Chuck Langmead President Industrial Foods Americas Lawrence Kurzius President International Business

Transcription

1 A WORLD OF FLAVOR Global Industrial Business Chuck Langmead President Industrial Foods Americas Lawrence Kurzius President International Business

2 Global Industrial Business $1.5 billion sales in 2011 Americas Consumer 43% Americas Industrial 28% EMEA Industrial 8% Asia Pacific Industrial 5% Asia Pacific Consumer 3% EMEA Consumer 13%

3 Steps to Position Industrial Business for Growth Streamlined products and customers Lowered cost base, consolidated asset base, creating centers of excellence for manufacturing and supply chain Aligned resources and developed capabilities to support customer growth

4 Industrial Business Net Sales Increased 5% CAGR in millions Net sales 35% sales increase

5 Improving Operating Income Margin Over Time Operating Income Margin* 150 BP increase 2005 to 2011 Cost inflation impact * Excluding restructuring charges

6 Industrial Business Operating Income Up 9% CAGR in millions Operating Income* * Excluding restructuring charges

7 One of Broadest Range of Customized Flavor Solutions

8 Our Customers Are Global Industry Leaders Customers include 8 of top 10 food service restaurant companies 9 of top 10 leading branded food companies Source: Global Food Markets

9 Supplying Customers Locally to Support Their Global Growth Operations Joint ventures Licensees

10 Unique Points of Difference vs Competition A natural food products company vs. chemicals/ additives Steward of our own leading brands, like our customers Keen consumer insights gained from our experience

11 Anticipating and Fulfilling Customer Needs CUSTOMER FULFILLMENT

12 Anticipating and Fulfilling Customer Needs Defining Our Right To Win Product superiority Customer intimacy Operational excellence CUSTOMER FULFILLMENT

13 Anticipating and Fulfilling Customer Needs Defining Our Right To Win Customer intimacy Product superiority Operational excellence CUSTOMER FULFILLMENT

14 Defining Our Right to Win Defining Our Right To Win Category Development Leverage Our Global Capabilities High Performance Work Organization Joint Value Creation CUSTOMER FULFILLMENT

15 Defining Our Right to Win Defining Our Right To Win Category Development Leverage Our Global Capabilities High Performance Work Organization Joint Value Creation Branding Our Value Proposition CUSTOMER FULFILLMENT

16 Global Consumer Business Global Industrial Roadmap to McCormick 2015 SUPERIOR CUSTOMER INTIMACY CONSISTENT GLOBAL DELIVERY OF CAPABILITIES & SERVICES CATEGORY LEADERSHIP WITH OUR CUSTOMERS INVEST IN CAPABILITIES TO DRIVE GROWTH

17 Level of Support Customer Intimacy Is a Strategy of Tailoring Interactions to Directly Address the Needs of the Customer SUPERIOR CUSTOMER INTIMACY High STRATEGIC Global Regional Superior Customer Intimacy CRITICAL VALUE Low Relative Value to McCormick

18 Customer Intimacy Is a Strategy of Tailoring Interactions to Directly Address the Needs of the Customer SUPERIOR CUSTOMER INTIMACY Involves people and resources Global, multi-functional account teams Ensures technology and innovation competitiveness CreateIT process Asian TIC in China Expansion of EMEA TIC & Flavor Lab Further strengthen both commercial and technical organizations

19 Success in Achieving Superior Customer Intimacy SUPERIOR CUSTOMER INTIMACY Delivering practical technology solutions at a competitive value. while excelling in Customer Engagement. insures a sustainable and successful business model

20 Customer Recognition China, Golden Pan Award 2011; Singapore KFC Supplier of Year 2011; Asia Quality Award 2011; USA Supplier of Year 2010; Asia Supplier of Year 2010; USA Innovation Award 2010; New Product Development Supplier of Year U.K. 2010; Europe Innovation Award 2010 Supplier of the Year 2010 SUPERIOR CUSTOMER INTIMACY Supplier of the Year Supplier of the Year MKC Ranked in Top 100 Suppliers for more than a decade Press On Award 2011 Merisant/France 2010 Distributor Best Practice Award Casa Cuervo A Class Supplier

21 High Customer Loyalty SUPERIOR CUSTOMER INTIMACY Client Preference Benchmark Nearly 2/3 of customers strongly prefer McCormick Do Not Prefer Indifferent Prefer Strongly

22 High Customer Loyalty SUPERIOR CUSTOMER INTIMACY Client Preference 27% at top rating versus 10% just years ago Do Not Prefer Indifferent Prefer Strongly

23 Success in Achieving Superior Customer Intimacy SUPERIOR CUSTOMER INTIMACY OUTCOMES Routinely recognized by our customersformally & informally High customer loyalty Greater participation and win rate in new product briefs

