F14 Summer Intern Amrita Sengupta Final Presentation

Small Planet FoodsNew Product Guidelines | Benchmarking Analysis

Rita SenguptaAugust 20th, 2013

Agenda

Introduction:

Rita Sengupta

Project Overview

Project 1:

New Product

Guidelines

Project 2:

Benchmarking Analysis

Who is Rita Sengupta?

Oklahoma City, OK

Washington University in St. Louis

Biking & Yoga Enthusiast

Avid Instagrammer

Guitarist

Project 1: New Product Guidelines

Project Overview

Background Deliverables

• Operates with a philosophy around new product guidelines

• No clearly formalized criteria

• Create and publish guidelines for each type of new product launch

• Gain buy-in from all stakeholders

Project 2:Benchmarking Analysis

Background Deliverables

• Several SPF categories have internal GMI analogs

• Identify analogs

• Deliver cost comparison analysis to help inform margin goals in divisional LRP

Project 1: New Product Guidelines

Discuss current process with

SPF

Benchmark against

USRO divisions

Analyze New Product

Performance

CreateGuidelines

Align withcross-functional

teams

Data Gathering

Objective:Develop and Publish

New Product Guidelines for SPF

SPF Guidelines vs. other USRO Divisions

DivisionIncrementality

(%)Gross Margin*

Incremental

ProfitClub Specific In & Outs

*sustaining gross margin

F13 Volume (EQCs) RNS (ex. NIFDA) GM% (ex. NIFDA + TSU)

Actual vs. Gate Actual vs. Gate Actual vs. GateActual vs. Line/BU

Avg.

CF Ancient Grains

CF Berry Cobbler

LB Uber

CF Crunchy

New Product Performance vs. Gate Documentation

Large standard deviation of new product performance

LineExtensions

BrandExpansions

NewPlatform

Process/Deliverable

Volume (Total/No. of SKUs) Charter-Gate 3: Quantify as necessary

Incrementality > 30% > 70% > 70% + Charter

Total RNSGate 1-3:

Quantify based on volume

Gross Margin (ex. NIFDA)≥ PNL Average ≥ BU Average

≥ DivisionAverage

Charter:Define guideline

Gate 1:accretive/neutral/

dilutive vs. guidelineGate 2-3:

Quantify and compare to guideline

See BU specific reference points

Incremental Profit* Year 1 > 0 Year 1 + 2 > 0 Gate 1-2

Test and Startup Costs Input estimate and determine if it’s within budget Gate 1

*Incremental Profit = (Gross Margin/EQC*Incremental Volume) – Test & Startup Costs – NIFDA – Depreciation

Proposed New Product Guidelines for Standard Innovation

LineExtensions

BrandExpansions

NewPlatform

Process/Deliverable

Volume (Total/No. of SKUs) Charter-Gate 3: Update as necessary

Incrementality > 30% > 70% > 70% + Charter

Total RNSGate 1-3:

Quantify based on volume

Gross Margin (ex. NIFDA)≥ PNL Average ≥ BU Average

≥ DivisionAverage

Charter:Define guideline

Gate 1:accretive/neutral/

dilutive vs. guidelineGate 2-3:

Quantify and compare to guideline

See BU specific reference points

Incremental Profit* Year 1 > 0 Year 1 + 2 > 0 Gate 1-2

Test and Startup Costs Input estimate and determine if it’s within budget Gate 1

*Incremental Profit = (Gross Margin/EQC*Incremental Volume) – Test & Startup Costs – NIFDA – Depreciation

Proposed New Product Guidelines for Standard Innovation

What Should Happen

Clear objectives, vision

Match customer need with feasibility

What Actually Happens

Reactive launches, no portfolio strategy

Assess feasibility after committing

Gap

Lack of standards, alignment (for

portfolio strategy)

Need to balance push & pull of new product

requests (requires preparation)

Current State of SPF Customer Exclusives

Strategic PurposeVolume

CommitmentTimeline

OtherConsiderations?

Incremental Gain Strategic Customer• Minimum run

requirement

• Ship 100% of commitment?

Define appropriate:

• Lead time

• Exclusivity Period

Should Sales region be liable for:

• Special pack?

• Unshipped volume commitment?

• Fire sale / DD?

Define strategic benefit:

• Profit driven?• Increase

distribution?

• Strategic customers by brand

Proposed Framework for Customer Exclusives

Other Considerations and Next Steps

Do the new guidelines support the Project Warhol initiative?

Ensure that guidelines are not hurdles

Does this address the issues identified at the Focused Improvement?

Enforce post-launch analysis

Gate 4: In-Market Review

Project 2: Benchmarking Analysis

Objective and Agenda

Key SPF Categories Case StudyAreas of

Opportunity

Help inform SPF’s long-run margin goals in the upcoming divisional LRP

Breakdown of Key Categories in SPF

Cereal and Granola

72%

Snack Bars12%

Frozen Vegetables

9%

Frozen Fruit5%

Cascadian Farm43%

Food Should

Taste Good20%

Larabar21%

Muir Glen16%

Volume (EQC) of each Business Unit in SPF

Volume (EQC) of each Category in Cascadian Farm

Case Study: CTC vs. CF Cinnamon Crunch (GM/oz)

CTC GM/oz. Net Sales Trade + Coupon Total Materials TotalManufacturing

Total Logistics CF CinnamonCrunch GM/oz.

