Green Mountain Coffee Strategy 2014

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Green Mountain Coffee Strategy 2014

  1. 1. 2014 CAGNY CONFERENCE – FEBRUARY 19, 2014 Brian Kelley, Chief Executive Officer
  2. 2. FORWARD-LOOKING STATEMENTS Certain information contained herein constitutes "forward-looking statements." Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as "believes," "expects," "anticipates," "estimates," "intends," "plans," "seeks" or words of similar meaning, or future or conditional verbs, such as "will," "should," "could," "may," "aims," "intends," or "projects." However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. These statements may relate to: the expected impact of raw material costs and our pricing actions on our results of operations and gross margins, expected trends in net sales and earnings performance and other financial measures, the expected productivity and working capital improvements, the success of introducing and producing new product offerings, the impact of foreign exchange fluctuations, the adequacy of internally generated funds and existing sources of liquidity, such as the availability of bank financing, the expected results of operations of businesses acquired by us, our ability to issue debt or additional equity securities, our expectations regarding purchasing shares of our common stock under the existing authorizations, projections of payment of dividends, and the impact of the inquiry initiated by the SEC and any related litigation or additional governmental inquiry or enforcement proceedings. A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. Management believes that these forward-looking statements are reasonable as and when made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our Company's historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to, those described in Part I, "Item 1A. Risk Factors," and Part II "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our fiscal 2013 Annual Report filed on Form 10-K, as amended, and elsewhere in this report and those described from time to time in our future reports filed with the Securities and Exchange Commission. Actual results could differ materially from those projected in the forward-looking statements. We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
  3. 3. GAAP TO NON-GAAP RECONCILIATIONS In addition to reporting financial results in accordance with generally accepted accounting principles (GAAP), the Company provides non-GAAP operating results that exclude any gain from sale of the Filterfresh U.S.-based coffee services business; legal and accounting expenses related to the SEC inquiry and pending securities and stockholder derivative class action litigation; and non-cash acquisition-related items such as amortization of identifiable intangibles, each of which include adjustments to show the tax impact of excluding these items. These amounts are not in accordance with, or an alternative to, GAAP. The Company's management believes that these measures provide investors with transparency by helping illustrate the underlying financial and business trends relating to the Company's results of operations and financial condition and comparability between current and prior periods. Management uses the measures to establish and monitor budgets and operational goals and to evaluate the performance of the Company. Please see the "GAAP to Non-GAAP Reconciliation" table that accompanies this document for a full reconciliation the Company's GAAP to non-GAAP results.
