Conagra Brands, Inc. · NYSE:CAG
Conagra Brands — Conagra Foods — Investor Presentation (February 2010)
79 slides from Conagra Brands's investor presentation, Feb 16, 2010
Slide 1: ConAgra Foods 2010
2010 ConAgra Foods Food you love
Slide 2: Note on Forward-Looking Statements
This presentation contains forward-looking statements. These statements are based on management's current views and assumptions of future events and financial performance and are subject to uncertainty and changes in circumstances. The company undertakes no responsibility for updating these statemen
Slide 3: ConAgra Foods: 2006 turnaround game plan
Organization and culture Portfolio Supply Chain Innovation Marketing Sales execution Systems and processes 2006 Goal for FY09 EPS*: $1.35 - $1.40 FY09 Actual EPS*: $1.52 ConAgra Foods: 2006 turnaround game plan Focus on fundamentals: *Diluted EPS from continuing operations, excluding items impacting
Slide 4: Execute with Excellence
Execute with Excellence ConAgra Foods: 2006 turnaround game plan Share Gains Volume Growth Growing Profits Bigger / Better Innovation & Communication Simplification Lower Inventory/ Service Costs Higher Margins Stronger Base Foundation Rationalized Supply Chain Consistently Great Customer Service Hi
Slide 5: ConAgra Foods: much stronger organization
ConAgra Foods: much stronger organization 2006: 2010: Transaction-oriented holding company Silos High turnover No unified mission Operators with deep CPG experience Well-wired Continuity Common goal Confidence and passion
Slide 6: Rationalized portfolio
Sustainable, profitable growth Convenient Meals Potatoes Snacks Meal Enhancers Specialty 1 2 3 4 5 Rationalized portfolio
Slide 7: Supply Chain: providing fuel for growth
Supply Chain: providing fuel for growth Organization wiring Talent upgrade Enterprise scale Infrastructure investment Original Goal: 2.5-3% Consumer Foods COGS Productivity/Year Long runway of savings remaining % of Consumer Foods COGS Achieved In Millions 5.4% 4.8% 5.5% 5.0% $140 $140 $150 $165 $27
Slide 8: Sustainable, profitable growth formula
Supply Chain productivity + Tight overhead control Insights-driven marketing/selling + Fewer, Bigger, Better Innovation Sustainable, profitable growth formula FUELS
Slide 9: Innovation strategies
Innovation strategies Fewer, Bigger, Better Create new insulated technology platforms Leverage external partners Work backward from price point Health and wellness leadership
Slide 10: Innovation: build on success
Innovation: build on success
Slide 11: Platform innovation
Platform innovation 8/08 8/09 2/09 6/07 6/08 1/10 FY10 Net Sales ^ $225MM FY10 Net Sales ^ $65MM More coming in June! Forecasted FY10 +2.1 SHARE POINTS
Slide 12: Renovation: improving nutrition and quality
Nutritional improvement on 90% of frozen meals Reduce sodium 20% by 2015 across portfolio Renovation: improving nutrition and quality
Slide 13: Consumer desire to save: value is here to stay
National Grocers Association Consumer Study (2010) Prices very important to store traffic Consumers intent on saving, buying healthy and cooking smarter There is no let up in consumer's desire to save Average Retail Price per Unit ^ Price per Serving Banquet Dinners $1.04 $1.04 Banquet Pot Pies $0.7
Slide 14: Banquet FY11 initiatives
Banquet FY11 initiatives "So good for so little." Margin Improvement Family Serve Entrees Transformation Proven Winners $ Dinner Line Extensions New Eating Occasion Fruit Pies
Slide 15: New one-step cheese microwave popcorn
New one-step cheese microwave popcorn Taps into $1B+ cheese salty snack segment Significant consumer taste preference vs. current competition Strong initial sell-in
Slide 16: The Pro-Veggie Consumer
Insight: "I'm replacing meat with more veggies in my diet." Importance of veggies evolving in consumer's diet Soy-based $50MM sales at retail Loyal user base 1% Strict Vegetarian 3% Occasional Vegetarian 10% Aspiring Vegetarian 30% Non-Vegetarian (But Meat Reducing) 56% Non-Vegetarian (Not Meat Redu
Slide 17: Testing Lightlife veggie entrees
Testing Lightlife veggie entrees Currently in test market Early reads positive New segment adjacency for ConAgra Foods
Slide 18: ConAgra Foods marketing: bar has been raised
Centers of Excellence Insights-driven Behavior changing ROI-based Talent upgrade ConAgra Foods marketing: bar has been raised
Slide 19: Marketing Center of Excellence
