Portfolio Performance - Private Equity and Infrastructure portfolios are performing resiliently despite a subdued macroeconomic environment[6] - Royal Sanders continues to perform well, and the broader PE portfolio shows improving momentum[6] - MAIT's sale was announced earlier this month, with total gross proceeds of approximately £143 million, a roughly 30% increase over its valuation on March 31, 2025, resulting in a 2.7x MM and approximately 27% IRR[6] - Action's year-to-date sales (as of September 21, 2025) reached €10.9 billion, which is 18% higher than the same period last year[6] - Action's year-to-date like-for-like (LFL) sales growth is 6.5% (compared to 6.8% at the end of August 2025), driven by transaction growth in all countries[6] - Action's operating EBITDA for the 12 months leading up to the end of P9 2025 is expected to be approximately €2,295 million, a 21% increase from €1,894 million at the end of P9 2024[6] Action Expansion - Action added 207 net new stores year-to-date and is on track to deliver or exceed 370 net new stores in 2025[6] - Action opened 7 stores in Switzerland year-to-date, and its first store in Romania opened on September 24, 2025[6] Investment and Acquisition - On September 24, 2025, 3i entered into an agreement with GIC to purchase a limited partnership interest representing 2.2% of Action equity in exchange for the issue of 19,916,225 new ordinary shares in 3i Group plc[6] - 3i invested approximately €1.7 billion in consumer businesses over the last 2 years[11] - 3i invested £124 million in MPM[18] - 3i invested approximately €145 million in WaterWipes[49] - 3i invested approximately £53 million in MAIT[95] - 3i invested £99 million in OMS[111] MPM Transaction - The total gross proceeds from the MPM transaction are approximately £400 million, with a money multiple of 3.2x and an IRR of 29%[44]

Summary of Conference Call on China Consumer Staples Industry Overview - The consumer staples sector in China is experiencing weak demand trends from Q2 to Q3, influenced by policy and weather factors, leading to a wider divergence between market leaders and laggards [1][2] - The spirits sector has seen a valuation increase of 24% in Q3 to date, compared to a 16% increase in the A-share Liquor index and a 13% increase in the MSCI China Index, driven by improved market sentiment and expectations of stimulus policies [1] Key Insights Demand Trends - Overall demand remains weak, particularly in gifting categories as noted by dairy and spirits companies [1] - Beer, spirits, and liquid milk are under pressure, while beverages, snacks, and pet foods show mixed performance with some companies experiencing growth due to strong product cycles and omnichannel strategies [2] Pricing and Market Dynamics - Pricing remains muted across the sector, with spirits and beer companies focusing on sub-premium segments [2] - The August Foods Consumer Price Index (CPI) decreased by 4.3% year-over-year, indicating potential challenges in pricing strategies [1] Company Performance and Strategies - Companies like Haitian and Nongfu are gaining market share, while others like Jonjee are struggling [9] - CR Beer reported growth in premium and sub-premium volumes, while maintaining a disciplined approach to pricing and promotions [47] - The spirits sector is seeing a shift towards mid-end and mass-market products to counteract upper-mid-end softness [43] Future Outlook - The sector is expected to see a gradual recovery in retail demand, particularly in traditional categories like beer and dairy, with potential for value stock rotation in early 2026 [8] - Companies are expected to enhance shareholder returns and maintain dividend payouts, with a focus on operational efficiency and cost management [8] Sector Preferences - Preference remains for beverages due to secular growth, followed by pet foods and dairy, with a positive outlook for beer in the medium term [13] - Stock recommendations include Eastroc, Gambol, and China Pet Foods for strong product cycles, and CR Beer and Tsingtao for their dividend yields and valuations [13] Additional Observations - The competitive landscape is evolving, with top players consolidating market share amid weak demand, leading to a valuation premium for leading brands [9] - The pet food sector is benefiting from a shift towards higher-value segments, with companies focusing on premiumization and operational efficiencies [48] - Snacks are seeing a channel shift towards discounters and mom-pop stores, with a focus on large SKU strategies and product mix upgrades [49] Key Watch Factors - Policy directions post the Fourth Plenum and local catering incentives are critical to monitor, especially their impact on banquet traffic [11] - The performance of mid-end and mass SKUs in spirits and the overall margin discipline across the sector will be crucial as cost pressures moderate [12]

