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Agenda
Topic 2.00 - 2.15 2.15 - 3.15 The Kerry Growth Model
Unlocking the Potential
Consumer Foods
Break 1 Kerry and Kerryconnect Business Transformation Business Enablement Investment and Financials The Kerry Growth Model
Realising the Potential
Michael ONeill
4.15 - 4.30
Q&A
3
Introducing Kerry
Kerry is the global leader in food ingredients & flavours UK/ROI leader in branded and customer branded chilled foods Revenue 5 billion Enterprise value 6 billion Market capitalisation 5 billion
Ingredients & Flavours 68%
Revenue - 2010
Consumer Foods 32%
3,675m 1,768m
401m 132m
Operations in 23 countries
EMEA 60%
1 Kerry Business
Transformation underway to implement 1 Kerry operating models, enabled via
Kerryconnect programme
8
Achievement
of long-term
Enabling: Go-to-market strategies, technology development, end-use-market development Geographic market strategies Platform for acquisitions Challenge now is to truly leverage Kerrys leadership and global opportunity
9
180
166.5
160
143.8
153.9
140
122.9
131.6 133.9
120
101.8
112.1
100
87.9
80
68.0
79.2
60
46.7
57.4
40 20
7.6 8.4 12.7 16.3 17.6
35.8
38.7
21.1
23.0
25.9
28.9
0
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Note: * before intangible amortisation and non-trading items
10
11
Performance v Targets to Date KPI Target 2008 2009 2010 3 Year Avg
+2% to +4% LFL Revenue volume growth 10% trading margin Margin Adjusted EPS Growth ROAE CFROI
(30bps pa)
+3.4%
+2.2%
+5.5%
+3.7%
10%+
15%+ 12%+
16.5% 12.4%
12
Gerry Behan President & CEO Kerry Ingredients & Flavours Americas Region
Albert McQuaid President & CEO Kerry Ingredients & Flavours EMEA Region
Mark McCormack President & CEO Kerry Ingredients & Flavours Asia-Pacific Region
15
Business Definition
Kerry Ingredients & Flavours develops, manufactures and delivers technology-based ingredients, flavours and integrated solutions for the Food, Beverage and Pharmaceutical markets.
16
17
18
- Latin America
- Europe, Middle East, Africa
19
GLOBAL RETAIL BEVERAGE KEY MARKETS MARKET SIZE & ESTIMATED ANNUAL GROWTH (2011-2015)
600
500 400
0.7% 0.8%
500
300
200 100 0
400
300
200
1.0%
100 0 Alcoholic Drinks Soft Drinks Hot Drinks
Source: Euromonitor
21
Foodservice Market
Global foodservice market estimated at ~$2 Trillion USD and forecasted to grow to $2.2 Trillion USD by 2015
North America and Western Europe are still projected to account for more than 80% of chain foodservice sales over the next five years
90% of total consumer foodservice value growth to 2014 coming from Asia Pacific and Latin America
Source: Euromonitor
22
Pharmaceutical Market
The global pharmaceutical market has estimated sales of $875 Billion USD, with the market expected to increase at a compound annual growth rate (CAGR) of 36% during the next five years
GLOBAL PHARMACEUTICAL MARKET SALES SPLIT BY REGION (2010) GLOBAL PHARMACEUTICAL MARKET SALES SPLIT BY REGION (2015)
23
26
Bakery Leverage functional ingredients and dairy portfolio to meet industry growth drivers
Fat reduction Clean label / natural shelf-life extension Sodium reduction Butter & egg replacement Texture improvement (Cakes, Bread, etc.)
Develop next-generation toppings and inclusions into sweet baked goods, focusing on indulgence and functionality
Heat-stable Natural toppings & inclusions
Source: Global Industry Analysts
27
EMEA
Key categories in Europe growing at 5% p.a. to 2015 Protein fractionation development for multi-stage infant nutrition
Source: UBIC Consulting, AC Nielsen, Euromonitor
28
HEALTH CONTINUUM
Removal of Perceived Unhealthy Ingredients Artificial Flavours Salt Sugar High-fructose Corn Syrup Addition of Ingredients with Perceived Health Benefits Protein Fiber Calcium Omega 3 Foods & Beverages that Aid in the Prevention or Treatment of Disease Diabetes Hypoglycemia Cardiovascular Conditions Digestive Health
Two key nutritional strategies working in parallel Leverage Kerrys portfolio of technologies and application expertise to deliver nutrition into food, beverage and pharmaceutical products Leverage flavour and texture capabilities to build back taste in healthier items
29
- Latin America
- Europe, Middle East, Africa
30
Beloit
Amsterdam
Sydney
Shanghai
Bristol
Campinas
Revenue by Region
Asia-Pacific 16%
EMEA 38%
Americas 46%
32
Value Proteins Platform Emulsion Technology Shelf-life Extension Cocoa Extension Fat & Egg Replacement Dairy Replacement Customising Systems for Emerging Markets
Nutrition Yoghurt Platform Clean & No-fry Bread Crumb Proteins Platform Natural & Clean-label Solutions Salt Reduction Systems Next-generation Flavour Modulation Food Safety Solutions Pharma Technologies Satiety Ingredients
33
Kerry is the global leader in developing and delivering consumer preferred taste solutions.
