General Mills, Inc. · NYSE:GIS
General Mills — Consumer Analyst Group of New York (CAGNY) Conference 2018
57 slides from General Mills's conference presentation, Feb 20, 2018
Slide 1: General Mills – Consumer Analyst Group of New York
GENERAL MILLS Consumer Analyst Group of New York February 20, 2018
Slide 2: A Reminder on Forward-looking Statements
A Reminder on Forward-looking Statements This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on management’s current expectations and assumptions. These forward-looking statements are subject to certain risks
Slide 3: Today's Key Messages
Today’s Key Messages 1. Clear Priorities for Restoring Consistent Topline Growth 2. Remaining Disciplined on Margins and Cash 3. Updating F18 Outlook, Including U.S. Tax Reform Impact 3
Slide 4: Our Strategic Framework is Grounded on the Consumer
Our Strategic Framework is Grounded on the Consumer 4
Slide 5: Four Levers Drive Shareholder Returns
Four Levers Drive Shareholder Returns 10-YEAR ANNUALIZED TOTAL SHAREHOLDER RETURN (Through Calendar 2017) 11% 10% Sales Margin Growth Expansion 9% Food Peers S&P 500 Cash Cash Conversion Returns Source: Capital IQ; Total shareholder return reflects price appreciation plus dividends, compound 5 annua
Slide 6: With Change Happening All Around…
With Change Happening All Around… 6
Slide 7: …Consumer First is More Relevant Than Ever
…Consumer First is More Relevant Than Ever
Slide 8: 3 Keys to Restoring Consistent Topline Growth
3 Keys to Restoring Consistent Topline Growth 1. COMPETE Effectively Across All Brands and All Geographies 2. ACCELERATE Our Differential Growth Platforms 3. RESHAPE the Portfolio for Growth 8
Slide 9: Competing Effectively in the U.S.
Competing Effectively in the U.S. GENERAL MILLS U.S. RETAIL SALES (% vs. LY) 1% -1% -4% -7% Q4 Q1 Q2 Q3TD Fiscal 2017 Fiscal 2018 9 Source: Nielsen XAOC; Q3TD through January 2018
Slide 10: Competing Effectively in the U.S.
Competing Effectively in the U.S. GENERAL MILLS U.S. RETAIL SALES IMPROVEMENT (Last 3 Months Growth % vs. Q4 Fiscal 2017 Growth %, basis points) 1,990 1,250 1,170 680 790 440 570 250 (220) Cereal Yogurt Grain Dough Soup Desserts Hot Fruit Mexican Snacks Snacks Snacks >80% of U.S. Retail Measured Sal
Slide 11: Competing Effectively Requires Strong Execution
Competing Effectively Requires Strong Execution COMPELLING MARKETING IMPACTFUL INNOVATION EXCELLENCE AT POINT OF SALE 11
Slide 12: Competing Effectively Requires Global Idea Sharing with Local Activation
Competing Effectively Requires Global Idea Sharing with Local Activation MARKETING NEW PRODUCT PLATFORMS LEVERAGING THE “CHASSIS” 12
Slide 13: Competing Effectively Requires New Capabilities
Competing Effectively Requires New Capabilities E-COMMERCE STRATEGIC REVENUE MANAGEMENT CONSUMER FIRST DESIGN 13
Slide 14: Compete Effectively: Cereal
Compete Effectively: Cereal F17 Net Sales = $2.7B (17% of total) 50% of CPW Net Sales = $0.8B Growing and Gaining CEREAL GROWTH DRIVERS: Share in F18 YTD ✓ Relevant Consumer News ✓ Innovation Focused on Consumer Needs ✓ Execution Across Channels 14