  4. 4. Who We Are Creating a Premium in the Beverage Category Our Innovation Capabilities Financial Overview
  5. 5. Who We Are Creating a Premium in the Beverage Category Our Innovation Capabilities Financial Overview
  6. 6. GMCR TODAY Revenue Growth Operating Margin Revenue Dividend Yield ROIC *Excluding 53rd Week 12%* 18% $4.4B 1% 19% LTM as of Q1 Fiscal Year 2014 * excluding 53rd week of Fiscal Year 2013 EBITDA $1.0B
  7. 7. Technology Company? Appliance Company? WE ARE Beverage Company? Coffee Company? an innovative, technology-driven, values-based, personal beverage system company
  8. 8. COFFEE TECHNOLOGY &
  9. 9. A UNIQUE MERGER IN 2006 ACCELERATED THE DISRUPTION Socially Responsible Premium Coffee Sustainability Focused Enlightened Capitalism Win-Win Partnerships Advanced Food Science Progressive Blending & Roasting Brewing A Better World Engineers Systems Design & Integration Materials Science Heat Transfer Injection Dosing Advanced Electronics Fluid Dynamics Continuous Innovation
  10. 10. SIGNIFICANT VALUE CREATION & OPPORTUNITY FOR CONSUMERS, FOR CUSTOMERS, FOR SHAREHOLDERS The ultimate at-home coffee experience Accelerated a category Creating significant value for consumers, customers & shareholders
  11. 11. SIGNIFICANT VALUE CREATION & OPPORTUNITY FOR CONSUMERS, FOR CUSTOMERS, FOR SHAREHOLDERS +20 billion packs sold +35 million Keurig® brewers sold 83% Keurig® brand awareness +60% repeat rates
  12. 12. OUR PURPOSE AND MISSION Our Purpose Create the ultimate beverage experience in every life we touch, from source to cup – transforming the way the world understands business A Keurig® brewer on every counter and a beverage for every occasion Our Mission
  13. 13. OUR VALUES Our boundaryless approach to collaboration creates benefits for all. We Partner for Mutual Success With courage and curiosity, we are shaping the future by redefining the consumer experience. We Innovate with Passion Our team sets ambitious goals and meets each challenge with unified purpose and character. We Play to Win We use the power of business to make the world a better place. We Brew a Better World
  14. 14. GMCR LEADERSHIP BACKGROUNDS
  15. 15. WHO ARE WE 9 PRODUCTION FACILITIES 2 R&D FACILITIES 460 ENGINEERS & SCIENTISTS 6250 EMPLOYEES 320 PATENTS ISSUED GLOBALLY 244 PATENT APPLICATIONS PENDING GLOBALLY
  16. 16. OUR GLOBAL SUPPLY CHAIN FOOTPRINT BREWER SOURCINGGMCR OFFICES & MANUFACTURING BEVERAGE SOURCING
  17. 17. A Keurig® brewer on every counter and a beverage for every occasion OUR BUSINESS MODEL INSTALLEDBASEOFBREWERS DAILY SINGLE USE PACKS PER BREWER
  18. 18. 18 FOUNDATION OF THE KEURIG SYSTEM’S SUCCESS Intuitive simplicity Less waste Ultra-convenient Vast brand selection Freshest taste… every time
  19. 19. DESIGNED FOR THE FIVE SENSES
  20. 20. A network system effect KEURIG® IS AN ADVANCED, PERSONAL BEVERAGE SYSTEM A brand accelerator A premium experience brought into the home An enabler to understand the demand signal in home An in-home beverage creation system
  21. 21. A POWERFUL PORTFOLIO OF BRANDS
  22. 22. A BREWER ON EVERY COUNTER • HOUSEHOLDS • OFFICES • OTHER LOCATIONS • REGIONS KEURIG®BREWED® BRANDS 22 BEVERAGE SYSTEM A NEW GATEWAY FOR BRANDS REGENERATING GROWTH CYCLE NEW BEVERAGE CATEGORIES
  23. 23. MULTI-BRANDED SYSTEM UNIQUE BEVERAGE & APPLIANCE MODEL VALUABLE, ‘SMART’ COUNTERTOP REAL ESTATE MUTUALLY BENEFICIAL PARTNERSHIP CAPABILITY OUR COMPETITIVE EDGE INNOVATION VIA HOLISTIC SYSTEM DESIGN & EXECUTION
