Premier Foods plc · LSE:PFD
Premier Foods — Investor Day (May 2011)
141 slides from Premier Foods's investor day presentation, May 13, 2011
Slide 1: Investor Seminar
Investor Seminar 13 May 2011
Slide 2: Forward looking statements
Certain statements in this presentation are forward for ard looking statements. statements By B their nature, forward looking statements involve a number of risks, uncertainties or assumptions that could cause actual results or events to differ materially from those expressed or implied by those sta
Slide 3: Why are we here today?
Why are we here today? Despite The Headwinds Restructuring Is Complete Commercial Supply Chain Financial Now Running The Business Organically Growing our brands + Delivering efficiency savings Today is about an in depth look at the growth potential of our brands and the competitive cost advantage ou
Slide 4: Three phases to Premier Foods' development
There have been 3 phases to Premier Foods’ development B ildi Scale… Building S l Transformation & Integration …Leveraging Scale • Branded acquisition • Organic growth through q • Commercial integration g branded innovation • Non-core disposals • Manufacturing rationalisation • Commercial strength •
Slide 5: Scale created through acquisition, portfolio reshaped through disposal
Scale created through acquisition portfolio reshaped through disposal Transformation …Leveraging Building Scale… & Integration Scale 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Branston Birds Acquisitions C&B Ambrosia Quorn Campbell’s RHM Sarson’s Cauldron UK IPO Typhoo MBM Frozen Meat-free Di
Slide 6: Sales grew from £0.6bn to over £2bn
Sales grew from £0.6bn to over £2bn Transformation …Leveraging Building Scale… & Integration Scale 3.0 2.5 Chilled sales Sales £bn 2.0 1.5 Hovis 1.0 sales S 0.5 Grocery 0.0 sales 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2010 Pro forma Branston Birds Acquisitions C&B Ambrosia Quorn Campbell’
Slide 7: Branded mix has risen to 66%
Branded mix has risen to 66% Transformation …Leveraging Building Scale… & Integration Scale 66% 65% 3.0 63% 61% 2.5 61% Chilled 66% Saless £bn 61% sales 2.0 55% 50% 15 1.5 49% Hovis 44% 1.0 sales 0.5 Grocery 00 0.0 sales 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2010 Pro forma Branston Birds
Slide 8: Trading profit margins grew each year to 15.3%
Trading profit margins grew each year to 15.3% before RHM acquisition Transformation …Leveraging Building Scale… & Integration Scale 15.3% 66% 12 9% 12.9% 65% 3.0 12.8% 63% 11.1% 61% 2.5 10.8% 61% Chilled 8.8% 66% Sales £bn 61% sales 2.0 55% 1.5 50% 49% Hovis 44% sales 1.0 0.5 Groceryy 0.0 sales 200
Slide 9: And have risen each year since
And have risen each year since Transformation …Leveraging Building Scale… & Integration Scale 12.7% 15.3% 12.1% 11.6% 12.9% 12 8% 12.8% 10.8% 10.7% 66% 3.0 11.1% 65% 10.8% 63% 2.5 8.8% 61% Chilled Sales £bn 61% 66% sales 2.0 61% 55% 1.5 50% Hovis 49% 1.0 44% sales 0.5 Grocery 0.0 sales 2001 2002 200
Slide 10: Successful transformation while maintaining strong operating margins
Successful business transformation whilst maintaining strong operating margins Transformation …Leveraging Building Scale… & Integration Scale 12.7% 15.3% 12.1% 11.6% 12.9% 12 8% 12.8% 10.8% 10.7% 66% 11.1% 65% 3.0 10.8% 63% 8.8% 61% 2.5 Chilled Sales £bn 61% 66% sales 2.0 61% 55% 1.5 50% Hovis 49% 1
Slide 11: Premier Foods following disposals, 2010 pro forma
Premier Foods following disposals 2010 Pro forma Sales: £2,104m , Trading g profit: p £267m Grocery £203m Hovis £39m Chilled £688m £1 213m £1,213m £228m 66% Branded 12.7% Trading profit margin We are the UK UK’ss largest food producer 11
Slide 12: Premier Foods today
Premier Foods today 2010 Pro forma Grocery Hovis Chilled Sales £1,213m Sales £688m Sales £203m 55% 100% Branded Non branded 82% B Branded d d Trading profit £228m Trading profit £39m Trading profit £nil margin 19% margin 6% 12
Slide 13: Group vision and strategy
Group vision and strategy The best in British food with brands you really love Growing our brands Scale Efficiency y Cash The Premier Way 13
Slide 14: Shape of the day
