Premier Foods plc · LSE:PFD
Premier Foods — Investor Day (July 2015)
61 slides from Premier Foods's investor day presentation, Jul 1, 2015
Slide 1: Investor & Analyst Carlton visit
Investor & Analyst Carlton visit 1 July 2015
Slide 2: Agenda for today
AGENDA FOR TODAY Time Activity Who 08:45 Arrival & introductions All 09:00 Investing for the future Gavin Darby, Chief Executive Officer 09:10 Funding the investment Alastair Murray, Chief Financial Officer 09:20 Delivering results in Grocery Helen Warren-Piper, Marketing Director, Grocery 09:35 Dri
Slide 3: Gavin Darby, Chief Executive Officer
Gavin Darby Chief Executive Officer 3
Slide 4: Today's objectives
TODAY’S OBJECTIVES 1 Demonstrate the growth opportunities in the Sweet Treats business ‒ Growth through cost and efficiency ‒ Growth through insights and innovation 2 Showcase our new Mr. Kipling Snack Pack line 3 A reminder of the great work going on in the Grocery business 4 An opportunity to meet
Slide 5: A year since we met at Worksop: new organisational structure
A YEAR SINCE WE MET AT WORKSOP Our new organisational structure is working well Corporate Grocery Sweet Treats International functions Legal IT Procurement Group finance Corporate Affairs Central Human Resources Sales Marketing Innovation Technical Commercial Finance Business unit Human Resources 5
Slide 6: Our strategy is to deliver category growth
OUR STRATEGY IS TO DELIVER CATEGORY GROWTH We invest in marketing, innovation, people and capex Consumer marketing (£m) Consumer marketing % Branded sales1 5.6% 34-38 4.8% 33 3.5% 25 6-12% UK multinational 2013/14 2014/15 2015/16 2013/14 2014/15 2015/16 peers Sales from innovation Household Penetrat
Slide 7: We are investing in our organisation
WE ARE INVESTING IN OUR ORGANISATION 616 623 22.5% (17.6%) Headcount Shared IT Finance Sales & International Headcount April 2014 services Marketing June 2015 Revenue Support Generating Functions Significant increases in commercial areas to support category growth strategy Reductions in IT and s
Slide 8: Alastair Murray, Chief Financial Officer
Alastair Murray Chief Financial Officer 8
Slide 9: Capital investment to drive growth and cost efficiencies
CAPITAL INVESTMENT TO DRIVE GROWTH AND COST EFFICIENCIES 25% 39% 1.5:1 c.3.25% 36% Capex : Depreciation Capex % Sales Growth Cost release Infrastructure 2015/16 CAPEX A strong pipeline of cost release and growth c.£25m projects, many with less than 3 year paybacks A legacy of under-investment acro
Slide 10: Capex projects at Stoke Cake Bakery
CAPEX PROJECTS AT STOKE CAKE BAKERY £7m investment expected to deliver 2.5 year paybacks Project Investment Payback • Packing automation for pies line, reducing labour costs • Introduces capability to produce twin pack formats for convenience £4.0m 2.7 yrs channel • Packing automation for slices lin
Slide 11: Capex projects at Stoke Cake Bakery
CAPEX PROJECTS AT STOKE CAKE BAKERY £7m investment expected to deliver 2.5 year paybacks Pies & Tarts line automatic case packer Ultrasonic Snack Pack slices cutter Robotic carton loader 11
Slide 12: Operational excellence
OPERATIONAL EXCELLENCE +10ppts Value engineering Better demand planning Moreton bakery delivering: processes operational improvements • Reduced cost • Improved promotional • Overall equipment • Improved product planning effectiveness (OEE) quality • Reduced product write improved by over offs 10ppts
Slide 13: Our cash guidance is unchanged
