The Campbell's Company · NASDAQ:CPB
The Campbell's — Campbell Soup — Proxy Contest (October 2018)
72 slides from The Campbell's's proxy contest presentation, Oct 30, 2018
Slide 1: #RefreshTheRecipe October 2018
#RefreshTheRecipe OCTOBER 2018
Slide 2: Disclaimer
The information in this presentation is for information purposes only, and this presentation does not constitute an offer to purchase or sell any security or investment product, nor does it constitute professional advice. The information in this presentation is based on publicly available informatio
Slide 3: Table of Contents
Overview Case for Change Independent Slate Operating Plan Biographies TABLE OF CONTENTS
Slide 4: Overview
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Slide 5: Proven Track Record
Proven Track Record Since inception in 1995, the Firm has generated average net annualized returns of 18% compared to the CS Event Driven Index, HFRI Event Driven Index, and S&P 500 returns of 8%, 9%, and 10%, respectively, over the same period Third Point has made over 40 active investments and has
Slide 6: Incumbent Board has overseen strategic and operational blunders
Campbell’s incumbent Board of Directors (“Board”) has overseen a series of strategic and operational blunders over many years that have driven extreme underperformance in Campbell shares over any relevant period of time, e.g., 20 years (19% total shareholder return vs. 306% for S&P 500), 10 years, 5
Slide 7: Operating Plan: Independent Slate brings credible plan
Hire a world-class CEO and recruit/promote new senior leaders with fresh perspectives; reenergize the culture around shared values and goals Return soup business to growth by improving innovation, optimizing pricing, and repairing key customer relationships Execute on “self-help” opportunities by ca
Slide 8: Case for Change
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Slide 9: Campbell Overview
CAMPBELL OVERVIEW Packaged food business focused on snacks, soup, simple meals, and beverages Approximately $10b in sales (including Snyder’s-Lance) Note: Campbell market cap approximately $11 billion and enterprise value approximately $21 billion as of 9.28.18 Source: Third Point LLC; Company Mater
Slide 10: Total Shareholder Return
TOTAL SHAREHOLDER RETURN Campbell’s incumbent Board has failed to create enduring value for shareholders Note: Total shareholder return includes dividends; data from 9.28.98 to 9.28.18 Source: Third Point LLC; Bloomberg Campbell has dramatically underperformed the S&P 500 and key US packaged food pe
Slide 11: Total Shareholder Return 10YR, 5YR, 3YR, 1YR
TOTAL SHAREHOLDER RETURN Campbell has also significantly underperformed on a 10YR, 5YR, 3YR, and 1YR basis Note: Total shareholder return includes dividends; data from 9.26.08 (10YR), 9.27.13 (5YR), 9.28.15 (3YR), 9.28.17 (1YR) to 9.28.18 (all charts) Source: Third Point LLC; Bloomberg
Slide 12: Campbell Today
CAMPBELL TODAY The past year has been particularly disastrous Losing market share across categories as core business significantly underperforms Earnings in rapid decline given sales weakness and substantial margin pressure Execution issues already plaguing highly complex integration with Snyder’s-L
Slide 13: How Did We Get Here?
