Sustainability Expectations: Retail Perspective SOURCE: Source Alisha Staggs Sustainability Manager, Animal Agriculture

Privileged and Confidential 2 Objectives: Better understand customer expectations Review Walmart positions & tracking for pork

Privileged and Confidential 3 What are customers telling us?

4 New Research from Consumer Reports® Consumers Want Standards for Meat Raised with Drugs Many consumers reported being extremely or very concerned that routinely feeding healthy animals antibiotics and other drugs may… –allow animals to be raised in crowded and unsanitary conditions (68%) –create new bacteria that cause illnesses that antibiotics cannot cure (65%) –lead to environmental pollution (53%) –or artificially promote growth (51%) Most (84%) consumers think the government should require that meat from healthy animals routinely fed antibiotics be labeled as ‘raised with antibiotics.’ The overwhelming majority (88%) of consumers think the government should require that meat raised with hormones/ractopamine be labeled as such. Most (87%) consumers think animals should not be given hormones, ractopamine or other growth promoting drugs. SOURCE: 2016 Food Labels Survey

5 Walmart Confidential Trust Savvy Spending Responsibility Wellbeing Convenience Experience 6 Key Macro Trends Reflect Broad Customer Needs and Values

6 Walmart Confidential Organic/ Non-GMO Minimally Processed Food Responsi- bility Clean Label, Additive Free Fresh Food Integrity Is The Customers’ Need For Food They Can Trust, And Food That They Feel Is Inherently Good For Them And Their Community. Macro Trend Grounding Food Integrity TRUST RESPONSIBILITY WELLBEING Aligned Food Trends Mega Food Trend Minimally Processed Artificial Ingredient Free Additive Free “Free from” Organic Non GMO Humanely Treated Animals Eco-Friendly

7 Walmart Confidential 7 Walmart Confidential Source: Walmart Pulse Communities; *Food Product Design 2014 How TRUST impacts our business Buy familiar, trusted items/brands (not necessarily national) because it’s more efficient Buy products that are: Made in USA (e.g., safe for consumption, clean farms and factories, etc.), Natural, Non-GMO, Organic Buying local breeds familiarity, connection, and trust (65% want to know more about where food comes from*) Demanding more traceability and transparency NGOs rising in importance to verify claims – e.g. USDA Organic logo on Organic products “ I plan on shopping for what I need at the same stores because of the products they sell and I buy the same products and brands because I trust their ingredients.” -Shannon B. from VA I shop at the local Farmers Market and at our local Hy- Vee, I say local but I would like to point out that I PASS two Walmarts to get there!!! The Hy-Vee has a special section of locally grown produce that always looks fresh and does not have a difference is price to other produce. They even show the names of the various farms the produce comes from and have had local producers at the store.” — Denise F. from KS What Customers say they are doing:

8 Walmart Confidential How RESPONSIBILITY impacts our business “ Avoid brands/companies with “irresponsible” practices or policies Buy local (e.g., small business/growers, farmer’s markets, co-ops, locally grown, made, etc.) Buy products that are ethically made, environmentally-friendly and use sustainable resources (e.g., uses recycled materials or can be recycled, etc.) Look for packaging that is eco-friendly and not excessive or wasteful (e.g., biodegradable, etc.) 8 Walmart Confidential I don't go to stores that are just in business for themselves and just to make a lot of money.” - Bruce B. “I tend to favor stores which support causes I believe in, and avoid those which support some causes I don't. After all, it's the profits that my purchases give them, that they are using to benefit these causes!” – Judith D from FL Source: GCIA analysis of Macro Trends from Walmart Pulse Communities and The Futures Group What Customers say they are doing:

9 Walmart Confidential How WELLBEING impacts our business The Bad Elements they try to limit Artificial ingredients (e.g., additives, chemicals, dyes, pesticides, etc.) Calories Canned Carbs Fats (e.g., saturated or trans-fats) Frozen GMOs High fructose corn syrup Hormones or antibiotics Processed Sugars Sodium The Good Elements they try to maximize Calcium Fiber Fresh (e.g., brightly colors vegetables, leafy greens, etc.) Grass-fed Lean protein (e.g., chicken, fish, nuts etc.) Local (e.g., grown, sourced, raised, sustainable, etc.) Natural Organic Whole grain (e.g., wheat pasta, bread, flour, etc.) 9 Walmart Confidential When reading labels, customers are assessing … Source: GCIA analysis of Walmart Pulse Communities

Privileged and Confidential 10 How does Walmart address sustainability?

