DPS CAGNY 2010

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Dr Pepper Snapple Presentation at 2010 Consumer Goods Analyst Conference

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DPS CAGNY 2010

  1. 1. CAGNY February 17, 2010
  2. 2. Safe Harbor Statement This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, in particular, statements about future events, future financial performance, plans, strategies, expectations, prospects, competitive environment, regulation, and cost and availability of raw materials. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “may,” “will,” “expect,” “anticipate,” “believe,” “estimate,” “plan,” “intend” or the negative of these terms or similar expressions. These forward-looking statements have been based on our current views with respect to future events and financial performance. Our actual financial performance could differ materially from those projected in the forward-looking statements due to the inherent uncertainty of estimates, forecasts and projections, and our financial performance may be better or worse than anticipated. Given these uncertainties, you should not put undue reliance on any forward-looking statements. All of the forward- looking statements are qualified in their entirety by reference to the factors discussed under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2008 and our other filings with the Securities and Exchange Commission. Forward-looking statements represent our estimates and assumptions only as of the date that they were made. We do not undertake any duty to update the forward- looking statements, and the estimates and assumptions associated with them, after the date of this presentation, except to the extent required by applicable securities laws.
  3. 3. Strong Portfolio of Brands with Leadership Positions Flavored CSDs Juice & Juice Drinks Premium Tea Mixers Gourmet CSDs
  4. 4. Priority Focus Brands Drive Over 70% of Volume
  5. 5. And Generate Over $8bn in Retail Sales Estimated Retail Sales (Millions) $0 $200 $400 $600 $4000 Source: The Nielsen Company and company estimates of non-measured channels including fountain foodservice. Estimates include sales by third-party bottlers and distributors.
  6. 6. Portfolio Also Contains Leading Regional, New and Allied Brands
  7. 7. Flavored CSDs Drive 80% of Our Business and Are Growing Flavored CSD Category Mix DPS Dollar Share (Retail Sales Dollars) Change 2009 vs 2006 50.6% 41.3% 49.3% 39.2% 48.3% 47.8% 46.3% +2.1pts 2005 2006 2007 2008 1/2010 Flavored CSDs Source: The Nielsen Company – U.S. Only
  8. 8. Route to Market is Broad, Balanced and Flexible Company Owned Distribution ~ 40% Fountain Foodservice ~ 10% Warehouse ~ 10% Bottling Partners ~ 40%
  9. 9. Spun-Off 5/08, DPS is an Amalgamation of Many Brand and Bottling Companies Dr Pepper/7UP Companies, Inc. Manufacturing & Distribution Assets Dallas / Fort Worth Dr Pepper Bottling Company Dr Pepper Bottling Company of Waco Seven Up Bottling Company of Waco Kemmerer Bottling Seven Up Bottling of IN / Northern KY Joyce Beverages Midwest Racine Seven Up Dr Pepper Bottling Co of Houston 7Up Detroit Inc. Beverage Management (OH) Full Service Beverage Co of Houston Snapple Beverage Corp. Metro Beverages, Inc. (Eastern IN) Klages (Akron, OH) Seven Up Bottling Co. of Dallas Mid-Continent Bottlers, Inc. A.J. Canfield Co. American Juice Co. Iowa Beverages All American Bottling Corp. (Rockford, IL) Dr Pepper Bottling Co. of Galveston Big Red Distributors, Inc. (Waco) All American Bottling Corp. (Minneapolis) Seven Up Bottling Company of Topeka All American Bottling Corp. (WV) Corsicana Dr Pepper Bottling Co. 7Up RC Bottling Company of Southern CA Duffy – Mott’s Co. Select Beverages Beverages America Cotton Club of Cleveland, OH Iowa Beverage Manufacturers Metro Beverages, Inc. (Eastern IN) Big Red Bottling of South TX Skyline Beverages of WV Weinstein Beverage Co. of Spokane, WA AABC (CO, OK, TN, KY, AR, MI) Easley SeaBev
  10. 10. Focused on Delivering Against a Set of Key Priorities Build and Enhance Leading Brands Exploit Opportunities in High Growth and High Margin Categories Increase Presence in High Margin Channels and Packages Leverage Integrated Business Model Strengthen Route-to-Market Improve Operating Efficiencies
