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22ndnd Grupo Bimbo DayGrupo Bimbo Day
December 1December 1stst, 2005, 2005
Reynaldo Reyna Reynaldo Reyna
2.5
0.30.7
6.7 6.4
4.11.9 2.3 2.4
(1.0)
1996
1997
1998
1999
2000
2001
2002
2003
2004
LTM
FourFour--SSTexas: Texas:
distribution distribution conversionconversion
LowLow--carbcarbcrazecraze
Economic Economic slowdownslowdown
BBU BackgroundBBU Background
LTM: Last Twelve Months as of September 2005
BB
U E
BIT
DA
Mar
gin
(%)
Situation Assessment: TrinitySituation Assessment: Trinity
STRU
CTUR
ES
TECHNOLOGY
PROCESSES
Profitability
GrowthCustomer Service
PERSON
THREE KEY ENABLERSPeople
ProcessesTechnology
THREE KEY DRIVERSCustomer Service
ProfitabilityGrowth
The Transformation RoadmapThe Transformation Roadmap
Back to BasicsBusiness
PerformanceRevenue
Generation1
9
4
3
7
2
106 5
8
Turnaround TransformationSustainable, Profitable Growth
Market Execution Operational EfficienciesControl & Accountability
Back to BasicsBusiness
PerformanceRevenue
Generation
9
10
Turnaround TransformationSustainable, Profitable Growth
The Transformation RoadmapThe Transformation Roadmap
Market Execution Operational EfficienciesControl & Accountability
47 6 5
8
1 3
2 Control & Control & AccountabilityAccountability
1. Organizational restructure2. Financial control & visibility3. Process control
BBU Structure: Early 2004BBU Structure: Early 2004
Working well
Only minor change needed
Regional brand management and account responsibilities
Communication across regions less than perfect
Planning, accounting and other finance areas split between two areas
IT part of accounting even though majority of projects were IT related
Accounting Accounting Treasury, ITTreasury, IT
Commercial Commercial CentralCentral
Commercial Commercial WestWest
Commercial Commercial EastEast
Planning Planning and and
AnalysisAnalysis
Project Project OfficeOffice Operations Operations Human Human
ResourcesResources
President President
BBU Structure: 2005BBU Structure: 2005
Goal: simplify, standardize and centralize
Direct reports reduced from 8 to 6, all located in Texas
Sales and marketing separated, each with total BBU responsibilityNational account and category management teamsUnified brand management with category focus on bread, sweet goods and tortillas
All finance and accounting activities merged
IT independent from Finance, created new Control Desk
PresidentPresident
SalesSales MarketingMarketing FinanceFinance IT/PMOIT/PMO OperationsOperations H RH R
Financial Reporting: Early 2004Financial Reporting: Early 2004
Legacy organizational structureLegacy organizational structure for finance areafor finance area
Accounting group reporting to legal entitiesAccounting group reporting to legal entitiesFinance group reporting to regional P&LsFinance group reporting to regional P&LsNeither provided for proper accountabilityNeither provided for proper accountability
Existing reporting was primarily Existing reporting was primarily Excel Excel -- basedbased using using Oracle data downloadsOracle data downloads
InefficientInefficientSlowSlowInconsistentInconsistent
Financial Reporting: 2005Financial Reporting: 2005
HPMA roll-out started January 2005
Specific and standardized reports developed for sales, operations and administrative areas
Accountability for specific responsibilitiesIncreased visibility: - 66 top sales managers
- 62 top operations managers- Full administrative recap
Essbase reporting feature creates efficienciesNear automatic report generationE-mail and shared drivesQuicker distributionMore time for analysis
Process ControlProcess Control
Completed BXXI plant roll-out in late 2004
Brio/Data warehouse implemented in mid-2004
BBU Control Desk established in early 2005
Modern Depot being rolled out to allow for more focused management of sales operations (returns, etc.)
