2011 Canaccord Genuity Growth Conference

Transcription

1 2011 Canaccord Genuity Growth Conference Alan S. Gever Executive VP & CFO

2 Forward Looking Statements This presentation may contain forward-looking statements within the meaning of the safe harbor provisions of the Securities Litigation Reform Act of Terms such as expect, believe, continue, going forward, and grow, as well as similar comments, are forwardlooking in nature. Actual results may differ from these forward-looking statements and the company can give no assurances that such expectations can be attained. Factors that could cause actual results to differ materially from the Company s expectation include: general business and economic conditions, competitive factors, raw materials purchasing, and fluctuations in demand. Please refer to the Company s Securities and Exchange Commission filings for further information. 2

3 Investment Highlights Health & wellness innovation platform: Eliminating bad ingredients such as trans fats (with patented technology), animal saturated fats, dairy and gluten. Fortifying with good ingredients such as Omega 3, antioxidants & plant sterols. Grown into the #2 player in the spreads category. Well positioned to capitalize on the growing healthy foods market beyond margarine spreads. Business model that generates significant free cash flow and has limited capital requirements. Quality and experienced management team with promotional and brand building expertise. 3

4 Corporate Vision Create a health & wellness innovation platform that builds brands targeted at highly motivated need states. Fuel growth through new science/products, channels and brands. 4

5 Functional Foods Growth Functional Foods Industry Sales Functional Foods Dairy and Spreads Sales $9.0 $7.0 $8.0 CAGR: 5.7% $7.6 $8.0 $8.4 $6.0 CAGR: 5.6% $5.4 $5.7 $6.0 $6.3 $7.2 $5.1 Sales ($ in billions) $7.0 $6.0 CAGR: 7.9% $6.1 $6.4 $6.8 Sales ($ in billions) $5.0 $4.0 CAGR: 7.5% $3.9 $4.1 $4.6 $4.8 $5.2 $5.5 $3.4 $3.6 $5.0 $4.7 $3.0 $4.4 $ E 2010P 2011P 2012P 2013P 2014P $ E 2010P 2011P 2012P 2013P 2014P Source: Mintel, August

6 Growth Strategy #1 Grow margarine spreads market share via three-tier strategy: Use Smart Balance, Earth Balance, and Bestlife brands, to appeal to a wider range of consumers. #2 Gain market share in other categories: National rollout of enhanced milk a category that is ten times larger than spreads. #3 Innovate brands & introduce new products: An umbrella of brands that creates crossover consumer loyalty and can support a broad number of products in various categories. #4 Leverage health & wellness platform by acquiring brands/science: Focus on need state brands - with unlimited category expansion potential. 6

7 Growth Strategy: #1 Grow Spreads Market Share Via Three-Tier Strategy 7

8 History of Smart Balance Innovating the Spreads Category 1996: Smart Balance formed - around a patented blend of natural vegetable oil US Food Channel $ Share Trends I Can t Believe It s Not Butter 1997: Company launches Smart Balance - heart-healthy margarine with no trans fats. 2007: Boulder Specialty Brands acquires GFA Brands : Company invests approximately $150 million marketing Smart Balance Ttl Conagra Brands Land O Lakes Private Label Promise CY 2003 CY 2004 CY 2005 CY 2006 CY 2007 CY 2008 CY 2009 CY : Company launches three-tier spreads strategy. Source: IRI ; Nielsen

9 Three Tier Brands Target Different Customers 9

10 10 Smart Balance Brand Consumer Scorecard Shopper Recognized as #3 Heart Health Brand! Question: What brands come to mind when you think of grocery food brands that are heart healthy? (List up to 5 brand names) Top 10 Heart Healthy Grocery Food Brands % of All Shoppers Healthy Choice 8% Cheerios 8% Smart Balance 7% Kashi 5% Quaker 4% Lean Cuisine 3% Among all shoppers, Healthy Choice and Cheerios products are most closely associated with heart health. Smart Balance ranks #3 respectively. Kellogg s 3% I Can t Believe It s Not Butter 3% Promise 2% Remaining Brands/Commodities: 56% Silk 2% Source: Omnibus Study, 2010, N=2,000 (adults 18+)

