Nestle 4Q15 Earnings Call Notes

Nestle’s (NSRGY) CEO Paul Bulcke on Q4 2015 Results

2016 is going to have the same challenges as 2015

“I don’t think 2016 is going to be much different from 2015. It is going to have the same uncertainty, the same challenges like 2015. But this is not new. Dare I say, we have seen that before. We have been there before.”

E-commerce key in China

“And talking about online channels in China, ecommerce is of extreme importance and we have heavily engaged with this. And already 50% of our sales in petcare goes via ecommerce in China, 30% in coffee, 30% also infant formula. And last year, for example, alone, our ecommerce business in China almost doubled. And this will remain a key growth driven also in the years to come.”

There’s been a softer growth environment and part of that is pricing

“In the last years it is a softer growth environment in general and there is low pricing and pricing’s part of it. So what we aim at is to be on the higher end of our industry, to be leading our contemporaries, to have the initiative of these categories ending in new dimensions and innovation, that we’re the top of mind among consumers in where we want to be.”

Price increases are not part of the discussion

“in certain parts of the world like Europe, Western Europe, pricing is not like part of the discussion. And we see our customers and we’re in permanent contact with them and price and price increases is not part of the discussion we have with them. So we have to be aware of that, hence a very, very strong focus on costs and really going for the brands that matter.”

Francois-Xavier Roger

Little improvement in consumer sentiment in NA

“Briefly touching on the macro environment for the zone, it is fair to say that we have seen very little improvement in consumer sentiment in North America over the past year. Latin America, on the other hand, is mixed, but Brazil, Argentina and Venezuela are particularly challenging and will likely remain so in 2016.”

Strong growth in water

“Waters has delivered another strong year of organic growth of 6.8%, driven entirely by RIG. The trend towards healthier hydration is dynamic, driving robust category growth. Consumers are increasingly drinking water over CSDs and other sugary beverages. And our balanced portfolio and footprint of international brands and leading local brands means that we’re growing in all categories and geographies.”

Hain Celestial FY 2Q16 Earnings Call Notes

The Hain Celestial Group’s (HAIN) CEO Irwin Simon on Q2 2016 Results

Social media is not the most expensive way to reach consumers

“It’s not that our spending — like we are a traditional consumer packaged goods company. Our consumers are focused on social media, on Facebook and SnapChat and all this. And it’s not the most expensive way to advertise. But we have so many great things to be telling about our brands that we need to get out there and just tell more and more about it.”

We do have to spend more, so we’re hiring consultants to tell us how

“Do we have to spend more? Absolutely. And it’s not only us; it’s every company out there that has to spend more. And that’s why we will work with Boston Consulting Group. Let me tell you something. I never wanted to work with consultants because I used to say, if we didn’t know what we were doing, then who else does? But I’ve got to tell you, like anything, I’ve changed too in how we look at things differently.”

Perimeter of the store growing much faster than the center

“- as we look where — as we are diversified in a lot of categories, it’s the perimeter of the store where you are seeing a tremendous amount of growth versus the center of the store. And as we sit with the center of the store and you talked about baby food, baby food is moving into fresh. Baby food — in Earth’s Best, what we have done with brands like Earth’s Best, we’ve taken it bigger into the frozen category, bigger into the fresh category. And we have been able to expand Earth’s Best into multiple categories.”

Retailers are trying to figure out how to save the center of the store

“listen, whether it’s Whole Foods or other retailers, they don’t want the center of the store to die. So they are all looking for innovation and working with us on innovation there.”

John Carroll

We bought some things that don’t belong in the conventional channel

“Sure. So David, what we think it was, was that we brought some brands that, quite frankly, shouldn’t go into the conventional channel. And that’s part of what Irwin talked about before. So, as we looked at it, there were some soup SKUs that really did not belong in that category and went in and washed out in a year’s time. So, that’s why our whole focus is — look, let’s focus on the top 500 items. We know they turn. We know they get traction. This way, you are not wasting your slotting and more importantly, you have got a better selling case. We actually are pulling back from some of the new items that we are showing to the conventional channel because, quite frankly, they — we owe it to them to prove out those items before we bring them into them. So, again, that’s why the whole thrust is to focus on the top 500 SKUs.”

