The J.m. Smucker Company · NYSE:SJM
The J.m. Smucker — Consumer Analyst Group of New York (CAGNY) Conference 2018
72 slides from The J.m. Smucker's conference presentation, Feb 21, 2018
Slide 1: The J.M. Smucker Company
The J.M. Smucker Company CONSUMER ANALYST GROUP OF NEW YORK CONFERENCE February 21, 2018
Slide 2: Strategy and Business Update
Strategy and Business Update Mark Smucker President and Chief Executive Officer Financial Update Mark Belgya Vice Chair and Chief Financial Officer 2
Slide 3: Forward-Looking Statements
Forward-Looking Statements This presentation contains forward-looking statements, such as projected net sales, operating results, earnings, and cash flows, that are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from any future results, perf
Slide 4: Our Long-Term Financial Priorities
Our Long-Term Financial Priorities TOP-LINE GROWTH COST SAVINGS EPS GROWTH 4
Slide 5: Progress on Our Strategic Roadmap
Progress on Our Strategic Roadmap CAPITALIZED ON KEY BRANDS STRONG SALES GROWTH (FY18 YTD) ACCELERATED INNOVATION +39% +14% ENHANCED CAPABILITIES ACHIEVED SYNERGIES +12% +15% COST SAVINGS PROGRAMS 5
Slide 6: Progress on Our Strategic Roadmap
Progress on Our Strategic Roadmap CAPITALIZED ON KEY BRANDS NEW PRODUCT LAUNCHES ACCELERATED INNOVATION ENHANCED CAPABILITIES ACHIEVED SYNERGIES COST SAVINGS PROGRAMS 6
Slide 7: Progress on Our Strategic Roadmap
Progress on Our Strategic Roadmap CAPITALIZED ON KEY BRANDS E-COMMERCE SALES UP 78% (FY18 YTD) ACCELERATED INNOVATION ENHANCED CAPABILITIES ACHIEVED SYNERGIES COST SAVINGS PROGRAMS 7
Slide 8: Progress on Our Strategic Roadmap
Progress on Our Strategic Roadmap CAPITALIZED ON KEY BRANDS $200M ACQUISITION SYNERGIES ACCELERATED INNOVATION ENHANCED CAPABILITIES ACHIEVED SYNERGIES COST SAVINGS PROGRAMS 8
Slide 9: Progress on Our Strategic Roadmap
Progress on Our Strategic Roadmap CAPITALIZED ON KEY BRANDS K-CUP® AGREEMENT & ZERO-BASED BUDGETING ACCELERATED INNOVATION ENHANCED CAPABILITIES ACHIEVED SYNERGIES COST SAVINGS PROGRAMS 9
Slide 10: Today’s Key Themes
Today’s Key Themes ICONIC & EXCELLENT ROBUST TAX & EMERGING CATEGORIES INNOVATION COST SAVINGS BRANDS 10
Slide 11: Our Leading Brands
Our Leading Brands #1 IN FRUIT SPREADS #1 IN PEANUT BUTTER #1 IN COFFEE #1 IN DOG SNACKS 43 46 26 36 DOLLAR SHARE DOLLAR SHARE DOLLAR SHARE DOLLAR SHARE Source: Smucker Internal Multi-Outlet Share Report 52 weeks ended January 28, 2018 Note: Dollar share represents total Company share across all bra
Slide 12: Strategy for Growth
Strategy for Growth COFFEE PET FOOD SNACKS A portfolio that combines #1 and leading brands with emerging, on-trend brands to drive balanced growth 12
Slide 13: Total At-Home Coffee Category
Total At-Home Coffee Category INSTANT 8% 4% ONE CUP MAINSTREAM 42% 25% 5-YR CAGR PREMIUM 25% Source: Smucker Internal Multi-Outlet Share Report 52 weeks ended January 28, 2018 13
Slide 14: Opportunity for Growth
Opportunity for Growth INSTANT INSTANT 8% 8% ONE CUP 24% ONE CUP MAINSTREAM 42% TOTAL 25% SMUCKER CATEGORY PORTFOLIO PREMIUM 14% MAINSTREAM 54% PREMIUM 25% Source: Smucker Internal Multi-Outlet Share Report 52 weeks ended January 28, 2018 14
Slide 15: U.S. Retail Coffee Segment
U.S. Retail Coffee Segment LONG-TERM SALES GROWTH OBJECTIVE 2-3% 15
Slide 16: U.S. Retail Consumer Foods Segment
U.S. Retail Consumer Foods Segment LONG-TERM LONG-TERM SALESSALES GROWTH GROWTH OBJECTIVE 2-3% 16
Slide 17: Pet Food is a Large and Growing Category
