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Dean Foods Presentation at 2010 Consumer Goods Analyst Conference

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  1. 1. February 19, 2010
  2. 2. The following statements made in this presentation are “forward looking” and are made pursuant to the safe harbor provision of the Private 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, including acquisitions and the integration of such acquisitions, (3) our branding initiatives, (4) our integration, innovation, and research and development 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, operating income, net income, debt covenant compliance, financial performance and adjusted earnings per share can vary based on a variety of economic, governmental and competitive factors, which are identified in our filings with the Securities and Exchange Commission, including our Forms 10-K and 10-Q (which can be accessed on our website at or the website of the Securities and Exchange Commission at Our ability to profit from our branding initiatives depends on a number of factors including consumer acceptance of products. 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. Certain non-GAAP financial measures contained in this presentation, including adjusted diluted earnings per share, free cash flow, consolidated adjusted operating income and consolidated adjusted net income, have been adjusted to eliminate the net expense or net gain related to certain items identified in our press releases. A full reconciliation of these measures calculated according to GAAP and on an adjusted basis is contained in such press releases, which are publicly available on our website at 2
  3. 3. Gregg Engles, Chairman and CEO CEO Perspective and Strategic Update Joe Scalzo, Chief Operating Officer Extending our Advantage in 2010 Jack Callahan, Chief Financial Officer Financial Update 3
  4. 4. The in fluid milk with 38% share of next largest milk competitor The country’s fluid dairy processing footprint Retailer and processor consolidation continues, Our scale advantage affords us opportunities to reduce costs and build capability that our We are aggressively attacking these opportunities 4
  5. 5. Net Sales* $8.5B $1.0B $1.8B #1 US fresh milk US leader in long Value-added shelf-life private brands in growth Cost leadership label dairy categories National footprint Nationwide #1 in global soy National selling capabilities #1 US organic with local Strong milk execution foodservice and retail presence #2 US creamers Note: Reflects full year 2009 information. *Proforma for Alpro acquisition that was completed in July 2009. Alpro net sales have been converted at a rate of $1.4 / €1 for purposes of this presentation 5
  6. 6. Focus on Cost Focus on Growth Share and cost Leading brands leadership Growth categories Stable category Global soy platform Distribution strength Solid margins Pass-through Best-in-class mitigates commodity capability impact Top-line growth Resilient cash opportunity generation Best in Class Commodity Food Packaged Food 6
  7. 7. Distribute Procure $50M $50M Procure Distribute $50M $50M WhiteWave $50M WhiteWave Convert $50M Convert $85 $85 Network Network Optimization Optimization $65M $65M 7
  8. 8. Fluid Milk Competitive Landscape in Geographies Dean Serves Dean is the only 160+ Competitors 350+ Total Plants national player in a highly fragmented Balance of industry Local Industry 1-4 Plants Each 155+ Players Dean has a third fewer plants, but Regional Next Five equal share as local 6-31 Plants Each Players competitors combined National 82 Plants Share continues to grow as we extend our advantage 8 Note: Dean internal analytics. Sources: NMPF 2010 Highlights, IRI, Retail Link, Dean internal data
  9. 9. Traditional Dairy The Dean Model Local/Regional Scale Tribal knowledge and Data intuition Complex product offering Focus results in high costs Little understanding of consumer product Capability preferences Limited cost reduction abilities Cost 9
  10. 10. A Hotly Contested Category 10
  11. 11. Gap Between Retail Price Dean Brand Price Premium and Class I Mover over Private Label $2.10 (per gallon, white milk) 32% $2.00 25% 21% 21% $1.90 2006 2007 2008 2009 $1.80 $1.70 $1.60 $1.50 11
  12. 12. Profit pool has been compressed Believe we will see a bottom in 2010 Margin pressure for retailers and commodity increases likely leads to price inflation Processor margin pool limited 12
  13. 13. Class I Mover ($/cwt) $23 $21 $19 $17 $15 5 year avg. $14.78 $13 $11 $9 J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D 13
  14. 14. Procure Convert Distribute 14
  15. 15. Fluid Milk Gallons (YOY change) Competition1 1Q 08 2Q 08 3Q 08 4Q 08 1Q 09 2Q 09 3Q 09 4Q 09 15 1 Competitor estimates derived from subtracting FDD pounds from USDA sales pounds
  16. 16. WhiteWave Revenue1 WhiteWave Operating Profit ($ Millions) ($ Millions) 1,750 150 1,500 125 1,250 100 1,000 0 0 Note:Net Revenue: 2007 & 2008 adjusted for exited businesses 16 Source: internal data
  17. 17. Free Cash Flow* ($ Millions) Adjusted Earnings Per Share $320 300+ $1.59 $1.54 – $1.64 $1.30 $1.20 17
  18. 18. Dean is uniquely positioned to win Near-term challenges underscore the importance of executing our strategies We expect to gain share in 2010 and hold the adjusted EPS growth we achieved in 2009 Our long-term earnings trajectory for double-digit adjusted EPS CAGR remains on track Confident we will win 18
