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Dean Foods Company
     CAGNY Conference
       February 21, 2006
      Scottsdale, Arizona
Forward Looking Statements

The following statements made in this presentation are “forward looking” and are made pursuant...
One of the nation’s leading food and
        beverage companies
• Largest dairy company in the U.S.
   – Over $10 billion ...
Dean Foods 2005 Achievements

• Spun-off Treehouse Foods
• Divested Marie’s dressings and Dean’s dips
• Combined branded b...
Dean Foods 2005 Financial Recap

• Dairy Group fluid milk volume growth of 2.5%
   – operating income growth of 7%

• Whit...
2006 Guidance



Consolidated operating income of $680 -
        700 million, up 9%-12%*

Earnings per share of $2.10 – $2...
A Unique Balance of Businesses

 Dairy Group                                                  WhiteWave Foods
      –    S...
2005 Net Sales by Segment



                     Dairy Group
                     $9 billion

                     WhiteW...
2005 Net Sales by Segment



                     Dairy Group
                     $9 billion
                     WhiteWa...
Dean Dairy Group



•   Nation’s largest dairy processor
•   Strong regional brands
•   Unique nationwide footprint
•   Na...
2005 Dairy Group Sales

                     Fresh Fluid
                     Milk/Cream 67%

                     Ice Cre...
National Refrigerated DSD Network
   Coupled With Strong Regional Brands


                                 • 99 facilitie...
Focus on Leading the Industry
             in Customer Service


•   One-stop-shop solution
•   Simplified pricing
•   Sup...
Focus on Volume and Marketshare Growth
        Dairy Group Fluid Milk and Cream Growth versus
                   USDA Tota...
Focus on Driving Efficiency

Historical Focus
• Consolidate redundant facilities
      – 32 facilities closed to date
    ...
Experienced Leadership

• Alan Bernon named
  President of Dean Dairy Group
   – 30 year dairy industry veteran
   – 20 ye...
2005 Net Sales by Segment



                     Dairy Group
                     $9 billion

                     WhiteW...
WhiteWave Foods’
                           Leading Brand Portfolio



                                                   ...
Branded products have become a core
    part of the Dean Foods portfolio over time

  1997               2002             ...
Significant Strides Have Been Made
                          in Integrating the 3 Legacy Companies

                      ...
White Wave’s Focus is to Enable Continued
      Growth and Superior Returns

       Focused                              F...
Creating a Leveraged,
        Fully-Integrated Supply Chain
                               Distributed          Complex
  ...
Focused on Premium, High Growth Brands
           in the Dairy Case


                          Focused on brands
        ...
Focused on Premium, High Growth Brands
           in the Dairy Case


                                   Focused on brands...
Strong Brands with a History of
                         Robust Growth
1,200



1,000

                    5 YR CAGR of
  ...
WhiteWave Foods’
                              Leading Brand Portfolio




                           $337 M


           ...
Despite the Rapid Growth of the
Soymilk Category, US Household
      Penetration is Low
•   Virtually all sales are to 7% ...
Silk’s strategy is to drive category growth


                                            Strategic focus
        $337 M
1...
Targeted Promotion




   p. 29
WhiteWave Foods’
                           Leading Brand Portfolio




                     $273 M

                   39...
There is Significant Latent Demand
          for Organic Milk

  •   32% of consumers are interested
       – 4% of househ...
We are Investing to Grow Supply

•   Increase supply from 325+ family-owned farms
    (80% of current supply)

•   Adding ...
Horizon Organic’s Focus is Profitable Growth


        $273 M
                                         Strategic focus
100...
Rachel’s Organic


         $69 M
                                        Strategic focus
100%
                         Ot...
WhiteWave Foods’
                           Leading Brand Portfolio




                     $241 M


                   1...
International Delight – Opportunities for Sales
               and Profit Growth


                                       ...
Innovation Drives the Brand:
          At Home

 • Hershey’s Chocolate Caramel
   leverages a strong co-brand
   equity

 ...
Innovation Drives the Brand:
     Away from Home
• Bulk Creamer dispensers
  complement Portion Control
  cups to provide ...
WhiteWave Foods’
                           Leading Brand Portfolio




                      $182 M

                   2...
Land O’ Lakes is a Premium
                     Dairy Brand
        $182 M
                                               ...
Building a World Class Organization

   • Joe Scalzo named
     President and CEO of
     WhiteWave
      – Proven executi...
Focus on Shareholder Value
       Stock Price Performance, IPO – February 13, 2006
$50                                    ...
Summary
• Dairy Group continues to execute long-term
  strategy
   – Growing marketshare
   – Driving efficiency

