Conagra Brands, Inc. · NYSE:CAG
Conagra Brands — Conagra Foods — CAGNY 2011
64 slides from Conagra Brands's conference presentation, Feb 22, 2011
Slide 1: ConAgra Foods CAGNY 2011
Slide 2: Note on Forward-Looking Statements
This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current views and assumptions of future events and financial performance and are subject to uncertainty and changes in circumst
Slide 3: Today's remarks
Today's remarks Today's remarks Gary Rodkin, CEO John Gehring, CFO
Slide 4: Stronger Foundation
Established capabilities Innovation Marketing & sales Supply Chain Systems Portfolio improvements Talent & culture Stronger Foundation
Slide 5: Higher quality EPS base
Holding company operating company Pre overhaul: FY06 EPS Target* $1.35 - $1.40 After rebuilding: FY10 EPS** Base $1.74 Higher Quality Base **Diluted EPS, adjusted for items impacting comparability. See Appendix C. *Company goal for FY06 EPS performance that fiscal year.
Slide 6: Winning in a new environment
Consumer behavior Competitive elements Inflationary pressure Total trips, pantry stocking down ($) Winning in a new environment Quick trips up ($) Responding through: Total $ basket size % change vs. YA Source: Symphony IRI Times & Trends August 2010 Channel Migration 1/09-6/10 Innovation: Quality,
Slide 7: He {tla :
He {tla : U aissice i 4 Syinaturel
Slide 8: Our frozen strategies are working
Our frozen strategies are working *IRI all outlet HH Panel dollar share SSM 52 wk ending 5/25/2008 and 52 wk ending 12/26/2010. Frozen results cited include dessert pie acquisition. FY11 numbers (est.). + 3% + 5% + 5.4 pts. Volume 3-year CAGR Sales 3-year CAGR + 2.9 pts. Gross Margin Share* FY08 to
Slide 9: Frozen: FY12 - FY14 growth strategy
Frozen: FY12 - FY14 growth strategy Healthy Choice and Marie Callender's Steaming Entrees Marie Callender's Bakes and Banquet Multi-serve Meals Marie Callender's and Banquet Frozen Desserts Win in single-serve meals Accelerate growth in adjacencies Expand share of multi-serve meals
Slide 10: Win in single-serve meals
More than 9x the dollar sales than competition1 Compelling taste and nutrition Win in single-serve meals 1. IRI 52 wk FDMx $ sales through Jan 9, 2011, CAG steaming SSM vs. Nestle steaming SSM Cafe Steamers Steaming Lunch Entrees ConAgra Foods steaming advantage (CHART) (CHART) Avg. meal2 Healthy Ch
Slide 11: Innovate for better quality, nutrition
Innovate for better quality, nutrition Vs.
Slide 12: Healthy Choice commercial
jr Healthy Choice commercial Grae Food you love
Slide 13: Win in single-serve meals
Win in single-serve meals Taking steaming advantage to Marie Callender's Delicious Fresh Flavor Steamers in a range of flavors
Slide 14: Expand share of multi-serve meals: breakthrough innovation
Expand share of multi-serve meals: breakthrough innovation Homemade taste from MicroRiteTM Cooks in less than 15 minutes Oven-like browning New Marie Callender's Bakes
Slide 15: Changing the frame of reference
Expand share of multi-serve meals: changing the frame of reference Home Cooking Responsible nutrition Strong value Takeout & Delivery Vs.
