The J.m. Smucker Company · NYSE:SJM
The J.m. Smucker — 2020 Consumer Analyst Group of New York (CAGNY) Conference
78 slides from The J.m. Smucker's conference presentation, Feb 19, 2020
Slide 1: Consumer Analyst Group of New York Conference 2020
2020 CONSUMER ANALYST GROUP OF NEW YORK CONFERENCE 1
Slide 2: Strategy & Business Update
STRATEGY & BUSINESS UPDATE Mark Smucker President & Chief Executive 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: Agenda
STRATEGY & BUSINESS UPDATE Mark Smucker PRESIDENT & CHIEF EXECUTIVE OFFICER FINANCIAL AGENDA STRATEGY Mark Belgya VICE CHAIR & CHIEF FINANCIAL OFFICER 4
Slide 5: Retiring After 35 Years
RETIRING AFTER 35 YEARS OF VALUABLE CONTRIBUTIONS 5
Slide 6: Leadership Updates
LEADERSHIP UPDATES CHIEF OPERATING GENERAL MANAGER, SENIOR VICE PRESIDENT, OFFICER U.S. RETAIL PET FOODS SALES 6
Slide 7: Third Quarter Earnings Conference Call
Third Quarter Earnings Conference Call Wednesday, February 26, 2020 8:30 a.m. EST 7
Slide 8: Presentation Themes
PRESENTATION THEMES OUR VISION & STRATEGY OUR PURPOSE BUSINESS OVERVIEW 8
Slide 9: 7th Largest Shelf-Stable Food and Beverage Manufacturer
7 LARGEST TH SHELF-STABLE FOOD AND BEVERAGE MANUFACTURER IN $260 BILLION U.S. CENTER OF THE STORE SOURCE: SMUCKER INTERNAL MULTI-OUTLET SHARE REPORT 52 WEEKS ENDED JANUARY 26, 2020 9
Slide 10: Strategic Growth Imperatives
STRATEGIC GROWTH IMPERATIVES LEAD IN THE BEST BUILD BRANDS CATEGORIES CONSUMERS LOVE BE EVERYWHERE 10
Slide 11: Lead in the Best Categories
Lead in the Best Categories CATEGORIES WHERE WE HOLD #1 OR #2 BRANDED POSITIONS CONTRIBUTE 75% OF NET SALES SOURCE: SMUCKER INTERNAL MULTI-OUTLET SHARE REPORT 52 WEEKS ENDED JANUARY 26, 2020 11
Slide 12: Build Brands Consumers Love
Build Brands Consumers Love 90% of ALL U.S. HOUSEHOLDS OUR BRANDS ARE have at least ONE OF OUR AN ESSENTIAL PART PRODUCTS OF EVERYDAY LIFE SOURCE: SMUCKER INTERNAL MULTI-OUTLET SHARE REPORT 52 WEEKS ENDED JANUARY 26, 2020 12
Slide 13: Marketing Investment
Marketing Investment FY20 10 NEW ADVERTISING CAMPAIGNS Pup per 6.5% -7% OF NET SALES oni 13
Slide 14: Be Everywhere
Be Everywhere MEETING CONSUMER NEEDS…WHENEVER AND WHEREVER THEY SHOP 14
Slide 15: E-commerce
E-commerce 5% GROWTH DRIVEN BY PET & COFFEE TOTAL U.S. RETAIL CATEGORIES RUNWAY FOR SALES IN FY20 FUTURE GROWTH 15
Slide 16: Feeding Connections That Help Us Thrive
“FEEDING CONNECTIONS THAT HELP US THRIVE - LIFE TASTES BETTER TOGETHER.” 16
Slide 17: Thriving Together
Thriving Together THRIVING PETS & PEOPLE THRIVING COMMUNITIES FAMILIES & KIDS THRIVING TOGETHER & PLANET FOOD & SHELTER PETS WHO NEED PEOPLE DISASTER RELIEF COMMUNITY PROGRAMS EDUCATION & LITERACY PEOPLE WHO NEED PETS ENVIRONMENTAL THE ARTS SUSTAINABILITY 17
Slide 18: Our Purpose in Action
OUR PURPOSE IN ACTION ON TRACK TO MEET OR EXCEED 2020 GOALS • LANDFILL DIVERSION • WATER USE • GREENHOUSE GAS 18