Shape of the day Introduction Robert Schofield Growing Our Brands Tim Kelly Transforming Iconic British Brands Jon Goldstone BREAK Mining Assets For Gold Tim Kelly Shine In Store Tim Kelly Scale And Efficiency In Supply Chain Bob Spooner Competitive Advantage Through Better Procurement Mark Hughes B
Slide 15: Today's presenters
Today’s presenters Tim Kelly - Chief Operating Officer J G Jon Goldstone ld t – Group G Marketing M k ti Director Di t Bob Spooner – Group Operations Director Mark Hughes – Group Procurement Director Jim Smart – Chief Financial Officer 15
Slide 16: Growing Our Brands
Growing Our Brands Tim Kelly Chief Operating Officer
Slide 17: Our strategy is now focused on growing our brands
Our strategy is now focused on growing our brands The best in British food with brands you really love Growing our brands Scale Efficiency y Cash The Premier Way 17
Slide 18: Key questions
But we have a number of key questions Can we grow our brands? Can we maintain our margins in a volatile environment? Can we grow our total sales? 18
Slide 19: Historically we have grown drive and core brands well
Historically we have grown our drive and core brands well CAGR 6.7% 1,400 1 200 1,200 1,000 800 Sales Drive brands £m 600 Core brands 400 200 0 2007 2008 2009 2010 19
Slide 20: Growth through innovation: Ambrosia 2003
We have some excellent examples of growth through innovation Ambrosia 2003 Sales - £53m 20
Slide 21: Ambrosia 2010 sales
Ambrosia 2010 Sales - £85m CAGR 7.0% 7 0% Since Acquisition 21
Slide 22: Total sales growth has been modest
Total sales growth has been modest CAGR 2.2% 3,000 2,500 Sales 2,000 £m 1,500 Non branded Branded 1 000 1,000 500 0- 2007 2008 2009 2010 Sales revenue is like for like sales including Meat-free and Canning but excluding RHM Frozen Foods and Frozen Bakery 22
Slide 23: Branston is another excellent example
Branston is another excellent example Branston Branston 2002 Sales 2010 Sales £19m £71m [ [Sweet Pickle] CAGR 17.9% 17 9% Since Acquisition 23
Slide 24: Built margins despite turbulent commodity markets
We have successfully built margins despite turbulent commodity markets 30% 14% on ofit margin Commodity inflatio 12.1% 20% 11.6% 12% 10.7% 10.8% Trrading pro 10% 10% 0% 8% C Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 -10% 6% -20% 4% Year on year commodity inflation % Trading profit marg
Slide 25: How do we accelerate total sales growth?
So how do we accelerate total sales growth? Transforming iconic British brands Mining assets for gold Shine in Store Enabled by: - structure aligned g for g growth - enhanced capability - resources focused on growth - clear KPIs 25
Slide 26: Learning from our peers
We’ve chosen to learn from our peers 2.5 2.0 Branded GB Sales 1.5 (£ Billions) Billi ) 1.0 0.5 P&G Unilever Nestle Premier Mars Foods* Foods Source: Kantar Worldpanel, 52 w/e 20 March, 2011 (alcohol, food & drink, healthcare, household and toiletries) * excludes Meat-free and Canning, 26
Slide 27: High-performance marketing: five things done well
They drive results through high-performance marketing by doing five things very well 1 2 Driving 3 Create Results Make Consumer 4 through Powerful Insight based Focus on Execution High Choices Strategies & Performance Plans Marketing 5 27
Slide 28: Making powerful choices
We started by making some powerful choices 1 2 Driving 3 Create Results Make Consumer 4 through Powerful Insight based Focus on Execution High Choices Strategies g & Performance Plans Marketing 5 28
Slide 29: Four macro categories with share gain opportunity
Our plan is to focus on four macro categories, where we have significant share gain opportunity Total GB Food & Drink = £68 bn Premier Share 2% Total Focus Categories = £44 bn Premier Share 3% £ Bn Sweet Bakery Desserts Hot Meals T t Treats £3.5 £7.5 £8.9 £24.4 Premier Share 12% 4% 2% 2% Source: Kan
Slide 30: Brand prioritisation around four categories
We have organised our brand prioritisation around these four categories Bakery Grocery Defend Hot Meals Categories Baking Sweet Treats Desserts Side of Plate Drive Brands Spreads Home Oxo, Bisto Baking Core Brands Cadbury Batchelor's Branston Beverages Defend Mothers Lyons Bird’s Paxo Pride Angel De