McCormicks 4Q15 Earnings Call Notes

McCormick’s (MKC) CEO Alan Wilson on Q4 2015 Results

New CEO taking over

“I am pleased to be transitioning from my role as CEO at this time. One of my conditions in stepping down was to have the company in great shape with strong financial performance and forward momentum”

We’re still robust on China going forward

“on a go-forward basis, we’re still robust on China. We know there’s a lot of discussion around China. We’re obviously very aware of the economic discussion going on there but our own business we’re anticipating that continues to do well.”

Lawrence Kurzius

Reduce sodium w/spices

“In mid-2015, the USDA first recommended spices and herbs as a way to reduce sodium in the diet in recommendations to school nutritionists and to adults over 65. And in early January, this recommendation made its way into the new 2015-2020 Dietary Guidelines for Americans.”

Much of our business is direct toward smaller cities in China, which have experienced more robust growth

“We’re aware of the macroeconomic pressure around the China market, which does make us cautious, but we’re also quite optimistic about our business in China. A great deal of the carnage that’s happened around us has been more in the modern trade portion of the business. That part of our business is slow as well but it only accounts for about 20% of our consumer business in China. Much more of our business in particular, thanks to the acquisition that we did a couple of years ago is more directed to the interior, to the smaller cities and through a more traditional trade outlet. So, we have continued to experience quite robust growth of our consumer business in China.”

The consumer side of the business in China has really been quite strong to start the year

“I don’t want to comment too much on 2016 but the opening of our year in China on the consumer side of our business has been really quite strong. And I focus my remarks on the consumer side because for us China has really become predominantly a consumer business. Years ago, China was more of an industrial business for us, and that’s how we got our foothold there. But with the continued growth of our consumer business and with the addition of the acquisition we did a couple of years ago, that business is now more [indiscernible] about two-thirds consumer.”

I was just over there and the China team is optimistic

“I was just there with the China team last week and met with the management over there. Actually, Alan and I went over as part of our internal transition communication. And so, it gave us an opportunity to meet firsthand with the China team and they continue to be quite optimistic.”

Trend towards more natural is an important driver for us

“improving the product mix and moving towards flavors and more value-added technically differentiated product is part of the margin equation, and the overall trend in our industry towards more natural, less artificial is an important driver of volume for us because this is an area where we think that we got particular expertise. I think in our remarks, we indicated that about 40% of the briefs that we get from our customers include some wellness aspect “

Kimberly Clark 4Q15 Earnings Call Notes

Kimberly-Clark’s (KMB) CEO Tom Falk on Q4 2015 Results

Remain very optimistic about growth prospects in 2016

“Even though volatility has increased and economies are slowing in some parts of the world we remain very optimistic about our growth prospects. For 2016 we are targeting organic sales growth of at least high single digits for our business in the developing and emerging markets.”

Facing continued currency headwinds in foreign markets

“Like other multinational companies, we’re facing continued currency headwinds. We’re planning that currency translation will reduce sales and earnings by 5% to 6% this year. The all-in drag on earnings including currency transaction is expected to approach 15%. These projections are based on forward exchange rates as of a couple of weeks ago which are pretty consistent with recent spot rates in most cases. To reduce the impact of currency headwinds we plan to raise selling prices in some of our international markets.”

Lots of competition around but I wouldn’t say it’s getting worse

“In China, we saw a bit more competitive pricing being spent in the market by some of the competitors which we matched up to at some extent, but we saw some of that in the third quarter as you may recall, but had a very strong volume quarter again and again have lots of innovation coming. So still tons of competition around, but I wouldn’t say it is getting worse, but it is continuing.”