11 11 Smart Balance Brand Consumer Scorecard #1 Leading Brand in Taste and Heart Health Among Franchise Buyers Question: Which ONE of those brands that you listed do you think is leading in delivering tasty and heart-healthy food? Top 10 Taste & Heart Healthy Grocery Food Brands % of SB Brand Shoppers Smart Balance 15% Healthy Choice 8% Kashi 7% Cheerios 7% Quaker 3% Lean Cuisine 2% Among Smart Balance franchise buyers, the Smart Balance brand leads in overall taste AND heart health, followed by Healthy Choice and Kashi. Kellogg s 2% I Can t Believe It s Not Butter 2% Promise 2% Remaining Brands/Commodities: 51% Silk 1% Source: Omnibus Study, 2010, N=2,000 (adults 18+)

12 Smart Balance Innovating the Spreads Category

13 Earth Balance Super Premium Spreads Natural ingredient profile Certified non-gmo ingredients Gluten free, lactose free, vegan No hydrogenated oils No artificially modified oils Largest distribution in health channel 2010 sales up 30% 13

14 Bestlife Buttery Spreads First value brand with no hydrogenated oils No palm kernel oil Excellent source of Vitamin D Started shipping Q Current distribution in 58% of supermarkets & 2,500 Wal-Mart stores Targeted marketing using Bob Greene, through Oprah media platforms Buttery Spray 8oz Buttery Spread 15oz Buttery Spread With Extra Virgin Olive Oil 15oz Buttery Spread 45oz 14

15 Three-Tier Market Share Continues to Grow Smart Balance family of spreads (1) 52 week dollar market share (1) Includes Smart Balance, Earth Balance, Bestlife, Smart Beat, Nucoa Source: IRI ; Nielsen

16 Spreads Trends and The Great Recession Two key trends impacting spreads category over past year: Cooking/baking category reporting unit declines. Value outpacing premium. 16

17 GROWTH STRATEGY: #2 GAIN MARKET SHARE IN OTHER CATEGORIES - NATIONAL ROLLOUT OF ENHANCED MILK 17

18 Smart Balance: A Premiere H&W Equity and Strategic Thought Leader in Dairy The Fastest Growing Brand in Total Dairy! Unit % Chg Rank $ % Chg Rank The 25 Largest Dairy Manufacturers $ `04-`10 CAGR $ % Ch`10 vs `04 Actual $ '04- '10 (MM) TOTAL STORE 1.5% 9.6% $24, SMART BALANCE INC 15.6% 138.1% $ DAISY BRAND 14.1% 120.8% $ SARGENTO FOOD COMPANY 8.1% 59.6% $ COCA COLA CO 7.4% 53.9% $ FROMAGERIES BEL INC 6.6% 46.7% $ GROUPE DANONE S A 6.4% 45.3% $ NESTLE S.A. (SWITZERLAND) 2.8% 18.2% $ GENERAL MILLS INC 2.4% 15.0% $ LACTALIS USA 2.1% 13.5% $ MICHAEL FOODS INC 1.9% 12.3% $ CITRUS WORLD INC 1.6% 9.9% $ CHIQUITA BRANDS INTL 1.4% 8.5% $ TILLAMOOK COUNTY CREAMERY 1.1% 6.7% $ UNILEVER 0.7% 4.1% $ DEAN FOODS CO 0.0% 0.2% $ PRIVATE LABEL -0.2% -1.1% -$ PRAIRIE FARMS DAIRY -0.5% -2.8% -$ DAIRY FARMERS OF AMERICA -1.7% -9.8% -$ H P HOOD INC -2.5% -13.9% -$ KRAFT FOODS INC -2.7% -15.1% -$ LAND O'LAKES INC -3.1% -17.4% -$ PEPSICO INC -3.6% -19.5% -$ DOLE FOODS CO INC -6.0% -31.0% -$ CONAGRA FOODS INC -9.4% -44.6% -$ AGRO FARMA INC NEW NEW $ NOTE: Over 2,500 Dairy manufacturers ranked from Source: IRI, US Food,

