Clorox Company (the) · NYSE:CLX
Clorox Company (the) — The Clorox Company — 2016 CAGNY Conference
78 slides from Clorox Company (the)'s conference presentation, Feb 17, 2016
Slide 1: The Clorox Company 2016 CAGNY Conference
The Clorox Company 2016 CAGNY Conference Boca Raton, FL
Slide 2: Benno Dorer, Chief Executive Officer
Benno Dorer Chief Executive Officer
Slide 3: Key Messages
Key Messages • Strategy 2020 is continuing to produce strong shareholder returns • Strong progress on Strategy Accelerators and investments in profitable growth • Long-term investment case remains solid
Slide 4: Safe Harbor
Safe Harbor Except for historical information, matters discussed in this presentation, including statements about the success of the Company’s future volume, sales, costs, cost savings, earnings, foreign currencies, and foreign currency exchange rates, cash flows, plans, objectives, expectations, gr
Slide 5: Advantaged Portfolio: Over 80% of Sales From #1 or #2 Share Brands
Advantaged Portfolio Over 80% of Sales From #1 or #2 Share Brands International : 19% Cleaning : 32% Home Care 17% International 19% FY15 Company Burt's Bees 4% Laundry 10% Brita 4% Sales: PPD 5% Food 9% $5.7B Charcoal 11% Glad 15% Lifestyle : 17% Litter 6% Household : 32%
Slide 6: Advantaged Portfolio: Big Share Brands in Mid-Sized Categories
Advantaged Portfolio Big Share Brands in Mid-Sized Categories Clorox Smaller 23% Players 32% Clorox is ~3X Private the size of next Competitor E Label 3% 20% branded competitor Competitor D 4% Competitor C Competitor B Competitor A 5% 5% 8% Note: Clorox share excludes Kitchen Bouquet, Salad Crispins
Slide 7: Advantaged Portfolio: Supported by Consumer Megatrends
Advantaged Portfolio Supported by Consumer Megatrends Health & Wellness Sustainability MEGA TRENDS Fragmentation Affordability
Slide 8: Advantaged Portfolio: Driving Significant Synergies
Advantaged Portfolio Driving Significant Synergies Customer Supply Chain Brand Building Scaled teams, Common consumer Scale across Buy, capabilities, and Make, Ship trends, insights, 3D broker network demand creation Health & Wellness Sustainability Fragmentation Affordability Over 80% of sa
Slide 9: Increasing Investments in Profitable Growth
Increasing Investments in Profitable Growth Focus on Core Increased Investments in Demand Innovation Investment
Slide 10: Market Share is Responding
Market Share is Responding… Last 6 Months Last 12 Months +0.3pts +0.3pts Last 24 Months -0.3pts Note: Clorox share excludes Kitchen Bouquet, Salad Crispins, Salad Kits, Veggie Kits, LDL, Laundry Detergent, Washing Machine Cleaners, Wash N Dri, Glad Straws, Cooking Bags, Litter Additives & Equipment
Slide 11: Categories are Growing
…Categories are Growing Last 6 Months Last 12 Months +2.0% +2.3% Last 24 Months +3.2% Note: Clorox share excludes Kitchen Bouquet, Salad Crispins, Salad Kits, Veggie Kits, LDL, Laundry Detergent, Washing Machine Cleaners, Wash N Dri, Glad Straws, Cooking Bags, Litter Additives & Equipment and Burt's
Slide 12: Strong Results Are Recognized by Shareholders
Strong Results Are Recognized by Shareholders Total Shareholder Return 1 Year Ending 12/31/15 25% 25% 3% 15% 22% 8% 5% 5% 1% 3% 2% -5% Clorox Peers SP500 -1% Share Price Appreciation Dividend Paid
Slide 13: Strong Long-Term Shareholder Return
Strong Long-Term Shareholder Return Over 2x the S&P 500!
