U.S. Consumer Goods

March 2021

U.S. Consumer GoodsSector Overview, Credit Trends & Outlook

Consumer Products Industry

Consumer Products | Industry Themes

3

Growth via innovation, M&A, and E-commerce channel

– Large CPGs benefitting from consumer trial and flexible supply chains resulting in strengthening of balance sheets.

– Packaged food sector will likely use balance sheet strength to reshape portfolios for faster growth through M&A.

– Large CPGs should gain share in e-commerce channel because top-selling products are placed on first page of category searches. We believe they will continue to benefit from participating in this fastest growing channel.

Structural shift back to services/experiences from goods

– Consumers return to most of their pre-COVID activities assuming wide availability of vaccine.

– Out of home activity is supported by consumer saving during the pandemic and record level net worth at year end 2020.

– Consumer staples will use innovation and advertising to retain some of the share they gained during the pandemic.

Large brands and private label will take share from small and mid-sized brands

– Barriers to entry have risen for challenger brands as retailers are favoring large brands because of scale and flexible distribution.

– Private label should be the biggest share gainer in the second half of 2021 because of normalized supply chains, retailers using it to boost margins and gain customer loyalty, and price polarization (erosion of mid-price points because of income disparity).

− Rating stability for Consumer Staples—financial policy remains key driver of rating changes.

− Negative ratings bias for Consumer Discretionaries should decrease throughout the year as consumer mobility increases as the vaccination roll out accelerates and pandemic driven negative outlook revisions are revised to stable.

4

− Innovation remains front-and-center

− Return to repositioning portfolios

− Accelerate digital transformation—investment focus: tailored marketing, top positions on search pages, mobile apps and websites, and omni-channel presence

− Work—blend of remote and office

− Shop less in stores—lower traffic off-set by bigger basket size

− Shop more in e-commerce channel and use subscription services

− Focus on health and wellness

− Increase interest in sustainabilityConsumer Companies

Ratings

Longer Term COVID-19 Impact On Consumer Products SectorConsumer and business behavior changes after every significant event – this crisis is no differentIt is difficult to predict stickiness of consumer behavior post pandemic. But below are trends we expected to remain:

− Branded staple companies increased household penetration—gained new customers and consumers returned to familiar brands.

− Strengthened relationship with retailers--quickly changed and adapted manufacturing and distribution.

− Channel disruption will likely continue—branded companies are channel agnostic and accelerating presence in e-commerce.

Opportunities

COVID-19 Impact

Spikes In New COVID-19 Cases And Slow Roll Out of Vaccine--Holding Consumer Spending Down… …Room for Savings Rates to Decline Boosts Spending

Discretionary Spending Should Improve

5

Sources: U.S Bureau of Economic Analysis, FRED®, Federal Reserve Bank of St. Louis, Euromonitor, U.S Department of Agriculture.

E-commerce Will Continue To Be The Fastest Growing Channel And Companies Are Well Positioned To Participated In That Growth

Post Covid-19, Consumers Will Likely Return To Spending A Greater % Of Their Food Dollar In The On-Premise Channel

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x0%

5%

10%

15%

20%

25%

30%

Savings Rate (Left Side) Household Assets/Liab (Right Side; Inverted)

5.3% 5.4%4.4% 3.8% 4.0% 4.0% 4.0%

1.9%

-9.7%

-1.7%

-12%-10%

-8%-6%-4%-2%

0%2%4%6%8%

Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20 Q2 '20

Total PCE %YoY

14.5% 16.3% 14.9% 14.4%10.9%

12.9%

29.7%

5.6% 7.3%10.1% 10.3% 10.4%

0%

5%

10%

15%

20%

25%

30%

0%

5%

10%

15%

20%

25%

30%

Ecommerce Sales %YoY (Left Side) Ecommerce as a % of Total Retail Sales (Right Side)

40%

45%

50%

55%

60%

Food at Home % Sales Food away from Home % Sales

Tailwinds Could Outpace Headwinds In 2021

6

– Lower volumes

– Deflationary pressures—promotions return

– Rising freight & commodities (packaging, corn, flour & wheat)

– Shift in wallet (Staples)

– Pressure from private label

– Weakening negotiating power

Headwinds

Tailwinds

– Sustainable SG&A reductions—travel, entertainment and occupancy

– SKU consolidation

– Marketing efficiencies and productivity prorgrams

– Lower COVID-19 related costs—materially less hazard pay and supply chain disruption

– Higher margin off-premise sales return

COVID-19 Impact On Global GDPS&P GDP Growth ForecastsAs of Jan. 21, 2021

2020 2021 2022

Global (3.7%) 5.0% 3.9%

US (3.9%) 4.2% 3.0%

Eurozone (7.2%) 4.8% 3.9%

China 2.1% 7.0% 5.0%

UK (11.0%) 6.0% 5.0%

LATAM (7.4%) 4.1% 3.2%

A new surge in COVID-19 cases has led to re-imposition of lockdowns in parts of the U.S. and Europe, slowing pace of recovery. East Asia has been relatively unscathed. Activity remains uneven. With momentum fading, we are forecasting a weaker start to 2021 for discretionaries. The risks to our baseline are on the downside. Vaccine timing remains an upside.

Infection rates are still high and govt’s are tightening restrictions, so the road to recovery will remain bumpy until a vaccine becomes widely available. The economic fallout of national lockdowns and potential corporate insolvencies remain a concern, as well as risks related to global trade, uncertainty around consumer spending, and failure of the U.K. and EU to reach a free-trade agreement.EU

ChinaChina is set to be an early exiter from the COVID-19 downturn, however, recovery has been state-led, fueled by infrastructure and property, with household spending lagging. Selective support for weak state-owned enterprises could mean defaults to come. While further escalation of tensions with the U.S. seems unlikely, negative bipartisan views point to a strenuous relationship ahead.

