Annual report2017

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SUSTAINABILITY REPORT 2017

Summary

Who We Are

Brazil’s leading açaí processing company

Passion for fruit

Traceability and monitoring

People and communities

Natural resources and land

Efficiency and innovation

From pulp to cream

Corporate information

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FROOTY

Who We AreWe want to deliver greater value

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ANNUAL REPORT 2017

Over the past four years, Frooty has redefined itself as a company focused on superfruits. Our unwavering commitment to superior product quality and flavor has remained unchanged since our beginnings, while our commitment to nature conservation and creating social value have grown with the company.

We believe the word superfruits denotes not only their high nutritional value and health and wellness benefits for consumers, but also the potential they have to create benefits across an extensive value chain.

Within this belief, we have worked to engage more closely with the small-scale açaí farmers—largely in riverside communities—from whom we purchase açaí berries in the Amazon region. We wanted to get to know them better to learn about how they live and how we can create value across the açaí supply chain in Brazil. We built a supply-chain policy and farmer relations program based on criteria that go beyond quality and production.

In this report we present the differentiators that define our brand and by which we will drive further value creation in the future.

Marcelo CesanaFounder and CEO, Frooty

We want to enhance the best value the forest has to offer and promote the sustainable use of its biodiversity. We believe that developing the açaí value chain offers an opportunity to keep forests standing while providing a source of income for traditional communities. This approach strengthens our brand and extends the value we create beyond our shareholders, employees and business partners.

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The power of superfruits

1999At Frooty we have translated our passion for fruits into powerful, healthy and delicious foods since 1999. As the

largest açaí berry processing company in Brazil, we helped to mainstream açaí consumption in the country and

introduce its unique flavor in another 15 countries globally.

We have recently expanded our portfolio to include pitaya, an exotic and delicious fruit that is now the basic ingredient

in our second product line. We also offer juices and smothies produced from açaí pulp.

Açaí pulping plants

Processing plant

Our extended supply chain further includes hundreds of açaí growers in Northern Brazil. Through our Frutos da Frooty program, we aim to enhance our value creation

efforts in the coming years under action plans that include providing support to growers across aspects such as

business, healthcare, safety and education..

FROOTY

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ANNUAL REPORT 2017

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2018

Our operations include a processing plant in Pocos de Caldas (MG) and açaí pulping plants in Amazonas and

Para — two owned by the company and three operated by partners — creating around 300 direct jobs .

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FROOTY

MissionTo be a globally leading fruit-based food company with a significant presence in the supply chain.

Our values

We are passionate about everything we do.

We value respect and honesty towards consumers, customers, suppliers and employees.

We care deeply about the environment and society.

We are focused on delivering superior product quality.

Brazil’s leading açaí processing company

1 juicing and smoothies line

32% growth in the last 5 years

17,000 metric tons of fruit processed

290 metric tons of beverages produced

740 metric tons of products exported

5% of output exported to 15 countries

Factory in Poços de Caldas (MG)

5* sorting and pulping facilities in the North

1 sales office in São Paulo (SP)

300 employees

600+ açaí suppliers, largely in riverside communities

Açaí Pitaya

* Three owned by the company and the

remainder operated by business partners.

FROOTY

Superfruits:

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ANNUAL REPORT 2017

Passion for fruit

Traditional communities in northern Brazil produce the açaí berries that give Frooty products their unique flavor and energy. Efforts to ensure the açaí we source is produced responsibly and in harmony with nature’s cycles and systems, and in a way that supports biodiversity and the development of smallholder farmers are central to Frooty's business model, and have been intensified since 2016.

When we decided to source açaí fruit directly from smallholder farmers with no middlemen, the structural challenges in the supply chain and the ways we could support its development through direct sourcing became immediately apparent. Conditions such as informal employment, distance from large urban centers and a lack of basic infrastructure are among the major challenges we identified.

We believe that regularly engaging with the more than 600 small-scale farmers supplying us with products can create opportunities that range from disseminating sustainable farming techniques that prevent deforestation through improving productivity and product quality to providing better working conditions and well-being for açaí farmers.

Launched in 2017, the Frooty Supply Chain Policy governs our relations with harvester communities and focuses on four essential aspects: suppliers’ profiles; how they interact with biodiversity; their production performance and methods; and their fruit quality and yields.

