Milling & Baking News - November 26, 2013 - 11

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ADM concentrating on initiatives
to deal with cost, cash and capital
BOSTON - Cost, cash and capital
- or the "three Cs" as they are commonly called - are in the crosshairs
of major initiatives at Archer Daniels
Midland Co., executives told participants at the Morgan Stanley Global
Chemicals and Agriculture Conference held Nov. 13 in Boston.
Patricia Woertz, chairman, president and chief executive officer of
ADM, said the Decatur, Ill.-based
company achieved its goal of $150
million in cost savings last year, most
of which was SG&A related. The company now has a new target: another
$200 million in annual run rate savings by the end of 2014.
"These areas are more in the operational side, so it's benchmarking and
standardization of practices across
many plants," Ms. Woertz said. "It's
energy cost savings. It's procurement
cost savings. About a half of that $200
million we already have the initiatives
under way and being executed to gain
that $200 million in savings. So half of

it would be $100 million. It's not quite
on the books, but the initiatives are
under way. So we think we're a little
ahead of schedule in even that additional $200 million."
Ms. Woertz said ADM is addressing the issue of cash through an
initiative referred to as "the billion
dollar challenge." As part of the program, ADM is asking its employees
to look for ways to unlock the cash in
the balance sheet that potentially was
hidden or was not being put to use in
the best manner.
"We were able to unlock not only
the first billion, but a little over $2 billion by earlier this year," she said.
Finally, ADM has reduced its capital
spending and improved its processes
for capital allocation, Ms. Woertz said.
"In the reduction in spending, we
were running at about $2 billion a
year of CapEx before acquisitions,
and we reduced that to about $1
billion a year here in 2013," she explained. "When we look forward to

Pinnacle pinpoints baking season
strategy, unveils new products
PARSIPPANY, N.J. - Ahead of
the critical holiday baking season,
Pinnacle Foods, Inc. fine-tuned its
fall program with new products,
promotions and pricing for its Duncan
Hines brand.
"I think the first point is making
sure that we've got the right
promotional programs in place and
our price points at a competitive
level because the fall bake timeframe
- the holiday timeframe from a
retailer standpoint - is one that they
see a huge gain in traffic; it's a big
profit generator for them, and they
use the baking category primarily
as a traffic draw to get people into
their stores," said Bob Gamgort,
chief executive officer, during a
Nov. 13 earnings call with analysts.
"So being able to secure the right
features and displays and making
sure that you have the right price
points is absolutely critical during
this time period."
Secondly, he said, new items drive
incremental or impulse purchases,
and Pinnacle's seasonal launches this
year have performed "remarkably
well." During the quarter, the
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company introduced a limited-edition
pumpkin spice cupcake mix under
Duncan Hines' Decadent line, which
at some retailers sold out well before
Thanksgiving, he said.
"The Decadent line continues to do
well in the market and gain share," he

said. "We also added a new limited
edition Holiday Velvets seasonal cake
mix, as well as two new flavors to our
Frosting Creations line."
Building on the success of
previously launched red velvet cake
products, the seasonal Holiday Velvets
product features a combination of red
and green cake mixes.
Additionally, Pinnacle has dialed up
digital marketing efforts for the brand.
"We found that the highest payback

Business

2014, while we're still putting our
business plan together and finalizing
some of that with respect to capital
structure, etc., we expect 2014 to be
under $1.5 billion. And included in
that is probably $100 million to $200
million on an E.R.P. project, something we call '1ADM.' So we're still
keeping a bit of a lid on capital."
As for the process for improving capital, ADM over the past couple of years
has worked on standardizing its project
evaluation process to make sure every
project is evaluated using the same criteria, said Ray Young, senior vice-president and chief financial officer.
"We've got standardized metrics
right now in terms of looking at every
project, whether it be R.O.I.C., I.R.R.,
accretion, or m.p.v.s.," Mr. Young
said. "We go through a standard process evaluation. We go through a capital allocation process whereby we're
targeting projects into certain areas,
certain geographies, so that we're actually purposeful in terms of capital
spending. And I think that's done a
lot in terms of helping us really direct
where we're going to grow this company into the future." MBN
in this category comes from optimized
search, as well as having the right
digital marketing campaign versus a
more traditional campaign, and we
have really focused that on all the
opportunities around the holiday
season," Mr. Gamgort said.
For the quarter ended Sept. 29,
the company posted net earnings of
$40,685,000, equal to 35c per share on
the common stock, up from $9,878,000,
or 12c per share, from the same period
of the previous year. Net sales for the
quarter increased to $572,455,000 from
$567,905,000 last year.
The Duncan Hines Grocery
segment posted a 4% increase in
net sales to $224.2 million from
$215.6 million last year, reflecting
higher sales of Vlasic pickles, Mrs.
Butterworth's and Log Cabin syrups,
Duncan Hines baking mixes and
frostings, Comstock and Wilderness
pie and pastry fruit fillings and the
company's Canadian business.
"As we discussed with you last
quarter, we increased our support
behind our Duncan Hines business,"
Mr. Gamgort told analysts. "While we
still have work to do, we have begun
to see sequential improvement in our
overall share heading into the holiday
season and are confident in our
programs for the fourth quarter." MBN
Milling & Baking News November 26, 2013 / 11

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Milling & Baking News - November 26, 2013

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