Premier Foods Plc · LSE:PFD
Premier Foods — Investor Day (July 2016)
60 slides from Premier Foods's investor day presentation, Jul 6, 2016
Slide 1: Lifton Investor & Analyst visit 6 July 2016
Lifton Investor & Analyst visit 6 July 2016 1
Slide 2: Agenda for Today
AGENDA FOR TODAY Time Activity Who 08:15 Agenda Richard Godden, Head of Investor Relations 08:20 Investing for the future Gavin Darby, Chief Executive Officer 08:30 Cash management and Knighton update Alastair Murray, Chief Financial Officer 08:40 Grocery strategy Alex Whitehouse, Grocery Managing D
Slide 3: Gavin Darby, Chief Executive Officer: Introduction
Gavin Darby Chief Executive Officer Introduction 3
Slide 4: Our Growth Agenda
OUR GROWTH AGENDA Expect FY16/17 sales growth +2-4%; additional Nissin opportunities Marketing Innovation Sales guidance Grocery Cake on the chilled Go +2-4% Opportunity Revenue Growth mgmt channels International Existing growth Strategic initiatives momentum 4 4
Slide 5: Brand Growth Following Investment
BRAND GROWTH FOLLOWING INVESTMENT 6 Brands have received disproportionate focus so far Marketing Investment & Innovation 2014 2015/16 (15 months) Sales decline Investment Product Launches Sales growth 3.5% 3.4% £31m 20 All data is Company sourced FY15/16 and FY14 5 5
Slide 6: Reminder of Good Work in Sweet Treats
REMINDER OF GOOD WORK IN SWEET TREATS Good momentum heading into FY16/17 +3.4% +290bps +10.0% Non-branded Cake on the Go FY15/16 Sales FY15/16 Strong NPD sales improves launched in growth margin accretion delivery utilisation market 6
Slide 7: And Our International Business Is Progressing Strongly
AND OUR INTERNATIONAL BUSINESS IS PROGRESSING STRONGLY +47% 9 → 28 +18% +23% FY15/16 sales FY15/16 Sales Increased people Additional cake Leverage Nissin growth in growth investment growth presence Australia & USA 7
Slide 8: Alastair Murray, Chief Financial Officer
Alastair Murray Chief Financial Officer
Slide 9: Cash Guidance Unchanged for FY16/17
CASH GUIDANCE UNCHANGED FOR FY16/17 We have a disciplined approach to cash management FY16/17 guidance £m Working capital Neutral to positive Depreciation £17-18m Capital expenditure £20-25m Interest – cash £40-£43m Interest – P&L c.£44-45m Tax – cash Nil Tax – notional P&L rate 20.0% Pension defici
Slide 10: Working Capital Initiatives
WORKING CAPITAL INITIATIVES Harnessing technology to reduce working capital Additional factory Acceleration of reduction targets invoice processing and improved to reduce debtor forecasting & days reporting Stock Invoicing Rollout of Training and advanced development & collections enhanced t
Slide 11: EU Referendum
EU REFERENDUM The FY16/17 financial impact to the Group of the UK voting to leave the EU is low Foreign currency movements 1. Group is net purchaser of around €50m per annum US$ 2. Currency exposure substantially hedged for FY16/17 3. Lower US$/£ rates helpful to International growth plans €50m Econ
Slide 12: Knighton Foods Business Overview
KNIGHTON FOODS BUSINESS OVERVIEW Sales and product capabilities For Premier Foods – 32% 3rd Party – 68% Process capabilities Agglomeration Spray drying Product is wetted and dried to form free flowing Homogenous materials such as fats and oils are particles atomised and rapidly dried to form free fl
Slide 13: Knighton Foods Potential
KNIGHTON FOODS POTENTIAL Clear opportunities to turnaround the business FY15/16 Full Year sales £57m Broadly break-even profitability Potential opportunities Specialist capabilities in agglomeration & spray drying 2 Strong business to business customer base 1 Stabilised management team Revis
Slide 14: Alex Whitehouse, Grocery Managing Director
Alex Whitehouse Grocery Managing Director 14
Slide 15: Grocery Business Unit Overview
