Mondelez International, Inc. · NASDAQ:MDLZ
Mondelez International — Kraft Foods — CAGNY Conference 2012
76 slides from Mondelez International's conference presentation, Feb 21, 2012
Slide 1: Kraft Foods CAGNY Conference
Kraft Foods February 21, 2012 CAGNY Conference Exhibit 99.2
Slide 2: Forward-looking statements
Forward-looking statements This slide presentation contains a number of forward-looking statements. The words “believe,” “expect,” “anticipate,” “optimistic,” “intend,” “plan,” “goals,” “may,” “aim,” “will” and similar expressions are intended to identify our forward-looking statements. Examples of
Slide 3: Agenda
Agenda • Driving sustainable, top-tier growth • Building on success in North America • 2012 guidance • The path to separation
Slide 4: Irene Rosenfeld Chairman and CEO
4 Irene Rosenfeld Chairman and CEO
Slide 5: Virtuous cycle of growth is paying off
Virtuous cycle of growth is paying off Focus on Power Brands +8% in 2011 Drive Top-Tier Growth Organic Net Revenue +6.6% (1) (1) Reported Net Revenue growth was 10.5%. See GAAP to Non-GAAP reconciliation at the end of this presentation.
Slide 6: Strong growth in global snacks portfolio
Strong growth in global snacks portfolio • Global Biscuits +9% – Developing Markets up double-digits – Developed Markets up mid-single digits • Global Chocolate +6% – Developing Markets up double digits – Developed Markets up slightly • Global Gum & Candy +1% – Developing Markets up high-single digi
Slide 7: Delivering top-tier organic growth
Delivering top-tier organic growth (1) (3) 4 Kraft Foods 6.6% 7 Kraft Foods 3.1/3.2% 12 Kraft Foods 1.5% Organic Revenue Growth (Fiscal Year) * (2) (2) (2) (2) (4) (2) (2) (2) (2) (2) (2) General Mills 8.5% Danone 6.9% Danone 7.8% ConAgra 7.7% Hershey 6.1% Nestlé 7.5% Heinz 5.5% Coca-Cola 6.0% Hersh
Slide 8: Virtuous cycle of growth is paying off
Virtuous cycle of growth is paying off Focus on Power Brands +8% in 2011 Reduce Costs Productivity >4%% COGS Drive Top-Tier Growth Organic Net Revenue +6.6% (1) (1) Reported Net Revenue growth was 10.5%. See GAAP to Non-GAAP reconciliation at the end of this presentation.
Slide 9: Virtuous cycle of growth is paying off
Virtuous cycle of growth is paying off Focus on Power Brands +8% in 2011 Reduce Costs Productivity >4%% COGS Leverage Overheads % of NR down (60)bps (2) Drive Top-Tier Growth Organic Net Revenue +6.6% (1) (1) Reported Net Revenue growth was 10.5%. See GAAP to Non-GAAP reconciliation at the end of th
Slide 10: Virtuous cycle of growth is paying off
Virtuous cycle of growth is paying off Focus on Power Brands +8% in 2011 Reinvest in Growth A&C 8% of NR NPD 10%+ of NR Reduce Costs Productivity >4%% COGS Leverage Overheads % of NR down (60)bps (2) Drive Top-Tier Growth Organic Net Revenue +6.6% (1) (1) Reported Net Revenue growth was 10.5%. See G
Slide 11: Operating gains fueling EPS growth
Operating gains fueling EPS growth Diluted EPS Adjustments (1) Operating Gains (2) Other, net (3) Operating EPS (5) $2.39 $(0.37) $0.25 $0.02 $2.29 Operating EPS (5) $2.02 Non- Operating Items (4) $(0.30) Diluted EPS $1.99 +13% +10% constant FX (1) 2010 Adjustments include earnings and gain from dis