HOW DID WE GET HERE? Incumbent Board has consistently failed Campbell shareholders Note: Campbell’s “everything is on the table” comment from fiscal 3q18 earnings call (5.18.18) Source: Third Point LLC; Company Materials; Bloomberg Failed to execute on corporate strategy Completely botched acquisiti
Slide 14: How Did We Get Here? Asleep at the switch
HOW DID WE GET HERE? Incumbent Board was “asleep at the switch” as a series of strategic and operational blunders were made Note: Campbell’s comment from fiscal 4q18 earnings call (8.30.18) Source: Emphasis from Third Point LLC; Company Materials Campbell Board member & interim CEO Keith McLoughlin
Slide 15: Corporate Strategy
CORPORATE STRATEGY Campbell has spent over $8 billion on acquisitions since 2012, taking leverage to over 5x, as it acquired a hodgepodge of assets with seemingly little strategic logic Independent Slate wonders if incumbent Board merely “rubber stamped” these acquisitions without conducting proper
Slide 16: Corporate Strategy: Fresh Food
CORPORATE STRATEGY — FRESH FOOD Campbell’s move into fresh food with $1.55 billion deal for Bolthouse Farms has been a disaster and has already led to nearly $1 billion in impairment charges Bolthouse Farms deal marred by countless executional issues Fresh food segment now loss-making, despite contr
Slide 17: Corporate Strategy: Small Deals
CORPORATE STRATEGY — SMALL DEALS Other deals like Garden Fresh Gourmet (salsa) and Plum Organics (baby food) have not worked Garden Fresh Gourmet Plum Organics Note: Comments from FY18 10-K; $64 million impairment charge part of $972 million taken against fresh food Source: Third Point LLC; Company
Slide 18: Corporate Strategy: Venture Bets
CORPORATE STRATEGY — VENTURE BETS Campbell also blew shareholder money on speculative investments in businesses like (now defunct) Juicero Note: Campbell invested $13.5 million in Juicero per press release (October 2016) Source: Third Point LLC; Company Materials; Google Images; Engadget, The Guardi
Slide 19: Corporate Strategy: Soup
CORPORATE STRATEGY — SOUP As Campbell busied itself with lousy deals, core soup business lost relevance with consumers and fell into significant decline Campbell allowed its brand equity to deteriorate Sales declines have accelerated with most recent quarter down a shocking 14% Note: Campbell’s comm
Slide 20: Corporate Strategy: Soup and Pacific Foods
CORPORATE STRATEGY — SOUP After missing trends in core soup business, Campbell paid up for Pacific Foods Campbell missed key shift in consumer preferences in soup (despite dominating category) Natural and organic ingredients Contemporary packaging (e.g. resealable box vs. traditional can) Failure to
Slide 21: Corporate Strategy: Soup retail channel
CORPORATE STRATEGY — SOUP Campbell also mismanaged the retail channel, driving large market share losses Self-inflicted problems in the retail channel Campbell losing share to branded AND private label competitors Note: Campbell’s comment from fiscal 4q18 earnings call (8.30.18); Last 52wks through
Slide 22: Corporate Strategy: Snacks
CORPORATE STRATEGY — SNACKS With fresh food and soup under pressure, Campbell doubled down on snacks in an expensive “bet the company” transaction that brings significant financial and operational risks Acquired Snyder’s-Lance, a US snacks business, in March 2018 High purchase price ($6 billion, nea
Slide 23: Corporate Strategy: Snyder's-Lance off to a poor start
CORPORATE STRATEGY — SNACKS Snyder’s-Lance deal already off to a poor start Campbell lowered accretion guidance twice in the first six months after deal announcement Sales in measured channels have deteriorated since the acquisition and are now declining Note: IRI scanner data through 8.26.18; deal
Slide 24: Corporate Strategy: Earnings
CORPORATE STRATEGY — EARNINGS Strategic and operational blunders have tanked sales, operating profit, and earnings Campbell’s most recent quarter was disastrous… …and inspires little hope for the future Note: Campbell guided FY19 Adj. EPS to $2.45-2.53 before divestitures vs. FY18 Adj. EPS of $2.87
Slide 25: Corporate Strategy: Earnings, further negative update
CORPORATE STRATEGY — EARNINGS Less than a month after giving terrible FY19 guidance, Campbell gave investors another negative update Campbell, in its FY18 10-K, disclosed that “cost increases, shipment delays, and weather-related issues” would have a “negative impact” on fiscal 1q19 In follow up con
Slide 26: Corporate Strategy: Execution issues, out of stocks
CORPORATE STRATEGY — EARNINGS Execution issues seem to be getting worse, creating further risk to FY19 earnings Note: Photo taken in late October 2018 at Giant Eagle store in Pittsburgh Source: Third Point LLC Channel checks show LONG TERM out of stocks across wide range of key grocery products Inde