Slide 14: Leading Through Strategic Change in CPG
Leading Through Strategic Change in CPG Digital Consumer Challenging International Revolution Focus on Value Retail Macro Environment Headwinds
Slide 15: 2020 Strategy
2020 Strategy Mission • We make everyday life better, every day • Maximize economic profit across categories, channels, and countries Objectives • Big-share brands in midsized categories and countries • Engage our people as business owners • Increase brand investment behind superior value and more t
Slide 16: Strategy Accelerators Drive Profitable Growth
Strategy Accelerators → Drive Profitable Growth 2020 Goals (Annual)
Slide 17: Focus on Portfolio Momentum
Focus on Portfolio Momentum 2020 Goals (Annual)
Slide 18: Portfolio Segmentation
Portfolio Segmentation High Fuel Growth 2020 Goals (Annual) Sales Growth Potential Low High
Slide 19: 1 Point of Household Penetration = $50M+ Sales
1 point of Household Penetration = $50M+ Sales Opportunity by Segment Cleaning Household Lifestyle $22M $20M $10M *Dollar Opportunity of 1pt of HH Pen based on 1 purchase per year Source: IRI Panel Data, Total U.S. All Outlets, NBD Weighted
Slide 20: New Usage Occasions Drives Household Penetration
New Usage Occasions Drives Household Penetration New Faces New Spaces New Places New Demographic or Consumes Product in a New Channel or Behavioral Group New Way Location in Store
Slide 21: Driving Household Penetration: Burt's Bees
Driving Household Penetration: Burt’s Bees International : 19% Cleaning : 32% Home Care 17% International 19% Burt's Bees 4% Laundry 10% Brita 4% PPD 5% Food 9% Glad 15% Charcoal 11% Litter Lifestyle : 17% 6% Household : 32%
Slide 22: Strong Foundation of Leadership
Strong Foundation of Leadership +8% 120+ #1 Natural brand 5 Year Items launched CAGR over past 3 yrs 26% 20% Nearly 1/2 of new NPC NPC Market of NPC sales over last Share Category 3 yrs Growth Source: IRI MULO 52we 8-9-15; CAGR represents Domestic POS data including IRI + SPINS + WF; Brand Health Tr
Slide 23: Growth With New Faces, Spaces & Places
Growth With New Faces, Spaces & Places Drive Expand into International Trial & Awareness Adjacencies Expansion on Core
Slide 24: Focus on Core: Fastest Growing Lip Balm
Focus on Core → Fastest Growing Lip Balm Retail Dollars vs Year Ago 20% Latest 12 months 11% 10% 5% 0% -1% -2% -10% Burt's Bees Chapstick Blistex EOS Source: IRI MULO 52wk Ending 12/27/15
Slide 25: Core is Increasing Household Penetration
Core is Increasing Household Penetration % Household Penetration vs YA +14% Increase vs YA Dec 2014 Dec 2015 Source: IRI Panel Data, Total U.S. All Outlets, NBD Weighted
Slide 26: Expanding Into Lip Color & Face Care
Expanding Into Lip Color & Face Care
Slide 27: Lipsticks – Strong Holiday Execution
Lipsticks – Strong Holiday Execution CVS Target ULTA 4,696 displays 1,789 displays 872 displays Source: 4.7 Star Rating on Target.com on 1/26/16
Slide 28: International Expansion
International Expansion Retailer Store within eCommerce Partnership Store Concept
Slide 29: Driving Household Penetration: Brita
Driving Household Penetration: Brita International : 19% Cleaning : 32% Home Care 17% International 19% Burt's Bees 4% Laundry 10% Brita 4% PPD 5% Food 9% Glad 15% Charcoal 11% Litter Lifestyle : 17% 6% Household : 32%
Slide 30: Focused on Reversing Share Trend
Focused on Reversing Share Trend $ Market Share Share Change vs YA Last 52 Weeks 1.5% 70% 60% 58% 0.5% 50% 40% -0.5% 29% 30% 20% -1.5% 10% 6% -2.5% 0% Q1 Q2 Q3 Q4 Q1 Q2 Brita Pur Private Label FY'15 FY'15 FY'15 FY'15 FY'16 FY'16 Source: IRI MULO Date Ending 12/20/15 Total Water Filtration
Slide 31: Focus on 3D Innovation
Focus on 3D Innovation 2020 Goals (Annual)
Slide 32: Broad-based Approach to Innovation