24 Success in Achieving Superior Customer Intimacy SUPERIOR CUSTOMER INTIMACY.their breadth and depth of product design is top tier in the industry a market leader in the area of innovative development and flavor trends the best scientists, developers and consumer insights in the business

25 Category Leadership Means Breadth and Reach CATEGORY LEADERSHIP WITH OUR CUSTOMERS Customers include 8 of top 10 food service restaurant companies 9 of top 10 leading branded food companies Source: Global Food Markets

26 Category Leadership Means Breadth and Reach CATEGORY LEADERSHIP WITH OUR CUSTOMERS Increase our share with our global customers by supplying into new categories Support customers as they expand worldwide

27 Category Leadership Extends to International Developed Markets CATEGORY LEADERSHIP WITH OUR CUSTOMERS Continue positive momentum with quick service restaurants (QSR) Accelerate growth of flavor and seasonings business

28 .and Into Emerging Markets CATEGORY LEADERSHIP WITH OUR CUSTOMERS New and Fast Growing Economies China More than 90% share of sauces, condiments and similar products for major QSR New restaurant openings to top 800 in 2012 Other Emerging Markets Add domestic supply capability for liquid products Expand / build Industrial seasonings Develop opportunities to leverage new assets

29 Invest in Capabilities that Drive Mutual Growth INVEST IN CAPABILITIES TO DRIVE GROWTH Technologies to address challenges Reduce volatility of commodity inputs and share benefits Stabilize flavors in extreme processing conditions Clean ingredient labels through natural replacements/flavors Productivity led Innovation

30 Invest in Capabilities that Drive Mutual Growth INVEST IN CAPABILITIES TO DRIVE GROWTH Introducing acquired consumer brands into food service channel

31 Invest in Capabilities that Drive Mutual Growth INVEST IN CAPABILITIES TO DRIVE GROWTH Success with technology behind, and production of, liquid customized flavor solutions in Asia/Pacific Smoothie Concentrate Coffee Syrups Fruit Toppings Sweet Sauces

32 Consistent Global Delivery of Capabilities and Services CONSISTENT GLOBAL DELIVER OF CAPABILITIES & SERVICES Safe, reliable and sustainable supply chain Best practice implementation The Taste You Trust

33 Consistent Global Delivery of Capabilities and Services CONSISTENT GLOBAL DELIVER OF CAPABILITIES & SERVICES Investing in capacity to service customer growth Technology transfer

34 Excellent Growth Potential for McCormick s Industrial Business Transformed to a well-positioned business with strong financial performance Competitively advantaged to excel in customer intimacy Effective initiatives driving profitable sales growth

35 Customized Flavor Solutions for Industrial Customers Globally Americas EMEA Asia Pacific

36 Global Industrial Business Questions and Answers Chuck Langmead President Industrial Foods Americas Lawrence Kurzius President International Business

37 A WORLD OF FLAVOR Finance & Operations Gordon Stetz Executive Vice President & Chief Financial Officer James Radin Vice President Global Supply Chain Operations

38 Three Avenues Driving Top-line Growth 4 to 6% sales growth Base Business Growth Product Innovation Acquisitions

39 Innovation Has Been An Important Contributor Goal to achieve 10-12% sales from new products by 2015 % Sales from new products launched in past 3 years

40 Acquisitions Have Been Adding 1/3 of Sales Growth % Net sales growth in local currency

41 Strong Long-term Financial Outlook Sales growth 4-6% Operating income growth 7-9% Leverage cash Leverage cash 2% add to EPS 2% add to EPS EPS growth 9-11% Dividend yield 2% Total shareholder return 11-13%

42 Gross Profit Margin Driving Operating Income Growth 4-6% sales growth + Gross profit margin improvement 7-9% operating income growth

43 Long-term Improvement in Gross Profit Margin Shift in mix to higher margin business Managing costs

44 Gross Profit Margin Improvement Has Been Interrupted During Periods of High Inflation

45 Can Still Deliver Operating Income Growth in High Cost Inflation Environment 4-6% sales growth + Gross profit margin improvement 7-9% operating income growth Pricing actions driving higher sales growth + Gross profit margin decline

46 Steady Increase in Operating Income* in millions +9.8% +8.7% +14.5% +5.5% +6.0% $4 $15 $20 $20 $20 Incremental brand marketing * On a comparable basis

47 Delivering High Performance

48 Excellent Track Record Since Inception of CCI in millions Our CCI program has delivered $156 million in savings last 3 years