OUR CASH GUIDANCE IS UNCHANGED 2015/16 guidance £m Working capital Broadly neutral Depreciation c.£16m Capital expenditure c.£25m Interest – cash £40-£43m Interest – P&L c.£45m Tax – cash Nil Tax – notional P&L rate 20.0% Pension deficit contributions £6m Pension administrative & PPF levy cash costs
Slide 14: Helen Warren-Piper, Marketing Director, Grocery
Helen Warren-Piper Marketing Director, Grocery
Slide 15: What we said at Worksop last year
WHAT WE SAID AT WORKSOP LAST YEAR 1 We have strong brand equity measures – Penetration, Consumer reach points 2 We have identified some key consumer trends which have informed our innovation agenda 3 Trailed our second half innovation agenda....which is delivering results 4 Showcased our research &
Slide 16: A reminder of our consumer insights
A REMINDER OF OUR CONSUMER INSIGHTS CONVENIENCE FEELS LIKE I’M COOKING “FOODIENESS” Busy Lives Increasing interest in Increased concerns food & cooking (TV about ‘what’s in it’ Pressure on time to cook chefs) & eat Time pressures / skill Wet feels fresher than On the Go eating dry gaps Key role for
Slide 17: Consumer insights, platforms and examples
CONSUMER INSIGHTS, PLATFORMS AND EXAMPLES Consumer Consumer Technology Product trends & platforms platforms examples insights Convenience One pot solutions Pouched paste Bisto Gravy pastes ‒ Cooking times concentrates Bisto Simply Casserole reduced to c.30 Family favourites pouches Gel concentrates
Slide 18: Our innovations and investment are delivering results
OUR INNOVATIONS AND INVESTMENT ARE DELIVERING RESULTS Category Volume Sales Share Penetration +8% +5% +0.8ppt +1.8ppt +2.5% +2% +3% +0.1ppt +1.1ppt Source: IRI volume & retail sales value, 26 w/e 4 April 2015; Penetration: Kantar Worldpanel, 52 w/e 29 March 2015 18
Slide 19: Delivering on premiumisation
DELIVERING ON PREMIUMISATION Value per serving increases to drive category growth £0.15/serving £0.24 £1.00 £0.66/serving £0.85 £1.25 19
Slide 20: Bisto case study
BISTO CASE STUDY VISION: Inspiring mum to create favourite meals that bring the family together, by showing new ideas or reminding her that existing family meals can taste better with flavourings and Modern seasonings Foodies “Home-made from fresh is ideal but takes time; dry packet mixes are helpfu
Slide 21: What's coming up next?
WHAT’S COMING UP NEXT? Desserts Flavourings & Seasonings Continuation of consumer platforms: • Real Ingredients are wet • One pot solutions Significant innovation Now instore and planned for 2016 more to come Cooking Sauces Light Meals Continued support for ‘flavour transformers’ Initiatives planned
Slide 22: Graham Hunter, Managing Director, Sweet Treats
Graham Hunter Managing Director, Sweet Treats 22
Slide 23: The Sweet Treats market: a £6 billion opportunity
THE SWEET TREATS MARKET A £6 billion opportunity Chocolate Cake Biscuits confect’y £1.0bn £2.2bn £2.6bn 5 Year CAGR +0.7% +3.0% +3.6% As the Sweet Treats market has grown, Cake has not adapted as successfully as Chocolate & Biscuits Source: Kantar Worldpanel 23
Slide 24: Sweet Treats strategy
SWEET TREATS STRATEGY BUSINESS UNIT OBJECTIVES 1. Grow share and become famous for snacking innovation across Sweet Treats 2. Build customer and consumer loyalty 3. Drive profitable growth Enhance our brand Increase efficiency, Extend formats, Taking the right offering reduce costs target new occasi
Slide 25: Aligned to our corporate strategy