  24. 24. DISCIPLINED CAPITAL ALLOCATION STRATEGY Reinvest in the business to drive revenue growth Tuck In M&A for specific technologies, market distribution and/or brands Return cash to shareholders in form of dividends and share repurchases
  25. 25. YTD TOTAL RETURN 5YR TOTAL RETURN3YR TOTAL RETURN STOCK PERFORMANCE Source: Bloomberg *YTD return (12/31/2013-2/14/2014) *3 year return (2/14/2011-2/14/2014) *5 year return (2/13/2009-2/14/2014) 54% -4% 0% GMCR Peer Group Russell 1000 Index 151% 70% 48% GMCR Peer Group Russell 1000 Index 1165% 252% 154% GMCR Peer Group Russell 1000 Index
  26. 26. Who We Are Creating a Premium in the Beverage Category Our Innovation Capabilities Financial Overview
  27. 27. POWER OF KEURIG® TO PREMIUMIZE Coffee Tea Brewers
  28. 28. 80% 20% % U.S. Households 90% 10% Consumption Growth* 2009-2012 U.S. CONSUMPTION GROWTH SKEWS HEAVILY TOWARD HIGH-INCOME HOUSEHOLDS • Source: Institute for New Economic Thinking • Inflation-adjusted consumption between 2009 and 2012 % US HH by Income Increase in inflation adjusted consumption ’09-’12
  29. 29. SINGLE CUP COFFEE SKEWS TO HIGHER INCOME DEMOGRAPHIC 63% 55% 44% 37% 45% 56% % of U.S. Households % of Dollars Sales % of Dollars Sales HH Income Greater Than or Equal To $70K HH Income Less Than $70K Total coffee Single cup coffee Source: IRI U.S. All Outlet Panel Data Ending 12.29.13
  30. 30. HOT BEVERAGES LEAD CATEGORY DOLLAR GROWTH 6% -1% 0% -1% 0% 1% 2% 3% 4% 5% 6% Hot Beverages Cold Beverages All Beverages Source: IRI U.S. Multi-Outlet Data Ending 12.29.13
  31. 31. BEVERAGE CATEGORY DOLLAR GROWTH Source: IRI, 52 Weeks Ending 12/29/13 7% 5% -1%-2% 3% 8% Hot Tea Coffee All Other Beverages Source: IRI U.S. Multi-Outlet Data Ending 12.29.13 Note: All Other includes: CSD, Water, Energy Drinks, Sports Drinks, Juices and Milk
  32. 32. THE KEURIG® SYSTEM IS DRIVING COFFEE CATEGORY DOLLAR GROWTH 5% 44% 3% -6% -9% -20% -10% 0% 10% 20% 30% 40% 50% 60% Coffee Single Cup Instant Ground Whole Source: IRI, 52 Weeks Ending 12/29/13Source: IRI U.S. Multi-Outlet Data Ending 12.29.13
  33. 33. THE KEURIG® SYSTEM IS DRIVING TEA CATEGORY DOLLAR GROWTH 7% 38% 4% 0% 10% 20% 30% 40% 50% 60% Hot Tea Single Cup Non- Single Cup Source: IRI, 52 Weeks Ending 12/29/13Source: IRI U.S. Multi-Outlet Data Ending 12.29.13
  34. 34. TOTAL COFFEE EQ SERVINGS GREW 5% SINCE 2009 34 33,473 33,673 33,340 33,897 35,243 2009 2010 2011 2012 2013 +5% Source: IRI Multi-Outlet Data Ending 12/22/13Source: IRI U.S. Multi-Outlet Data Ending 12.22.13
  35. 35. PRICE PER COFFEE EQ SERVING IS UP 45% VS. 2009 35 $0.16 $0.17 $0.21 $0.23 $0.24 2009 2010 2011 2012 2013 +45% Source: IRI Multi-Outlet Data Ending 12/22/13Source: IRI U.S. Multi-Outlet Data Ending 12.22.13
  36. 36. $5,427 $5,755 $7,013 $7,882 $8,290 $0 $2,000 $4,000 $6,000 $8,000 $10,000 2009 2010 2011 2012 2013 Coffee Dollar Sales (millions) COFFEE CATEGORY DOLLARS GREW 53% SINCE 2009 36 +53% Source: IRI Multi-Outlet Data Ending 12/22/13Source: IRI U.S. Multi-Outlet Data Ending 12.22.13
  37. 37. $5,427 $5,755 $7,013 $7,882 $8,290 2% 5% 11% 21% 29% 0.0 10.0 20.0 30.0 40.0 $0 $2,000 $4,000 $6,000 $8,000 $10,000 2009 2010 2011 2012 2013 Coffee Dollar Sales (millions) Single Cup Share of Total Coffee COFFEE CATEGORY DOLLARS GREW 53% SINCE 2009 37 Source: IRI Multi-Outlet Data Ending 12/22/13Source: IRI U.S. Multi-Outlet Data Ending 12.22.13 +53%
