CAGNY PRESENTATION FEBRUARY 22, 2017

Transcription

1 CAGNY PRESENTATION FEBRUARY 22, 2017

2 CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS This presentation contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995 regarding, among other things, future operating and financial performance, product development, market position and business strategy. The viewer is cautioned not to rely on these forward-looking statements. These statements are based on current expectations of future events. If underlying assumptions prove inaccurate or known or unknown risks or uncertainties materialize, actual results could vary materially from the expectations and projections of Johnson & Johnson. Risks and uncertainties include, but are not limited to, economic factors, such as interest rate and currency exchange rate fluctuations; competition, including technological advances, new products and patents attained by competitors; challenges inherent in product research and development, including uncertainty of clinical success and obtaining regulatory approvals; uncertainty of commercial success for new and existing products; challenges to patents; the impact of patent expirations; the ability of the company to successfully execute strategic plans, including business plans, transactions and restructuring plans; market conditions and the possibility that the on-going share repurchase program may be delayed, suspended or discontinued; the impact of business combinations and divestitures; significant adverse litigation or government action, including related to product liability claims; changes to applicable laws and regulations, including tax laws and global health care reforms; trends toward health care cost containment; changes in behavior and spending patterns or financial distress of purchasers of health care products and services; financial instability of international economies and legal systems and sovereign risk; manufacturing difficulties or delays, internally or within the supply chain; product efficacy or safety concerns resulting in product recalls or regulatory action; increased scrutiny of the health care industry by government agencies; and the potential failure to meet obligations in compliance agreements with government bodies. A further list and description of these risks, uncertainties and other factors can be found in Johnson & Johnson s Annual Report on Form 10-K for the fiscal year ended January 3, 2016, including in Exhibit 99 thereto, and the company s subsequent filings with the Securities and Exchange Commission. Copies of these filings are available online at or on request from Johnson & Johnson. Any forward-looking statement made in this presentation speaks only as of the date of this presentation. Johnson & Johnson does not undertake to update any forwardlooking statement as a result of new information or future events or developments. CAUTIONARY NOTE ON NON-GAAP FINANCIAL MEASURES This presentation refers to certain non-gaap financial measures. These non-gaap financial measures should not be considered replacements for, and should be read together with, the most comparable GAAP financial measures. A reconciliation of these non-gaap financial measures to the most directly comparable GAAP financial measures can be found in the accompanying financial schedules of the earnings release and the Investor Relations section of the Company s website at 2

3 OUR CREDO We believe our first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services. In meeting their needs everything we do must be of high quality. We must constantly strive to reduce our costs in order to maintain reasonable prices. Customers' orders must be serviced promptly and accurately. Our suppliers and distributors must have an opportunity to make a fair profit. We are responsible to our employees, the men and women who work with us throughout the world. Everyone must be considered as an individual. We must respect their dignity and recognize their merit. They must have a sense of security in their jobs. Compensation must be fair and adequate, and working conditions clean, orderly and safe. We must be mindful of ways to help our employees fulfill their family responsibilities. Employees must feel free to make suggestions and complaints. There must be equal opportunity for employment, development and advancement for those qualified. We must provide competent management, and their actions must be just and ethical. We are responsible to the communities in which we live and work and to the world community as well. We must be good citizens support good works and charities and bear our fair share of taxes. We must encourage civic improvements and better health and education. We must maintain in good order the property we are privileged to use, protecting the environment and natural resources. Our final responsibility is to our stockholders. Business must make a sound profit. We must experiment with new ideas. Research must be carried on, innovative programs developed and mistakes paid for. New equipment must be purchased, new facilities provided and new products launched. Reserves must be created to provide for adverse times. When we operate according to these principles, the stockholders should realize a fair return. Caring for people around the world by anticipating their needs, creating solutions and experiences that help them and those they care for live healthy, vibrant lives 3

4 DID YOU KNOW? $13.3B in NTS Global leader in 7 Consumer categories Operations in more than 80 countries Iconic brands 4