  11. 11. Focused on Delivering Against a Set of Key Priorities Build and Enhance Leading Brands Exploit Opportunities in High Growth and High Margin Categories Increase Presence in High Margin Channels and Packages Leverage Integrated Business Model Strengthen Route-to-Market Improve Operating Efficiencies
  12. 12. Priority Focus Brands Have Significant Growth Opportunities 8 oz Servings Per Capita 238 Goal = 100 Goal = 20 26 62 11 Average Top State Average Top State Juice 33 Goal = 20 Goal = 5 5 5 3 Average Top State Average Region Top Region Source: The Nielsen Company YTD 12/26/09
  13. 13. Dr Pepper is America’s Oldest Major Soft Drink Brand
  14. 14. And Still Has Plenty of Room to Grow DP Volume – 288 oz DP Volume Share % CAGR +3.2 pt +4% 1989 2009 1989 2009 8 oz Servings Per Capita Household Penetration % 215 62 37 62 DP #1 CSD DP #1 CSD Source: The Nielsen Company and Nielsen Homescan YTD 12/26/09
  15. 15. Fountain Expansion is Driving Awareness and Trial Max & Erma’s R % Outlets 0% 20% 40% 60% 80% 100% Source: Company specific data
  16. 16. Dr Pepper Cherry is Bringing in New Users and Growing the Base % HH Penetration Cherry is prompting additional light user purchases and 37.2 bringing in new users 2.4pts 23.7 Cherry Only 15.0 9.6 DP TM DP Reg DP Diet DP Cherry # of Display Growth vs. LY +10% +2% DP TM DP TM ex Cherry Source: The Nielsen Company and Nielsen Homescan, Total US, 52 WE 10/31/09
  17. 17. Snapple Premium Restage is Working ACV% 16oz 6 pack Grocery 78 78 77 75 73 68 56 49 30 13 8 2/09 3/09 4/09 5/09 6/09 7/09 8/09 9/09 10/09 11/09 12/09 16oz 6 pack Growth Cases vs 2008 2/09 3/09 4/09 5/09 6/09 7/09 8/09 9/09 Source: The Nielsen Company YTD 12/31/09. Volume growth cases per internal reporting.
  18. 18. Exploiting $4bn Value-Tea Category with Multi-Pack PET ACV% 16.9oz 12 pack Grocery 51 52 51 50 49 50 47 50 37 30 20 23 1/09 2/09 3/09 4/09 5/09 6/09 7/09 8/09 9/09 10/09 11/09 12/09 Growth Cases vs 2008 1/09 2/09 3/09 4/09 5/09 6/09 7/09 8/09 9/09 Source: The Nielsen Company YTD 12/31/09. Volume growth cases per internal reporting.
  19. 19. And Testing $0.79 Pre-Priced Cans
  20. 20. Mott’s #1 or #2 in Cost Advantaged Locations # 1 or # 2 #1 or #2 position Source: The Nielsen Company – U.S. Only
  21. 21. West Coast Capacity and Strong Innovation are Key Enablers
  22. 22. Crush Expansion Exceeding Expectations… Highlights Latent Potential of Our Brands
  23. 23. Surrounding the Consumer… Merchandising and POS Dr Love Targeted Print National Media Massive Sampling
  24. 24. …Where They Shop
  25. 25. …Where They Play
  26. 26. …Outdoor
  27. 27. …Online
  28. 28. …On TV
  29. 29. Run Commercials
  30. 30. Investing Behind Our Brands While Driving Down Costs GRP Growth vs. LY Q1 Q2 Q3 Q4 Cost per GRP down 10% Source: GRPs measured through The Nielsen Company, Arbitron and internal reporting
  31. 31. Brand Health Continues to Improve Total Brand Awareness +2 pts +3 pts +2 pts Q1 Q3 Q1 Q3 Q1 Q3 Source: Ipsos 2009
  32. 32. Strong Innovation Pipeline Starts with Best-In-Class R&D Capabilities Key Capabilities ● Flavors ● Sensory Science ● Sweeteners ● Antioxidants ● Vitamins & Minerals ● Approved Functional Ingredients ● Emerging Functional Ingredients ● Nutrition, Claims & Labeling ● Analytical Chemistry / Food Safety ● Process Development / Scale Up ● Technical Data Management
  33. 33. 2010 Line-up is Strong and Supports Continued Business Momentum Multi-Year Platforms 2010 New Products
  34. 34. Focused on Delivering Against a Set of Key Priorities Build and Enhance Leading Brands Exploit Opportunities in High Growth and High Margin Categories Increase Presence in High Margin Channels and Packages Leverage Integrated Business Model Strengthen Route-to-Market Improve Operating Efficiencies
  35. 35. Mixer Restage and New Capacity on Track
  36. 36. Venom Growing One Bottle at a Time ACV% Distribution 60 61 61 53 56 58 58 50 52 46 41 36 1/09 2/09 3/09 4/09 5/09 6/09 7/09 8/09 9/09 10/0911/0912/09 Growth Cases vs 2008 1/09 2/09 3/09 4/09 5/09 6/09 7/09 8/09 9/09 Source: The Nielsen Company YTD 12/31/09. Volume growth cases per internal reporting.
