Barry Callebaut AG · SIX:BARN
Barry Callebaut — Merger or Acquisition (September 2003)
41 slides from Barry Callebaut's merger presentation, Sep 1, 2003
Slide 1: Barry Callebaut acquires Brach's - Creating together platform for global consumer confectionery
Barry Callebaut acquires Brach’s - Creating together platform for attractive global consumer confectionery business Presentation at media and analyst conferences Zurich/Switzerland, September 1, 2003 1
Slide 2: Andreas Schmid
Andreas Schmid Chairman of the Board of Directors, Barry Callebaut AG September 1, 2003 MEDIA AND ANALYST CONFERENCES, ZURICH/SWITZERLAND 2
Slide 3: Content and speakers
Content and speakers X Barry Callebaut pursuing its course to a fully integrated company; strategy and transaction rationale (Andreas Schmid, Chairman; Patrick De Maeseneire, CEO) X Company profile Brach’s (Jerry Hagedorn, CFO Brach’s Confections Inc.) X Financial rationale and synergies (Dieter Enk
Slide 4: Barry Callebaut to acquire Brach's: Transaction summary and rationale
Barry Callebaut to acquire Brach‘s: Transaction summary and rationale X Brach‘s is a household name in confections in the U.S. X Brach‘s will provide the foundation of Barry Callebaut‘s consumer business growth: X Giving Barry Callebaut access to major U.S. retailers X Increasing Barry Callebaut‘s s
Slide 5: Brach's company profile
Brach‘s company profile X One of America‘s leading manufacturers of confections and fruit snacks X Aided awareness of 93% (2003) X Founded in 1904 by Emil Brach X Brach‘s products are produced in three facilities in the US, at a factory in Northern Mexico recently constructed by KJ Jacobs AG and by
Slide 6: BC's way from an industrial manufacturer to a fully integrated company
BC‘s way from an industrial manufacturer to a fully integrated company September 1, 2003 MEDIA AND ANALYST CONFERENCES, ZURICH/SWITZERLAND 6
Slide 7: Forward-integration along the chocolate value chain
Forward-integration along the chocolate value chain September 1, 2003 MEDIA AND ANALYST CONFERENCES, ZURICH/SWITZERLAND 7
Slide 8: Barry Callebaut today
Barry Callebaut today X A fully integrated company from the bean to the shelf that produces and markets high-quality cocoa and chocolate products serving 3 strong customer segments: industrial food manufacturers, artisanal/professional users, and retailers. Industrial Food Service/Retail Cocoa, Sour
Slide 9: Brach's is a good fit
Brach‘s is a good fit X Brach‘s – like Stollwerck – presents a good opportunity X Both companies allow Barry Callebaut the entry into the largest consumer confectionery markets in Europe and North America, respectively X Barry Callebaut will build its worldwide consumer platform market by market, th
Slide 10: Strategic rationale – operational
Strategic rationale – operational Strengthen Barry X Access to consumer and retail knowledge and Callebaut’s US manufacturing capabilities in the US, a priority market market and X Offer global and complete manufacturing system to outsourcing FMCG (Fast Moving Consumer Goods) looking to platform out
Slide 11: Strategic rationale – growth
Strategic rationale – growth Create X Initially keep Brach’s and Stollwerck as separate opportunity to business units to deliver on restructuring plans, while build an attractive capturing revenue opportunities and joint product consumer development potential business X At the appropriate moment com
Slide 12: Barry Callebaut further expands its consumer confectionery business
Barry Callebaut further expands its consumer confectionery business Patrick De Maeseneire CEO, Barry Callebaut AG September 1, 2003 MEDIA AND ANALYST CONFERENCES, ZURICH/SWITZERLAND 12
Slide 13: Vision and mission
Vision and mission X Vision X Barry Callebaut is the heart and engine of the chocolate industry X As the chocolate expert, Barry Callebaut is the worldwide business partner of choice for the food industry, the professionals and the retailers X Barry Callebaut masters every step of the chocolate valu
Slide 14: Barry Callebaut's capabilities