Slide 15: Cereal Growth Drivers
Cereal Growth Drivers RELEVANT INNOVATION FOCUSED ON EXECUTION ACROSS CONSUMER NEWS CONSUMER NEEDS CHANNELS Granola 15
Slide 16: Compete Effectively: Yogurt
Compete Effectively: Yogurt F17 Net Sales = $2.4B (15% of total) YOGURT GROWTH DRIVERS: F18 Share Improving, ✓ Premium New Products but Below LY ✓ Strengthen the Core ✓ Geographic Expansion 16
Slide 17: Yogurt Growth Drivers
Yogurt Growth Drivers PREMIUM NEW PRODUCTS STRENGTHEN THE CORE GEOGRAPHIC EXPANSION China Brazil 17
Slide 18: Compete Effectively: Regional Business Highlights
Compete Effectively: Regional Business Highlights (FISCAL 2018, LATEST 12 WEEKS, % VS LY) TOTINO’S SEASONAL BUSINESSES WANCHAI FERRY Expand Snacking Competitive in Key Season Premium Innovation Retail Sales: +7% Retail Sales: +2% Net Sales: +DD Source: Nielsen XAOC through January 2018; net sales th
Slide 19: Accelerate Our Differential Growth Platforms
Accelerate Our Differential Growth Platforms Häagen-Dazs Snack Bars Old El Paso Natural & Organic • F17 Net Sales ~$4B ($25% of Total) • Growing and Gaining Share in F18 YTD • Increasing Investment to Drive MSD+ Net Sales Growth 19
Slide 20: Accelerate: Häagen-Dazs
Accelerate: Häagen-Dazs • Category Outside N. America: $49B, Growing +MSD • Premium, Indulgence, and Impulse Driving Category Growth • Häagen-Dazs is the World’s Premier Super-premium Ice Cream Brand Source: Euromonitor 20
Slide 21: Häagen-Dazs Growth Drivers
Häagen-Dazs Growth Drivers BUILD THE CORE DIFFERENTIAL INNOVATION EXPAND DISTRIBUTION Australia Italy Marketing Developed Markets China Point of Sale Emerging Markets 21
Slide 22: Accelerate: Snack Bars
Accelerate: Snack Bars • Global Category: ~$20B, Growing +MSD • General Mills is the Global Snack Bars Leader • Our Key Advantages are our Innovation Engine and Global Scale Source: Euromonitor 22
Slide 23: Snack Bars: Performance Highlights
Snack Bars: Performance Highlights (F18 YTD RETAIL SALES GROWTH) Nature Valley U.S. +11% Lärabar U.S. +31% Snack Bars Europe & Australia +39% Source: Nielsen XAOC through January 2018 23
Slide 24: Snack Bars Growth Drivers
Snack Bars Growth Drivers FUEL THE EXPAND INNOVATION ENGINE INVEST IN BRAND BUILDING PLATFORMS GLOBALLY U.K. India U.S.A. 24
Slide 25: Accelerate: Old El Paso
Accelerate: Old El Paso • Global Category: $3.5B, Growing +LSD • Consumers Looking for Freshness, Variety, and Convenience • Old El Paso is the Global Leader in Mexican Source: Nielsen and company estimates. 25
Slide 26: Old El Paso Growth Drivers
Old El Paso Growth Drivers MORE FROM OUR CORE DIFFERENTIAL INNOVATION EXPANDED FOOTPRINT Media and Online Support Online Presence Distribution Growth In Store Support 26
Slide 27: Accelerate: Natural & Organic
Accelerate: Natural & Organic • N. America Category: $41B, Growing +HSD • General Mills is #3 N&O Food Producer in U.S. • Leading Brands: Annie’s, Lärabar, Liberté, Cascadian Farm Source: Nielsen and company estimates. 27
Slide 28: Natural & Organic Growth Drivers
Natural & Organic Growth Drivers DISTRIBUTION INNOVATION CONSUMER SUPPORT TV and Digital Sampling 28