Summary of China Pet Foods Conference Call Company Overview - **Company**: China Pet Foods - **Event**: Asia Leaders Conference 2025 - **Date**: September 3, 2025 Key Points Domestic Market Insights - Management targets **35% year-over-year (yoy) sales growth** for FY25 in the domestic self-brand business, aiming for earnings of approximately **Rmb70-90 million** [4] - Ambition to **double domestic sales** on a 3-year rolling basis, primarily driven by the brand **Wanpy** [2][4] - **Toptree** brand expected to achieve **70%+ yoy sales growth** in FY25, with 2H sales growth anticipated to be slightly higher than 1H [4] - Wanpy's sales growth projected at **30%+ yoy** in FY25, with specific sales targets of **Rmb80 million** in 2H compared to **Rmb40 million** in 1H [4] - Management expects improved gross profit margin (GPM) for domestic business in 2H due to reduced sampling costs [4] - Strong potential identified in **O2O platforms** such as JD, Meituan, and Ele.me, with expectations to double or triple sales volume compared to market levels [4] Overseas Expansion - Management anticipates total overseas sales to reach **Rmb250 million** in 1H, up from **Rmb200 million** in the previous year, implying a total of **Rmb450 million** in FY25 [5] - GPM for overseas sales is around **30%**, lower than domestic due to distributor channels [5] - Long-term sales goal set at **Rmb1 billion** with expectations of rapid growth in new markets over the next 1-2 years [5] - New factories in the U.S. and Canada targeting high-end pet treats market, with **Rmb200 million** capacity added in Canada and **Rmb1.4-1.5 billion** in the U.S. [9] - Southeast Asia factories expected to reduce tariff impacts from **Rmb200 million** to less than **Rmb10 million** for overseas OEM business [9] Financial Projections and Risks - Management expects a **1-2 percentage point** margin expansion in 2H due to decreasing selling cost ratios and ongoing GPM improvements [2] - Selling expense ratio projected to stabilize around **30%**, with an expected increase of **Rmb20-30 million** in selling expenses compared to initial plans [10] - Key risks identified include slower-than-expected domestic revenue growth, food safety issues, forex fluctuations, and potential tariffs on pet food exports to the U.S. [11] Valuation and Price Target - The company is rated as a **Buy** with a 12-month sum-of-the-parts (SOTP) target price of **Rmb63.0**, based on **25X FY26E P/E** for overseas business and **30X FY27E P/E** for domestic business [11] Additional Insights - Management's focus on establishing a sales and marketing team in local markets for overseas expansion [8] - Emphasis on leveraging existing brand strength and market presence to drive growth in both domestic and international markets [2][4][5] This summary encapsulates the key insights and projections from the conference call, highlighting the company's growth strategies, financial expectations, and potential risks.

Company Overview - Freshpet has maintained a strong belief in the long-term potential of fresh pet food, which is supported by data from competitors and retailers [1] - The company has grown to become a $1 billion entity, with an estimated $3 billion in retail sales potential within the fresh pet food market [1] Industry Insights - The fresh pet food category, which Freshpet pioneered 20 years ago, continues to show strong growth prospects and is expected to remain a significant segment of the pet food market [1]

Financial Data and Key Metrics Changes - The company has improved its EBITDA margin from 3% three years ago to a projected 18% this year, with gross margins running around 48% [8][19][34] - The company is approaching $1 billion in revenue and sees a potential market growth from $3 billion to $10 billion in the next decade [5][45] Business Line Data and Key Metrics Changes - The company has successfully built a strong business and competitive moat through investments in manufacturing capabilities, retail fridge availability, and brand equity [5][41] - The operational improvements over the last couple of years have been significant, contributing to the current financial performance [8][66] Market Data and Key Metrics Changes - Consumer sentiment has negatively impacted growth rates, with the second quarter showing the worst consumer sentiment on record [6][12] - Despite the slowdown, the existing user base remains strong, indicating that the category is sticky [7][34] Company Strategy and Development Direction - The company aims to adapt its messaging to target consumers who are considering trading up to higher-quality dog food [21][22] - The focus is on attracting high-value consumers, referred to as MVPs (Most Valuable Pet Parents), who are expected to spend more on Freshpet products [35][36] Management's Comments on Operating Environment and Future Outlook - Management believes the current slowdown is a temporary phenomenon and expects to return to growth as consumer sentiment improves [6][61] - The company is well-prepared for increased competition in the fresh dog food market and believes that new entrants will ultimately benefit the category [39][44] Other Important Information - The company has reduced its capital expenditure (CapEx) forecast for the year to about $175 million, down from an initial outlook of $250 million [53] - New technology is being tested that could significantly improve bag margins and production efficiency [48][52] Q&A Session Summary Question: What are your expectations for top line growth this year? - The company is focusing on adapting its message to consumers and targeting advertising to those likely to trade up their dog food [21][22] Question: Can you describe the strategic shift towards MVPs? - The goal is to build a loyal base of consumers who feed Freshpet as their main meal, focusing on high-value consumers [35][36] Question: How does the company view the increased competition in the fresh dog food market? - The company welcomes competition and believes it will raise awareness of the benefits of fresh pet food, ultimately benefiting the category [39][44] Question: What is the breakdown of your CapEx? - The company spends about $20 million on maintenance capital, $20 to $25 million on fridges, with the remainder for capacity expansion [53][54] Question: How is the company managing its margins amid the slowdown? - Management is confident that margins can be maintained even with slower growth, projecting an 18% EBITDA margin for the year [66]