Barry Callebaut‘s capabilities X Semi-finished products X Processed products X Consumer products X Cocoa sourcing X Cocoa X Cocoa X Industrial chocolate X Molding X Marketing X Liquor X Powder/butter X Packaging X Africa X Europe X Europe X Stollwerck / Van Houten – X Brazil X USA X Eastern Europe E
Slide 15: Barry Callebaut's consumer opportunities
Barry Callebaut‘s consumer opportunities The market Our response Retailers X See the market place as global – X Develop leading confection- significant geographical expansions category skills and leverage X Private Label growth driven international know-how through significant discounts and ’value f
Slide 16: US confectionery market is highly attractive
US confectionery market is highly attractive 1. Confection is a large category – over USD 21 billion 2. Confection has a high household penetration (95%) and is sold across multiple trade classes 3. Confection has realized strong growth over the last eight years 4. Consumption of confections is belo
Slide 17: US confectionery market - category growth
US confectionery market - category growth Annual average growth rate of + 4.6% over the last nine years (Food, Drug & Mass). $9'000 1.4% 1.2% 7.7% 3.0% $8'000 5.5% Retail $ Sales in Millions 3.6% 5.4% $7'000 7.0% 6.7% $6'000 $5'000 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003* * YTD Source: IRI
Slide 18: US confectionery consumption underdeveloped
US confectionery consumption underdeveloped Per capita lb of confectionery consumption per year 40 33.9 35 30.5 28.8 28.7 28.1 27.8 30 27.5 24.4 24.0 25 23.2 21.9 18.8 18.0 20 15 10.7 10 5 0 y ay m m ds k A e d ly ia d en nd an ar nc an an S a do tr iu w n ed U a It m a m us la lg rl el nl or g Fr w
Slide 19: Gaining access to top US food retailers
Gaining access to top US food retailers Top retailers Barry Callebaut Brach‘s Consumer US and Europe Wal-Mart √ √ Kroger √ √ Target √ Costco √ Albertson‘s √ Kmart √ √ Ahold Europe based Safeway √ √ Publix √ Delhaize Europe based √ Winn-Dixie √ September 1, 2003 MEDIA AND ANALYST CONFERENCES, ZURICH/
Slide 20: The trading-up opportunity in the chocolate category
The “trading-up“ opportunity in the chocolate category – synergies with BC X Super premium chocolate is an affordable luxury X Trading-up opportunities are evident in chocolate as growth in the USD 2 billion premium segment exceeds that of the overall chocolate category X Gourmet/specialty chocolate
Slide 21: Implementation and integration
Implementation and integration Transaction Integration Exploiting benefits September 2003 Oct. – Dec. 2003 2004 and beyond X Announcement X Kick-off joint X New business Sept. 1, 2003 integration teams processes implemented X Expected closing X Anchor new X Realize cost synergies end of Sept. ’03 bu
Slide 22: Brach's company profile
Brach‘s company profile Jerry Hagedorn Chief Financial Officer, Brach’s Confections, Inc. September 1, 2003 MEDIA AND ANALYST CONFERENCES, ZURICH/SWITZERLAND 22
Slide 23: Brach's was founded in Chicago in 1904
Brach’s was founded in Chicago in 1904 “Brach’s Palace of Sweets” September 1, 2003 MEDIA AND ANALYST CONFERENCES, ZURICH/SWITZERLAND 23
Slide 24: Sales by product categories
Sales by product categories Total 2002/2003: USD 340 m (estimate) Fruit snacks 22% Sugar candy 59% Chocolate 19% Sold in both packaged and loose forms September 1, 2003 MEDIA AND ANALYST CONFERENCES, ZURICH/SWITZERLAND 24
Slide 25: Brach's has four business segments
Brach’s has four business segments Loose Seasonal $84 m $80 m Packaged Fruit Snacks $127 m $84 m September 1, 2003 MEDIA AND ANALYST CONFERENCES, ZURICH/SWITZERLAND 25
Slide 26: Competition is different for each segment
Competition is different for each segment • Loose Regional distributors, some branded • Packaged Big Four – Large branded companies • Seasonal Big Four as well as price players • Fruit Snacks General Mills (with a 60+ share) September 1, 2003 MEDIA AND ANALYST CONFERENCES, ZURICH/SWITZERLAND 26
Slide 27: Brach's: the fastest growing manufacturer
Brach’s: the fastest growing manufacturer % Dollar Growth vs. YA Confection Fruit Snacks Total Confection +1.2% Total Fruit Snacks +6.3% Brach's +5.4% Brach's +37.6% M&M/Mars +5.2% All Other +8.8% Kraft +3.8% Hershey +3.3% Kraft +4.4% Nestle +2.2% General Mills +1.6% Tootsie Roll -1.8% All Other -2.