Slide 31: Tightened definition of Drive brands
We have tightened our definition of “Drive” brands They already have They will have • Potential for transformational sales • More innovation and profit growth • P f Preferred d quality li vs competition ii • Significant scale • 5 star launches • Great resonance with the British • P i iti d ffor capi
Slide 32: Our Core brands
… our “Core” brands… They already have They will have • Scale in their category • The ability to become Drive • Supporting role for Drive brands • The ability to compete hard • Growth opportunities • Occasional advertising We will defend their positions and take growth opportunities as they are iden
Slide 33: Our Defend brands
… our “Defend” brands… They already have They will have • Scale in their category • Dedicated management • Strong category shares • Tactical marketing and innovation • Categories modest in size or low • Relentless focus on cash and profit growth 33
Slide 34: Our Non Branded business
… and our Non Branded business Retailer branded • Scale in category, e.g. Spreads • Scale with customer • Supply pp y chain scale • Generates cash Business to business • Low margin but low risk • Additi Additional l volume l tto supportt manufacturing f t i scale l • Flour • Preserves • Vinegar g 34
Slide 35: Drive and Core brands over 50% of portfolio
Today our Drive and Core brands account for over 50% of our portfolio Business to Business 8% Retailer branded Drive Chilled 36% 9% Retailer branded Grocery/Bakery 16% Defend Core 15% 16% Source: Internal data, 2010 pro forma Net Sales 35
Slide 36: Proportion increasing in the future
We see that proportion increasing significantly in the future 2010 Future 8% 9% Drive 36% Core Defend 16% Retailer branded Business to Business 15% 16% % Target: 75% Branded 36
Slide 37: Our growth enablers
Our growth enablers Transforming iconic British brands Mining assets for gold Shine in Store Enabled by: - structure aligned g for g growth - enhanced capability - resources focused on growth - clear KPIs 37
Slide 38: Re-aligning our structure to drive growth
We are re-aligning our structure to drive growth Brand Management Drive & Core Defend & Non branded Customer Management Operations Procurement IS Finance HR 38
Slide 39: We are British and proud of it
We also want to create a culture based around our “#1 in British Food” position We are British 39and proud of it! 39
Slide 40: Innovation to become 10% of sales
As we look to shift innovation to become 10% of our sales... 10% % of Retail Sales from 6% new SKUs* 2010 2012 *Source: IRI Annual sales coming from new barcodes launched in previous 24 months 40
Slide 41: New Innovation Process
… we have invested heavily in a new Innovation Process 41
Slide 42: New marketing capability programme
We have developed a new marketing capability programme… 42
Slide 43: The Premier Foods Marketing Framework
… that is designed to create a new Premier Foods way of marketing The Premier Foods Marketing Framework A six module marketing process & capability programme Insight Brand Strategy & Commercial Marketing Planning Effectiveness Innovation In-Store Strategy 360 Activation 43
Slide 44: Reallocating resources to drive growth
We are also reallocating resources, focusing on driving growth Increasing resources behind drive brands Reallocating g investment,, i.e. – Promotional Push Æ Advertising Pull – Capital Æ Innovation Focus Dedicated organisations for DRIVE/CORE and DEFEND/NON BRANDED >100 people focused on innovation
Slide 45: Six clear growth KPIs
Finally, we have six very clear growth KPIs 1 Innovation 10% 2 Volume and Value SHARE Of Net Sales growing g g ahead of market 3 Q lit Quality 4 Relative PRICE LEADERSHIP growing g g ahead of market 5 Brand Equity >40% q y 6 EXECUTION In-Store “A Brand You Love” best in class 45
Slide 46: Transforming iconic British brands
Growing our brands Transforming iconic British brands Mining assets for gold Shine in Store Jon Goldstone, Group Marketing Director 46
Slide 47: How do you transform iconic British brands?