US The U.S. economy, which has recouped two-thirds of the economic losses from the COVID-19 recession, is now showing signs of weakness in the midst of climbing COVID-19 infection rates. Recent (and planned) stimulus will help prop up consumer spending, which has begun to improve.

7

Source: S&P Global Ratings | “Global Economic Outlook: Limping Into A Brighter 2021”, Dec 3, 2020; “Credit Conditions Europe: Waiting For Relief”,Dec 3, 2020; “Credit Conditions Asia-Pacific: The Rebound Has Begun”, Dec 3, 2020; “Staying Home For The Holidays”, Dec 2, 2020; “Latin America’s Economic Recovery From the Pandemic Will Be Highly Vulnverable To Setbacks”, Dec 1, 2020.

LATAM Latin American economies are expected to have the slowest recovery out of the emerging markets due to damage the virus caused to investment and inefficient government support to labor markets. These problems were exacerbated by economic weakness that preceded the pandemic. Limited ability to implement additional stimulus means economic recovery in the region will remain fragile.

GDP Growth—Expect Stimulus Programs Bring GDP Back To Pre-Crisis Levels In 2Q 2021

Unemployment Rate Remains Elevated, But Significantly Below The Last Recession

Macro Trends

8

Sources: U.S Bureau of Economic Analysis, FRED®, Federal Reserve Bank of St. Louis .

Consumer Confidence Weak--Consumers Wary About The Future Of The Virus & Economy

Food Inflation Is A Potential Headwind: CPI For All Urban Customers

-5%

-3%

-1%

1%

3%

5%Real GDP %YoY

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%University of Michigan Consumer Confidence % YoY

0%

5%

10%

15%

Unemployment Rate %

-5%

0%

5%

10%Food at Home % YoY Food Away from Home %YoY

Apparel and Footwear Market Size

Discretionary | Industry Level Retail Sales 2019-2024Food service category likely will take the longest to recover

9

Beauty and Personal Care Market Size

Source: Euromonitor.

Consumer Appliances Market Size

Consumer Food Service Market Size

2%

-23%

17%8%

4% 3%

$-

$200,000

$400,000

$600,000

-30%

-10%

10%

30%

2019 2020 2021 2022 2023 2024

Sales Level (Millions)

YoY % Sales Growth

2% -1% 1% 2% 3% 3%

$95,000

$100,000

$105,000

$110,000

$115,000

-30%

-10%

10%

30%

2019 2020 2021 2022 2023 2024


YoY % Sales Growth

0%-1% 4% 4% 5% 5%

$80,000

$90,000

$100,000

$110,000

$120,000

-30%

-10%

10%

30%

2019 2020 2021 2022 2023 2024


YoY % Sales Growth

1%

-24%

12% 8% 6% 4%

$-

$200,000

$400,000

$600,000

$800,000

-30%

-10%

10%

30%

2019 2020 2021 2022 2023 2024


YoY % Sales Growth

Packaged Food Market Size

Staples | Industry Level Retail Sales 2019-2024Retain some share gained during the pandemic—Beverages should be the fastest growing categories ’20-’24

10

Alcoholic Drink Market Size

Soft Drink Market Size

Tobacco Market Size

2%

12%

-4% 2% 3% 3%

400,000.0

450,000.0

500,000.0

550,000.0

-30%

-10%

10%

30%

2019 2020 2021 2022 2023 2024


YoY % Sales Growth

4%8%

0% 2% 4% 4%

120,000.0130,000.0140,000.0150,000.0160,000.0170,000.0

-30%

-10%

10%

30%

2019 2020 2021 2022 2023 2024


YoY % Sales Growth

4%4% 4% 4% 3% 3%

110,000.0120,000.0130,000.0140,000.0150,000.0160,000.0

-30%

-10%

10%

30%

2019 2020 2021 2022 2023 2024


YoY % Sales Growth

2% -2% 3% 4% 4% 4%

120,000.0130,000.0140,000.0150,000.0160,000.0170,000.0

-30%

-10%

10%

30%

2019 2020 2021 2022 2023 2024


YoY % Sales Growth


Home Care Market Size

Staples Continued| Industry Level Retail Sales 2019-2024Hygiene and consumer health should be the fastest growing categpries ’20-’24

11

Tissue and Hygiene Market Size


Consumer Health

Health and Wellness

2%11% 3% 3% 3% 3%

0.0

20,000.0

40,000.0

60,000.0

-30%

-10%

10%

30%

2019 2020 2021 2022 2023 2024


YoY % Sales Growth

2%8% 4% 3% 4% 4%

0.0

20,000.0

40,000.0

60,000.0

-30%

-10%

10%

30%

2019 2020 2021 2022 2023 2024


YoY % Sales Growth

3% 5% 3% 4% 4% 4%

0.0

50,000.0

100,000.0

150,000.0

-30%

-10%

10%

30%

2019 2020 2021 2022 2023 2024


YoY % Sales Growth

3%9%

0% 3% 3% 4%

0.0

100,000.0

200,000.0

300,000.0

-30%

-10%

10%

30%

2019 2020 2021 2022 2023 2024


YoY % Sales Growth

Beverages And Apparel Should Benefit From Consumers’ Increased Mobility Post-COVID After Taking A Big Hit During The Pandemic