Slide 12: Delivering top-tier earnings growth
Delivering top-tier earnings growth (2) (3) 1 Kraft Foods 13.4% 4 Kraft Foods 8.0% 9 Kraft Foods 4.7% (4) (4) (4) (4) (4) (4) (4) (4) (4) (4) (4) Operating EPS Growth (1) Hershey 15.4% Hershey 17.5% General Mills 13.1% General Mills 15.6% Hershey 10.6% Heinz 10.3% ConAgra 14.5% Coca-Cola 10.0% Coca-
Slide 13: Kraft Foods Developing Markets
Kraft Foods Developing Markets Sanjay Khosla President Kraft Foods Developing Markets
Slide 14: Kraft Foods Developing Markets is driving a virtuous cycle
Kraft Foods Developing Markets is driving a virtuous cycle Focus on Power Brands +17% in 2011 (1) Reported Net Revenue growth was 16.2%. See GAAP to Non-GAAP reconciliation at the end of this presentation. Drive Top-Tier Growth Organic Net Revenue +11.2% (1)
Slide 15: 5-10-10 strategy drives revenue growth
5-10-10 strategy drives revenue growth 5 Categories 10 Power Brands 10 Priority Markets +12% India Chocolate +30% +17% +50% +35% +12% Brazil +15% To $2B+ +30% to $800M+ China
Slide 16: Kraft Foods Developing Markets is driving a virtuous cycle
Kraft Foods Developing Markets is driving a virtuous cycle Focus on Power Brands +17% in 2011 Drive Top-Tier Growth Organic Net Revenue +11.2% (1) Reduce Costs Productivity 4% COGS Leverage Overheads % of NR down (20) bps (2) (1) Reported Net Revenue growth was 16.2%. See GAAP to Non-GAAP reconcilia
Slide 17: Kraft Foods Developing Markets is driving a virtuous cycle
Kraft Foods Developing Markets is driving a virtuous cycle Focus on Power Brands +17% in 2011 Reinvest in Growth A&C 10% of NR NPD 12% of NR Drive Top-Tier Growth Organic Net Revenue +11.2% (1) Reduce Costs Productivity 4% COGS Leverage Overheads % of NR down (20) bps (2) (1) Reported Net Revenue gr
Slide 18: Developing Markets will continue to drive strong growth in 2012
Kraft Foods Developing Markets will continue to drive strong growth in 2012 • Relentless focus behind 5-10-10 strategy • Capture Cadbury synergies • Expand margins through productivity and overhead leverage
Slide 19: Kraft Foods Europe
Kraft Foods Europe Tim Cofer President Kraft Foods Europe
Slide 20: Kraft Foods Europe is driving a virtuous cycle
Kraft Foods Europe is driving a virtuous cycle Focus on Power Brands +7% in 2011 Drive Top-Tier Growth Organic Net Revenue +4.6% (1) (1) Reported Net Revenue growth was 14.9%. See GAAP to Non-GAAP reconciliation at the end of this presentation.
Slide 21: Power Brands, innovation and geographic expansion driving growth
Power Brands, innovation and geographic expansion driving growth Choco-Bakery +29% +25% +25% +18%
Slide 22: Kraft Foods Europe is driving a virtuous cycle
Kraft Foods Europe is driving a virtuous cycle Focus on Power Brands +7% in 2011 Reduce Costs Productivity >4% COGS Drive Top-Tier Growth Organic Net Revenue +4.6% (1) (1) Reported Net Revenue growth was 14.9%. See GAAP to Non-GAAP reconciliation at the end of this presentation.
