dps cagny 2010
DESCRIPTION
Dr Pepper Snapple Presentation at 2010 Consumer Goods Analyst ConferenceTRANSCRIPT
CAGNYCAGNYFebruary 17, 2010February 17, 2010
Safe Harbor StatementSafe Harbor Statement
This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, in particular, statements about future events, future financial performance, plans, strategies, expectations, prospects, competitive environment, regulation, and cost and availability of raw materials. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “may,” “will,” “expect,” “anticipate,” “believe,” “estimate,” “plan,” “intend” or the negative of these terms or similar expressions. These forward-looking statements have been based on our current views with respect to future events and financial performance. Our actual financial performance could differ materially from those projected in the forward-looking statements due to the inherent uncertainty of estimates, forecasts and projections, and our financial performance may be better or worse than anticipated. Given these uncertainties, you should not put undue reliance on any forward-looking statements. All of the forward- looking statements are qualified in their entirety by reference to the factors discussed under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2008 and our other filings with the Securities and Exchange Commission. Forward-looking statements represent our estimates and assumptions only as of the date that they were made. We do not undertake any duty to update the forward- looking statements, and the estimates and assumptions associated with them, after the date of this presentation, except to the extent required by applicable securities laws.
Premium Tea
Gourmet CSDs
Juice & Juice DrinksFlavored CSDs
Strong Portfolio of Brands with Leadership PositionsStrong Portfolio of Brands with Leadership Positions
Mixers
Priority Focus Brands Drive Over 70% of VolumePriority Focus Brands Drive Over 70% of Volume
And Generate Over $8bn in Retail SalesAnd Generate Over $8bn in Retail SalesEstimated Retail Sales (Millions)
$0 $200 $400 $600 $4000
Source: The Nielsen Company and company estimates of non-measured channels including fountain foodservice. Estimates include sales by third-party bottlers and distributors.
Portfolio Also Contains Leading Regional,Portfolio Also Contains Leading Regional, New and Allied BrandsNew and Allied Brands
Flavored CSDs Drive 80% of Our Business and Are Flavored CSDs Drive 80% of Our Business and Are GrowingGrowing
Flavored CSD Category MixFlavored CSD Category Mix
(Retail Sales Dollars)(Retail Sales Dollars)
DPS Dollar ShareDPS Dollar Share
Change 2009 vs 2006Change 2009 vs 2006
Flavored CSDs
46.3%46.3%
50.6%50.6%
47.8%47.8%48.3%48.3%
49.3%49.3%
2005 2006 2007 2008 1/2010
39.2%39.2%41.3%41.3%
+2.1pts+2.1pts
Source: The Nielsen Company –
U.S. Only
Route to Market is Broad, Balanced and FlexibleRoute to Market is Broad, Balanced and Flexible
Fountain Foodservice ~ 10%Fountain Foodservice ~ 10%
Bottling Partners ~ 40%Bottling Partners ~ 40%
Company Owned Distribution ~ 40%Company Owned Distribution ~ 40%
Warehouse ~ 10%Warehouse ~ 10%
SpunSpun--Off 5/08, DPS is an AmalgamationOff 5/08, DPS is an Amalgamation of Many Brand and Bottling Companiesof Many Brand and Bottling Companies
Dr Pepper/7UP Companies, Inc.
Snapple Beverage Corp.
Duffy – Mott’s Co.