Financial Data and Key Metrics Changes - The company has improved its EBITDA margin from 3% three years ago to a projected 18% this year, with gross margins running around 48% [8][19][71] - The company is approaching $1 billion in revenue, with a significant portion of the pet food market still untapped, estimated at $3 billion in retail sales for fresh and frozen products [4][5] Business Line Data and Key Metrics Changes - The company has seen a slowdown in new user acquisition due to weak consumer sentiment, although the existing user base remains strong [6][7] - Household penetration growth rates are in the high single digits overall, with mid double digits for the most valuable pet parents (MVPs) [38] Market Data and Key Metrics Changes - Consumer sentiment has been at its lowest, impacting the willingness to adopt dogs and trade up to premium dog food [6][12] - The company expects the dog food category to continue growing, with long-term trends favoring premiumization despite short-term fluctuations [11][14] Company Strategy and Development Direction - The company aims to maintain a competitive edge through strong manufacturing capabilities and brand equity, preparing for increased competition in the fresh pet food market [44][46] - The focus is on targeting high-value consumers (MVPs) who are likely to feed Freshpet as their main meal, enhancing brand loyalty [39][40] Management's Comments on Operating Environment and Future Outlook - Management believes the current slowdown is a temporary phenomenon and remains confident in the long-term growth potential of the fresh pet food market [64][67] - The company is adapting its advertising strategy to better communicate the value of fresh food to consumers, particularly in a challenging economic environment [21][22] Other Important Information - The company has reduced its capital expenditure (CapEx) forecast for the year to about $175 million, down from an initial outlook of $250 million, allowing for more free cash flow [56][58] - New technology is being tested that could significantly improve bag margins and production efficiency, with expectations for implementation in the coming years [50][53] Q&A Session Summary Question: What gives you confidence in your ability to hit long-term margin targets? - Management expressed confidence in achieving 48% gross margin and 22% adjusted EBITDA margin by 2027, contingent on steady sales growth [19][20] Question: Can you talk about your expectations for top-line growth this year? - The company is focusing on adapting its messaging to attract consumers willing to trade up, while also expanding distribution channels [21][23] Question: How do you foresee the competitive landscape evolving? - Management believes they are well-prepared for increased competition and that new entrants will ultimately benefit the category by raising awareness [42][46] Question: What are the key themes from investor meetings? - Investors are concerned about the current slowdown but are reminded that it does not diminish the long-term opportunity in the market [64][66]