China probably a bit of a slowdown, but still growing overall

“In other markets China kind of a mixed bag with a little weaker quarter for us and yes some of that was execution on our front that we need to improve and there is plenty of competition there, probably a bit of the economic slowdown, but again that market is still growing overall, it’s just not at the same pace that it once was.”

Birth rates are ticking up

“If you look at a market like China, we’d still say high single digit growth. It is going to be the year of the monkey in China which is a good year and so you typically have a little bit of an uptick in the birth rate, restarts with the forecasters were calling for, the birth rate in the U.S. is actually ticking up. ”

Local competitors have exposure to dollar priced commodities

“If you look at a market like China, we’d still say high single digit growth. It is going to be the year of the monkey in China which is a good year and so you typically have a little bit of an uptick in the birth rate, restarts with the forecasters were calling for, the birth rate in the U.S. is actually ticking up. ”

We’re pretty bullish on China

“We’re doing a ton in e-commerce and that channel is growing pretty dramatically in China and so it’s probably a third of our diaper sales were in e-commerce which is over wait the rest of the categories. We’re still seeing good mid-tier super premium segment growth where we tend to do better. So again, I’d say China we are pretty bullish, lots of competition but good growth in innovation coming and some geography expansion as well.”

Unilever 4Q15 Earnings Call Notes

Unilever’s (UL) CEO Paul Polman on Q4 2015 Results

Currency boost

“Turnover grew by 10% which was helped by currencies. Underlying sales growth returned to a solid 4.1% which was ahead of the markets. It was driven by emerging markets where we grew a strong 7.1%, with 2.7% of this coming from volume despite the challenging environments there as well.”

Tailwinds proved short lived last year

“At the beginning of last year I said that we were starting to see more tailwinds than headwinds, but unfortunately the tailwinds proved short-lived.”

A second consecutive monsoon failure have put pressures on rural demands in India

“Crop failures for a second consecutive monsoon failure have put pressures on rural demands in India.’

Have to work harder on costs in a low growth deflationary environment

“In a low growth and deflationary environment we have to work the cost part of the equation harder. ”

Global ice cream helps improve seasonality

” one of the beauties that we now have in our ice-cream business from what it was six, seven years ago if you want to, that we have made it global James and Latin America has had a reasonable summer and strong ice-cream plants in that part of the world, but the pricing component to recover cost increases is much higher there than in other parts of the world. ”

The middle market is disappearing in the US, but prestige brands well positioned

“Combined, despite what you see at the global economy, we think that these prestige brands, small as they may be, are well positioned. Because you take the U.S. as a great example. You announce a growth rate of the GDP, but what really happens is — Oxfam just reported that the 1% in the wealth now has the same wealth as the bottom 99%. The U.S. is the extreme of that. The GDP growth goes to a very small amount of people and they’re not eating more products. The middle market is disappearing which is the bulk of the business. That’s why you see a lot of retailers struggling. But the prestige segment is continuing to grow amongst that target and we’re very well positioned for that.”

Europe has been strong

“Greece, as you can imagine, is very challenging and will continue to be. The Nordic countries are actually challenging. But if you look at Italy, France, Germany, the UK and — which is the other big one? Spain, we’re performing well and we’re actually growing share there on more of our businesses than not. So the core of it is healthy. You’ve actually seen a strong volume component in Europe, offset by a slight negative on pricing, but still an overall positive. A very strong performance in Europe.”

Currency adjustments should be less enormous this year

“if I may take one step back here, there is undoubtedly the enormous currency adjustments we’ve seen in these emerging markets. I think there will be continued pressure to the downside, but not the enormous adjustments. So it is fair to say that there will less — pricing component will be less moving forward as a result of that.”

Pricing is not going to be higher this year than last year

“The pricing on a macro level on a global basis is not going to be higher than last year, that you have to take. That is separate from commodity cost being the same or not. There are currency effects, there’s mix effects, there’s the net revenue management that we’re doing. So the pricing component is not going to increase.”