Manufacturing & Distribution Assets
Dallas / Fort Worth Dr Pepper Bottling CompanyDr Pepper Bottling Company of WacoSeven Up Bottling Company of WacoKemmerer BottlingSeven Up Bottling of IN / Northern KYJoyce Beverages MidwestRacine Seven UpDr Pepper Bottling Co of Houston7Up Detroit Inc.Beverage Management (OH)Full Service Beverage Co of HoustonMetro Beverages, Inc. (Eastern IN)Klages (Akron, OH)Seven Up Bottling Co. of DallasMid-Continent Bottlers, Inc.A.J. Canfield Co.American Juice Co.Iowa BeveragesAll American Bottling Corp. (Rockford, IL)Dr Pepper Bottling Co. of GalvestonBig Red Distributors, Inc. (Waco)All American Bottling Corp. (Minneapolis)Seven Up Bottling Company of TopekaAll American Bottling Corp. (WV)Corsicana Dr Pepper Bottling Co.7Up RC Bottling Company of Southern CASelect BeveragesBeverages AmericaCotton Club of Cleveland, OHIowa Beverage ManufacturersMetro Beverages, Inc. (Eastern IN)Big Red Bottling of South TXSkyline Beverages of WVWeinstein Beverage Co. of Spokane, WAAABC (CO, OK, TN, KY, AR, MI)EasleySeaBev
Focused on Delivering Against a Set of Key PrioritiesFocused on Delivering Against a Set of Key Priorities
Build and Enhance Leading BrandsBuild and Enhance Leading Brands
Exploit Opportunities in High GrowthExploit Opportunities in High Growth and High Margin Categoriesand High Margin Categories
Increase Presence in High MarginIncrease Presence in High Margin Channels and PackagesChannels and Packages
Leverage Integrated Business ModelLeverage Integrated Business Model
Strengthen RouteStrengthen Route--toto--MarketMarket
Improve Operating EfficienciesImprove Operating Efficiencies
Focused on Delivering Against a Set of Key PrioritiesFocused on Delivering Against a Set of Key Priorities
Build and Enhance Leading BrandsBuild and Enhance Leading Brands
Exploit Opportunities in High GrowthExploit Opportunities in High Growth and High Margin Categoriesand High Margin Categories
Increase Presence in High MarginIncrease Presence in High Margin Channels and PackagesChannels and Packages
Leverage Integrated Business ModelLeverage Integrated Business Model
Strengthen RouteStrengthen Route--toto--MarketMarket
Improve Operating EfficienciesImprove Operating Efficiencies
Goal = 100
Priority Focus Brands Have Significant Growth OpportunitiesPriority Focus Brands Have Significant Growth Opportunities
8 oz Servings Per Capita
Goal = 20
Top StateAverage
Goal = 20
Top StateAverage
Goal = 5
Top RegionAverage Region
Juice
Top StateAverage
2626
1111
3333
55
55
33
238238
6262
Source: The Nielsen Company YTD 12/26/09
Dr Pepper is AmericaDr Pepper is America’’s Oldest Major Soft Drink Brands Oldest Major Soft Drink Brand
And Still Has Plenty of Room to GrowAnd Still Has Plenty of Room to Grow
20091989
#1 CSDDP #1 CSDDP
20091989
DP Volume DP Volume ––
288 oz288 oz DP Volume Share %DP Volume Share %
8 oz Servings Per Capita8 oz Servings Per Capita Household Penetration %Household Penetration %
CAGRCAGR +4%+4% +3.2 pt+3.2 pt
215215
6262
6262
3737
Source: The Nielsen Company and Nielsen Homescan
YTD 12/26/09
R
Max & Erma’s
Fountain Expansion is Driving Awareness and TrialFountain Expansion is Driving Awareness and Trial
% Outlets
0% 20% 40% 60% 80% 100%
Source: Company specific data
Dr Pepper Cherry is Bringing in New UsersDr Pepper Cherry is Bringing in New Users and Growing the Baseand Growing the Base
DP RegDP TM
DP TM ex CherryDP TM
% HH Penetration% HH Penetration
# of Display Growth vs. LY# of Display Growth vs. LY
2.4pts2.4pts
CherryCherry
OnlyOnly
DP CherryDP Diet
37.237.2
23.723.7
15.015.09.69.6
+10%+10%
+2%+2%
Cherry is prompting additional Cherry is prompting additional light user purchases and light user purchases and
bringing in new usersbringing in new users
Source: The Nielsen Company and Nielsen Homescan, Total US, 52 WE 10/31/09
Snapple Premium Restage is WorkingSnapple Premium Restage is Working
2/09
ACV% 16oz 6 pack GroceryACV% 16oz 6 pack Grocery
16oz 6 pack Growth Cases vs 200816oz 6 pack Growth Cases vs 2008
88 1313
3030
49495656 6868 7373 7575 7878 7878 7777
3/09 4/09 5/09 6/09 7/09 8/09 9/09 10/09 11/09 12/09
2/09 3/09 4/09 5/09 6/09 7/09 8/09 9/09
Source: The Nielsen Company YTD 12/31/09. Volume growth cases per internal reporting.
