Sara Lee Food & Beverage. CJ Fraleigh Chief Executive Officer

Transcription

1 Sara Lee Food & Beverage CJ Fraleigh Chief Executive Officer

2 Today s Goal: Confidence in Profitable Growth Overview F&B Strategy FY06 Performance & Drivers FY07 Plans

3 Sara Lee Food & Beverage

4 Today s Goal: Confidence in Profitable Growth Overview F&B Strategy FY06 Performance & Drivers FY07 Plans

5 Our Aspirations Are Clear With a Strong Start To be the most insightful, innovative food company Off to a strong start with clear targets going forward FY06 vs. FY05 Sales +4% Operating Segment Income +52% Note: Operating segment income excludes significant items of $(203) million. A reconciliation is provided on slides 15 and 17 of this presentation.

6 Our Strategy is Focused Vision: The Most Insightful, Innovative Food Company Strategic Focus Scale by focus on two large categories: Strengthen core Accentuate innovation Tighter, more process disciplined organization

7 Great Categories Grocery $ Sales Million 1. Beer & Wine $12, Cereal $5, Carbonated Beverages $11,922 Milk $10,326 Fresh Bakery $10,083 Packaged Meat $9,550 Salty Snacks $6,686 Cheese $5,904 Frozen Dinners & Entrees $5,137 Ice Cream $4,200 Source: IRI Syndicated Reviews category data ending 6/18/06 and IRI/Sara Lee custom category data ending 6/25/06

8 Concentration in Other Categories Soft Drink Market Share Cereal Market Share Other 30% Coke 38% Other 37% Kellogg 34% Pepsi 32% General Mills 29% Beer Market Share Salty Snacks Market Share Other 42% Miller 17% A-B 41% Frito Lay 63% Other 37% Source: IRI Syndicated Reviews category data ending 6/18/06

9 Commonality Across Leaders Consumer Focus Customer Focus Operational Excellence

10 Branded Grocery Market Share Packaged Meat Share Fresh Bakery Share All Other 37% Smithfield 9% Hormel 5% ConAgra 8% Sara Lee Corp. 20% Kraft 21% All Other 31% Bimbo 10% Flowers 10% Weston 22% IBC 13% Sara Lee Corp. 14% IRI InfoScan -Total US Food, 52 week ending August 6, 2006 for Bakery and 52 week ending July 23, 2006 for Package Meats

11 Our Strategy is Focused Vision: The Most Insightful, Innovative Food Company Strategic Focus Scale by focus on two large categories: Strengthen core Accentuate innovation Tighter, more process disciplined organization Performance Objectives: Consumer Customer Operations 1. Strengthen Core 2. Accelerate Innovation 3. Customer Leadership 4. Pricing Architecture 5. Core Selling 6. Reinvent Bakery 7. Supply chain of future 8. Performance Driven One Sara Lee

12 Specific Actions to Drive FY07 Consumer Customer Operations 1.Strengthen Core 1.1 Invest choice-fully 1.2 Portfolio power 1.3 New communication 1.4 Effective brand plans Accelerate Innovation 2.1 Ingrain CI process 2.2 Increased dedicated resources 2.3 Plan & launch initiatives 2.4 Improve launch process 2.5 Advance multicultural & wellness 3.Customer Leadership 3.1 Segmentation 3.2 Insights/solutions Pricing Architecture 4.1 Aligned objectives 4.2 Tools 4.3 Org. structure 4.4 Process/prioritization 5.Core Selling 5.1 Collaborative planning 5.2 People/org. development 5.3 Customer service/s.c. 5.4 Retail excellence (DSMP) 6. Reinvent Bakery 3.1 Segmentation 3.2 Insights/solutions 3.3 Supply chain of future 7. Supply Chain of Future 7.1 Optimize Network 7.2 Delivery Consistent Quality & Food Safety 7.3 Build Capability/Flexibility 7.4 Superior Customer Service 7.5 Drive sustainability 8. Performance Driven One Sara Lee 8.1 Optimal structure & process 8.3 Growth of performance culture 8.2 Talent management & development 8.4 Great place to work

13 Today s Goal: Confidence in Profitable Growth Overview F&B Strategy FY06 Performance & Drivers FY07 Plans

14 Sara Lee Food & Beverage Sales FY05 FY06E N.A. Retail Meats $2.4 billion +1 3% N.A. Retail Bakery $1.8 billion (3) (1)% Significant items Total $36 million $4.3 billion N/A +0 2%