• Signif...
Dean Foods Company
     CAGNY Conference
       February 21, 2006
      Scottsdale, Arizona
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CAGNY 2006

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Transcript of "CAGNY 2006"

  1. 1. Dean Foods Company CAGNY Conference February 21, 2006 Scottsdale, Arizona
  2. 2. Forward Looking Statements The following statements made in this presentation are “forward looking” and are made pursuant to the safe harbor provision of the Securities Litigation Reform Act of 1995: statements relating to (1) projected sales (including for individual segments, for specific product lines and for the company as a whole), profit margins, net income and earnings per share, (2) our growth strategy, (3) our branding initiatives (4) our integration plans, and (5) our cost-savings initiatives. These statements involve risks and uncertainties that may cause results to differ materially from those set forth in this presentation. Financial projections are based on a number of assumptions. Actual results could be materially different than projected if those assumptions are erroneous. Sales, profit margins, net income and earnings per share can vary based on a variety of economic, governmental and competitive factors, all of which are identified in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10K (which can be accessed on our website at www.deanfoods.com or the website of the Securities and Exchange Commission at www.sec.gov). The success of our branding initiatives will depend on a number of factors, including customer and consumer acceptance of both the products themselves and the prices that we intend to charge for those products. We have many competitors with greater resources than ours, and significant additional spending or innovations by our competitors could render our products less successful than we currently expect. All forward looking statements in this presentation speak only as of the date of this presentation. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any such statements to reflect any change in our expectations with regard thereto or any changes in the events, conditions or circumstances on which any such statement is based.
  3. 3. One of the nation’s leading food and beverage companies • Largest dairy company in the U.S. – Over $10 billion in net sales – Approximately 4X the size of nearest fluid dairy competitor • Uniquely positioned branded portfolio – On trend with healthy, better-for-you product offerings – High-growth brands – Significant margin-enhancing opportunities • Extremely focused on shareholder value
  4. 4. Dean Foods 2005 Achievements • Spun-off Treehouse Foods • Divested Marie’s dressings and Dean’s dips • Combined branded businesses • Joe Scalzo named president of WhiteWave • Alan Bernon promoted to president of the Dairy Group • Repurchased 18.9 million shares
  5. 5. Dean Foods 2005 Financial Recap • Dairy Group fluid milk volume growth of 2.5% – operating income growth of 7% • WhiteWave Foods revenue growth of 13% – operating income growth of 32% • Consolidated operating profit growth of 7% • Earnings per share growth of 15%
  6. 6. 2006 Guidance Consolidated operating income of $680 - 700 million, up 9%-12%* Earnings per share of $2.10 – $2.15, up 15%-18% over $1.82 in 2005* * Post stock-option expense
  7. 7. A Unique Balance of Businesses Dairy Group WhiteWave Foods – Stable, predictable earnings – Attractive growth categories – Volume growth – Strong national brands – Synergy opportunities – Value-added margins – Strong cash flow – Improving supply chain – National refrigerated direct – Leverage through store delivery network consolidation 1 Positioned for 8-10% Long-Term Earnings Per Share Growth 1 Excludes possible facility closing costs, future acquisitions / divestitures and one-time items
  8. 8. 2005 Net Sales by Segment Dairy Group $9 billion WhiteWave Foods $1.1 billion International $0.4 billion
  9. 9. 2005 Net Sales by Segment Dairy Group $9 billion WhiteWave Foods $1.1 billion International $0.4 billion
  10. 10. Dean Dairy Group • Nation’s largest dairy processor • Strong regional brands • Unique nationwide footprint • National refrigerated direct store delivery (DSD) network
  11. 11. 2005 Dairy Group Sales Fresh Fluid Milk/Cream 67% Ice Cream 9% Ice Cream Mix 4% Cultured 6% Juice/Drinks/Water 4% ESL Cream/Creamer 6% Others 4%
  12. 12. National Refrigerated DSD Network Coupled With Strong Regional Brands • 99 facilities • 6,500 DSD routes • 150,000 locations served DSD coverage Processing plants
  13. 13. Focus on Leading the Industry in Customer Service • One-stop-shop solution • Simplified pricing • Superior responsiveness • Focus on quality
