Hillshire Brands — CAGNY 2013
58 slides from Hillshire Brands's conference presentation, Feb 20, 2013
Slide 1: CAGNY 2013
CAGNY 2013 Exhibit 99
Slide 2: Forward Looking Statements
Forward Looking Statements This presentation contains forward-looking statements regarding HSH’s business prospects and future financial results and metrics. These statements are typically preceded by terms such as “will,” “anticipates,” “intends,” “expects,” “likely” or “believes” and other similar
Slide 3: What We Want You to Take Away From Today
What We Want You to Take Away From Today Terrific portfolio of leading, iconic brands that respond to investment Growth and cost agendas gaining traction Confident we will deliver on financial targets
Slide 4: An Amazing Year…
An Amazing Year… Launched new company Built new management team Relocated headquarters to Chicago Energized new culture
Slide 5: Past Months Have Validated Our Core Investment Thesis
Past 12 Months Have Validated Our Core Investment Thesis Compete in attractive and profitable categories Key to success is disciplined investment in brand building and innovation Cost efficiencies exist to fund growth agenda Potential to deliver significant shareholder return
Slide 6: Early Days But Turnaround Starting to Take Hold
Early Days But Turnaround Starting to Take Hold Percent Change in Total Volume Sales Product FY12 FY13 YTD Ball Park Hot Dogs (4.7)% +5.2% Jimmy Dean Frozen Breakfast (3.6)% +7.9% Hillshire Farm Lunchmeat (7.5)% +1.0% State Fair Corn Dogs (1.5)% +1.7% Gallo Salame (6.4)% +3.2% Sara Lee Pre Sliced De
Slide 7: What We Will Cover Today
What We Will Cover Today Background on Hillshire Brands Review of our four core strategies for growth Financial outlook
Slide 8: A $4B North American Meat-Centric Food Company
A $4B North American Meat-Centric Food Company 73% 27% Retail Foodservice Retail vs. Foodservice 96% 65% 4% 35% Retail Foodservice Meat Bakery Meat vs. Bakery Source: FY12 Company Financial Statement information; Based on reported net sales
Slide 9: 88% of Sales Are Branded; Two $1B Brands
88% of Sales Are Branded; Two $1B Brands 88% 12% Branded Unbranded Source: Company Financial Statement information
Slide 10: Leading Share Positions in Core Categories
Leading Share Positions in Core Categories Brand Category HSH Share Position Relative Market Share Source: IRI Multi-Outlet 52 weeks Ending 2/3/2013 Breakfast Sausage #1 2.8x Frozen Protein Breakfast #1 7.4x Lunchmeat #3 0.3x Smoked Sausage #1 2.8x Hot Dogs #1 1.1x Corn Dogs #1 1.7x Super Premium Sa
Slide 11: Multiple Areas for Growth in Large Categories
Multiple Areas for Growth in Large Categories Size of Category $5.1B $2.7B $1.8B $1.8B $1.5B 80% 79% 60% 61% 36% 28% 31% 30% 28% 21% Lunchmeat Hot Dogs Smoked Sausage Breakfast Sausage Frozen Protein Breakfast Category HH Penetration Brand HH Penetration Source: Symphony IRI Group, National Consumer
Slide 12: Core Categories Have Limited Private Label Penetration
Core Categories Have Limited Private Label Penetration Category Private Label Share Source: Symphony IRI Group Total US Multioutlet data, 52 weeks ending. 2/3/13 Frozen Protein Breakfast 7% Hot Dogs 4% Corn Dogs 4% Smoked Sausage 6% Cocktail Links 5% Fresh Breakfast Sausage 9% Mainstream Lunchmeat 1
Slide 13: Vision
Vision Become THE Most Innovative Meat-Centric Food Company in the US
Slide 14: Four Strategies Will Deliver Long-Term Value Creation
Four Strategies Will Deliver Long-Term Value Creation FY 2015 Targets Core Strategies Volume Growth Net Sales Growth MAP % of Total Revenue Operating Margin 2-3% 4-5% 5% 10% Strengthen the core Extend into adjacencies Fuel growth through efficiency Acquire on-trend brands
Slide 15: Two Core Growth Strategies Improve Business Fundamentals
Two Core Growth Strategies Improve Business Fundamentals Leverage Equities to Win in New Categories Near-term growth comes from strengthening the core Strengthen the Core Extend into Adjacencies
Slide 16: Six Brands Will Drive Our Growth
Six Brands Will Drive Our Growth Mainstream Brands Artisanal Brands
Slide 17: Brand Building and Innovation Key to Growth Agenda
Brand Building and Innovation Key to Growth Agenda Brand positioning World-class advertising Category management Brand Building Innovation Upgrade existing quality and packaging New line extensions Adjacent innovations
Slide 18: Increasing Investment in MAP Behind Our Core Brands