Category09-'19 CAGR growth

20-24 Est. CAGR Growth

2020 Y-T-Y

2021 Y-T-Y

2022 Y-T-Y

2023 Y-T-Y Fastest Growing Category

Slowest Growing Category

% Private Label Share Top 3 Share

Alcoholic Drinks (off-trade) 3.20 2.40 7.60 0.40 2.40 3.60 RTD Wine 0.2 61.2

Alcoholic Drinks (on-trade) 2.80 18.00 50.30 34.30 18.20 11.80 RTD Cider/Perry 0.2 61.2

Soft Drinks (off-trade) 2.30 3.50 3.90 3.70 3.90 3.20 RTD coffee, Sports Drinks Carbonated 21.9 45.7

Soft Drinks (on-trade) 1.40 10.90 36.00 32.80 5.90 4.10 RTD Coffee Carbonates 21.9 45.7

Hot Drinks 5.00 3.30 6.50 3.30 4.00 3.20 Coffee Pods Black tea 11.6 33.8

Packaged Food 2.00 1.20 12.40 3.70 2.00 3.00 Snacks Staples 16.4 13.3

Fresh Food 1.00 0.80 0.50 0.60 1.80 1.10 Starchy Roots Sugar and Sweeteners N/A N/A

Consumer Health 4.30 3.90 5.00 3.70 4.10 4.10 Herbal/Traditional ProductsWeight Management and Wellbeing

14.5 15.4

Beauty and Personal Care 3.00 2.40 0.90 1.50 2.30 2.00 Skin and Sun Care Color Cosmetics 3.8 30.5

Home Care 1.10 2.90 10.70 2.90 2.60 2.90 Laundry, Dish and Air Care Polishes 6.9 52.7

Tissue and Hygiene 1.30 3.70 8.00 3.90 3.40 3.70 N/A N/A 23.5 64

Apparel and Footwear 2.50 8.00 22.90 16.00 8.20 4.20 Sportswear Accessories 4.1 10.8

Home and Garden 3.20 5.60 0.40 6.00 5.60 5.50Home Improvement and Gardening

Homewares and Home Furnishings

5.6 6.7

Consumer Appliances 4.00 4.40 1.10 3.50 4.40 4.70 Dish Washers Irons 3 25.2

Consumer Electronics 0.80 0.50 4.40 1.00 0.80 0.20 Portable Consumer Electronics In-Car Entertainment 1 43

12


Retail Selling Price Market Size

Consumer Products | Key Takeaways

13

– Economic growth remains under pressure, despite good news on the vaccine front. Pre-pandemic social and economic activates are still far off because of spikes in COVID-19 cases.

– Weak consumer confidence, high unemployment, and lower consumer spending.

– Staples’ sales momentum continues to be good while subsectors exposed to social activity and discretionary spending sales remain negative.

– Operating margins flat to up slightly in 2021 because of lower COVID-19 relate costs, return of on-premise sales in second half, greater operating efficiency and cost controls.

– We see rating pressure and potential for defaults at the low-end of the rating spectrum.

– Potential for prolonged-muted sales for discretionary and food service sub-sectors underpin our negative bias for the sector.

– How companies manage operations, financial policies, and adjust channel mix are key factors in the direction of their ratings.

Macro

Industry

Ratings

COVID-19, Recession & O&G Impact*

2020 vs 2019 Estimates 2021 v 2019 Estimates

Potential Neg. LT Industry DisruptionRevenue Decline EBITDA Decline Revenue Decline EBITDA Decline

Packaged Food Low No Decline No Decline ≥2019 ≥2019 --

Household Products Low No Decline No Decline ≥2019 ≥2019 --

Personal Care Low No Decline No Decline ≥2019 ≥2019 --

Agribusiness Low 0% to 5% No Decline ≥2019 ≥2019 --

Beverage Non-Alcoholic Low 0% to 5% 0% to 10% 0% to 5% 0% to 10% --

Tobacco Low No Decline No Decline ≥2019 ≥2019 --

Consumer Services Low 0% to 5% 10% to 15% 0% to 5% 5% to 10%

Beverage Alcoholic Moderate 5% to10% 10% to 15% ≥2019 0% to 10% --

Durables High 15% to 25% 25% to 40% 10% to 15% 15% to 25% --

Beauty High 10% to 15% 15% to 25% 5% to 10% 10% to 15% --

Personal Luxury High 15% to 25% 25% to 40% 10% to 20% 10% to 20% --

Apparel High 15% to 25% 25% to 40% 10% to 20% 10% to 20% --

Food Service High 25% to 50% 25% to 40% 10% to 20% 20% to 30% Yes*The impact descriptor (high, moderate, low) is our qualitative view of the degree of impact to the sectors' operations and credit metrics

Key

High - Significant drop in volume and EBITDA

Moderate: meaningful drop in volume and EBITDA

Low - marginal or no impact on volume and EBITDA

Subsector Risk And Recovery

14

Path Back To Normalcy

15

Source: S&P Global.

Riskiest And Longest Recovery

Path Back To Normalcy

16

Moderate To Low Risk With Minimal Impact To Credit Metrics

Deleveraging After Large M&A TransactionsThe majority of issuers are under our downgrade triggers

17

Note: As of May 2020 McCormick & Co. achieved the S&P leverage target post the Reckitt Benckiser Group's Food Division acquisition. Source: S&P Global Ratings.