Slide 23: Kraft Foods Europe is driving a virtuous cycle
Kraft Foods Europe is driving a virtuous cycle Focus on Power Brands +7% in 2011 Reduce Costs Productivity >4% COGS Drive Top-Tier Growth Organic Net Revenue +4.6% (1) Leverage Overheads % of NR down (150)bps (2) (1) Reported Net Revenue growth was 14.9%. See GAAP to Non-GAAP reconciliation at the e
Slide 24: Kraft Foods Europe is driving a virtuous cycle
Kraft Foods Europe is driving a virtuous cycle Focus on Power Brands +7% in 2011 Reinvest in Growth A&C 8% of NR NPD 12% of NR (1) Reported Net Revenue growth was 14.9%. See GAAP to Non-GAAP reconciliation at the end of this presentation. (2) Underlying overheads as a % of net revenue excludes Integ
Slide 25: Kraft Foods Europe will continue to drive a growth agenda in 2012
Kraft Foods Europe will continue to drive a growth agenda in 2012 • Top-line momentum – Distort investments towards Power Brands – Step up innovation – Excellent sales execution – Enter “white space” markets • Expand margins and fund investments through relentless cost management – Lower overheads –
Slide 26: Building on Success in North America
Building on Success in North America 26 Tony Vernon President Kraft Foods North America
Slide 27: 2011 Priorities
2011 Priorities • Revitalize our brands • Increase marketing and sales excellence • Deliver record cost savings
Slide 28: Kraft Foods North America is driving a virtuous cycle
Kraft Foods North America is driving a virtuous cycle Focus on Power Brands +4.5% in 2011 Drive Top-Tier Growth Organic Net Revenue +4.8% (1) (1) Reported Net Revenue growth was 5.1%. See GAAP to Non-GAAP reconciliation at the end of this presentation.
Slide 29: Solid market share performance in an unprecedented environment
Solid market share performance in an unprecedented environment 36% 31% 13% Source: 52-weeks ending Dec. 24, 2011. 4-outlet data, Nielsen. Percent of 2011 U.S. Retail Revenue Gaining/holding share Pricing to protect profit Outsized category growth through Innovation
Slide 30: Drove our U.S. retail categories faster than the industry
Drove our U.S. retail categories faster than the industry Total U.S. Food & Beverage Kraft Foods U.S. Categories (2.4)% (0.6)% 2011 Equivalent Units Growth Total U.S. Food & Beverage Kraft Foods U.S. Categories 2.7% 7.1% 2011 $ Growth Source: 52-weeks ending Dec. 24, 2011. 4-outlet data, Nielsen.
Slide 31: Kraft Foods North America is driving a virtuous cycle
Kraft Foods North America is driving a virtuous cycle Focus on Power Brands +4.5% in 2011 Leverage Overheads % of NR down (60)bps (2) Drive Top-Tier Growth Organic Net Revenue +4.8% (1) Reduce Costs Productivity >4% COGS (1) Reported Net Revenue growth was 5.1%. See GAAP to Non-GAAP reconciliation a
Slide 32: Focus on cost reduction is paying off
Focus on cost reduction is paying off Productivity as % of Cost of Goods Sold 4.0% 4.4% Overheads as % of Net Revenue (1) 12.0% 11.4% (1) Reflects underlying overheads as a % of net revenue, which excludes Integration Program costs, acquisition-related costs and costs associated with the proposed sp
Slide 33: Kraft Foods North America is driving a virtuous cycle
Kraft Foods North America is driving a virtuous cycle Focus on Power Brands +4.5% in 2011 Leverage Overheads % of NR down (60)bps (2) Reinvest in Growth A&C 6% of NR NPD 9% of NR Drive Top-Tier Growth Organic Net Revenue +4.8% (1) Reduce Costs Productivity 4.4% COGS (1) Reported Net Revenue growth w
Slide 34: Distorting brand building investments to Power Brands
Distorting brand building investments to Power Brands KFNA A&C as a Percentage of Net Revenues (1) (1) Pro forma for Cadbury acquisition. A&C % of net revenues for total KFNA A&C % of net revenues for KFNA Power Brands 6.2% 6.5% 6.3% 6.6% 7.2% 7.2%
Slide 35: Driving growth in our iconic brands
Driving growth in our iconic brands +12% +5% +8% +9% +6% +11% +7% +20% +44% +5%
Slide 36: Stepping up growth from new products