Financial Data and Key Metrics Changes - The company reported 2.4% organic growth in the second quarter, excluding the impact of private label products [3] - The company expects 2025 to be at the low end of the 2% to 4% organic growth range communicated previously [5] - The company has seen sequential dollar earnings per share growth during the 2025 strategy cycle [7] Business Line Data and Key Metrics Changes - The company has increased advertising investment over the last five years, which has improved brand penetration and health [6] - Elmex toothpaste has become one of the fastest-growing products in the European market, contributing to record market share [11] - The anti-cavity segment in India is a significant part of the franchise, with new technology combining amino acids and arginine to strengthen teeth [12] Market Data and Key Metrics Changes - The company has seen growth in both North America and emerging markets, ensuring broad-based growth across all categories [5] - In China, 40% of the market is online, with 80% of media being digital, indicating a shift in consumer purchasing behavior [28] - The company has successfully increased sales at Sam's Club by 30 times through targeted advertising and data integration [32] Company Strategy and Development Direction - The company is focused on leveraging its 2025 strategy to drive consistent top-line growth and is preparing to execute its 2030 strategy starting December 31 [2][4] - Key themes for the 2030 strategy include global brand penetration, investment in key geographies, and enhancing data and analytics capabilities [24][26] - The company aims to implement omni demand generation to better integrate online and offline marketing strategies [30][41] Management's Comments on Operating Environment and Future Outlook - Management noted that consumer uncertainty is the primary driver for category vitality, leading to cautious purchasing behavior [59] - The company anticipates that discretionary spending will suffer in the latter half of the year, affecting overall category growth [62] - Management emphasized the importance of continuous innovation across all product segments to maintain consumer interest and drive growth [63] Other Important Information - The company has announced a new productivity initiative to streamline operations and fund strategic initiatives [3][46] - The company has invested significantly in its supply chain to optimize operations and meet consumer demands for customization [51] - Hill's pet food brand continues to outperform the category due to disciplined brand management and significant advertising investments [53][55] Q&A Session Summary Question: What areas of the 2025 strategic plan were most successful and where can improvements be made? - The company successfully focused on dollar top-line growth and building long-term capabilities, particularly in AI and digital innovation [36][37] Question: Why was omnichannel demand generation emphasized in the new strategy? - The complexity of the consumer journey necessitates a more integrated approach to marketing that targets both online and offline consumers effectively [40][41] Question: What will be the biggest changes as the company transitions to the new strategy? - Key changes will include increased innovation, resource allocation to key growth regions, and a focus on omni demand generation [43][44] Question: How does the company plan to address the slowdown in category growth? - The company will continue to innovate and bring excitement to both premium and mid-price segments to drive consumer engagement [63] Question: Is the company experiencing destocking issues? - Destocking is primarily a function of consumer behavior, with online retailers managing inventory more aggressively than brick-and-mortar stores [64][65]

Financial Data and Key Metrics Changes - The company reported 2.4% organic growth in the second quarter, excluding the impact of private label products [3] - The company expects 2025 to be at the low end of the 2% to 4% organic growth range communicated earlier [5] - The company has seen sequential dollar earnings per share growth during the 2025 cycle [7] Business Line Data and Key Metrics Changes - The company has increased advertising investment over the last five years, which has improved brand penetration and health [6] - Elmex toothpaste has become one of the fastest-growing products in the European market, contributing to record market share [10] - The anti-cavity segment in India is a significant part of the franchise, with new technology introduced to strengthen teeth [11] Market Data and Key Metrics Changes - The company has seen growth in both North America and emerging markets, ensuring broad-based growth across all categories [5] - In South Africa, a new antibacterial product has resulted in a 450 basis point share growth since its introduction [12] - The Chinese market is highlighted as a significant opportunity, with 40% of the market being online and 80% of media being digital [30] Company Strategy and Development Direction - The 2025 strategy focused on consistent top-line growth and reinvesting in the business to accelerate growth [5][6] - The company is preparing to execute its 2030 strategy, which includes leveraging brand penetration and enhancing omni demand generation [27][28] - The company aims to invest more in key geographies and continue building capabilities in data and analytics [28] Management's Comments on Operating Environment and Future Outlook - Management noted that consumer uncertainty is the primary driver for category vitality, affecting purchasing behavior [62] - The company is optimistic about its ability to drive top-line and bottom-line growth despite current market challenges [37] - Management emphasized the importance of innovation and strategic planning in navigating the current environment [41][42] Other Important Information - The company has announced a new productivity initiative to support its strategic plan and improve efficiency [3][49] - The restructuring is intended to optimize the supply chain for a more dynamic environment [54] - The Hill's pet food brand continues to outperform the category due to disciplined investment and brand differentiation [56] Q&A Session Summary Question: What areas of the 2025 strategic plan were most successful? - The focus on dollar top-line growth and building long-term capabilities, particularly in AI and digital innovation, has been key to success [39] Question: Why was omnichannel demand generation emphasized? - The complexity of the consumer journey necessitates a more integrated approach to media spending across online and offline channels [43][44] Question: What are the biggest changes transitioning to the new strategy? - Increased focus on innovation, resource allocation in key growth regions, and a consistent omni demand generation model are the main changes [46][47] Question: How does the company view the current category growth slowdown? - The slowdown is attributed to consumer caution and uncertainty, affecting purchasing behavior in both discretionary and nondiscretionary categories [62] Question: Is destocking affecting the company differently? - The company has observed that destocking is more prevalent in online retail environments rather than brick-and-mortar stores [68][69]