So how do you transform iconic British brands? “The world has moved on and Mr. Kipling has refused to move with it, leaving it feel like a relic” T Tony Quinn, Q i Head H d off Planning, Pl i JWT London L d Source: MarketingWeek “Brand Health Check, February 2011 47
Slide 48: Great examples of brand transformation
It’s not easy but there are some great examples 48
Slide 49: Insight driven brand strategies and plans
We have created insight driven brand strategies and plans 1 2 Driving 3 Create Results Make Consumer 4 through Powerful Insight based Focus on Execution High Choices Strategies g & Performance Plans Marketing 5 49 49
Slide 50: Six brands
Today I am going to talk about six of our brands Bakery Grocery Baking Sweet Treats Desserts Hot Meals 50
Slide 51: Ambrosia
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Slide 52: The Desserts category is large and in growth
The Desserts category is large and in growth £0.3 Bn Ambient Desserts Ambrosia £2.4 Bn £95m +2% yoy 1% share Yoghurt/ g Chilled +9% 9% yoy Desserts +5% yoy £8.8 Bn £6.1 Bn Own Label M ll Muller Fruit Activia Ice Cream All Others TOTAL DESSERTS TOTAL DESSERTS £8.9 Bn,, +4% £8.9 Bn,, +4% Source: Kanta
Slide 53: Ambrosia has a unique position
Ambrosia has a unique position Natural, Treatt T Treat Health Desserts Desserts Desserts Delicious Dairy Goodness 53
Slide 54: A secret brand truth
And a rather secret brand truth Carbs = Slow Release Energy gy Sugar = Quick Release Energy Perfect Food for Protein = Muscle Recovery Endurance Athletes 54
Slide 55: Video
Video 55
Slide 56: Ambrosia potential for explosive growth
We believe Ambrosia has the potential for explosive growth TODAY FUTURE “Delicious Dairy Goodness from “Occasional Treat” D Dawn tto D Dusk k ffor all ll th the ffamily” il ” £95m* £320m 1% Sh Share 4% Sh Share * Source: Kantar Worldpanel Retail sales value 52 w/e March 2011 56
Slide 57: Five platforms to unlock potential
We have identified five platforms to unlock the potential FUTURE £320m 4% share Modern of Complete D Desserts t Sweet Top In Toppings Good Morning Britain Goodness TODAY on the Go Getting Goodness £95m £95m* Into 1% share Kids of Desserts * Source: Kantar Worldpanel Retail sales value 52 w/e March 2
Slide 58: Mr Kipling
58
Slide 59: The Sweet Treat category is large and in growth
The Sweet Treat category is large and in growth £1.4 Bn Ambient Cakes £171m +1% yoy Mr Kipling p g £3.1 £3 1 Bn £7.3 Bn £171 m Confectionery £3.0 Bn 2% share +5% yoy Own Label Biscuits +9% yoy McVities Frozen Cakes Morning Goods Cadbury Dairy Milk Chilled Cakes All Others TOTAL SWEET TREATS TOTAL SW
Slide 60: Vision for Mr Kipling
Our vision is to position Mr Kipling as “Britain’s best loved baker of sweet treats” TODAY FUTURE “Britain’s biggest and best “The nation’s favourite cake l loved d baker b k off sweett treats t t – brand” delighting the nation daily” £134m* £340m 2% Sh Share 5% Share * Source: Kantar Worldpanel Ret
Slide 61: Positioning takes us into interesting areas
The positioning takes us into some very interesting areas FUTURE £340m £340 5% Freshly share of Baked Sweet Mr Kipling’s Treats Delicious Desserts Kitchen From Lifting the Mr Kipling lid on snacking g TODAY Celebrate Cake with Reinvigorate Mr Kipling £134m* Cake 2% And share of a Cuppa Sweet Treats
Slide 62: Loyd Grossman
LOYD GROSSMAN
Slide 63: The Hot Meals category is large and in growth
The Hot Meals category is large and in growth Sauces, Stocks Sauces £1 1 Bn £1.1 Sharwoods Bisto Bi £84m & Gravy £102m 0.3% share +4% yoy 0.4% share +1% yoy +9% yoy £4.2 Bn Ready Meals +6% yoy £19.1 Bn £24.1 Bn Veg Own Label Loyd Grossman Birds Eye Meat & Fish McCain £57m Other Ingredients All Other
Slide 64: Bisto
64
Slide 65: Transition Bisto from Gravy to Family Togetherness
Our job is to transition Bisto from being all about “Gravy” to standing for “Family Togetherness” Gravy Family Togetherness 65
Slide 66: Current advertising
Our current advertising does this very successfully 66
Slide 67: Bisto is Britain's most loved food brand
This is possible because Bisto is Britain’s most loved food brand “Is a Brand “I B d you Love” 49% 40% 29% Source: Millward Brown 67
Slide 68: Vision for Bisto
Our vision for Bisto is to grow from this great base TODAY FUTURE “At twice as many family dinner “Gravy” t bl than tables th any other th brand” b d” £95m* £250m 0 4% Sh 0.4% Share 1% Sh Share * Source: Kantar Worldpanel Retail sales value 52 w/e March 2011 68
Slide 69: This is Quite a Challenge
This is Quite a Challenge! 1.6 Family F il Mealtime Occasions 0.8 (Billions) 0.5 0.6 Birds Heinz Eye 2011 FUTURE Source: Kantar Family Food Panel, 52 w/e March 2011 69
Slide 70: Right platforms for Bisto