Marketing Center of Excellence Advertising and Marketing Integration Advertising Consumer Promotion Agency Management Integrated Customer Marketing Shopper Insights Category Leadership Shopper Marketing In-store Marketing Consumer Insights Brand Insights Analytics Innovation Research Content Distrib
Slide 20: Orville Redenbacher's re-design
OLD Orville Redenbacher's re-design NEW Preferred 2-to-1 vs. current packaging
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Slide 22: Hunt's re-design
Hunt's re-design OLD NEW
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Slide 24: Healthy Choice
Healthy Choice Healthy | Choice @Condgrafoods
Slide 25: Innovation drives successful Healthy Choice re-launch
This is not the Healthy Choice you Thought you knew SURPRISE! Product Showcase at-shelf Cross Category Banner placements Cart Advertising Yahoo Homepage Takeover SpokepersonWanted.com Email blasts Media In-Store Marketing innovation drives successful Healthy Choice re-launch Television Interactive B
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Slide 27: Manwich
Manwich
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Slide 29: Key brand sales highlights H1 FY10 vs. H1 FY09
Key brand sales highlights H1 FY10 vs. H1 FY09 H1 FY10 vs. H1 FY09 Orville Redenbacher's +9% Hunt's Tomatoes +13% Healthy Choice +17% Manwich +6%
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Slide 31: Lamb Weston net sales
Lamb Weston net sales (in Millions) (excluding JVs and Intercompany)
Slide 32: Worldwide sales (FY10 est.)
Americas 66% EMEA 26% Far East 8% Worldwide sales (FY10 est.)
Slide 33: Sales channels (FY10 est.)
Sales channels (FY10 est.) Distributors & General Foodservice 38% Total Chain 35% Other 3% US Retail 10% Export 14% $2.3 Billion Revenue
Slide 34: Lamb Weston: major customer examples
Lamb Weston: major customer examples
Slide 35: Lamb Weston: great track record of productivity
Production lbs. per labor hour (indexed to 100) Industry leading process technology innovation Lamb Weston: great track record of productivity Consistent capital investment Consistent capital investment Fiscal Year
Slide 36: Sweet potato opportunity
Sweet potato opportunity Healthier image with consumers and operators Currently only on 5% quick service restaurant menus Alexia #1 SKU: Sweet potato fries (retail) Lamb Weston sweet potato 5-yr. CAGR > 50% Advantageous Louisiana location
Slide 37: Andre Hawaux, Consumer Foods
Andre Hawaux Consumer Foods
Slide 38: Building pride in Consumer Foods
Building pride in Consumer Foods
Slide 39: Pride through performance means...
Delivering results Putting the foundation in place Setting the table for future growth Pride through performance means...
Slide 40: Strategically aligned portfolio
Convenient Meals Potatoes Snacks Meal Enhancers Specialty 1 2 3 4 5 Strategically aligned portfolio Enhanced focus Clear priorities
Slide 41: Enhanced organizational & process capabilities
Enhanced organizational & process capabilities SAP deployment Food and employee safety upgrades Significant infrastructure investment Reduced complexity Simplified customer planning
Slide 42: Delivered four quarters of operating profit growth
(CHART) * Continuing Operations excluding items impacting comparability. See appendix A. Delivered four quarters of operating profit growth Consumer Foods operating profit growth vs. year ago *
Slide 43: Delivered share growth in both units and dollars
Delivered share growth in both units and dollars Delivered share growth in both units and dollars (CHART) Q1 Q2 Q3 Q4 Q1 Q2 09 09 09 09 10 10 Consumer Foods unit share Consumer Foods dollar share Change vs. Year Ago Change vs. Year Ago Q1 Q2 Q3 Q4 Q1 Q2 09 09 09 09 10 10
Slide 44: Delivered significant cost savings
Delivered significant cost savings Cost savings ($ in millions) 5.4 % 5.5% 5.0% 4.8 % % of Consumer Foods COGS
Slide 45: Delivered improved safety record
Delivered improved safety record Industry Average 6.2 Total Incident Rate (TIR)
Slide 46: Reduced our cash conversion cycle
(CHART) Reduced our cash conversion cycle Number of Days Consumer Foods COGS only $66 $101 $79
Slide 47: Resulting in customer recognition
Source: Cannondale Associates PowerRanking (r)2009 "ConAgra is starting to drive with strong healthy brands." "ConAgra has done a great job in getting their top brands in front of the consumer - their media has been very good." "ConAgra has solid knowledge and a variety of insights that have helped