49 Comprehensive Continuous Improvement CCI: on-going initiative to improve productivity and reduce cost throughout the organization McCormick s High Performance System Canada U.K. Poland Global CCI Champions Employee engagement Mexico USA France India China Thailand Singapore South Africa Australia CCI Champions

50 Comprehensive Continuous Improvement France U.S. U.K. US and Canada China

51 A Long Runway for CCI in millions $70 $60 Cost savings track record Restructuring savings CCI $50 $40 $30 $20 $10 $ est

52 A Long Runway for CCI High-speed equipment and automation Acquisition integration New products Go-to-market approach System technology Shared services roll-out Process reliability Sustainability Sourcing 2011 CCI savings by category Freight & Distribution Manufacturing SG&A

53 Sustainability Efforts Complement CCI Program Phase one, reduced water usage, electricity, greenhouse gas emissions and solid waste at least 17% on a per unit basis Set new 5-year goals Completed our 2 nd solar power installation in Maryland

54 Sustainability Efforts Complement CCI Program Electricity Process Fuel Coconut Shells Cogeneration System Carbon Powder

55 Quality Standards.Taste You Trust

56 A Long Runway for CCI in millions

57 Procurement of Spices and Herbs a Core Competency Components of COGS Other Raw Materials Labor & Overhead Packaging Spice & Herbs

58 Growing Regions for Spices and Herbs Span the Globe Central & South America Allspice Ancho Chile Black Pepper Cardamom Cloves Ginger Mace Nutmeg Oregano Paprika Sesame Turmeric Vanilla Beans White Pepper North America Caraway Seed Coriander Garlic Mint Mustard Onion Parsley Europe Anise Seed Basil Chervil Coriander Dill Weed Marjoram Oregano Paprika Parsley Poppy Seed Rosemary Saffron Sage Savory Tarragon Thyme Middle East & Africa Anise Seed Basil Bay Leaves Caraway Cilantro Cinnamon Cloves Coriander Cumin Dill Weed Fennel Seed Fenugreek Ginger Majoram Mint Flakes Oregano Parsley Poppy Seed Red Pepper Rosemary Saffron Sage Thyme Vanilla Beans Asia/Pacific Black Pepper Cardamom Celery Seed Chives Cinnamon Cloves Coriander Cumin Seed Dill Seed Fennel Seed Fenugreek Ginger Lemongrass Mace Nutmeg Oregano Paprika Parsley Poppy Seed Red Pepper Sesame Seed Star Anise Szechwan Pepper Turmeric Vanilla Beans White Pepper

59 No Concentration in Any One Ingredient No one spice and herb, or other ingredient, > 5% COGS

60 In A Period of Cost Volatility for Spices and Herbs

61 Expect Some of the Cost Increase to Persist Short-term factors Weather and growing conditions Political/economic instability Longer-term factors Alternative, less laborintensive crops Competition for acreage Growing demand for spices and herbs in emerging markets

62 Global Sourcing Team and Direct Supply Chain an Advantage McCormick has a more direct route to source

63 Strategic Inventory Used to Hedge Spices and Herbs in millions Nearly $50 M increase in strategic inventory in 2011

64 Strategic Inventory Adversely Affected Progress Improving Cash Conversion Cycle Cash conversion cycle days 84 days 80 days 77 days 86 days

65 Strategic Inventory Used to Hedge Spices and Herbs Nearly $50 M increase in strategic inventory in 2011 in millions

66 Early Progress with Finished Goods Reduction in number of finished goods units last 3 quarters in U.S. * Average month-end number of U.S. units of finished goods pallets for consumer business, excluding Zatarains

67 Improving Asset Utilization in millions Gross profit $ Property, Plant & Equipment

68 Alignment of Incentives with Improved Working Capital McCormick profit: Operating profit + Capital charge

69 Expect to Get Back on Track Reducing Cash Conversion Cycle days est est est est

70 Projecting Increased Cash Flow from Operations in millions

71 Balanced Use of Cash Delivering Shareholder Return while We Invest to Drive Growth 2011 Cash Uses Invested $441 million in acquisitions and joint ventures Invested $97 million in capital projects Returned $180 million* to shareholders in dividends and share repurchases Uses of cash 10 years ended 2011 Acquisitions Dividends Share Repurchases Capital Expenditures * Net of proceeds from stock option exercises

72 Committed to Increased Dividend Payments 26 consecutive years of increase in dividends per share $1.12 $

73 Managing Capital Expenditures in millions

74 Balancing Acquisitions with Share Repurchases in millions Debt/EBITDA Debt/EBITDA * Share repurchases are net of proceeds from exercised stock options

75 Share Repurchases Have Been Accretive * No shares purchased in 2008 and 2009

76 2011 Added to Our Strong Long-Term Financial Track Record in millions Economic Value Added * * EVA is a registered trademark of Stern Stewart & Co. See details at end of presentation.

