Company Acquisition ProposalDecember 16, 2011

Agenda

AcquisitionContext

OrganizationRecommendations

ResponsibilityFinancials Conclusion

2

Acquisition Proposal

* Data for this page was taken from the AC Nielsen Database - Sales exclude Walmart**http://thomson.mobular.net/thomson/7/3004/4313/

Why  ConAgra  Will  Sell

Kid Cuisine is the dominant player in children’s frozen foods

Kid Cuisine has more potential than current value of $71 millionDPC can increase the NPV of Kid Cuisine to over $120 million

Why  DPC  Should  Buy

$0

$2

$5

$7

$9

2010 2011 2012 2013 2014 2015

Current Estimated FCF’sAcquisition with Proposed Changes

Free Cash Flows in Millions

Smallest of ConAgra’s four frozen prepared food brands

Sales have declined by 4% (CAGR) over the past three yearsAccounts for 0.58% of ConAgra’s overall business

$100

$105

$110

$115

$120

2008 2009 2010

Retail Sales in Millions (excluding Walmart)

3

ContextFrozen Prepared Dinners

* Data for this page was taken from the AC Nielsen Database - Sales exclude Walmart

Overall sales are over $1 billion

Six brands account for 91% of the market share

Overall market shrank by over 5% (CAGR) from 2006-2010

ConAgra owns four primary brands, accounting for 69% market share

Market  Sta8s8cs Sales Volume - Top 10

Overall Volume (Dollars)Overall Volume (Dollars)Overall Volume (Dollars)

*BANQUET

*MARIE CALLENDER'S

*HEALTHY CHOICE

HUNGRY-MAN

*KID CUISINELEAN CUISINE

AMY'S

BOSTON MARKET

SWANSON

CLAIM JUMPER

OTHERS

52 Weeks Ending 06/12/10

% Frozen Dinner Market

$201,237,060 22%

$171,419,784 18%

$164,614,390 18%

$132,488,544 14%

$103,313,725 11%

$66,728,644 7%

$17,057,759 2%

$13,718,543 1%

$13,576,044 1%

$13,007,980 1%

$32,875,821 4%

22%

18%

18%11%

14%

7%9%

*Banquet*Marie Callender’s*Healthy Choice*Kid CuisineHungry-Man (Pinnacle)Lean Cuisine (Nestle)Others

*ConAgra Brands

4

Consumers’ Needs & Decisions

Emerging Consumption Patterns: serving size, ingredients, ethnic variety

Threats: portion size, cooking is relaxing

Opportunities: open to new brands, useful under time constraint

Parent Child

Motivations

Role

Criteria

Power

Attitude

Saving Time & Money Tasty & Fun Meal

Gatekeeper/Buyer Influencer

Nutrition, Good Value Flavor, Packaging

Very High Medium

Negative Positive

Decision  Making  Unit

5

Kids between 6-11: 24 million

59% of children between 6-11 eat frozen meals: 14 million

Average consumption: 4 meals per month

Average MSRP: $2.17

$1.5 Billion

Total  Poten8al  Market  Size  for  Kid  Cuisine

Market Potential

6

Competitive Analysis

VarietyPriceQualityNutritional Value

Single-­‐Serve  Meals

ConveniencePriceQuality

Mul8-­‐Serve  Meals

0%

25%

50%

75%

100%

Brand Awareness in Northeast**

Kid Cuisine LunchablesHot

Pockets

Yes

No

Kid

Fri

end

ly

Low High

Price

“The competitive landscape includes the multi-serve world. Frozen pizzas and

lasagnas also compete for a share of the [kid’s] stomach.”

David Cox - Senior Director of Consumer Insights. ConAgra, Inc.

7

Brand PositioningCompetitive Positioning

Organic Healthy Alternative Filling Satisfying

Kid Cuisine Positioning to Kids Focused on fun and creativity

Kid Cuisine Positioning to Parents Reward your kids Be a “YES-Mom”

8

Production and Distribution

Contracted Farmers

Food Processor

Distributor

Supermarket Hypermarket

Other Retailer

Local / Regional Farmers

Open Market

Supplier RetailerDistributorManufacturer

Excellent relationship with supplier network

Manufacturer margin of an estimated 25%

Key functions such as packaging and transportation outsourced

Core competency in food processing

9

Retail ChannelsAverage ACV of 71%

41% of sales in south

15% of sales through non-supermarket channels vs. industry average of 5%

Alternative channel retailing growing faster than supermarkets

Frozen Food Industry Profile: United States; Nov20092010 STATE OF THE INDUSTRY REPORT. (cover story), refrigerated & Frozen Foods Retailer; September 2010, Vol. 8 Issue 8Mintel Frozen Meals - US - September 2010

67%

18% 6%4%

5%

ConAgra Distribution

Super/HypermarketsWalmartDrug stores and othersSpecialized retailersConvenience stores

Kid Cuisine should keep the production and distribution

processes similar to those currently used by ConAgra

10

Understanding ConAgra

Strategy: Focused, socially responsible and environmentally friendly “food company”

Structure: Organization structure shows focus on quality, innovation and consumer experience

Systems: Emphasis on accountability, simplification and collaboration

Shared Values: One Company. One Goal. Making foods you love.