Slide 28: Historical perspective
Historical perspective Mid-Tier Small Big Four Brachs Price Players X Gross Margins (45%) X Gross Margins (30%) X Very Low Margins X Large Brands X Strong “Family” X No Brands X Large Direct Sales Brand Force X Brokered Sales X Heavy Ad & Force Consumer Support X No Ad and relatively low Consumer Su
Slide 29: Manufacturing restructuring – 4 key components
Manufacturing restructuring – 4 key components 1. Establish strategic partnership with South American company (Arcor) 2. Design and build highly focused low cost plant in Mexico (Vernell) 3. Increased utilization of Brach’s Chattanooga and Winona facilities 4. Exit antiquated Chicago manufacturing f
Slide 30: Production facilities
Production facilities Chicago Winona Chattanooga Vernell September 1, 2003 MEDIA AND ANALYST CONFERENCES, ZURICH/SWITZERLAND 30
Slide 31: Manufacturing restructuring – The goal is to become a cost leader
Manufacturing restructuring – The goal is to become a cost leader Chicago Plant Mexico Plant (Vernell) key indices key indices X Age 75 years X Age - New X Size - 2.2 million square feet X Size - 250,000 square feet 13 buildings Single Building 4 to 11 stories high Single Story with 2 Mezzan
Slide 32: Brach's key figures
Brach’s key figures in USD 2001/02 2002/03 (estimates) (fiscal year ending August 31) Net sales USD 326.8 m USD 340 m EBITDA USD 21.5 m Total assets USD 199.9 m USD 209 m Employees 1,612 approx. 1,600 Both financial years affected by extraordinary cost items relating to the restructuring program Sep
Slide 33: Financial rationale and synergies
Financial rationale and synergies Dieter Enkelmann CFO, Barry Callebaut AG September 1, 2003 MEDIA AND ANALYST CONFERENCES, ZURICH/SWITZERLAND 33
Slide 34: Key transaction terms
Key transaction terms Transaction X Acquisition of 100% of Brachs Confections, Inc., from KJ Jacobs AG Purchase price X Purchase consideration amounts to USD 16 million consisting of the purchase price of USD 1.- for 100% of the equity for Brachs Confections, Inc. and USD 16 million assumed net debt
Slide 35: Synergy potential overview
Synergy potential overview Cost synergies Revenue upside Business system cost savings: Cross-selling opportunities: • sourcing/purchasing • Selected Stollwerck • distribution/logistics products in Brach‘s • overhead chocolate portfolio • Seasonal products ~CHF 12-15 m of annual • Customer label prod
Slide 36: The combined group by Business Units
The combined group by Business Units (net sales revenues) 2001/02 2002/03 E Consumer Consumer Products Products Cocoa & Gourmet & Sourcing Gourmet & Specialties Specialties 7% 24% 33% 16% 12% 15% 53% + Stollwerck 40% Cocoa & Sourcing + Brachs Food Food Manufacturers Manufacturers September 1, 2003 M
Slide 37: Two-pillar business model
Two-pillar business model Patrick De Maeseneire CEO, Barry Callebaut AG September 1, 2003 MEDIA AND ANALYST CONFERENCES, ZURICH/SWITZERLAND 37
Slide 38: Why a two-pillar business model?
Why a two-pillar business model? X Barry Callebaut covers the entire chocolate value chain X Food Manufacturers used to be by far the largest business unit X Cocoa business has reoriented itself to focus on internal needs and on select 3rd party industrial customers X “Boundaries” between Gourmet bu
Slide 39: Clear business model - greater transparency
Clear business model* - greater transparency Business model Barry Callebaut Industrial Food service Retail X Sourcing X Production X Production X Production X Moulding & X Moulding & X Semi-finished packaging packaging X Liquid chocolate X Sales & marketing X Sales & X Sales X Horeca; pro- marketing
Slide 40: Summary of key points
Summary of key points X The acquisition of Brach‘s gives us access to the world‘s single largest consumer confectionery market and to the world‘s biggest retailers X Our consumer business will have two strong geographic pillars: Europe and the U.S., allowing us to build an attractive consumer busine
Slide 41: Question and answer session
Question and answer session X Thank you for your attention September 1, 2003 MEDIA AND ANALYST CONFERENCES, ZURICH/SWITZERLAND 41
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