Broad-based Approach to Innovation KEEP THE CORE HEALTHY GROW MARKET SHARE Product & Product Marketing Superiority New Product Cost-o- Platforms EXPAND MARGIN vation* & ACCELERATE GROWTH Adjacency Expansion *Cost-o-vation is a term used at Clorox that describes innovation that improves product perfo
Slide 33: Innovation is Delivering Growth
Innovation is Delivering Growth 5% Incremental Sales Growth from Innovation (Last 12 months) 4% 3.3% 3.4% 2.9% 3.0% 3.0% 3% 2.8% 2% 1% 0% FY11 FY12 FY13 FY14 FY15 FY16 Outlook Note: FY16 Outlook based on Feb 4th Earnings Release
Slide 34: New Metric: Consumer Value Measure (CVM)
New Metric: Consumer Value Measure (CVM) To Date Process FY16 & Beyond Product Experience 60/40 Testing 60/40 Testing Perception Brand Equity Price Price 2020 Goals (Annual) Total Consumer Value
Slide 35: Glad: Improving Value Through Product Experience
Glad: Improving Value Through Product Experience International : 19% Cleaning : 32% Home Care 17% International 19% Burt's Bees 4% Laundry 10% Brita 4% PPD 5% Food 9% Glad 15% Charcoal 11% Litter Lifestyle : 17% 6% Household : 32%
Slide 36: Blockbuster & Sequels: Differentiated Technology Provides Staying Power
Blockbuster & Sequels Differentiated Technology Provides Staying Power
Slide 37: The Next Sequel: Glad with Heavy Duty Febreze
The Next Sequel: Glad with Heavy Duty Febreze • 2X Odor-Neutralizing Power • 91% of HH’s want benefit, only 30% buying today Sources: Scent Landscape Quant Study 2011; IRI Household Pane 52wks 6/14/2015
Slide 38: Premium Segment Driving Growth in FY16
Premium Segment Driving Growth in FY16 +0.2 pts +10% +4% vs YA Premium Trash vs YA Sales Growth Market Share Top-Line Driver Category Growth Growth Driver Source: IRI MULO 13wk Ending 12/20/15 Trash Disposal Category. Premium Trash consists of Forceflex, Odorshield, Forceflex Odorshield
Slide 39: Litter: Improving Value Through Product Experience
Litter: Improving Value Through Product Experience International : 19% Cleaning : 32% Home Care 17% International 19% Burt's Bees 4% Laundry 10% Brita 4% PPD 5% Food 9% Glad 15% Charcoal 11% Litter Lifestyle : 17% 6% Household : 32%
Slide 40: Focused on Reversing Share Trend
Focused on Reversing Share Trend $ Market Share Share Change vs YA Last 52 Weeks 1.0% 40% 35% 0.0% 30% 23% 20% -1.0% 20% -2.0% 10% -3.0% 0% Q1 Q2 Q3 Q4 Q1 Q2 Tidy Cats Clorox Arm & Hammer FY'15 FY'15 FY'15 FY'15 FY'16 FY'16 Source: IRI MULO Date Ending 12/20/15 Cat Litter
Slide 41: New Fresh Step With Febreze: Superior Odor Control
New Fresh Step With Febreze: Superior Odor Control
Slide 42: Outstanding In-Store Launch Support
Outstanding In-Store Launch Support
Slide 43: Focus on 3D Technology Transformation
Focus on 3D Technology Transformation 2020 Goals (Annual)
Slide 44: Leading the Industry in Digital Consumer Engagement
Leading the Industry in Digital Consumer Engagement Driving Consumer Engagement More More More Targeted Personal Real-Time
Slide 45: Accelerating Investments in Digital Media
Accelerating Investments in Digital Media % of Working Media on Digital Clorox now 41% invests over 40% 34% of our media in 22% 25% digital FY13 FY14 FY15 FY16
Slide 46: Digital Improves ROI
Digital Improves ROI Enhanced More More Targeting Personalized Real Time Across Channels
Slide 47: Campaign ROI Comparison
Campaign ROI Comparison ROI per Marketing Dollar Spent TV X Enhanced Targeting TV + 1.6X More Personalized More Real TV + + + + 2.1X Time Across Channels
Slide 48: Innovative Partnerships are a Competitive Advantage
Innovative Partnerships are a Competitive Advantage
Slide 49: Momentum in eCommerce
Momentum in eCommerce ~50% Sales Growth (FY15 vs FY13) FY13 FY14 FY15
Slide 50: Key Messages
Key Messages • Strategy 2020 is continuing to produce strong shareholder returns • Strong progress on Strategy Accelerators and investments behind profitable growth • Long-term investment case remains solid
Slide 51: Current Environment: Why Invest More?