11 Walmart’s Broad Sustainability Goals Create Zero Waste Be supplied 100% by Renewable Energy Sell Products that Sustain people and the environment

12 We Must Partner with Our Suppliers to Make a Big Impact only 10% of our environmental footprint is within our direct control

13 Our approach to Measuring and Managing Sustainable Products SOURCE: Walmart, TruCost Driving sustainability along our supply chains Our commitment is that by the end of 2017, 70 percent 1 of the goods we sell will be from suppliers who use our Sustainability Index 1 Figure is % of Walmart US and Sam's Club goods for covered categories

14 The Sustainability Index is Walmart’s key tool to integrate sustainability into the core business Sustainability Index Suppliers ▪ Identify KPIs for questionnaires ▪ 100+ members: ▪ Annual survey of suppliers ▪ Administered by Sustainability Team ▪ Track data for KPIs ▪ Respond to survey Sustainability Index Scorecards ▪ For buyers and suppliers to understand sustainability status and track progress ▪ Make informed decisions to act on sustainability metrics ▪ Data has been collected from over suppliers covering categories

Privileged and Confidential 15 What does this mean for Walmart pork suppliers?

Sustainability Index Survey Results Snapshot

17 Walmart’s Positions are Publically Available on our Website

18 Walmart supports the globally-recognized “Five Freedoms” of Animal Welfare Five Freedoms 1.Freedom from hunger or thirst by ready access to fresh water and a diet to maintain full health and vigor. 2.Freedom from discomfort by providing an appropriate environment including shelter and a comfortable resting area. 3.Freedom from pain, injury or disease by prevention or rapid diagnosis and treatment. 4.Freedom to express normal behavior by providing sufficient space, proper facilities and company of the animal's own kind. 5.Freedom from fear and distress by ensuring conditions and treatment that avoid mental suffering. *The Five Freedoms were developed by the UK government in 1965 and are widely endorsed by authoritative organizations such as the World Organization for Animal Health (OIE) What we’re asking of our suppliers 1.Do not tolerate animal abuse of any kind. 2.Report to authorities and take appropriate disciplinary and corrective action in any cases of animal abuse. 3.Adopt the principles of the Five Freedoms in your own operations and industry producer programs, and publish a corporate policy on animal welfare. 4.Implement solutions to address animal welfare concerns including, but not limited to: housing, painful procedures, euthanasia or slaughter. 5.Promote transparency by providing an animal welfare report to Walmart and publicly reporting against your animal welfare policy on an annual basis.

Index Survey Welfare Question PQA Plus/CSIA, TQA, AMI

20 Walmart supports Responsible Use of Antibiotics in Farm Animals What we’re asking of our suppliers 1.Comply with all federal, state and local regulatory requirements as well as Walmart food safety standards. 2.Adopt and implement AVMA Judicious Use Principles of Antimicrobials in your own operations and in your industry producer programs. 3.Adopt and implement U.S. Food and Drug Administration’s Voluntary Guidance for Industry #2094 (Judicious Use of Medically Important Antimicrobial Drugs) in your own operations and in your industry producer programs to eliminate growth promotion uses of medically-important antibiotics. 4.Eliminate growth promotion uses of all antibiotics. 5.Promote transparency by providing an antibiotics management report to Walmart and publicly reporting antibiotic use on an annual basis.

Index Survey Antibiotics Question Focus will be on VCPR, corporate policy, and monitoring This is a revision from last year’s “animal daily dose” KPI

Sustainability Index Timeline FY17 FebMarAprMay JunJulAugSepOctNovDecJan Walmart Registration Period Survey Period Suppliers Get Results Buyers Get Results Sam’s Club Registration Period Survey Period Suppliers Get Results Buyers Get Results Walmart Registration = June 20 – July 29 Sam’s Club Registration = August 22 – Sept 9 Survey Period (Both) = October 3 – November 4 3x score boost for priority KPIs: welfare and antibiotics

23 Supplier Showcase: Antibiotics at Smithfield First pork producer to develop and implement a comprehensive, systematic animal welfare management program to monitor and measure animal well-being Voluntarily aligned with the Food and Drug Administration's (FDA's) guidelines 209 and 213 years ahead of schedule, and ended its use of medically important antibiotics for growth promotion on company-owned and contract farms First and only company in the industry to report antibiotics usage (since 2007) Developed a definition of preventative use of antibiotics to help assure stakeholders that it is not a “catch-all” term disguising sub-therapeutic uses of medically important antibiotics Fund ongoing research to identify new technologies and procedures that improve animal health while minimizing antibiotic use

Privileged and Confidential 24 Walmart Sustainability Priorities for Pork recap: 100% of Suppliers using the Sustainability Index Focus on Welfare, Antibiotics & Swine Assurance

25 “We can make a positive difference on environmental issues and simultaneously reduce costs and run a better business.” -Doug McMillon