But we believe we have the right platforms FUTURE £250 m 1% share of Hot Bisto Meals Cooks It For Family You Cooking Made TODAY Proper Easy Gravy £95m* for Proper 0 4% 0.4% Food ood share of Hot Meals 70 * Source: Kantar Worldpanel, 52 w/e March 2011 70
Slide 71: Loyd Grossman sauces
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Slide 72: Loyd Grossman launched 15 years ago
Loyd Grossman was launched 15 years ago and has gone from strength to strength 57 Retail 43 Sales £m Loyd Grossman 13 • Inventive • Care and Attention to Detail 2 • Experience and Knowledge 1996 2001 2006 2011 Source: Kantar Worldpanel 72
Slide 73: From Italian sauce brand to food lovers
Our aim is to transition it from being seen as an Italian sauce brand to representing ‘food lovers’ Italian Cooking Food Lovers Choice Sauce brand 73
Slide 74: Three platforms to deliver £100m growth
We believe that three platforms can deliver £100m of growth FUTURE £150 m 0.6% share of H t Hot The Meals Missing Ingredient g Doing it Better TODAY Exploding Italian £55m* £55m 0.2% share of Hot Meals 74 *Source: Kantar Worldpanel Retail sales value 52 w/e March 2011 74
Slide 75: Sharwood's
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Slide 76: Sharwood's history of taste adventure
Sharwood’s was first launched in the 1880s and has been leading Britain on a taste adventure ever since 1889 Company founded by James A Sharwood launched his first range of products in the UK 1890 presents 1st range James p g of Indian chutneys, pickles & powders 1985 Sharwood’s launch Chi Chinese r
Slide 77: Future of Taste Adventure
We see the future of the brand continuing this tradition of “Taste Adventure” 77
Slide 78: Four platforms to deliver £100m growth
We think four platforms can deliver £100m of growth FUTURE £175 m 14% of world meals Discover the Spice Trail Lunchtime Adventure Teach Britain to TODAY Stir-fry Indian the £75m* new Italian 7% of world meals *Source: Kantar Worldpanel Retail sales value 52 w/e March 2011 78
Slide 79: Hovis
WHOLEMEAL “ETT ALLY RIDE I MMOLESA AM GOODNESS FORA HEALTHY REART™ ———_
Slide 80: Plan to grow our share of Bakery
Our plan is to grow our share of Bakery £0.9 Bn Hovis Morning £458m Goods 12% share +0.8% yoy -2% £1.9 Bn £0.8 Bn Pre-Packaged £3.1 Bn Flour Bread -2% Own Label £1.7 Bn Homebaking Warburtons £0.5 Bn Chilled/Frozen Bread Kingsmill £0.3 Bn All Others £0.6 Bn BAKERY BAKERY £3.6 Bn,, +1% £3.6 Bn, +1% *
Slide 81: Critical to improve profitability
But it is critical that we improve profitability 19% % Trading profit margin 6% Grocery* y Hovis Division Division * 2010 pro forma for disposals 81
Slide 82: Ambition to step-change margin whilst gaining share
The ambition is to step-change margin whilst gaining share FUTURE £560 m 16% share Good to Go Snacks My Choice, My Hovis Girls Allowed TODAY Win in White Worth £440 m* Paying 12% More For share Aim is to expand Trading profit margin from 6% to 10% through costs savings and innovation *Source: Kantar
Slide 83: Brands with great potential for growth
In summary… Brands with great potential for growth! 83
Slide 84: Break
BREAK B k iin 30 minutes Back i t 84
Slide 85: Mining assets for gold
Mining assets for gold Transforming iconic British brands Mining assets for gold Shine in Store Tim Kelly, Chief Operating Officer 85
Slide 86: Our Defend brands
… our “Defend” brands… They already have They will have • Scale in their category • Dedicated management • Strong category shares • Tactical marketing and innovation • Categories modest in size or low • Relentless focus on cash and profit growth 86
Slide 87: Our Non Branded business
… and our Non Branded business Retailer branded • Scale in category, e.g. Spreads • Scale with customer • Supply pp y chain scale • Generates cash Business to business • Low margin but low risk • Additi Additional l volume l tto supportt manufacturing f t i scale l • Flour • Preserves • Vinegar g 87
Slide 88: A significant part of our portfolio
A significant part of our portfolio 2010 pro forma sales B2B 8% B2B, Retailer brand Chilled, 9% Di Drive, 36% Retailer brand Grocery / Bakery, 16% Core, 16% Defend, 15% Defend Brands and Grocery / Bakery Retailer branded are 31% off P Premier’s i ’ sales l 88
Slide 89: Defend and non branded create category scale
Defend and non branded combine to create category scale 2010 Sales Branded Non branded Branded pro forma f ffor di disposals l £ £m £ £m % Spreads1 69 56 55% Cake & Home baking 73 42 63% Desserts 45 23 66% Side of plate 58 56 51% Beverages 14 30 32% Baking & Milling 21 290 7% Other 33 7 83% Total2 3
Slide 90: An attractive part of our portfolio
This is an attractive part of our Portfolio • High g market shares,, hence high g margins g and category g y leadership p 72% 66% 98% 79% • Recovery of overheads Bury Volume Ashford Volume Defend brand & Drive & Core Defend brand & Drive & Non branded 47% 53% Non branded 57% Core 43% • Growth opport
