumer trends and works to collaborate with its customers to develop customized products. This knowledge helps the team continue to provide products that are relevant to clients’ customers, further driving their business.This is just part of the reason why the Food Service Division has retained many of its customers for more than 20 years – unparalleled customer service, expert insights, solutions and strong client partnerships. Sargento Food Service team members are recognized as natural cheese dairy experts and a source of dairy industry advice throughout the industry. Division team members are involved in organizations such as the International Food Service Manufacturers Association, the National Restaurant Association and the Research Chefs Association. Despite difficult times within the foodservice industry, Sargento experienced growth in 2010. Sargento was voted “Best in Class” in the foodservice industry by leading menu decision makers at America’s most iconic restaurant brands. The team plans to continue this momentum by filling industry voids in the culinary solution, cross-functional teams and customized-menu solutions offerings. 24 CuSTOMER Accolades The Sargento Food Service Division was recently awarded the O’Charley’s R&D Supplier of the year award in 2009. • Food Service TRENDS Always ahead of the curve, here’s a sneak peek into a few of the foodservice industry trends the Sargento team is currently working on: Better for You: As the industry prepares for new menu regulations in the coming years, the Sargento team is already developing options, like customized portions using Reduced Fat cheeses, to help customers make the transition to more healthful dishes. Snacking: Customers are looking for options to sustain them between meals, and Sargento snacks like our Chocolate-Covered Cheesecake Bites, provide the same great taste they love in traditional meals but in bite-size portions. Authentic and bold flavors: Consumers are becoming more sophisticated and are seeking bold and authentic flavors, like our Jalapeño Poppers, as opposed to processed ingredients. Breakfast: Cheese is a big part of breakfast, and as consumers strive to eat wholesome meals throughout the entire day, Sargento is bringing its offerings to a new day part. 25 FOOD Ingredients Sargento Food Ingredients provides custom Reduced Fat and Reduced Sodium also are cheese products to meet the needs of food increasing in popularity. manufacturers, including sliced, shredded and diced cheeses, portion-control packs, fillings The Food Ingredients Division does this all in a and sauces. Our team of experts works with food customized way; there is no sell sheet or one size manufacturers to offer customized solutions to fit fits all program. Together, the team works with their needs. For example, our Custom Melts™ each food processor to figure out the best solutions use technology that allows manufacturers to for them. produce high quality sauces delivered in nearly any refrigerated form - shreds, cubes, dices, slices As the Food Ingredients Division looks to the - all within seconds or minutes of heating. future, the team is exploring frozen food Added to a meal kit or side dish, Custom Melts opportunities to drive innovation. In addition, turn into sauces in minutes, making an ordinary the cheese experts continue to identify dish extraordinary. This provides a kitchen opportunities to provide portion-controlled solution for not only food manufacturers products to meet food processors’ goals. but also home chefs. One such way this is accomplished is with the Idea Center. This virtual research and development kitchen allows food processors to explore and create their own products directly from the convenience of their computers. This interactive, eight-step tool, gives food processors the freedom to customize a product just for their consumers. But it doesn’t stop there; the family of cheese experts within the Food Ingredients Division has developed an array of offerings to fit every need for food manufacturers and their customers. Portion-control shreds and sauces make it easy to offer great tasting meal kits for a wide array of applications using convenient pouches and cups. For example, portion-controlled products have become popular with fundraising pizza kits, salad kits and smoothies. Better for You options like 26 Culinary SOLUTIOnS DIVISIOn At Sargento, we are always looking for new opportunities to bring our high-quality, great tasting products to consumers. As Americans are increasingly crunched for time, many are opting to buy prepared meals at retail store delis. In fact, according to the research firm NPD Group, approximately 20 percent of adults purchase a prepared item from a retail store in a typical week. To reach this market directly, we’ve created Culinary Solutions, a new division within Sargento leveraging the best practices of our other divisions to grow this exciting new market. With a focus on cheese products, this new division will allow groceries and delis to deliver high-quality offerings. In addition to providing exemplary products, the Culinary Solutions Division is also collaborating with its business partners to help with menu planning, market analysis, strategic business insights, joint development of menu items, culinary expertise and custom efficiencies solutions. Since its inception a year ago, the Culinary Solutions Division already has the top selling meal in one of the leading retailer’s deli departments. 28 MEET ThE Sargento Culinary Team The Sargento Culinary Team is comprised of the experts behind some favorite Sargento delights. Together they work with the Food Service Division to help solve problems for restaurants and foodservice companies throughout the nation. With more than 20 years of experience as corporate and fine dining chefs and as food developers, they both have their fingers on the pulse of the food industry. Whether they are working to spot trends like regional provenances or food trucks, the Sargento culinary team is always thinking about new innovations. Just recently, the chefs, research scientists and food technologists reinvented breaded Mozzarella in new and interesting shapes and varieties, like breaded cheese twists and scoops. And what are these dairy experts up to now? They are currently looking beyond cheese and wine, pairing innovative food and beverages together and working to reinvent appetizers and salads found at many of the popular restaurant chains. 29 Sargento OPERATIOnS Operations Mantra: “Do it right the first time… and do the right things.” Here at Sargento, the Operations team does not take its job lightly. We are committed to delivering products to our customers that consistently meet the highest standards for premium quality, wholesomeness and purity. Food safety is the number one priority, followed closely by product quality and customer satisfaction. For our team, safety and quality combine to create a comprehensive system that is built into everything we do. We know quality means doing things right the first time, preventing defects and, if ever customers experience a problem with our products, providing prompt, effective support. It’s the responsibility of all our employees to uphold our Quality Assurance processes -- and we empower employees to deliver on that responsibility every day. And it’s working: Our Quality Assurance inspection scores average 94 percent—one of the best in the industry. In addition to being persnickety about service to our customers, we are just as committed to our employees. We’re increasingly focused on employee health and well-being, and we work hard to ensure employees know this. We offer competitive wages for our area and industry. But more importantly, we emphasize the need to establish work-life balance and provide long-term, stable work for our employees. The spirit of innovation is alive and well in the Operations team here at Sargento. We foster an employee engagement environment that results in ongoing continuous improvement efforts. At the same time, we pledge that automation will not displace workers. That includes choosing to defer installing automated processes until we have jobs for those that would otherwise be displaced as a result of increased automation. Our commitment to food safety, product quality, customers and employees will continue to solidify our spot as a leader in the cheese industry. 30 2010 Achievements • Continued superior customer fill rates and customer satisfaction levels • Building of a 50,000 square foot expansion to the distribution center • Added improvements to the plants and installed state of the art equipment which allows us to continue delivering high quality products at competitive prices • Implemented significant improvements in the ability to produce frozen sauces • Continued to stay at the forefront of new technologies 31 ThE SARgENTO Board of Directors Seated left to right: Mark Train, Jason Inc.; Gail Lione, Harley –Davidson; Wayne Oldenburg, The Oldenburg Group. Standing left to right: Lee Gentine, Sargento; Larry Gentine, Sargento; Lou Gentine, Sargento; Jerry Jerome, Hormel Foods.