5 ICONIC BRANDS 5

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7 OUR BRANDS ARE CLUSTERED IN 6 BROAD CATEGORIES BEAUTY OTC BABY CARE ORAL CARE WOUND CARE WOMEN'S HEALTH 7

8 OUR BRANDS ARE CLUSTERED IN 6 BROAD CATEGORIES OTC ~30% ~30% BEAUTY ORAL CARE 12% ~5% 8% 15% BABY CARE WOUND CARE WOMEN S HEALTH Based on FY 2016 Consumer sales, 8

9 WE HAVE 12 MEGABRANDS 3 BRANDS > $1B 9

10 OUR 12 MEGABRANDS DELIVER 65% OF SALES TODAY $1B Brands ~75% ~65% Aspiration 1 1. Internal estimate. 10

11 WE ARE GLOBAL LEADERS ACROSS NUMEROUS PRODUCT SEGMENTS 1 2 Allergy Care Baby Toiletries Digestive Remedies Mouthwash Smoking Cessation Aids Therapeutic Beauty Wound Care Diaper Rash Facial Cleansers Feminine Care Sun Protection Source: Euromonitor FY 2015 data. Note: Therapeutic Beauty includes hair loss treatments, acne treatments and medicated shampoos; Wound Care includes adhesive bandages, first aid kits, gauze, and tape. 11

12 WITH >50% OF SALES OUTSIDE OF NORTH AMERICA 28% EMEA 45% NORTH AMERICA 17% ASIA PACIFIC 10% LATIN AMERICA 2016 Net Trade Sales 12

13 OUR 2016 INVESTOR MEETINGS 13

14 OUR 2016 COMMITMENTS 1. Grow topline faster than the market 2. Expand our profit margin to reach benchmark levels 3. Accelerate growth through acquisitions 14

15 WE HAVE MADE SIGNIFICANT PROGRESS AGAINST OUR COMMITMENTS 15

16 GROWING FASTER THAN THE MARKET IN 2016 NTS GROWTH 1 : +4.2% PEER COMPOSITE GROWTH 2 : +3.2% MARKET GROWTH 3 : +2.9% 1. Operational growth excluding Acquisitions and Divestitures, additional 2015 shipping days and impact of Venezuela 2. GSR data and internal analysis 3. Source: Neilson market data 16

17 2016 MARKET SHARE NTS ($ billions) Share Growth (% pts) OTC Beauty Oral Care Feminine Care Wound Care Baby Source: ACT NTS Dec 2016 in USD 17

18 WE ARE DELIVERING MAJOR IMPROVEMENTS IN PROFITABILITY 19.9% Adjusted Income Before Tax* 14.3% +560BPS *NON-GAAP measure 18

19 WE ARE ACCELERATING GROWTH THROUGH ACQUISITIONS Premium Hair Global Allergy Light Therapy Derma-Cosmetics 19

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21 OUR 2016 COMMITMENTS 1. Grow topline faster than the market 2. Expand our profit margin to reach benchmark levels 3. Accelerate growth through acquisitions 21

22 WHAT IS J&J CONSUMER S RIGHT TO WIN? 22

23 CLEAR RIGHT TO WIN 1. Strong portfolio of enduring brands 2. Playing in attractive, growing categories 3. Powerful strategy that drives competitive advantage 23

24 COLLECTION OF ENDURING WORLD-CLASS BRANDS 24

25 GROWING THROUGH INSIGHT-LED INNOVATION, ENDORSED BY PROFESSIONALS #1 Allergist recommended brand #1 Brand of OTC pain reliever hospitals use most #1 Dermatologist recommended Dentist recommended #1 mouthwash Pediatrician recommended #1 brand of ibuprofen #1 Hospital recommended #1 Recommended by doctors and moms 70 Years relied on by doctors Years recommended 70 by dermatologists 25