Stepping up growth from new products (1) Reflects percentage of net revenue derived from products introduced within the prior 3 years. (2) Reflects Kraft Foods base business only. New Product Development as % of Net Revenue 8% 9% 6.5% (1) (2)
Slide 37: 2012 environment will remain difficult
Economy Consumer Customer 2012 environment will remain difficult • Weak GDP rebound • High unemployment • Commodity costs expected to remain high / volatile • Low consumer confidence, but improving • F&B demand recovering, but remains weak • Value focus will remain; more than just low price • Rising
Slide 38: Three priorities will position both grocery and snacks businesses for success
Three priorities will position both grocery and snacks businesses for success 1. Strategically distort portfolio – Drive break-through innovation – Skew A&C investments to Power Brands – Discontinue products with low profitability
Slide 39: GE VA ALIA
GE VA ALIA bela | “ralte
Slide 40: A&C investments skewed to Power Brands will drive 2012 organic growth
A&C investments skewed to 21 Power Brands will drive 2012 organic growth • Higher-than-average gross margins • Vibrant categories • Outsized investments behind product news
Slide 41: Selective product line pruning will improve mix
Selective product line pruning will improve mix • Eliminating product lines with low profitability – 40% from North America Foodservice – 60% from other business units • Impacts organic net revenue growth – Up to 2 percentage points in North America – Up to 1 percentage point for total Kraft • Manag
Slide 42: Three priorities will position both grocery and snacks businesses for success
Three priorities will position both grocery and snacks businesses for success 1. Strategically distort portfolio 2. Drive towards best-in-class costs – Deliver productivity of 4%+ – Streamline manufacturing and distribution networks – Reduce overhead
Slide 43: Realigning U.S. Sales organization
Realigning U.S. Sales organization Grocery Business Snacks Business Retail Execution HQ Sales
Slide 44: Three priorities will position both grocery and snacks businesses for success
Three priorities will position both grocery and snacks businesses for success 1. Strategically distort portfolio 2. Drive towards best-in-class costs 3. Reignite a winning culture – Spirit of a start up, soul of a powerhouse – Recruit the best talent – Reinvest in our employees
Slide 45: Summary
Summary • Kraft Foods North America is driving a virtuous cycle • We will continue to deliver industry-leading results • We will launch two businesses positioned for success
Slide 46: 2012 Guidance
Executive Vice President and CFO 2012 Guidance Dave Brearton
Slide 47: 2012 results will be driven by multiple factors
2012 results will be driven by multiple factors • Strong organic growth from Power Brands • Full Cadbury synergies • Further gains from End-to-End Cost Management • One-time costs to achieve peak performance • Financing costs to execute the separation
Slide 48: 2012 will benefit from the tailwind of top-line momentum in each region
2012 will benefit from the tailwind of top-line momentum in each region Kraft Foods (1) +6.6% +4.8% North America (1) +4.6% Europe (1) +11.2% Developing Markets (1) Pricing Vol/Mix 6.0 pp 0.6 pp 6.1 pp (1.3) pp 4.4 pp 0.2 pp 7.3 pp 3.9 pp 2011 Organic Net Revenue Growth (1) Reported Net Revenues in
Slide 49: Cadbury revenue synergies will escalate
Cadbury revenue synergies will escalate • Achieved $400 million revenue run-rate – Drove 2011 revenue synergies of $300+ million – ~60 bps of growth • On-track to reach $1 billion target – Roughly two-thirds from Developing Markets – 50-100 bps of growth in 2012
Slide 50: Exceeding Cadbury cost synergy targets
Exceeding Cadbury cost synergy targets (Cumulative P&L Impact, % of Original $750 Million Target) Cost Synergies ~25% ~80% 105%+ ~15% Actual Original Estimate Actual Original Estimate ~70% ~$800 Million
Slide 51: End-to-End Cost Management will drive further gains