Key Differences in Trade



KEY DIFFERENCES:

• CTC is traded more frequently (8 times/year vs. 4 times/year)

• CTC has deeper discounts

• Big G varies trade strategy by brand and size of product

Key Differences in Material Cost



KEY DIFFERENCE:

• Higher costs of premium organic ingredients

Key Differences in Manufacturing Cost



KEY DIFFERENCE:

• GMI owned plants vs. External Supply Chain

AREA OF OPPORTUNITY:

• Co-production with GMI plants

Key Differences in Logistics Cost



KEY DIFFERENCES:

• Big G—scale drives more efficient use of CSF network

• SPF—products flow through more CSFs

Case Study: Key Takeaways



1. CF prices for premium ingredients

2. Areas of opportunity:

Manufacturing

Co-production with internal plantsLogistics

Tighten volume forecasting Evaluate structure

Next Steps

Share insights and areas of opportunities for other analogs to Cascadian Farm brand team

Transition analysis to finance team for divisional LRP

THANK YOU!

Jeff Siemon, Eileen Anderson, Kethan Pradhan, Meggie Wittorf, Andrew Nymo, Nathan McCurren, Haylee Remark, Jessica Lee, Danielle Bagge, Brian McIntosh, Chad Ries, Brianna Menning,

Alicia Beerman, Joffrey Wilson, Peter Roose, Allen Gerten, Onaisa Husain, Kristin Witt, Ryan Flanagan, Jessica Britton,

Jennifer Kaplan, and the FRIT team!

Questions?

NPG Benchmarking Analysis

New Product Performance

Standard Innovation Guidelines

Customer Exclusive Framework

Key SPF Categories

CF Case Study

Main Takeaways

Appendix

Gross Margin(Sustaining)

VolumeIncrementality

(to Division)

New Platform

Brand Expansion

Line Extension

Club & All Other*

≥ 70%

Frozen Frontier New Product Guidelines

CumulativeProfit

(Incremental)

> Division Retail Target

≥ 50% ≥ 30% ≥ 70%

> BU Retail Target

> PNL Retail Target

* All Other includes Small Format, DD&D

Adjust for Club

Profitable < 30

Months

Profitable < 12

Months

Capital IRR 20%

BreakevenLaunch Yr

Profitable < 24

Months

New Platforms

Brand Expansion

Line ExtensionClub

(New/Rotational)Retail In/Outs

GM% 40% 40%35% OR line

accretive25%

35% OR line accretive, incl.

write-offsGross RNS $5MM $3MM $5MM $1MM $1.5MM

IRR% 20%EBIT

Breakeven Year

Year 3 Year 2 Year 1 Year 1 Year 1

New Platforms

Brand Expansion

Line ExtensionClub

(New/Rotational)Retail In/Outs

Gross Volume 250 150 250 50 75

Marketing Spend (Year 1&2

Combined)$2,000 $500 $ - $ - $-

Incrementality 75% 60% 50% 80% 60%

Capital $833 $ 333 $50 $50 $ 50

Supporting Model to Hit Hurdles

Pillsbury New Product GuidelinesSTRATEGY:

Innovate with larger and highly incremental new products that

will drive share and profit growth

Incremental > 40%

Net Sales

Per SKU

> 40% > 30% > 40% > 30%

IRR ( 5yr life)

and within at least 90% of products impacted by steal

> Category

Margins impacted

by steal*

> 20%

Gross Margin

% (Sustaining)

> $6MM > $8MM > $6MM > $8MM > $6MM

Line

ExtensionNew Platform

Brand

Expansion

> 80% > 60%

Net Sales Gross Margin

Club/Channel

Permanent

Distribution

>$2MMGap to Retail <

13%

Financials must be

approved by business

teams

Category GM % Club GM% Category GM % Club GM% Category GM % Club GM% Category GM % Club GM%

Cereals Core Tomatoes Tortilla

Granola ALT Diced Kettle Cooked

Cereal Uber Fire Roasted Crackers

Granola Bars Jocalat Whole BU Average

Chewy BU Average Crushed and Ground

Crunchy Pasta Sauce

Frozen Fruit Salsas

Frozen Vegetables Soups

Boxed Pastes

Bagged Ketchup

Blends BU Average

Frozen Potatoes

Fruit Spreads

Concentrates

Relish

BU Average

Business Unit GM %

Cascadian Farm

Larabar

Muir Glen

FSTG

DIVISION AVERAGE 30%

CASCADIAN FARM LARABAR MUIR GLEN FOOD SHOULD TASTE GOOD

Back

Template for Average BU Margins

Brand Strategic Customers

Club (Costco)Natural Channel (WFM)

Retail (Target)

WFMAholdPublixKroger

W-MPublixKrogerWFM

Club (Costco)Natural (WFM, Sprout)

Target

Back

Brand Minimum Runs

Production: 700 casesPackaging: 9,000-12,000 cases

Production: 20,000 cases/SKU

No packaging limit

CF Granola: 17,500 cases CF Cereal: 13,500 cases Bars: 6,000-7,000Packaging: 10,000 prints – bars (individual film or box) or cereal

Min. Actual Cases/production run:Fresca SUS- 1,350Fresca MPK- 2,160Uber SUS- 3,500Uber MPK- 5,200

Min. Pouches/order: 660,00Min. Caddy’s/order: 12,000

Back

Summary of Other Analogs

CASE STUDY: CF Cinnamon Crunch

CEREAL

FROZEN VEGETABLES

SNACK BARS

CF Honey Nut O’sCF Multigrain Squares

CF Broccoli & CarrotsCF Mixed Vegetables

CF Crunchy Oats n HoneyCF Chewy Chocolate Chip

F14 Summer Intern Amrita Sengupta Final Presentation

Data & Analytics