26 PLAYING IN LARGE STRUCTURALLY ATTRACTIVE CATEGORIES Our total consumer categories represent ~$350B globally 2015 Market Sizes ($B) $15 $160 $40 BABY CARE BEAUTY ORAL CARE $100 $30 $3 OTC WOMEN S HEALTH WOUND CARE Source: Euromonitor FY 2015 data 26

27 THAT ARE GROWING FASTER THAN CONSUMER PACKAGED GOODS AVERAGE 5 Year Sales CAGR 1 BABY CARE 6% BEAUTY 3 6% ORAL CARE 4 4% 5% 7% 3% OTC WOMEN S HEALTH WOUND CARE Our categories are growing a weighted average of >4% versus CPG 2 market growth of 3~4% 1. Source: Euromonitor, CAGR 2. Consumer Packaged Goods Five Year Sales CAGR 3. Excludes cosmetics 4. Excludes toothbrush & toothpaste 27

28 FAVORABLE CONSUMER TRENDS HEALTHY BEAUTY NATURAL / ORGANICS MILLENNIALS ARE DIGITAL / SOCIAL NATIVES 135 MILLION NEW BIRTHS/YEAR AGING POPULATION OTC SELF-CARE SOLUTIONS LIFESTYLE HEALTH ISSUES DISCIPLINED GEOGRAPHIC PORTFOLIO MANAGEMENT 28

29 OUR STRATEGY POSITIONS US TO BE A SIGNIFICANT CONTRIBUTOR TO J&J Target $13.3B Revenue 1~2pts Above market growth per year 19.9% Profitability 1 Growing earnings faster than sales 1. Adjusted Income Before Tax by Segment (Non-GAAP Measure). 29

30 FUNDAMENTAL PRINCIPLES GUIDING OUR STRATEGY Change the rules of the game through global, transformational, science-based innovation Create an ecosystem that builds enduring, loyal relationships with consumers over time Make our brands more available to our consumers wherever they are Drive profitability and margin expansion Further leverage acquisitions to accelerate growth 30

31 TRANSFORMATIONAL SCIENCE-BASED INNOVATION FOCUS ON FEWER & BIGGER EXCELLENCE IN SCIENCE EXTERNAL FOCUS DESIGN THINKING Differentiated Innovation With Global Scale Regulatory and Clinical Excellence Engage World s Best Innovators and Scientists Consumer and Patient-centric Solutions Leader in R&D Productivity Professional Endorsement Partner of Choice Brand Loyalty 31

32 FOCUS ON FEWER & BIGGER IDEAS # of projects by Launch Year Estimated Portfolio Value by Launch Year -50% 3x vs Data indexed to 2015 number of projects and portfolio value 32

33 EXCELLENCE IN SCIENCE: POWERFUL SUN PROTECTION Leader in Prevention Leader in Protection Strong Professional Endorsement 1 in every 3 cancers diagnosed globally is a Skin Cancer 1 person dies from Melanoma every 57minutes (in the US) #1Dermatologist recommended 33

34 EXTERNAL FOCUS: LIGHT THERAPY Neutrogena Light Therapy Acne Mask Winning Clinical Efficacy Miniaturized LED light based device Commonly used in Dermatologist offices Disruptive technology 34

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36 BUILDING A CONNECTED ECOSYSTEM Analytics Precision Marketing Digital Ecosystem Triggerbased Marketing Influencer Marketing Virtual professional detailing 36

37 EXPAND DIGITAL ECOSYSTEM: JOHNSON S BEDTIME Johnson's Bedtime app delivers on-demand sleep support via a mobile device Soon to be launched on Amazon Echo + Scientifically proven bedtime routine has helped hundreds of thousands of babies across 18 countries. 37

38 EXPAND DIGITAL ECOSYSTEM: NEUTROGENA SHADE FINDER Skincare Questions Get the Look Questions Neutrogena shade enhances shopper experience on our own and e-retailer sites. Increased revenue 2x by helping women find the right product for their skin tone. 38

