farmer cooperatives 2001 positioning for performance

Farmer Cooperatives 2001Farmer Cooperatives 2001Positioning for PerformancePositioning for Performance

October 30, 2001Steve Dunphy, VP Sales

Land O’Lakes Dairy Foods

““Meeting the Needs of our Food Customers”Meeting the Needs of our Food Customers”

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IntroductionIntroduction

My background New to Land O’Lakes

– V.P. of Sales 20 years consumer products experience

– Kellogg, Pillsbury, Procter & Gamble 6 years grocery retail experience

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Very exciting time to be in the Food Industry

There will be clear winners and losers in the near future based on decisions we make as leaders in the food industry.Not a “business as usual” industry

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Consolidating Industry– Fragmented/Inefficient Efficient

What Should That Mean to Us?– Many familiar food companies will cease to exist

• Autos, brewing, retailing, etc.• “Whatever happened to Strohs, Nabisco, Quaker,

Pillsbury?”– Superior financial performance is an imperative

Tremendous opportunity or tremendous threat

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Customer2000 Sales($ billions)

Grocery% ACV

Kroger/Fred Meyer 45.4 9.8Wal*Mart Super Centers 45.0 9.8Albertson’s 37.5 8.1Safeway 28.9 6.3Ahold 20.3 4.4Delhaize America 14.4 3.1Loblaws 13.3 2.9Winn-Dixie 13.3 2.9Publix 12.9 2.8A & P 10.0 2.2Sub-Total “Top 10” Retail Chains 241.0 52.3%SuperValu 20.3 4.4Fleming 14.6 3.2

Sub-Total “Top 2” Wholesalers 34.9 7.6Total Top Customers 275.9 59.9%Total Grocery ACV 460.6 100.0%

(Source: 2000 Supermarket News)

Retailer ConsolidationRetailer Consolidation

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Drug (60+% ACV)

CVS

Walgreen’s

Rite Aid

Eckerd

Mass (70+% ACV)

Wal*Mart

Kmart

Target

Clubs (99% ACV)

Sam’s

Costco

BJ’s

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Acquisition1. Unilever/Bestfoods2. Kraft/Nabisco3. General Mills/Pillsbury4. Pepsi/Quaker5. Kellogg’s/Keebler6. Campbell’s/?7. Heinz/?8. Hershey/?

Combined Sales$8 B/$8 B$31 B/$8 B$6 B/$6 B$12 B/$ 4 B$6 B/$ 3 B$7 B/ ?$9 B/ ?$4 B/ ?

Is Driving Dramatic Manufacturer Consolidation

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Is driving dramatic food broker consolidation– 3 National Brokers

• Acosta• Advantage• Crossmark

But why is this important?

Sales Agencies

2300

500

1988 2000

Source:ASMC

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Source: Sandford C. Bernstein & Co.

15.3%

14.0%13.7%

13.2%

10%

11%

12%

13%

14%

15%

16%

% R

etur

n on

Cap

ital S

&P F

ood

Gro

up

1991 2000e 2001e 2002e

It’s Important because...It’s Important because... Retailer Consolidation is resulting in lower returns for

food manufacturers/marketers – Cost of doing business is up– Pricing power is down

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“I think there needs to be more consolidation among the mid-tier in order to do a better job

of competing with the big boys”

-- Ellen Baras, AnalystBiard and Company

It’s Important Because...It’s Important Because...

Manufacturer Consolidation will continue into the “Mid Cap” arena

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How to Survive and Prosper?How to Survive and Prosper?

Low cost supplier

Value Added brands

Customer relevance

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Median Operating Profit Growth(1994 - 1999 CAGR)

8.3%

-1.9%

Unbranded Branded

Source: Swander Pace & Co. Study; GMA data base

BrandsBrands

Why Are Brands Important?– Brands Provide Superior Returns & Profit Growth

Median ROS(1999)

10.5%

1.7%

Unbranded Branded

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BrandsBrands

“Leading” brands are of the most value

#1 brand earns 20% ROS #2 brand approximately 5%

Source: PIMS Study

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Customer RelevanceCustomer Relevance

Ultimate Question Can you help a retailer increase some store

sales and profits?

