General Mills, Inc. · NYSE:GIS
General Mills — Investor Day (July 2018)
78 slides from General Mills's investor day presentation, Jul 11, 2018
Slide 1: General Mills Fiscal 2019 Investor Day
GENERAL MILLS FISCAL 2019 INVESTOR DAY JULY 11, 2018
Slide 2: Europe & Australia
GENERAL MILLS FISCAL 2019 INVESTOR DAY EUROPE & AUSTRALIA Bethany Quam Group President, Europe & Australia 62
Slide 3: Europe & Australia Segment at a Glance
Europe & Australia Segment at a Glance PLATFORM CONTRIBUTION (Fiscal 2018 Net Sales by Platform) • F18 Net Sales: $2.0 Billion • Focused on 4 Global Platforms All Other • F18 Returned to Net Sales Yogurt Growth Accelerate Platforms 63
Slide 4: Emerging Company in a Developed Market
Emerging Company in a Developed Market HOUSEHOLD PENETRATION GEOGRAPHIC FOOTPRINT (Europe & Australia Household Penetration %) (General Mills Europe & Australia F18 Sales by Geography) 99% 87% 75% 62% All 49% Other 29% 16% 22% France, UK, & Australia Yogurt Ice Cream Snack Bars Mexican Category Gene
Slide 5: Update
UPDATE ex. $1Billion 65
Slide 6: Drivers of Topline Growth
Drivers of Topline Growth INTEGRATED MARKETING INNOVATION EXPANDING CAMPAIGNS AVAILABILITY 66
Slide 7: Europe & Australia Fiscal 2019 Priorities
Europe & Australia Fiscal 2019 Priorities • Compete Effectively in Yogurt • Accelerate Growth in Mexican, Ice Cream and Snack Bars • Deliver Margin Expansion 67
Slide 8: Compete Effectively in Yogurt
COMPETE EFFECTIVELY IN YOGURT 68
Slide 9: Competing More Effectively in F18
Competing More Effectively in F18 YOPLAIT NET SALES France GROWTH VS. LY • Home of Yoplait • Broad Portfolio -LSD • 13% Market Share -MSD -HSD United Kingdom • Leader in Kids Segment Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 • Focused Portfolio F17 F17 F17 F17 F18 F18 F18 F18 • 7% Market Share Source: IRI L52 Weeks t
Slide 10: Drive Our Core Yogurt Brands
Drive Our Core 7 Yogurt Brands INNOVATION, RENOVATION & COMMUNICATION Core 7 = 65% of Yogurt Net Sales in Europe & Australia Source: Fiscal 2018 Net Sales 70
Slide 11: Petits Filous Integrated Consumer Execution
PETITS FILOUS INTEGRATED CONSUMER EXECUTION 71
Slide 12: Innovate in Growing Yogurt Segments
Innovate in Growing Yogurt Segments LEAD IN SIMPLE INDULGENCE BUILD SCALE IN ORGANIC 72
Slide 13: Accelerate Growth in Mexican
ACCELERATE GROWTH IN MEXICAN 73
Slide 14: Category Penetration Opportunity
Category Penetration Opportunity MEXICAN CATEGORY PENETRATION Mexican Meal Kits 97% 94% 81% Tortillas & Carriers 49% Ingredients U.S Europe & Australia & Sides Open to Mexican Buying Mexican Source: Nielsen US L52 Weeks to December 2017, Nielsen EUAU L52 Weeks to May 2018 74
Slide 15: Drive Old El Paso Through Category Visibility
Drive Old El Paso Through Category Visibility VISIBILITY AT HOME, ONLINE & IN-STORE 75
Slide 16: Expand in Growing Mexican Segments
Expand in Growing Mexican Segments GLUTEN FREE CHIPS & DIPS KITS & CARRIERS IN MEXICAN AISLE 76
Slide 17: Accelerate Growth in Ice Cream
ACCELERATE GROWTH IN ICE CREAM 77
Slide 18: Growing At Double The Category Rate