Slide 27: Return on Invested Capital
RETURN ON INVESTED CAPITAL Poor capital allocation and declines in the core business combined have weighed on returns Note: Return on Invested Capital defined as Adj. EBIT (per Company) less 25% tax rate (per Company FY19 guidance), divided by average invested capital (per Bloomberg); same tax rate
Slide 28: Lack of Accountability
LACK OF ACCOUNTABILITY Incumbent Board failed to hold CEO accountable Incumbent Board claims to maintain a “strong alignment between corporate performance and compensation” However, same Board lavished fellow board member Denise Morrison with over $60 million in total compensation during her tenure
Slide 29: Lack of Leadership
LACK OF LEADERSHIP Incumbent Board also failed to plan for succession, leaving Campbell without a permanent CEO at a crucial juncture in its history Denise Morrison (CEO since August 2011) abruptly left as the Company reported disastrous fiscal 3q18 earnings and lowered forward guidance Despite year
Slide 30: Strategic Review
STRATEGIC REVIEW Incumbent Board had an opportunity to take bold action during the strategic review process, but instead largely recommitted to the failing status quo Campbell concluded its strategic review by announcing plans to divest its fresh foods and global snacks businesses (collectively wort
Slide 31: Analyst Perspective
ANALYST PERSPECTIVE After failed strategic review, leading sell-side analysts see need for greater change Note: Emphasis from Third Point; quotations from Goldman Sachs report “Fundamentals deteriorate and turnaround plans are still lacking” (8.30.18), Consumer Edge Research report “Q4 Follow up – N
Slide 32: Analyst Perspective: ratings and price targets
Bank Rating Price Target SELL $36 SELL $35 SELL $33 SELL $33 SELL $31 SELL $31 ANALYST PERSPECTIVE Absent greater change, analysts see little hope for Campbell shares (under current leadership) Sell-side analysts more bearish on Campbell than they are on other US packaged food peers… …and leading ba
Slide 33: Employee Perspective
EMPLOYEE PERSPECTIVE Employees also see little hope for Campbell (under current leadership) Note: Data as of 10.25.18 Source: Third Point LLC; Glassdoor Morale inside the company has tanked… …and employees have limited faith in the CEO Keith McLoughlin appointed CEO Strategic review concludes
Slide 34: Governance Failures
GOVERNANCE FAILURES Incumbent Board trying to hide its corporate governance failures and mislead shareholders Dorrance family qualifications & conflicts: Materials avoid details about relevant experience and business acumen of billionaire sibling heirs Mary Alice & Bennett Dorrance, merely citing “e
Slide 35: Governance Failures: creeping take-over
GOVERNANCE FAILURES Incumbent Board enabled the “creeping take-over” of Campbell by Mary Alice & Bennett Dorrance, even as they sold shares Billionaire heirs effectively handed blocking rights through Board-sponsored share buybacks Incumbent Board failed to protect ALL shareholders Note: Numbers rou
Slide 36: Time for Change
TIME FOR CHANGE Incumbent Board offering shareholders and employees more of the same; new leadership required to fix Campbell Incumbent Board has overseen a series of strategic and operational blunders that have placed the company in a precarious situation Incumbent Board now asking shareholders to
Slide 37: The Independent Slate
THE INDEPENDENT SLATE
Slide 38: Independent Slate
Munib Islam (Third Point) Matthew Cohen (Third Point) Michael J. Silverstein (Boston Consulting Group, Author) Franci Blassberg (Debevoise & Plimpton) Sarah Hofstetter (360i, Kayak Communications) Lawrence C. Karlson (former Campbell Board member) Bozoma Saint John (Endeavor, Uber, Apple, Pepsi) Kur
Slide 39: Independent Slate: experience and skills
INDEPENDENT SLATE Independent Slate has the experience and skills to ensure a smooth transition and help create a better path forward Strawbridge is a Dorrance family member and large Campbell shareholder Strawbridge and Karlson both previously served on Campbell’s Board Silcock and Toler both held
Slide 40: Independent Slate: skills and experience
INDEPENDENT SLATE Independent Slate brings a wide range of skills and experience to the table Source: Third Point LLC
Slide 41: Operating Plan
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Slide 42: Independent Slate will pursue optimal outcomes for all shareholders
INDEPENDENT SLATE Independent Slate will pursue optimal outcomes for ALL shareholders Will bring objective mindset; remain open to all options, unwedded to historical mistakes and failures Will make evidence-based decisions, unclouded by anecdotes, biases, and emotions Will NOT prioritize interests
Slide 43: 100-Day Plan