Increasing Investment in MAP Behind Our Core Brands 3.5% 4.3% 5% Historic Average FY13 YTD FY15E MAP Spending as % of Sales
Slide 19: Building a Culture Of Innovation
Building a Culture Of Innovation Creating a sustainable pipeline by shifting focus to growth platforms Streamlining processes to reduce time to market Improving in-market success by focusing on consumer insights 9% 11% 13% 15% Past 4 Years FY13 YTD FY15E - Revenue from New Innovations* *Percent annu
Slide 20: New Marketing Leadership and Communications Partners
New Marketing Leadership and Communications Partners New Marketing Leadership New Communications Partner
Slide 21: Sharpened Brand Positioning
Sharpened Brand Positioning “Farm House Quality Meats” “Hearty Comfort Food” “Better Guy Food for Better Guy Times” “Smart & Sensible Family Choices” “Authentic Ingredients, Exceptional Tastes” “Artisanal Italian Meats”
Slide 22: Slide 22
Slide 23: Focused on Making MAP More Effective
Focused on Making MAP More Effective Post-Market Analytics Pre-Market Testing 1) Purchase Interest sourced from Nielsen In-Market Study (among ad aware) 2) Emotive Power sourced from Pre-Advertising Study (OTX) Consumption Trends Improved ROI TBD Purchase Interest +25 pct. pts. Emotive Power +57 pts
Slide 24: Strengthening Our Customer Relationships
Strengthening Our Customer Relationships Gaining additional category captaincies Increasing shelf space in key retailers Improving shelf mix to higher velocity and margin products
Slide 25: Brand Building and Innovation Key to Growth Agenda
Brand Building and Innovation Key to Growth Agenda Innovation Upgrade existing quality and packaging New line extensions Adjacent innovations Brand positioning World-class advertising Category management Brand Building
Slide 26: Hillshire Farm Improving Lunchmeat Packaging
Hillshire Farm Improving Lunchmeat Packaging Launch: Q3 FY13 New “fresh” callout Transparent window UPGRADES BASED ON CONSUMER INSIGHTS
Slide 27: Hillshire Farm Improving Lunchmeat Quality
Hillshire Farm Improving Lunchmeat Quality Better Taste Better Appearance Launch: Q3 FY13 Better flavor Optimized seasoning More natural look Better texture
Slide 28: Hillshire Farm Launching New Lunchmeat Flavors
Hillshire Farm Launching New Lunchmeat Flavors Launch: Q4 FY13
Slide 29: Sara Lee Deli: Improved Quality, Improved Packaging
Sara Lee Deli: Improved Quality, Improved Packaging Launch: H2 FY13 American Heart Association Heart-Check Mark No gluten No MSG No fillers No artificial flavors No added hormones 0 grams of trans fat
Slide 30: Hillshire Black Label: Testing A New Approach To The Deli
Hillshire Black Label: Testing A New, Superior-Quality Approach To The Deli Whole muscle meat Seasoned in own juices No added preservatives No MSG No fillers Launch: Q1 FY14
Slide 31: Hillshire Farm Upgrading Smoked Sausage
Hillshire Farm Upgrading Smoked Sausage Quality 3 new varieties No artificial colors, flavors No MSG Gluten free 60/40 taste win vs. competition Launch: Q3 FY13
Slide 32: Jimmy Dean Adding Additional Comfort Foods
Jimmy Dean Adding Additional Comfort Foods Launch: Q3 FY13
Slide 33: Ball Park Bringing New, On-Trend Benefits to Hot Dogs
Ball Park Bringing New, On-Trend Benefits to Hot Dogs Launch: Q3 FY13
Slide 34: State Fair Introducing New Packaging and Varieties
State Fair Introducing New Packaging and Varieties Launch: FY14
Slide 35: Aidells Continues its Tradition of Flavor Experiences
Aidells Continues its Tradition of Flavor Experiences Launch: FY13 - FY14
Slide 36: Gallo Adding Higher-Quality Salame
Gallo Adding Higher-Quality Salame Launch: Q4 FY13
Slide 37: Second Growth Opportunity Is To Extend Into Adjacencies
Second Growth Opportunity Is To Extend Into Adjacencies Protein breakfast Meat-centric meal starters Meat-centric snacks Meat-centric entrees Heat & eat mini-meals Heritage categories
Slide 38: Track Record of Moving From Core to Adjacencies
Track Record of Moving From Core to Adjacencies
Slide 39: Jimmy Dean Frozen Adjacency Extended To Better For You
Jimmy Dean Frozen Adjacency Extended To “Better For You” Launch: Q3 FY13
Slide 40: Ball Park Extended Into Pre-cooked Burgers
Ball Park Extended Into Pre-cooked Burgers Launch: FY12
Slide 41: State Fair Entering Hot Dog Category
State Fair Entering Hot Dog Category Launch: Q4 FY13 Bilingual packaging
Slide 42: Aidells Extending Beyond Smoked Sausage
Aidells Extending Beyond Smoked Sausage Launch: FY13 – FY14
Slide 43: Recent Record of Managing Costs