Growing At Double The Category Rate HÄAGEN-DAZS RETAIL SALES (EUROPE & AUSTRALIA, $ IN MILLIONS) Pints +12% CGR MiniCups Stickbars F16 F18 Source: Nielsen 78
Slide 19: Launching Extraordinary Innovation
Launching Extraordinary Innovation 79
Slide 20: Activating Across Europe & Australia
Activating Across Europe & Australia 80
Slide 21: Expanding Distribution
Expanding Distribution AUSTRALIA UNITED KINGDOM ITALY 81
Slide 22: Accelerate Growth in Snack Bars
ACCELERATE GROWTH IN SNACK BARS 82
Slide 23: Tremendous Snack Bar Growth Momentum
Tremendous Snack Bar Growth Momentum NATURE VALLEY AND FIBRE ONE RETAIL SALES (EUROPE & AUSTRALIA, $ IN MILLIONS) +30% CGR F16 F18 Source: Nielsen 83
Slide 24: Significant Increase in Snack Bars Brand Investment in F19
Significant Increase in Snack Bars Brand Investment in F19 84
Slide 25: Accelerate Consumer First Innovation
Accelerate Consumer First Innovation DRAFT PROVEN BUILD NEW WINNERS OCCASIONS 85
Slide 26: Deliver Margin Expansion in F19
Deliver Margin Expansion in F19 • Commodity Inflation Continues: Dairy, Vanilla, Eggs • Deliver Continued Strong HMM Savings • Accelerate SRM to Drive Net Price Realization • Drive Efficient Spending Through Integrated Consumer Executions 86
Slide 27: Europe & Australia Summary
Europe & Australia Summary • Emerging Company in a Developed Market • Fiscal 2019 Priorities –Compete Effectively in Yogurt –Accelerate Growth in Mexican, Ice Cream and Snack Bars –Deliver Margin Expansion 87
Slide 28: Asia & Latin America
GENERAL MILLS FISCAL 2019 INVESTOR DAY ASIA & LATIN AMERICA Christina Law Group President, Asia & Latin America 88
Slide 29: Asia & Latin America Segment
Asia & Latin America Segment OVER 150 6B 80% $1.7B COUNTRIES PEOPLE OF WORLD’S IN NET SALES POPULATION 89
Slide 30: Asia & Latin America Fiscal 2019 Priorities
Asia & Latin America Fiscal 2019 Priorities Accelerate Accelerate Compete Drive Häagen-Dazs Snacking Key Regional Margin Growth Platform Businesses Expansion 90
Slide 31: Accelerate Häagen-Dazs Across Asia & Latin America
Accelerate Häagen-Dazs Across Asia & Latin America ICE CREAM CATEGORY RETAIL SALES IN ASIA & LATIN AMERICA ($ in Billions) • Projected Category Growth of +7% Over CGR = +6% Next 5 Years $31 • Häagen-Dazs ~50% of Asia Net Sales $23 • F18 Retail Sales +MSD in F18; +DD in Q4 • Investing in F19: Extra
Slide 32: Accelerate Häagen-Dazs: Extraordinary Innovation
Accelerate Häagen-Dazs: Extraordinary Innovation PINTS & MINI CUPS EXPAND GIFTING RANGE STICK BARS 92
Slide 33: Accelerate Häagen-Dazs: One Asia Activation
Accelerate Häagen-Dazs: “One Asia” Activation #1 Share Positions Power of Scale 93
Slide 34: Häagen-Dazs Asia Plans
HÄAGEN-DAZS ASIA PLANS 94
Slide 35: Accelerate Häagen-Dazs: Channel Development
Accelerate Häagen-Dazs: Channel Development EXPAND DISTRIBUTION GROW E-COMMERCE SHOP REFRESH Significant Freezer Investment Joint Business Plan with Alibaba Refreshing More Than 50 Shops to Drive Retail Distribution F18 E-commerce Growth +30% 95
Slide 36: Accelerate Snacking Across Asia & Latin America
