Farmer Cooperatives 2001 Positioning for Performance

1
Farmer Cooperatives 2001Positioning for
Performance
Meeting the Needs of our Food Customers

• October 30, 2001
• Steve Dunphy, VP Sales
• Land OLakes Dairy Foods

2
Introduction

• My background
• New to Land OLakes
• V.P. of Sales
• 20 years consumer products experience
• Kellogg, Pillsbury, Procter Gamble
• 6 years grocery retail experience

3
Introduction

• 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 i
ndustry
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Introduction

• 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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Retailer Consolidation
(Source 2000 Supermarket News)
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Retailer Consolidation

• Drug (60 ACV)
• CVS
• Walgreens
• Rite Aid
• Eckerd

• Mass (70 ACV)
• WalMart
• Kmart
• Target

• Clubs (99 ACV)
• Sams
• Costco
• BJs

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Retailer Consolidation

• Is Driving Dramatic Manufacturer Consolidation

• Acquisition
• 1. Unilever/Bestfoods
• 2. Kraft/Nabisco
• 3. General Mills/Pillsbury
• 4. Pepsi/Quaker
• 5. Kelloggs/Keebler
• 6. Campbells/?
• 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/ ?

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Retailer Consolidation

• Is driving dramatic food broker consolidation
• 3 National Brokers
• Acosta
• Advantage
• Crossmark
• But why is this important?

SourceASMC
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Its Important because...

• Retailer Consolidation is resulting in lower
  returns for food manufacturers/marketers
  
• Cost of doing business is up
• Pricing power is down

Source Sandford C. Bernstein Co.
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Its Important Because...

• Manufacturer Consolidation will continue into the
  Mid Cap arena

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, An
alyst Biard and Company
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How to Survive and Prosper?

• Low cost supplier
• Value Added brands
• Customer relevance

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Brands

• Why Are Brands Important?
• Brands Provide Superior Returns Profit Growth

Source Swander Pace Co. Study GMA data base
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Brands

• Leading brands are of the most value
• 1 brand earns 20 ROS
• 2 brand approximately 5
• Source PIMS Study

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Customer Relevance

• Ultimate Question
• Can you help a retailer increase some store sales
  and profits?

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Customer Relevance

• Sales Force Capability
• Partner with top customer toward a common goal
• Best Practice Sales Organization - PG
• High performance multi-functional teams
• Relationships at all levels
• Close to customer

• 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 re
tailers ranking in top 3 Source Cannondale Surve
y 2000 and 2001 Power Ranking
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Customer Relevance

• Sales Force Capability
• Understanding and utilizing joint profitability
  models
  
• Best Practice Sales Organization - Kraft offered
  best combination of growth and profitability
  
• Basic profitability models to include
• Promotion analysis

• Pricing
• Product mix

Which Manufacturers offer the best combination of
growth and profitability?
Note Scores based on of retailers ranking in
top 3 Source Cannondale Survey 2000 and 2001 Pow
er Ranking
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Customer Relevance

• Sales Force Capability
• 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 Management

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 Note Scores based on of ret
ailers ranking in top 3 Source Cannondale Survey
2000 and 2001 Power Ranking
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Customer Relevance

• Sales Force Capability
• 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
  approach

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 Note Scores based on of
retailers ranking in top 3 Source Cannondale Su
rvey 2000 and 2001 Power Ranking
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Customer Relevance

• Sales Force Capability
• Knowledge of customers and local markets that
  translates
  
• back to consumer insights and new products
• Best Practice Sales Organization - PG and Kraft
• Collaborative customer/manufacturer new product
  development and insight development (consumer
  info)

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 Note Scores based on o
f retailers ranking in top 3 Source Cannondale S
urvey 2000 and 2001 Power Ranking
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Customer Relevance

• Key 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 Focus

• WAS Buy well
• IS Merchandise well
• BECOMING Market well

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Summary

• Consumers
• Customers
• Competitors

DO NOT CARE THAT WE ARE CO-OPS
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Summary

• Low-cost supplier
• Value Added brands
• Customer relevance