PCS (product control) reporting established to include all depots and distribution centers
SICOM roll-out and Hyperion Planning underway
Back to BasicsBusiness
PerformanceRevenue
Generation
9
10
Turnaround TransformationSustainable, Profitable Growth
1 3
2
The Transformation RoadmapThe Transformation Roadmap
Market Execution Operational EfficienciesControl & Accountability
47 6 5
8
Market Market ExecutionExecution
1. Organizational restructure2. Financial control & visibility3. Process control
4. Returns reduction5. Allowances rationalization6. Client rationalization7. SKU rationalization8. Hispanic growth
Return ImprovementReturn Improvement
Focus on driving down returns while maintaining in-stock conditions throughout the retail market
Development of “Brio” exception reporting tools
Weekly regional conference calls: share best practices
Weekly review by BBU Executive Committee
SKU rationalization process: elimination of over 160 low volume/high return SKU’s
Modern Depot pilot: Pacific Northwest
Modern Depot Phase I BBU roll-out: Q4 2005
Results tied to individual performance goals
Posting consistent return reduction
Optimize and reduce trade marketing promotion spending:
Trade marketing disciplines implemented,
Monthly regional review: key metrics• Dollar spend, unit performance, cost per incremental unit,
profitability
Sophisticated planning tools for brand/segment
Sales operations and customer development team accountability
Enhanced forecasting for manufacturing
Migration to automated software tools
Reduced Western BBU region by 10%; re-invested in Oroweat media
Allowance RationalizationAllowance Rationalization
Client RationalizationClient Rationalization
Improve and optimize profitability of Restaurant and Institutional accounts by increasing net prices
Margin review of all BBU accounts
Increased prices on low-margin fast food accounts
• Loss of Jack in the Box, Burger King, Wendy’s (CA)
Project delivered standard benchmarks for evaluation of food service business: VCM’s / pound
Quarterly review of account scorecard: price / prune
Management accountability: price integrity
Profitable capture of new business in Texas and California
Hispanic Brand Growth InitiativeHispanic Brand Growth Initiative
Drive sales in core Bimbo and Marinela brands focusing on:
Geographic expansion in Midwest and East regions
Brand and route separation in mature California market
Placement of Marinela freezers
Convenience store penetration
Contributing 25% of 2005e BBU sales growth
TransformationSustainable, Profitable Growth
Back to BasicsBusiness
PerformanceRevenue
Generation
Turnaround
1 3
2
47 6 5
8
The Transformation RoadmapThe Transformation Roadmap
Market Execution Operational EfficienciesControl & Accountability
9
10
Operational Operational EfficienciesEfficiencies
1. Organizational restructure2. Financial control & visibility3. Process control
9. Supply chain optimization10. Shared services
4. Returns reduction5. Allowances rationalization6. Client rationalization7. SKU rationalization8. Hispanic growth
Supply Chain OptimizationSupply Chain Optimization
Closing of La MiradaSlow and inefficient plantProduct quality improved55 positions eliminated$4.2 mm annual savings
Production Optimization“Caps Logistics” software508 SKU’s considered24 production lines impacted$1.7mm annual savings
AmDutch / PCDataImproved:
Order accuracyOn-time deliveryProduct accountabilityProduct allocationsSpace utilization
20% labor reduction: $700K
Shared ServicesShared Services
Leveraging the size and strength of the Group today
Research and Development
New product developmentProduct formula redesignIngredient optimizationInnovation councils
Financial Services:
Accounts payable, cash application and some accounting functions
Elimination of 38 FTE’s
Annual savings of $2.0mm before charges from SSC
The Results…The Results…
Sales Growth
0.8
1.9
7.0
1.1(0.6)
(0.2)
2.81.7
3.7 3.4
1Q04
2Q04
3Q04
4Q04
1Q05
2Q05
3Q05
2003
2004
LTM
Revenue Growth: 7.9% in USDRevenue Growth: 7.9% in USD
Combination of: US and Hispanic brandedand private label volume gains
Relationship with key customers: awarded National Category Partner status by Kroger and Albertson’s
Introduced 5 successful new products, launched Mrs. Baird’s bread in Kansas City
Operating Margin: 1.4%Operating Margin: 1.4%
Second consecutive quarter of profits
YTD EBIT margin of 0.6%
Focus on our plan
Lower commodity prices
Higher absorption of fixed costs and expenses
Operating Margin
(3.3)
(2.2)
(2.5) (2.4) (2.2)(1.7)
(1.0)
1.51.4
(0.8)1Q04
2Q04
3Q04
4Q04
1Q05
2Q05
3Q05
2003
2004
LTM
3Q 2005
LTM: Last Twelve Months as of September 2005
Challenges AheadChallenges Ahead
Higher commodity prices
Higher energy prices
Aggressive competition
Tougher comparables vs previous year results
Thank YouThank You