Slide 29: Reshape Our Portfolio for Growth
Reshape Our Portfolio for Growth M&A HAS ENHANCED OUR ORGANIC GROWTH PROFILE F15-F17 Acquisitions Acquisition Focus Areas: ✓ Bolt-on Acquisitions in North America and Europe ✓ Adding Scale in Emerging Markets ✓ New Growth Platforms that Leverage Our Capabilities F16 Divestiture Divestiture Scope: Ro
Slide 30: 3 Keys to Restoring Consistent Topline Growth
3 Keys to Restoring Consistent Topline Growth NET SALES GROWTH OPPORTUNITY +LSD -1% 1 2 3 F14-F17 Compete Accelerate Reshape Sustainable CGR* Effectively Differential Portfolio Growth Growth Platforms Opportunity *Organic Net Sales CGR. Non-GAAP measure. See appendix for reconciliation. 30
Slide 31: Don Mulligan, EVP, Chief Financial Officer
Don Mulligan EVP, Chief Financial Officer
Slide 32: Four Levers to Drive Shareholder Returns
Four Levers to Drive Shareholder Returns Sales Margin Cash Cash Growth Expansion Conversion Returns LT Target: +LSD +MSD ≥ 95% ≥ 90% Adjusted Op. Profit* of Free Cash Flow* *Non-GAAP measures. 32
Slide 33: Significant Cost Savings Realization
Significant Cost Savings Realization ($ in Millions) COST OF GOODS HMM SAVINGS ANNOUNCED PROJECTS SAVINGS $4,000 $390 $3,250 $700 $700 $540 $350 $75 F10 - F17 F18 F10 - F20 F15 F16 F17 F18 Cumulative Target Cumulative Target Savings Savings Goal 33
Slide 34: Profit Margins and Cost Structure Ahead of Food Peer Median
Profit Margins and Cost Structure Ahead of Food Peer Median ADJUSTED OPERATING SG&A EXPENSE EXCLUDING PROFIT MARGIN* MEDIA AND R&D* (% of Net Sales) (% of Net Sales) 18.1 19.0 17.2 15.9 16.4 16.8 15.1 12.5 8.6 F15 F16 F17 GIS U.S. Food Median GIS Source: CapIQ, fiscal 2017/calendar year 2016. Food P
Slide 35: Further Opportunities for Global Efficiency
Further Opportunities for Global Efficiency ENTERPRISE PROCESS TRANSFORMATION Global Sourcing Go to Market Human Resources Finance 35
Slide 36: Reducing Core Working Capital and Increasing Efficiency
Reducing Core Working Capital and Increasing Efficiency ($ in Billions) -52% Cum Decline $1.8 $1.7 45 $1.6 $1.6 40 40 $1.4 $1.4 35 $1.2 $1.2 34 30 $1.0 29 25 24 $0.8 $0.8 $0.7 20 $0.6 15 $0.4 10 10 $0.2 8 5 $0.0 0 F12 F13 F14 F15 F16 F17 Core Working Capital CWC Days 36
Slide 37: Opportunities to Drive Further Core Working Capital Improvement
Opportunities to Drive Further Core Working Capital Improvement Core Working Capital Days 56 Global CPG Peers Top Quartile 10 GIS Source: CapIQ, fiscal 2017/calendar year 2016. (44) Industry Peer Group – see 2017 proxy for full list. 37
Slide 38: Free Cash Flow Performance
Free Cash Flow Performance TARGET: CASH CONVERSION ≥ 95% (3-Year Rolling, $ in Billions) +5% CGR $5.9 $6.0 $6.1 $5.6 $5.4 $4.9 $4.1 109% 109% 111% 102% 94% 97% 83% F10-F12 F11-F13 F12-F14 F13-F15 F14-F16 F15-F17 Latest 12 Qtrs Free Cash Flow* Free Cash Flow Conversion* *Non-GAAP measure. See appendi
Slide 39: Consistent Dividend and Share Repurchase Track Record
