Building a World-Class Integrated Supply Chain

Transcription

1 Building a World-Class Integrated Supply Chain Daniel Myers Executive Vice President Supply Chain 1

2 Forward-Looking Statements Forward-Looking Statements This slide presentation contains a number of forward-looking statements. The words will, expect, wellpositioned, poised and similar expressions are intended to identify our forward-looking statements. Examples of forward-looking statements include, but are not limited to, our beliefs and expectations regarding the proposed separation of our businesses; our expectations for GroceryCo and SnackCo; our virtuous cycle; implications for ISC; new platform delivery; Lean Six Sigma performance; cost savings; supply chain performance; procurement savings; SAVOR; and the Power of One. These forwardlooking statements involve risks and uncertainties, many of which are beyond our control, and important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, our ability to launch two successful companies, increased competition; risks from operating globally and tax law changes. For additional information on these and other factors that could affect our forward-looking statements, see our risk factors, as they may be amended from time to time, set forth in our filings with the SEC, including our most recently filed Annual Report on Form 10-K and subsequent reports on Forms 10-Q and 8-K. We disclaim and do not undertake any obligation to update or revise any forward-looking statement in this slide presentation, except as required by applicable law or regulation. 2

3 IMAGINE if in 6 short years 3

4 Organized for growth 2 of the largest acquisitions in CPG history Achieved significant consolidation & integration Created 2 new POWERHOUSE companies While driving top-tier revenue & profit growth 4

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6 The Kraft Foods JOURNEY Fix the base Reposition the portfolio Improve financial performance

7 Limited exposure to outside ideas 80% of top leaders new to company or position Centralized structure Inferior product quality, limited advertising support Fix the base Overhead cost disadvantage Accountable business units ~2/3 of base KFT revenue rated preferred / superior Base KFT A&C spend = $600MM+ vs 2006 Base KFT overheads held essentially flat as percent of net revenue since 2006 FIX THE BASE 7

8 Divestitures Acquisitions (European rights) Fix the base Reposition the portfolio REPOSITION THE PORTFOLIO 8

9 2006 Portfolio Sector Mix (1) Geographic Mix (1) Channel Mix (1) Grocery 15% Convenient Meals 16% Cheese 19% Snacks 29% Beverages 21% Europe 20% Developing Markets, Oceania, North Asia 13% North America 67% ICC ~10% Discounter/ Club/Mass/ Other ~25% Grocery ~65% (1) As reported originally in Kraft Foods 2006 Form 10-K filed with the SEC on March 1, Amounts have not been revised to reflect the current Kraft Foods structure and accordingly are not in line with current presentation. 9

10 2010 Portfolio Repositioned Sector Mix (1) Geographic Mix (1) Channel Mix (1) Convenient Meals 10% Cheese 14% Grocery 8% Beverages 18% Confectionery (2) 29% Biscuits (2) 21% Developing Markets 28% Europe 24% North America 48% ICC ~20% Discounter/ Club/Mass/ Other ~25% Grocery ~55% Snacks 50% (1) 2010 Pro Forma amounts reflect the acquisition of Cadbury on a full-year basis. (2) Biscuits and Confectionery were previously reported combined and known as Snacks. With the Cadbury acquisition, the Biscuits and Confectionery sectors have been separately broken out. The Biscuits sector primarily includes cookies, crackers and nuts. The Confectionery sector includes chocolate, gum and candy. 10

11 Unrivaled Portfolio of Loved Brands 40 brands over 100 years old 80+ brands with more than $100MM in revenue each 12 brands with more than $1B in revenue each #1 share positions in many categories 11

12 Achieved Best-in-Class 2011 EPS Growth... With Tough Economic Times & Huge Change Agenda 13.4% (2) Operating EPS Growth (1) 10.6% (3) 10.0% (3) 7.8% (3) 7.3% (3) 6.6% (3) 6.5% (3) 2.8% (3) 2.6% (3) 2.4% (3) 0.6% (3) (1) Source: Thomson First Call (2) Diluted EPS declined 16.7%. See GAAP to Non-GAAP reconciliation at the end of this presentation. (3) Per company reports. (7.2)% (3) 12

13 Success of Turnaround has Enabled the Creation of Two Great Companies GroceryCo SnackCo ($7B in North America) 13

14 GroceryCo $~19 Billion in Revenues * High margin categories Grow the categories Reduce costs, enhance margins Focus on capital efficiency, dividend payout * As reported in Kraft Foods Group, Inc. Amended Form 10, filed with the SEC on May 14,

15 SnackCo $~35 Billion in Revenues * High growth categories Achieve industryleading growth Leverage cost structure Invest to build capabilities * Based on 2011 reported net revenues adjusted for accounting calendar changes, the 53 rd week of shipments and divestitures. Excludes Planters. All figures are unaudited. 15

16 2006 Turnaround 2010 Growth Fix the base Reposition the portfolio Achieve peeraverage growth High growth categories Achieve industryleading growth World-class capabilities Drive power brands Top-tier growth Leverage cost structure Invest to build capabilities 16