Current Environment: Why Invest More? Build on Strong ROIs Strong Long-Term Momentum Innovation Focus Plans
Slide 52: Steve Robb, Chief Financial Officer
Steve Robb Chief Financial Officer
Slide 53: Key Messages
Key Messages • Strategy 2020 is continuing to produce strong shareholder returns • Strong progress on Strategy Accelerators and investments behind profitable growth • Long-term investment case remains solid
Slide 54: FY16 YTD Performance
FY16 YTD Performance 1H FY16 Vs. Year Ago +1.4% Sales $2.7B (+4% FX Neutral) EBIT Margin 19.6% +220 bps Diluted EPS $2.46 +19% (cont. ops) EBIT (a non-GAAP measure) represents earnings from continuing operations before income taxes (a GAAP measure), excluding interest income & interest expense. EBIT
Slide 55: FY16 Outlook
FY16 Outlook Based on February 4th Earnings Call • Categories: +1% to +2% Sales • Innovation: +3pts 0% to +1% • FX: about -3pts • Trade/Other: -1pt • Gross Margin: about +100bps EBIT Margin • Selling & Admin: about 14% of Sales +50bps to +75bps • Advertising & Sales Promotion: > 9% of Sales Diluted
Slide 56: Long-Term Growth Algorithm Remains Unchanged
Long-Term Growth Algorithm Remains Unchanged U.S. Domestic International ~80% of Clorox Sales ~20% of Clorox Sales +2-4% annual growth +5-7% annual growth 1.5 - 3.0 pts 1.0 - 1.5 pts = 3 - 5 pts company growth company growth company growth Annual EBIT Margin Improvement: +25 to 50 bps Annual Free Ca
Slide 57: U.S. Domestic Results are on Track
U.S. Domestic Results are on Track Domestic Sales Growth FYTD 6% 4% 2% Q1 Q2 FYTD
Slide 58: International is a Key Component of our Portfolio
International is a Key Component of our Portfolio International : 19% Cleaning : 32% Home Care 17% International 19% Burt's Bees 4% Laundry 10% Brita 4% PPD 5% Food 9% Glad 15% Charcoal 11% Litter Lifestyle : 17% 6% Household : 32%
Slide 59: Why We Like International
Why We Like International Peru Leading Midsized Faster Strong Brands Countries Category Operational Growth Rates Performance
Slide 60: Strong Growth in Local Currency, However FX is Real
Strong Growth in Local Currency, However FX is Real Sales Growth 10% 10% Exchange Rate 7% vs YAGO 5% 5% 4% Canada -15% 2% Argentina -15% 0% Australia -16% -1% -5% -3% Chile -14% Colombia -29% -10% -8% Mexico -17% FY 2013 FY 2014 FY 2015 FYTD 2016 Currency Neutral As Reported Source: Foreign Exchange
Slide 61: International: Go Lean Approach
International: “Go Lean” Approach Pricing Focus on Right-Size Optimize Maximization Cost Savings Infrastructure Demand Creation 4 Pillars of Profitability
Slide 62: 2020 Strategy
2020 Strategy • Engage our people as business owners • Increase brand investment behind superior value and more targeted 3D plans Strategy • Keep the core healthy and grow into new categories, channels, and existing countries • Reduce waste in work, products, and supply chain to fund growth
Slide 63: Cost Savings Continue to Deliver +150bps
Cost Savings Continue to Deliver EBIT Margin Benefit from Cost Savings 300 bps 250 bps 200 bps +150bps Annual Goal 150 bps 100 bps 50 bps 0 bps FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16+ Note: FY16 Outlook based on Feb 4th Earnings Release
Slide 64: Strong Pipeline of Cost Savings
Strong Pipeline of Cost Savings Resin ~2% Efficiency Reduction Plant Consolidation World Class Manufacturing Bleach Concentration Improved Product Performance Reduce weight of charcoal briquette Packaging Every Year Reduction
