To Our Fellow Shareholders:

Fiscal 2000 was another dynamic year for Del Monte Foods. We achieved excellent operating margins and delivered strong year-to-year earnings per share growth. In each of our major businesses, we continued to grow our market shares and maintained our number one position. However, despite these gains we are not satisfied with our fiscal 2000 revenue results, which fell below our growth objectives. As we look to the future, we remain confident in the fundamental strategies we have initiated, and which we believe are building long-term value for our company.


The Numbers

For the year ended June 30, 2000, we reported net sales of $1,462.1 million, a three percent decrease from the previous year’s net sales of $1,504.5 million. Diluted earnings per share for fiscal 2000 were $2.42, up from $0.23 in fiscal 1999. Net income for the year was $128.7 million, up from $13.5 million in the last fiscal year. Net income for fiscal 2000 included a tax credit of $67.7 million related to the release of the majority of our valuation allowance during the fourth quarter of the year.


Driving A Billion Dollar Brand

In our second year as a publicly held company, we continued to put our tremendous assets to work to strengthen our marketplace position. As one of the few billion-dollar brands in grocery, Del Monte has size, momentum, and over a century of history with consumers, all of which lets us leverage our base business and develop new revenue opportunities. Going forward, we will continue to build our traditional fruit, vegetable and tomato businesses by focusing on quality products that are easy to use for meals at home and on the go. Importantly, however, we will also increasingly take advantage of new packaging forms – glass and plastic. With this packaging, we will benefit from two strong, emerging platforms for growth: healthy snacks, such as our Del Monte Fruit To-Go single-serve cups, and packaged produce, such as Orchard Select. These will be key sources of future expansion.

By focusing our products and our brands on key consumer trends – for example, the impact of consumers’ fast-paced and busy lives on eating habits – we are charting a course that we believe will lead to superior performance well into the future. As this year’s annual report illustrates in the preceding section, our products excel at providing what people want: delicious, healthy food solutions that are fast and easy to prepare, at home and on the go.


Revenues

In spite of our overall earnings per share growth for the year, top-line sales decreased. During this fiscal year, we continued the downsizing of Del Monte’s foodservice business. This is consistent with our strategy of focusing Del Monte on the branded, high-margin categories of our business. This downsizing, which lowered our fiscal year 2000 revenues, is now complete. In addition, our non-foodservice revenues only grew by one percent due to lower shipments as retailers reduced their inventory levels.


Staying on Strategy

Last year, I reported on the five-point growth strategy that we have pursued since its launch in fiscal 1998. This strategy continues to represent the building blocks of our success. The following point-by-point update demonstrates how our growth strategy is effectively grounded in straightforward, realistic business assumptions, which we believe will continue to provide consistent progress.

1. To increase sales of targeted, high-margin product lines. Fiscal 2000 revenues from these product lines – such as diced tomatoes and specialty fruits and vegetables – grew by over 7.5 percent compared to last year, and these product lines now represent approximately 27 percent of revenues.

2. To expand by introducing new products and new packaging. Incremental sales of new products this year grew the top-line by over two percent, primarily from Del Monte Fruit To-Go, Mandarin Orange Cup, Zesty Diced Tomatoes, and from continued expansion in the produce section of our Orchard Select glass jar line, which now includes apricots. Products sold in glass or plastic packaging represented 75 percent of total new product growth during the past year. New packaging also contributed to revenue growth across all product lines. In addition to plastic and glass, both of which we will continue to expand, we have introduced pull-top lids in vegetables. Also, our colorful, multi-pack jacket packaging continues to be very successful in the club mass merchandisers channel.

3. To increase sales in the club mass merchandisers channel. We grew sales in this channel by 19 percent in fiscal 2000 – mostly from the fast-growing supercenters and club stores.

4. To invest in our plants and reduce costs. We continue to make progress with our five-year, $100 million capital investment program, scheduled to generate $170 million in cost savings. We have completed our tomato facility expansion in Hanford, California, and began the harvest season at our newly renovated, state-of-the-art fruit processing facility in Modesto, California. In early December 1999, we invested in additional production capacity with the purchase of a strategically located processing facility in Cambria, Wisconsin, which can handle all of our core vegetable lines. Overall, the consolidation program has met or exceeded all of our operating objectives.

5. To explore strategic acquisitions. We continue to consider acquisitions if they make strategic sense for our business. A case in point is our recent decision to enhance our growing presence in the produce section by buying the worldwide rights to the Sunfresh brand from the UniMark Group, Inc. Del Monte will market and distribute the Sunfresh line of premium tropical and citrus fruits in jars. Sunfresh products are sold in the produce section, one of the fastest growing segments in retail food. This acquisition also strengthens our Orchard Select jarred fruit line, which is consistent with our strategy of focusing on premium, high-margin brands and further extending our presence beyond the canned food aisle.


Looking Forward

As we enter fiscal 2001, we are confident that the strong progress we achieved in our five-point growth strategy will continue to create top-line growth. Our base business, supported by the equity of the billion-dollar Del Monte brand and driven by improved margins and focused execution, will continue to leverage the “Hey, I Can Do That!” popular grocery campaign, which promotes easy-to-prepare meals. Going forward, we will continue to expand through new packaging and with new Del Monte products focused on more fast-growing market segments, such as healthy snacking and packaged produce. Finally, we will continue to appeal to consumers by showcasing how the good-for-you convenience of our fruit, vegetable, and tomato products fits all lifestyles, is appropriate for any eating occasion, and enhances a wide variety of meals.

I thank all our employees throughout Del Monte for their extra efforts, commitment, and passion for this great company; as well as our many trade customers, consumers, their families, and our shareholders for their continued support.





Richard G. Wolford
Chairman of the Board,
President and Chief Executive Officer