GROCERY BUSINESS UNIT OVERVIEW • FY15/16 sales £549m; 71% of group sales • 92% branded, 8% non-branded • Operate in 5 ambient grocery categories (& very recently ice cream) • Strong portfolio of well known & well loved brands • Present in 94% of UK households1 • Market leader in 4 of 5 ambient categ
Slide 16: Grocery Senior Leadership Team
GROCERY SENIOR LEADERSHIP TEAM All with strong consumer sector backgrounds Managing Director Finance Director Operations Director Marketing Director Alex Whitehouse Laura Evison Paul Thompson Helen Warren-Piper Sales Director Sales Impulse, W’sale, Head of HR Discounters Director - Multiples Wendy S
Slide 17: Our Key Categories & Brands
OUR KEY CATEGORIES & BRANDS 50% Market Value: £479m 40% Flavourings 30% & 20% Seasonings 10% 0% BISTO OXO PAXO PF No.2 No.3 20% Market Value: £938m 15% Cooking Sauces 10% & 5% Accompaniments 0% LOYD SHARWOODS HOMEPRIDE PF No.2 No.3 GROSSMAN 40% Market Value: £391m 30% Quick Meals, 20% Snacks & 10% S
Slide 18: Our Key Categories & Brands
OUR KEY CATEGORIES & BRANDS 50% Market Value: £375m 40% Ambient 30% Desserts 20% 10% 0% ANGEL AMBROSIA BIRDS PF No.2 No.3 DELIGHT 15% Market Value: £384m Home Baking 10% Paul Hollywood Range 5% launched February 2016 PAUL 0% MCDOUGALLS No. 1 No. 2 PF HOLLYWOOD Ice Cream Market Value Ambrosia Frozen
Slide 19: Our Grocery Strategy
OUR GROCERY STRATEGY A category approach with consumers at its heart 1 2 3 Drive sustainable Customer partnerships & Outstanding instore category & brand growth growth channel focus execution 4 5 6 Optimise promotional Supply chain excellence People development investment to create P&L space investm
Slide 20: UK Food Retailing Dynamics
UK FOOD RETAILING DYNAMICS Requires flexibility, agility and a category approach A continually changing and challenging environment 3.0 Changing Market Promotional trip share strategies 0.0 dynamics (3.0) Range Management Jul Mar reviews changes 2014 2016 Food deflation Shifts in shopper dynamics Ch
Slide 21: Our Approach to Retailer Partnerships
OUR APPROACH TO RETAILER PARTNERSHIPS Differentiated channel strategies 1 Major Multiples A partnership approach • We have category leading brands • Consumer focused strategy to deliver category £0.39/g £0.50/g growth 1) Incremental product usage 1. Incremental usage 2. Premiumisation 2) Premiumisat
Slide 22: Our Approach to Retailer Partnerships
OUR APPROACH TO RETAILER PARTNERSHIPS Differentiated channel strategies – Online & Discounters 2 Online • Head of Digital appointed • Online focus with our existing retail partners • Standalone online specialists e.g. Ocado and Amazon • Start-up supplier with Amazon pantry 3 Discounters • Mix of bra
Slide 23: Consumer Focused Approach
CONSUMER FOCUSED APPROACH Our innovation strategy starts and ends with consumers Insight Innovation Execution Developing new products Supporting with media Building in depth that make consumers & outstanding in-store consumer understanding lives easier execution Macro Consumer Trends Convenience Foo
Slide 24: Innovation Is Core to Our Overall Strategy
INNOVATION IS CORE TO OUR OVERALL STRATEGY Providing better solutions for consumers delivering brand & category growth Innovation is Provides Delivers brand Contemporises CORE to our better and category our brands strategy solutions for growth consumers Consumer understanding Innovation Process Comm
Slide 25: Consumer Marketing Investment
CONSUMER MARKETING INVESTMENT L P RO F I T 5.7% S S Investment % Business Brand Director GRP Branded sales efficiencies P&L responsibility optimisation Different timeframes & methodologies to measure media ROI Pre-test Pre-Screen Post Valuation Medium-term Pre-test finished advertising copy Economet
Slide 26: Our Strategy Is Working
OUR STRATEGY IS WORKING Bisto & Oxo: The first brands we tackled; both growing, driving category growth & taking market share Oxo retail sales value YoY % growth +4.2% Category Brand Market Growth Growth Share +2.0% (0.4%) +1% +1% +0.1ppt +2% +3% +1.1ppt Herbs & More Stock Pots (9.5%) launch launch
