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| 8-K - FORM 8-K - Kraft Foods Group, Inc. | d591409d8k.htm |
 Kraft Foods
Group Barclays Back-to-School Conference
September 4, 2013
Exhibit 99.1 |
 Tony Vernon
Chief Executive Officer |
 3
Kraft Foods Group, Inc.
Forward-Looking Statements
This
presentation
contains
a
number
of
forward-looking
statements.
The
words
“plan,”
“build,”
“make,”
“improve,”
“invest,”
“focus,”
“will,”
“execute,”
“target”
and
similar
expressions
are
intended
to
identify
the
forward-looking
statements.
Examples
of
forward-looking
statements
include,
but
are
not
limited
to,
statements
regarding
Kraft’s
growth,
progress,
plans,
supply
chain,
productivity,
working
capital,
building
blocks
to
deliver
potential
and
long-term
targets.
These
forward-looking
statements
are
not
guarantees
of
future
performance
and
are
subject
to
a
number
of
risks
and
uncertainties,
many
of
which
are
beyond
Kraft’s
control.
Important
factors
that
could
cause
actual
results
to
differ
materially
from
those
indicated
in
the
forward-looking
statements
include,
but
are
not
limited
to,
increased
competition;
continued
consumer
weakness
and
weakness
in
economic
conditions;
Kraft’s
ability
to
differentiate
its
products
from
retailer
and
economy
brands;
Kraft’s
ability
to
maintain
its
reputation
and
brand
image;
continued
volatility
and
increases
in
commodity
and
other
input
costs;
pricing
actions;
increased
costs
of
sales;
regulatory
or
legal
changes,
restrictions
or
actions;
unanticipated
expenses
and
business
disruptions;
product
recalls
and
product
liability
claims;
unexpected
safety
or
manufacturing
issues;
Kraft’s
indebtedness
and
its
ability
to
pay
its
indebtedness;
Kraft’s
inability
to
protect
its
intellectual
property
rights;
tax
law
changes;
Kraft’s
ability
to
achieve
the
benefits
it
expects
to
achieve
from
the
spin-off
and
to
do
so
in
a
timely
and
cost-effective
manner;
and
its
lack
of
operating
history
as
an
independent,
publicly
traded
company.
For
additional
information
on
these
and
other
factors
that
could
affect
Kraft’s
forward-looking
statements,
see
Kraft’s
risk
factors,
as
they
may
be
amended
from
time
to
time,
set
forth
in
its
filings
with
the
Securities
and
Exchange
Commission,
including
its
Annual
Report
on
Form
10-K
for
the
year
ended
December
29,
2012.
Kraft
disclaims
and
does
not
undertake
any
obligation
to
update
or
revise
any
forward-looking
statement
in
this
presentation,
except
as
required
by
applicable
law
or
regulation. |
 One year ago, we
introduced the new Kraft Foods Group |
 5
Kraft Foods Group, Inc.
We laid out our four-part plan
Turbocharge
Our Iconic
Brands
Execute with
Excellence
Make Our
People Our
Competitive
Edge
Redefine
Efficiency |
 6
Kraft Foods Group, Inc.
We stated our mission
Make Kraft North American
Food & Beverage Company
THE
Innovator
THE
Strongest Portfolio
THE
Lowest Cost Producer |
 7
Kraft Foods Group, Inc.
In February, we outlined our innovation journey
THE
Innovator |
 8
Kraft Foods Group, Inc.
Today, we’ll chart our path on costs
THE
Lowest Cost Producer |
 Bob Gorski
Executive Vice President, Integrated Supply Chain
9 |
 10
Kraft Foods Group, Inc.
We manage a $15 billion value chain
~$15B
Plant
Conversion
Other
Manufacturing
Indirect
Transportation
&
Warehousing
Commodities
Ingredients
&
Packaging
Scrap
& Waste
Total
Value
Chain
$Billions
Cost of Goods Sold ~$12.5B |
 11
Kraft Foods Group, Inc.
We’ve made great progress on productivity
*Net Productivity
Gross productivity less inflation, business investments and
changes in HQ overhead supporting COGS
Net Productivity* as a % of COGS |
 12
Kraft Foods Group, Inc.
*
*
*
*
*
*
*
*
* |
 13
Kraft Foods Group, Inc.
Building a simpler, more integrated supply chain
Today
Future State
Suppliers
> 7,000
< 1,000
Packaging Component
Specifications
~ 6,800
< 500 |
 14
Kraft Foods Group, Inc.