End-to-End Cost Management will drive further gains • Productivity – Procurement – Manufacturing – Customer Service & Logistics • Overhead Cost Reset – North America: NOG – Europe: NOG – Developing Markets: HOG Productivity % of COGS Overheads % of Net Revenue ~4% 4%+ 4%+ 2012E 13.8% 14.4% 13%-13.5%
Slide 52: Targeting top-tier growth in 2012
Targeting top-tier growth in 2012 • Organic revenue growth consistent with 5%+ long-term guidance + Strong momentum, Power Brands in each region + Revenue synergies from Cadbury + Low/mid-single-digit benefit from pricing – Macroeconomic environment – Product pruning in North America of up to 1 pp O
Slide 53: Targeting top-tier growth in 2012
Targeting top-tier growth in 2012 • Organic revenue growth consistent with 5%+ long-term guidance • Operating EPS growth consistent with 9%-11% constant-currency, long-term guidance + Strong operating momentum + Further gains from End-to-End Cost Management, synergies – Pension cost headwind ~4 pp –
Slide 54: Setting up each company for future success
Setting up each company for future success • “Clean sheet” approach – Lean corporate structures – Tailoring support functions to needs of each company – Streamlining manufacturing and distribution infrastructures • Transition and transaction costs to execute separation • $1.6-$1.8 billion of one-tim
Slide 55: Refinancing costs to be incurred to set up capital structures
Refinancing costs to be incurred to set up capital structures • Debt breakage and financing fees from migrating debt to North American grocery • $400 million to $800 million cost
Slide 56: Generating strong free cash flow
Generating strong free cash flow (1) Adjusted free cash flow is defined as net cash from operating activities less capital expenditures plus voluntary pension contributions and taxes paid on the gain on the 2010 sale of North America pizza business. See GAAP to Non-GAAP reconciliation at the end of
Slide 57: Well-positioned to launch two investment grade companies with access to CP
Well-positioned to launch two investment grade companies with access to CP • Successfully delevered from Cadbury acquisition – Gross debt-to-underlying EBITDA of 3.1x – Total debt down $4+ billion since March 2010 • Taking actions to create space, flexibility – Issued $800 million floating rate note
Slide 58: Driving sustainable, top-tier performance for the long term
Driving sustainable, top-tier performance for the long term • Top-tier operating performance on both top and bottom lines • Setting stage for strong, future gains through a clean-sheet approach • On track to launch two investment-grade entities with low-cost debt
Slide 59: The Path to Separation
The Path to Separation Irene Rosenfeld Chairman and CEO
Slide 60: North American grocery will be a major force in the industry
North American grocery will be a major force in the industry U.S. Beverages 16% U.S. Cheese 21% U.S. Convenient Meals 18% U.S. Grocery 25% Canada & NA Foodservice 20% $18 Billion in Revenues* Growth in line with categories Strong margins with upside opportunity Highly competitive dividend payout * B
Slide 61: Global snacks' geographic profile is unique within consumer products
Latin America CEEMA Asia Pacific Europe 37% North America 19% Developing Markets 44% Global snacks’ geographic profile is unique within consumer products $35 Billion in Revenues* Industry-leading growth Drive margin gains through revenue growth and cost containment Invest to support future growth To
Slide 62: What's next
What’s next • Continue to report as one company • Initial Form 10 filing, carve-out financials in Q2 • Tax Rulings around mid-year • Management structures and personnel decisions finalized by mid-year • Complete separation no later than Dec. 31, 2012 • Investor events close to separation date
Slide 63: 2012 will be an exciting year for Kraft Foods and our shareholders
2012 will be an exciting year for Kraft Foods and our shareholders • Strong operating momentum • Executing separation from position of strength • The best is yet to come!