Recent Record of Managing Costs Saved $90 million via cost reductions in FY11 and FY12 Right-sized workforce for speed and empowerment More than 600 positions eliminated in last 24 months Closed two plants in FY12 •
Slide 44: We Will Remain Relentless on Cost Efficiency
We Will Remain Relentless on Cost Efficiency Committed to $100 million of cost savings Opportunities for additional efficiency Supply chain Trade spend Productivity through culture change Expected savings by year $ in millions FY13 FY14/ FY15 Total • • • Supply chain SG&A / Corp. Total
Slide 45: Building Brands to Build Value
Building Brands to Build Value Outstanding portfolio of brands with clear potential Emerging culture of innovation and agility Demonstrating success – products, processes and performance Committed to growth and profitability through brand-building Focus on cost efficiency as fuel for growth Building
Slide 46: Capital Allocation Priorities
Capital Allocation Priorities Invest in Business Dividends Acquisitions Share Repurchases Pay Down Debt Top priority Expect to increase over time Strategic and opportunistic Opportunistic Not a near-term priority
Slide 47: Assets & Capabilities We Can Leverage With Acquisitions
Assets & Capabilities We Can Leverage With Acquisitions Consumer insights Protein / Breakfast / Meals expertise Category captaincies in key product areas Robust R&D and innovation focus History of success integrating acquired businesses Efficient supply chain and production Fully-integrated SAP ente
Slide 48: Criteria For Acquisitions
Criteria For Acquisitions Value-added categories / consistent with consumer trends Strong brands with attractive competitive positioning Complementary / additive to HSH capabilities Scale with suppliers and customers Attractive top-line growth trends Accretive to margin structure EPS contribution an
Slide 49: Remain Committed to Our FY15 Targets
Remain Committed to Our FY15 Targets FY 2015 Targets Volume Growth 2-3% Net Sales Growth 4-5% MAP % of Total Revenue 5% Operating Margin 10%
Slide 50: FY13 Results on Track
FY13 Results on Track Strong 2013 First Half Results Fiscal 2013 Full-Year Guidance vs. H1 FY12 Adjusted Net Sales +2.3% Adjusted Operating Income +44% Adjusted Diluted EPS +49% Adjusted Net Sales Slightly up vs. FY12 Adjusted Diluted EPS $1.60 - $1.70 “Adjusted” terms are non-GAAP financial measure
Slide 51: Healthy Financial Position
Healthy Financial Position ($ in millions) As of Dec. 31, 2012 Adjusted YTD Cash Flow $ 114 Adjusted YTD EBITDA $ 301 Cash $ 299 Debt $ 946 Net Debt $ 647 “Adjusted” terms are non-GAAP financial measures. See our reconciliation to the most directly comparable GAAP measure at the end of this presenta
Slide 52: Key Takeaways
Key Takeaways Terrific portfolio of leading, iconic brands that respond to investment Growth and cost agendas gaining traction Confident we will deliver on financial targets
Slide 53: Appendix
A Hillshire BRANDS
Slide 54: Appendix
A Hillshire BRANDS
Slide 55: Operating Income Reconciliation - Reported to Adjusted
Impact of As Significant Reported Items Dispositions Adjusted (1) 2,034 $ - $ - $ 2,034 $ 1,408 - 1,404 (4) - - - - Net charges for exit activities, asset and business dispositions - - Impairment charges - - - - $ (45) $ - $ $ Impact of As Significant Reported Items Dispositions Adjusted (1) Net Sal
Slide 56: Net Income and EPS Reconciliation - Reported to Adjusted
Impact of Impact of As Significant As Significant Reported Items Adjusted (1) Reported Items Adjusted (1) $ (45) $ $ $ (118) $ $ (16) (11) (46) (29) (72) (223) (440) - - (23) (52) - - - - $ (23) $ $ $ (52) $ $ $ (29) $ $ $ (72) $ $ Earnings per share of common stock: $ 0.87 (0.23) $ 1.10 $ 0.13 $ (0
Slide 57: Cash Flow Reconciliation - Reported to Adjusted
Cash Flow Reconciliation - Reported to Adjusted Six Months ended Dec. 31, 2012 (in millions, except per share data - unaudited) Six Months ended Dec. 29, 2012 As Reported Impact of Significant Items Adjusted (1) Cash Flow $70 $44 $114 (1) Represents a non-GAAP financial measure. See detailed explana
Slide 58: EBITDA Reconciliation - Reported to Adjusted
(1) Represents a non-GAAP financial measure. See detailed explanation of these and other non-GAAP measures in the release dated January 31, 2013 EBITDA Reconciliation - Reported to Adjusted Six Months ended Dec. 31, (in millions, except per share data - unaudited) Reported Net Income Income tax expe