The J.m. Smucker Company · NYSE:SJM
The J.m. Smucker — 2019 Barclays Global Consumer Staples Conference
59 slides from The J.m. Smucker's conference presentation, Sep 3, 2019
Slide 1: Barclays Global Consumer Staples Conference 2019
2019 BARCLAYS GLOBAL CONSUMER STAPLES CONFERENCE
Slide 2: Business & Strategy Update
BUSINESS & STRATEGY UPDATE Mark Smucker President and Chief Executive Officer
Slide 3: Agenda
Agenda BUSINESS & Mark Smucker STRATEGY UPDATE PRESIDENT AND CHIEF EXECUTIVE OFFICER MARKETING & Geoff Tanner INNOVATION UPDATE SENIOR VICE PRESIDENT, GROWTH AND CONSUMER ENGAGEMENT Mark Belgya FINANCIAL UPDATE VICE CHAIR AND CHIEF FINANCIAL OFFICER 3
Slide 4: 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
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Slide 6: Generating Momentum in FY20
Generating Momentum in FY20 NUTRISH® PEANUT BUTTER UNCRUSTABLES® NEW ADVERTISING 6
Slide 7: Financial Discipline for FY20
Financial Discipline for FY20 REPRIORITIZE CERTAIN PROJECTS REDUCE DISCRETIONARY EXPENSES ACCELERATE SYNERGIES 7
Slide 8: Strategic Growth Imperatives
STRATEGIC GROWTH IMPERATIVES LEAD IN THE BEST BUILD BRANDS CATEGORIES CONSUMERS LOVE BE EVERYWHERE
Slide 9: Strategic Growth Imperatives
STRATEGIC GROWTH IMPERATIVES LEAD IN THE BEST BUILD BRANDS CATEGORIES CONSUMERS LOVE BE EVERYWHERE
Slide 10: Lead in the Best Categories
Lead in the Best Categories FY19 PROFORMA NET SALES RESHAPED PORTFOLIO TOTAL ADDRESSABLE MARKET +25% PET FOOD & COFFEE PET SNACKS VERSUS 5 YEARS AGO PEANUT BUTTER OTHER 80% FRUIT OF U.S. RETAIL PORTFOLIO FROZEN SPREADS SHORTENING & IN GROWING CATEGORIES HANDHELD OILS Source: Smucker Internal Multi-O
Slide 11: 70% of Net Sales from #1 or #2 Branded Positions
CATEGORIES WHERE WE HOLD #1 OR #2 BRANDED POSITIONS CONTRIBUTE 70% OF NET SALES Source: Smucker Internal Multi-Outlet Share Report 52 weeks ended August 11, 2019
Slide 12: Strong Portfolio of Brands
Strong Portfolio of Brands #1 #2 #3 MARKET POSITION MARKET POSITION MARKET POSITION DOG SNACKS CAT FOOD DOG FOOD Source: Smucker Internal Multi-Outlet Share Report 52 weeks ended August 11, 2019 12
Slide 13: Total Retail Sales
TOTAL RETAIL SALES +MSD Source: Smucker Internal Multi-Outlet 13 weeks ended August 11, 2019 and Pet Specialty Share Report 3 months ended June 30, 2019 13
Slide 14: Growth Through Targeted Actions
GROWTH THROUGH TARGETED ACTIONS NEW ENHANCE EXPAND INTO LAUNCH MARKETING INCREASE CONSUMER NEW NEW CAMPAIGNS DISTRIBUTION VALUE CHANNELS INNOVATION 14
Slide 15: Nutrish SuperMedleys
Nutrish® SuperMedleys SPECIALLY FORMULATED BLENDS OF REAL SUPERFOODS WELLNESS BLEND VITALITY BLEND CHICKEN WITH SALMON & BEEF WITH BARLEY & SUPERFOODS RECIPE SUPERFOODS RECIPE …FOR YOUR DOG'S TOTAL, …FOR YOUR DOG’S EVERYDAY WELLNESS VITALITY THROUGHOUT LIFE DIGESTION IMMUNITY DIGESTION MENTAL ACUITY
Slide 16: Our Leading Coffee Brands
Our Leading Coffee Brands #1 25% SHARE OF 16% SHARE AT-HOME COFFEE #3 7% SHARE 11% YoY GROWTH Source: Smucker Internal Multi-Outlet Share Report 52 weeks ended August 11, 2019 16
Slide 17: U.S. Retail Coffee
U.S. Retail Coffee FY19 SALES INSTANT +3% PREMIUM +8% MAINSTREAM LONG-TERM TARGETS (3%) +2% 30%+ ONE CUP +8% NET SALES GROWTH SEGMENT PROFIT +2% YoY 17
Slide 18: Strategic Growth Imperatives
STRATEGIC GROWTH IMPERATIVES LEAD IN THE BEST BUILD BRANDS BE EVERYWHERE CATEGORIES CONSUMERS LOVE
Slide 19: E-Commerce Channel