4.9x

3.3x3.0x 3.1x

At Close October 2020 July 2021F July 2021F

Campbell Soup Co. (BBB-/Positive/A-3)

Leverage Downside Trigger

Post Snyder's-Lance Inc. Acquisition

5.3x

4.1x 4.1x 4.0x

At Close May-20 May 2021F May 2022F

Conagra (BBB-/Stable/A-3)


Post Pinnacle Foods Inc. Acquisition

4.5x

3.2x2.8x 2.7x

At Close May 2020P May 2021F May 2023F

General Mills Inc. (BBB/Stable/A-2)


Post Blue Buffalo Pet Products Inc. Acquisition

5.2x

3.5x 3.8x 3.9x

At Close December 2020*(Trigger change due to

rating change)

December 2021F* December 2022F*

Kraft Heinz Food Co. (BB+/Stable/--)


Post Kraft Foods Group Inc. Acquisition

18

Source: S&P Global Ratings.

Deleveraging After Large M&A Transactions ContinuedThe majority of issuers are under our downgrade triggers

5.8x

4.1x3.6x 3.3x

At Close December 2020 December 2021F December 2022F

Keurig Dr Pepper Inc. (BBB/Stable/A-2)


Post Dr Pepper Snapple Group Inc. Acquisition

5.0x

3.9x 3.7x3.4x

At Close December 2020*(Trigger change due to

rating change)

December 2021F* December 2022F*

Newell Brands Inc. (BB+/Negative/B)


Post Jarden Corp. Acquisition

5.5x

3.6x 3.6x3.2x

At Close Dec-20 December 2021F December 2022F

Molson Coors Beverage Co. (BBB-/Negative/A-3)


Post Miller Coors Acquisition

5.1x

3.8x 3.8x3.2x

At Close December 2020P March 2021F March 2022F

Bacardi (BBB-/Stable/A-3)


Post Patron Spirits International Acquisition

Brands Took Share From Private Label During COVID…Market share vs. top 3 players

19

*2019 figures used where 2020 data was not yet available. Source: Euromonitor.

2011 2013 2015 2017 2020* Share Change (%)

Tissue and Hygiene* ’20 vs. ’11

Procter & Gamble Co. 32.5 32.2 32.6 32.4 32.8 0.1

Kimberly-Clark Corp 24.7 24.5 24.3 23.8 23.2 -1.9Georgia-Pacific Corp 10.8 9.9 9.1 8.6 8 -2.7Private Label 20.5 21.8 22.4 22.9 23.5 3.2

Consumer HealthJohnson & Johnson Inc 5.3 4.9 5 5 5.8 -1.7Pfizer Inc 4.3 4.3 4.3 4.1 -- N/ABayer AG 2.9 2.9 4.4 4 3.6 24.1Private Label 17.2 17.7 16.9 16.4 14.5 -9.9

Packaged FoodPepsiCo Inc 4.9 5.1 5.2 5.4 5.6 12.0Kraft Heinz Co -- -- 5.1 4.9 4.7 N/ANestlé SA 3.9 3.9 3.6 3.4 3.0 -25.0Private Label 16.4 16.3 16.2 16 16.4 0

Pet Care*Nestlé SA 21.7 21.3 21.1 19.9 19.3 -2.4Mars Inc 9.5 9.6 12.9 12.8 12.6 3.1JM Smucker Co, The - - 6.5 5.8 6.6 N/APrivate Label 12.4 12.3 12 11.8 12.5 -0.3

Health and WellnessPepsiCo Inc 9.1 8.7 8.5 8.1 8.7 -4.4Coca-Cola Co, The 7.2 6.7 6.2 6 5.8 -19.4General Mills Inc 4.6 4.4 4.4 3.9 3.6 -21.4Private Label 13.2 13 12.8 12.4 12.2 -0.9

Hot DrinksNestlé SA 3.9 3.9 4 4.7 16.2 305JM Smucker Co, The 14.1 12 12 11.2 10.6 -25.4Kraft Heinz Co - - 8.4 8.3 7.1 N/APrivate Label 6.7 7.3 8.4 9.9 11.6 70.6

…But We Expect Private Label To Regain Share Post COVIDMarket share vs. top 3 players

20

2010 2012 2014 2016 2020* Share Change (%)

Soft Drinks ’20 vs. ‘10

Coca-Cola Co, The 23 22.7 21.9 21.6 20.0 -14.2

PepsiCo Inc 20.3 19.2 18.8 17.9 18.1 -14.6Dr Pepper Snapple Group Inc 8.5 8.2 8.1 8.5 7,4 N/APrivate Label 8.8 9 8.9 9.1 9.9 12.5

Home CareProcter & Gamble Co, The 35.1 35.7 35.8 36.6 36.1 2.8Henkel AG & Co KGaA 4.2 4 3.9 7.9 6.5 54.8SC Johnson & Son Inc 8.9 8.6 8.4 8.6 8.0 -10.1Private Label 6.2 6.6 6.5 6.5 7.1 14.5

Home and Garden*Ashley Furniture Industries Inc 2.4 2.5 2.7 2.7 2.6 0.4Mohawk Industries Inc 2 2.2 2.3 2.3 2.2 0.2Serta Simmons Bedding - - 2.1 2.1 1.6 N/APrivate Label 6.9 6.8 6.6 5.8 5.6 -1.2

Apparel and FootwearNike Inc 3.8 4.4 5.5 6.3 6 57.9Gap Inc, The 3.5 3.6 3.3 3.4 3.7 5.7Adidas Group 1.6 1.4 1.4 1.8 2.4 50.0Private Label 6.9 6.8 6.6 5.8 4.7 6.8

Beauty and Personal Care*L'Oréal Groupe 11.4 12 11.9 12.7 12.4 1.2Procter & Gamble Co, The 17.1 16 15 10.8 10.7 -7Estée Lauder Cos Inc 6.6 6.9 7.1 7.4 7.3 0.9Private Label 6.9 6.8 6.6 5.8 5.6 -1.2

Consumer AppliancesConair Corp 9.3 9.2 9.1 8.9 8.8 -5.4Newell Brands Inc - - - 8.3 7.7 N/ASpectrum Brands Holdings Inc 10.3 9.5 9.3 9 8.7 -15.5Private Label 4.1 4 3.8 3.6 3.0 -26.8*2019 figures used where 2020 data was not yet available. Source: Euromonitor.