Slide 16: Marie Callender's Time to Savor
Marie Callender's "Time to Savor"
Slide 17: Marie Callender's growth story
Source: IRI FDMx w/e Oct 17, 2010; Mediacom, FY11 data through 8/29/10 All Outlet Share - SS ONLY FY 09 FY 09 FY 10 FY 10 FY 11 YTD FY 11 YTD Unit Share Dollar Share Unit Share Dollar Share Unit Share Dollar Share MC 6.9 9.1 7.7 10.2 8.3 10.4 All outlet share through 1.23.11 Marie Callender's growth
Slide 18: Accelerate growth in adjacencies
Accelerate growth in adjacencies Enter into new categories to grow Deliver new occasions leveraging our current capabilities * Source: IRI Syndicated Data, 52-weeks ending 1/2/11 #1 in Frozen Pies Opportunity to leverage the power of the Marie Callender's master brand Banquet: Leveraging #1 position
Slide 19: Expanding growth via adjacencies
Expanding growth via adjacencies Expand to more eating occasions Added wholesome desserts Build from strong base business Refresh line-up FY11 innovation Coming soon More snacks and appetizers on the way Savory Snacks Desserts Dinner
Slide 20: Popcorn & Snacks
Popcorn & Snacks Seek Food you love @ Z Orville af Reon “SMA POP
Slide 21: Orville Redenbacher's Pop Up Bowl
Boldest popcorn innovation in 25 years Introducing Orville Redenbacher's Pop Up Bowl Pops into a sturdy, stand-up, wide-mouth bowl See when popcorn is popped Instant serving, easy sharing No need for a separate bowl, less mess
Slide 22: Orville Redenbacher's Pop Up Bowl
Orville Redenbacher's Pop Up Bowl
Slide 23: Category rejuvenation: flavors
(CHART) Older kids leave microwave popcorn due to lack of flavors Category rejuvenation: flavors Source: Proprietary MW Popcorn Barrier Study, April 2010, Dunnhumby 10wks ending 1/8/11 Percent with Flavors
Slide 24: News from Slim Jim: The Dare
News from Slim Jim: Consumers take "The Dare" *Source: Based on research conducted by The Food Channel in conjunction with CultureWaves(r), the International Food Futurists, and Mintel Kinda Hot Chili Pepper Freakin' Hot Jalapeno Really Freakin' Hot Habanero "Bodaciously Bold" One of the Top 10 Snac
Slide 25: Nutrition & Cereal Bars
Nutrition & Cereal Bars Seek Food you love
Slide 26: Growing nutrition and cereal bar business
Growing nutrition and cereal bar business Utilize ConAgra Foods scale Supply Chain Quality Assurance Innovation Consumer Insights Emulate national brands ConAgra Foods Bar Sales (CHART) Indexed to 100 (Base Year FY06) 3-year CAGR = 20% 5 -year CAGR = 17% Uniquely positioned in a $3.4 billion, growin
Slide 27: Growth in Elan acquisition
Growth in Elan acquisition ConAgra Foods acquired Elan Nutrition in April 2010 Expands capacity to fuel short-term and long-term growth Delivers incremental manufacturing capabilities Provides technical expertise in health and nutrition segment; fastest growing segment within the bar category (CHART
Slide 28: Health & Nutrition segment: Growth opportunities
Health & Nutrition segment: Growth opportunities Meal Replacement Energy Protein Indulgent Natural Health & Nutrition Bar Category $1.1 billion: +12% Athletic Performance $417 million: +20.5% Wellness $262 million: +20.2% Diet $413 million: +1% Source: IRI FDMx 52 Weeks Ending Dec. 26, 2010
Slide 29: Sweet Potatoes
ConAgra @Fodds Food you love Sweet Potatoes
Slide 30: Sweet potato fries: the business case
(CHART) Sweet potatoes in restaurants: sales doubled over past 4 years If available: 71% of consumers stated they would order them all the time or frequently 42% of adult consumers stated they would order them for their kids Research shows multiple fry offerings drive incremental purchase Sweet pota
Slide 31: Lamb Weston sweet potato operations
Lamb Weston sweet potato operations Frozen sweet potato market leader: 60% foodservice share Delhi, La. : First dedicated frozen sweet potato plant in the world First frozen food plant in the world to be awarded Platinum LEED by the U.S. Green Building Council (CHART) Indexed to 100 (Base Year FY05)