  14. 14. Focus on Volume and Marketshare Growth Dairy Group Fluid Milk and Cream Growth versus USDA Total Consumption 5% 4.1% 4% 3.4% 2.7% 2.4% 3% 2% 1.4% 1.3% 0.9% 1% 1.2% 0% -0.8% 0% 0% -1% - 0.5% -2% -2.3% -3% - 2.9% -4% Q4 05 Q3 04 Q2 05 Q3 05 Q1 05 Q2 04 Q4 04 Dean Milk and Cream USDA Fresh Milk Volume Growth Volume Growth * Calculation is exclusive of cream volumes in 2005
  15. 15. Focus on Driving Efficiency Historical Focus • Consolidate redundant facilities – 32 facilities closed to date – Includes 2 facilities closed in 2005 • Separated branded and private label product manufacturing Next Steps • Modernize information systems platform • Optimize SG&A infrastructure – Consolidate regional structure – Leverage scale in purchasing and administrative functions
  16. 16. Experienced Leadership • Alan Bernon named President of Dean Dairy Group – 30 year dairy industry veteran – 20 years as president of Garelick/ COO of Dean Northeast region • Pete Schenkel named Vice-Chairman of Dean
  17. 17. 2005 Net Sales by Segment Dairy Group $9 billion WhiteWave Foods $1.1 billion International $0.4 billion
  18. 18. WhiteWave Foods’ Leading Brand Portfolio $337 M and other $111 M $273 M $182 M $241 M 2005 Net Sales * Note: excludes Marie’s p. 18
  19. 19. Branded products have become a core part of the Dean Foods portfolio over time 1997 2002 2004 Purchased Entered licensing Purchased Morningstar agreement with Horizon Land O’ Lakes Organic 2005 2002 Merged 3 legacy companies Purchased under WhiteWave name White Wave
  20. 20. Significant Strides Have Been Made in Integrating the 3 Legacy Companies One, unified company; best-in-class brands, One company talent, and 3 separate, Sustainable growth and infrastructure legacy companies superior returns – 1 organization – 1 leadership team – Focused portfolio of – 3 faces to the – 1 “sales” face to premium brands customer the customer – 1 face to the customer – 3 separate, – Supply chain – Fully integrated supply under-leveraged integration in chain supply chains progress – Top-talent organization – Internal redundancy – Process and – Best-in-class – Limited process systems build-out in processes and and systems progress systems infrastructure Time 2004 2005 2006-2007
  21. 21. White Wave’s Focus is to Enable Continued Growth and Superior Returns Focused Focused Product Organization Portfolio Strong Growth And Superior Returns Focused Supply Chain p. 21
  22. 22. Creating a Leveraged, Fully-Integrated Supply Chain Distributed Complex Under-leveraged Mfg Footprint Distribution Short-run Plants 12 Company 2,600 SKU’s 2004 65 Owned Plants and Inefficient Inventory 30+ Co-packers Processing Locations Focus Dedicated, Reduced product multi-line, product portfolio on long run plants movement, largest (5 WWFC plants full trucks 2005 opportunities 3 strategic (11 inventory (~700 SKUs) co-packers) locations) Vertically Integrated Branded Supply Chain 2006- Focused Efficient Optimized 2007 Product Portfolio Manufacturing Distribution
  23. 23. Focused on Premium, High Growth Brands in the Dairy Case Focused on brands that offer: • High growth • Health and wellness • High profit potential • Premium dairy brands • Supply chain fit
  24. 24. Focused on Premium, High Growth Brands in the Dairy Case Focused on brands that offer: • High growth • Health and wellness • High profit potential • Premium dairy brands • Supply chain fit Fit with the vision
  25. 25. Strong Brands with a History of Robust Growth 1,200 1,000 5 YR CAGR of Key Brands = 28% 800 600 400 200 0 2000 2001 2002 2003 2004 2005 * Pro forma assuming we owned these same businesses in all comparable periods
  26. 26. WhiteWave Foods’ Leading Brand Portfolio $337 M 20% increase vs. 2004 2005 Net Sales * Note: excludes Marie’s p. 26
  27. 27. Despite the Rapid Growth of the Soymilk Category, US Household Penetration is Low • Virtually all sales are to 7% of households – These buyers represent 80% of category volume • Core soymilk households still consume 3X as much conventional milk as soymilk • Another 30% of US households are interested in soymilk Represents significant opportunity to grow the category p. 27
  28. 28. Silk’s strategy is to drive category growth Strategic focus $337 M 100% Other • Focus on current users and 90% Aseptic interested prospects 80% • Increase marketing investment 70% and focus on heart health 60% • Focus on core refrigerated 50% products (best taste - margins) Refrigerated 40% • Use new products to drive trial 30% (e.g. Silk Light) 20% • Integrate the supply chain 10% to improve margins 0% 2005 Net Sales p. 28