Financial Data and Key Metrics Changes - The company has experienced five years of strong growth through fiscal 2023, influenced by significant inflationary pressures [5] - The fiscal 2026 priorities focus on organic sales growth, with a long-term target of 2% to 3% growth [5][10] - The company expects a decline in operating profit of 10% to 15% for fiscal 2026, attributed to unusual factors such as the divestiture of Yoplait and reset of incentive compensation [25][26] Business Line Data and Key Metrics Changes - The North America retail business aims to restart volume-driven organic sales growth, with improvements seen in eight of ten categories [6][7] - The Pet business is focused on driving dollar share growth and has significant product news planned [6][10] - New product sales are expected to increase by 25% this year, with notable launches across major categories [35] Market Data and Key Metrics Changes - Industry volume recovery has been slower and more expensive than anticipated, with flat volume growth expected in the company's categories [16][17] - The company acknowledges a shift in consumer behavior towards value, impacting overall volume [18][19] - Despite challenges, there are growth opportunities in categories focused on health, bold flavors, and nostalgia [19] Company Strategy and Development Direction - The company is reshaping its portfolio towards growth orientation, having divested underperforming segments and acquired into fast-growing areas like pet food [10][11] - A focus on the "remarkable experience framework" aims to enhance brand competitiveness across key measures [12][34] - The company is investing in digital capabilities to improve efficiency and market positioning [13][61] Management's Comments on Operating Environment and Future Outlook - Management highlights the importance of addressing consumer value needs and the impact of inflation on purchasing behavior [5][18] - The company is optimistic about returning to mid-single-digit growth in the pet segment and leveraging new product innovations [56] - Management emphasizes the need for responsible investment to support organic sales growth while managing profitability [25][27] Other Important Information - The company plans to launch into the fresh pet food category, projecting significant growth potential in this $3 billion segment [43] - The fresh segment is expected to grow to $10 billion within the next decade, with a focus on leveraging the Blue Buffalo brand [43][44] - The company is committed to maintaining strong in-store presence and national advertising for the fresh product launch [46] Q&A Session Summary Question: What gives you confidence in achieving your long-term growth targets? - Confidence stems from portfolio reshaping, brand focus, and investment in capabilities [10] Question: What are the main drivers of the expected decline in profitability? - The decline is influenced by the Yoplait divestiture and reset of incentive compensation, which are seen as transitory factors [26] Question: How do you view the competitive landscape and your positioning? - The company acknowledges past competitiveness issues and is focused on improving product quality and advertising [34] Question: What metrics will indicate success in the fresh pet food segment? - Initial metrics will focus on trial, repeat purchases, and penetration within households [53]

Financial Data and Key Metrics Changes - The company has experienced five years of strong growth through fiscal 2023, influenced by significant inflationary pressures [5] - The fiscal 2026 priorities focus on organic sales growth, with a target of 2% to 3% long-term growth [10][12] - The company reaffirmed its guidance for the year, indicating confidence in its strategies despite current challenges [9] Business Line Data and Key Metrics Changes - The North America Retail business is focused on restarting volume-driven organic sales growth and driving dollar share growth in the Pet business [5][6] - The company reported pound share growth in eight of its ten categories in North America Retail, with seven categories showing improvement since Q4 [8] Market Data and Key Metrics Changes - The industry is facing a flat volume growth, with expectations of 0.5% growth aligning with population growth [20] - The company noted a shift in consumer behavior towards cooking from scratch due to value concerns, impacting volume trends [22][24] Company Strategy and Development Direction - The company is reshaping its portfolio towards growth-oriented categories, having divested underperforming segments [12] - The focus is on enhancing brand performance through the Remarkable Experience framework, which emphasizes product quality, packaging, and price value [13][14] - Significant investments in digital capabilities and e-commerce are being made, with e-commerce sales now representing 18% of total sales [16] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by inflation and consumer value consciousness, which have affected volume recovery [19][24] - The company is optimistic about growth opportunities in categories focused on health and nostalgia, which are currently trending positively [25] Other Important Information - The company is launching into the fresh pet food category, leveraging learnings from previous tests to ensure a successful entry [47][52] - The Fresh segment is projected to grow significantly, with the company aiming to capture a fair share of this market [52] Q&A Session Summary Question: What gives confidence in achieving long-term growth targets? - Confidence stems from portfolio reshaping, brand focus, and investment in capabilities [12][13] Question: What are the main drivers of expected profitability decline? - Unusual factors include the divestiture of Yoplait and reset of incentive compensation, which are seen as transitory [28][30] Question: How is the company addressing competitiveness issues? - The company is investing in product quality, advertising, and adjusting pricing strategies to improve competitiveness [39][40] Question: What metrics will be tracked for the Fresh business? - Initial metrics include trial, repeat, and penetration rates to gauge success [64] Question: What is the long-term growth potential for the Pet segment? - The company aims for mid-single-digit growth in the Pet segment, focusing on product superiority and market expansion [66]