19 Marketing Initiatives: Spreads Grocery Milk Marketing in 2011 designed to drive consumer purchase intent, leveraging the brand equity building in the prior years All-Family FSI Coupons Supermarket Coupons 19

20 Healthy Premium Milk - $1.7B Market Healthy Premium Volume Grew 12% Grocery Channel Full Year 2010 versus 2009 Healthy Premium Milk by Segment +>100% +8% -4% +8% +13% Source: Nielsen Grocery Channel Full Year ending , equivalent units Note: All Other includes almond milk, acidophilus, rice milk and goats milk 20

21 Expanding Category Reach Driven by Milk Exceptional benefits and great taste Enhanced Milks: Varieties include an excellent source of DHA/EPA Omega-3s, Antioxidant Vitamin E and plant sterols Enhanced Milk category has doubled in 5 years. Expanded across U.S. in 2010 Milk now in 65% of supermarkets & 400 Wal-Mart stores Added new varieties in 2011: Smart Balance with Calcium Fat Free & Lactose Free 21

22 Gaining Share in Milk 0.45 Rolling 4 wk SB $ Share of Ttl Milk, Ttl US Food Source: Nielsen, data through

23 Building Scale in Milk Will Build Leverage $ Milk Market Share (ending 7/9/11) 12 Weeks 24 Weeks 52 Weeks Florida New York New England New Markets New Markets/ On Shelf Total U.S. Grocery Source: Nielsen, data through

24 GROWTH STRATEGY: #3 INNOVATE BRANDS & INTRODUCE NEW PRODUCTS 24

25 Highly Targeted Investment Plan Core products profitability is the fuel for innovation platform Innovation: investment to fuel growth Milk Bestlife Earth Balance Core products: profit foundation Source: The Nielsen Company Core spreads Grocery 25

26 Earth Balance - Building a Platform Focused on the Plant-Based Diet Spread/Stick Nut Butters Soymilk GROWTH THORUGH INNOVATION Mayo Other Core to the Earth Balance proposition No meat, no dairy Building a Promising Platform Focused on the Plant Based Diet Three type of consumers vegan; proactive health & allergenic Improving your health by living lower on the food chain Natural foods companies leading the cause Innovation resulted in revenue CAGR 23% over past two years

27 Earth Balance Soy Milk First Non GMO Verified refrigerated soymilk; 100% USA soybean Launched in partnership with Whole Foods Market, as part of their renewed commitment to organic in the soymilk category Whole Foods Soymilk category up double-digits since launch Expanded to 40% of all other natural food stores (SPINS) 27

28 Earth Balance New Product Introductions Earth Balance Coconut Spread Formula with organic extra virgin coconut oil Lactose-free, soy-free, organic, vegan, non-gmo Earth Balance Mayo Refrigerated mayo No eggs/dairy GMO-free 28

29 The Bestlife Franchise Food Diet Seal Books Bestlife Buttery Spreads, Spray and Sticks Online tool Weight and Diabetes management Product certification program Book franchise with 4 Best Life titles, including best-sellers 29

30 Bestlife Brand & Bob Greene Bob Greene is Oprah s personal trainer and nutrition and fitness expert Author of books on diet, fitness, and nutrition over 10 million copies sold Created the Bestlife healthy lifestyle program includes eliminating trans fats and reducing saturated fats from dairy Recently launched 20 Years Younger book and lifestyle program 30

31 GROWTH STRATEGY: #4 LEVERAGE HEALTH & WELLNESS PLATFORM BY ACQUIRING BRANDS & SCIENCE 31

32 Investment Rationale Attractive, high growth industry #1 dedicated gluten-free brand with leading position in key categories Aligned With Health & Wellness Broadest product offering in industry Complementary to Smart Balance strategy of building a health & wellness platform Significant untapped growth opportunities in distribution and product offerings Fits into Smart Balance s core competencies of R&D, marketing & sales. Superior Growth & Financial Profile Strong Brand Equity With Defensible Position Accretive to Smart Balance growth and earnings 32