Consistent Dividend and Share Repurchase Track Record DIVIDENDS PER SHARE AVERAGE DILUTED SHARES OUTSTANDING CGR = +9% CGR = -2% $1.92 $1.96 667 666 $1.78 $1.67 $1.55 646 $1.32 $1.22 619 612 598 Down 2% F12 F13 F14 F15 F16 F17 Current F12 F13 F14 F15 F16 F17 F18 Annualized Target Rate 39
Slide 40: Strong Cash Returns to Shareholders
Strong Cash Returns to Shareholders TARGET: CASH RETURN ≥ 90% (3-Year Rolling, $ in Billions) $5.9 $6.0 $6.2 $6.1 $6.2 $6.1 $5.9 $5.6 $5.4 $4.9 $5.1 $4.1 $4.0 $3.3 F10-F12 F11-F13 F12-F14 F13-F15 F14-F16 F15-F17 Latest 12 Qtrs Cash Return %: 80% 81% 86% 104% 110% 116% 96% Free Cash Flow* Net Share R
Slide 41: Four Levers to Drive Shareholder Returns
Four Levers to Drive Shareholder Returns Sales Margin Cash Cash Growth Expansion Conversion Returns 41
Slide 42: U.S. Tax Reform Impact
U.S. Tax Reform Impact • Estimate F18 Adjusted ETR* ~27%; F19 Adjusted ETR ~22-24% • Plan to Reinvest a Portion of Benefit in High-ROI Initiatives: • “Accelerate” Plans on Häagen-Dazs, Snack Bars, Old El Paso, and N&O • Key Capabilities Including E-commerce and SRM • Anticipate One-time Impacts in F
Slide 43: Updating Fiscal 2018 Guidance
Updating Fiscal 2018 Guidance PREVIOUS REVISED • Broad-based Topline Momentum GUIDANCE MEASURE F18 GUIDANCE F18 GUIDANCE Continues to Strengthen Organic Net Sales* Growth -1% to Flat Flat • Greater Input Cost Pressure and Total Segment Operating Slower Improvement in Brazil Profit* Growth Flat to +1
Slide 44: Today's General Mills Summary
Today’s General Mills Summary • Consumer First Remains Our Central Strategy • Changing How We Operate: More Global, New Capabilities, Stronger Execution • Competing, Accelerating, and Reshaping to Drive Consistent LSD Topline Growth • Balancing All Levers to Generate Long-term Shareholder Value 44
Slide 45: General Mills – Consumer Analyst Group of New York
GENERAL MILLS Consumer Analyst Group of New York February 20, 2018
Slide 46: A Reminder on Non-GAAP Guidance
A Reminder on Non-GAAP Guidance Our fiscal 2018 outlook for organic net sales growth, constant currency total segment operating profit, adjusted operating profit margin, tax rate excluding items, adjusted diluted EPS, and free cash flow are non-GAAP financial measures that exclude, or have otherwise
Slide 47: Reconciliation of Organic Net Sales Growth
Reconciliation of Organic Net Sales Growth (Fiscal Years) Full Year Reported Organic Organic Organic Foreign Acquisitions & Net Sales Volume Price/Mix Net Sales Exchange Divestitures 53rd Week Growth 2015 (2) pts 2 pts Flat (3) pts - 1 pt (2) % 2016 Flat Flat Flat (4) pts (1) pt (1) pt (6) % 2017 (7
Slide 48: Reconciliation of Adjusted Operating Profit Margin
Reconciliation of Adjusted Operating Profit Margin (Fiscal Years) Full Year % of Net Sales 2017 2016 2015 Operating profit as reported 16.4 % 16.3 % 11.8 % Mark-to-market effects (0.1) (0.4) 0.5 Divestitures (gain) loss, net 0.1 (0.9) - Restructuring costs 1.4 1.4 1.9 Project-related costs 0.3 0.4 0
Slide 49: Reconciliation of SG&A Expense Excluding Media and R&D
Reconciliation of SG&A Expense Excluding Media and R&D (Fiscal Year) Full Year 2017 $ in Millions % of Net Sales SG&A as reported $2,801 17.9 % Media 624 4.0 R&D 218 1.4 SG&A Excluding Media and R&D $1,959 12.5% 49