  38. 38. TEA EQ SERVINGS HAVE SLIGHTLY DECLINED SINCE 2009 38 13,501 13,574 13,629 13,233 13,260 2009 2010 2011 2012 2013 -2% Source: IRI Multi-Outlet Data Ending 12/22/13Source: IRI U.S. Multi-Outlet Data Ending 12.22.13
  39. 39. PRICE PER TEA EQ SERVING GREW BY 24% SINCE 2009 39 $0.08 $0.08 $0.08 $0.09 $0.09 2009 2010 2011 2012 2013 +24% Source: IRI Multi-Outlet Data Ending 12/22/13Source: IRI U.S. Multi-Outlet Data Ending 12.22.13
  40. 40. $1,026 $1,046 $1,087 $1,164 $1,245 $0 $2,000 2009 2010 2011 2012 2013 Tea Dollar Sales (millions) TEA CATEGORY DOLLARS GREW BY 21% SINCE 2009 40 +21% Source: IRI Multi-Outlet Data Ending 12/22/13Source: IRI U.S. Multi-Outlet Data Ending 12.22.13
  41. 41. $1,026 $1,046 $1,087 $1,164 $1,245 0.2% 0.9% 3.3% 8.6% 11.0% 0.0 10.0 20.0 $0 $2,000 2009 2010 2011 2012 2013 Tea Dollar Sales (millions) Single Cup Share of Total Tea TEA CATEGORY DOLLARS GREW BY 21% SINCE 2009 41 +21% Source: IRI Multi-Outlet Data Ending 12/22/13Source: IRI U.S. Multi-Outlet Data Ending 12.22.13
  42. 42. 15% 14% 10% 10% 7% 7% 5% -7% -11% -12% COFFEE #1 IN FOOD & BEVERAGES IN DOLLARS PER BUYER % CHANGE 2009 - 2013 42 Source: IRI All Outlet Panel Data Ending 12/29/13 Coffee is #1 among 170 food/drink categories Source: IRI Dollars per Buyer % Change – CY 2013 vs. CY 2009 – Total U.S. All Outlet 49% Key beverage categories
  43. 43. TOTAL BEVERAGE CATEGORY 43 Source: IRI All Outlet Panel Data Ending 12/29/13 Carbonated Beverages 24% Milk 20% Bottled Water 11% Shelf-Stable Juice 10% Rfg Bev 9% Sports & Energy Drinks 7% Ground Coffee 6% Single Cup Coffee 3% RTD Cold Tea/Coffee 3% Tea Bags 1% All Other Cold 4% All Other Hot 2% Total Beverage Sales CY 2013: $79,607 million Source: IRI U.S. Multi-Outlet Data Ending 12.29.13
  44. 44. TOTAL BEVERAGE CATEGORY 44 Source: IRI All Outlet Panel Data Ending 12/29/13 Carbonated Beverages 24% Milk 20% Bottled Water 11% Shelf-Stable Juice 10% Rfg Bev 9% Sports & Energy Drinks 7% Ground Coffee 6% Single Cup Coffee 3% RTD Cold Tea/Coffee 3% Tea Bags 1% All Other Cold 4% All Other Hot 2% Total Beverage Sales CY 2013: $79,607 million Source: IRI U.S. Multi-Outlet Data Ending 12.29.13
  45. 45. SINGLE CUP BREWERS SKEW TO HIGHER INCOME DEMOGRAPHIC 63% 52% 69% 37% 48% 31% % of U.S. Households % of Dollars Sales % of Dollars Sales HH Income Greater Than or Equal To $75K HH Income Less Than $75K Drip Coffeemakers Single Cup Brewers Source: NPD U.S. Consumer Panel Data – 12 Months Ending Nov ‘13
  46. 46. COFFEE MAKER UNITS GROWING SLIGHTLY 46 21M 21M 22M 2011 2012 2013 Coffee Maker Units (millions) Total Keurig Share +2% Source: IRI Multi-Outlet Data Ending 12/22/13Source: NPD U.S.; total Keurig share includes licensed brewer partners 15% 22% 25%
  47. 47. PRICE PER COFFEE MAKER UNIT GREW 26% SINCE 2011 47 $41.00 $49.00 $52.00 2011 2012 2013 +26% Source: IRI Multi-Outlet Data Ending 12/22/13Source: NPD U.S. Data
  48. 48. $880 $1,049 $1,130 $0 $2,000 2011 2012 2013 Coffee Maker Sales (millions) COFFEE MAKER CATEGORY DOLLARS GROWING AT 28% 48 Total Coffee Dollar Sales Trend by Year and Single-Cup Pack Share – Total U.S. Multi-Outlet +28% Source: IRI Multi-Outlet Data Ending 12/22/13Source: NPD U.S. Data
  49. 49. Source: IRI Multi-Outlet Data Ending 12/22/13 $880 $1,049 $1,130 43% 53% 55% 40.0 60.0 80.0 $0 $2,000 2011 2012 2013 Coffee Maker Sales (millions) Single Serve Unit Share of Total Coffee COFFEE MAKER CATEGORY DOLLARS GROWING AT 28% 49 Total Coffee Dollar Sales Trend by Year and Single-Cup Pack Share – Total U.S. Multi-Outlet +28% Source: NPD U.S. Data