Ratings

21

Channel & Product Mix Has Resulted in Diverse Performance

22

– Food, household products and personal hygiene companies are outperforming. Consumption has increased because of COVID-19 stay-at-home mandates, nondiscretionary in nature of products, and no major disruption with their retail customers.

– Apparel, food service, Durables, and cosmetics issuers are facing significant disruption because consumers have reduced their out-of-home social activity, working from home more, and purchasing essentials.

– Beverage companies' performance is also being impacted by a significant drop in on-premise sales but have been able to make up a substantial amount of the loss with an uptick in sales to the off-premise channels.

NM– Not Meaningful

Source: S&P Global Ratings as of February 16, 2021

Discretionary Sectors Have the Most Negative Outlooks and Watch Negative

Apparel Consumerservices

Beverages Durables Personalcare and

householdproducts

Agricultureand

commodityfoods

U.Spackaged

food

Developing

NM

WatchdevelopingPositive andWatch positiveStable

Negative andWatch negative

Sector Ratings Distribution Sector Outlook Distribution

Pandemic Pressured Discretionary Subsectors

23

Source: S&P Global Ratings

– There was a downward shift in consumer products ratings distribution especially at the low-end of the scale.

– We expect negative bias to decrease as recovery in non-essentials continues and pandemic driven negative outlook revisions are restored to stable


3

15

32

10 9 1014

37

24

8 8

20 1 0

3

14

31

8 9 8

13

40

22

1210

40 0 0

0

5

10

15

20

25

30

35

40

45

As of Dec 31, 2019 (173 Issuers) As of Feb 1, 2021 (174 Issuers)

Stable40%

Negative or CWNeg

59%

Positive or CWPos

1%

Stable59%

Negative or CWNeg

35%

Positive or CWPos

6%

Developing1%

Inner May 2020(174 Issuers)

Outer Feb. 2021(174 Issuers)

4 4

10

57

139

41

15

8

37

15

52

0 1 2 1

63

610

5

14

913

7 8

14

4 4

14 14 1311

19

5

1113 13

1613

31

25

18

1

Num

ber

of e

ntit

ies

Upgrades Downgrades

Rating Actions – Downgrades Outpaced Upgrades 3.0x in 2020

24


U.S Consumer Product Companies on the Fallen Angel CuspPotential Fallen Angel’s Reported Debt is a Small Portion of Consolidated Investment Grade Debt in the Sector

Potential Fallen Angels

Current Rating

Current Outlook

Previous Rating

Previous Outlook

Molson Coors Beverage Company

BBB- Negative BBB- Stable

PVH Corp. BBB- Negative BBB- Stable

Steelcase Inc. BBB- Negative BBB- Stable

25

Ratings as of February 16, 2021Source: S&P Global Ratings.

Reported Debt as of Q3 2020Source: S&P Global Ratings.

050

100150200250300350400450

Reported debt of allinvestment grade companies

Reported debt of 'BBB-' ratedcompanies with negative

outlook

$ in Billions

Consumer Products Sector Companies Defaults by Year

26

Agribusiness and Commodity FoodsApparelConsumer ServicesDurablesPersonal Care and Household ProductUS Packaged Foods

*SD- Selective Default** Lowered to SD then DSource: S&P Global Ratings.

Premier Brands Group Holdings*

Boardriders Inc.*

TMK Hawk Parent

Corporation*

Acosta Inc. ** Revlon Inc.*Never Slip Topco Inc.

Indra Holdings Corp

CSM Bakery Solutions LLC**

Renfro Corp.*

Nine WestDean Foods

CompanyLibbey Inc.**

Serta Simmons Bedding LLC*

Gibson Brands Inc.

CDR HRB Holdings Inc.

VIP Cinema Holdings Inc.

Tupperware Brands

Corporation*

Del Monte Foods Inc.*

CROSSM ARK Holdings Inc.*

PFS Holding Corp.**

Pyxus International

Inc.

Performance Sports Group

Ltd.

Velocity Pooling Vehicle LLC

Iconix brand Group Inc.*

CTI Foods Holding Co

Tom Shoes LLC Outerstuff LLC*

2016 2017 2018 2019 2020

Sector Outlooks

Subtitle

Rating Distribution by Issuer Outlook by Issuer

U.S. Packaged Food Sector

28

35 Issuers as of February 16, 2021.Source: S&P Global Ratings

– Stronger operating results due to increased at-home consumption. Retention of volume gains and new customers essential for long term industry growth.

– M&A expected to continue, albeit more tuck-ins. Financial policy will drive ratings transitions.

9%

23%

6%

54%

9%

0%

10%

20%

30%

40%

50%

60%

AA A BBB BB B CCC CC D SDStable(86%)

Negative(9%)Positive

(6%)

U.S. Packaged Food

29

Ratings as of February 16, 2021. Reflects business and financial risk profile descriptors only.