Slide 19: Plum Creek Wind Farm Project
PLUM CREEK WIND FARM PROJECT 50% OF TOTAL ELECTRICITY USAGE ADDRESSED BY WIND ENERGY BEGINNING SUMMER 2020 19
Slide 20: Next Generation of Goals
NEXT GENERATION OF GOALS CONTINUING 1 OPERATIONAL COMMITMENT TO … EXCELLENCE RESPONSIBLE 2 SOURCING ANIMAL WELFARE, HUMAN 3 PACKAGING RIGHTS, LIVING WAGES AND REDUCING EMISSIONS 20
Slide 21: Packaging Goals
PACKAGING 2025 GOALS 100% RECYCLABLE, COMPOSTABLE, OR REUSABLE PACKING MATERIALS HOW2RECYCLE INFORMATION ON PACKAGING 100% FIBER-BASED PACKAGING 21
Slide 22: U.S. Retail Business: Pet Foods, Coffee, Consumer Foods
U.S. RETAIL BUSINESS PET COFFEE CONSUMER FOODS FOODS 22
Slide 23: $2.9B U.S. Retail Pet Foods
$2.9B U.S. RETAIL FY19 Net Sales PET FOODS DOG SNACKS FOOD 27% 39% CAT FOOD 26% 2 3 PERCENTAGES DO NOT ADD DUE TO ROUNDING 23
Slide 24: Pet Share
Pet Share #1 #2 #3 DOG CAT DOG SNACKS FOOD FOOD 25% 18% 13% DOLLAR DOLLAR DOLLAR SHARE SHARE SHARE SOURCE: SMUCKER INTERNAL MULTI-OUTLET SHARE REPORT 52 WEEKS ENDED JANUARY 26, 2020 24
Slide 25: Dog Snacks
Dog Snacks HIGHEST MARGINS IN #1 CONTINUED MARKET GROWTH COMPANY SHARE FOR FY20 PORTFOLIO Source: Smucker Internal Multi-Outlet Share Report 52 weeks ended January 26, 2020 25
Slide 26: Cat Food Portfolio
Cat Food Portfolio #2 MARKET SHARE 8 CONSECUTIVE QUARTERS OF YEAR-OVER- YEAR GROWTH SOURCE: SMUCKER INTERNAL MULTI-OUTLET SHARE REPORT 52 WEEKS ENDED JANUARY 26, 2020 26
Slide 27: Premium & Super Premium
Premium & Super Premium #3 MARKET 70% SHARE OF DOG FOOD NET SALES SOURCE: SMUCKER INTERNAL MULTI-OUTLET SHARE REPORT 52 WEEKS ENDED JANUARY 26, 2020 27
Slide 28: Nutrish
Nutrish ® REAL RECIPES…REAL INGREDIENTS …REAL GOOD 28 28
Slide 29: Return to Growth in FY21
Return to Growth in FY21 NEW ADVERTISING FEATURING RACHAEL RAY NEW PACKAGING ON AIR FEBRUARY 2020 INNOVATION IMPROVED PRICING 29
Slide 30: Natural Balance
Natural Balance® OPTIMIZE IMPROVE REFRESH FORMULAS PRICING MARKETING 30
Slide 31: U.S. Retail Pet Foods Growth Opportunities
U.S. Retail Pet Foods GROWTH OPPORTUNITIES NEW LEADERSHIP REFINEMENTS TO PET STRATEGY 31
Slide 32: $2.1B U.S. Retail Coffee
PREMIUM 15% $2.1B U.S. RETAIL MAINSTREAM FY19 Net Sales COFFEE 52% ONE CUP 25% #1 AT HOME COFFEE 3 SOURCE: SMUCKER INTERNAL MULTI-OUTLET SHARE REPORT 52 WEEKS ENDED JANUARY 26, 2020 2 32
Slide 33: U.S. Retail Coffee
U.S. Retail Coffee GREEN COFFEE AT MULTI-YEAR LOWS STRONG PROFIT MARGINS 5 CONSECUTIVE QUARTERS OF YOY VOLUME GROWTH 33
Slide 34: Coffee Portfolio
Coffee Portfolio FY19 FY14 PREMIUM 15% PREMIUM 17% MAINSTREAM 52% ONE CUP MAINSTREAM ONE CUP 13% 61% 25% 34
Slide 35: Mainstream Coffee
Mainstream Coffee 1 IN 3 COFFEE HOUSEHOLDS THE BEST PART HAVE A OF WAKING UP IS FOLGERS® FOLGERS® IN CANISTER YOUR CUP 35 SOURCE: DIRECTIONS RESEARCH COFFEE HABITS & PRACTICES
Slide 36: Dunkin' Growth