Slide 27: So What's Next
SO WHAT’S NEXT…… Apply the same rejuvenation approach to other brands Insight Innovation Execution • Key focus this year on Batchelors & Ambrosia • Working our way towards the principle of something new and interesting on every brand, every year • Expect to see first chilled products and first outpu
Slide 28: Batchelors
BATCHELORS Well known by consumers, but some formats out-dated 95% 48% Prompted Household Awareness penetration Insight Innovation Execution September 2016 • Major consumer • Developed 3 ranges of • Launching in understanding programme contemporary products September - October during 2015 • Healthy
Slide 29: Batchelors Innovation This Year
BATCHELORS INNOVATION THIS YEAR Informed by consumer insights High Veg Pots High Protein Pots Soup Dippers • Wet pasta or • Wet snack pot • Wet ambient soup noodles infused based on either with bruchetta like with vegetables + a beans, quinoa or crackers sauce chick peas • One of your 5 a day • One
Slide 30: Something New on Every Brand
SOMETHING NEW ON EVERY BRAND….. A few other examples of this year’s innovation BISTO OXO PAXO Wet Gravy Sauces Lamb Stock Pots Premium Stuffing Range LOYD GROSSMAN SHARWOOD’S HOMEPRIDE Premium Indian & Italian Sauces All American Chilli World Sauces AMBROSIA ANGEL DELIGHT PAUL HOLLYWOOD Deluxe Custa
Slide 31: Strong Brand Equities
STRONG BRAND EQUITIES Household penetration and awareness statistics are high • We have very well-known brands and high levels of household penetration • We can expand the business by driving growth in our current categories through innovation Household penetration 59% 42% 50% 48% ‒ New usage ‒ Incr
Slide 32: Leveraging Brand Equity to Deliver Growth Beyond the Core
LEVERAGING BRAND EQUITY TO DELIVER GROWTH BEYOND THE CORE Or what consumers tell us about Ambrosia: A We can think of Ambrosia as a Custard & Rice creamy dessert brand from Devon, that makes pudding brand us feel happy “Custard & Rice Pudding” “Creamy Desserts from Devon” • Similarly we can think of
Slide 33: In Summary
IN SUMMARY • A consumer focused strategy • An organisation structured around its delivery • Leverages our portfolio of well-known British brands • Expanding beyond our existing categories – based on the equity of our brands • Delivered through contemporary new products, rooted in deep consumer under
Slide 34: Helen Warren-Piper, Grocery Marketing Director
Helen Warren-Piper Grocery Marketing Director
Slide 35: The Wider Desserts Market
THE WIDER DESSERTS MARKET Currently we play in just 13% of the £4.4bn desserts market Total Desserts & Toppings £4.4bn RSV Ambient Yoghurt & Ice Cream Chilled Fresh Frozen Desserts Fromage Desserts Cream Desserts Frais £564m RSV £1,600m RSV £856m RSV £700m RSV £321m RSV £270m RSV 13% of category 72%
Slide 36: Desserts Market Consumer Insight Process
DESSERTS MARKET CONSUMER INSIGHT PROCESS Crucial to understand future opportunities 7,500 interviews 2,000 diary studies Consumer Time of day Motivation Full Research interviews & and U&A study Need State Modelling diary studies This segmentation has enabled us to identify future opportunities 36
Slide 37: Desserts Market Occasions
DESSERTS MARKET OCCASIONS Our brands predominantly enjoyed as ‘Traditional desserts’ Need states Motivations (Needs) Breakfast Daytime snack Occasions Other desserts & associated eating occasions Evening snack Light meals Main meals Traditional desserts eating occasions (lunch/dinner) Source: Incite
Slide 38: Desserts Market Occasions & Opportunity
DESSERTS MARKET OCCASIONS & OPPORTUNITY U&A study identifies additional areas our brands can enter Need states Motivations (Needs) Breakfast Good start to the day Daytime snack Occasions Evening snack Simple goodness End of day reward Light meals Main meals Traditional desserts eating occasions (lun