Slide 91: Objective to provide greater focus
Our objective is to provide a greater focus 1 2 3 4 Cost out Marketing Sustain Selected from field on a Retailer growth to fork shoestring Brand opportunities 91
Slide 92: Cost out from field to fork
1 Cost out from field to fork • Alignment with Procurement to take out raw material cost • Ingredient consolidation • Optimisation of factories to take out manufacturing controllable costs • Remove the long tail of small run skus From To 92
Slide 93: Marketing on a Shoestring
2 Marketing on a Shoestring Use PR to exploit opportunities “Paddington becomes the face of Robertson’s marmalade” Licensing.biz “Space is an issue for winner of TV Martian” Metro “Orange crush: Pregnant Victoria Beckham 'can't can t get enough' of marmalade on toast” Daily Mail 93
Slide 94: Sustain Retailer Brand
3 Sustain Retailer Brand 2010 Sales* Other £7m Significant scale in Beverages categories enables £30m Spreads £56m us to be lowest cost suppliers Category captaincy through brands supports retailer brand Cake & Selectively take Side of Home opportunities where plate £56m Desserts b ki baking th d th
Slide 95: Selected growth opportunities
4 4. Big Selected growth Bets opportunities • Even within Defend we have growth opportunities • We will selectively y grow g these brands as opportunities are identified • E l it licensing Exploit li i opportunities t iti • We can migrate into our bigger brands 95
Slide 96: Focus on profit and cash
Focus on profit and cash • Role in the portfolio is clear • Category scale • Now structured to give necessary focus • Management team focused on maintaining sales and growing profit 96
Slide 97: Shine in store
Shine in store Transforming iconic British brands Mining assets for gold Shine in Store 97
Slide 98: Obsessive about execution
No great brand plans will work without being obsessive about execution 1 2 Driving 3 Create Results Make Consumer 4 through Powerful Insight based Focus on Execution High Choices Strategies g & Performance Plans Marketing 5 98
Slide 99: Vision to step-change in-store execution
Our vision is to step-change our levels of in-store execution Connect with our Customers to make our Brands Shine in Store 99
Slide 100: Five platforms to realise this vision
We have identified five platforms to help us realise this vision 5 FUTURE 4 Connecting with our 3 Customers to Maximise make our In-Store Brands shine 2 Events in store Launch with Excellence 1 Make Brands & Categories Build B ild the th Basics Connect & Relevant Collaborate with Customers TODAY In
Slide 101: Connect and Collaborate with Customers
Key Initiatives: Connect and Collaborate with Customers • Standardised trade terms that reward in-store execution • Senior communication of a rolling 18 month activity calendar • Strategic alignment of resource • Align structure to our customers 101
Slide 102: Make Brands and Categories Relevant
Key Initiatives: Make Brands and Categories Relevant • Become ‘customer champions’ p in our four focus categories: - Bakery - Sweet Treats - Desserts - Hot Meals • Launch industry leading category gro th sol growth solutions tions • Build ‘best in class’ category management g capability p y 102
Slide 103: Track-record of success in category management
We have a track-record of success in this area to build upon Food Enhancers Category: Premier Foods Brands: 103
Slide 104: Build the Basics
Key Initiatives: Build the Basics • Improved control over promotional compliance • Industry leading tools to: - Ensure planogram compliance - Maximise distribution - Improve availability • Improve packaging design to deliver better shelf stand-out 104
Slide 105: Launch with Excellence
Key Initiatives: Launch with Excellence • Annual ‘top p to tops’ p to showcase our Innovation Pipeline • Gold, Silver, Bronze executional standards • Gold to really mean Gold! - Best in class investment - Coke/Walkers style theatre • Stick to our guns, do what we say we are going to do 105
Slide 106: Maximise In-Store Events
Key Initiatives: Maximise In-Store Events • Build upon our success at Ch i t Christmas • Link commercial calendar to key retailer events: - Valentines, Halloween, etc - Mothers Day, Fathers Day - Easter, Bank Holidays - Olympics, World Cup, etc - Race for Life, Comic Relief, etc • Leverage ‘Great Li
Slide 107: Sales execution as important as strategic direction
Execution of our Strategy We believe sales execution is as important as our strategic direction 107
Slide 108: Building foundations in a difficult environment
Building foundations in a difficult environment Building foundations: • Capability Trading hard in a Building the case for • Structure difficult environment Brand investment • Choices • Allocating resources 108