Slide 64: Kraft Foods: make today delicious
“kraft foods ¢ 4 ee make today delicious
Slide 65: Kraft Foods FY 2011 results
Kraft Foods Pricing +6.0 pp Vol/Mix +0.6 pp 11.5% (reported) 12.2% (reported) Organic Net Revenue Growth (1) • Revenue growth in top-tier of peer group – Positive vol/mix despite significant pricing • Power Brands +8% • Underlying OI +10% (3) – Pricing fully covered $2.6 billion increase in raw mate
Slide 66: Kraft Foods North America FY 2011 results
Kraft Foods North America Pricing +6.1 pp Vol/Mix (1.3)pp 16.8% (reported) 16.5% (reported) Organic Net Revenue Growth (1) • Pricing and new products drove revenue growth – Vol/mix in line with expectations – Power Brands +6% – New products contributed 9%+ of revenue • Underlying SOI +4% (3) – (3)pp
Slide 67: Kraft Foods Europe FY 2011 results
Kraft Foods Europe Pricing +4.4 pp Vol/Mix +0.2 pp 9.6% (reported) 10.5% (reported) Organic Net Revenue Growth (1) • Strong performance in each quarter this year – 8 straight quarters of top- and bottom-line gains – Positive vol/mix despite significant pricing • Power Brands +7% • Underlying SOI +19
Slide 68: Kraft Foods Developing Markets FY 2011 results
Kraft Foods Developing Markets Pricing +7.3 pp Vol/Mix +3.9 pp 11.6% (reported) 13.0% (reported) Organic Net Revenue Growth (1) • Strong revenue performance in each region despite volatile market conditions – Latin America and Asia Pacific both up double-digits – CEEMA up high single-digits • Power
Slide 69: Reconciliation
GAAP to Non-GAAP Reconciliation As Reported (GAAP) Impact of Divestitures Impact of Acquisitions (2) Impact of Integration Program Impact of Accounting Calendar Changes (3) Impact of Currency Organic (Non-GAAP) As Reported (GAAP) Organic (Non-GAAP) Biscuits 12,010 $ - $ - $ - $ (235) $ (219) $ 11,55
Slide 70: Reconciliation
GAAP to Non-GAAP Reconciliation (1) Impact of divestitures includes for reporting purposes Starbucks CPG business. (2) Impact of acquisitions reflects the incremental January 2011 operating results from our Cadbury acquisition on February 2, 2010. (3) As Reported (GAAP) Impact of Divestitures (1) Im
Slide 71: Reconciliation
GAAP to Non-GAAP Reconciliation As Reported (GAAP) Impact of Divestitures Impact of Acquisitions (1) Impact of Integration Programs Impact of Accounting Calendar Changes Impact of Currency Organic (Non-GAAP) Impact of Acquisitions - Cadbury (1) Divestitures - Cadbury's Poland and Romania Operations
Slide 72: Reconciliation
GAAP to Non-GAAP Reconciliation As Reported (GAAP) Integration Program Costs (1) Acquisition- Related Costs (2) Spin-off Costs (3) Underlying (Non-GAAP) As Reported (GAAP) Integration Program Costs (1) Acquisition- Related Costs (2) Underlying (Non-GAAP) Kraft Foods Operating Income 6,657 $ $ - $ $
Slide 73: Reconciliation
GAAP to Non-GAAP Reconciliation As Reported (GAAP) Integration Program Costs (1) Acquisition- Related Costs (2) and Financing Fees (3) U.S. Health Care Legislation Impact on Deferred Taxes Spin-off Costs (4) Operating (Non-GAAP) Currency Operating Constant Fx (Non-GAAP) As Reported EPS Growth (GAAP)
Slide 74: Reconciliation
GAAP to Non-GAAP Reconciliation As Reported (GAAP) Integration Program Costs (1) Acquisition- Related Costs (2) and Financing Fees (3) U.S. Health Care Legislation Impact on Deferred Taxes Operating (Non-GAAP) As Reported EPS Growth (GAAP) Operating EPS Growth (Non-GAAP) Diluted EPS - Continuing ope
Slide 75: Reconciliation
GAAP to Non-GAAP Reconciliation As Reported (GAAP) Integration Program Costs (1) Acquisition- Related Costs (2) Spin-off Costs (3) Underlying (Non-GAAP) Currency Underlying Constant Fx (Non-GAAP) As Reported (GAAP) Integration Program Costs Acquisition- Related Costs (2) Underlying (Non-GAAP) As Rep
Slide 76: Reconciliation
GAAP to Non-GAAP Reconciliation Net Cash Provided by Operating Activities (GAAP) 3.6 $ 4.1 $ 5.1 $ 3.7 $ 4.5 $ Capital Expenditures (1.2) (1.4) (1.3) (1.7) (1.8) Free Cash Flow (Non-GAAP) (1) 2.3 $ 2.8 $ 3.8 $ 2.1 $ 2.7 $ Taxes Paid on Frozen Pizza Business Divestiture - - - 1.2 - Voluntary Pension