  37. 37. Leveraging Allied Brands to Fill in Gaps and Leverage Asset Base
  38. 38. Focused on Delivering Against a Set of Key Priorities Build and Enhance Leading Brands Exploit Opportunities in High Growth and High Margin Categories Increase Presence in High Margin Channels and Packages Leverage Integrated Business Model Strengthen Route-to-Market Improve Operating Efficiencies
  39. 39. 5 Year Cold Drink Program on Track, Despite Tough Environment Coolers Per 10,000 35K Incremental Coolers Per Year Head of Population 186 Now 2 billion serving occasions over 5 years 151 SW 9 Pacific 4 116 NE 9 Central/SE 8 81 46 5 Year 10 36 35 35 35 35 GOAL 23 2008 2009 2010 2011 2012 2013
  40. 40. Placements Driving Awareness and Returns
  41. 41. Balanced Routes to Market Enables Full Price/Pack Participation Company Owned/ Bottling Partners Independent System
  42. 42. Focused on Delivering Against a Set of Key Priorities Build and Enhance Leading Brands Exploit Opportunities in High Growth and High Margin Categories Increase Presence in High Margin Channels and Packages Leverage Integrated Business Model Strengthen Route-to-Market Improve Operating Efficiencies
  43. 43. Changing Landscape Requires Continuous Improvement ● Consumer Insights ● Shopper Insights ● Innovation ● Local Marketing / Customer Development ● Demand Planning / Vendor Managed Inventory ● Technology (ASN, EDI, RFID, etc.)
  44. 44. Customer Results And Feedback Are Clear
  45. 45. Focused on Delivering Against a Set of Key Priorities Build and Enhance Leading Brands Exploit Opportunities in High Growth and High Margin Categories Increase Presence in High Margin Channels and Packages Leverage Integrated Business Model Strengthen Route-to-Market Improve Operating Efficiencies
  46. 46. 5 Year Supply Chain Optimization Journey Nearing Completion Five Regional Centers Hub and Spoke Distribution 1. South (2006-07) 4. West Coast (2009-10) 2. Southeast (2008-09) 5. Midwest (2010-11) 3. Northeast (2009)
  47. 47. Victorville, CA Regional Center on Schedule and on Budget
  48. 48. Core IT Infrastructure in Place Expanding SAP to Warehouse Direct Business and Mexico
  49. 49. Instilling One Set of Behaviors… the Foundation of Our People Strategy 1. Laying the Foundation 2. Mobilizing 3. Building Our Bench Tying Performance Call to ACTION to Operational Workshops Metrics DPS Campus
  50. 50. Ensuring Environmental Sustainability as We Optimize
  51. 51. Focused on Delivering Against a Set of Key Priorities Build and Enhance Leading Brands Exploit Opportunities in High Growth and High Margin Categories Increase Presence in High Margin Channels and Packages Leverage Integrated Business Model Strengthen Route-to-Market Improve Operating Efficiencies
  52. 52. Building Revenue and Margin Management Capabilities ● Insights to improve decision-making ● Transparency into what works ● Enable better conversations with our customers Drive Productivity to Fuel Growth
  53. 53. Making Better Decisions with Real-Time and Consistent Information ● Improved sales and route analytics ● Better fleet utilization ● Greater sales efficiency ● Improved Customer Service
  54. 54. Leveraging Best-in-Class Procurement Processes 2010 Priorities ● 8 step strategic sourcing process ● Formula and packaging optimization ● Reverse engineering of flavors ● Indirect and capital procurement ● Low cost country sourcing