Slide 109: Scale and efficiency in supply chain
Scale and efficiency in supply chain Providing the fuel for growth Using scale to deliver competitive advantage Delivering ongoing efficiency y savings g Efficient use of capital and minimising cash requirements Bob Spooner, Group Operations Director 109
Slide 110: What we inherited
What we inherited • > 50 Factories & > 30 Distribution Centres • Under utilised asset base <40% • Some well invested sites, sites Unilever Unilever, Campbell Campbell’s s • Some poorly invested sites ex RHM • As a consequence – High overheads, low efficiencies – Poor standards, aging infrastructure
Slide 111: Strategic options we considered
Strategic options we considered The Big Questions • Could we sustain a long term competitive position? • Could our supply base support our brand growth strategy? Our Choices • Outsource our manufacturing g • Invest in a reconfigured UK manufacturing base Considerations • The investment required • Th
Slide 112: In-house or outsourced
In-house or outsourced Premier Foods Labour Costs S l Efficiency Scale Effi i Eastern Europe / Far East • Target to reduce direct COSTS labour cost from 15% to 6% COSTS of prime Distribution Costs • Eastern Europe import cost 7% • Far East import cost 15% Customer & Consumer Quality Concerns Service
Slide 113: What we did
What we did • Closed 15 factories and 5 distribution centres • MCC & LCC reduced by £41m or 5.3% over past 12 months • Asset utilisation increased from < 40% to > 55% – Two shift operation moving to three shift operation • Technical standards and infrastructure substantially upgraded • Inventory red
Slide 114: Grocery supply chain
Grocery supply chain 600k Tonne 10 Factories of Food £ £ £ £ MCC £200m LCC £75m £ 4600 People 7 Distribution Centres £ £ £ 114
Slide 115: Hovis supply chain
Hovis supply chain 600k Tonnes 13 Bakeries of Bread 950k Tonnes Flour 9 Mills £ £ £ £ MCC £145m £ LCC £115m £ £ 4,800 People 15 Distribution Centres £ £ 115
Slide 116: Chilled supply chain
Chilled supply chain 50k Tonnes 3 Factories of Food £ £ £ £ MCC £77m LCC £9m £ 2200 to 2800 People £ £ £ 116
Slide 117: Reducing controllable costs
Reducing controllable costs Controllable costs defined as: • Direct and indirect labour • Operational overheads • Business variances • Waste Automation: Capex Aligned to Strategic NPD: • Labour <6% of prime cost from current 15% • Ambrosia single/twin pots • 3 Shift Shif operation i • Ki li single K
Slide 118: Our people
Our people • W have We h the th best b t Supply S l Chain Ch i L Leadership d hi Team T in i UK M Manufacturing f t i • Our factories and logistics operations will have increasingly flexible working patterns • We will invest in training and development to achieve self directed work teams • Our peopl
Slide 119: Technology platforms to support innovation
Technology platforms to support innovation Thermal Agglomeration Baking Extrusion Processing Drying Packaging Technology Platforms Technology Platforms Brewing Forming Frying Wid range off technology Wide t h l platforms l tf to t supportt innovation i ti 119
Slide 120: The financial fuel to fund growth
The financial fuel to fund growth 25% Controllable Costs Capital Investment Inventory £767m £142m £165m £726m £151m £591m £123m £78m £75 £75m £65m £60m 2009 2010 2015 * 2008 2009 2010 2011 2015 2009 2010 2015 Target Plan Target Target Reduction Reduction Reduction Reduction £41m £135m £14m £28m 5.3%
Slide 121: Corporate social responsibility
Corporate p social responsibility p y Health & Safety Energy Usage Waste to Landfill RIDDOR s RIDDOR’s Frequency Rate / Gigawatts Tonnes 100,00 hours 37,003 29,368 19,784 10,246 1825 1735 1654 1586 0.62 0.52 0.38 0.23 2007 2008 2009 2010 2007 2008 2009 2010 2007 2008 2009 2010 60% Reduction Over 3 Y
Slide 122: Corporate social responsibility
Corporate p social responsibility p y Non Ingredient Water CO2 Equivalent Delivery Miles Usage Emissions Megalitres Tonnes Miles (M) 548,950 515,309 448,567 478,114 74963 66784 5938 6815 5816 5320 2007 2008 2009 2010 2007 2008 2009 2010 2009 2010 10% Reduction Over 3 Years 18% Reduction Over 3 Years
Slide 123: The way ahead
The way ahead • We e have a ecchosen ose st strategically ateg ca y to invest est in Britain ta • We have achieved and will continue to sustain a cost advantage • Local supply shortens lead times • Local supply pp y meets customer service needs and CSR concerns • Technical standards that are a true
Slide 124: Competitive advantage through better procurement
Competitive advantage through better procurement Using scale to deliver competitive advantage Delivering ongoing efficiency y savings g Efficient use of capital and minimising cash requirements Mark Hughes, Group Procurement Director 124
Slide 125: What do we buy?
