dean foods Joseph Scalzo Investor Day
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Transcript of dean foods Joseph Scalzo Investor Day
The following statements made in this presentation are “forward looking” and are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995: statements relating to (1) projected sales (including for individual segments, for specific product lines and for the company as a whole), profit margins, net income and earnings per share, (2) our growth strategy, (3) our branding initiatives (4) our integration, innovation, and research and development plans, and (5) our cost-savings initiatives. These statements involve risks and uncertainties that may cause results to differ materially from those set forth in this presentation. Financial projections are based on a number of assumptions. Actual results could be materially different than projected if those assumptions are erroneous. Sales, profit margins, net income and earnings per share can vary based on a variety of economic, governmental and competitive factors, which are identified in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K (which can be accessed on our website at www.deanfoods.com or the website of the Securities and Exchange Commission at www.sec.gov). The Company's ability to profit from its branding initiatives depends on a number of factors including consumer acceptance of the Company's products. All forward looking statements in this presentation speak only as of the date of this presentation. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any such statements to reflect any change in our expectations with regard thereto or any changes in the events, conditions or circumstances on which any such statement is based.
Certain non-GAAP financial measures contained in this presentation, including adjusted diluted earnings per share, free cash flow, consolidated adjusted operating income and consolidated adjusted net income, have been adjusted to eliminate the net expense or net gain related to certain items identified in our press releases. A full reconciliation of these measures calculated according to GAAP and on an adjusted basis is contained in the appendix of this presentation and in such press releases, which are publicly available on our web site at www.deanfoods.com/investors.
Source: IRI (1/09). Grocery only. All shares reported for refrigerated segments only
$1.5B Revenue (2008)
1,500 employees
Broomfield HQ, 6 plants, 2 strategic co-packers
OtherC-stores
0
20
40
60
80
100%
Percent of Revenue
Other
0
20
40
60
80
100%
Foodservice
Percent of Revenue
Club/Mass
Grocery
1. Creamers includes refrigerated non-dairy flavored creamers and Half & HalfSource: IRI (1/09). Grocery only
0
10
20
30%
OrganicMilk
28.0%
Soymilk
7.7%
Creamers1
7.2%
Yogurt
6.3%
Cheese
4.2%
2004–08 Sales CAGR
Relative Market Share 2.5 11.0 0.5
WhiteWave = 40% share
One integrated organization
<400 SKUs in four primary categories
9 “ship-from” locations
Strategic supply chain network
One WhiteWave face to the customer
One enterprise-wide SAP solution
3 separate companies
Unfocused portfolio with 2,600 SKUs
12 owned plants & 30+ co-packers
65 inventory locations
3 distinct sales organizations
3 sub-scale IT platforms
CAGR = Compound Annual Growth RateNote: WhiteWave revenue excludes Hershey’s from 2004-06
0
500
1,000
1,500
2,000
2004 2006 2008HorizonSilk, Creamers, Other
($ Millions)
+13%CAGR
($ Millions)
CAGR = Compound Annual Growth RateNote: WhiteWave contribution margin excludes Hershey’s from 2004-06
-100
0
100
200
300
2004 2006 2008
+11%CAGR
HorizonSilk, Creamers, Other
Operating IncomeNet Sales
Excludes impact of Hero JV
Conversion
Procurement
Network Optimization
WhiteWave$50M
DSD Distribution
Distribution $45M $19M $26M
Manufacturing $40M $23M $17M
Procurement $9M $2M $7M
Total $94M $44M $50M
Continuous improvement
Standardize formulas
Redesign packaging
Reduce waste
Improve load utilization
Implement order minimums
Optimize routes
Leverage sourcing volumes across Dean
Move to low-cost supplier and specification alternatives
2008 Sales: $433M
21% increase vs 2007
42% market share
Largest national milk brand in U.S.