  50. 50. Who We Are Creating a Premium in the Beverage Category Our Innovation Capabilities Financial Overview
  51. 51. OUR INNOVATION CAPABILITIES KEVIN SULLIVAN, CHIEF TECHNOLOGY OFFICER
  52. 52. INNOVATION OUR INNOVATION CAPABILITIES 52 BEVERAGES TECHNOLOGY
  53. 53. OUR POWERFUL ‘SYSTEM ENGINEERING’ APPROACH 53 Great Beverages, Constant Innovation, At Scale APPLIANCE PORTION PACK MANUFACTURING EQUIPMENT BEVERAGE
  54. 54. THE COMBINATION OF OUR SYSTEM APPROACH 54 Appliance Manufacturing Equipment Portion Pack Beverage
  55. 55. A SYSTEM APPROACH IS OUR ADVANTAGE
  56. 56. OUR APPLIANCE R&D LEADERSHIP
  57. 57. FOCUS ON RESEARCH & DEVELOPMENT 57 2011 2013 +226% * GMCR FY 2011 and 2013 R&D Expenses
  58. 58. OUR BEVERAGE INNOVATION CAPABILITIES TOM NOVAK, SVP, BEVERAGE R&D AND REGULATORY AFFAIRS
  59. 59. OUR INTEGRATED BEVERAGE SYSTEM 59 THE POD THE INGREDIENTS PROCESSING THE BREWER 4 COMPONENTS: • 4 Degrees of Freedom • 6 Interactions/Synergies • Multiple Brewer Settings Capability for Breakthrough Quality THE BEVERAGE
  60. 60. SYSTEM-INHERENT ADVANTAGES FOR BEVERAGE DELIVERY 60 Taste Convenience Nutrition VarietyFreshness Experiential
  61. 61. OUR BEVERAGE DEVELOPMENT ORGANIZATION 61 PRODUCT DEVELOPMENT PROCESS DEVELOPMENT PACKAGE DEVELOPMENT Sensory Testing Marketing Consumer Insights Analytical Testing Manufacturing Microbiology Pod Carton Display Distribution Shelf Life Regulatory Affairs System Partners Brewer Platforms Supplier Partners
  62. 62. 2007 2013 SPECIALTY BEVERAGES DEVELOPMENT 62 ICED COFFEES HOT COCOAS - SWEET TREATS HOT APPLE CIDER ICED FRUIT BREWS LEMONADE LATTES - CAPPUCCINOS SWEET & CREAMY ICED COFFEES WELLNESS COFFEES ICED TEAS WELLNESS TEAS COFFEE TEA BLACK COFFEES INDULGENT LEAF TEAS FRUIT BREWS
  63. 63. KEURIG®COLD BEVERAGE DEVELOPMENT COLA ICED TEA Stills Carbonated FLAVORED CLEAR OLD FASHIONED SODA FOUNTAIN SPARKLING FLAVORED WATERSNATURAL DIET FLAVORED SELTZERS ISOTONICS JUICE DRINKS FLAVORED WATERS LEMONADE JUICE SPRITZERS
  64. 64. OUR BEVERAGE R&D LEADERSHIP
  65. 65. INNOVATION UPDATE BRIAN KELLEY, CHIEF EXECUTIVE OFFICER
  66. 66. INNOVATION PIPELINE Keurig® 2.0 Keurig® Cold
  67. 67. NEW KEURIG® 2.0 Offers all 50+ Keurig® system beverage brands Brews all Keurig® K-Cup®, Vue® and K-Carafe™ packs First ever Keurig® brewer to brew a single cup or carafe of coffee Uses proprietary technology to identify and perfectly brew only Keurig® packs Offered at similar price points Will be available at all current Keurig® retailers and replaces current Keurig® brewer models
  68. 68. KEURIG® SUCCESS – SOLVING CONSUMER TRADE-OFFS 68 Larger volume Multiple servings Inexpensive
  69. 69. KEURIG® SUCCESS – SOLVING CONSUMER TRADE-OFFS 69 Convenient Low mess Fast Reduce coffee waste Brand variety Consistent taste Larger volume Multiple servings Inexpensive vs
  70. 70. HIGHLY CONFIDENTIAL – INTERNAL USE ONLY 70
  71. 71. KEURIG®2.0 – STRATEGIC GROWTH OPPORTUNITY Brings new households into the Keurig®system Drives increased consumption among Keurig®households Drives incremental volume, profit and consumer value
  72. 72. KEURIG®2.0 – STRATEGIC GROWTH OPPORTUNITY Brings new households into the Keurig®system Drives increased consumption among Keurig®households Drives incremental volume, profit and consumer value
  73. 73. 80% of U.S. households still not using single cup SINGLE CUP AT EARLY STAGE OF DEVELOPMENT 73 20% 58% 22% Single Serve Drip Other Source: 2013 NCA Study; method of preparation among past-day drinkers 20% 58% 22%