Dunkin’ Growth ® ATTRACTING NEW HOUSEHOLDS THROUGH INNOVATION AND ADVERTISING 5 YEAR 14% NET SALES CAGR 36
Slide 37: More Than 50% of Espresso Occasions Are In Home
MORE THAN 50% OF ESPRESSO OCCASIONS ARE IN HOME 37 SOURCE: JMS PROPRIETARY ESPRESSO LANDSCAPE RESEARCH 2019 FPO/NOT FINAL IMAGE
Slide 38: Café Bustelo Growth
Café Bustelo Growth ® DOUBLED HOUSEHOLD PENETRATION IN 5 YEARS 5 YEAR 14% NET SALES CAGR SOURCE: IRI PANEL DATA 38
Slide 39: Café Bustelo Origins and Sweet & Creamy
Catex BUSTELO. f CAFExs BUSTELO. CAFE BUSTEL( BUSTELO os < BRAZIL econ : DULCE >*LECH: _ & +2 4 < ‘ re ps agen ay? " Qo bu iG Bie Om, Nese —{ oricins | CAFE 2% —- BUSTELO
Slide 40: 1850 Coffee
1850 Coffee ™ CONTINUED INVESTMENT TO DRIVE REPEAT TRIAL PURCHASE CONTINUES TO BE STRONG 40
Slide 41: 1850 Everywhere
1850™ Everywhere EXPANDING REACH IN FARMER NEW CONNECT CHANNELS CANADA &AWAY FROM HOME 41
Slide 42: $1.8B U.S. Retail Consumer Foods
OTHER BAKING BUSINESS 4% (DIVESTED) 6% NATURAL U.S. RETAIL $1.8B FOOD & BEVERAGE CONSUMER 10% PEANUT FROZEN BUTTER 39% FOODS HANDHELDS 13% FY19 Net Sales OILS 13% FRUIT SPREADS 15% 42
Slide 43: Peanut Butter & Jelly
Peanut Butter & Jelly # LUNCH SANDWICH SOURCE: (1)NPD EATING PATTERNS IN SIMPLE DELICIOUS NUTRITIOUS AMERICA DATA TABLES, FEBRUARY 2018 43
Slide 44: Jif Initiatives
Jif Initiatives ® 40% MARKETSHARE LEAD IN THE BEST BUILD BRANDS BE EVERYWHERE CATEGORIES CONSUMERS LOVE SOURCE: SMUCKER INTERNAL MULTI-OUTLET SHARE REPORT 52 WEEKS ENDED JANUARY 26, 2020 44
Slide 45: FY21 Launches
FY21 LAUNCHES 45
Slide 46: Jif Power Ups
Power Ups Ups® Jif Power ® DISCONTINUING PLATFORM REALLOCATING RESOURCES 46
Slide 47: Uncrustables Growth
® Uncrustables Growth $289M 289.4M 153.8M $154M NET SALES $118M $12M $61M 19% 18 YEAR CAGR A NO-TRADE-OFF SOLUTION FOR FASTEST-GROWING BRAND IN BUSY PARENTS FROZEN SNACKING 47 47
Slide 48: New Uncrustables Plant
® New Uncrustables Plant FOOD ENGINEERING MAGAZINE 2020 PLANT OF THE YEAR $500M NET SALES FY23 LONGMONT, CO 2 MILLION SANDWICH CAPACITY/DAY AT COMPLETION LARGEST SINGLE SIZE TECHNOLOGY EFFICIENCY LINE BAKERY 48
Slide 49: Uncrustables Innovation
® Uncrustables Innovation UNLOCKING GROWTH POTENTIAL EASY CONVENIENT VERSATILE 49 49
Slide 50: Key Summary
KEY SUMMARY EVOLVE LEADERSHIP STRUCTURE STRENGTHEN COMMERCIAL CAPABILITIES PRIORITIZE RESOURCES FOR GROWTH PLATFORMS REINVIGORATE OUR LARGEST BRANDS MAINTAIN FINANCIAL DISCIPLINE 50
Slide 51: Financial Strategy
FINANCIAL STRATEGY Mark Belgya Vice Chair & Chief Financial Officer 51
Slide 52: Full-Year Fiscal 2020 Outlook
Full-Year Fiscal 2020 Outlook 3% Decrease Net Sales Third Quarter Earnings Conference Call $8.10 - $8.30 Wednesday, February 26, 2020 ADJUSTED EPS 8:30 a.m. EST $850M FREE CASH FLOW 52
Slide 53: Financial Priorities
Financial Priorities IMPROVE CONSISTENT INCREASE BALANCED RETURN ON EARNINGS FREE CASH CAPITAL INVESTED GROWTH FLOW ALLOCATION CAPITAL SUSTAINABLE INCREASE LONG-TERM SHAREHOLDER GROWTH VALUE 53