Accelerate Snacking Across Asia & Latin America PORTFOLIO EXPANSION GLOBAL IDEA SHARING GROW DISTRIBUTION F18: Distribution in 100M+ New Stores Launched in Middle East 100% Digital Campaign F19 Target: 130M+ New Stores Expanding to Latin America Leveraging Global Learnings 96
Slide 37: Compete Effectively on Key Regional Businesses
Compete Effectively on Key Regional Businesses New Brand Campaign & Expanding to New Channels Core Renovation Improved In-Store Execution 97
Slide 38: Actions to Drive Margin Expansion in Fiscal 2019 and Beyond
Actions to Drive Margin Expansion in Fiscal 2019 and Beyond • Continued Strong HMM Savings, Including Global Sourcing • Targeted SRM Actions Driving Positive Price/Mix • Supply Chain Optimization • Improved Go-to-Market Capabilities and Effectiveness 98
Slide 39: Asia & Latin America Summary
Asia & Latin America Summary • Investing to Accelerate Growth on Häagen-Dazs and Snacks • Competing Effectively on Key Regional Businesses • Actions in Place to Drive Margin Expansion in F19 and Beyond 99
Slide 40: Pet Segment
GENERAL MILLS FISCAL 2019 INVESTOR DAY PET SEGMENT Billy Bishop Group President, Pet Segment 100
Slide 41: It All Started with Our Family Dog Blue
It All Started with Our Family Dog Blue
Slide 42: The Great Disconnect Led Us to Develop Blue Buffalo
The Great Disconnect Led Us to Develop Blue Buffalo to Honor Him The disconnect between pet parents’ expectations and legacy brands led us to develop the BLUE line of pet foods and bring transparency to the industry LEGACY BRANDS BLUE BUFFALO • Ground Yellow Corn • Deboned Chicken • Chicken By-Produ
Slide 43: True BLUE Promise
True BLUE Promise TRUE BLUE PROMISE Formulated with the Finest Natural Ingredients e NO Chicken/Poultry By-Product Meals © NO Corn, Wheat or Soy e NOArtificial Flavors or Preservatives
Slide 44: A Strong and Growing Position in a Great Category
A Strong and Growing Position in a Great Category A STRONG AND ...IN A GREAT CATEGORY… ...WITH PLENTY OF UPSIDE GROWING POSITION… F18 Net Sales: $1.3 Billion Humanization of Pets has Led 2017 U.S. Pet Food Retail Sales to Premiumization, Driving #1 Pet Food Brand in Pet LSD Category Growth Blu
Slide 45: Our Strategic Framework
Our Strategic Framework OBJECTIVE: REACH MORE PET PARENTS AND FEED MORE PETS Grow Market Share in the U.S. Capitalize on Select Grow with Increase our International Drive awareness younger pets Make BLUE share of Opportunities with pet parents and younger more available wet foods and influencers pet
Slide 46: Blue Buffalo Fiscal 2019 Priorities
Blue Buffalo Fiscal 2019 Priorities 1 Continue to Grow in Food, Drug, and Mass 2 Maximize E-commerce Growth 3 Continue to Support Pet Specialty Partners 4 Commission and Ramp Up Two New Plants 5 Leverage General Mills Capabilities to Create Value 106
Slide 47: FDM Distribution Continues to Build
FDM Distribution Continues to Build BLUE DISTRIBUTION (BLUE ACV % Distribution in U.S. FDM) 30% 24% 12% Aug Jan Jun 2017 2018 2018 Source: TDLinx 107
Slide 48: Growing Share Positions in Current FDM Accounts
Growing Share Positions in Current FDM Accounts BLUE U.S. DOLLAR SHARE BY CUSTOMER 10.1% 9.4% 7.0% 6.2% 5.8% 6.0% Launched in May 2018 4.8% 4.3% 4.2% 2.5% 1.7% 1.6% 1.6% A B C D E F G H I J K L Total Source: Nielsen FDM accounts excluding rawhide, chews, and RX sold in-store Latest 4 weeks ending 06
