cagny 2006
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Dean Foods Company
CAGNY ConferenceFebruary 21, 2006
Scottsdale, Arizona
Forward Looking Statements
The following statements made in this presentation are “forward looking” and are made pursuant to the safe harbor provision of the Securities Litigation Reform Act of 1995: statements relating to (1) projected sales (including for individual segments, for specific product lines and for the company as a whole), profit margins, net income and earnings per share, (2) our growth strategy, (3) our branding initiatives (4) our integration plans, and (5) our cost-savings initiatives. These statements involve risks and uncertainties that may cause results to differ materially from those set forth in this presentation. Financial projections are based on a number of assumptions. Actual results could be materially different than projected if those assumptions are erroneous. Sales, profit margins, net income and earnings per share can vary based on a variety of economic, governmental and competitive factors, all of which are identified in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10K (which can be accessed on our website at www.deanfoods.com or the website of the Securities and Exchange Commission at www.sec.gov). The success of our branding initiatives will depend on a number of factors, including customer and consumer acceptance of both the products themselves and the prices that we intend to charge for those products. We have many competitors with greater resources than ours, and significant additional spending or innovations by our competitors could render our products less successful than we currently expect. All forward looking statements in this presentation speak only as of the date of this presentation. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any such statements to reflect any change in our expectations with regard thereto or any changes in the events, conditions or circumstances on which any such statement is based.
One of the nation’s leading food and beverage companies
• Largest dairy company in the U.S.– Over $10 billion in net sales– Approximately 4X the size of nearest fluid
dairy competitor• Uniquely positioned branded portfolio
– On trend with healthy, better-for-youproduct offerings
– High-growth brands– Significant margin-enhancing opportunities
• Extremely focused on shareholder value
Dean Foods 2005 Achievements
• Spun-off Treehouse Foods
• Divested Marie’s dressings and Dean’s dips
• Combined branded businesses
• Joe Scalzo named president of WhiteWave
• Alan Bernon promoted to president of the Dairy Group
• Repurchased 18.9 million shares
Dean Foods 2005 Financial Recap
• Dairy Group fluid milk volume growth of 2.5% – operating income growth of 7%
• WhiteWave Foods revenue growth of 13%– operating income growth of 32%
• Consolidated operating profit growth of 7%
• Earnings per share growth of 15%
2006 Guidance
Consolidated operating income of $680 -700 million, up 9%-12%*
Earnings per share of $2.10 – $2.15, up 15%-18% over $1.82 in 2005*
* Post stock-option expense
Positioned for 8-10% Long-Term Earnings Per Share Growth1
1 Excludes possible facility closing costs, future acquisitions / divestitures and one-time items
A Unique Balance of Businesses
Dairy Group– Stable, predictable earnings– Volume growth – Synergy opportunities– Strong cash flow– National refrigerated direct
store delivery network
WhiteWave Foods– Attractive growth categories– Strong national brands– Value-added margins– Improving supply chain– Leverage through
consolidation
2005 Net Sales by Segment
Dairy Group$9 billion
WhiteWave Foods$1.1 billion
International$0.4 billion
2005 Net Sales by Segment
Dairy Group$9 billion
WhiteWave Foods$1.1 billion
International$0.4 billion
Dean Dairy Group
• Nation’s largest dairy processor• Strong regional brands• Unique nationwide footprint• National refrigerated direct store
delivery (DSD) network
2005 Dairy Group Sales
Fresh FluidMilk/Cream 67%
Ice Cream 9%
Cultured 6%
Juice/Drinks/Water 4%
ESLCream/Creamer 6%
Others 4%
Ice Cream Mix 4%
National Refrigerated DSD Network Coupled With Strong Regional Brands
DSD coverageProcessing plants
• 99 facilities
• 6,500 DSD routes
• 150,000 locations served
Focus on Leading the Industryin Customer Service
• One-stop-shop solution • Simplified pricing• Superior responsiveness• Focus on quality
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
Focus on Volume and Marketshare Growth
Dairy Group Fluid Milk and Cream Growth versusUSDA Total Consumption
* Calculation is exclusive of cream volumes in 2005
USDA Fresh MilkVolume Growth
Dean Milk and CreamVolume Growth
-0.8%
- 2.9%
- 0.5%
-2.3%
0%
1.3%0.9%
2.4% 2.7%
1.2%
4.1%3.4%
Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05
0%
1.4%
Historical Focus• Consolidate redundant facilities
– 32 facilities closed to date– Includes 2 facilities closed in 2005
• Separated branded and private label product manufacturing
Next Steps• Modernize information systems
platform• Optimize SG&A infrastructure
– Consolidate regional structure– Leverage scale in purchasing and
administrative functions
Focus on Driving Efficiency
Experienced Leadership
• Alan Bernon namedPresident of Dean Dairy Group– 30 year dairy industry veteran– 20 years as president of Garelick/
COO of Dean Northeast region
• Pete Schenkel namedVice-Chairman of Dean
2005 Net Sales by Segment
WhiteWave Foods$1.1 billionInternational$0.4 billion
Dairy Group$9 billion
p. 18
WhiteWave Foods’Leading Brand Portfolio
* Note: excludes Marie’s
$273 M