Slide 48: Improving Supply Chain recognition
(CHART) "ConAgra has stepped up the game in supply chain - they are top ranked in most aspects." Best Supply Chain Management Cannondale Ranking And improving Supply Chain recognition Percent of retailers ranking ConAgra Foods in the top three Source: Cannondale Associates PowerRanking (r)2009 3.5%
Slide 49: Setting the table to grow with our customers
Sales Excellence Pricing Architecture Category Management Joint Customer Planning Setting the table to grow with our customers
Slide 50: Pricing architecture
Pricing architecture based on ... Consumer insights Consumer value defined thresholds Clearly defined promoted margin boundaries Recommended price gaps to relevant competition Proactive margin management Price elasticity defined depth of discount
Slide 51: Pricing architecture example
Pricing architecture example *Price gap is non-promoted price vs. private label, FDMx Recommended Target Gap Actual Gap Base Unit Velocity Base Unit Share Dollar Share Ro*Tel 10 oz $0.49 + +11.4% +0.6 pt +0.7 pt
Slide 52: Shopper insights are the currency for customer partnerships
Shopper insights are the currency for customer partnerships Joint customer planning Seasons of Mom Cocooning, Regroup, Relax, Catch Up Renew, Refresh, Rebirth Freedom, No Rules, No Schedules, Mom's Favorite New routines are steady... the calm before the storm Overwhelmed, Stressed, New Routines Obli
Slide 53: Joint customer planning in action
October Fling Joint customer planning in action The return on shopper insights is strong targeted customer execution Hebrew National +44% Orville +23% Reddi-wip +10% All measurements are based on unit sales vs. October Year Ago
Slide 54: S P A C E Program
S P A C E Program Simplifying Product Assortment and Creating Efficiency Category Management
Slide 55: Category Management put into practice
Category Management put into practice Issue #1: Difficult to shop Issue #2: High out-of-stocks Issue #3: More feature & display S P A C E Program Solving key issues in the tomato portfolio
Slide 56: Category Management learnings and insights
4ft 4ft 4ft Category Management learnings and insights Recommended Canned Tomato Shelf Set Spicy Diced Paste Diced Puree/All Other Stewed Flavors Stewed Whole Flavored Whole Crushed Flavored Crushed Sauce
Slide 57: Sales excellence is driving growth
Sales excellence is driving growth Pricing Architecture Category Management Joint Customer Planning Total Points of Distribution Percent Change vs. Year Ago Source: IRI FDMX
Slide 58: Supply Chain: setting the table for future growth
Supply Chain Setting the table for future growth Demand Driven Supply Chain Complexity Reduction Plant Optimization SAP Value Extraction
Slide 59: Supply Chain improving - opportunities remain
Supply Chain improving - opportunities remain 5,200 78 days 1,050 2.4 60% FY2008 FY2010 Industry Avg. Number of SKUs 4,600 3,500 Cash Conversion Cycle 66 days 52 days Miles 950 650 Touches 2.3 1.7 Overall Equipment Effectiveness 67.4% 80%
Slide 60: Early program successes
Early program successes 90% process reliability (OEE) Breakdowns reduced 40% Material scrap cut 68% Zero total incident rate (safety) 33% reduction in trays/cartons Improved shelf-set utilization Perfect pallet - 1MM miles eliminated 430 SKUs rationalized ( 20+%) 60+% volume substitutable Inventory
Slide 61: Supply Chain - changing the game
Supply Chain - changing the game Complexity Reduction Plant Optimization SAP Value Extraction Demand Driven Supply Chain Top Line Growth Improve Return on Assets Improve Operating Margins Business Imperatives Strategic Programs
Slide 62: Supply Chain program deliverables
Plant Optimization Demand Driven Supply Chain Complexity Reduction SAP Value Extraction Supply Chain program deliverables Supplier Collaboration Lean Plant Run Strategy Retailer Collaboration Active SKU Management Product Design-to-Value Material/ Vendor optimization OEE Improvement Material waste r
Slide 63: Strong forecast for Supply Chain savings FY11-FY13
Consumer Foods COGS only Strong forecast for Supply Chain savings FY11 - FY13 Strategic Planning Horizon Projected cost savings $275 million each of the next 3 years 15-day reduction in cash conversion cycle $300 million reduction in working capital
Slide 64: Building Pride through Performance
Building Pride through Performance We are aligned strategically We are organized to win We have built a strong foundation We are delivering consistent results We have set the table for future growth