What do we buy? Raw Indirect materials £366m £656m Packaging Energy Factored £168m £63m goods £116m In a year we buy: -1 million tonnes of wheat produced by some 4,000 growers - 1 in 8 UK wheat fields - 70 million litres of milk (enough to fill 28 Olympic swimming pools) - 82,000 tonnes of UK produc
Slide 126: Significant progress from a strategic function
Significant progress from a strategic function 2007 2011 • No centralised • Centralised, category specialist buyer structure procurement • Greater leverage of spend • Not leveraging scale g • Significant systems, y effectively process and data • Poor coverage of indirect improvement categories • Enl
Slide 127: How are we structured?
How are we structured? Group Procurement Finance Director Support & analysis Programme Operational Corporate Business & Project j Packaging g g Ingredients g Indirects Services Partners Management Scale allows us to have category experts 127
Slide 128: How are we doing?
How are we doing? Number of suppliers Cumulative Indirect Savings - £m 70 12,000 60 10,000 50 8,000 40 6,000 30 4,000 ,000 20 2,000 10 0 0 2007 2008 2009 2010 2011 2012 2007 2008 2009 2010 2011 2012 Spend under direct control Payment days 100% 95% 90% 85% 80% 75% 70% 2007 2008 2009 2010 2011 2012 20
Slide 129: How do we buy?
How do we buy? Directs Indirects • Hedging – smoothing volatility • Supporting Manufacturing • Standardising items Controllable Costs (MCC) • Simplifying specifications • Increasing compliance • Leveraging our scale • Control through SAP • Innovation from our suppliers • Catalogues • S Supplier li c
Slide 130: Long term sustainable supplier relationships
Building long term sustainable supplier relationships, an innovative competitive advantage Issue: How:How: • Importing foreign wheat as no viable UK • Trialling various strains over a number of strain available years • Build the confidence of the UK grower network to promote wheat contracts to a suf
Slide 131: Sustainable packaging
Sustainable packaging Issue: Deliverables: • Committed to reducing carbon footprint and • By moving to PET jars we: wider environmental impact of products – Reduced 2,404 tonnes of packaging – Significant logistics efficiency gains Aim: – Reduced road miles through greater weight allowance for PET o
Slide 132: What next? 2011 and beyond
What next ….? 2011 and beyond Sustainable dvantage e Procurement Excellence in Risk Management etitive ad Great category management Step change St h P2P d compe efficiency Improved Compliance Improved Scale and Compliance S Complexity reduction Time / Benefit 132
Slide 133: Summary: scale gives competitive advantage
Summary • Further opportunity pp y to leverage g scale and drive competitive p advantage g • Track record of year on year benefit and synergy delivery • Clear objectives to support the business strategy • Direct commodity exposure is less than 25% of our spend • Continue to recognise and manage our
Slide 134: Our operating model
Our operating model Using scale to deliver competitive advantage Delivering ongoing efficiency y savings g Efficient use of capital and minimising cash requirements Jim Smart, Chief Financial Officer 134
Slide 135: Building foundations in a difficult environment
Building foundations in a difficult environment Building foundations: • Capability Trading hard in a Building the case for • Structure difficult environment Brand investment • Choices • Allocating resources 135
Slide 136: Business model: what it might imply
Business model: What it might imply Growth of 0‐2% ahead of market Pricing covers raw material cost IMPLIES Revenue Growth 1 - 2% inflation Improving brand mix and efficiencies will improve gross margin Trading profit growth 3 - 5% IMPLIES Cost savings will cover inflation and Recurring cash flow £8
Slide 137: Annuity value of cash flow
Annuity value of cash flow Target maximum average debt level 3.25 x EBITDA Once achieved: IMPLIES Choices which benefit Recurringg cash flow becomes ‘surplus’ p shareholders • Return: Dividend Yield Share buyback Capital growth • Continue debt reduction Recurring cash flow growth EPS growth • Accele
Slide 138: Summary and Q & A
Summary and Q & A Robert Schofield 138
Slide 139: Summary
Summary Transforming iconic O Our Drive D i andd Core C brands b d are capable bl British brands of transformational growth Mining assets for gold Our focus on Defend brands and Non branded can grow profit and cash Shine in Store We will connect with our customers to make our Brands Shine in Store -
Slide 140: Summary
Summary Using scale to deliver competitive advantage With both procurement and our operations we can drive long term sustainable cost Delivering ongoing savings to support our branded growth efficiency savings 5-10% Earnings growth Business model £80m and growing recurring cash flow 140
Slide 141: The Best in British Food with Brands You Really Love
The Best in British Food with Brands You Really Love 141