15 Sara Lee Food & Beverage Sales FY05 FY06E FY06A FY06 change versus FY05 N.A. Retail Meats $2.4 billion +1 3% $2.5 billion +5% N.A. Retail Bakery $1.8 billion (3) (1)% $1.8 billion +1% Significant items $36 million N/A $38 million $2 million Total $4.3 billion +0 2% $4.4 billion +4%

16 Sara Lee Food & Beverage Operating Segment Income FY05 FY06E N.A. Retail Meats $144 million % N.A. Retail Bakery $(10) million +$10-15 million Subtotal $134 million N/A Significant items $41 million N/A Total $175 million N/A

17 Sara Lee Food & Beverage Operating Segment Income FY05 FY06E FY06A FY06 change versus FY05 N.A. Retail Meats $144 million % $197 million +36% N.A. Retail Bakery $(10) million +$10-15 million $9 million NM Subtotal $134 million N/A $205 million +52% Significant items $41 million N/A $(254) million $(294) million Total $175 million N/A $(48) million NM

18 Planned Actions Drove Margin 4.7% Innovation/ Vol. Leverage 3.2% FY05 Other Inflation Consumer Spending Meats Pricing Corrections Energy & Packaging FY06 Costs Procurement Saves LEAN/ CI U.S. Fresh Pricing/Mix Commodities FY06 Drivers Note: Operating margin excludes significant items which had a (5.9)% impact on the year. A reconciliation of this information is provided on slides of this presentation.

19 Planned Actions Drove Margin Innovation Jimmy Dean Skillets Sara Lee Whole Grain White

20 Planned Actions Drove Margin Innovation LEAN/CI Jimmy Dean Skillets Sara Lee Whole Grain White Hillshire Farm Co-Extruded Technology Yield Improvements/Labor Efficiencies

21 Planned Actions Drove Margin Innovation LEAN/CI Volume Leverage Jimmy Dean Skillets Sara Lee Whole Grain White Hillshire Farm Co-Extruded Technology Yield Improvements/Labor Efficiencies Fresh Sausage up 5% Smoked Sausage up 4%

22 Specific Actions to Drive FY07 Consumer Customer Operations 1.Strengthen Core 1.1 Invest choice-fully 1.2 Portfolio Overhead power 1.3 New Leverage communication 1.4 Effective brand plans Accelerate Innovation 2.1 Ingrain CI process 2.2 Increased dedicated resources Margin 2.3 Plan & launch Up initiatives 2.4 Improve launch process 2.5 Advance multicultural & wellness 3.Customer Leadership 3.1 Segmentation 3.2 Insights Focus / solutions 3.3 Resources 4.Pricing Architecture 4.1 Aligned objectives 4.2 Tools Total Margin 4.3 Org. structure 4.4 Process Focus / prioritization 5.Core Selling 5.1 Collaborative planning 5.2 People / org. development Execution 5.3 Customer service / S.C. 5.4 Retail excellence (DSMP) 8. Performance Driven One Sara Lee 6. Reinvent Bakery 3.1 Segmentation Leverage Costs 3.2 Insights / solutions 3.3 Supply chain of future 7. Supply Chain of Future 7.1 Optimize Network Reduce 7.2 Delivery Consistent Quality & Food Safety Overhead 7.3 Build Capability/Flexibility 7.4 Superior Customer Service 7.5 Drive sustainability Employee Efficiency 8.1 Optimal structure & process 8.3 Growth of performance culture 8.2 Talent management & development 8.4 Great place to work