Our açaí traceability system is among the components of the policy. Through it, açaí harvesters are monitored against indicators covering harvesting, packing and transportation as well as aspects such as income, well-being, housing, and access to water. The traceability system also ensures the harvesting process meets applicable legal requirements on aspects such as deforestation and PPE usage. Bonuses are awarded to suppliers who improve their performance. Farmers struggling to improve performance receive support to develop their farm management skills. The system includes initial registration, interviews and quarterly visits to 100% of our suppliers.

The Frutos da Frooty program was created to provide a comprehensive support framework. Initiatives currently included within the program range from the provision of water filters and personal protective equipment (PPE) to technical workshops to improve yields while minimizing environmental impact. Educational materials on polyculture are also developed and distributed as part of the program.

Traceability and monitoring

Where we source our açaí

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FROOTY

Improve quality of life for riverine and traditional harvester communities

Support the conservation of natural resources

Our supply chain

approach

Açaí cultivation and harvesting

-Ensure our Compliance

Program is effective -Promote açaí as a source of income and well-being

-Integrate riverside communities with forest

ecosystems -Support forest conservation

Certifications

Manage and ensure positive impact from initiatives

Processing

-Ensure our Compliance Program is effective

-Provide better working conditions and well-being

for farmers -Support human

development -Reduce environmental impact (GHG emissions,

energy consumption and waste)

Drive efficiency and innovation in the açaí supply chain

Ensure superior fruit quality

Four priorities

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ANNUAL REPORT 2017

People and communities

Getting to know our suppliers

"Progress has come,'' says one supplierAugustinho Rodrigues is 66 years old and has been an açaí farmer for almost as long. Married and a father of three children, he lives in Cametá (PA), a town more than 650 kilometers from Belém, Northern Brazil. Frooty recently set up

a pulping plant in neighboring Mocajuba. Previously, Rodigues had to take his produce all the way to Belém by boat to try to sell it at the harbor. The boat

would arrive at the harbor packed with fruit that had often been harvested five to six days earlier. “Much of the fruit would spoil along the way,” he explains.

With Frooty’s new pulping facility, this has now changed. During harvest season, Mr. Rodrigues often delivers two shipments in a single day. “And I get home

in time for supper.” Spoilage has been reduced to near zero and his business has thrived. “I have now added another three boats to my fleet to transport

produce,” he says proudly.

Mr. Rodrigues is among the beneficiaries of our Frutos da Frooty program. He received protective equipment including gloves and boots to use for harvesting.

He is also chairman of the local Forest Association, which brings together 42 families of riverine farmers—all registered suppliers. “We used to experience constant problems and nothing was certain. Now we've seen progress,” he

says about his relationship with Frooty.

Farmers like Rodrigues are among our more than 600 small-scale açaí suppliers—a third of whom have already been integrated into our tracking system. Across all properties, an estimated 6,000 workers are either directly or indirectly involved in açaí harvesting for Frooty.

The system compiles data on land use, production capacity, smallholders and their families, working methods, fruit harvesting and handling techniques, and fruit transportation.

Preliminary findings have revealed a number of challenges in the supply chain. At least half of covered households draw water from the rivers near their properties, and boil it for drinking.

The data also show that all family members typically work during the açaí harvest season. Visiting Frooty technicians help to support children’s rights to play and study, rather than work. Through collaborations that are being developed with the International Labor Organization (ILO) and a number of NGOs in the region, we will also engage in efforts to raise awareness about child labor being prohibited in açaí harvesting. On a positive note, the data show that 95% of school-age children are attending school.

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ACCESS TO WATER

Protecting farmers’ safety in the açaí harvesting process is a priority. One of the deficiencies identified in our survey was that farmers are unfamiliar with and fail to use proper personal protective equipment during harvesting.