Business Risk Profile

---- Financial Risk Profile ----

Minimal (1) Modest (2) Intermediate (3) Significant (4) Aggressive (5) Highly Leveraged (6)

Excellent (1) Mars Inc. (A/Stable/--)

Strong (2) The Hershey Co. (A/Stable/A-1)

General Mills Inc. (BBB/Stable/A-2) Kellogg Co. (BBB/Stable/A-2)

McCormick & Co. Inc. (BBB/Stable/A-2) Mondelez International Inc.

(BBB/Stable/A-2) The J.M. Smucker Co. (BBB/Stable/A-2)

Conagra Brands Inc. (BBB-/Stable/A-3)

Satisfactory (3) Hormel Foods Corp. (A/Negative/NR) Flowers Foods Inc. (BBB/Stable/--) Campbell Soup Co. (BBB-/Positive/A-3) Kraft Heinz Company (The)

(BB+/Stable/--)

Fair (4) Hostess Brands, Inc. (B+/Stable/--) TreeHouse Foods Inc. (BB-/Stable/--)

H-Food Holdings LLC (B-/Stable/--) Post Holdings Inc. (B+/Stable/--)

Weak (5)BellRing Brands, Inc. (B/Stable/--) The Simply Good Foods Company

(B+/Stable/--) Wells Enterprises Inc. (B+/Stable/--)

Whole Earth Brands, Inc. (B/Positive/--)

8th Avenue Food & Provisions, Inc. (B-/Stable/--)

B&G Foods Inc. (B+/Stable/--) CHG PPC Intermediate II LLC (B/Stable/--)

Chobani Global Holdings, LLC (B-/Stable/--) CSM Bakery Solutions LLC (CCC+/Negative/--)

Del Monte Foods, Inc. (CCC+/Stable/--) JHW CJF Holdings Inc. (B-/Stable/--)

KC Culinarte Holdings LP (CCC/Negative/--) KNEL Acquisition LLC (B-/Stable/--) Nathan's Famous Inc. (B/Stable/--) Shearer's Foods LLC (B-/Stable/--)

Sovos Brands Intermediate, Inc. (B/Stable/--) Utz Brands, Inc. (B/Stable/--)

Woof Intermediate, Inc. (B-/Stable/--)

Vulnerable (6) Badger Finance, LLC (B-/Stable/--)


Beverage Sector

30


– Alcoholic: U.S. off-premise sales should continue to largely offset lost on-premise sales until a recovery in that channel gains momentumby the second half of the year. Outside the U.S., the outlook is dimmer as on-premise consumption is a much larger share of the sales mix.

– Non-alcoholic: Recent prices increase, a better mix shift to more convenience channel sales and a slow return of restaurant traffic shouldoffset modest input cost inflation and higher marketing spend keeping margins stable in 2021.

25%

50%

25%

0%

10%

20%

30%

40%

50%

60%

AA A BBB BB B CCC CC D SD

Stable(58%)

Negative(42%)

Beverage

31





Excellent (1) PepsiCo Inc. (A+/Stable/A-1) The Coca-Cola Co. (A+/Negative/A-1)

Strong (2) Brown-Forman Corp. (A-/Stable/A-2) Constellation Brands Inc.

(BBB/Stable/A-2) Keurig Dr Pepper Inc. (BBB/Stable/A-2)

Bacardi Limited (BBB-/Stable/A-3)

Satisfactory (3) Ocean Spray Cranberries Inc. (BBB-/Stable/NR)

Coca-Cola Consolidated, Inc. (BBB/Stable/NR)

Molson Coors Beverage Company (BBB-/Negative/A-3)

Fair (4)

Weak (5)Blue Ribbon Intermediate Holdings LLC

(CCC/Negative/--) Winebow Group LLC (CCC/Negative/--)

Vulnerable (6) Arctic Glacier Group Holdings, Inc. (CCC+/Negative/--)


Agribusiness & Commodity Foods Sector

32


– Strong global demand for livestock and feed and a rebound in biofuel demand underpin a healthy operating outlook, but grain originators and protein processors face a difficult comp to 2020, which benefitted from low commodity input costs and strong retail food demand.

– Operating margins for ingredient manufacturers and commodity processors should also benefit from fewer supply chain disruptions and one-time COVID costs rolling off by the second half of the year.

10%

43%

19%

29%

0%5%

10%15%20%25%30%35%40%45%

AA A BBB BB B CCC CC D SDStable(81%)

Negative(19%)

Agribusiness & Commodity Foods

33





Excellent (1)

Strong (2)Archer Daniels Midland Co.

(A/Stable/A-1) Cargill Inc. (A/Stable/A-1)

Tyson Foods Inc. (BBB+/Stable/A-2)

Dairy Farmers of America Inc. (BBB/Negative/A-2)

International Flavors & Fragrances Inc. (BBB/Negative/A-2)

Satisfactory (3)American Crystal Sugar Co.

(BBB+/Negative/A-2) Universal Corp. (BBB/Stable/NR)

Bunge Ltd. (BBB/Stable/--) Ingredion Inc. (BBB/Stable/--)

Land O'Lakes Inc. (BBB-/Stable/--) Darling Ingredients Inc (BB+/Stable/--)

Fair (4)Pilgrim's Pride Corp. (BB+/Stable/--)

Smithfield Foods Inc. (BBB-/Stable/A-3)

Lamb Weston Holdings Inc. (BB+/Stable/--)

Weak (5) Savage Enterprises, LLC (BB-/Stable/--)

ASG Parent, LLC (B/Stable/--) Dole Food Co. Inc. (B/Stable/NR)

Milk Specialties Company (B/Stable/--) MVK Intermediate Holdings, LLC

(B/Stable/--) Sierra Enterprises LLC (B-/Negative/--)

Simmons Foods Inc. (B/Stable/--)

Vulnerable (6)


Personal Care & Household Products Sector

34


– There could be some lasting increase in demand for cleaning products because of greater health concerns from the coronavirus.