33 Gluten-free Opportunity Estimated three million Americans with celiac disease: U.S. Gluten-Free Market ($ in billions) Only known treatment is a strict gluten-free diet $3.5 $3.2 Another estimated 40 million Americans suffer from non-celiac gluten intolerance $3.0 $2.5 $2.0 $1.7 $2.6 Growing evidence that a gluten-free diet can help mitigate the symptoms of other medical conditions Broad appeal among consumers with other allergies who recognize gluten-free foods to be safer than products containing gluten $1.5 $1.0 $0.5 $0.0 $ A 2009E 2012P 2015P Note: Packaged Facts and Datamonitor. Based on total U.S. gluten-free markets and assumes that the U.S. gluten-free market will grow at the same rate as the global market through

34 Overview Leader in Gluten-free Glutino is the #1 dedicated glutenfree brand in North America with market leadership in its categories: Glutino Sales ($ in millions) Approximately $54 million in net sales in FY2011 (ending March 31 st, 2011) $60.0 $50.0 $40.0 $31.2 $44.0 $ to 2011 net sales CAGR of 29.0% $30.0 $20.0 $24.8 $ gluten-free products Acquired by Smart Balance in August $0.0 FY 2008A FY 2009A FY 2010A FY 2011A 34

35 Sales Mix Sales by Product Sales by Channel Note: Based on FY 2011 (ending March 31, 2011) 35

36 Market Leadership #1 Pretzel #2 Breakfast Bar #3 Cookie #2 Frozen Entree #2 Bagel #2 Frozen Pizza 36

37 Diversifying Sales Mix Smart Balance Sales Mix Smart Balance & Glutino Sales Mix Milk 13% Other 2% Grocery 15% Other 1% Grocery 23% Frozen 5% Spreads 70% Milk 11% Spreads 60% Note: Based on Q2-11 Gross Sales 37

38 FINANCIAL PERFORMANCE 38

39 Strong Historical Performance $ in Millions Net Sales Cash Operating Income (COI) Note: 2010 COI excludes $4M in restructuring costs 39

40 Q vs. Q $ in millions Q Q Change Net Sales $59.0 $ % Gross Profit % Gross Margin 47.7% 48.3% (60 bps) Operating Income* % Net Income* % E.P.S.* $0.07 $ % In Q2-2010, net income excludes a charge of $130.0 million, or $2.08 in EPS, related to a goodwill impairment and charges totaling of $4.3 million, or $0.07 in EPS, associated with restructuring actions/stock option forfeitures in In Q net income excludes a gain of $0.4 million, or $0.01 per share related to a one-time benefit in the change in stock based compensation expense. 40

41 Creating Financial Flexibility Completed credit amendment in March 2011 Flexibility in strategic investments, capital spending, covenants Enabled the company to acquire Glutino Food Group Share repurchase program: $25M over two years 3.7 M shares repurchased through 6/30/2011 ($15.6 million cost) Ongoing supply chain productivity program Over $11 million annualized savings through

42 2011 Priorities Drive Three Tier spreads strategy Maintain share growth in core category Manage through commodity driven price increases Expand Bestlife and Earth Balance brands Increase Smart Balance milk trial and distribution Broaden the Earth Balance brand Expand distribution of Earth Balance soymilk in the natural channel Capitalize on Earth Balance success through new product introductions in the natural channel Integrate Glutino acquisition Invest in growth (R&D, sales & marketing) Improve upon hybrid production model/supply chain 2011 Outlook Net sales: +10% to +12% growth versus 2010 Cash operating income: +12% to +14% growth versus

43 Investment Highlights Health & wellness innovation platform: Eliminating bad ingredients such as trans fats (with patented technology), animal saturated fats, dairy and gluten. Fortifying with good ingredients such as Omega 3, antioxidants & plant sterols. Grown into the #2 player in the spreads category. Well positioned to capitalize on the growing healthy foods market beyond margarine spreads. Business model that generates significant free cash flow and has limited capital requirements. Quality and experienced management team with promotional and brand building expertise. 43