In 2017, we began supporting these families in getting access to basic necessities. In addition to training, 600 harvesting PPE kits were provided in Cametá (PA) and Breves (PA). Farmers also received 130 water filters. The materials, provided free of charge, will improve safety and well-being for farmworkers. Further families will

FARMER PROFILES

CHILDREN

CERTIFICATION

48%

90% HAVE SCHOOL-AGED CHILDREN

95% OF STUDENTS ARE ATTENDING

SCHOOL

FROOTY’S SUPPLY CHAIN POLICY EXPRESSLY PROHIBITS

CHILD LABOR

21%89%

31%11%

SOURCED FROM TOWN ARTESIAN WELL OR FILTER

FROM THE RIVER

NONE IDB ORGÂNICO

GREATER SAFETY AND CLEAN WATER

Distributed

130 water filters 600 Personal Protective Equipment (PPE) kits

be benefited by these initiatives in 2018, especially in Mocajuba (PA) and Manacapuru (AM).

To achieve progress on more structural issues, such as improving access to sanitation and education and helping farmers better manage their business, we will also collaborate with other organizations in 2018. This includes collaborations with organizations that are already active in the region to pool efforts for the benefit of these communities.

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ANNUAL REPORT 2017

Natural resources and land

Keeping forests standing

Using best forest farming practices and helping to combat deforestation in the Amazon are an essential requirement for Frooty suppliers. By developing the açaí supply chain and market, we are also helping to protect the region's ecosystems by offering income opportunities to residents in replacement of heart-of-palm harvesting.

Visits to harvester communities have shown that only 14% of properties are compliant with CAR (Rural Environmental Registration) requirements—the first step in the land titling process and in becoming eligible to programs and benefits such as access to agricultural loans, support for environmental conservation and other government programs. We also identified that 11% of our suppliers have IBD organic certification.

Through our tracking system, we have documented the baseline natural forest areas on each property, their formal registration and information on deforestation. Information on water use on plantations is also recorded.

Based on our Supply Chain Policy, additional collaborations are planned for 2018 to implement a technical assistance program in order to fill gaps in knowledge about best practices in açaí harvesting and management. One of our partners is EMBRAPA (the Brazilian Agricultural Research Corporation), which provides the expertise needed to implement these programs. Other partnerships are being developed to deliver training in the period 2018-2019, including guidance on CAR registration.

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Fair and certified tradeInternational certification provides not only recognition of our practices but also strengthens our commitment to sustainable development and ensuring we are consistently in line with best practice and continually improving our approach.

Frooty is currently working towards For Life certification as part of the Fair for Life program, which promotes fair trade based on dialogue, transparency

and respect. To become certified, companies must demonstrate their commitment to social responsibility, respect for human rights, diversity, the environment and climate, responsible supply chain practices and adequate

working conditions, among other requirements . Applicants must also be compliant with ISO 26000, International Labor Organization (ILO) rules and

the social requirements established by the International Federation of Organic Agriculture Movements (IFOAM).

The certification process is in progress company-wide, including our three plants in the North of Brazil.

More opportunities for small-scale farmers We aspire to ensure all our suppliers make at the least the minimum wage in monthly income. The achieve this, our policy establishes requirements that entitle compliant farmers to equivalent firm annual orders. This helps to strengthen suppliers’ business management practices, revenue predictability and organizational excellence.

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ANNUAL REPORT 2017

Efficiency and innovation

Managing the supply chain

Under our Supply Chain Policy, we have worked to improve our understanding of and assess farmers’ day-to-day production and working conditions. By monitoring operational indicators, we can also measure improvement and identify opportunities to increase efficiency and innovation in production practices.

Production indicators include training on health and safety, such as the use of personal protective equipment (PPE) in açaí production, and methods used in harvesting, packaging and transporting produce to the plant.

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Partners united in purposePitaya, a tasty and curiously shaped fruit that is native to Central American and Asian countries, has become the newest ingredient in Frooty’s product range.

Just as with açaí, we are helping to popularize pitaya consumption in Brazil and around the world and hope to make it a favorite among consumers who are

passionate about health and energy.

To bring pitaya to the Brazilian market, we have partnered with Sol Organica, a Nicaraguan company that specializes in producing fruit pulp, and whose

values and practices are akin to ours. Sol Organica does business directly with smallholder farmers and cooperatives, helping them to generate new business while empowering growers, promoting gender equity and supporting farming

practices that minimize environmental impact. It also supports farmers in securing certification – including USDA Organic and Fair Trade certification –

that provides access to new markets for their produce and additional business revenue streams. Sol Organica is also B Corp certified to meet rigorous standards

of social and environmental performance, accountability, and transparency.