Slide 65: John Gehring: Financial Priorities and Outlook
John Gehring Financial Priorities and Outlook
Slide 66: Financial priorities for sustainable, profitable growth
Financial priorities for sustainable, profitable growth Growing cash flows Healthy balance sheet and strong liquidity High-return capital allocation
Slide 67: Growing cash flows
Growing cash flows Operating Cash Flow Target Operating Cash Flows ^ $1.2 to $1.4 billion per year for the next 3 years Earnings growth Working capital efficiency
Slide 68: Growing cash flows: outlook
EPS: Long-term EPS* growth of 8 to 10% Working capital Cash generation averaging $100MM/yr, FY11-13 Capital expenditures $450MM to $475MM/yr FY11-13 Shift from infrastructure to growth and cost reduction Growing cash flows: outlook *EPS guidance discussed in this presentation is based on diluted EPS
Slide 69: Key cash flow assumptions: inflation
Key cash flow assumptions: inflation Inflation trending upward in CY10 FY10 - Manageable input cost levels Planning for net low single-digit impact after considering pass-through categories, such as cooking oil Increases in packaging and vegetables, offset by favorability in edible oils, energy and
Slide 70: Key cash flow assumptions: cost savings
Sustained Supply Chain savings in Consumer Foods Cumulative ^ $1.1 billion+ since the beginning of FY07 FY2010: Ahead of expectations at approximately $300MM Continued progress in FY11-13: Targeting $275MM/yr Effective margin management in Commercial Foods Selling, general and administrative cost Ze
Slide 71: Healthy balance sheet and strong liquidity
Strong investment grade credit rating Strong liquidity, improved financial flexibility Nearly $500MM of cash at end of Q2 FY10 Continued access to commercial paper markets Manageable debt maturities $1.5 billion revolving credit facility in place through December 2011 Approximately $600MM of PIK not
Slide 72: Capital allocation: priorities
Capital allocation: priorities Dividend payout attractive among peer set: top tier Growth and profit enhancement investments New product and capacity expansion - e.g., Sweet Potatoes Bolt-on acquisitions Share repurchase $500MM program announced today
Slide 73: Full year outlook
*All EPS amounts are from continuing operations, excluding items impacting comparability. See Appendix A. Full year outlook* Confirming full FY10 EPS* guidance of approaching $1.73 ^ $0.83 in second half Consumer Foods segment: very strong performance driven by very good fundamentals Commercial Food
Slide 74: Long-term goals
*EPS and ROIC guidance discussed in this presentation excludes items impacting comparability. EPS guidance is based on diluted EPS from continuing operations, excluding items impacting comparability. The inability to predict the timing and amount of future items impacting comparability makes a detai
Slide 75: Summary
Summary Focus: strong cash flow, healthy balance sheet and liquidity, and high-return capital allocation Cash flow expected to support strong dividend and investments to drive sustainable business model FY10 EPS* on track Committed to EPS* growth of 8 to 10% long-term *EPS guidance is based on dilut
Slide 76: ConAgra Foods 2010
2010 ConAgra Foods Food you love
Slide 77: Appendix A: Fiscal 2010 EPS Reconciliation
Appendix A: Fiscal Regulation G Q1 FY10 Q2 FY10 Q3 & Q4 FY10 Fiscal Year Total Diluted EPS from continuing operations $ 0.37 $ 0.55 Items impacting comparability*: (Benefit) / Expense related to mark-to-market impact of derivatives 0.01 (0.01) ** ** (Benefit) / Expense of lower than planned effectiv
Slide 78: Appendix A: Fiscal 2009 EPS Reconciliation
Appendix A: Fiscal Regulation G FY 09 Total FY 09 Total Diluted EPS from continuing operations $ 1.42* Items impacting comparability**: Expense related to early retirement of debt $ 0.07 Gain on sale of Pemmican brand $ (0.02) Expense related to restructuring charges, continuing operations $ 0.02 Ex
Slide 79: Appendix A: Consumer Foods segment operating profit
Appendix A: Fiscal Regulation G Consumer Foods segment operating profit exclusive of items impacting comparability (Dollars in millions) Q2 FY10 Q2 FY10 Q2 FY09 Q2 FY09 Year-over-year % change Consumer Foods Segment Operating Profit $ 330 $ 251 31% No items impacting comparability - - Consumer Foods
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