Exploiting $4bn ValueExploiting $4bn Value--Tea Category with MultiTea Category with Multi--Pack PETPack PET
ACV% 16.9oz 12 pack GroceryACV% 16.9oz 12 pack Grocery
Growth Cases Growth Cases vsvs
20082008
1/09 3/09 4/09 5/09 6/09 7/09 8/09 9/092/09
2020 23233030
37374747 5050 5151 5252 5151 5050 4949 5050
1/09 3/09 4/09 5/09 6/09 7/09 8/09 9/09 10/09 11/09 12/092/09
Source: The Nielsen Company YTD 12/31/09. Volume growth cases per internal reporting.
And Testing $0.79 PreAnd Testing $0.79 Pre--Priced CansPriced Cans
MottMott’’s #1 or #2 in Cost Advantaged Locationss #1 or #2 in Cost Advantaged Locations
# 1 or # 2# 1 or # 2
Source: The Nielsen Company –
U.S. Only
#1 or #2 position#1 or #2 position
West Coast Capacity and Strong Innovation are Key EnablersWest Coast Capacity and Strong Innovation are Key Enablers
Crush Expansion Exceeding ExpectationsCrush Expansion Exceeding Expectations…… Highlights Latent Potential of Our BrandsHighlights Latent Potential of Our Brands
Dr Love
Surrounding the ConsumerSurrounding the Consumer……
Massive Sampling
Targeted Print
Merchandising and POS
National Media
……Where They ShopWhere They Shop
……Where They PlayWhere They Play
……OutdoorOutdoor
……OnlineOnline
……On TVOn TV
Run Commercials
Investing Behind Our Brands While Driving Down CostsInvesting Behind Our Brands While Driving Down Costs
GRP Growth vs. LY
Q1Q1 Q2Q2 Q3Q3 Q4Q4
Cost per GRP down 10%Cost per GRP down 10%Source: GRPs
measured through The Nielsen Company, Arbitron
and internal reporting
Brand Health Continues to ImproveBrand Health Continues to Improve
Total Brand Awareness
Q1Q1 Q3Q3
+2 pts+2 pts
Q1Q1 Q3Q3
+3 pts+3 pts
Q1Q1 Q3Q3
+2 pts+2 pts
Source: Ipsos
2009
Key Capabilities
Strong Innovation Pipeline StartsStrong Innovation Pipeline Starts with Bestwith Best--InIn--Class R&D CapabilitiesClass R&D Capabilities
●
Flavors●
Sensory Science●
Sweeteners●
Antioxidants●
Vitamins & Minerals●
Approved Functional Ingredients●
Emerging Functional Ingredients●
Nutrition, Claims & Labeling●
Analytical Chemistry / Food Safety●
Process Development / Scale Up●
Technical Data Management
2010 Line2010 Line--up is Strong andup is Strong and Supports Continued Business MomentumSupports Continued Business Momentum
Multi-Year Platforms 2010 New Products
Focused on Delivering Against a Set of Key PrioritiesFocused on Delivering Against a Set of Key Priorities
Build and Enhance Leading BrandsBuild and Enhance Leading Brands
Exploit Opportunities in High GrowthExploit Opportunities in High Growth and High Margin Categoriesand High Margin Categories
Increase Presence in High MarginIncrease Presence in High Margin Channels and PackagesChannels and Packages
Leverage Integrated Business ModelLeverage Integrated Business Model
Strengthen RouteStrengthen Route--toto--MarketMarket
Improve Operating EfficienciesImprove Operating Efficiencies
Mixer Restage and New Capacity on TrackMixer Restage and New Capacity on Track
Venom Growing One Bottle at a TimeVenom Growing One Bottle at a Time
ACV% DistributionACV% Distribution
Growth Cases vs 2008Growth Cases vs 2008
3636 4141 4646 5050 5252 5353 5656 5858 5858 6060 6161
1/09 3/09 4/09 5/09 6/09 7/09 8/09 9/09
6161
1/09 3/09 4/09 5/09 6/09 7/09 8/09 9/09 10/0911/0912/092/09
2/09
Source: The Nielsen Company YTD 12/31/09. Volume growth cases per internal reporting.