– Beauty sector’s recovery will be slow and uneven – companies will focus on skin care, e-commerce channel, and costs in 2021.

7%

14%

4%

25%

32%

18%

0%

5%

10%

15%

20%

25%

30%

35%


Stable57%

Negative32%

Positive7%

Developing4%

Personal Care & Household Products

35





Excellent (1) Colgate-Palmolive Co. (AA-/Stable/A-1+) Procter & Gamble Co. (AA-/Stable/A-1+)

Strong (2) The Estee Lauder Cos. Inc. (A+/Stable/A-1)

S.C. Johnson & Son Inc. (A/Stable/NR) Clorox Co. (A-/Stable/A-2)

Kimberly-Clark Corp. (A/Stable/A-1)

Satisfactory (3) Church & Dwight Co. Inc. (BBB+/Stable/A-2)

Fair (4) Reynolds Consumer Products Inc. (BB+/Stable/--)

Edgewell Personal Care Co. (BB/Negative/--) The Scotts Miracle-Gro Co. (BB/Stable/--)

Valvoline Inc. (BB/Stable/--)

Energizer Holdings Inc. (BB-/Negative/--)

Prestige Brands Inc. (B+/Positive/--) Coty Inc. (B-/Negative/--)

Weak (5) Central Garden & Pet Co. (BB/Stable/--) Herbalife Nutrition Ltd. (BB-/Stable/--)

Tupperware Brands Corp. (B/Positive/NR)

Alphabet Holding Company Inc. (B-/Stable/--)

American Greetings Corp. (B/Stable/NR) PDC Beauty & Wellness Co. (B/Negative/--) pH Beauty Holdings I, Inc. (B-/Negative/--)

Vulnerable (6)

Anastasia Holdings LLC (CCC/Negative/--) Fetch Holdco LLC (B-/Stable/--)

Isagenix Worldwide, Inc (CCC/Negative/--) NSA International LLC (CCC/Developing/--)

P&L Development Holdings, LLC (B-/Stable/--)

Revlon Inc. (CCC-/Negative/--) Rodan & Fields, LLC (CCC+/Negative/--)


Tobacco Sector

36


– Following a solid 2020 we expect combustible cigarette volumes in 2021 to fall by 3%-4%. This is because of increased consumer mobility and reduced smoking opportunity. Trade down to cheaper brands is a risk factor which could curtail profit growth.

– Regulatory uncertainty remains a key risk factor, though we view regulatory cliff events for combustibles as less likely in the medium-term.

33%

67%

0%

10%

20%

30%

40%

50%

60%

70%


Stable67%

Positive33%

Tobacco

37





Excellent (1)

Strong (2) Altria Group Inc. (BBB/Stable/A-2)

Satisfactory (3)

Fair (4)

Weak (5) Turning Point Brands, Inc. (B+/Stable/--) Vector Group Ltd. (B/Positive/--)

Vulnerable (6)


Durables Sector

38


– Performance has been mixed, depending on end-markets and channel mix. Housing, home, outdoor, and sports-related sectors have outperformed from increased consumer share of wallet.

– Pull forward demand could result in weaker future operating results for companies that have benefitted. Recovery for companies hurt by pandemic will depend on pace of re-openings and vaccine dissemination.

7%10%

66%

17%

0%

10%

20%

30%

40%

50%

60%

70%


Stable(52%)

Negative(38%)

Positive(3%)

WatchNeg(3%)

WatchPos(3%)

Durables

39





Excellent (1)

Strong (2)

Satisfactory (3) Steelcase Inc. (BBB-/Negative/NR) Whirlpool Corp. (BBB/Negative/A-2)

Newell Brands Inc. (BB+/Negative/B)

Fair (4) Tempur Sealy International Inc. (BB/Stable/--)

ACCO Brands Corp. (BB-/Negative/--)

AI Aqua Sàrl (B/Stable/--) Alliance Laundry Holdings LLC (B/Stable/--)

CD&R Smokey Buyer, Inc (B/Stable/--) Champ Acquisition Corporation (B/Stable/--)

Hayward Industries, Inc. (B/Stable/--) Samsonite International S.A. (B/Negative/--) Weber-Stephen Products LLC (B/Stable/--)

Weak (5) Vista Outdoor Inc. (B+/Positive/--)

Callaway Golf Company (B+/WatchNeg/--) Fender Musical Instruments Corp.

(B/Stable/--) Latham Pool Products, Inc. (B/Stable/--)

Steinway Musical Instruments Inc. (B/Stable/--)

Brown Jordan Inc. (CCC+/Negative/--) Corelle Brands Holdings Inc. (B/Negative/--)

KNB Holdings Corp. (CCC-/Negative/--) Lifetime Brands Inc. (B/Stable/--)

Serta Simmons Bedding LLC (CCC+/Negative/--) SIWF Holdings Inc. (B/Stable/--)

Spectrum Brands Holdings Inc. (B/Negative/--) TGP Holdings III LLC (B/Stable/--)

The Hillman Companies Inc. (B-/WatchPos/--) Visual Comfort & Co. (B/Stable/--)

Vulnerable (6)Innovative Water Care Global Corp.

(CCC+/Negative/--) LG Parent Holdco Inc. (CCC+/Stable/--)


Apparel Sector

40


– Negative ratings bias given high dependence on retail locations remaining open and consumer’s ability and willingness to spend on apparel.