17 Well-Positioned to Benefit from a Virtuous Cycle Reinvest in Growth Focus on Power Brands, Categories, Markets Drive Top-Tier Growth Leverage Overheads Reduce Costs 17

18 Implications for ISC Growth Drive winning innovation and speed to market Deliver competitively advantaged network design Step change organization capability Profitability Deliver breakthrough margin improvement for existing portfolio Initiate end-to-end optimization to drive simplification, scale and speed Drive cash management with inventory and capital solutions Innovation Drive breakthrough, competitively advantaged, low-cost global platforms Partner with R&D to deliver winning innovations 18

19 Implications for ISC 200+ plants 95,000+ employees 19

20 How We re Doing It Best today is not enough for tomorrow Must not measure against past performance, but against the best in the world 20

21 Video QuestToBeBestLift.wmv 21

22 Quest to be the Best Unleash Innovation Leadership Unleash The Power of Performance Unleash 22

23 Unleash Innovation Leadership Supply chain innovations inspired by consumers, customers, suppliers and our people Implement best-in-class global platform management model, and seamless teamwork between Global Category Team and regions Implement Shelf Back Value Chain designed to leverage low-cost production platforms Create seamless technology community with Research & Development to accelerate better, cheaper, faster 23

24 Imagine If Our New Platforms Delivered... Scale Speed Agility 50% reduction in capital cost $10MM in operating cost savings per line +500bp gross margin New capacity in 1/3 the time Modular design for 7 days going to going Global expansion in less than 6 months Standard Lego box one-time design Standard equipment & operations Supplier-enabled scale and speed 24

25 Lines Past and Now Past Making Packing In 12 months our global platform teams are delivering the impossible Making Packing Now 25

26 Unleash Power of Performance Breakthrough performance through end-to-end holistic implementation of Lean Six Sigma (L6S) while leveraging scale and simplification Accelerate L6S implementation across the Supply Chain Deliver superior customer service through customer-driven integrated supply chain, integrated business planning, and excellence in product supply processes Implement supply chain loss analysis and breakthrough L6S loss elimination capability Achieve 85% process reliability through best-in-class manufacturing Drive SAVOR to leverage procurement scale and reduce complexity through dramatic simplifications of supply base, specifications and SKUs 26

27 Imagine If We Could Double Cost Savings Black Belt Grads in ,337 Green Belts Trained in Black Belts Worldwide Irene recognizes China BBs 27

28 Celebrating the Performance Lean 6 Sigma Black Belt program 3,600+ projects worldwide in last 24 months ~$450 million cost savings worldwide 28

29 Supply Chain Performs 80% step up in cost savings over the last 2 years has fueled company growth through the virtuous cycle 29

30 Imagine If We Could 3x Procurement Direct and Indirect Savings S OURCING Becoming a Best in Class Sourcing organization A LIGNMENT Working together across regions, countries, business units, categories, functions and suppliers V ALUE Creating value for the entire company Procurement Transformation O RGANIZATION Focusing on People, Process and Collaboration R ESPONSIBILITY Sharing the responsibility to transform Kraft Foods 30

31 SAVOR has Unleashed Performance Procurement Savings E 31

32 Unleash Power of One Build high-performance, value-led integrated supply chain organization Role model and bring to life ISC team that creates a proud company across disciplines Reward and recognize successes and great achievements Build mastery in six disciplines and end-to-end ISC leadership for future leaders Provide company-wide leadership to achieve excellence in integrated business planning Build sustainable capability in our markets Design global SC footprint for the future 32

33 Imagine If We Could Combine and Separate at the Same Time... Integration of acquisitions GroceryCo Creation of 2 great companies SnackCo 33

34 Kraft Foods Europe delivered fantastic results in 2011 and into Q1 Organic Revenue Growth (1) 4.6% 7.2% Underlying Segment OI Growth (2)(3) 19.2% 12.3% with the Supply Chain a Key Contributor Increased productivity Significantly improved working capital Improved safety reduced Loss Time Accidents by over 60% (1) Reported Net Revenue growth for FY 2011 and Q was 14.9% and 4.5% respectively. See GAAP to Non-GAAP reconciliation at the end of this presentation. (2) Reflects underlying segment operating income, which is defined as segment operating income excluding costs related to: the Integration Program; and acquisition-related costs, including transaction advisory fees, U.K. stamp taxes and the impact of the Cadbury inventory revaluation. See GAAP to Non-GAAP reconciliation at the end of this presentation. (3) Reported SOI growth for FY 2011 and Q was 26.1% and 24.7% respectively. 34

35 Integration of SC Key for China Growth Gross Margin Success Story SKU Harmonization Strict Financial Guidance on NPD Managing Mix/ Trade Spend Optimization Optimizing Pricing Cost Saving Q1 35