Slide 32: Sweet potato commercial
: ConAgra Sweet potato commercial @odds
Slide 33: International
International
Slide 34: FY10 International sales base
(CHART) FY10 International sales base ConAgra Foods' portion of unconsolidated international investments represents an additional $300+ million in sales Total FY10 company sales: $12 billion International: 10% Domestic: 90%
Slide 35: International - Consumer Foods
International - Consumer Foods Concentrated footprint Canada Mexico India
Slide 36: Canada
Canada Groas = Z oe f= ee UY VAs (ret
Slide 37: Canada: Healthy Choice very strong first year
(CHART) Canada Source: $ Share Nielsen Market Track All Channels L52 wks PE Dec 18, 2010 Healthy Choice: very strong first year Expansion of proprietary steaming platform Leading contributor to incremental category growth Premium price vs. competition Aug 2009 June 2010 Dollar Share Trend
Slide 38: Mexico
Mexico ouge : (Cf Foo
Slide 39: Mexico: Innovative selling & distribution model
Direct selling/order taking Replicable/expandable model Increases horizontal distribution 20%+ Improves velocities 2.5 times via direct merchandising Mexico Innovative selling & distribution model ACT II 13.4 Sabritas 10.1 Cheetos 8.1 Salty Snack Share Leaders: Modern Trade Source: Nielsen Scantrack
Slide 40: India
India
Slide 41: India investment continues to build momentum
India Double digit growth vs. year ago Adding high-margin products, now ^ 25% of profits Sundrop Oil: Now value-added, #1 brand Successfully tested new platforms like peanut butter ACT II Net Sales Growth India investment* continues to build momentum Indexed to 100 (Base Year FY08) (CHART) *This bus
Slide 42: Lamb Weston International
Lamb Weston International Sold in over 100 countries on all seven continents ^ 20% LW volume is international 20-year sales CAGR = 10%+ Joint Venture with Lamb Weston Meijer: the Netherlands, U.K., Austria Worldwide Customers
Slide 43: Summary: sustainable, profitable growth
Top Line Pricing, mix, trade Innovation High ROI marketing Summary: sustainable, profitable growth Long-term EPS outlook: 6-8% annual growth* *Diluted EPS, adjusted for items impacting comparability **Est. Consumer Foods annual COGS productivity FY12-FY14 Productivity ^ $275 million/year** Tight SG&
Slide 44: Financial Priorities and Outlook
John Gehring Financial Priorities and Outlook
Slide 45: Long-term goals
Long-term goals Sales growth of ^ 3% annually EPS* growth of 6-8% annually ROIC* of 13-14% *EPS and ROIC guidance discussed in this presentation has been adjusted for items impacting comparability. EPS guidance is based on diluted EPS, adjusted for items impacting comparability. The inability to pre
Slide 46: Financial priorities
Financial priorities Strong earnings & cash flows Healthy balance sheet and strong liquidity High-return capital allocation with top tier dividend
Slide 47: Strong earnings & cash flows
Strong earnings & cash flows Strong earnings & cash flows Low single-digit unit growthPricing & trade efficienciesImproved Mix Savings ^ $275 million/year (Consumer Foods COGS)Long-term: Inflation low single-digit (short term higher)Commercial Foods crop sourcing, processing efficiencies Zero Overhe
Slide 48: Key earnings assumptions: inflation
Key earnings assumptions: inflation Inflation will remain high through next 12-24 months FY11 - Rising input cost levels Exceed 5% after considering pass-through categories, such as cooking oil Increases in grains, proteins, edible oils, packaging, and energy FY12 - Inflation pressures continue ^ 7%
Slide 49: Continued Supply Chain productivity
Savings ^ $275 million/year FY12-FY14 (Consumer Foods COGS) Continued Supply Chain productivity $1.4 billion of savings since FY07 Product Line Complexity Demand-driven Supply Chain Network Optimization Plant Optimization Leverage SAP Programs
Slide 50: Other margin management capabilities