  29. 29. Targeted Promotion p. 29
  30. 30. WhiteWave Foods’ Leading Brand Portfolio $273 M 39% increase vs. 2004 2005 Net Sales * Note: excludes Marie’s p. 30
  31. 31. There is Significant Latent Demand for Organic Milk • 32% of consumers are interested – 4% of households use organic milk today • Demand is outstripping supply, customers are on allocation • We are not currently investing in marketing the brand or pursuing new distribution (68% ACV) Category will grow as supply situation improves p. 31
  32. 32. We are Investing to Grow Supply • Increase supply from 325+ family-owned farms (80% of current supply) • Adding 180 new family farms to producer network – Horizon Organic Producer Education (HOPE) – Assists farmers to become organic – 12-36 month transition period • Increase supply at company-owned farms (20% of current supply) – Improve operations at Idaho and Maryland to increase quality and productivity – Add new company-owned farms p. 32
  33. 33. Horizon Organic’s Focus is Profitable Growth $273 M Strategic focus 100% Other 90% Non-milk • Invest to increase supply 80% Dairy 70% • Integrate the supply chain and drive margin 60% • Optimize pricing to improve 50% profitability and moderate 40% Fluid Milk demand 30% • Drive growth on core fluid 20% milk by targeting interested prospects 10% 0% 2005 Net Sales p. 33
  34. 34. Rachel’s Organic $69 M Strategic focus 100% Other 90% Yogurt & • Intensify marketing 80% Cream support of branded 70% products 60% • Use innovation as driver 50% of growth and 40% Milk differentiation 30% • Continue to reinforce 20% premium nature of the 10% brand 0% 2005 Net Sales 38% increase over 2004 p. 34
  35. 35. WhiteWave Foods’ Leading Brand Portfolio $241 M 13% increase vs. 2004 2005 Net Sales * Note: excludes Marie’s p. 35
  36. 36. International Delight – Opportunities for Sales and Profit Growth Strategic focus $241 M 100% Away from 90% • Continue to innovate Home – Introduction of seasonal 80% (Portion Control flavors and “trans fat- & Bulk) free” varieties 70% • Capture the “Away from 60% Home” opportunity At Home 50% (Pints and • Integrate the supply chain to Quarts) 40% drive margin expansion 30% • Maintain/enhance market 20% position over time – currently 30% market 10% share 0% 2005 Net Sales p. 36
  37. 37. Innovation Drives the Brand: At Home • Hershey’s Chocolate Caramel leverages a strong co-brand equity • 0 Trans Fat formulation targets health and wellness trends p. 37
  38. 38. Innovation Drives the Brand: Away from Home • Bulk Creamer dispensers complement Portion Control cups to provide full creamer solutions for Away From Home coffee programs • Seasonal, limited time flavors add excitement and incremental sales p. 38
  39. 39. WhiteWave Foods’ Leading Brand Portfolio $182 M 2% increase vs. 2004 2005 Net Sales * Note: excludes Marie’s p. 39
  40. 40. Land O’ Lakes is a Premium Dairy Brand $182 M Strategic focus 100% Other 90% 80% • Invest to drive national Aerosol brand equity and growth 70% Half & Half 60% Away from home • Introduce value-added 50% (Portion Control) products 40% • Leverage brand equity 30% Half & Half to build leadership in 20% At home premium dairy (Pints & Quarts) 10% categories 0% 2005 Net Sales p. 40
  41. 41. Building a World Class Organization • Joe Scalzo named President and CEO of WhiteWave – Proven executive with skills and experience to realize WhiteWave’s potential – Gillette, Coca-Cola, Procter & Gamble – Brand management, marketing, logistics and supply chain management experience – Passion for excellence
  42. 42. Focus on Shareholder Value Stock Price Performance, IPO – February 13, 2006 $50 TreeHouse Spin-off $45 CAGR = 26% Acquired Horizon Organic $40 Acquired Dean Foods $35 $30 Acquired Morningstar $25 $20 Began WhiteWave consolidation $15 Acquired White Wave $10 $5 $0 6 7 8 9 0 1 2 3 4 5 6 97 98 99 00 01 02 03 04 05 -9 -9 -9 -9 -0 -0 -0 -0 -0 -0 -9 r- r- r- r- r- r- r- r- r- ct ct ct ct ct ct ct ct ct ct r Ap Ap Ap Ap Ap Ap Ap Ap Ap Ap O O O O O O O O O O TreeHouse Foods was Spun-off from Dean Foods on June 27, 2005. Chart includes the value of TreeHouse Foods on the day it was spun-off to show total shareholder return since IPO
  43. 43. Summary • Dairy Group continues to execute long-term strategy – Growing marketshare – Driving efficiency • Significant opportunities at WhiteWave Foods – Driving rapid growth in well-positioned brands – Pushing efficiency to grow profitability • Intense focus on shareholder value creation – History of shareholder enriching activities
  44. 44. Dean Foods Company CAGNY Conference February 21, 2006 Scottsdale, Arizona
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