Pet Food is a Large and Growing Category ALL OTHER PET SPECIALTY $30B 4% 5-YR CAGR TOTAL MARKET TRADITIONAL RETAIL Source: Euromonitor February 2018 17
Slide 18: U.S. Retail Pet Foods Segment
U.S. Retail Pet Foods Segment LONG-TERM SALES GROWTH OBJECTIVE 2-3% 18
Slide 19: Enhanced Capabilities
Enhanced Capabilities INNOVATION CONSUMER INSIGHTS ANALYTICS REVENUE GROWTH CONNECTED COMMERCE DIGITAL MARKETING MANAGEMENT 19
Slide 20: Strategic Roadmap
Strategic Roadmap KEY FINANCIAL PRIORITIES TOP-LINE GROWTH COST SAVINGS EPS GROWTH GROWTH PILLARS INNOVATION INVESTMENTS COST SAVINGS ACQUISITIONS REVENUE CONSUMER CONNECTED DIGITAL CAPABILITIES INNOVATION ANALYTICS GROWTH INSIGHTS COMMERCE MARKETING MGMT 20
Slide 21: Strategic Roadmap
Strategic Roadmap KEY FINANCIAL PRIORITIES TOP-LINE GROWTH COST SAVINGS EPS GROWTH GROWTH PILLARS INNOVATION INVESTMENTS COST SAVINGS ACQUISITIONS REVENUE CONSUMER CONNECTED DIGITAL CAPABILITIES INNOVATION ANALYTICS GROWTH INSIGHTS COMMERCE MARKETING MGMT 21
Slide 22: Consumer-Driven Innovation
CONSUMER-DRIVEN INNOVATION 22
Slide 23: The Folger Coffee Co.
S.F. THE FOLGER COFFEE cCo.™ CA. 92
Slide 24: New premium coffee platform inspired by the Folger heritage
New premium coffee platform inspired by the Folger heritage 24 24
Slide 25: Premium Arabica blends
Premium Arabica blends Fire-roasted and steel-cut for a bold, smooth flavor 25 25
Slide 26: Meticulously designed to deliver stopping power in the coffee aisle
Meticulously designed to deliver stopping power in the coffee aisle 26 26
Slide 27: Prepack bags and K-Cup pods shipping April 2018
® Prepack bags and K-Cup pods shipping April 2018 27 27
Slide 28: Ready-to-Drink launching Summer 2018
Ready-to-Drink launching Summer 2018 28 28
Slide 29: 1850 Launch Support
1850 Launch Support ™ EXPERIENTIAL NATIONAL IN-STORE MARKETING MEDIA SUPPORT 29
Slide 30: 30
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Slide 31: Shipping May 2018
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Slide 32: Platform-Driven Growth
Platform-Driven Growth ™ ® ™ ® 1850 Jif Power Ups Milk-Bone Future Platforms APRIL 2018 MAY 2018 2019 32
Slide 33: New Products
New Products COFFEE SNACKS PET FOOD Aligning with consumer trends to maintain category strength 33
Slide 34: Dunkin’ Donuts Premium Coffee
Dunkin’ Donuts Premium Coffee ® $500M+ TTM NET SALES Shipping Spring 2018 #1 SELLING #1 SELLING ® PREMIUM BAG K-CUP Source: Smucker Internal Multi-Outlet Share Report 52 weeks ended January 28, 2018 34
Slide 35: New Folgers Products
New Folgers Products ® New instant coffee Smaller size appeals to value packs value-oriented consumers 35
Slide 36: New Jif Poppers
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Slide 37: Natural & Organic
Natural & Organic New unsweetened & Certified by the Roundtable for lightly-sweetened flavors Sustainable Palm Oil 37
Slide 38: Pet Food & Snacks
Pet Food & Snacks Capitalizing on humanization and premiumization trends 38
Slide 39: Strategic Roadmap
Strategic Roadmap KEY FINANCIAL PRIORITIES TOP-LINE GROWTH COST SAVINGS EPS GROWTH GROWTH PILLARS INNOVATION INVESTMENTS COST SAVINGS ACQUISITIONS REVENUE CONSUMER CONNECTED DIGITAL CAPABILITIES INNOVATION ANALYTICS GROWTH INSIGHTS COMMERCE MARKETING MGMT 39
Slide 40: Nature’s Recipe
Nature’s Recipe ® Net sales up 39% YTD with expansion into mass channels 40
Slide 41: Nature’s Recipe
Nature’s Recipe” | & “eve INGREDIENT ae ADULT | GRAIN FREE -Easy to Digest— ; eS Real Chicken #1 Ingredient ae ce oes = ciickEN, sweer poraro | & PUMPKIN RECIPE {VARIETY PACK ] REAL CHICKEN #1 INGREDIENT Preparedina svar broth GRAIN FREE Ay sisi ree Chicken & Groin Free Chicken & k Recipe