Slide 54: Consistent Growth
Consistent Growth NET SALES ADJUSTED EPS 5-Year 5-Year CAGR CAGR 7% 8% 2014 2019 2014 2019 ADJUSTED EBITDA FREE CASH FLOW 5-Year 5-Year CAGR CAGR 6% 6% 2014 2019 2015 2019 54
Slide 55: Marketing & Innovation
Marketing & Innovation BUILDING BRANDS CONSUMERS LOVE VOLUME TRENDS AND BRAND HEALTH INDICATORS ARE POSITIVE MARKETING SUPPORT RESULTING IN SUSTAINABLE TOP-LINE GROWTH 55
Slide 56: Fiscal 2021 Outlook
Fiscal 2021 Outlook • BENEFITS OF MARKETING INVESTMENT • LAPPING DEFLATIONARY PRICING • DISCONTINUATION JIF® POWER UPS® • NATURAL BALANCE® HEADWINDS • STABLE PRIVATE LABEL DOG FOOD • SUPPORT KEY GROWTH BRANDS NET SALES FLAT TO SLIGHTLY UP IN FY21 56
Slide 57: Guidelines for Profitable Growth
Guidelines for Profitable Growth DELIVERING OUR COMMITMENTS BY… 1 MAINTAIN MARKETING SUPPORT 2 MARGIN MANAGEMENT PROGRAMS 3 LEVERAGE ASSET PRODUCTIVITY TRANSLATING SALES TO EPS GROWTH 57
Slide 58: Operational Savings Program
Operational Savings Program OPTIMIZATION OF OUR PET FOOD LOGISTICS NETWORK 2 LARGER AND CONSOLIDATION OF EXIT OF THIRD-PARTY MORE EFFICIENT DISTRIBUTION CENTERS STORAGE LOCATIONS DISTRIBUTION CENTERS 58
Slide 59: Free Cash Flow Growth
Free Cash Flow Growth $850M $1B FY19 TARGET LONG HISTORY OF DELIVERING CONSISTENT FREE CASH FLOW 59
Slide 60: Capital Expenditures
Capital Expenditures $360M $300M- STRATEGIC $322M $320M TARGET $201M $192M 3.5% OF NET SALES CAPEX REMAINS ELEVATED IN FY21 DUE FY16 FY17 FY18 FY19 FY20E TO UNCRUSTABLES® PLANT EXPANSION 60
Slide 61: Leverage
Leverage 4.1x 3.6x < 3.0x $1B DEBT REPAYMENTS SINCE AINSWORTH ACQUISITION 3.0X LEVERAGE TARGET FY21 Q1 2019 Q2 2020 2021E 61
Slide 62: Capital Deployment Model
Capital Deployment Model INVESTING IN RETURNING CASH TO GROWTH SHAREHOLDERS SHARE CAPITAL STRATEGIC REPURCHASES EXPENDITURES PROJECTS DIVIDENDS & DEBT REPAYMENT 50% 50% 62
Slide 63: Dividend Growth
Dividend Growth 18 CONSECUTIVE YEARS $3.52 OF DIVIDEND INCREASE $2.56 10% 10-YEAR CAGR $1.45 40% PAYOUT RATIO TARGET 63
Slide 64: Return on Invested Capital
Return on Invested Capital PRIORITIZING THIS METRIC IN ALL DATA DRIVEN OF OUR DECISION MAKING INSIGHTS COMPREHENSIVE RISK ANALYSIS ENHANCED MODELING 64
Slide 65: Key Summary
KEY SUMMARY PURPOSE DRIVEN COMPANY STRONG STRATEGIC FRAMEWORK FINANCIAL DISCIPLINE 65
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Slide 67: Consumer Analyst Group of New York Conference
2020 CONSUMER ANALYST GROUP OF NEW YORK CONFERENCE 67
Slide 68: Supporting Materials
Supporting Materials 68
Slide 69: Non-GAAP Financial Measures
Non-GAAP Financial Measures The Company uses non-GAAP financial measures, including: net sales excluding acquisition, divestiture, and foreign currency exchange; adjusted gross profit; adjusted operating income; adjusted income; adjusted earnings per share; earnings before interest, taxes, depreciat