E-Commerce Channel 5% OF U.S. RETAIL NET SALES IN FY20 19
Slide 20: Away From Home Business
Away From Home Business RESTAURANTS & SCHOOLS HOSPITALS LODGING 20
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Slide 22: Marketing & Innovation Update
MARKETING & INNOVATION UPDATE Geoff Tanner Senior Vice President, Growth and Consumer Engagement
Slide 23: New Market Reality
New Market Reality CHANGING MEDIA E-COMMERCE CONSUMER FRAGMENTATION + LOCK-IN EFFECT PREFERENCES BRANDS CONSUMERS LOVE AVAILABLE WHERE THEY SHOP 23
Slide 24: Big Brands Can Thrive
Big Brands Can Thrive CONSUMER PRODUCTS NORTH AMERICA 60% BIG BRANDS PERFORM BIG BRAND LOYALTY JUST AS WELL ACROSS HAS NOT CHANGED, ALL AGE GROUPS OF BIG BRANDS REMAINS HIGHER BIG BRANDS ARE GROWING SALES INCOME IS A BETTER ARE WINNING ONLINE THAN SMALL BRANDS PREDICTOR OF BRAND PERFORMANCE Professo
Slide 25: Strategic Growth Imperatives
STRATEGIC GROWTH IMPERATIVES LEAD IN THE BEST BUILD BRANDS CATEGORIES CONSUMERS LOVE BE EVERYWHERE WORLD-CLASS BREAKTHROUGH INNOVATION MARKETING
Slide 26: Innovation
INNOVATION
Slide 27: Innovation Results
Innovation Results FY19 +$200M NET SALES HIGHLY INCREMENTAL FY20 STRONG MOMENTUM 27
Slide 28: Robust Pipeline
Robust Pipeline TARGET $200M+ NET SALES ANNUALLY 28
Slide 29: Marketing
MARKETING
Slide 30: Total Portfolio Impact
Total Portfolio Impact ACCELERATE REVITALIZE FUEL INNOVATION CORE BRANDS GROWTH BRANDS 30
Slide 31: Where We Were
Where We Were BRANDS CREATIVE NOT FRAGMENTED LOSING REACH LESS RELEVANT BREAKTHROUGH + SLOW + HOUSEHOLD WITH YOUNGER PENETRATION CONSUMERS 31
Slide 32: New Marketing Model
New Marketing Model Breakthrough Optimize Agile 1. 2. 3. Creative Reach Model Creative drives 50-70% of the return on advertising 32
Slide 33: Revitalizing A Core Brand
Revitalizing A Core Brand 33
Slide 34: Jif Video Playing
JIF VIDEO PLAYING
Slide 35: Fueling A Growth Brand
f GA Growth Mg: TOV ie a i MES fs e
Slide 36: Bustelo Video Playing
BUSTELO VIDEO PLAYING
Slide 37: Transformative Campaigns for 11 Brands
Transformative Campaigns for 11 Brands 20+ NEW TV SPOTS + >100 DIGITAL/BITE-SIZED PIECES OF CONTENT 37
Slide 38: Reinvesting Efficiency Savings
Reinvesting Efficiency Savings FY20 MARKETING SPEND 6.5%-7% ~FLAT OF SALES VS. FY19 $60M REINVESTED TO EXPAND REACH NON-WORKING WORKING EFFICIENCY $25M $35M • AGENCY FEES • NEW MEDIA GUIDELINES • RESEARCH • LOWER MEDIA RATES SAVINGS SAVINGS • ORGANIZATION • REACH-BASED PRINCIPLES 38
Slide 39: Reaching New Consumers
Reaching New Consumers YOUNGER MODERN CULTURALLY ADULTS PROGRAMMING RELEVANT 39
Slide 40: Strategic Growth Imperatives
STRATEGIC GROWTH IMPERATIVES LEAD IN THE BEST BUILD BRANDS CATEGORIES CONSUMERS LOVE BE EVERYWHERE WORLD-CLASS BREAKTHROUGH INNOVATION MARKETING E-COMMERCE
Slide 41: Financial Update
FINANCIAL UPDATE Mark Belgya Vice Chair and Chief Financial Officer
Slide 42: Full-Year Fiscal 2020 Outlook
Full-Year Fiscal 2020 Outlook NET SALES (1%) - 0% ADJUSTED EPS $8.35 - $8.55 FREE CASH FLOW $875M - $925M CAPITAL EXPENDITURES $300M - $320M EFFECTIVE TAX RATE 24.5% - 25.0% Q2 NET SALES EXPECTED TO DECLINE 1% COMPARED TO THE PRIOR YEAR 42
Slide 43: Fiscal 2020
Fiscal 2020 REDUCE DISCRETIONARY ACCELERATE SYNERGY EXPENSES CAPTURE EVALUATE NON-WORKING OPTIMIZE TRANSPORTATION MARKETING NETWORK PRIORITIZE PROJECTS WITH IMPROVE WORKING CAPITAL HIGHEST RETURNS 43
Slide 44: Fiscal 2020 Outlook