See irrational competition in home care in some markets like South Africa/Middle East

“the competitive pressure has not been really significantly eased either. We see very irrational behavior still of our competitor in some of the markets, like South Africa, the Middle East. We’ve just seen the buy one get one frees on all of the Middle East volume which to me is puzzling. But anyway, we deal with that and we get these results. So that’s it.”

India is very affected by weather events

“In India it’s still a very rural environment, with 70% of the people living in the rural environment. And if you really have this climate stress — they’ve had tremendous droughts there again and not the right monsoon seasons. So the rural income that was growing at, let’s say, 150% or 170% versus average, has now moved down again.”

Graeme Pitkethly

Argentina nor Venezuela have triggered hyperinflation accounting quite yet

On the technical question of hyperinflation which I think is, memory serves, IAS 29. Neither Argentina nor Venezuela have triggered the criteria for hyperinflation accounting and I think that’s pretty much consistent with their peers.

ConAgra Foods FY 2Q16 Earnings Call Notes

ConAgra Foods’ (CAG) CEO Sean Connolly on Q2 2016 Results

Spinning off into two companies

“Last month, we announced our plans to pursue the separation of ConAgra Foods into two independent public companies, ConAgra Brands and Lamb Weston, through a tax-free spin-off, which we expect to complete by fall of calendar 2016. ”

There’s an undeniable need for frozen foods

“I think the first big picture point on frozen is the consumer need state for frozen food is absolutely undeniable. If you look at income levels in this country, cash flows in this country and the perishability associated with fresh foods and the fact that people have need states most often during the week and frankly it’s the majority of occasions where they are eating by themselves off major kind of breakfast, lunch and dinner hours. The ability to have frozen food that stays ready when you are on hand is absolutely undeniable. ”

Diet frozen foods have struggled the most

“What’s fascinating about when you peel back the onion and look at it is far and away the largest piece of the weakness within the frozen section is stuff that I will describe as diet foods. Brands that have historically had trademarks and positioning that were associated with weight loss. And they wore that weight loss diet positioning on their sleeve. Those are the products that disproportionately have struggled and have struggled for some time.’

Companies are refocusing on what the definition of wellness means for a new generation

“I think companies are refocusing on quality and they are refocusing on what the definition of wellness means and for kind of a whole new generation, including us. So, if you look at our Healthy Choice franchise as an example, it’s kind of a mixed bag. We have got in the last few years a major thrust away from the old what I will call kind of ice cube tray type of frozen dinners that have been around forever and into a much more innovative product that we brand as Café Steamers. ‘

Campbell Soup FY 1Q16 Earnings Call Notes

Campbell Soup’s (CPB) CEO Denise Morrison on Q1 2016 Results

The operating environment remains challenging

“Looking at the operating environment, conditions remain challenging. In the United States, the economic situation is mixed. Unemployment continues to improve, but consumers remain very cautious. We’re continuing to see Americans save more and spend less amid the uncertain economic climate. Outside the U.S., we’re seeing macro-economic challenges in other markets where we have significant operations, including Canada, China and Indonesia.”

The industry is creating value through consolidation, spin-offs and cost cutting

“Generating growth in this environment has been and remains difficult. As a result, the industry continues to respond with consolidation, spin-offs, aggressive cost cutting programs, and other measures to improve operational efficiency. Meanwhile, food retailers continue to respond by reconfiguring existing stores with a focus on the perimeter by launching new, smaller formats and by investing heavily in e-commerce capabilities.”

Consolidation and intensified competition are disrupting the landscape

“these are unprecedented times of change marked by challenging economic conditions. In the food world, consolidation and intensified competition are disrupting and altering the landscape. At Campbell, we remain clear-eyed about our challenges, focused on the consumer, responsive to our customers, and dedicated to delivering against our purpose”

We’re shifting 40% of our ad spend to digital

“we’re shifting our spend overall to about 40% of our spend in digital, and that is creating a different dynamic between working and non-working media. ”

We’re establishing a beachhead in fresh food

“we’re establishing a real beachhead in fresh food, bringing Campbell’s suite of capabilities to that faster growing part of the food business. We are being really transparent about our products with our new website, We are talking to consumers about what’s in our food, and the ingredients we use, and how it’s made. And these are just steps that really distinguish us and are very true to activating our purpose with the consumer.”