Slide 70: Forward-Looking Statements
Forward-Looking Statements This presentation contains forward-looking statements, such as projected net sales, operating results, earnings, and cash flows that are subject to risks and uncertainties that could cause actual results to differ materially from future results expressed or implied by thos
Slide 71: Non-GAAP Reconciliation
Non-GAAP Reconciliation ($ in millions) Year Ended April 30, 2019 2014 Operating income reconciliation: Operating income $928.6 $772.0 Amortization 240.3 110.9 Goodwill impairment charge 97.9 - Other intangible asset impairment charges 107.2 - Unallocated derivative losses (gains) 54.2 24.5 Cost of
Slide 72: Non-GAAP Reconciliation
Non-GAAP Reconciliation ($ in millions) Year Ended April 30, 2019 2014 EBITDA (as adjusted) reconciliation: Net income $514.4 $565.2 Income tax expense (benefit) 187.2 284.5 Interest expense - net 207.9 79.4 Depreciation 206.0 157.5 Amortization 240.3 98.9 Goodwill impairment charge 97.9 - Other int
Slide 73: Non-GAAP Reconciliation
Non-GAAP Reconciliation ($ in millions) Year Ended April 30, 2019 2014 Free Cash Flow reconciliation: Cash provided by (used for) operating activities $1,141.2 $856.0 Additions to property, plant, and equipment (359.8) (279.5) Free Cash Flow $781.4 $485.5 73
Slide 74: Non-GAAP Reconciliation
Non-GAAP Reconciliation ($ and shares in millions, except per share data) Year Ended April 30, 2019 2014 Net income reconciliation: Net income $514.4 $565.2 Income tax expense (benefit) 187.2 284.5 Amortization 240.3 98.9 Goodwill impairment charge 97.9 - Other intangible asset impairment charges 10
Slide 75: Non-GAAP Reconciliation
Non-GAAP Reconciliation ($ in millions) Three Months Ended TTM Ended January 31, April 30, July 31, October 31, October 31, 2019 2019 2019 2019 2019 EBITDA (as adjusted) reconciliation: Net income $121.4 $71.5 $154.6 $211.2 $558.7 Income tax expense 35.8 30.4 52.1 67.9 186.2 Interest expense - net 5
Slide 76: Non-GAAP Reconciliation
Non-GAAP Reconciliation ($ 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 $1,344.8 Income tax expense 97.2 (715.3) 78.3 40.1 (499.7) (benefit) Interest
Slide 77: Non-GAAP Reconciliation
Non-GAAP Reconciliation Company Guidance Year Ending April 30, 2020 ($ in millions, except per share data) Low High Net income per common share – assuming dilution reconciliation: Net income per common share – assuming dilution $6.77 $6.97 Net cumulative unallocated (losses) gains (0.36) (0.36) Spec
Slide 78: 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’™ and Dunkin' Donuts ® is a registered trademark of DD IP Holder LLC and Rachael Ray TM is a registered trademark of Ray Marks II LLC. The Num
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