Source: Third Point LLC; Google Images 100-DAY PLAN Independent Slate ready to hit the ground running Reassure all employees that we are here to help restore an American icon Listen to key stakeholders and learn Evaluate recent strategic review and proposed asset divestitures Recruit world-class per
Slide 44: Blueprint for Action: Days 0-30
Org health: Reassure employees of intention to improve the company, help restore an American icon Host town-hall meetings to reaffirm belief in the people, the brands, and the market opportunities Go on a “listening tour” to deepen understanding of challenges facing the organization CEO search: Begi
Slide 45: Blueprint for Action: Days 30-60
CEO search: Hire world-class permanent CEO Management: Work with new CEO to evaluate senior leaders and determine how to build optimal management team (retain, add, or replace) Compensation: Evaluate reward and recognition systems Org Health: Reaffirm commitment to strengthening internal talent pipe
Slide 46: Blueprint for Action: Days 60-100
Org health: Boost morale and reenergize corporate culture around shared values and goals Management: Recruit new senior leadership talent to fill key gaps Compensation: Set key performance indicators (KPIs) and establish incentive compensation plans to better align pay with performance Governance: H
Slide 47: Vision for Future
VISION FOR FUTURE Independent Slate sees a path towards a future where the iconic Campbell brand is restored, as is shareholder confidence in the company… TO FROM Refreshed, modern products that resonate with today’s consumers Core products that seem tired and out-of-date Fully integrated deals that
Slide 48: Value Creation
VALUE CREATION Independent Slate sees many levers to create value Sales Innovation Pricing and promotions Demand generation E-commerce and digital Bolt-on acquisitions COGS Trade spending and promotions SKU rationalization Procurement savings Manufacturing footprint optimization SG&A Integration of
Slide 49: Soup - Innovation
SOUP – INNOVATION Independent Slate sees opportunity to “refresh” core legacy products (packaging, flavors, ingredients) Campbell Beef Noodle Soup recipe Ingredients: Beef Stock, Seasoned Beef (Contains Up To 10% Of A Solution Of Water, Salt, Sodium Phosphate), Mushrooms, Modified Food Starch, Conta
Slide 50: Soup - Innovation in the core
Note: IRI data through 9.23.18; numbers rounded Source: Third Point LLC; IRI; Company Materials SOUP – INNOVATION Independent Slate sees opportunity to incorporate greater innovation into the core (where it matters most) Slow Kettle Well Yes! Home Style On The Go Core Campbell’s and Chunky brands st
Slide 51: Soup - Innovation: Conagra's frozen playbook
SOUP – INNOVATION Independent Slate sees opportunity to adapt Conagra’s “frozen playbook” and better incorporate relevant innovation into core legacy products Note: Nielsen data through 9.8.18 Source: Third Point LLC; Nielsen; Conagra Company Materials Conagra’s “frozen playbook” provides roadmap to
Slide 52: Soup - Pricing
SOUP – PRICING Independent Slate sees opportunity to optimize pricing to stem market share losses Note: Price gap analysis from Morgan Stanley based on Nielsen data; Market share data (last 52wks) through 7.29.18 (per Campbell fiscal 4q18 public presentation) Source: Third Point LLC; Morgan Stanley;
Slide 53: Cost Savings
Note: Achieved savings through fiscal 4q18 Source: Third Point LLC; Company Materials COST SAVINGS Independent Slate sees opportunity to execute on Campbell’s in-flight cost savings program Streamline organization Expand ongoing zero-based budgeting work Optimize existing manufacturing network Drive
Slide 54: Deal Synergies
Note: Synergies include savings from legacy Snyder’s-Lance savings program; achieved synergies through fiscal 4q18 Source: Third Point LLC; Company Materials DEAL SYNERGIES Independent Slate sees opportunity to capture announced Snyder’s-Lance deal synergies Distribution and warehouse efficiencies M
Slide 55: Snacks
SNACKS Independent Slate sees opportunity to participate in growth of (attractive) snacks category Note: IRI data through 9.23.18 Source: Third Point LLC; IRI; Company Materials Operate in major category segments like crackers, pretzels, and cookies Opportunity to participate in category premiumizat
Slide 56: Other Value Drivers
OTHER VALUE DRIVERS Independent Slate sees opportunity to drive additional value across the business Source: Third Point LLC; Company Materials Bring Pop Secret (microwavable popcorn) into fast growing ready-to-eat popcorn category Acquire smaller, better-for-you snacking brands Explore divestitures
Slide 57: Earnings Power
Note: Assumes 75% of remaining legacy cost savings ($230m) and remaining deal synergies ($260m) achieved beyond FY19 Source: Third Point LLC; Company Materials EARNINGS POWER Independent Slate sees opportunity to significantly increase earnings power under new leadership Base EBITDA: FY19E EBITDA ba