  55. 55. Productivity Office Funding Continuous Improvement Initiatives Productivity Office Savings Impact Annual Investments Ongoing Savings 2009 2010 2011 2012 2013 2014
  56. 56. Results Show Our Focused Strategy is Working Build and Enhance Leading Brands Exploit Opportunities in High Growth and High Margin Categories Increase Presence in High Margin Channels and Packages Leverage Integrated Business Model Strengthen Route-to-Market Improve Operating Efficiencies
  57. 57. Brands + Execution = Long Term Growth + Volume/Price/Mix Net Sales + Distribution gains Growth 3-5% + Cold drink equipment + Innovation + Revenue growth EPS Growth + Operating efficiencies/ High-single-digit crush costs + Below-the-line leverage
  58. 58. Confident in Long-Term Algorithm Despite Significant Headwinds Challenges Responses ● Changing  Consumer insights consumer needs  Product / package innovation and demographics  Availability – Coastal, Hispanic, etc. ● Economic  Constantly delivering consumer value uncertainty  Crushing costs ● Commodity costs  Balanced pricing  Mix management  World class supply chain/procurement  Productivity / Supply chain efficiency ● US/Canada/  Leading brands with significant Mexico focus growth opportunities  Execution excellence…. distribution and availability
  59. 59. Packaging and Ingredients Drive 65% of COGS COGS Key Ingredients Components • Sweeteners • Apple / Juice Concentrates Ingredients • Flavors / Colors ~20% Key Packaging Components Packaging ~45% • Cans / Ends • Bottles / Caps • Glass • Corrugated / Paperboard • Labels / Films
  60. 60. Hedging and Procurement Best Practices Ensure Cost Visibility ● Aluminum ● Net Corn Key Items Covered ● Apple Juice Concentrate ● Natural Gas ● Heating Oil ● Min / max coverage policies Governance ● Commodity Purchasing Committee
  61. 61. Consistently Delivering Strong Net Income to Free Cash Flow Conversion Net Income to Free Cash Conversion % 124% 86% 87% 75% 2006 2007 2008 2009 Q3YTD Source: Reconciliation of non-GAAP financial measures can be found under the investor section at www.drpeppersnapple.com.
  62. 62. Opportunities Exist to Drive Additional Working Capital Productivity A/R INVENTORY • Reduce invalid deductions • Drive forecast accuracy • Credit to cash process • Vendor managed inventory optimization • Safety stock management A/P • Early pay discounts • Vendor management • Terms standardization • Organizational capabilities CASH CONVERSION CYCLE…KEY OPERATIONAL METRIC
  63. 63. Continuing to Invest in the Business to Fuel Growth Capex % Net Sales Growth / Efficiencies Maintenance 5% 5% 5% 5% 5% 2008 2009 2010 2011 2012
  64. 64. Rapidly Approaching Our Target Capital Structure $1,200 Adjusted* Total Debt / EBITDA Target = 2.25x 10 yr note @ 6.82% $655 5 yr note $450 @ 6.12% $400 3 yr note Credit $250 2 yr note @ 2.35% Facility @ 1.70% L + 200 30 yr note ($405) @ 7.45% $0 2010 2011 2012 2013 // 2018 // 2038 *Adjusted for unfunded pension liabilities, operating leases, stock-based compensation expenses and other items
  65. 65. Priorities for Free Cash Flow are Clear ● Achieve and maintain target capital structure ● Build modest cash reserves to maintain liquidity and financial flexibility ● Return excess cash to shareholders over time
  66. 66. Key Takeaways ● Strong portfolio of brands with leadership positions ● Journey to integrate collection of powerful assets on track ● Focused on delivering against a set of key priorities ● Brands + Execution = Long Term Growth

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