39 EXPAND DIGITAL ECOSYSTEM: ZYRTEC SNEEZE TRIGGER Zyrtec Sneeze Trigger app reaches consumers in their local zip code during their moment of need Increased purchase intent +14pts Expanding model to include more brands, consumers and professionals Delivering Premium Engagement through the ALLERGY CAST App Capitalizing On Local Seasonality with Sneezetriggered Media 39

40 MAKE OUR BRANDS MORE AVAILABLE TO OUR CONSUMERS WHEREVER THEY ARE 40

41 AVEENO GLOBAL EXPANSION Launching in 15+ markets by the end of

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43 GLOBALIZING LE PETIT MARSEILLAIS Successful European expansion continues, launched in the U.S. and in Canada in

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45 MAKING OUR BRANDS MORE AVAILABLE E-Commerce Emerging Markets 45

46 E-COMMERCE: FOCUS ON FUNDAMENTALS SCANR Search Content Rating & Reviews How to Win- Focus on Fundamentals SCANR Available Assortment at the Right Place Navigation 46

47 BROADENING OUR REACH & DRIVING PENETRATION Well-distributed in key markets Focused on driving coverage Significant upside potential 47

48 DRIVE PROFITABILITY & MARGIN EXPANSION Revenue Growth Management Marketing Productivity >$1B in savings Supply Chain Transformation SG&A Optimization 48

49 WE ARE DELIVERING MAJOR IMPROVEMENTS IN PROFITABILITY Adjusted Income Before Tax Margin BPS Operating Income 2 2X Non-GAAP measure 2. Adjusted for constant exchange rates and excluding one-time items 49

50 PRODUCTIVITY INITIATIVES DELIVERING MAJOR VALUE Partnering with customers for shared value optimizing pricing, assortment, and promotion & trade terms Revenue Growth Management Marketing Productivity Consolidated media spend behind one global advertising agency >$1B Pursuing game-changing initiatives around entire value chain Supply Chain Transformation SG&A Optimization Implemented aggressive cost savings program that achieved >$250M in 1 st year 50

51 ACCELERATE INORGANIC GROWTH THROUGH ACQUISITIONS Five Key Priorities 1 Build scale in OTC 2 Enable growth in BEAUTY Lead in BABY with business model innovation Accelerate growth with regional opportunities; reinvent key markets Invest in long-term external pipeline 51

52 OUR FOCUS IS TO CREATE A VIRTUOUS CYCLE OF PROFITABLE GROWTH Revenue Growth Management Drives sustainable profitable growth over time P&L Productivity Big Innovation & Brand Building 52

53 A STRONG, CONSISTENT, SUSTAINABLE BUSINESS 33 Consecutive years of adjusted operational earnings growth 1 54 Consecutive years of dividend increases 2 Balanced Sheet Operational & AAARated investment flexibility ~75% of sales from #1 or #2 global market share position ~70% of 10 year free cash flow returned to shareholders 3 $1B 24 Brands/Platforms with > $1b in sales ~22% launched of sales from products in past 5 years 1. Non-GAAP measure; excludes intangible amortization expense, special items and the impact of translational currency 2. Inclusive of the April 2016 dividend declaration 3. Non-GAAP measure; defined as operating cash flow less capital spending 53

54 TOTAL RETURN TO SHAREHOLDERS SUMMARY As of 12/31/ Year 3 Year 5 Year 10 Year 15.3% 11.0% 15.3% 9.0% Competitor Composite* -0.2% 6.3% 13.0% 7.0% Consumer Competitor Composite* 3.6% 3.4% 9.9% 7.3% S&P % 8.9% 14.6% 6.9% Dow Jones Industrial Average 16.5% 8.7% 12.9% 7.5% Data Source: Bloomberg * For a list of the companies included, see page 40 of company s 2016 Proxy Statement 54

55 WE ARE WELL POSITIONED FOR SUSTAINED GROWTH World-class: portfolio of brands in large, growing categories Strong innovation pipeline and world-class brand building Well-positioned to grow sales above the market while continuing to expand margins to achieve benchmark profitability Our strategy positions us to be a significant contributor to Johnson & Johnson 55

56 QUESTIONS?