Food & Services Division Nigel Garrard Managing Director Food - - PDF document

Food & Services Division

Nigel Garrard Managing Director – Food & Services 16-17 October 2008

2

6 Key Issues to Cover

• 1. Australian SPCA Manufacturing Restructure
• 2. The Drought and its Effects
• 3. Creating the Goulburn Valley Master Brand
• 4. New Products to counter Private Label Challenges
• 5. International Strategy
• 6. Grinders Growth Trajectory

3

The SPCA Manufacturing Restructure

Previously announced restructure, results in consolidation of fruit production at Shepparton site One-off restructuring charge of $26.4 million to be taken in H2 Estimated benefits $8-10 million pa for full year 2009 No financial impact in 2008 as benefits offset by restructure costs Progress is on plan and on budget – will be completed by end November – well before 2009 fruit season

4

What does the Australian Manufacturing Restructure involve?

Shepparton Mooroopna

(only3-4 months of wet production)

Production Peach

• Pear
• Fridge Packs
• Juice/Paste
• Baked Beans/Spaghetti
• Tomatoes
• GV “Erca” Snacks
• Distribution
• Kyabram site not affected

5

And where do the cost savings come from?

Casual Wages

Only running one plant (the most automated of the two) allows significant labour efficiencies across the plant This is a further step in a 5 year cost reduction and efficiency program

Reduced Overheads

One factory management structure (given Mooroopna only on 3-4 month operation) Reduced trade waste, power, gas, maintenance

Improved plant efficiencies

with 1 plant running at close to full capacity

6

Full Time Equivalent Staff Numbers at SPCA Down by 30% Over 4 Years

800 900 1000 1100 1200 1300 1400 1500 2005 2006 2007 2008E 2009E

7

Australian Manufacturing Restructure - Why not close Mooroopna altogether? The drought will not last forever. We need to preserve capacity. The drop in AUD will open up export opportunities once drought breaks No fruit preparation at Mooroopna – Erca (Goulburn Valley fruit snacks) fruit will be transferred from Shepparton Space at Mooroopna will be utilised for additional warehousing

8

No Sign of Victorian Drought Breaking – yet!

NOT

9

Fruit Sourced from Two Key Regions

Murray Irrigation Goulburn Irrigation

10

Allocations already down on 2007/08

Allocations at 1 October 2008

System %HRWS In 2007/08 Murray 13% 16% Broken 0% 15% Goulburn 9% 23% Campaspe 0% 1% Loddon 0% 5% Bullarook 0% 0%

11

Recent Year Water Allocations at Historical Lows

50 100 150 200 250 1 9 9 2 / 9 3 1 9 9 3 / 9 4 1 9 9 4 / 9 5 1 9 9 5 / 9 6 1 9 9 6 / 9 7 1 9 9 7 / 9 8 1 9 9 8 / 9 9 1 9 9 9 / 2 / 1 2 1 / 2 2 2 / 3 2 3 / 4 2 4 / 5 2 5 / 6 2 6 / 7 2 7 / 8 2 8 / 9

Murray G

• ulburn

?

12

SPCA – Managing the Drought effects well

Water entitlements used by permanent plantings (most efficient use) at expense of annual crops and dairy Subsidies and loans to grower suppliers have helped ensure SPCA’s fruit intakes For 2009 fruit season:

Have acquired sufficient temporary water entitlements to underwrite tomato requirements. Expect to receive all the fruit that is required

Growers have adapted well to less water, changing agricultural practices Expect intakes to be in line with 2008 but unlikely to be better

13

Leveraging SPCA – The Goulburn Valley Brand

Joint initiative of food and beverages to leverage the Goulburn Valley brand and CCA’s distribution capability Increased consumer awareness, improved distribution, coordinated marketing – all provide group benefits Creating a ”Power Brand”

14

MORE TO COME

Power Brand Build

+ + + + + +

15

Overall Goulburn Valley brand sales have increased by >50% since CCA acquisition

20 40 60 80 100 120 140 160 2005 2006 2007 2008 $ Million Sales

16

Utilising the CCA Network – 1+1 = >2

Over 3,500 Convenience & Petroleum customers now serviced via CCA distribution Transitioning SPCA Agency agreements in

PNG Fiji Pacific Islands to CCA Sales & Merchandising teams

Changeover planned for October 08 with strong support from local CCA beverage teams Reviewing opportunities in Indonesia to use existing CCA relationships

17

New Products help combat Private Label growth

Private Label offerings from major retailers have increased foothold over last few years, across most

• f SPCA’s categories

SPCA supply some of these Private Label products where we can supply profitably. Some customers have shown preference for Australian sourced products Private Label is here to stay! Heightens the requirement for NPD and investment in our brands Strong brands will be well placed to take advantage of retailers range/supplier rationalisation

18

Range of New Fruit & Snacks Products Launched – over 25 in total

19

International Strategy continues to develop

Leverage SPCA’s market leadership in packaging innovation across selected international markets Develop a branded business using “SPC Nature’s Finest” Transition out of sole Australian supply to include mix of sourcing countries Provide multi-country sourced, multi- product variety offering to selected retail customers

20

Diverse International Relationships

JV - Deciduous JV - Tropical Exclusive Supply Agreement Exclusive Supply Agreement Strategic Alliance

21

And the results are coming!

UK market is the stand-out performance

SPC Nature’s Finest now No. 2 brand in packaging fruit in UK Listings in all major retailers Appointed category captains by Tesco and Sainsbury Trials underway with vending and convenience channels

Next priority is to roll out in other European

• countries. Canada showing promising early signs

22

The New Sainsbury UK Fruit Fixture

23

The New Tesco UK Fruit Fixture

24

Germany – Off shelf Displays in Product

25

25

Grinders Volume Comparison 2008 v 2007 v 2006

100 200 300 400 500 600 700 800 900 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Month Tonnes

2008 2007 2006

Volume Growth 23.7% Volume Growth 20% 26

Rainforest Alliance

Being heavily promoted by McDonald’s Over 30 outlets already signed

New Brand Launch – September 2008

Protecting the environment, wildlife, workers and local communities

27

Our Coffee Business now comprises

Premium

• ffering

Corporate

• ffering

Core of business Environmentally friendly

28

SPCA Priorities for 2009

Complete implementation of the rationalisation of Australian manufacturing. On plan to deliver $8-10m of savings in 2009 SPCA is well positioned vs industry peers Drive growth of Goulburn Valley brand in conjunction with Beverages Continue to reduce the reliance on Australian sourcing by fast-tracking the international business Pro-actively manage the drought and its effects Continue to drive NPD to deliver ongoing sales growth

29