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Customer RelevanceCustomer RelevanceSales Force Capability:

Partner with top customer toward a common goal Best Practice Sales Organization - P&G

– High performance multi-functional teams• Relationships at all levels• Close to customer

50.3%

39.8%

19.8% 19.4%

11.2% 10.9% 9.3% 7.5% 7.1% 6.7%

PG Kraft Coca-Cola Gen.Mills ConAgra Nestle Pepsi Unilever Pillsbury Nabisco

• Shared risks/commitment• Fully integrated plans

Which Manufacturer Has the Best Sales Force/Customer Team?

Pt.Change vs YAG -0.3 +10.3 +2.2 +0.6 +2.9 -0.9 -1.3 +1.3 -1.1 -2.7

Note: Scores based on % of retailers ranking in top 3Source: Cannondale Survey 2000 and 2001 Power Ranking

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Understanding and utilizing joint profitability models Best Practice Sales Organization - Kraft: offered best

combination of growth and profitability– Basic profitability models to include:

• Promotion analysis30.1%

26.0%

20.5%17.8%

15.1%

11.0%8.2% 8.2% 8.2% 8.2%

Kraft Frito-Lay P&G Nabisco Gen.Mills Pepsi Anheuser-Bush

Coca-Cola ConAgra Nestle

• Pricing• Product mix

Which Manufacturers offer the best combination of growth and profitability?


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Ability to understand and sell value added supply services and link business and customers strategies

Best Practice Sales Organization - General Mills & Kraft– Top customers are demanding value added services, I.e. Supply

Chain Management57.6%

34.6%

18.2%

12.0%9.4% 8.9% 8.7% 8.2% 6.8% 6.6%

PG Kraft Gen.Mills Coca-Cola Unilever RalstonPurina

Campbell's Nestle Kimberly-Clark

Conagra

Which Manufacturer Has the Best Supply Chain Management?

Pt.Chg vs YAG --3.1 +10.4 +2.3 +1.8 +2.5 -1.8 -0.4 +2.0 -2.1 -2.6


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Ability to analyze and interpret data and translate into actual customer strategies Best Practice Sales Organization - Kraft

– Understand how consumers shop, translates into winning strategies for customers (Kraft Plus program). Understand data linkages innovation and approach33.9%

27.8%

22.9%

17.1%

12.5%

9.7% 8.9% 8.9% 8.1% 7.2% 6.8%

PG Kraft Gen.Mills Coca-Cola Frito-Lay Pepsi ConAgra Nestle Campbell's Nabisco Pillsbury

Which Manufacturer Has the Most Innovative Programs and Approach?

Pt.Chg, vs YAG +2.3 +6.3 +2.6 -4.4 -4.0 -5.5 -2.5 -2.5 +0.5 -2.9 +1.7


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Knowledge of customers and local markets that translatesback to consumer insights and new products

Best Practice Sales Organization - P&G and Kraft– Collaborative customer/manufacturer new product

development and insight development (consumer info)57.6%

34.6%

18.2%

12.0%9.3% 8.9% 8.7% 8.2% 6.8% 6.6% 6.6%

PG Kraft Coca-Cola Gen.Mills Unilever Frito-Lay Pillsbury Nabisco Nestle Kellogg's Quaker

Which Manufacturer Has the Best Customer Information and Insights?

Pt.Chg, vs YAG -0.8 +11.2 -1.6 +4.6 +3.3 -4.7 -2.4 -4.1 -0.6 +1.7 -4.5


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Customer RelevanceCustomer RelevanceKey Indicators Do your brands draw consumers into my store? Are your business systems and structures aligned with

me? Can you help me differentiate myself from the store

across the street? Can you build my brand equity? Do you provide “intellectual capital?”

– Consumer/shopper insights– Profitability analytics– Value chain best practices

Do you have scale?

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Customer FocusCustomer Focus

WAS: Buy well

IS: Merchandise well

BECOMING: Market well

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SummarySummary

Consumers

Customers

Competitors

DO NOT CARE THAT WE ARE

CO-OPS

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SummarySummary

Low-cost supplier

Value Added brands

Customer relevance

farmer cooperatives 2001 positioning for performance

Documents

brands important

food industrythere

store sales

familiar food companies

asmcits important

total grocery acv460

best sales forcecustomer

retailer consolidationdrug