Fiscal 2020 Outlook FY20E GROSS MARGIN 38.5% FY20E SD&A EXPENSES YoY Decline 44
Slide 45: Financial Discipline
Financial Discipline CONSISTENT EARNINGS GROWTH SUSTAINABLE LONG-TERM INCREASE FREE CASH FLOW GROWTH BALANCED CAPITAL ALLOCATION INCREASE SHAREHOLDER VALUE IMPROVE RETURN ON INVESTED CAPITAL 45
Slide 46: Full-Year Fiscal 2020 Cash Deployment
Full-Year Fiscal 2020 Cash Deployment CASH FROM CAPEX OPERATIONS $300M - $320M $1.1B - $1.2B FREE CASH FLOW $875M - $925M DIVIDENDS DEBT REPAYMENT $400M $500M 46
Slide 47: Projected Leverage
Projected Leverage DEBT REDUCTION ADDS 1% ANNUAL EARNINGS GROWTH 4.1X 3.6X DEBT REPAYMENTS 3X $900M OVER LAST 12 MONTHS 1Q19 1Q20 FY21E 47
Slide 48: Balanced Capital Deployment
Balanced Capital Deployment RETURNING CASH TO INVESTING IN GROWTH SHAREHOLDERS SHARE CAPITAL STRATEGIC REPURCHASES & EXPENDITURES ACTIONS DIVIDENDS DEBT REPAYMENT 48
Slide 49: Returning Cash to Shareholders
Returning Cash to Shareholders $4.00 $3.50 10% $3.00 $2.50 10-YEAR CAGR $2.00 40% $1.50 $1.00 PAYOUT RATIO $0.50 TARGET $0.00 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20E 49
Slide 50: Focus On Increasing ROIC
Focus On Increasing ROIC NEW INCENTIVE COMPENSATION PROGRAM EFFECTIVE FISCAL 2020 50
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Slide 52: Barclays Global Consumer Staples Conference 2019
2019 BARCLAYS GLOBAL CONSUMER STAPLES CONFERENCE
Slide 53: Forward-Looking Statements
Forward-Looking Statements This presentation contains forward-looking statements, such as projected net sales, operating results, earnings, and cash flows that are subject to risks and uncertainties that could cause actual results to differ materially from future results expressed or implied by thos
Slide 54: Non-GAAP Financial Measures
Non-GAAP Financial Measures The Company uses non-GAAP financial measures, including: net sales excluding acquisition, divestiture, and foreign currency exchange; adjusted gross profit; adjusted operating income; adjusted income; adjusted earnings per share; earnings before interest, taxes, depreciat
Slide 55: Non-GAAP Reconciliation
Non-GAAP Reconciliation ($ in millions) Three Months Ended TTM Ended October 31, January 31, April 30, July 31, July 31, 2017 2018 2018 2018 2018 EBITDA (as adjusted) reconciliation: Net income $ 194.6 $ 831.3 $ 185.9 $ 133.0 $ 1,344.8 Income tax expense 97.2 (715.3) 78.3 40.1 (499.7) (benefit) Inte
Slide 56: Non-GAAP Reconciliation
Non-GAAP Reconciliation ($ in millions) Three Months Ended TTM Ended October 31, January 31, April 30, July 31, July 31, 2018 2019 2019 2019 2019 EBITDA (as adjusted) reconciliation: Net income $ 188.5 $ 121.4 $ 71.5 $ 154.6 $536.0 Income tax expense 80.9 35.8 30.4 52.1 199.2 Interest expense - net
Slide 57: Non-GAAP Reconciliation
Non-GAAP Reconciliation Company Guidance Year Ending April 30, 2020 ($ in millions, except per share data) Low High Net income per common share – assuming dilution reconciliation: Net income per common share – assuming dilution $ 7.01 $ 7.21 Net cumulative unallocated (losses) gains (0.35) (0.35) Sp
Slide 58: 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: Dunkin' Donuts® is a registered trademark of DD IP Holder LLC, and Rachael Ray® is a registered trademark of Ray Marks Co. LLC. The following tradema
Slide 59: Thank You
2019 BARCLAYS GLOBAL CONSUMER STAPLES CONFERENCE
The J.M. Smucker Company — 2019 Barclays Global Consumer Staples Conference on 6ix