Slide 39: The Wider Desserts Market
THE WIDER DESSERTS MARKET A new category definition unlocks sizeable opportunity Total Desserts & Toppings £4.4bn RSV Ambient Yoghurt & Ice Cream Chilled Fresh Frozen Desserts Fromage Desserts Cream Desserts Frais £564m RSV £1,600m RSV £856m RSV £700m RSV £321m RSV £270m RSV 85% of category (£3.2bn
Slide 40: The Ambrosia Brand: Permission to Extend
THE AMBROSIA BRAND: PERMISSION TO EXTEND Strong existing brand equity and high awareness give us permission to extend the brand foot-print into other areas of the store Target Consumer : Brand Measures : • Women who enjoy life on their • 100 years old own terms. Go with the flow and • Already purcha
Slide 41: Ambrosia Innovation
AMBROSIA INNOVATION Ambrosia Frozen Custard Ambrosia Deluxe • Current roll-out • Launched Feb ‘16 • A tasty range of delicious ice-ream tubs • A delicious range of indulgent premium-tier inspired by the “Frozen Custard” trend in the custard products with finest ingredients USA, made from real dairy.
Slide 42: The Angel Delight Brand
THE ANGEL DELIGHT BRAND Target Consumer Brand Measures • Families with younger children • Already purchased by 12% of UK (under 10 years old), who prefer to HHs keep things easy in the kitchen, but • Already bought 2.5 times a year by enjoy the playful side of food with UK HHs their kids. • Prompted
Slide 43: Angel Delight Product Roll-out
ANGEL DELIGHT PRODUCT ROLL-OUT Angel Delight re-launch Angel Delight innovation • Launches Jan ‘17 • Launches Feb ‘17 • Made with friendly ingredients for a fun, light & • The light & bubbly taste you know and love, fluffy dessert that is now even yummier now in a different format • No artificial fl
Slide 44: Expansion into Chilled Categories
EXPANSION INTO CHILLED CATEGORIES Underpinned by deep consumer insights DEEP CONSUMER INSIGHT CHILLED INSIGHTS IDENTIFIED 20 Consumer Accompanied Expert Chilled = Fresh Transparent & Sweet evolves deliver on Immersions Shops Interviews & Quality Convenience through the day UNDERPINNED BY THE CONSUME
Slide 45: Desserts Health & Nutrition
DESSERTS HEALTH & NUTRITION Three key strategies to deliver nutritional benefits for consumers Strategy 1 Strategy 2 Improve and promote everyday goodness Deliver natural wholesomeness • Prohibited ingredients : GMO, HVO, • Launch fortified variants artificial preservatives, colours and flavours • R
Slide 46: Paul Thompson, Grocery Operations Director
Paul Thompson Grocery Operations Director 46
Slide 47: Operations Strategy
OPERATIONS STRATEGY A focused programme aligned to the Business Unit strategy Service Safety Advertising Environmental Quality footprint Operations excellence Efficiency savings to invest in growth Releasing cash through inventory reduction Building supply chain capability to deliver innovation 47
Slide 48: Grocery Factory Locations & Distribution Sites
GROCERY FACTORY LOCATIONS & DISTRIBUTION SITES A range of capabilities focused on 3 main sites Worksop Skelmersdale (RDC North) • Sauce manufacturer in glass & pouches • Poppadoms & noodle manufactured • Agglomerations & extrusion to cube, glass jar & cardboard drum Rugby Charnwood • Day 1 for day 2
Slide 49: Integrated Grocery Supply Chain
INTEGRATED GROCERY SUPPLY CHAIN Business unit focus accelerating benefit delivery Factory Customer Planning End to end planning and execution Shared Teams Resources Customer Service Inventory Reduction Efficiency savings 98.5% +0.5% YOY 16% £££ Top tier in Advantage Survey Organisation simplificatio
Slide 50: Delivering Efficiency Savings
DELIVERING EFFICIENCY SAVINGS Focused programme of activities delivering results 1 Organisation 2 Labour flexibility • Reduced layers • Flexible shift patterns • Improved communication & engagement • Multi skilled technicians and operators 3 Process optimisation 4 Logistics optimisation Index - 1 1.