Building a simpler, more integrated supply chain
Today
Future State
4
-rated Production Lines
14%
> 90%
Planned Maintenance
35%
> 80%
Production Breakdowns
every 4 minutes
> 240 minutes |
 15
Kraft Foods Group, Inc.
Building a simpler, more integrated supply chain
Today
Future State
SKUs
~ 5,500
20% net
reduction
Direct Plant-to-Customer
Shipments
~ 30%
~ 60% |
 16
Kraft Foods Group, Inc.
Room to improve gross-to-net conversion
Productivity as a % of COGS
Gross-to-Net
Conversion
49%
40%
56%
~60%
70%-plus |
 17
Kraft Foods Group, Inc.
Sizable opportunity to take out working capital
Cash Conversion Cycle
(days)
(1)
Reflects
2012
four-quarter
average
of
Receivables
Days
plus
Days
Inventory
on
Hand,
less
Accounts
Payable
Days
1 |
 18
Kraft Foods Group, Inc.
*
*
*
*
*
*
*
**
* |
 19
Kraft Foods Group, Inc.
Invest in people to close capability gaps
LOW
HIGH
Current State
INTEGRATED LEAN SIX SIGMA
MAINTENANCE
NETWORK
OPTIMIZATION
GROSS-TO-NET
PRODUCTIVITY
CONVERSION
END-TO-END
VALUE-CHAIN MAPPING
CASH CONVERSION CYCLE
QUALITY
SERVICE / SUPPLY CHAIN RELIABILITY
SAFETY
SIMPLIFICATION
ENGINEERING
BUSINESS PROCESSES / SYSTEMS
METRICS
DATA
COMMODITY MANAGEMENT /
PRICING NET OF COSTS |
 20
Kraft Foods Group, Inc.
Invest in people to close capability gaps
LOW
HIGH
Current State
INTEGRATED LEAN SIX SIGMA
MAINTENANCE
NETWORK
OPTIMIZATION
GROSS-TO-NET
PRODUCTIVITY
CONVERSION
END-TO-END
VALUE-CHAIN MAPPING
CASH CONVERSION CYCLE
QUALITY
SERVICE / SUPPLY CHAIN RELIABILITY
SIMPLIFICATION
ENGINEERING
BUSINESS PROCESSES / SYSTEMS
METRICS
DATA
COMMODITY MANAGEMENT /
PRICING NET OF COSTS
SAFETY |
 21
Kraft Foods Group, Inc.
Invest in people to close capability gaps
LOW
HIGH
Current State
INTEGRATED LEAN SIX SIGMA
MAINTENANCE
NETWORK
OPTIMIZATION
GROSS-TO-NET
PRODUCTIVITY
CONVERSION
END-TO-END
VALUE-CHAIN MAPPING
CASH CONVERSION CYCLE
QUALITY
SERVICE / SUPPLY CHAIN RELIABILITY
SIMPLIFICATION
ENGINEERING
BUSINESS PROCESSES / SYSTEMS
METRICS
DATA
COMMODITY MANAGEMENT /
PRICING NET OF COSTS
SAFETY |
 22
Kraft Foods Group, Inc.
Invest in people to close capability gaps
LOW
HIGH
Current State
INTEGRATED LEAN SIX SIGMA
MAINTENANCE
NETWORK
OPTIMIZATION
GROSS-TO-NET
PRODUCTIVITY
CONVERSION
END-TO-END
VALUE-CHAIN MAPPING
CASH CONVERSION CYCLE
QUALITY
SERVICE / SUPPLY CHAIN RELIABILITY
SAFETY
SIMPLIFICATION
ENGINEERING
BUSINESS PROCESSES / SYSTEMS
METRICS
DATA
COMMODITY MANAGEMENT /
PRICING NET OF COSTS |
 23
Kraft Foods Group, Inc.
Seven building blocks will deliver our potential
Integrated L6S
World Class Maintenance
Network Optimization
Collaborative Supplier
Integration
World Class Innovation
Integrated Business
Planning
Business Process Excellence & Simplification |
 24
Kraft Foods Group, Inc.
Focus
•
Extend Black Belt capabilities to customer service & logistics
•
Build “end-to-end”
capabilities and eliminate “intersection losses”
through value stream mapping and loss analysis
•
100% employee engagement via unique ownership of equipment,
work areas, systems
Benefit
•
Reduce costs, cash usage by driving defects to zero, unlocking
trapped costs
•
Enable revenue growth
Integrated L6S |
 25
Kraft Foods Group, Inc.