Style: Strong and focused - Gary Rodkin, CEO, ConAgra

Staff: Currently 24,400 employees

Skills: High investment in employee development

11

Transition to DPCMaintain current 141 ConAgra employeesProvide attractive compensation packages for top managersLease new plant in the proximity of existing ConAgra plantRecruit employees based on expertise from:

PepsiCoJimmy DeanWhole Foods

IT DirectorKid Cuisine

Breakfast BrandManager

Jimmy Dean

Healthy BrandManager

Whole Foods

Dinner BrandManager

Kid CuisinePepsi

Marketing DirectorKid Cuisine

Finance DirectorKid Cuisine

DistributionKid Cusine

ManufacturingKid Cuisine

Operations DirectorKid Cuisine

Pepsi

HR DirectorKid Cuisine

Dave CoxKid Cuisine Brand Manager

12

Recommendation #1 Healthier Ingredients

Product: Improved image; targeted changes to select dinners

Pricing strategy: Increase MSRP by $1 in the Northeast and West regions

Distribution: Grocery stores and Peapod

Promotion: Online and television

Economic Analysis (est.)NPV= $14 millionIncremental yearly sales= 3.4 million (4% CAGR over 4 years)

Goal: Drive consumers to eat twice as many Kid Cuisines per month and expand current customer base

0%

10%

20%

30%

40%

Nothing+ $0.50

+ $1.00+ $1.50

+ $2.00

No Differen

ce

Survey  Results:  “How  much  more  would  you  be  willing  to  pay  for  a  

healthier  frozen  dinner?”

13

A Need for Healthier FoodChildhood Obesity is on the rise

More than 12% of adolescents are overweight or obese. 46% of parents are concerned that their children may become obese.

The United States Government is more focused on children’s health

Competitors are introducing healthier options

Lunchables

Lean Pockets

Other organic options more prevalent

Yes

No

Kid

Fri

end

ly

Low High

Healthy

14

Relationships: Price, Product & Promotion

Goal: Improve the image of Kid Cuisine by focusing on the healthy ingredients

Test: Determine if healthier ingredients or healthier positioning increase sales

Plan: Launch national advertising campaign focused on the idea that Kid Cuisine is made from ingredients that are better for children.

“Our experience shows that there is a fine balance between Mom’s stated desire to give her kids healthy food and her actual desire to

get the kids to eat something.” - David Cox, ConAgra Director of Consumer Insight

West:Original ProductModified Price

Northeast:Modified Product

Modified Price

Central and South:Original Product

Original Price

15

Positioning Statement: Kid Cuisine is made with ingredients that are good for kids, allowing busy moms to spend less time preparing food and more quality time with their kids.

Budget: $4.3 million annually

Media: Television advertisements and onlineinitiatives:

New website focused on nutrition factsFacebook integrationContinue current promotions with Krazy Kombos and Kidz Bop Music ManiaNew promotion: Kid Cuisine QuestRedesigned box

Healthy Advertising Campaign

NPV(est.) = $14 million

16

Recommendation #2Breakfast

Goal: Drive consumers to eat twice as many Kid Cuisines per month

Breakfast Lunch Dinner

ProductExpansion in the breakfast category with three new products

Price and Distribution Remain consistent

Promotion 8-week launch campaign Total cost: $3.75 million

17

Market potential: Kids between 6-11: 24 million

48% eat frozen breakfasts: 12 million children

Average consumption: 4.6 frozen breakfasts per month

Average consumption: 643,004,928 units per year

Why Breakfast?

Frozen Breakfast Category - Forecasted Sales (in millions)

$0

$275

$550

$825

$1,100

20052007

2009

2011 (fore.)

2013 (fore.)

2015 (fore.)

6.1% growth

* Mintel “Breakfast Entrees and Sandwiches” November, 2010

64% of kids think “breakfast is the most important meal of the day”*

Primary competitor: Jimmy Dean

Reduced SKU’s by 30% while increasing sales year

Recently launched Jimmy D’s

18

Breakfast LaunchPositioning statement Quick, guilt-free, and easy

alternative for your kid’s breakfast or breakfast for dinner.