Slide 49: F19 FDM Go-to-Market Plan
F19 FDM Go-to-Market Plan DOMINATE IN-STORE GENERATE TRIAL AND SERVICE THE PLAN CONVERSION • Overhead Signage • Education & Engagement • Inventory in the Right Place • Leverage Demo and Mobile Marketing • Shippers teams • On-time Delivery • Shelf Talkers • Innovation • Tailored to support growth acr
Slide 50: Maximize E-commerce Growth
Maximize E-commerce Growth Building Brand Awareness with Pet Parents has Generated High Online Velocities • Premium Brand Presence and Placements On Site • Advantaged Product Display • E-retailer Ad Features • Best-in-class Content Creation 110
Slide 51: Continue to Support Pet Specialty Partners
Continue to Support Pet Specialty Partners • Exclusive Innovation • Continued Pet Detective Support • Media Investment on Pet Specialty Exclusive Product Lines 111
Slide 52: Additional F19 Innovation
Additional F19 Innovation • Right Products with Right Sizes for Each Channel • Expand Treat and Wet Portfolio Gain share in Underpenetrated Category Wet and Treat Mix Improving Improved Profitability with Mix Shift 112
Slide 53: Hybrid Manufacturing Strategy Provides Us the Best of Both Worlds
Hybrid Manufacturing Strategy Provides Us the Best of Both Worlds IN-HOUSE MANUFACTURING CONTRACT MANUFACTURING Significant Savings Opportunities with Creates Redundancy and Swing Scale Manufacturing Capacity More Control Over Supply Chain Yields Can Incubate New Products Without More Effici
Slide 54: Leverage General Mills Capabilities to Create Value
Leverage General Mills Capabilities to Create Value • Capitalize on Capabilities in FDM and E-commerce • Tap Into Technical Platforms to Strengthen Innovation Pipeline • Leverage Supply Chain Know-how • Deliver Synergy Goals Significant Sourcing Savings Duplicative Public Company Costs 114
Slide 55: Blue Buffalo Summary
Blue Buffalo Summary • Leading the Transformation of U.S. Pet Food • Strong F19 Plans in FDM, E-commerce, and Pet Specialty Targeting Double-digit Top and Bottom Line Growth in F19* • Leveraging General Mills Capabilities to Create Value • Excited About the Future as Part of the General Mills Famil
Slide 56: Joint Ventures & Financial Summary
GENERAL MILLS FISCAL 2019 INVESTOR DAY JOINT VENTURES & FINANCIAL SUMMARY Don Mulligan Chief Financial Officer 116
Slide 57: Joint Ventures
Joint Ventures CEREAL PARTNERS WORLDWIDE HÄAGEN-DAZS JAPAN • Global Footprint: 130 Markets • Operating in Japan for 30+ Years • F18 Net Sales: $1.7 Billion* • F18 Net Sales: $430 Million* *Joint Venture net sales on a 100 percent basis 117
Slide 58: Joint Ventures Fiscal 2019 Plans
Joint Ventures Fiscal 2019 Plans CEREAL PARTNERS WORLDWIDE HÄAGEN-DAZS JAPAN • Core Innovation and Renovation • Launching New Mini Cups and Stick Bars • Portfolio Expansion in India • Actions to Offset Commodity Inflation 118
Slide 59: Four Levers to Drive Shareholder Returns