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ANNUAL REPORT 2017

From pulp to creamMuch of our interaction with communities is through the facilities where açaí is pulped and frozen before it is shipped to the Southeast of Brazil, where our product range is produced. As part of our commitment to ensuring superior product quality while also supporting development in areas where our fruit is sourced, we chose to build our pulping facilities in underdeveloped areas, whereas previously most plants were located in major urban centers.

We own two plants and source pulp from another three facilities operated by business partners in small towns in Amazonas and Para. Each plant has a processing capacity of up to 5,000 drums per day (equivalent to 70 metric tons).

Plant locations were selected based on three primary factors: the levels of açaí production in the area, logistical feasibility and the municipal Human Development Index (HDI). Preference was given to towns with a lower HDI, which would benefit most from facilities providing both job opportunities and a stimulus to the local economy.

This strategy required us to address a number of challenges, including limited infrastructure for industrial facilities and ensuring our plants use technologies that minimize environmental impact (especially water and energy usage) while providing a high quality working environment for employees.

Our facilities largely operate during the açaí harvest season and some are reliant on power generators to operate. In the absence of municipal waste and wastewater treatment infrastructure, our plants operate their own treatment processes in accordance with applicable regulations. Continual improvements help to ensure an increasingly eco-efficient operation by recycling wastewater back into the process and re-utilizing waste heat (from heated water) to reduce energy consumption. We are also developing new uses for açaí seed, the primary waste stream from our processes. Part of our seed waste is currently used as a biomass fuel at brick making factories or as an organic fertilizer. Plants located on the riverside and near harvesting communities also reduce greenhouse gas (GHG) emissions from fruit transportation.

Our workforce is sourced from local communities and receives training on sanitary and hygiene requirements in accordance with the recommendations issued by the Brazilian health surveillance agency, ANVISA, and the Ministry of Agriculture, ensuring food safety at an industrial scale. All employees are formally employed in accordance with applicable legal requirements, and are provided with adequate working conditions including ergonomics, safety, clothing, cafeterias and lounge areas. Local providers of services such as catering, janitorial and laundry services also receive special training.

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This strategy, which is supported by structured processes in place across the supply chain, helps to enhance value creation and strengthen our brand differentiators. We want to be recognized for offering the best açaí on the market while supporting forest conservation and social development in the communities where our fruit is sourced.

Amazonas

1 Manacapuru

2 Humaitá*

Pará

3 Santa Izabel do Pará*

4 Mocajuba

5 Breves*

*Operated by business partners.

All other facilities are owned by Frooty.

Our North Facilities

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AM PA

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ANNUAL REPORT 2017

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A new, uniquely sustainable plant

Frooty’s expansion and future growth plans require us to develop expanded production capabilities. As part of these plans, we have recently built a new, state-of-the-art facility in Poços de Caldas (MG) that is due to start operation in the first half of 2018.

The plant has been designed for superior efficiency and minimal environmental impact. Built to meet LEED (Leadership in Energy and Environmental Design) certification standards, the facility incorporates building technologies that range from rainwater harvesting and LED lighting to regular air change and more efficient electronic equipment. It also meets workplace comfort requirements, with a cafeteria and lounge and a thawing area for cold store workers, providing greater safety and well-being for employees. A storage and distribution center has been built within the plant perimeter for a streamlined logistics process.

The new facility will expand our production capacity from 80 to 120 metric tons per day. It will replace our current facility in Atibaia (SP), which will be decommissioned.

The transfer to Poços de Caldas (MG) was managed in a way that was transparent and fair for employees. Workers at the Atibaia (SP) plant were informed of the decision 16 months in advance. A voluntary retention program was offered to employees who chose to continue with the company until decommissioning, including bonus payments and continued eligibility to health insurance even after termination.

Employees at the new facility were trained at the Atibaia plant to ensure excellence in production from day one.

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ANNUAL REPORT 2017

Corporate information˜

Frooty BrazilR. Natingui, 632Vila Madalena São Paulo, SPCEP 05443 000

/FrootyBrasil /FrootyBrasil

www.frooty.com.br

ANNUAL REPORT 2017

/FrootyBrasil