ALIGNED TO OUR CORPORATE STRATEGY DRIVING CATEGORY GROWTH CUSTOMERS CONSUMERS 1. Focus on category 1. Invest in brands leadership 2. Build brand equity 3. Drive penetration & BRANDS 2. Extend category 1. Brand investment presence loyalty 2. Innovation through 3. Volume & value insights growth COSTS
Slide 26: A new Sweet Treats leadership team
A NEW SWEET TREATS LEADERSHIP TEAM WITH OVER 100 YEARS SECTOR EXPERIENCE GRAHAM HUNTER MANAGING DIRECTOR TARVINDER PURI DAVID SEECKTS PHIL ELLIS CHRIS STONE RICHARD MARTIN HR MANAGER OPERATIONS DIRECTOR MARKETING DIRECTOR FINANCE DIRECTOR COMMERCIAL DIRECTOR 26
Slide 27: A customer & consumer focused organisation
A CUSTOMER & CONSUMER FOCUSED ORGANISATION ● Organisation refocused on the customer and consumer ● Our sales & marketing team is over 60 strong ● Over 25 heads added to the business to drive new commercial engine: Marketing team under new leadership with injection of 1 new talent New R&D structure f
Slide 28: Progress with major customers
OUR PROGRESS WITH MAJOR CUSTOMERS AT A GROUP LEVEL IS STRONGLY REFLECTED IN SWEET TREATS 2012 2015 Top 6 customers Premier Foods categories Premier Foods categories Low influence Category advisor Category Captain * “I can’t remember having such a positive brief from my team in advance of a category
Slide 29: The cake market: some unique characteristics
THE CAKE MARKET: SOME UNIQUE CHARACTERISTICS These present clear opportunities to win Structural Characteristics High >45% Barriers to entry Fragmented Non-branded Historically low Immediate Added value high for scale competition market share brand consumption segments are in participants above Groc
Slide 30: Building blocks to a higher margin business
BUILDING BLOCKS TO A HIGHER MARGIN BUSINESS Projected improvements deliver step change to Promotional double digit operating margins strategy Premiumisation Range rationalisation Reduced cost to serve Double Process digit % Control Plant automation Cost release / efficiency initiatives c.8% Growth i
Slide 31: Progress to date
PROGRESS TO DATE Volume Sales Share Penetration +20% +11% +1.3ppt +2.2ppt +15% +14% +0.8ppt +1.7ppt Source: IRI volume & retail sales value, 26 w/e 4 April 2015; Penetration: Kantar Worldpanel, 52 w/e 29 March 2015 31 31
Slide 32: Retailer branded strategy
RETAILER BRANDED STRATEGY Doubled c.12% resources Sales Market share of Expect retailer Increased 1. Supports asset retailer branded branded in Sweet resources in utilisation cake category Treats to deliver commercial & 2. Extend retailer sales growth in technical teams branded within core FY16 over
Slide 33: Health & nutrition
HEALTH & NUTRITION Cake in Context 106 140 230 • Consumers view cake as a treat calories calories calories • Contribution of cake to UK sugar intake significantly less than soft drinks, fruit juice and confectionery (1) Positive Approach • Calorie caps on individual cakes <250kcal • Investing in por
Slide 34: Benefits of our strategy are clear
BENEFITS OF OUR STRATEGY ARE CLEAR 1 Renewed market growth following more focused and relevant activities 2 Better customer relationships, engaging and helping solve category specific challenges 3 Improved innovation pipeline 4 Increased consumer marketing to support growth 5 A focused drive to impr
Slide 35: Phil Ellis, Marketing Director, Sweet Treats
Phil Ellis Marketing Director, Sweet Treats 35
Slide 36: The Sweet Treats/cake market is worth nearly £1 billion