Other margin management capabilities Procurement capabilities Crop procurement Hedging strategies Strategic supplier relationships Commercial Foods: pricing, innovation, processing efficiencies SG&A Zero Overhead Growth culture
Slide 51: Operating cash flow
Operating cash flow (CHART) Operating Cash Flow (continuing operations) ($ in millions)
Slide 52: Cash flow
Cash flow EPS: Long-term EPS* growth of 6-8% annually Working capital efficiency Capital expenditures $450 million to $475 million/year FY12-14 Focused on growth and cost reduction Target Operating Cash Flows ^ $1.2 to $1.4 billion per year for the next 3 fiscal years *Diluted EPS, adjusted for item
Slide 53: Healthy balance sheet and strong liquidity
Healthy balance sheet and strong liquidity Strong investment grade credit rating Strong liquidity, improved financial flexibility Over $500 million of cash at end of Q2 FY11 Additional ^ $550 million of PIK notes proceeds received in Q3 FY11 Continued access to commercial paper markets Manageable de
Slide 54: Capital allocation: priorities
Capital allocation: priorities Dividend payout: Top Tier Growth and profit enhancement investments New product and capacity expansion Supply chain optimization and restructuring Charges of ^ $65 million over an 18-month period (pre-tax) ^ $25 million of the charges represent a cash outlay Dividends
Slide 55: Capital allocation: priorities - Acquisitions
Capital allocation: priorities Capital allocation: priorities Acquisitions
Slide 56: Capital allocation: Share Repurchase
Capital allocation: priorities $500 million program from Q3 2010 Increased by $550 million - PIK Notes proceeds As of Q2 earnings release (12/21/10): $750 million remaining $550+ million to be repurchased during H2 FY11 Share Repurchase
Slide 57: Fiscal 2011 outlook
Fiscal 2011 outlook Confirming expectation for low single digit rate of growth from $1.74* base in FY10 Strong H2 Pricing Contribution from innovation/acquisitions Cost savings Potato crop SG&A/lower incentive compensation Share repurchases Cash flows from operations ^ $1.3 billion *Diluted EPS, adj
Slide 58: Long-term goals
Long-term goals Sales growth of ^ 3% annually EPS* growth of 6-8% annually ROIC* of 13-14% *EPS and ROIC guidance discussed in this presentation has been adjusted for items impacting comparability. EPS guidance is based on diluted EPS, adjusted for items impacting comparability. The inability to pre
Slide 59: Summary
Summary Focus: strong earnings and cash flow, healthy balance sheet and liquidity, and high-return capital allocation Cash flow expected to support strong dividend and investments to drive sustainable business model FY11 EPS* on track Committed to EPS* growth of 6-8% long-term *Diluted EPS, adjusted
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Slide 61: Appendix A: Consumer Foods COGS - Major Components
Appendix A: Consumer Foods COGS - Major Components Proteins 22% Fats & Oils 11% Dairy 5% Grains and Other Ingredients 9% Seeds and Nuts 4% Fruits, Vegetables, Legumes 9% Sweeteners, Starches, Other 5% Packaging 31% Energy 4% ^ % of Procurement Spend by Commodity Class (current year est.) (CHART) $1.
Slide 62: Appendix B: Supply Chain details
Active SKU management Design for preference & value Material/Vendor optimization Supplier collaboration Lean plant run strategy Retailer collaboration Product sourcing Optimize plant footprint Warehouse/IMC footprint CPS 2.0 High performance teams Asset modernization SAP value leverage New systems e
Slide 63: Appendix C: FY10 EPS Reconciliation
Appendix C: FY10 EPS Reconciliation FY10 EPS - Reconciliation for Regulation G Purposes FY10 EPS - Reconciliation for Regulation G Purposes Total FY10 Diluted EPS from continuing operations $ 1.67 Items impacting comparability: Expense related to unallocated mark-to-market impact of derivatives (Q1)
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