  74. 74. WHY HAVE YOU NOT YET BOUGHT A KEURIG®? 60%#1 Reason (non-price): 60% Does not brew pot or larger size Source: GMCR Survey
  75. 75. KEURIG®2.0 – STRATEGIC GROWTH OPPORTUNITY Brings new households into the Keurig® system Drives increased consumption among Keurig® households Drives incremental volume, profit and consumer value
  76. 76. Remaining 25% is for larger volume brewing needs COFFEE CONSUMPTION WITHIN KEURIG® HOUSEHOLDS 25% 75% Keurig®gets ~75% of in home coffee consumption Source: GMCR internal data
  77. 77. WHY CURRENT KEURIG® OWNERS STILL USE A DRIP COFFEE MAKER? #1 Reason: 72% want larger brew sizes Source: GMCR Survey
  78. 78. KEURIG®2.0 – STRATEGIC GROWTH OPPORTUNITY Brings new households into the Keurig®system Drives increased consumption among Keurig®households Drives incremental volume, profit and consumer value
  79. 79. KEURIG 2.0 – ADDRESSING MULTIPLE NEEDS AND OCCASIONS 79 K-Cup® pack K-Mug® pack K-Carafe® pack
  80. 80. SMART & INTERACTIVE: PORTION PACK INFORMS BREWER 80 Proprietary Technology on Pack Informs Brewer Perfect Cup or Carafe
  81. 81. First Keurig® Brewer to brew a single cup + carafe
  82. 82. KEURIG COLD™
  83. 83. KEURIG COLD™ – A TECHNICAL BREAKTHROUGH Temperature: it needs to be served cold Dosing: precise flavor blend; precise carbonation every time Carbonation: without a CO2 tank Space/$: Keurig® footprint and attractive price range Brand Variety: multi-brand system
  84. 84. One touch simplicity quality and variety Ensures a consistently perfect taste and carbonation profile every time Freshly prepared carbonated, sparkling, and still beverages KEURIG COLD™ Multi-brand, open architecture platform to optimize convenience and choice Announced global strategic partner Launching: fiscal 2015
  85. 85. Who We Are Creating a Premium in the Beverage Category Our Innovation Capabilities Financial Overview
  86. 86. FINANCIAL OVERVIEW FRAN RATHKE, CHIEF FINANCIAL OFFICER
  87. 87. 5-year CAGR of 55% $ IN MILLIONS STRONG SALES GROWTH $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 2009 2010 2011 2012 2013 LTM Dec '13 * Excludes the 53rd week of FY2012 which added approximately $90.0 million in net sales; approximately $11.0 million (net of income taxes of $5.8 million) in net income; and, approximately $0.07 in diluted earnings per share in the fourth quarter and fiscal year 2012. *
  88. 88. STRONG IMPROVEMENTS IN GROSS MARGINS 31.2% 31.4% 34.1% 32.9%* 37.2% 28% 30% 32% 34% 36% 38% $- $400 $800 $1,200 $1,600 $2,000 2009 2010 2011 2012* 2013 Gross Profit % of Net Sales Gross Profit ($ in millions) Gross Margin * Excludes the 53rd week of FY2012 which added approximately $90.0 million in net sales; approximately $11.0 million (net of income taxes of $5.8 million) in net income; and, approximately $0.07 in diluted earnings per share in the fourth quarter and fiscal year 2012.
  89. 89. PROCUREMENT LOGISTICSMANUFACTURING PRODUCTIVITY WILL DELIVER $100M BY END OF FY15
  90. 90. STRONG NON-GAAP OPERATING MARGIN IMPROVEMENT 10.4% 12.7% 16.2% 16.0% 18.7% 5.0% 8.0% 11.0% 14.0% 17.0% 20.0% $(100) $100 $300 $500 $700 $900 2009 2010 2011 2012* 2013 Non-GAAP Operating Income % of Net Sales Non-GAAP Operating Income ($ in millions) As % of Net Sales * Excludes the 53rd week of FY2012 which added approximately $90.0 million in net sales; approximately $11.0 million (net of income taxes of $5.8 million) in net income; and, approximately $0.07 in diluted earnings per share in the fourth quarter and fiscal year 2012.