34
35
- Latin America
- Europe, Middle East, Africa
36
Develop and implement a continuous improvement programme as part of an overall environmental sustainability programme
37
- Latin America
- Europe, Middle East, Africa
39
Emerging Markets
Kerrys strategy in emerging markets - in line with global market trends and issues
Global Dynamics
Multinationals globalising their brands (CPG, Foodservice Chains) Consolidation will accelerate as producers seek greater efficiencies Demand for convenience in retail & foodservice will continue to grow Investments in innovation will increase as producers seek competitive differentiation Government legislation will play an increasing role Food threats & supply chain challenges
Strategies
Capitalise on brand globalisation in regions & key growth accounts Leverage global purchasing power to deliver maximum value Capitalise on population & GDP growth & urbanisation trend Transfer of proven Kerry End Use Market & Technology expertise Continue to invest in innovation and leading edge technology solutions
40
Investment in Local Capabilities & Structures Customer Centres China India Indonesia Thailand APAC COEs Sydney, Australia Johor Bahru, Malaysia Leveraging global technologies locally
43
Confectionery Leverage cereal technologies & processes into key regional confectionery markets Cereal Bars Focus on cluster growth into bar & cereal markets Ice Cream & Frozen Desserts Premium toppings & inclusions for high volume markets
Nutritional Beverages Platform development to penetrate infant nutrition market and leverage Group capabilities Soft Drinks Leverage modulation technology & tea extract platform into emerging growth markets
44
Developing CIS 280m 5.0% Developing Central & Eastern Europe 176m 3.7% Developing Middle East & North Africa 412m 4.1% Developing Sub-Saharan Africa 818m 5.5%
45
Source: IMF
46
30% Revenue
15%
22%
2006
2010
2017
Mature
Emerging
47
Emerging markets include Latin & South America, Middle East, Africa, Eastern Europe and Asia Pacific (excluding Australia, New Zealand & Japan)
- Latin America
- Europe, Middle East, Africa
48
Mature Markets
Volume growth 3% - 5%
Emerging Markets
Volume growth 10%
1 Kerry Impact
Global best in class infrastructure
49
1 Kerry
Technology & Product Groups
Processing
By working together in the 1 Kerry model, we are uniquely able to deliver a number of benefits to our customers.
50
- Latin America
- Europe, Middle East, Africa
51
52
54
A Leading Player in Food & Beverage and the Leaders in Convenient Fridge Food
Premier Kraft Unilever Mars ABF Bakkavor Pepsico Coke Dairy Crest Kerry Nestle Arla Morrisons Boparan Tulip Vion Findus UB Heinz Princes Cranswick Moy Park Greencore Danone Gerber Samworth Muller Warburtons Birds Eye McCain Uniq Kellogg
A Leading Player in Food & Beverage and the Leaders Samworth Kerry Foods in Convenient Fridge Food Danone
Boparan Vion Muller DC Unilever Arla Uniq IDB
Nestle Adams
55
42
Thats how many chances you have each week to stand out in the Fridge
24
In the Cupboard
In the Freezer
57
58
59
Creating health territories for Chilled Ready Meals across our Customers
Healthy Meals
Easy Healthy
Ultimate Tasty, So Healthy
Living Goodness
Healthy Oriental
60
Using Superior Technology to Create Food that is Delicious, Healthy and Affordable
Using superior technology to create food that is delicious, healthy and affordable
61
- Ongoing Maturity assessment to achieve ambition - Develop Lean across the extended - Roll out of KPS enterprise to all sites
- Specialist Training
- 15 Sites Engaged - Mgt directed Jishuken activites
- 6 Pilot Sites
2009
2010
Lean mindset change Elimination of waste Consistent quality Standard work Continuous improvement - 8 step problem solving
62
CRM
Savoury Pastry
1% 3.6%
5% 5%
Cheese
1% 3.1%
2010
2017
63
Driven by: Volume growth (operational leverage) Greater efficiencies Lean Programme and capital investment
2010 2017 % Margin
Mix
64
65
67
Agenda
1 Kerry Business Transformation Why 1 Kerry? Overview of 1 Kerry Operating Model Project and its link to Kerryconnect Kerryconnect
68
69
Why 1 Kerry?