Total cost:$3.75 million

Total reach: (over 8 weeks)Greater than 60% of target

Media:Television

OnlinePoint of purchaseMovie integration

Economic analysis (est.) NPV = $28 million Market share = 5% Incremental sales= 13.7 million units (25% CAGR over 2 years)

19

Corporate Social Responsibility

An Active and Healthy Future

Goals1. Increase brand awareness2. Change brand perception to ‘a nutritious, energy-packed meal’3. Create a sense of loyalty

Sustainable packagingFour-sided packaging, $0.02 saving per box100% recycled materials

Stewards of growth programEmployee development and safety

BPA-free packagingMore vegetables and whole wheat

20

Non-Profit SponsorshipFive-year, strategic alliance with Boys and Girls Club of America

44% (1.85 million) of BCGA members 6-10 years old65% (2.73 million) of BCGA members minorities

What$5 millionDonate meals Eating healthy educational seriesKid Cuisine Learn to Swim Program

BenefitsEnhance brand imageIncrease brand awarenessYearly $380,000 tax shield Five-year increase in sales of 17 million units, resulting in net revenues of $5 million

21

Sales and Margins

* ConAgra 2010 10K - Page 80** Beaman, J.A., Johnson, A.J., A Guide for New Manufacturers Food Distribution Channel Overview, Oregon State University, 2006.*** Broker fee of 3-5% buried in SG&A

Margin % Margin $ Sale Price

COGS

Manufacturer

Distributor

Retailer

$0.90

25% $0.30 $1.20

15% $0.21 $1.41

35% $0.76 $2.17

AC Nielsen Walmart (18%) Total

Kid Cuisine Sales (FY2010) in 000’s $103,314 $22,679 $125,992

Est. Units Sold in 000’s

Revenue ($) in 000’s

EBIT ($) in 000’s

Kid Cuisine Sales (FY2010) 58,061 69,673 6,914

22

DCF Valuation & Industry Ratios

* Please refer to Appendix I & II for Income Statement and Balance Sheet** http://academic.mintel.com.ezproxy.bu.edu/sinatra/oxygen_academic/search_results/show&/display/id=482903/display/id=548674?select_section=548675*** ConAgra 10-K 2010

Kid Cuisine DCF Valuation*Kid Cuisine DCF Valuation*Present Value of Cash Flows (in 000’s) $18,258

Present Value of Terminal Value (in 000’s) $53,272Estimated Firm Value (in 000’s) $71,530

Assumptions

Five-year growth rates were taken directly from Mintel reports** 9% depreciation charge based off current parent company*** Financing mix of 2:1 debt to equity Tax rate: 38% WACC: 6.02%

23

Monte Carlo SimulationOverall:

Growth (taken directly from a Mintel report)Unit price variation (+/- 2%) historically stableUnit cost variation (+/- 5%) based on corn, plastic, cardboard, and lean manufacturing initiatives

Healthy line inputs:Growth (twice the current rate) as compared to comparable productsVariation (+/- 10%) as compared to comparable products

Breakfast line inputs:Growth (five times the current rate) new product introduction in a healthy market growing at 6.1% vs -5% frozen dinnerVariation (+/- 25%) new contender in a growing market, with some proven success, but strong competition

$ in 000’s

NPV Mean

25th Percentile

50th Percentile

75th Percentile

124,838

82,801

118,561

159,903

24

Free Cash Flow Estimation

$0

$2,250

$4,500

$6,750

$9,000

2010 2011 2012 2013 2014 2015

Current StatusHealthy LineBreakfast LineAll Changes

}

in 000’sProposed Changes Increase NPV from:

$71 million to

$120 million

25

SummaryKid Cuisine is a relatively neglected brand, and ConAgra may be interested in selling

We believe that with a few changes: We can increase the current market shareWe can enter a similar, but growing market

ROI of 76% over life of project “Don’t leave money on the table”

26

a proud brand of

Acquire Kid Cuisine

27

ReferencesAC  Nielsen  Database.  www.nielsen.com

“ANtudes  Toward  Food:  Weight  and  Diet,”  May,  2009.  Mintel  Database.  www.mintel.com.  

Beaman,  J.A.  and  A.J.  Johnson.  “A  Guide  for  New  Manufacturers:  Food  Distribu8on  Channel  Overview.”  Oregon  State  University  Food  Innova8on  Center.

Boys  and  Girls  Club  of  America  Na8onal  Headquarters.  Phone  call.  December  8,  2010.

Boys  and  Girls  Club  of  America  Website,  Facts  and  Figures.    h[p://www.bgca.org/whoweare/Pages/FactsFigures.aspx

“Breakfast  Sandwiches  and  Entrees  -­‐  US  -­‐  November,  2010”  Mintel  Database.  www.mintel.com.

Business  Wire.    “Strategy  Engages  Kids  by  Building  Story  Arc  for  KC  Character”.    November  19,  2009.    h[p://www.istockanalyst.com/ar8cle/viewiStockNews/ar8cleid/3650619

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References“Frozen  Foods  -­‐  US  -­‐  September,  2010”  Mintel  Database.  www.mintel.com.

“Frozen  Snacks,”  October,  2010.  Mintel  Database.  www.mintel.com.  

Iden8ty  Works.  “ConAgra  Foods”.  h[p://www.iden8tyworks.com/reviews/2009/ConAgra.htm

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