23 Today s Goal: Confidence in Profitable Growth Overview F&B Strategy FY06 Performance & Drivers FY07 Plans

24 Specific Actions to Drive FY07 Consumer Customer Operations 1.Strengthen Core 1.1 Invest choice-fully 1.2 Portfolio power 2.Accelerate Innovation 3.Customer Leadership 3.1 Segmentation 3.2 Insights / solutions 1.3 New 1. communication Strengthen 3.3 Core 1.4 Effective brand plans 4.Pricing Architecture Invest choicefully 4.1 Aligned objectives 4.2 Tools 2.1 Ingrain CI 1.2 process Portfolio 4.3 Org. power structure 2.2 Increased dedicated 4.4 Process / prioritization resources 1.3 New communication 2.3 Plan & launch 5.Core Selling initiatives 5.1 Collaborative planning 2.4 Improve launch 5.2 People / org. process1.5 development 2.5 Advance multicultural 5.3 Customer service / S.C. & wellness 5.4 Retail excellence (DSMP) 1.4 Effective brand plans 6. Reinvent Bakery 3.1 Segmentation 3.2 Insights / solutions 3.3 Supply chain of future 7. Supply Chain of Future 7.1 Optimize Network 7.2 Delivery Consistent Quality & Food Safety 7.3 Build Capability/Flexibility 7.4 Superior Customer Service 7.5 Drive sustainability 8. Performance Driven One Sara Lee 8.1 optimal structure & process 8.3 Growth of performance culture 8.2 Talent management & development 8.4 Great place to work

25 Portfolio Power A Core Driver Multiple Branded Events Portfolio Power Drive in-store activity Accelerate household penetration & frequency Simplify for the consumer Drive profits for the retailer Improve Sara Lee efficiency/impact

26 Sara Lee Portfolio Power Event Customer $ Sales +22% 80% 83.8% 70% 60% 50% 50.4% 53.1% 51.6% 51.8% 40% 30% 30.2% 32.3% 20% 10% 3.8% 0% Hillshire Farm Lunch Meat Jimmy Dean Frozen Breakfast Sara Lee Fresh Bread Sara Lee Frozen Desserts Pct ACV Display Wk Prior Pct ACV Event Significant increased display support was a key driver of the event s success

27 Power Portfolio FY07 Calendar of Events Q1 Q2 Q3 Q4 TAILGATING HOLIDAY PULSE DRIVE LABOR DAY

28 Specific Actions to Drive FY07 Consumer Customer Operations 1.Strengthen Core 1.1 Invest choice-fully 1.2 Portfolio power 2.Accelerate Innovation 3.Customer Leadership 3.1 Segmentation 3.2 Insights / solutions 1.3 New 2. communication Accelerate 3.3 Innovation 1.4 Effective brand plans 4.Pricing Architecture Ingrain 4.1 CI Aligned process objectives 4.2 Tools 2.1 Ingrain CI process 4.3 Org. structure 2.2 Increased dedicated 4.4 Process / prioritization resources 2.3 Plan & launch 5.Core Selling initiatives 5.1 Collaborative planning 2.4 Improve launch 5.2 People / org. process development 2.5 Advance multicultural 5.3 Customer service / S.C. & wellness 5.4 Retail excellence (DSMP) 6. Reinvent Bakery 3.1 Segmentation 3.2 Insights / solutions 3.3 Supply chain of future 7. Supply Chain of Future 2.2 Increased dedicated resources 2.3 Plan & launch initiatives 2.4 Improve launch process 2.5 Advance multicultural & wellness 7.1 Optimize Network 7.2 Delivery Consistent Quality & Food Safety 7.3 Build Capability/Flexibility 7.4 Superior Customer Service 7.5 Drive sustainability 8. Performance Driven One Sara Lee 8.1 optimal structure & process 8.3 Growth of performance culture 8.2 Talent management & development 8.4 Great place to work

29 Innovation Little process No leader FY05 FY07 Detailed stage-gate SVP R&D/CMO

30 Innovation FY05 Little process No leader Funnel 20% filled 11% NSV FY07 Detailed stage-gate SVP R&D/CMO Funnel 80% filled 15% NSV

31 Innovation Little process No leader FY05 Funnel 20% filled 11% NSV No operating profit analysis upfront Inconsistent & limited resources spend FY07 Detailed stage-gate SVP R&D/CMO Funnel 80% filled 15% NSV Operating profit analysis 126 people and incremental launch spend

32 Jimmy Dean Franchise Continues to Expand $600 $500 $400 $300 $200 $100 $0 FY04 FY05 FY06 FY07 Breakfast Sausage/Bacon Skillets Breakfast Sandwiches/Handhelds Bowls Source: Spark

33 Jimmy Dean Skillets A Success 3 SKUs Sausage, Ham, Southwest Fastest distribution build - 85% Top new frozen breakfast item past 24 months 43% of volume incremental to category; 83% incremental to brand Source: IRI, JD Skillets: Year 1 New Product Review, August 2006