Slide 58: Price Target
Source: Third Point LLC; Company Materials; Bloomberg PRICE TARGET Independent Slate sees opportunity to create significant shareholder value under new leadership Only under new leadership can Campbell (1) improve core soup, (2) reliably grow snacks, and (3) successfully execute on in-flight savings
Slide 59: Biographies
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Slide 60: Franci Blassberg
FRANCI BLASSBERG FRANCI BLASSBERG Of Counsel at Debevoise & Plimpton LLP Ms. Franci Blassberg has been Of Counsel at Debevoise & Plimpton LLP since 2013 and served as a partner from 1985 until 2012. She spent her career advising clients in setting legal strategy, negotiating complex transactions and
Slide 61: Matthew Cohen
MATTHEW COHEN MATTHEW COHEN Managing Director, Third Point Matthew Cohen is a Managing Director and Head of Consumer investments at Third Point. He joined the firm in 2008 and now oversees the fund’s efforts across the global consumer sector. Over the years, he has led successful investments in many
Slide 62: Sarah Hofstetter
SARAH HOFSTETTER SARAH HOFSTETTER President of ComScore, Inc. (effective October 4, 2018) Ms. Sarah Hofstetter will become President of ComScore, Inc., effective October 4, 2018, a global information and analytics company that measures consumer audiences and advertising across media platforms. Effec
Slide 63: Munib Islam
MUNIB ISLAM MUNIB ISLAM Partner, Third Point Munib Islam is a Partner at Third Point where he leads the firm’s efforts in global equity research and investing. He also sits on the firm’s Risk Committee. Munib worked at Third Point from 2004-2008 and rejoined the firm in 2011, after returning from Hi
Slide 64: Lawrence C. Karlson
LAWRENCE C. KARLSON LAWRENCE C. KARLSON Former Chairman and Chief Executive Officer of Berwind Financial Corporation Mr. Lawrence Karlson is a private investor. He has served as a member of the Advisory Board of the Berwind Corporation, a multi-billion-dollar investment company, since 1989 and curre
Slide 65: Bozoma Saint John
BOZOMA SAINT JOHN BOZOMA SAINT JOHN Chief Marketing Officer of Endeavor Co. Ms. Bozoma Saint John has served as Chief Marketing Officer of Endeavor Co. since June 11, 2018. Prior to joining Endeavor Co., Ms. Saint John served as Chief Brand Officer of Uber Technologies Inc., an on-demand car service
Slide 66: Kurt T. Schmidt
KURT T. SCHMIDT KURT T. SCHMIDT Former Director and Chief Executive Officer of Blue Buffalo Company Mr. Kurt Schmidt is currently retired and formerly served as a director and the Chief Executive Officer of Blue Buffalo Company, Ltd. (“Blue Buffalo”), a pet food company, from 2012 to December 31, 20
Slide 67: Raymond Silcock
RAYMOND SILCOCK RAYMOND SILCOCK Chief Financial Officer of International Nutrition & Wellness Holdings Mr. Raymond Silcock has been the chief financial officer of International Nutrition & Wellness Holdings, a Rosewood private investment company with a mission to partner with and acquire companies i
Slide 68: David Silverman
DAVID SILVERMAN DAVID SILVERMAN Founder and Chief Executive Officer of CrossLead Mr. David Silverman is the Founder and Chief Executive Officer of CrossLead, Inc (“CrossLead”). CrossLead was founded in 2016 and is a technology company whose product suite is being used by top leaders and companies ar
Slide 69: Michael J. Silverstein
MICHAEL J. SILVERSTEIN MICHAEL J. SILVERSTEIN Former Operating Executive at The Carlyle Group Mr. Michael Silverstein served as an operating executive at The Carlyle Group from December of 2016 to September of 2018, where he conducted research and due diligence on possible acquisitions for the Carly
Slide 70: George Strawbridge
GEORGE STRAWBRIDGE GEORGE STRAWBRIDGE Private Investor Mr. George Strawbridge, Jr. is currently a private investor. Mr. Strawbridge was a member of the Company’s Board of Directors from 1988 until 2009. While a director of the Company, he served on various committees including the Governance Committ
Slide 71: William D. Toler
WILLIAM D. TOLER WILLIAM D. TOLER Former President and Chief Executive Officer of Hostess Brands Mr. William Toler formerly served as the President and Chief Executive Officer of Hostess Brands, Inc. (“Hostess”), a packaged food company, from 2016 until his retirement in 2018 and as a director of Ho
Slide 72: Conclusion
CONCLUSION Time to #RefreshTheRecipe and elect the Independent Slate www.RefreshCampbells.com Source: Third Point LLC * * * * IMPORTANT INFORMATION On September 28, 2018, Third Point LLC filed a definitive proxy statement and on October 1, 2018 filed Supplement No. 1 thereto and on October 9, 2018 f