P&G at Morgan Stanley Conference Notes

The Procter & Gamble’s (PG) Management Presents at Morgan Stanley Global Consumer Conference
Jon Moeller – Chief Financial Officer

Growth rates decelerating due to developing markets

“We continue to operate in a challenging and volatile macro environment. Market growth rates on both the volume and value bases are decelerating due mainly to slower growth in developing markets. We entered the year expecting the market to grow close to 4% globally. We now expect 3%. There are more flashpoints across the globe than in anytime in recent memory. ”

Remain comfortable that we can get some growth in 1Q

“we are sitting here on what’s the date, middle of November. And certainly, we had visibility on what’s happened for the first part of the quarter and we remain comfortable that we can get to some level of growth in the first quarter.”

Promotions aren’t the best way to drive sales

“the problem with promotion, particularly when it’s all focused on price; one, its equity destructive, two, there is nothing proprietary about it. As soon as that promotion is out there in the marketplace, the competitor can match it in a nanosecond.”

WMT is largest customer and we are their largest supplier

“we certainly view Walmart as a valued partner. They are our largest customer. We are their largest supplier. It’s a very important relationship.”

The shelves are getting cluttered at many chains

“A number of the retail chains and I certainly won’t name specific chains, but have increased assortment on their shelves by as much as 2X in the last 5 years. And you all know what’s happened to same-store sales growth across most of the retail channels in North America, it hasn’t grown 2X. And so the amount of consumer confusion that’s associated with that complex assortment is inhibiting purchase. You literarily – when I am in stores you will watch a consumer trying to make sense of the shelf and walking away. They just – they literally give up and we are guilty of that sometimes too. We have some of those shelves that we are working to cleanup. ”

We are guilty of over sku-ing some brands too

“we are guilty in terms of having some of the largest brands and having over sku-ed some of our lineups which we are working to reduce. But also, it’s the addition of other brands, it’s the addition of own label brands as well. It’s all of the above.”

Procter and Gamble FY 1Q16 Earnings Call Notes

Market growth rates decelerating in value and volume thanks to developing markets

“We do continue to operate in a challenging and volatile macro environment. Market growth rates on both a volume and value basis are decelerating, due mainly to slower growth in developing markets.”

Our competitors aren’t having to deal with the same currency fluctuations

“The relative strength of the dollar has made it tougher for us than our euro and yen functional currency competitors. We’re facing, for example, a 40% devaluation in Russia, while our euro functional competitors are facing half of that. Each of these items are realities, not excuses, and many of these dynamics will continue.”

INnovating with Gillette online

“We’re also innovating online. With more men purchasing their blades and razors through e-commerce, it’s critical that Gillette establishes itself as the online leader. Gillette’s online Shave Club launched in June and is off to a very good start, with e-commerce share of blades and razors up four points since launch. We’re building partnerships with e-tailers and retailers. We’re offering our shoppers subscription tie-ins for the Gillette Shave Club. Gillette is now consistently number one in paid search and has gone from number 50 to number two in organic shave club search. Importantly, Gillette’s product is significantly consumer preferred over any and all shave club competition, winning on closeness, smoothness, comfort, and 18 other attributes tested, including importantly, overall better shaves.”

Challenging environment

“So it continues to be a challenging environment. Against this backdrop, we continue to improve productivity, to transform our supply chain, to focus our portfolios, and to invest in superior consumer preferred brands and products. ”

We haven’t had premium products in China and that’s hurt us

“China, our second largest market, so it makes a significant difference both from a top line and bottom line standpoint, we have not fully accessed the opportunity that the market is presenting in terms of growth in the premium price tiers as consumers look for better, more differentiated solutions, and frankly, higher product quality. We are bringing those items to market now, but our absence in those price tiers has, frankly, hurt us fairly significantly.”