Focus
•
Real-time equipment performance
•
Master preventative maintenance
•
Transform parts buying into Just-in-Time methodology and
drastically reduce suppliers
Benefit
•
Reduce costs and spare parts inventory
•
Enable growth via more predictable throughput
World Class Maintenance |
 26
Kraft Foods Group, Inc.
Focus
•
Simplify, streamline, standardize engineering processes
•
Strategically allocate technical resources in best-for-Kraft
manner
•
Selectively develop, implement high tech/state-of-the-art
equipment platforms with step-change performance
Benefit
•
Lower delivered cost with greater speed to market
•
Enable network optimization
•
Improve free cash flow predictability, maintain capex at
2.5% of net revenue
World Class Innovation |
     27
Kraft Foods Group, Inc.
Focus
•
Consolidate supplier base, form strategic partnerships
•
Reduce total cost of ownership
•
Tap supplier innovation product and process
Benefit
Productivity
Cash-Flow
Innovation
Growth
Relationship
Collaborative Supplier
Integration |
 28
Kraft Foods Group, Inc.
Focus
•
Establish metrics to track network-wide lowest landed cost
•
Move to pull system with demand-driven front end
•
Optimize End-to-End network design
Benefit
•
Improve customer service levels
•
Reduce costs and total cost of ownership
•
Improve working capital, free cash flow through increased
velocities
Network Optimization |
 29
Kraft Foods Group, Inc.
Focus
•
Establish integrated product, demand, supply review
processes across business units
•
Optimize sku’s within each product line
Benefit
•
Achieve world-class customer service levels and lower
inventory through increased forecast accuracy, on-time
delivery, improved case fill rates
•
Enable Business Process Excellence & Simplification
Integrated Business
Planning |
 30
Kraft Foods Group, Inc.
Business Process Excellence
& Simplification
Focus
•
Define standard plant metrics and supply chain KPI’s
•
Optimize, integrate operational reporting
Benefit
•
Lower manufacturing, customer service and logistics costs
•
Drive long-term cash flow delivery
Order Management
Order Management
Manufacturing
Procurement
Procurement
Demand & Supply
Demand & Supply
Planning
Planning
SINGLE SAP PLATFORM
Financials
Financials |
 Tim
McLevish Chief Financial Officer |
 32
Kraft Foods Group, Inc.
Situation and discovery
Integrated
Business
Planning
Business Process
Excellence
SAP Refresh
Integrated Lean
Six Sigma
•
Fragmented systems designed for a
complex business model
•
Ownership and accountabilities of
processes not defined
•
Processes lacked uniformity;
complex; siloed; fragmented;
not
end-to-end
•
Key to any sustainable benefit
realization would require process
simplification, standardization,
streamlining |
  33
Kraft Foods Group, Inc.
SAP utilization low, customization high
Customized
Where We Are
Where We Will Be
NOT in Use
Standard |
 We put dollars in
Shareholders’ pockets…
not
growth rates, not margins
Inconsistent commitment
Revenue growth and OI margin
focus
No capital charges
Functional silos, metrics
and incentives
Data and reports
Key cultural priority
Balanced emphasis on both P&L
and Balance Sheet
ROIC focus from strategic to
operating decisions
End-to-end metrics
Decision tools that create bias
for action
From
To
To
34
Kraft Foods Group, Inc. |
 35
Kraft Foods Group, Inc.
A sustainable long-term growth algorithm
Metric
Long-Term Target
(1)
Market defined as the North American Food & Beverage market
Organic Net Revenue
Operating Income
Dividends
Profitable growth at or above market growth
1
Consistent mid-single-digit growth
Consistent mid-single-digit growth
EPS
Consistent mid-to-high, single-digit growth
Free Cash Flow
Consistent mid-single-digit growth
ROIC
Consistent year-to-year improvement |
 Tony
Vernon Chief Executive Officer |
 Our
transformation is a marathon, not a sprint Way we
Way we
think
think
Way we
Way we
behave
behave
Way work
Way work
gets done
gets done
Way we use
Way we use
our enablers
our enablers
Way we run
our business
37
Kraft Foods Group, Inc. |
 38
Kraft Foods Group, Inc.
Our Mission
Make Kraft North American
Food & Beverage Company
Best Investment in the Industry
Profitable
Top-Line
Growth
Consistent
Bottom-Line
Growth
Superior
Dividend
Payout |
 |