Four Levers to Drive Shareholder Returns Sales Margin Cash Cash Growth Expansion Conversion Returns Long-term Target: +LSD +MSD ≥ 95% ≥ 90% Organic Sales* Adj. Operating Profit* Adj. EAT to FCF* of FCF* *Non-GAAP measures. 119
Slide 60: Generated Significant Cost Savings in Fiscal 2015-2018
Generated Significant Cost Savings in Fiscal 2015-2018 F15-F18 COST SAVINGS DRIVERS ADJUSTED OP PROFIT MARGIN* (% of Net Sales) • Cumulative COGS HMM Savings = $1.6B 17.2% 15.9% • Additional Project Savings = $700MM +130 bps Restructured Global Supply Chain Realigned Global Org Structure Imple
Slide 61: Actions to Support Profitability in Fiscal 2019 and Beyond
Actions to Support Profitability in Fiscal 2019 and Beyond • HMM = $450MM, Including Global Sourcing • SRM Actions Driving Increased Price/Mix • Distribution Network Optimization • Administrative Structure Optimization • Enterprise Process Transformation Projects 121
Slide 62: Investing to Accelerate Growth in Fiscal 2019 and Beyond
Investing to Accelerate Growth in Fiscal 2019 and Beyond KEY CAPABILITIES ACCELERATE PLATFORMS CAPACITY & EFFICIENCY 122
Slide 63: Margin Expectations for Fiscal 2019
Margin Expectations for Fiscal 2019 FAVORABLE UNFAVORABLE • Increased HMM Savings • Input Cost Inflation • SRM Actions • Growth Investments Global Capabilities • Other Efficiency Initiatives Accelerators • Other SG&A Expenses • Addition of Blue Buffalo FISCAL 2019 TARGET Adjusted Gross Margin* F
Slide 64: Delivering Working Capital Improvement
Delivering Working Capital Improvement ($ in Billions) -62% Cum Decline $1.8 40 $1.6 $1.6 35 $1.4 $1.4 34 30 $1.2 $1.2 29 25 $1.0 24 $0.8 20 $0.8 $0.7 $0.6 15 $0.6 $0.4 10 10 $0.2 8 5 0 $0.0 0 F13 F14 F15 F16 F17 F18 Core Working Capital CWC Days 124
Slide 65: Opportunities to Drive Further Core Working Capital Improvement
Opportunities to Drive Further Core Working Capital Improvement Core Working Capital Days 49 Top Quartile 0 GIS -35 Source: CapIQ, peer fiscal 2018/fiscal 2017/calendar year 2017. Industry Peer Group – see 2017 proxy for full list. 125
Slide 66: Free Cash Flow Performance
Free Cash Flow Performance (3-Year Rolling, $ in Billions) +13% Cum Increase $6.2 $6.3 $5.9 $6.0 $5.7 115% 115% $5.3 108% 108% 101% 103% F11-F13 F12-F14 F13-F15 F14-F16 F15-F17 F16-F18 Free Cash Flow* Free Cash Flow Conversion* *Non-GAAP measure. See appendix for reconciliation. Adjusted for the ado
Slide 67: Long-run Capital Allocation Strategy
Long-run Capital Allocation Strategy F15-F17 USES OF CASH DIVIDENDS AVERAGE DILUTED PER SHARE SHARES OUTSTANDING CGR = +8% CGR = -3% $1.96 666 Dividends Share 586 Repurchases $1.32 CapEx F13 F18 F13 F18 127
Slide 68: Near-term Capital Allocation Priorities
Near-term Capital Allocation Priorities ESTIMATED F19-F20 USES OF CASH • F19 CapEx = ~4% of Net Sales Debt • Maintain Current Dividend Per Share Repayment Current Dividend Yield ~4.4% Dividends • Share Repurchases on Hold CapEx • F18 Net Debt-to-Pro Forma Adjusted EBITDA* Ratio of 4.2x Targeting
Slide 69: Four Levers to Drive Shareholder Returns
Four Levers to Drive Shareholder Returns Sales Margin Cash Cash Growth Expansion Conversion Returns 129
Slide 70: Fiscal 2019 Plan Assumptions