  19. 19. Gregg Engles, Chairman and CEO CEO Perspective and Strategic Update Joe Scalzo, Chief Operating Officer Extending our Advantage in 2010 Jack Callahan, Chief Financial Officer Financial Update 19
  20. 20. Highlights Fluid Milk Share % Largest US milk processor 36 37 38 35 $8.5B revenue 50 regional brands and private 2003 2005 2007 2009 label Product Mix 5,800 company owned DSD routes 82 plants;160,000 locations 71% 10% Milk Ice Cream served 5% Industry consolidating, but still Other Beverages highly fragmented 5% Cultured 8% 1% Other Other Fluid Dairy 20
  21. 21. 2009 Delivered: 2010 Plan: Cost Savings $75M $90M Target: $300M+ 21
  22. 22. Drive Procurement Savings Leveraging Our Scale ($ millions) 50 10% advantage achieved today by leveraging scale and capability 26 $11M in 2009 savings 15 Targeting $15 million in 2010 $11 11 Focus on product standardization 22
  23. 23. Continuous Improvement Marathon Campaigns Gain Momentum 85 ($ millions) Problem solving & lean skills 54 SWAT team approach 30 Hands-on 20 week program $24 24 Cultural transformation KPI enabled 40-60% line efficiency improvement in marathon plants 5-15% labor cost reduction in plant and cooler in marathon plants Improved scheduling 23 *Includes capital projects
  24. 24. Simplify the Network Right Products in the Right Plants 65 ($ millions) Fewer, more productive 23 manufacturing facilities 13 Consolidation to most efficient facilities Closed eight plants in the last $10 10 two years Like products into focused facilities Optimize the network to reduce total costs 24
  25. 25. Example Case: Texas Production Transportation Reduction Before After 25
  26. 26. Distribution Efficiency Fewer, More Productive Routes 50 ($ millions) 32 Leveraging truck based GPS 17 Reduced administration time $15 15 Live truck data Standardized delivery time Routing tools Future focus Gallons of Fuel -4% Delivery frequency Routes Removed 220 management Labor $ per Gal -1% Dynamic routing Avg. Cases per Load +3% 26
  27. 27. Highlights Strong Brand Positions Largest US value-added dairy case competitor $1.8B Revenue (2009)1 2,200 employees, 10 plants Strong 2009 operating profit growth Note: 1Alpro 2009 revenues while owned by Dean Foods $174MM. 27 Source: Grocery data from IRI and Nielsen
  28. 28. 2009 Sales: $750MM 54% combined share No. 1 in soymilk worldwide Soymilk category slowed in 2009 driven by economy Maintained clear leadership behind marketing investment of +10% in 2009 Expanding beyond soy: PureAlmond Note: Alpro share of “EU9”: UK, NL, BE, DE, P, SW, AU, IT, FR. Approx 2009 share. 2009 Alpro sales translated back to US GAAP. 28 Source: Grocery data from IRI and NIelsen; Internal Data
  29. 29. DF Position and Share in Global Strong Opportunities to Grow Soy (by Brand) within Existing Regions EU6 0.2 US 0.5 Australia 0.8 Dean Foods Soymilk Business Germany 8.3 #1 position in N America and Europe UK 11.3 World-leading expertise International growth opportunities US 15.0 Belgium 25.0 Note: 67% Silk share for US grocery and Canada grocery + mass 42% Alpro share for “EU9”: UK, NL, BE, DE, P, SW, AU, FR, IT Core countries = BE, NL, UK, DE 29 Source: Grocery data from IRI and Nielsen
  30. 30. 2009 Sales: $550M 7% increase vs. 2008 24% share, +2 pts Strong core growth; Accelerating growth behind CoffeeHouse Inspirations Q309 launch, at 80% ACV International Delight is the 50%+ of ND creamer growth #2 fastest growing national “Skinny” launching now grocery brand Share growth accelerating 30 Source: Grocery data from IRI and Nielsen; Internal Data
  31. 31. 2009 Sales: $435M Maintaining 41% share Category down in 2009 – starting to recover with better price gaps to conventional Focus on cost and price management driving improved profit outlook Driving sales to differentiated products: single-serve and DHA Note: Horizon market share includes The Organic Cow 31 Source: Grocery data from IRI; Internal Data
  32. 32. Gregg Engles, Chairman and CEO CEO Perspective and Strategic Update Joe Scalzo, Chief Operating Officer Extending our Advantage in 2010 Jack Callahan, Chief Financial Officer Financial Update 32
  33. 33. Gross Profit + 6% Selling & Distribution < 1% Operating Cost + 5% G&A + 23% + 22% Adjusted Full Year Operating Profit Adjsted + 10% $693M EPS $1.59 33
  34. 34. ~$45M in Support of Strategy ($ Millions) 15 $599 30 Special 43 Projects IT Strategic R&D Consulting 25 Supply-Chain $486 Wages/Benefits Incentive Comp Pension Legal Insurance 2008 Acquisitions Base Growth / Strategic Discretionary 2009 G&A Corporate Items Capability Spending G&A 34
  35. 35. 2007 – 2010E ($ Millions) $462 $390 $300 + $109 CapEx 35
  36. 36. Net Debt $5,295 ($ Million) $4,459 $4,190 < $3,900 2007 2008 2009 2010 E Leverage Ratio* 36 *Year end, as defined by credit agreement
  37. 37. Limited G&A Growth in 2010 Flat Operating Profit Growth 37
  38. 38. 2010 Estimated Adj EPS Growth Drivers of Second Half Growth Margin concessions in run-rate Accumulating benefit of cost programs Limited G&A growth Minimal impact from dairy commodities Easier overlap, including Q1 Q2 Q3 Q4 share count 38
  39. 39. Clear leadership positions in both fluid milk and our value- added branded portfolio Current marketplace pressures make scale more important than ever, and Dean has a 5x advantage Cost programs gaining momentum WhiteWave-Alpro well positioned to sustain growth Significant capability now in place, limited incremental investment Resilient cash generation, and long-term EPS progression 39
  40. 40. February 19, 2010
  41. 41. Appendix 41
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