Aligning the Global Kerry Organisation internally to efficiently deliver One Face to the Customer externally Leverage our talent, capability and scale through a sustainable, efficient global 1 Kerry business model
Enable functional excellence across a diverse portfolio of Technologies, End Use Markets and Geographies
Delivering efficient integration of new acquisitions
Opportunities for improvement have been scoped and regional implementation plans agreed for the 1 Kerry Processes in advance of Kerryconnect
71
1 Kerry Organisation
72
74
Kerryconnect Objectives
organisation
Implement Master Data Management standards globally to enable one consistent view of our business Implement an Integrated Global I.C.T. System to enable our processes and Data Model for efficiency and sustainability
75
Kerryconnect Phase 0:
This was focussed on C.R.M. and Business Intelligence to enable the Go to Market Strategy.
Kerryconnect Phase 1:
This is defined as getting the foundation and basics right and will address Finance, Master Data Management, Purchasing, H.R. and Trade Promotion Management processes.
Kerryconnect Phase 2:
This will address Supply Chain, Manufacturing & Customer Care processes and the design will commence during Phase 1 rollout.
76
Kerryconnect Timeline
2009
Back Office Operating Model Review Phase 1 Design & Pilot (N.I. & Germany) Phase 1 GB & Irl Deployment Overall Operating Model Review Phase 2 Design & Pilot Phase 1 & 2 Europe Phase 1 & 2 APAC Phase 1 & 2 Americas Globalise 1 Kerry Processes
77
2010
2011
2012
2013
2014
2015
2016
78
Enable our Global Supply Chain, Manufacturing and Procurement Teams to deliver efficiency and maximise scale
Maximise Shared Service Centre capability
79
Summary
Kerryconnect is a global platform for our 1 Kerry Strategy Kerryconnect is owned by the Business Executive Teams
80
82
KPI
Target
2011
2012
Revenue
On track
Margin
Behind**
Adjusted EPS*
Growth ROAE* CFROI
On track
16.5%
12.4%
On track
84
Costs will be weighted to the earlier years but software and hardware investments will be capitalised and amortised
P&L impact approximately 50m per annum on average
Savings
Savings phased to latter end of programme when operational synergies realised 2% margin increase driven by incremental savings, offset by 1% cost increase above
Summary
Slight negative impact on EPS until 2013, positive thereafter Software amortisation a cost in arriving at adjusted earnings per share Net savings will progressively increase and deliver an additional 1% margin increase when project complete
85
'm
1% margin increase
2010 2011 2012 2013 2014 2015 2016 2017
Years
This 1% margin increase attributable to efficiency gains arising from the operating model and Kerryconnect investment is in addition to the 30bps group margin expansion target arising from operating leverage and business mix
86
18%
17%
16%
15%
14%
13%
12% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
88
16%
15%
14%
13%
12%
11%
10%
9%
8%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
89
25.0
22.5
20.0
20
18.0
18
16.0
16
14.0
14 12
10 8 6 4
2.1
2 0
2.3
2.5
2.7
2.7
2.9
3.3
3.6
0.5
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 90
91
Mature Markets
Volume growth 3% - 5%
Emerging Markets
Volume growth 10%
1 Kerry Impact
Global best in class infrastructure
92
Margin Improvement
% Margin
Private Label 1.5% CAGR Foodservice 1.5% CAGR Branded 3.6% CAGR
2010
2017
2010
2017
93
94
10%+ p.a.
Consumer Foods
Group Margin expansion Kerry Ingredients & Flavours Consumer Foods Group Financial and Tax Leverage Return: ROAE* 15%+ and CFROI 12%+ on average
2% to 3% p.a.
3% to 5% p.a. 50 bps p.a. 20 bps p.a. 30 bps p.a.
+ an additional 100 bps at end of project Structures aligned with 1 Kerry model
95
Benefits
Ability to grow globally
Collaborative brand innovation Consumer-ready solutions Synergistic benefits through R&D and marketing collaboration Concentrated supply chain Increased speed to market
Confident of delivering our strategic growth initiatives and objectives over next 5 year cycle
98