THE SWEET TREATS/CAKE MARKET Is worth nearly £1 billion +3.2% % Growth YoY +1.4% +0.9% 25.1% Premier Foods McVitie's 47.6% Other branded (0.1%) 5.4% Own label 21.8% (2.8%) Premier McVitie's Other Own label Market Foods branded We are the major branded player Growing ahead of the market following bra
Slide 37: The world of cake
THE WORLD OF CAKE Whole cakes Slices Small cakes & pies Seasonal cakes £353m £99m £384m £130m Key competitors Key competitors Key competitors Key competitors • Thorntons • Weight Watchers • McVitie’s • McVitie’s • Lightbody • Own label • Thorntons • Lightbody • Own label • Fabulous Bakin’ Boys • Own
Slide 38: The way we live our lives is changing
THE WAY WE LIVE OUR LIVES IS CHANGING Traditional cake eating moments are increasingly less relevant Busy lives Individual eating On the go Variety & Snacking excitement 38 38
Slide 39: Everyone buys cake, everyone eats cake
EVERYONE BUYS CAKE, EVERYONE EATS CAKE Shoppers Frequency Trips per month Chocolate 26m 37 Sweet 26m 41 biscuits Cake 25m 19 A clear opportunity to increase frequency of purchase 39 39
Slide 40: Four broad consumer need states
FOUR BROAD CONSUMER NEED STATES THAT DICTATE ANY SWEET TREAT MOMENT Togetherness Reward Snacking Nutrition • Care and share • End of day reward • Quick top up • Sustained energy • Shared indulgence • Lunchtime treat • Resourceful snack • Good start to the day • Mood lift • Sweet sign off • Simple go
Slide 41: Key flavour and product fusion trends
THERE ARE ALSO SOME KEY FLAVOUR AND PRODUCT FUSION TRENDS WHICH PRESENT OPPORTUNITIES Coffee culture Salted Caramel Citrus / Lime Honey, Nuts, Oats 41
Slide 42: Key needstates inform upcoming innovation
KEY NEEDSTATES INFORM UPCOMING INNOVATION Togetherness Reward Snacking Nutrition FY16 Product innovation: • Oats • Nuts • Fruit • Other meal occasions 42
Slide 43: Premiumisation opportunities
PREMIUMISATION OPPORTUNITIES YoY Growth +21% +4% +13% +1% % Pence 70 81 47 30 / Slice Nibbles & Category Eat Now Occasion Bites average Source: IRI 52 w/e 16 May 2015 43 43
Slide 44: Cake on the go
CAKE ON THE GO Confectionery Cake 5.0% 35.0% 65.0% Pack size flexibility delivered through capex 95.0% investment 14p 21p Rest of market Impulse 6 pack Twin pack Immediate consumption for cake is under developed compared to confectionery Turnover per slice 53% higher in Twin pack 44
Slide 45: Upcoming new products from Mr. Kipling
UPCOMING NEW PRODUCTS FROM MR. KIPLING Unlocking new opportunities, targeting new needs states Fabulous Fancy Deluxe Whirls Whole Cakes • Leveraging iconic Mr. • Indulgent flavours • Sharing need-state Kipling cakes into sharing • Added value format • Untapped opportunity for Mr. need-state Kipling
Slide 46: Cadbury: exciting new products for the Autumn
CADBURY Exciting new products for the Autumn Hot Cakes Amaze Bites • Convenient solution: simply heat for 30 secs • Snacking & sharing moments • Plays strongly to Premiumisation • Delicious brownie texture bite with chocolate chips Further innovation to come beyond 2015 46 46
Slide 47: David Seeckts, Manufacturing Director, Sweet Treats
David Seeckts Manufacturing Director, Sweet Treats 47
Slide 48: Sweet Treats supply chain footprint
SWEET TREATS SUPPLY CHAIN FOOTPRINT 3 Manufacturing site & 1 Distribution site: • 84,000 Tonnes produced • 31,000,000 Cases • 77,000 Pallets moved CARLTON • 1,800 People MORETON RUGBY STOKE MANUFACTURING SITES DISTRIBUTION SITE 48
Slide 49: Sweet Treats technology capabilities