Slide 65: Bleach Network Optimization 1990s
Bleach Network Optimization 1990s (9 Plants)
Slide 66: Bleach Network Optimization Today
Bleach Network Optimization Today (6 Plants → 5)
Slide 67: Opportunities Exist Within SG&A
Opportunities Exist Within SG&A 45% 35% % of Sales 25% Goal: < 14% Sales 15% 14.1% 5% CHD KHC KMB GIS CLX TAP K PG EPC HSY RB- CL KO PEP EL GB SG&A % of Sales as of Latest Fiscal Year End CLX as of June 30th, 2015
Slide 68: Top-Tier ROIC
Top-Tier ROIC 40% 30% 27% 20% Peer Average: 14% 10% 0% CL CLX EL RB-GB HSY CPB PEP CHD KO GIS PG KMB K KHC TAP EPC Return on invested capital (ROIC), a non-GAAP measure, is calculated as earnings from continuing operations before income taxes and interest expense, computed on an after-tax basis as a
Slide 69: Strong Free Cash Flow
Strong Free Cash Flow $900 Projected $800 $858 10% - 12% $786 of Sales $780 $700 $M $600 $622 $500 $733 $649 $590 $400 $433 $300 FY12 FY13 FY14 FY15 Goal Operating Cash Flow Free Cash Flow Free Cash Flow = Operating Cash Flow from Continuing Operations – Capital Expenditures
Slide 70: Use of Cash Priorities
Use of Cash Priorities Business Growth Support Dividend (includes targeted M&A) Free Cash Flow Debt Leverage1 Share Repurchases (Target: 2.0 – 2.5x) 1. Debt Leverage = Gross Debt / EBITDA
Slide 71: M&A Criteria
M&A Criteria • Target areas with tailwinds in categories, countries, and channels Categories: Health & Wellness, Food Enhancers, and Natural Personal Care Countries: US-Centric, with possible International expansion Channels: Current retail and professional markets • Strong fit with Clorox str
Slide 72: Nearly $2 Billion Returned To Shareholders in Last 4 Years
Nearly $2 Billion Returned To Shareholders in Last 4 Years FY15 Payout Ratio 64% $800 $733 $649 $590 $600 $433 $400 $M $532 $568 $200 $454 $330 $0 FY12 FY13 FY14 FY15 FCF Cash Returned to Shareholders
Slide 73: Healthy Dividend Growth
Healthy Dividend Growth… Dividends Have Increased Each Year Since 1977 Dividend Yield as of Dec 31st, 2015 4% 2.8% 2.4% Peer Average: 2.6% 2% 0% PG KO KHC GIS PEP KMB K CPB HSY CLX CL TAP CHD EL
Slide 74: Long Track Record of Share Repurchases
…and Long Track Record of Share Repurchases $100 Repurchased Nearly 40% of Shares over last 10 Years $80 $60 $40 CY04 CY05 CY06 CY07 CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15 Shares Outstanding 214M 133M Shares Outstanding are as of June 30th, 2015
Slide 75: Long-Term Investment Case Remains Solid
Long-Term Investment Case Remains Solid • FX headwinds likely to lessen over the long-term • Investing behind our brands to grow categories and share • Solid pipeline of innovation and cost savings, including SG&A • Free cash flow: 10% to 12% of Sales
Slide 76: Strong Shareholder Return
Strong Shareholder Return Over 2x the S&P 500!
Slide 77: Near-Term Priorities
Near-Term Priorities • Invest in our categories by supporting innovation • EBIT margin expansion: Continue executing with operational excellence • International Segment: Prioritize profitability while managing through an increasingly difficult F/X environment
Slide 78: Key Messages
Key Messages • Strategy 2020 is continuing to produce strong shareholder returns • Strong progress on Strategy Accelerators and investments behind profitable growth • Long-term investment case remains solid