  91. 91. 5-year CAGR of 74% STRONG NON-GAAP EPS GROWTH $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 2009 2010 2011 2012 2013 LTM Dec'13* * Excludes the 53rd week of FY2012 which added approximately $90.0 million in net sales; approximately $11.0 million (net of income taxes of $5.8 million) in net income; and, approximately $0.07 in diluted earnings per share in the fourth quarter and fiscal year 2012.
  92. 92. 5-year CAGR of 76% STRONG GAAP EPS GROWTH $- $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 2009 2010 2011 2012* 2013 * Includes the 53rd week of FY2012 which added approximately $90.0 million in net sales; approximately $11.0 million (net of income taxes of $5.8 million) in net income; and, approximately $0.07 in diluted earnings per share in the fourth quarter and fiscal year 2012.
  93. 93. CAPITAL INVESTMENT TO SUPPORT GROWTH 11% 13% 5% 0% 2% 4% 6% 8% 10% 12% 14% $- $100 $200 $300 $400 $500 $600 2011 2012* 2013 2014 Hot Growth Cold Growth IT and Other As a % Net Sales * Excludes the 53rd week of FY2012 ($ in millions) As a % of Net Sales 1 1 Guidance provided by the Company on February 5, 2014 ~ 9%
  94. 94. $(283) $77 $200 - 300 $(300) $(200) $(100) $- $100 $200 $300 $400 $500 $600 2011 2012 2013 Q1'14 FREE CASH FLOW Free Cash Flow ($ in millions) * Guidance provided by the Company on February 5, 2013 Free cash flow $603 2014 Est.*
  95. 95. With improving returns on capital STRONG RETURNS 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 2009 2010 2011 2012 2013 Note: GAAP ROIC is the sum of LTM GAAP Net Income / ((1st quarter of LTM debt + equity plus 4th quarter of LTM debt + equity)/2)
  96. 96. KEY TERMS OF RECENT STRATEGIC RELATIONSHIP • 10-year strategic global partnership • Collaborate on intro of The Coca-Cola Company brand portfolio in the Keurig Cold™ beverage system • Work together to introduce Keurig Cold™ to consumers worldwide Commercial Agreement • 10% minority investment, representing 16.684 million new GMCR shares • New shares priced at $74.98, for ~$1.25 billion in total proceeds • Option to increase ownership to 16% with open market purchases Equity Agreement
  97. 97. FY 2014 OUTLOOK & NON-GAAP EPS WALK THROUGH* * Per guidance provided by GMCR on February 5, 2014. FY’13 non-GAAP EPS base $3.39 Expected Fx impact ($0.11) Estimated Coca-Cola/Lavazza-related dilution (absent any actions GMCR may take to offset dilution) ~ ($0.20) Constant currency non-GAAP EPS growth 14% 17%to Constant currency non-GAAP EPS $3.86 $3.96to FY’14 non-GAAP EPS pre Coca-Cola transaction $3.75 $3.85to FY’14 non-GAAP EPS post dilution $3.55 $3.65to Revenue growth High single digits
  98. 98. FY 2015 NON-GAAP EPS WALK THROUGH* * Per guidance provided by GMCR on February 5, 2014. ** includes Company’s assumptions on share repurchases Underlying business mid-teens growth Less: Net dilution impact for Coca-Cola transaction** Non-GAAP EPS guidance Mid-single digit growth (est. 4% to 7%) FY’15 non-GAAP EPS estimate $3.69 $3.90to Less: Incremental growth investment _______________ FY’14 non-GAAP EPS base $3.55 $3.65to
  99. 99. BALANCE SHEET & CAPITAL DEPLOYMENT Share Repurchases & Dividend • In Nov. 2013 announced incremental share repurchase authorization of up to $1 billion and as of Q1’14 $1.1 billion remains. • Committed to meaningful share repurchase program to reduce dilution from The Coca-Cola Company transaction • Annual dividend of $1.00 per share, yield of about 1% • Latest 12 Months Earnings before Interest, Taxes, Depreciation and Amortization • 2014 is estimated mid-point of free cash flow guidance on 2/5/14 Strong Balance Sheet Metrics Total Debt Q1'14 $ 260M Total Cash Q1'14 $ 350M Net Cash $ 90M LTM EBITDA $ 1,032M Total Debt/EBITDA 0.3X Net Debt/EBITDA 0X
  100. 100. THANK YOU!

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