Fiscal 2019 Plan Assumptions • Input Cost Inflation = ~5% of COGS • COGS HMM = $450MM • Increased Investment in Growth Accelerators and Capabilities • Net Interest Expense Approximately $550MM • Adjusted Effective Tax Rate* 23-24% • Average Diluted Shares Outstanding +4% • Blue Buffalo -$0.04 Impact
Slide 71: Our Fiscal 2019 Targets
Our Fiscal 2019 Targets F18 BASE F19 TARGET $15.7 Billion Net Sales +9 to +10%3 Organic Net Sales² Flat to +1% $2.7 Billion¹ Adjusted Operating Profit² +6 to +9%3 $3.11¹ Adjusted Diluted EPS² -3% to Flat3 Free Cash Flow Conversion² >95% (1) Non-GAAP measure. See appendix for reconciliation. (2) Non-
Slide 72: A Reminder on Non-GAAP Guidance
A Reminder on Non-GAAP Guidance Our fiscal 2019 outlook for organic net sales growth and constant-currency adjusted operating profit and adjusted diluted EPS are non-GAAP financial measures that exclude, or have otherwise been adjusted for, items impacting comparability, including the effect of fore
Slide 73: Reconciliation of Fiscal 2018 Adjusted Operating Profit
Reconciliation of Fiscal 2018 Adjusted Operating Profit (Fiscal Year) Full Year 2018 Operating profit as reported $2,509.3 Mark-to-market effects (32.1) Restructuring costs 82.7 Project-related costs 11.3 Acquisition transaction and integration costs 34.0 Intangible asset impairments 96.9 Adjusted o
Slide 74: Reconciliation of Fiscal 2018 Adjusted Diluted EPS
Reconciliation of Fiscal 2018 Adjusted Diluted EPS (Fiscal Year) Full Year Per Share Data 2018 Diluted earnings per share, as reported $ 3.64 Provisional net tax benefit (0.89) Tax items 0.07 Mark-to-market effects* (0.04) Acquisition transaction and integration costs* 0.10 Restructuring charges* 0.
Slide 75: Reconciliation of Adjusted Operating Profit Margin
Reconciliation of Adjusted Operating Profit Margin (Fiscal Years) Full Year % of Net Sales 2018 2017 2016 2015 Operating profit as reported 15.9 % 16.4 % 16.3 % 11.8 % Mark-to-market effects (0.2) (0.1) (0.4) 0.5 Divestitures (gain) loss, net - 0.1 (0.9) - Restructuring costs 0.6 1.4 1.4 1.9 Project
Slide 76: Reconciliation of Free Cash Flow and Free Cash Flow Conversion
Reconciliation of Free Cash Flow and Free Cash Flow Conversion (Fiscal Years, $ in Millions) 2018 2017 2016 2015 2014 2013 2012 2011 Net earnings, including earnings attributable to redeemable and noncontrolling interests $2,163 $1,701 $1,737 $1,259 $1,861 $1,892 $1,589 $1,804 Mark-to-market effects
Slide 77: Reconciliation of Income Taxes on Adjusting Items
Reconciliation of Income Taxes on Adjusting Items (Fiscal Years, $ in Millions) 2018 2017 2016 2015 2014 2013 2012 2011 Pretax Income Pretax Income Pretax Income Pretax Income Pretax Income Pretax Income Pretax Income Pretax Income Earnings* Tax es Earnings* Tax es Earnings* Tax es Earnings* Tax es
Slide 78: Net Debt-to-Pro Forma Adjusted EBITDA Ratio
Reconciliation of Fiscal 2018 Net Debt-to-Pro Forma Adjusted EBITDA Ratio (Fiscal Year, $ in Millions) Full Year 2018 Total Debt $15,818.6 Cash 399.0 Net Debt $15,419.6 Pro forma net earnings attributable to General Mills, as reported $2,252.4 Net earnings, attributable to redeemable and noncontroll