Slide 42: Natural Balance
Natural Balance ® 20% of brand sales are from e-commerce 42
Slide 43: Accelerating E-Commerce
Accelerating E-Commerce 5% of net sales from e-commerce by FY20 FY18 pet food sales up 71% and coffee sales up 160% 43
Slide 44: Strengthening E-Commerce Capabilities
Strengthening E-Commerce Capabilities SEARCH IMPULSE PRICING SUPPLY CHAIN OPTIMIZATION PURCHASES STRATEGIES FLEXIBILITY 44
Slide 45: New Smucker’s Uncrustables Plant
New Smucker’s Uncrustables Plant ® ® On track for completion in 2020 45 45
Slide 46: Smucker’s Uncrustables
Smucker’s Uncrustables ® ® $250M FY18E NET SALES 12% 5-YEAR CAGR $500M FY22E NET SALES Note: Represents brand sales Company-wide 46
Slide 47: U.S. Olympic Team Sponsor
U.S. Olympic Team Sponsor Supporting Our Purpose of “helping to bring families together to share memorable meals and moments” 47
Slide 48: Strategic Roadmap
Strategic Roadmap KEY FINANCIAL PRIORITIES TOP-LINE GROWTH COST SAVINGS EPS GROWTH GROWTH PILLARS INNOVATION INVESTMENTS COST SAVINGS ACQUISITIONS REVENUE CONSUMER CONNECTED DIGITAL CAPABILITIES INNOVATION ANALYTICS GROWTH INSIGHTS COMMERCE MARKETING MGMT 48
Slide 49: Financial Update
Financial Update Mark Belgya Vice Chair and Chief Financial Officer 49
Slide 50: Financial Update
Financial Update THIRD QUARTER CAPITAL TAX REFORM FY19 EPS RECAP & FULL DEPLOYMENT & IMPACT KEY DRIVERS YEAR OUTLOOK FREE CASH FLOW 50
Slide 51: Third Quarter Fiscal 2018 Results
Third Quarter Fiscal 2018 Results ($ in millions, except per share data) FY18 Q3 YoY CHANGE Net Sales $1,903 1% Adjusted Gross Profit $732 1% Adjusted Operating Income $400 4% Adjusted EPS (as reported) $2.50 25% Adjusted EPS (excluding $0.35 per share tax benefit) $2.15 8% 51
Slide 52: Tax Reform Benefit
Tax Reform Benefit FY18E FY19E 28% 23% EFFECTIVE TAX RATE EFFECTIVE TAX RATE $55M $65M EARNINGS BENEFIT INCREMENTAL BENEFIT $120M ANNUAL EARNINGS BENEFIT 52
Slide 53: Full-Year Fiscal 2018 Outlook
Full-Year Fiscal 2018 Outlook CURRENT PREVIOUS Adjusted EPS $8.20 - $8.30 $7.75 - $7.90 Free Cash Flow $825M $775M Capital Expenditures $310M $310M Adjusted Effective Tax Rate 28.0% 32.5% - 33.0% Net sales are expected to be flat to down slightly compared to the prior year. 53
Slide 54: Strategic Roadmap
Strategic Roadmap KEY FINANCIAL PRIORITIES TOP-LINE GROWTH COST SAVINGS EPS GROWTH GROWTH PILLARS INNOVATION INVESTMENTS COST SAVINGS ACQUISITIONS REVENUE CONSUMER CONNECTED DIGITAL CAPABILITIES INNOVATION ANALYTICS GROWTH INSIGHTS COMMERCE MARKETING MGMT 54
Slide 55: $450M Total Annual Synergies & Cost Reductions by FY20
$450M Total Annual Synergies & Cost Reductions by FY20 55
Slide 56: Fiscal 2018 Incremental Cost Savings
Fiscal 2018 Incremental Cost Savings ACHIEVED $40M PET FOOD ACQUISITION SYNERGIES ON TRACK $140M $100M COST MANAGEMENT PROGRAM 56
Slide 57: K-Cup Growth
K-Cup Growth ® +2% +21% +44% LAUNCHING Q3 NET SALES Q3 NET SALES Q3 NET SALES SOON Capitalizing on benefit of new K-Cup agreement ® Note: Represents U.S. Retail Coffee Segment 57
Slide 58: Zero-Based Budgeting Program
Zero-Based Budgeting Program $50 million cost savings over next two years 58
Slide 59: Strategic Roadmap
Strategic Roadmap KEY FINANCIAL PRIORITIES TOP-LINE GROWTH COST SAVINGS EPS GROWTH GROWTH PILLARS INNOVATION INVESTMENTS COST SAVINGS ACQUISITIONS REVENUE CONSUMER CONNECTED DIGITAL CAPABILITIES INNOVATION ANALYTICS GROWTH INSIGHTS COMMERCE MARKETING MGMT 59