Earn a return on marketing dollars

“yes, we expect marketing to increase this year on both an absolute basis and a percentage of sales basis. By marketing, I mean working dollars, so we’re going to continue to fund increases in spending that matters with reduction in spending that doesn’t. And look, if I was asked to spend an additional $1 billion tomorrow, I could obviously do that, but that’s not the question. The question is can we earn a return on that and create value through that investment.”

Promotion is not our game

“We will not, in most cases, be looking to promotion as a way to strengthen our business. We will be competitive where we need to be, but that is not going to be something that we proactively increase. We may increase trade spending at any point in time as a mechanism of adjusting price, but generally that’s not our game.”

We’d rather establish superior value equations

“We’d much prefer to establish superior value equations with superior products that are adequately supported. And that’s also the reason why maybe the top line isn’t turning as quickly as certainly we would like or understandably as you would like because we’re not going to spend money just to spend money. We’re not going to spend money in ways that are not sustainable in terms of generating growth in a profitable way on our business.”

General Mills FY 1Q16 Earnings Call Notes

Sold Green Giant to B&G

“We’re selling the Green Giant and Le Sueur brands of frozen and shelf stable vegetables to B&G Foods for $765 million in cash, subject to an inventory adjustment closing. ”

Structure of sales organization

“we employ around 1,700 sales professionals across the U.S. Our organization includes cross functional teams that call on customer headquarters, a retail organization that make sure our products are merchandised in stores and stocked on shelves and a centralized support group that provides advantaged capabilities to our sales teams. We have expertise in 25 categories, that span all three temperature states and we manage an average of 690 General Mills items in distribution.”

We’re the third largest natural and organic foods manufacturer in the US

“Natural and organic retailers have also experienced strong growth as consumer preferences change. We’ve been selling to these retailers for more than 15 years but the acquisition of Annie’s has opened up new growth avenues and increased our capabilities. We’re now the third largest natural and organic food manufacturer in the United States and this enhanced scale combined with our dedicated stewardship of our brands has made us a significant and credible supplier to natural and organic consumers.”

e-commerce is the fastest growing food channel

“E-commerce is the fastest growing food channel and our customers are testing a wide range of business and distribution models. We’ve established an e-commerce Center of Excellence to provide leadership for the virtual shelf by serving as food captain and we engage in annual collaborative business planning with our key retailers like Amazon, and other pure play e-commerce retailers.”

Challenging economic conditions impacting emerging markets

“Challenging economic conditions are having an impact on our categories and our businesses in emerging markets. First quarter net sales increased 3% on a constant currency basis for the Asia-Pacific region, but it was a mixed bag across our portfolio. In China, constant currency net sales were down 1%, driven by a decline on Wanchai Ferry dumplings. ”

Revising currency headwind higher

“it’s about $0.05, I think it is. I think we had $0.04 in July, it’s $0.09 now. So about $0.05 swing. And obviously the U.S. dollar strengthens, the Canadian dollars, the A dollars, the Euro, the Brazilian Real. So yeah we see more of a headwind on our reported results from currency.”

People ask us why we don’t do divestitures and the reason is that we have nice cash flowing brands

“we’re often asked why don’t we do — why aren’t we more active from a divestiture standpoint and one of the things we always come to is we have very profitable cash generative brands. And so Green Giant has a little under $600 million in sales last fiscal. Its margins were in the upper teens and that’s going to be lost income this year.”

5-6% of US food sales could go online

“U.S. food sales that are going through online are between 1% and 2%. Now that’s changing pretty quickly, meaning moving from 1% to 2%. If you said what does it look like out four or five years ahead, all the projections I’ve seen are in the 5% to 6% range. So it’s going to be a high growth area.”