Competing in a large, rapid growth segment
Significant growth potential remains
Compelling, differentiated growth segments targeting young children
Source: IRI Grocery (01/09); Internal Data. Horizon market share includes The Organic Cow
Over-supply – Government regulations
Aggressive retail pricing due to over-supply
Dramatic demand growth –Household penetration and distribution gains, and strong economy
Inflationary inputs – increasing cost of goods
Modest supply – Poor farm economics
Increasing prices due to declining supply
Slow demand growth – Flat household and distribution and poor economy
Declining inputs – lowering cost of goods
Source: IRI (1/09). Grocery only. Dollar share
0
20
40
60
80
100%
Jan 2007
Private Label
Horizon
Jan 2009
Horizon
Private Label
Other BrandsOther Brands
5% of category in short time period
Over 20% of category sales growth
Strong loyalty with a 61% repeat rate
Source: IRI (8/08)
Source: IRI (8/08)
Tremendous health appeal for mothers
Strong 3-year growth rate
3% of total category share
Introducing new, loyal consumers to Horizon: 25% new to brand with 60% repeat
2008 Sales: $427M
10% increase vs. 2007
78% market share
Source: IRI Grocery (01/09); Internal Data
No. 1 soy beverage in the world
Compelling heart health benefits and beyond
Significant growth potential– Category only has 16% HH penetration
Shifting competitive set – to all wellness food and beverage products
Expand benefits via advertising & innovation
New “Natural” line will keep Silk affordable
First Silk specific claim – Clinically shown to reduce cholesterol by 7% in 4 weeks
Compares favorably to other wellness products
98 million in U.S. with cholesterol concerns
Expect to be a top-selling SKU in portfolio
2008 Sales: $535M
8% increase vs. 2007
23% market share1
Coffee consumption trends driving category
Well positioned portfolio
– #2 flavored ND, #1 Dairy creamer
– #2 Retail, #1 Away-from-home
Driving category growth via innovation
Benefiting from trend away from coffeehouses
Source: IRI Grocery (01/09); Internal Data. Creamers defined as ND flavored creamers and H&H. Share includes only WWFC LOL and ID creamers (HO and Silk creamers 2% additional share)
53%49%
56%
‘04 ‘06 ‘07
Drank Coffee Yesterday
‘05
57%
57% of adults are daily drinkers
77% of daily drinking is at home
Half of daily drinkers use creamers
0
2
4
6
8
10
All Creamers1
(ex-WhiteWave)
5.3
8.8
2-Year Revenue CAGR (%)
1. Includes all cream and creamer products, including powderSource: National Coffee Drinking Trends, 2007
New, more premium consumer preferred bottle
Continued flavor innovation
Coffeehouse drinker targeted product offering
1.2.3.
Built capability and recently opened new Centers for Innovation and R&D
We are building a pipeline of new products through two paths:– Internal Development– External Partnerships
0
20
40
60
80
100%
Hero
Other
Infant
Fruit
$1.6B
A European leader in fruit-based foods
A global leader in baby food
Highly innovative and entrepreneurial
Source: Hero website (converted CHF to USD at 2/24 rate)
Source: IRI (6/08)
Fruit2day is a unique “fruit in a bottle”
Targeting a large consumer market– $1.3B chilled cut-fruit
– $420M super-premium juice
Extensive consumer validation
$1.75/bottle retail compares favorably to other super-premium juices
Source: IRI
0
10
20
30
$40M
Germany
8.5
30.233.8
Netherlands
18.3
26.830.0
200520062007
Implies a $200M+ U.S. retail business at comparable sales per capita
Retail Sales ($ Millions)
Note: Externally reported revenue; does not include internal sales
US leader in national long shelf-life private label dairy
Well penetrated in leading retailers, quick serve restaurants
Strong share of nationwide cultured and extended shelf life dairy
Compelling transformation opportunity
Ice Cream MixCreamers/Half & HalfWhipping CreamsAerosol Whipped Cream Specialty Milk
YogurtSour CreamCottage Cheese
Note: Externally reported revenue and operating income (ex-restructuring and non-recurring costs)
2004
$749
2006
811
2008
1,120+11%CAGR
0
1,000
1,250
750
500
250
($ Millions)
Category-centric Organization
Thought Leaders in Private Label and Restaurant Chains
RationalizeSKUs
Growth from core categories, core customers, and
focused innovation
Align RegionalProduction
With Demand
Rationalize Assets
Continued cost savings from WhiteWave transformation
Strong performance by our brands
Exciting innovation pipeline
Early stages of assessing Morningstar opportunityWhiteWave-
MorningstarWhiteWaveMorningstar