Slide 60: Areas of M&A Interest
Areas of M&A Interest Categories and on-trend brands that provide synergistic growth opportunities COFFEE PET FOOD SNACKS NATURAL & ORGANIC 60
Slide 61: Financial Update
Financial Update THIRD QUARTER CAPITAL TAX REFORM FY19 EPS RECAP & FULL DEPLOYMENT & IMPACT KEY DRIVERS YEAR OUTLOOK FREE CASH FLOW 61
Slide 62: Fiscal 2019 Key Drivers
Fiscal 2019 Key Drivers INCOME TAX REFORM COST SAVINGS INCREASED MARKETING FREIGHT COSTS Expect to deliver adjusted EPS growth above our long-term target of 8% 62
Slide 63: Cash Deployment Strategy
Cash Deployment Strategy RETURN TO INVESTORS DIVIDENDS & CAPITAL SHARE EXPENDITURES REINVESTMENT REPURCHASE ▪ Expect to maintain dividend payout ratio in FY19 ▪ CapEx will be slightly STRATEGIC DEBT elevated in FY19 PROJECTS REPAYMENT 63
Slide 64: Capital Expenditures
Capital Expenditures $325M - $350M $310M $248M $201M $192M 3-YR HISTORICAL AVERAGE: CAPEX: $213M % OF NET SALES: 3.2% FY15 FY16 FY17 FY18E FY19E 64
Slide 65: Strategic Roadmap
Strategic Roadmap KEY FINANCIAL PRIORITIES TOP-LINE GROWTH COST SAVINGS EPS GROWTH GROWTH PILLARS INNOVATION INVESTMENTS COST SAVINGS ACQUISITIONS REVENUE CONSUMER CONNECTED DIGITAL CAPABILITIES INNOVATION ANALYTICS GROWTH INSIGHTS COMMERCE MARKETING MGMT 65
Slide 66: The J.M. Smucker Company
The J.M. Smucker Company CONSUMER ANALYST GROUP OF NEW YORK CONFERENCE February 21, 2018
Slide 67: Forward-Looking Statements
Forward-Looking Statements This presentation contains forward-looking statements, such as projected net sales, operating results, earnings, and cash flows that are subject to risks and uncertainties that could cause actual results to differ materially from future results expressed or implied by thos
Slide 68: Non-GAAP Measures
Non-GAAP Measures The Company uses non-GAAP financial measures, including: net sales excluding foreign currency exchange; adjusted gross profit, operating income, income, and earnings per share; earnings before interest, taxes, depreciation, amortization, and impairment charges related to intangible
Slide 69: Non-GAAP Reconciliation
Non-GAAP Reconciliation ($ in millions) Three Months Ended January 31, 2018 2017 Gross profit reconciliation: Gross profit $ 728.5 $ 722.9 Unallocated derivative losses (gains) 0.7 (0.8) Cost of products sold – special project costs 2.3 0.5 Adjusted gross profit $ 731.5 $ 722.6 Operating income reco
Slide 70: Non-GAAP Reconciliation
Non-GAAP Reconciliation Three Months Ended January 31, ($ and shares in millions, except per share data) 2018 2017 Net income reconciliation: Net income $ 831.3 $ 134.6 Income tax expense (benefit) (715.3) 63.0 Amortization 51.6 51.7 Impairment charges 176.9 75.7 Unallocated derivative losses (gains
Slide 71: Non-GAAP Reconciliation
Non-GAAP Reconciliation Company Guidance Year Ending April 30, 2018 ($ in millions, except per share data) Low High Net income per common share – assuming dilution reconciliation: Net income per common share – assuming dilution $ 11.78 $ 11.88 Special project costs 0.41 0.41 Amortization 1.27 1.27 I
Slide 72: Additional Information
Additional Information The Company is the owner of all trademarks and logos referenced herein, except for the following, which are used under license: Pillsbury ® is a trademark of The Pillsbury Company, LLC, and Dunkin' Donuts ® is a registered trademark of DD IP Holder LLC. The Numi trademark and
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