Balancing Resources & Priorities

Mike DevereuxPresident & CEO Nature‘s Way Brands

Lunch ‘n LearnGreen Bay, August 26, 2014

About Me

• Grew up in the western suburbs of Chicago in a 3-bedroom, 1-bathroom bungalow.

• Learned how to balance resources and priorities at an early age, while competing with four sisters for the bathroom before school.

Me

Cat“Bark the Wonder Cat”

Nature‘s Way Group

Balancing Resources and Priorities in the context of …

• Why?

• How!

• Does it matter?

Strategic Planning

Why?

“If you don’t know where you are going, any road will take you there.”

R. Rose – My Predecessor

How to Start?

• Diagnostic on today’s business– E.g. SWOT analysis

• Aspiration for the future

• Capabilities to deliver

• Manage the competing agendas

People

$

Management Team

Shareholders

a. Outline of Strategic Plans

• Industry / Business unit / Market context and dynamics– Industry/Business unit/Market overview– Industry/Business unit/Market profitability– Industry/Business unit/Market dynamics– Customer needs

• Competitive assessment– Performance review (Brands, Categories, SKUs (topline, bottom line)– Achievements since last year – Product line assessment (Brands, Categories, SKUs (topline, bottom line)– Competitive assessment (Sales operations/ Channels, Marketing, Etc.)

• Strategic issues (Resulting from Market environment and Competitive assessment)– Where are opportunities and threats?– Where are our competitive strengths and weaknesses?– What are the strategic success factors and with regards to that, where are the strategic gaps?

• Key strategic initiatives (5-10 year) strategic initiatives in detail that describe measures, steps (timeline), investments, structural implications (Resources) and implementation risks

– Financial projections (including scenarios if needed)– Detailed financial projections (cash in and cash out)– Capital plan– NPV

b. Example from Pitman Moore

• Aspiration

• Focus

• Filters also

“what not to do”

Circa 1990

Aspiration

Mission(medium term)

Where to Compete

Create Make SellHow to Compete

Leadinganimal health

and nutrition company

Product categories Species Geographics

Key technologies

• Biologicals• Implants• Ectoparasiticides• Feed• Antimicrobials• Vet specialties

• Cattle• Swine• Poultry• Sheep• Cats and

dogs

• Base: NA, UK, ANZ, Brazil

• Penetration: G, F, SP, I, Mexico

• Beachheads: Korea, China, Japan . . .

• Deletant/ recombinant vaccines

• Controlled release systems

Make food animals more valuable to producers by providing superior disease prevention and rearing

productivity solutions

• No in-house “R”• Strong links to biologicals

science (universities, biotech companies)

• Focus on core categories• Develop world-class biologicals

manufacturing skills

• P-M in-house sales forces• Superior customer service and

technical support• Distributor-only in companion

animals

Profit from the Core

Profit from the Core – Key Points thatlead to Profitable Revenue Growth

•Focus scarce resources on the core of your business if attractive growth opportunities remain – if not, the core needs to be extended.

• Establish a common set of facts and market insights from which impactful growth initiatives can be found.

• Get an “A” on 3 or 4 initiatives rather than a “C” on 10.

• Master the science of making change happen within your organization.

Profit from the CoreKeys to Success:

• Reaching the full potential of the core business.

• Expanding into logical adjacent businesses surrounding the core.

• Pre-emptively redefining the core business in response to market turbulence.

All that . . .“and some luck/good fortune helps.”

Natures Way Example

• Consumer Business

• Professional Business

• Canada

• Export

SpecialtyMassInternet

NaturopathsMD’sChiroOther

SpecialtyMass

AsiaLatin America Europe

% ofTotal Product Line

70% 800 sku’s

10% 400 sku’s

10% 200 sku’s

10% 600 sku’s

100% 2,000 sku’s

The Alchemy of Growth

Planning the future over 3 time horizons

Performance /Profit /Growth

Time

Horizon 1Defend and extendcore businesses

Horizon 2Build emergingbusinesses

Horizon 3Create viableoptions

3 years

Now

Beyond

Nature’s Way Accountabilities and Time Horizons

Performance /Profit /Growth

Time

Horizon 1

Horizon 2

Horizon 3

U.S. Market Potential focus & Maximize existing Brands

Develop International Markets and enter new categories and technologies

Enter New Business models, Mergers & Aquisitions

Get an “A” on 3 to 4 initiatives versus a “C” on 10.

Digital Competency• 50% of population is < 30.

• 53% of Twitter is recommending products via Tweets.

• 93% of buyer decisions are influenced by Social Media.

• 90% trust peer review.

Source: Socialnomics 2014 by Erik Qualman

Nature’s Way Opportunity Becoming much more relevant to the last mile of our customer base. Historically we transact 100% through retailers and practitioners . . . We want to speak directly with the people who buy our supplements.

Digital Examples

Pre-emptively redefining the core businessin response to market turbulence.

Digital Examples

Pre-emptively redefining the core businessin response to market turbulence.

Digital Examples

Pre-emptively redefining the core businessin response to market turbulence.

Digital Examples

Digital Examples – Output Measurement

Key Learnings from Mentors (1)

3 simple rules:

• Focus on your output

• Know your resources

• Be analytical

L. Bernicky – First boss at Arthur Young

Key Learnings from Mentors (2)

“Mike, your biggest strength is also your biggest weakness . . .

… Idealism”

A. Chawla – SVP of Strategic Planningand former boss during the McKinsey project

“Be okay with me accepting 1 or 2 good ideas from you versus your entire agenda”

Key Learnings from Mentors (3)

“When you move into the CEO role, first reset your relationship with all your former peers - …

…You are now their Boss.

T. Flood – CEO Collier Enterprises – former boss at Beatrice Foods

Key Learnings from Mentors (4)“As CEO, you must be able to “create a vision and articulate it verbally with substantive support …

… If you cannot, you don’t belong in the CEO role.”

After that . . .

“Be yourself”

A. Nieto – Former Chairman of Life Fitness,now ALS sufferer

http://www.freep.com/article/20140629/COL01/306290088/augie-nieto-als-mitch-albom

Summary of the Key Learnings that have shaped my thinking

1. Bernicky – The Fundamentals

2. Chawla – Pick and choose based on substance

3. Flood - Lead

4. Nieto – “Be you”

Inputs

The Output ! ! !

Does it Matter?

CAGR 2010-2013: 17% CAGR 2010-2013: 44%

Summary

Balancing Resources and Priorities in the context of Strategic Planning

You know where you are going the strategic map takes you there!

Why?Good luck

How!

Does it matter?

Post Mortem• Quote from C. Jennings – Nature’s Way gummy vitamin supplier:

“The most impressive thing about your facility tour is your People.”

• Come on, let me give your minds a ride.