Leveraging Allied Brands to Fill in GapsLeveraging Allied Brands to Fill in Gaps and Leverage Asset Baseand Leverage Asset Base
Focused on Delivering Against a Set of Key PrioritiesFocused on Delivering Against a Set of Key Priorities
Build and Enhance Leading BrandsBuild and Enhance Leading Brands
Exploit Opportunities in High GrowthExploit Opportunities in High Growth and High Margin Categoriesand High Margin Categories
Increase Presence in High MarginIncrease Presence in High Margin Channels and PackagesChannels and Packages
Leverage Integrated Business ModelLeverage Integrated Business Model
Strengthen RouteStrengthen Route--toto--MarketMarket
Improve Operating EfficienciesImprove Operating Efficiencies
5 Year Cold Drink Program on Track,5 Year Cold Drink Program on Track, Despite Tough EnvironmentDespite Tough Environment
35K Incremental Coolers Per Year35K Incremental Coolers Per YearCoolers Per 10,000 Coolers Per 10,000 Head of PopulationHead of Population
2008
NowNow
SWSW
99 PacificPacific
44
NENE
99 Central/SECentral/SE
88
5 Year5 YearGOAL 23GOAL 23
2009 2010 2011 2012 2013
1010
4646
8181
116116
151151
186186
3636 3535 3535 3535 3535
2 billion serving2 billion serving occasions over occasions over
5 years5 years
Placements Driving Awareness and ReturnsPlacements Driving Awareness and Returns
Company Owned/ Independent SystemBottling Partners
Balanced Routes to Market Enables Full Price/Pack ParticipationBalanced Routes to Market Enables Full Price/Pack Participation
Focused on Delivering Against a Set of Key PrioritiesFocused on Delivering Against a Set of Key Priorities
Build and Enhance Leading BrandsBuild and Enhance Leading Brands
Exploit Opportunities in High GrowthExploit Opportunities in High Growth and High Margin Categoriesand High Margin Categories
Increase Presence in High MarginIncrease Presence in High Margin Channels and PackagesChannels and Packages
Leverage Integrated Business ModelLeverage Integrated Business Model
Strengthen RouteStrengthen Route--toto--MarketMarket
Improve Operating EfficienciesImprove Operating Efficiencies
Changing LandscapeChanging Landscape Requires Continuous ImprovementRequires Continuous Improvement
●●
Consumer InsightsConsumer Insights●●
Shopper InsightsShopper Insights
●●
InnovationInnovation●●
Local Marketing /Local Marketing /
Customer DevelopmentCustomer Development●●
Demand Planning /Demand Planning /
Vendor Managed InventoryVendor Managed Inventory●●
Technology (ASN, EDI, RFID, etc.)Technology (ASN, EDI, RFID, etc.)
Customer Results And Feedback Are ClearCustomer Results And Feedback Are Clear
Focused on Delivering Against a Set of Key PrioritiesFocused on Delivering Against a Set of Key Priorities
Build and Enhance Leading BrandsBuild and Enhance Leading Brands
Exploit Opportunities in High GrowthExploit Opportunities in High Growth and High Margin Categoriesand High Margin Categories
Increase Presence in High MarginIncrease Presence in High Margin Channels and PackagesChannels and Packages
Leverage Integrated Business ModelLeverage Integrated Business Model
Strengthen RouteStrengthen Route--toto--MarketMarket
Improve Operating EfficienciesImprove Operating Efficiencies
Hub and Spoke DistributionFive Regional Centers
5 Year Supply Chain Optimization Journey Nearing Completion5 Year Supply Chain Optimization Journey Nearing Completion
1.1.
South (2006South (2006--07)07)2.2.
Southeast (2008Southeast (2008--09)09)3.3.
Northeast (2009)Northeast (2009)
4.4.
West Coast (2009West Coast (2009--10)10)5.5.