77 A Financially Strong Business Generating fuel for growth Leveraging global sourcing insights Increasing cash / balanced use of cash Maintaining a strong balance sheet

78 Finance & Operations Questions and Answers Gordon Stetz Executive Vice President & Chief Financial Officer James Radin Vice President Global Supply Chain Operations

79 THE FUTURE OF FLAVOR Hamed Faridi, Ph.D. Chief Science Officer McCormick Brings Passion to Flavor TM

80 McCormick Is Investing in the Future of Flavor R&D spending up 30% from 5 years ago 10% of capital expenditure allocated to infrastructure and instrumentation upgrades around the world

81 A Global Community Serving Global Markets

82 400 Innovators Developing On-Trend Products Sensory Scientists Research Chefs MDs/ Molecular Biologists Analytical & Flavor Chemists Packaging Designers Product Development Experts Process & Material Scientists

83 R&D s Most Important Purpose The Eating Experience is at the center of everything we do The consumer as a higher authority

84 Broad Channel Access Provides Excellent Trend Insight for Guiding Technology Investment

85 One of the Broadest All-Natural and Flavor Application Platforms in the Industry Bakery & Confections Beverages Breakfast Cereals Breakfast Entrees Coatings Compound Flavors Condiments, Sauces & Dressings Dairy Products Dessert Toppings Frozen Foods Marinades Reaction & Culinary Flavors Savory Products Salty Snacks Sandwiches Savory Products Seasonings Side Dishes Soups

86 Innovation that Delivers Business-relevant, consumer-centric INNOVATION is at the core of everything we do Applied Research Sensory Culinary CreateIT Analytical Sciences Material science Molecular Biology Packaging Flavor Delivery Global Innovation and Technology Transfer Divisional Product Development Americas EMEA Asia/Pacific

87 Innovating How We Innovate to Increase Topline Growth Facilities People Technology State-of-the-art facilities around the globe Outstanding developers, innovators and scientists Advanced robotics and technologies

88 We Are Building One Networked, Digital Global Lab The McCormick Global Science Network A World of Information Within Reach

89 Key Areas of Focus for Our Global Development Teams Rising Demand for Flavor Wellness & Health

90 Translating Tastes and Trends into Winning Product Consumer Experience Trend Calling Culinary Creativity Product Development Ideation

91 Our Patented Encapsulation Technology Provides Our Global Industrial & Consumer Businesses with Enhanced Flavor Delivery and Cost Advantages Starting Flavor Manufacturing Technology Flavor Retention No Encapsulation Spray Dry McCormick Encapsulation

92 Connecting Spices & Herbs with Dietary Guidelines

93 Leveraging MSI Research to Develop the Evidence 17 clinical studies completed or underway

94 Leveraging MSI Research to Develop the Evidence

95 Interest in Spices, Herbs and Health Has Grown Significantly Spice, Herb & Health PubMed Searches and Google Citations by Year: 2007 to PubMed Search Google News Spice Health (approximate) Combined, the number of PubMed searches and Google Citations is up 95% since

96 Connecting with the Consumer & Providing Flavorful Healthy Choices McCormick molecular biologists & MDs Wellness research 96 Social Physical Intellectual Cultural Emotional

97 The Future of Food Foods for: 1) Self care - simplicity, Real food, H&W 2) Indulgence - great flavor 3) Convenience & Value Driven by technology: nutrigenomics & biotechnology Increasingly authentic ethnic & flavorful More local, safe & sustainable For the informed consumer: Cuisine for Wellness Includes some familiar standbys: but ingredients may change! Driven by the preferences of digital consumers around the globe

98 The Future of Flavor Investing in global initiatives to maximize McCormick s competitive advantages and culture of innovation Developing winning, on-trend flavors for our global markets using healthy and natural ingredients with one of the broadest application platforms in the industry A continuously expanding suite of technologies for providing new flavor experiences Deep understanding of the consumer experience of food and flavor

99 A WORLD OF FLAVOR Summary Alan Wilson Chairman, President & CEO McCormick Brings Passion to Flavor TM

100 A WORLD OF FLAVOR Summary Alan Wilson Chairman, President & CEO McCormick Brings Passion to Flavor TM

101 Strong Shareholder Returns Total shareholder return through March 2012

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104 McCormick 2015 Larger geographic footprint Broader flavor portfolio Globalized organization and resources

105 Meeting Objectives Key takeaways Meeting increased demand for flavor Globalizing our business with strong leadership, coordinated growth initiatives and superior resources Delivering high performance with an effective strategy and engaged employees

106 Thank You!