Slide 50: Reconciliation of Free Cash Flow and Free Cash Flow Conversion
Reconciliation of Free Cash Flow and Free Cash Flow Conversion (Fiscal Years, $ in Millions) 2017 2016 2015 2014 2013 2012 2011 2010 Net earnings, including earnings attributable to redeemable and noncontrolling interests $1,701 $1,737 $1,259 $1,861 $1,893 $1,589 $1,804 $1,535 Mark-to-market effects
Slide 51: Reconciliation of Free Cash Flow and Conversion for Latest 12 Quarters
Reconciliation of Free Cash Flow and Free Cash Flow Conversion for Latest 12 Quarters (Fiscal Years, $ in Millions) Latest 12 2018 1H 2017 2016 2015 2H Quarters Net earnings, including earnings attributable to redeemable and noncontrolling interests $4,842 $852 $1,701 $1,737 $552 Mark-to-market effe
Slide 52: Cash Return to Shareholders
Cash Return to Shareholders (Fiscal Years, $ in Millions) 2017 2016 2015 2014 2013 2012 2011 2010 Dividends paid $1,135 $1,072 $1,018 $983 $868 $800 $729 $644 Purchases of common stock for treasury 1,652 607 1,162 1,745 1,045 313 1,164 692 Proceeds from common stock issued on exercised options (113)
Slide 53: Cash Return to Shareholders for Latest Quarters
Cash Return to Shareholders for Latest 12 Quarters (Fiscal Years, $ in Millions) Latest 12 2018 1H 2017 2016 2015 2H Quarters Dividends paid $3,287 $565 $1,135 $1,072 $515 Purchases of common stock for treasury 3,052 601 1,652 607 193 Proceeds from common stock issued on exercised options (463) (51)
Slide 54: Reconciliation of Income Taxes on Adjusting Items
Reconciliation of Income Taxes on Adjusting Items (Fiscal Years, $ in Millions) 2017 2016 2015 2014 2013 2012 2011 2010 Pretax Income Pretax Income Pretax Income Pretax Income Pretax Income Pretax Income Pretax Income Pretax Income Earnings* Taxes Earnings* Taxes Earnings* Taxes Earnings* Taxes Earn
Slide 55: Reconciliation of Income Taxes on Adjusting Items for Latest 12 Quarters
Reconciliation of Income Taxes on Adjusting Items for Latest 12 Quarters (Fiscal Years, $ in Millions) 2018 1H 2017 2016 2015 2H Pretax Pretax Pretax Pretax Earnings* Income Taxes Earnings* Income Taxes Earnings* Income Taxes Earnings* Income Taxes As reported $1,208 $403 $2,271 $655 $2,404 $755 $80
Slide 56: Reconciliation of Fiscal 2017 Adjusted Diluted EPS
Reconciliation of Fiscal 2017 Adjusted Diluted EPS Per Share Data Fiscal Year 2017 Diluted earnings per share, as reported $ 2.77 Mark-to-market effects* (0.01) Divestiture loss, net* 0.01 Restructuring costs* 0.26 Project-related costs* 0.05 Diluted earnings per share, excluding certain items affec
Slide 57: Reconciliation of Fiscal 2017 Tax Rate Excluding Items
Reconciliation of Fiscal 2017 Tax Rate Excluding Items ($ in Millions) Fiscal Year 2017 Pretax Earnings* Income Taxes As reported $2,271.3 $655.2 Mark-to-market effects (13.9) (5.1) Divestiture loss 13.5 4.3 Restructuring costs 224.1 70.2 Project-related costs 43.9 15.7 As adjusted $2,538.9 $740.3 E
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