Midwest (2010Midwest (2010--11)11)
Victorville, CA Regional Center on Schedule and on BudgetVictorville, CA Regional Center on Schedule and on Budget
Core IT Infrastructure in PlaceCore IT Infrastructure in Place Expanding SAP to Warehouse Direct Business and MexicoExpanding SAP to Warehouse Direct Business and Mexico
1. Laying the Foundation 2. Mobilizing
Call to ACTION Workshops
Tying Performance to Operational
Metrics
Instilling One Set of BehaviorsInstilling One Set of Behaviors…… the Foundation of Our People Strategythe Foundation of Our People Strategy
3. Building Our Bench
DPS Campus
Ensuring Environmental Sustainability as We OptimizeEnsuring Environmental Sustainability as We Optimize
Focused on Delivering Against a Set of Key PrioritiesFocused on Delivering Against a Set of Key Priorities
Improve Operating EfficienciesImprove Operating Efficiencies
Build and Enhance Leading BrandsBuild and Enhance Leading Brands
Exploit Opportunities in High GrowthExploit Opportunities in High Growth and High Margin Categoriesand High Margin Categories
Increase Presence in High MarginIncrease Presence in High Margin Channels and PackagesChannels and Packages
Leverage Integrated Business ModelLeverage Integrated Business Model
Strengthen RouteStrengthen Route--toto--MarketMarket
Building Revenue and Margin Management CapabilitiesBuilding Revenue and Margin Management Capabilities
●●
InsightsInsights to improve decisionto improve decision--makingmaking●●
TransparencyTransparency into what worksinto what works
●●
EnableEnable better conversationsbetter conversations with our customerswith our customers
Drive Productivity to Fuel GrowthDrive Productivity to Fuel Growth
Making Better Decisions with RealMaking Better Decisions with Real--TimeTime and Consistent Informationand Consistent Information
●●
Improved salesImproved sales and route analyticsand route analytics
●●
Better fleetBetter fleet utilizationutilization
●●
Greater salesGreater sales efficiencyefficiency
●●
ImprovedImproved Customer ServiceCustomer Service
●●
8 step strategic sourcing process8 step strategic sourcing process
●●
Formula and packaging optimizationFormula and packaging optimization
●●
Reverse engineering of flavorsReverse engineering of flavors
●●
Indirect and capital procurementIndirect and capital procurement
●●
Low cost country sourcing Low cost country sourcing
Leveraging BestLeveraging Best--inin--Class Procurement ProcessesClass Procurement Processes
2010 Priorities
Productivity Office Funding Continuous Improvement InitiativesProductivity Office Funding Continuous Improvement Initiatives
Productivity Office Savings Impact
20092009 20102010 20112011 20122012 20132013 20142014
Annual InvestmentsAnnual Investments
Ongoing SavingsOngoing Savings
Results Show Our Focused Strategy is WorkingResults Show Our Focused Strategy is Working
Build and Enhance Leading BrandsBuild and Enhance Leading Brands
Exploit Opportunities in High GrowthExploit Opportunities in High Growth and High Margin Categoriesand High Margin Categories
Increase Presence in High MarginIncrease Presence in High Margin Channels and PackagesChannels and Packages
Leverage Integrated Business ModelLeverage Integrated Business Model
Strengthen RouteStrengthen Route--toto--MarketMarket
Improve Operating EfficienciesImprove Operating Efficiencies
++
Volume/Price/MixVolume/Price/Mix++
Distribution gainsDistribution gains
++
Cold drink equipmentCold drink equipment++
InnovationInnovation
Net SalesNet Sales Growth 3Growth 3--5%5%
Brands + Execution = Long Term GrowthBrands + Execution = Long Term Growth
++
Revenue growthRevenue growth++
Operating efficiencies/ Operating efficiencies/ crush costscrush costs
++
BelowBelow--thethe--line leverageline leverage
EPS GrowthEPS Growth HighHigh--singlesingle--digitdigit
Challenges Responses
Confident in LongConfident in Long--Term AlgorithmTerm Algorithm Despite Significant HeadwindsDespite Significant Headwinds
Consumer insights Consumer insights
Product / package innovationProduct / package innovation
Availability Availability ––
Coastal, Hispanic, etc.Coastal, Hispanic, etc.