34 Jimmy Dean Bowls Continue Franchise Expansion 3 SKUs Sausage, Bacon, Pancake & Sausage Sell-in exceeding expectations Strong velocity

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36 Jimmy Dean Commercial #1

37 Jimmy Dean Commercial #2

38 Introducing Hillshire Farm Entrée Salads Launch Date: January 2007 On Trend: Main dish salad restaurant segment is growing Consumers seeking more convenient options at home Product Details: Chopped meats, cheeses, dressings & toppings Four Varieties: Chicken Caesar, Chicken & Bacon Club, Turkey & Ham Chef, Turkey & Cranberries w/ Ham Julienne

39 Sara Lee Brand Continues Strong Growth $1,200 $1,000 $800 $600 $400 $200 $ Frozen Deli Fresh Bakery

40 Sara Lee Now #1 in Fresh Bakery CY2001 CY WE Aug. 6, 2006 Rank Brand Share Rank Brand Share Rank Brand Share 1 Wonder $407MM Pepperidge $428MM Sara Lee $697MM Pepperidge $341MM Sara Lee $413MM Pepperidge $509MM Oroweat $338MM Wonder $394MM Nature s Own $401MM Sara Lee $91MM 1.0 Source: IRI Total Retail View & Infoscan Category is fresh bread, buns, rolls, bagels

41 Hearty & Delicious Continues the Trend Wide Pans are an important, growing segment $1.2B category; +5% / year: 18% of Fresh Bread category Hearty & Delicious Ownable Hearty & Delicious name Thicker, open grain slices Richer flavors and toppings for homemade appeal 6 unique varieties Re-launched Sara Lee Wide Pan September 14 Source: IRI, 52 Wks Ending 8/6/06 + Wal-Mart

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44 The Joy of Eating Commercial #1

45 The Joy of Eating Commercial #2

46 FY07 Launches Q1 Q2 Q3 Q4 Better Sandwich Wide Pan Bread S&S 100% Wheat Thick Slice Bread at Deli Bologna, Salami Ultra Thin New Flavors Quick Meals / Snacks Bacon Skillets Bkfst. Bowl Brewmaster Links 6 Pies Improved Bagel Single-serve Cappuccino

47 Specific Actions to Drive FY07 Consumer Customer Operations 3. Customer Leadership 1.Strengthen Core 3.Customer Leadership 6. Reinvent Bakery 1.1 Invest choice-fully 3.1 Segmentation 3.1 Segmentation 3.1 Segmentation 1.2 Portfolio power3.2 Insights/solutions 3.2 / solutions 1.3 New communication Effective brand 3.3 plans 4.Pricing Architecture Pricing Architecture 4.1 Aligned objectives 2.Accelerate Innovation 4.1 Aligned 4.2 objectives Tools 2.1 Ingrain CI process 4.3 Org. structure 2.2 Increased dedicated 4.2 Tools 4.4 Process / prioritization resources 4.3 Org. structure 2.3 Plan & launch 5.Core Selling initiatives 4.4 Process/prioritization 5.1 Collaborative planning 2.4 Improve launch 5. Core Selling 5.2 People / org. process development 2.5 Advance multicultural 5.1 Collaborative 5.3 Customer planning service / S.C. & wellness 5.2 People/org. 5.4 Retail development excellence (DSMP) 5.3 Customer service/s.c. 8. Performance Driven One Sara Lee 5.4 Retail excellence (DSMP) 3.2 Insights / solutions 3.3 Supply chain of future 7. Supply Chain of Future 7.1 Optimize Network 7.2 Delivery Consistent Quality & Food Safety 7.3 Build Capability/Flexibility 7.4 Superior Customer Service 7.5 Drive sustainability 8.1 optimal structure & process 8.3 Growth of performance culture 8.2 Talent management & development 8.4 Great place to work

48 Customer Management FY07 AOP Summary SLF&B 07 Objectives Volume/Revenue Operating Profit Cash Flow 3.0 Customer Leadership 4.0 Pricing Architecture 5.0 Core Selling 5.1 Collaborative Planning 5.2 People/ Organizational Development 5.3 Customer Service/ Supply Chain 5.4 Retail Excellence