36 Unleash the Power of People 36

37 Power of focus, distortion Virtuous cycle, reinvest Accountable hard measures Momentum, margin and material Blank checks, family targets Balance of co-creation Embracing change, followership Entrepreneurial spirit, global giant Dream, Delight, Deliver 37

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39 GAAP to Non-GAAP Reconciliation Diluted Earnings per Share to Operating EPS For the Twelve Months Ended December 31, (Unaudited) % Growth 2011 Diluted EPS As Reported (GAAP) Integration Program Costs (1) Acquisition- Related Costs (2) and Financing Fees (3) U.S. Health Care Legislation Impact on Deferred Taxes Spin-off Costs (4) Operating (Non-GAAP) As Reported EPS Growth (GAAP) Operating EPS Growth (Non-GAAP) - Continuing operations $ 1.99 $ 0.28 $ - $ - $ 0.02 $ % 13.4% - Discontinued operations - - Net earnings attributable to Kraft Foods $ 1.99 (16.7)% 2010 Diluted EPS - Continuing operations $ 1.44 $ 0.29 $ 0.21 $ 0.08 $ - $ Discontinued operations Net earnings attributable to Kraft Foods $ 2.39 (1) Integration Program costs are defined as the costs associated with combining the Kraft Foods and Cadbury businesses, and are separate from those costs associated with the acquisition. Integration Program costs were $521 million, or $497 million after-tax including certain tax costs associated with the integration of Cadbury, for the twelve months ended December 31, 2011, as compared to $657 million, or $497 million after-tax for the twelve months ended December 31, (2) Acquisition-related costs include transaction advisory fees, U.K. stamp taxes and the impact of the Cadbury inventory revaluation. (3) Acquisition-related financing fees include hedging and foreign currency impacts associated with the Cadbury acquisition and other fees associated with the Cadbury bridge facility. (4) Spin-off costs include transaction fees and other costs associated with the proposed spin-off of the North American grocery business. 39

40 GAAP to Non-GAAP Reconciliation Net Revenues to Organic Net Revenues For the Twelve Months Ended December 31, ($ in millions, except percentages) (Unaudited) % Change 2011 As Reported (GAAP) Impact of Acquisitions (1) Impact of Accounting Calendar Changes (2) Impact of Currency Organic (Non-GAAP) As Reported (GAAP) Organic (Non-GAAP) Kraft Foods Europe $ 13,356 $ (201) $ (403) $ (632) $ 12, % 4.6% 2010 Kraft Foods Europe $ 11,628 $ - $ (45) $ - $ 11,583 (1) (2) Impact of acquisitions reflects the incremental January 2011 operating results from our Cadbury acquisition on February 2, Includes the impacts of accounting calendar changes and the 53 rd week of shipments in

41 GAAP to Non-GAAP Reconciliation Net Revenues to Organic Net Revenues For the Three Months Ended March 31, ($ in millions, except percentages) (Unaudited) % Change 2012 As Reported (GAAP) Impact of Currency Organic (Non-GAAP) As Reported (GAAP) Organic (Non-GAAP) Kraft Foods Europe $ 3,151 $ 83 $ 3, % 7.2% 2011 Kraft Foods Europe $ 3,016 $ - $ 3,016 41

42 GAAP to Non-GAAP Reconciliation Segment Operating Income To Underlying Segment Operating Income For the Twelve Months Ended December 31, ($ in millions, except percentages) (Unaudited) As Reported (GAAP) Integration Program Costs (1) Acquisition- Related Costs (2) Underlying (Non-GAAP) As Reported (GAAP) Integration Program Costs (1) Acquisition- Related Costs (2) Underlying (Non-GAAP) Kraft Foods Europe Segment Operating Income $ 1,406 $ 256 $ - $ 1,662 $ 1,115 $ 256 $ 23 $ 1,394 Growth vs. Prior Year 26.1% 19.2% Segment Operating Income Margin 10.5% 12.4% 9.6% 12.0% (1) Integration Program costs are defined as the costs associated with combining the Kraft Foods and Cadbury businesses, and are separate from those costs associated with the acquisition. (2) Acquisition-related costs include transaction advisory fees, U.K. stamp taxes and the impact of the Cadbury inventory revaluation. 42

43 GAAP to Non-GAAP Reconciliation Segment Operating Income To Underlying Segment Operating Income For the Three Months Ended March 31, ($ in millions, except percentages) (Unaudited) As Reported (GAAP) Integration Program Costs (1) Underlying (Non-GAAP) As Reported (GAAP) Integration Program Costs (1) Underlying (Non-GAAP) Kraft Foods Europe Segment Operating Income $ 384 $ 19 $ 403 $ 308 $ 51 $ 359 Growth vs. Prior Year 24.7% 12.3% Segment Operating Income Margin 12.2% 12.8% 10.2% 11.9% (1) Integration Program costs are defined as the costs associated with combining the Kraft Foods and Cadbury businesses, and are separate from those costs costs associated with the acquisition. 43