●●
Changing Changing consumer needs consumer needs and demographicsand demographics
●●
Economic Economic uncertaintyuncertainty
●●
Commodity costsCommodity costs
●●
US/Canada/US/Canada/
Mexico focusMexico focus
Constantly delivering consumer value Constantly delivering consumer value
Crushing costsCrushing costs
Balanced pricingBalanced pricing
Mix managementMix management
World class supply chain/procurementWorld class supply chain/procurement
Productivity / Supply chain efficiencyProductivity / Supply chain efficiency
Leading brands with significantLeading brands with significant
growth opportunitiesgrowth opportunities
Execution excellenceExecution excellence……..
distribution and availabilitydistribution and availability
COGS
Key Packaging Components
Key Ingredients Components
Packaging and Ingredients Drive 65% of COGSPackaging and Ingredients Drive 65% of COGS
•
Sweeteners•
Apple / Juice
Concentrates
•
Flavors
/ Colors
•
Cans / Ends•
Bottles / Caps
•
Glass•
Corrugated / Paperboard
•
Labels / Films
PackagingPackaging~45%~45%
Ingredients Ingredients ~20%~20%
Hedging and Procurement Best PracticesHedging and Procurement Best Practices Ensure Cost VisibilityEnsure Cost Visibility
●●
AluminumAluminum●●
Net CornNet Corn
●●
Apple Juice ConcentrateApple Juice Concentrate●●
Natural GasNatural Gas
●●
Heating OilHeating Oil
●●
Min / max coverage Min / max coverage policiespolicies
●●
Commodity Commodity Purchasing CommitteePurchasing Committee
Key ItemsKey Items CoveredCovered
GovernanceGovernance
Net Income to Free Cash Conversion %
20062006 20072007 20082008 2009 Q3YTD2009 Q3YTD
Consistently Delivering Strong Net IncomeConsistently Delivering Strong Net Income to Free Cash Flow Conversionto Free Cash Flow Conversion
86%86%75%75%
87%87%
124%124%
Source: Reconciliation of non-GAAP financial measures can be found under the investor section at www.drpeppersnapple.com.
Opportunities Exist to Drive AdditionalOpportunities Exist to Drive Additional Working Capital ProductivityWorking Capital Productivity
A/R
•
Reduce invalid deductions•
Credit to cash process optimization
•
Drive forecast accuracy•
Vendor managed inventory
•
Safety stock management
INVENTORY
•
Early pay discounts•
Vendor management
•
Terms standardization•
Organizational capabilities
A/P
CASH CONVERSION CYCLECASH CONVERSION CYCLE……KEY OPERATIONAL METRICKEY OPERATIONAL METRIC
Continuing to Invest in the Business to Fuel GrowthContinuing to Invest in the Business to Fuel Growth
Capex % Net Sales
20082008 20092009 20102010 20112011 20122012
Growth / EfficienciesGrowth / EfficienciesMaintenanceMaintenance
5%5% 5%5% 5%5% 5%5% 5%5%
Adjusted* TotalAdjusted* Total Debt / EBITDADebt / EBITDA Target = 2.25xTarget = 2.25x
Rapidly Approaching Our Target Capital Structure Rapidly Approaching Our Target Capital Structure
20102010 20112011 20122012 20132013 20182018 20382038//// ////$0$0
$400$400 $450$450
$655$655
$1,200$1,200
$250$2502 yr note 2 yr note @ 1.70%@ 1.70%
3 yr note 3 yr note @ 2.35%@ 2.35%
5 yr note 5 yr note @ 6.12%@ 6.12%
10 yr note 10 yr note @ 6.82%@ 6.82%
30 yr note 30 yr note @ 7.45%@ 7.45%
Credit Credit Facility Facility L + 200 L + 200 ($405)($405)
*Adjusted for unfunded pension liabilities, operating leases, stock-based compensation expenses and other items
Priorities for Free Cash Flow are ClearPriorities for Free Cash Flow are Clear
●●
Achieve and maintain target capital Achieve and maintain target capital structurestructure
●●
Build modest cash reserves to maintain Build modest cash reserves to maintain liquidity and financial flexibilityliquidity and financial flexibility
●●
Return excess cash to shareholders Return excess cash to shareholders over timeover time
●●
Strong portfolio of brands with leadershipStrong portfolio of brands with leadership positionspositions
●●
Journey to integrate collection of powerfulJourney to integrate collection of powerful assets on trackassets on track
●●
Focused on delivering against a set ofFocused on delivering against a set of key prioritieskey priorities
●●
Brands + Execution = Long Term GrowthBrands + Execution = Long Term Growth
Key TakeawaysKey Takeaways