SWEET TREATS TECHNOLOGY CAPABILITIES CARLTON (BARNSLEY) MORETON STOKE Cake - Pies Cake – Chocolate Cake - Slices Capabilities Capabilities Capabilities • Pies • Mini rolls enrobing • Snack Pack packing • Slice • Large celebration cakes technology • Fondant Fancies • Hand decoration through to • Iced
Slide 50: History of Mr. Kipling Snack Pack
HISTORY OF MR. KIPLING SNACK PACK 2011 2012 2013 2014/15 New £20m Snack pack range Range extended investment at launched in 6 to three new 7 day working Carlton, Barnsley pack and 9 pack exciting favours implemented bakery formats Chocolate Demand began to Enhanced £4.7m investment Caramel outstrip
Slide 51: Investment rationale
INVESTMENT RATIONALE +130% 2→7 30% 30% → → 80 Reduction in Capacity Pack format headcount Increase in line Jobs for the local increase flexibility through throughput rate area automation Other benefits • Vision systems eliminating the picking of defective cake • X Ray systems screening and removing
Slide 52: Implementation timeline
IMPLEMENTATION TIMELINE December June November April May 2013 2014 2014 2015 2015 Investment Site Equipment Line First product to approval preparation installation commissioning customers Before After 52 52
Slide 53: Key components of the line
KEY COMPONENTS OF THE LINE Decorating Mixing Buffer Robotics 53 53
Slide 54: Facts & figures of the new Snack Pack line
FACTS & FIGURES OF THE NEW SNACK PACK LINE 264 metres 85 mins 310 million A slice from Slice production Length of the mixing to capacity per line palletising annum 65,000 65 0 Contractor hours Vehicles used to Lost time used in deliver the accidents construction equipment 54 54
Slide 55: Simon Wood, Factory General Manager, Carlton
Simon Wood Factory General Manager, Carlton 55
Slide 56: Carlton site history
CARLTON SITE HISTORY 1975 Opened by Lyons manufacturing cakes, then the largest purpose built bakery in the world 1995 Acquired by RHM Manor Bakeries 2005 Production from Eastleigh bakery transferred to Carlton ‒ Asser (pie production) transfer of 3 lines ‒ Fondant Fancies line ‒ Mini Battenberg lin
Slide 57: Site facts & figures
SITE FACTS & FIGURES 750 +40,000 16 220 (1,500 peak A+ demand) Production Production BRC tonnes per SKUs Employees lines accreditation annum 57 57
Slide 58: Bakery overview
BAKERY OVERVIEW A bird’s eye view Fruit & Mince Pies Fondant Fancies Trifle Sponge Sponge Puddings / Cup Cakes Sponge Sandwich Slices plant Viennese Whirls Battenburg Mini Battenburg Swiss Roll Plants Snack Pack line Process Mezzanine Packing → Despatch 58 58
Slide 59: Carlton products & lines
CARLTON PRODUCTS & LINES Plant line Products/Packs Battenburg Standard Mini Battenburg 5 per pack Viennese Whirls Packs in 6s & 8s Shock & Orange, Bakewell, Country Slices Slices Apple, Fruit, Mince Pies Pies Standard & lattice topped Packs in 8s, various flavour Fondant Fancies combinations Sponge
Slide 60: Factory KPIs
FACTORY KPIs 2014/15 2013/14 KPI (12 months) (12 months) Volume (equiv. packs) 140.2 million 130.8 million Efficiency (OEE) 78.7% 78.7% Manufacturing Controllable Costs £29m £29m Quality (cpmu) 31 34 Service 97.3% 98.2% Accidents 44 67 “In 2014, the site delivered its highest volume performance in 6
Slide 61: Cautionary statement
CAUTIONARY STATEMENT Certain statements in this presentation are forward looking statements. By their nature, forward looking statements involve a number of risks, uncertainties or assumptions that could cause actual results or events to differ materially from those expressed or implied by those sta