Slide 51: Facilitating Innovation Strategy
FACILITATING INNOVATION STRATEGY Our approach to meet demand and manage risk 1 2 3 Modify existing process Add to existing capability New process Ambrosia Deluxe Angel Delight Innovation Oxo Stock Pots; Frozen Custard Modifications to current ingredient Introducing unique additional Partner with 3rd
Slide 52: Lifton Investment
LIFTON INVESTMENT Building capabilities and maintaining infrastructure Deluxe Custard New unique technology Modification to existing plant Added capability to existing plant Retort renewal Energy Centre • Planned replacement • Conversion from heavy fuel oil to gas • Improved efficiencies • Energy co
Slide 53: Steve Pretty, Lifton Factory General Manager
Steve Pretty Lifton Factory General Manager
Slide 54: Lifton Site History – Home of Ambrosia Since 1917
LIFTON SITE HISTORY – HOME OF AMBROSIA SINCE 1917 What started as a small Creamery is now a Desserts Centre of Excellence 1917 Alfred Morris opens the first Ambrosia Creamery : Dried milk powder 1936 First canned Creamed Rice produced 1958 Current factory built to produce 15.5oz Creamed Rice 1960s E
Slide 55: Site Layout & Statistics
SITE LAYOUT & STATISTICS Manufacturing from milk to finished production and R&D centre Pots and Combi Lines Boilerhouse Water treatment Castor Extension Plant Dispensary You are here & Rice prep R&D Milk Reception/ Tankroom Finished Goods Outloading • Fully integrated site from Milk Intake to Recept
Slide 56: Lifton Site Facts & Figures
LIFTON SITE FACTS & FIGURES 67 127 2003: 4 80:20 million million 2016: 8 Branded : Non- Litres of Milk Cans produced branded sales Production lines used per year per year ratio 305 Zero BRC A+ 141 since +50% 2012 Employees & increase since Audit & Safety Lifton SKUs Waste to landfill acquisition awa
Slide 57: Local Sourcing and Community Involvement
LOCAL SOURCING AND COMMUNITY INVOLVEMENT Local economy expenditure Employee community fund Nature of expenditure £000 Ambrosia sponsors and supports events, charities and other organisations with direct links to Premier Foods Milk Contracts 15,000 Lifton employees Haulage 2,400 Salaries 9,100 Packag
Slide 58: Manufacturing Capabilities
MANUFACTURING CAPABILITIES A unique combination of processes and pack formats 5 Single and multipack pot lines • Rice, custard, fruit, dry inclusions • Mini pots, singles, 4 pack, twins, large lidded 500g • UHT and 5 filling lines for flexible manufacture 1 Combi high speed carton line • 500g, 750g
Slide 59: Site Plans
SITE PLANS Delivering cost efficient manufacturing and facilitating growth Innovation capability • Investment in additional unique capability for brand innovation • Recipe additions for Deluxe eg White chocolate, clotted cream High speed canning retorts • Underpinning investment to replace retorts •
Slide 60: Cautionary Statement
CAUTIONARY STATEMENT Certain statements in this presentation are forward looking statements. By their nature, forward looking statements involve a number of risks, uncertainties or assumptions that could cause actual results or events to differ materially from those expressed or implied by those sta