– Sales return to pre-Covid levels in 2022, profitability returns faster due to cost-savings initiatives. E-commerce channel will be a key driver of growth; however, we expect traffic to improve in the bricks and mortar channel as availability of vaccines become more widespread.

–

4%

8%

4%

25%

29% 29%

0%

5%

10%

15%

20%

25%

30%

35%


Stable17%

Negative79%

Positive4%

Apparel

41





Excellent (1)

Strong (2) NIKE Inc. (AA-/Stable/A-1+) VF Corp. (A-/Stable/A-2)

Satisfactory (3) Ralph Lauren Corp. (A-/Negative/A-2) PVH Corp. (BBB-/Negative/A-3)

Fair (4) Levi Strauss & Co. (BB+/Negative/NR) Carter's, Inc. (BB+/Negative/--)

G-III Apparel Group, Ltd. (BB/Negative/--) Under Armour Inc. (BB/Negative/--)

Hanesbrands Inc. (BB/Negative/--) Wolverine World Wide Inc.

(BB/Negative/--) Kontoor Brands, Inc. (B+/Negative/--)

Weak (5)

Authentic Brands Group LLC (B/Stable/--) Calceus Acquisition Inc. (B-/Negative/--) Elevate Textiles, Inc (CCC+/Negative/--)

Fossil Group Inc. (B/Negative/--) New Trojan Parent, Inc. (B/Stable/--)

Oak Holdings LLC (B-/Negative/--) Varsity Brands Holding Co Inc.

(CCC+/Negative/--) YS Garments LLC (B-/Positive/--)

Vulnerable (6)

Boardriders Inc. (CCC/Negative/--) Iconix Brand Group Inc. (CCC-/Negative/--)

Outerstuff LLC (CCC/Negative/--) Premier Brands Group Holdings LLC

(CCC/Negative/--) Renfro Corp. (CCC-/Negative/--)


Consumer Services Sector

42


– Negative ratings bias due to discretionary nature of demand, potential for high restaurant failures, and pandemic re-emergence risk.

– Absent a resurgence or adverse mutation of the virus, issuers in the food away from home sector should benefit from improved conditions as governments increasingly signal a desire to relax restrictions on hard hit sectors, such as restaurants and schools.

12%18%

59%

12%

0%

10%

20%

30%

40%

50%

60%

70%


Stable47%

Negative47%

Positive6%

Consumer Services

43





Excellent (1)

Strong (2) Sysco Corp. (BBB-/Stable/A-3)

Satisfactory (3) H&R Block Inc. (BBB/Negative/A-2) Aramark (BB-/Stable/--)

US Foods Inc. (BB-/Stable/--)

Fair (4)Performance Food Group Inc.

(B+/Positive/--) Terminix Global Holdings, Inc. (BB-

/Stable/--)

Weak (5) WW International, Inc. (B+/Negative/--)

Advantage Sales & Marketing Inc. (B/Stable/--) American Residential Services LLC (B/Negative/--)

Edward Don & Company Holdings LLC (B-/Negative/--)

Highline Aftermarket Acquisition, LLC (B/Stable/--) LS Parent Corporation (B/Stable/--)

Outdoor Home Services Holdings LLC (B/Stable/--) The Chefs' Warehouse Inc. (B-/Negative/--) TMK Hawk Parent Corp. (CCC/Negative/--)

Wrench Group, LLC (B/Negative/--)

Vulnerable (6) Never Slip Topco Inc. (CCC+/Negative/--)

ESG In Consumer Goods

Subtitle

ESG In Consumer Goods | Key Takeaways

45

– We consider environmental and social risks to be modest from a credit perspective, and evenly balanced in the branded non-durable consumer goods industry. Environmental and social concerns include the supply chain --particularly regarding raw materials from agriculture and livestock, water scarcity, plastic and packaging, and waste treatment. The COVID-19 pandemic has raised awareness of the human effect on the environment. Consequently, climate change and carbon emissions are increasingly part of public debate.

– Consumers’ focus on health and wellness has been an important industry driver in the past and will probably gain more importance after the COVID-19 pandemic.

– Within the agribusiness industry, environmental risk factors are more important than social risks, particularly for weather-related volatility and disease outbreaks. We note that governance has featured more heavily in recent rating actions.

Environmental And Social Risk For Selected Industries

ESG In Consumer Goods | COVID-19

46

In most cases, governance does not significantly affect ratings in the consumer sector. Tobacco and alcoholic beverages require greater management oversight due to the need to engage with regulators and public officials. In addition, a number of companies have significant family ownership or voting rights. We do not believe that these companies' governance unduly benefits the family trusts over other stakeholders.

Source: S&P Global Ratings.

0 2 4 6 8 10 12

Oil and gasMetals and mining

ChemicalsAutos and auto parts

Agribusiness and commodity foodsTransportation

Consumer productsTelecom

RetailMedia

Transportation infrastructureHeath care

Capital goodsReal estate operators

Business and consumer servicesSupra. and dev. institutions

Risk Score

Environmental risk Social risk

Environmental

Governance

Social

As consequence of COVID-19, we see new topics gaining attention. Plastics and packaging used to be among the most debated issues in consumer goods. These issues remain central, but we also see supply chains, climate change, and carbon emissions gaining attention in the public domain and in companies’ communications and agendas.

COVID-19 has increased awareness of health and wellness. This was already an industry focus resulting in a loss of market share for some product categories. Consumer preferences for natural and organic features will likely strengthen. The tobacco sector has significantly higher social risk than the rest of the consumer goods industry because of the adverse health effects of smoking that trigger increasingly stringent regulations.

47

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