49 Customer Management OBJECTIVES: Profitably grow revenues through distribution and portfolio trade strategies STRATEGIES: Collaboratively plan fact based Align people Leverage portfolio power Execute

50 Results to Date Reset all stores in 2.5 weeks Tripled average weekly sales Gained creditability for Sara Lee Planned 5 Co-Marketing Events for 2007 Established partnership for 2007 Pie Season Improved Jimmy Dean Frozen Breakfast shelf presence Grew the category

51 Specific Actions to Drive FY07 Consumer Customer Operations 1.Strengthen Core 1.1 Invest choice-fully 1.2 Portfolio power 1.3 New communication 1.4 Effective brand plans Accelerate Innovation 2.1 Ingrain CI process 2.2 Increased dedicated resources 2.3 Plan & launch initiatives 2.4 Improve launch process 2.5 Advance multicultural & wellness 3.Customer Leadership 3.1 Segmentation 3.2 Insights / solutions Pricing Architecture 6. Reinvent Bakery 4.1 Aligned objectives 4.2 Tools 4.3 Org. structure 4.4 Process / prioritization 6.1 Live Lean 6.2 More 5.Core Selling for the Store 6.3 Build Brands 5.1 Collaborative planning 5.2 People / org. development 5.3 Customer service / S.C. 5.4 Retail excellence (DSMP) 6. Reinvent Bakery 3.1 Segmentation 3.2 Insights / solutions 3.3 Supply chain of future 7. Supply Chain of Future 7.1 Optimize Network 7.2 Delivery Consistent Quality & Food Safety 7.3 Build Capability/Flexibility 7.4 Superior Customer Service 7.5 Drive sustainability 8. Performance Driven One Sara Lee 8.1 optimal structure & process 8.3 Growth of performance culture 8.2 Talent management & development 8.4 Great place to work

52 N.A. Bakery/Beverage Reported Segment DSD Ops Senseo Investment DSD New Market Investment FY04 FY06

53 DSD Margins 25.0% 8.1% 8.2% Other Bakery Soft Drink Snack Food

54 U.S. Fresh Achieving Results in Certain Geographies ROS 11.0% -13.0% Bottom 4 Top 4

55 Margin Improvement Opportunity Driving DSD Profit Consumer Customer Operations Sara Lee Brand Innovation Bread Adjacent Categories FY03 = No National Sales Force FY05 = 40+ National Sales Force Today = 500+ National Sales Force Basic Integration Segmented Delivery Model Density/Geography

56 Basic Integration Drives Margin Current Margin SKU Rationalization Interplant Reductions Stale Reductions RSR Compliance Reduced Out of Stocks LEAN Manuf.

57 Segmented Delivery Model Weekend service Display vs. service Supermarket drop size big vs. small Metro vs. rural Non-branded mix high Traditional 2-person Independent Operator (IO) Capability strength =

58 Arizona Market Revenue Growth Operating Margin +4.6% +3.2 pts. -6.0%

59 Will Build Scale Locally & Nationally Local Density Geography Consumer Bolt-on Acquisitions Bolt-on Acquisitions Greenfields Customer

60 Reinvention Requires a Phased Approach LEAN MODIFY TRANSFORM What must we do to deliver near term? How will we earn the right to grow? What is the future vision? and Beyond Operational Excellence LEAN the network Stales SKUs Interplant miles LEAN in plant Modify route system I/O, 2-person, etc. Automate warehousing Plant automation Transform to new low cost business system Plant investment Consumer Focus Power SKUs Tuck-in acquisitions Warehouse/deli opportunities Tuck-in acquisitions New categories Customer Excellence Category management Portfolio power Pricing Category management/insights New channels

61 Specific Marching Orders to 25,000 People Consumer Customer Culture/Operations BUILD BELIEVABLE BRANDS Innovate with tangible benefits Deliver consistent quality Benefits communicated well MORE FOR THE STORE Distribution, shelving, display Service excellence Portfolio Power Priced right LIVE LEAN Take value to your customer Despise waste (time & $) Fund the future People/Culture Best team = one team GROW AND ACHIEVE Growth = knowing it, improving it Walk, talk, live Mission, Vision, Values

62 Our Daily Screen 1. Is the activity I m doing driving the business? Selling, saving, linked to 4 priorities 2. Did I go one step beyond? 3. Am I accountable and empowered?