$337 M
$241 M
and other$111 M
2005 Net Sales
$182 M
Branded products have become a corepart of the Dean Foods portfolio over time
2002Purchased
White Wave
1997Purchased
Morningstar
2002Entered licensing agreement with Land O’ Lakes
2004Purchased HorizonOrganic
2005Merged 3 legacy companies
under WhiteWave name
Significant Strides Have Been Madein Integrating the 3 Legacy Companies
3 separate,legacy companies
– 3 faces to the customer
– 3 separate,under-leveragedsupply chains
– Internal redundancy– Limited process
and systems infrastructure
One company
– 1 organization– 1 leadership team– 1 “sales” face to
the customer– Supply chain
integration in progress
– Process and systems build-out in progress
One, unified company;
best-in-class brands, talent, and
infrastructure
– Focused portfolio of premium brands
– 1 face to the customer– Fully integrated supply
chain– Top-talent organization– Best-in-class
processes and systems
Sust
aina
ble
grow
th a
ndsu
perio
r ret
urns
Time2004 2005 2006-2007
p. 21
White Wave’s Focus is to Enable Continued Growth and Superior Returns
StrongGrowth
And SuperiorReturns
StrongGrowth
And SuperiorReturns
FocusedProductPortfolio
FocusedProductPortfolio
FocusedOrganization
FocusedOrganization
FocusedSupplyChain
FocusedSupplyChain
Vertically Integrated Branded Supply Chain
Efficient Manufacturing
Optimized Distribution
FocusedProduct Portfolio
Creating a Leveraged,Fully-Integrated Supply ChainUnder-leveragedShort-run Plants
2,600 SKU’sInefficient
Processing
DistributedMfg Footprint
12 CompanyOwned Plants and
30+ Co-packers
ComplexDistribution
65InventoryLocations
Reduced product
movement, full trucks
(11 inventory locations)
Focusproduct
portfolio onlargest
opportunities(~700 SKUs)
Dedicated,multi-line,
long run plants(5 WWFC plants
3 strategicco-packers)
2004
2005
2006-2007
Focused on brands that offer:• High growth
• Health and wellness
• High profit potential
• Premium dairy brands
• Supply chain fit
Focused on Premium, High Growth Brands in the Dairy Case
Focused on Premium, High Growth Brands in the Dairy Case
Fit with the vision
Focused on brands that offer:• High growth
• Health and wellness
• High profit potential
• Premium dairy brands
• Supply chain fit
Strong Brands with a History ofRobust Growth
0
200
400
600
800
1,000
1,200
2000 2001 2002 2003 2004 2005
5 YR CAGR ofKey Brands = 28%
* Pro forma assuming we owned these samebusinesses in all comparable periods
p. 26
WhiteWave Foods’Leading Brand Portfolio
* Note: excludes Marie’s
$337 M
2005 Net Sales
20% increase vs. 2004
p. 27
Despite the Rapid Growth of the Soymilk Category, US Household
Penetration is Low
• Virtually all sales are to 7% of households– These buyers represent 80% of category
volume
• Core soymilk households still consume 3X as much conventional milk as soymilk
• Another 30% of US households are interested in soymilk
Represents significant opportunity to grow the category
p. 28
Strategic focus
Silk’s strategy is to drive category growth
• Focus on current users and interested prospects
• Increase marketing investment and focus on heart health
• Focus on core refrigerated products (best taste - margins)
• Use new products to drive trial (e.g. Silk Light)
• Integrate the supply chainto improve margins
2005 Net Sales
0%10%20%30%40%50%60%70%80%90%
100%$337 M
Other
Aseptic
Refrigerated
p. 29
Targeted Promotion
p. 30
WhiteWave Foods’Leading Brand Portfolio
* Note: excludes Marie’s
$273 M
2005 Net Sales
39% increase vs. 2004
p. 31
There is Significant Latent Demand for Organic Milk
• 32% of consumers are interested– 4% of households use organic milk today
• Demand is outstripping supply, customers are on allocation
• We are not currently investing in marketing the brand or pursuing new distribution (68% ACV)
Category will grow as supply situation improves
p. 32
We are Investing to Grow Supply
• Increase supply from 325+ family-owned farms (80% of current supply)
• Adding 180 new family farms to producer network– Horizon Organic Producer Education (HOPE) –
Assists farmers to become organic– 12-36 month transition period
• Increase supply at company-owned farms (20% of current supply)– Improve operations at Idaho and Maryland to
increase quality and productivity– Add new company-owned farms
p. 33
Strategic focus
Horizon Organic’s Focus is Profitable Growth
• Invest to increase supply
• Integrate the supply chainand drive margin
• Optimize pricing to improve profitability and moderate demand
• Drive growth on core fluid milk by targeting interested prospects
0%10%20%30%40%50%60%70%80%90%
100%
2005 Net Sales
$273 M
Fluid Milk
Non-milk Dairy
Other
p. 34
Strategic focus
Rachel’s Organic
• Intensify marketing support of branded products
• Use innovation as driver of growth and differentiation
• Continue to reinforce premium nature of the brand
0%10%20%30%40%50%60%70%80%90%
100%
2005 Net Sales
$69 M
Milk
Yogurt & Cream
Other
38% increase over 2004
p. 35
WhiteWave Foods’Leading Brand Portfolio
* Note: excludes Marie’s
$241 M
2005 Net Sales
13% increase vs. 2004
p. 36
Strategic focus
International Delight – Opportunities for Sales and Profit Growth
• Continue to innovate– Introduction of seasonal
flavors and “trans fat-free” varieties
• Capture the “Away from Home” opportunity
• Integrate the supply chain to drive margin expansion
• Maintain/enhance market position over time
– currently 30% market share
2005 Net Sales0%
10%20%30%40%50%60%70%80%90%
100%$241 M
At Home(Pints and Quarts)
Away from Home(Portion Control
& Bulk)
p. 37
Innovation Drives the Brand: At Home
• Hershey’s Chocolate Caramel leverages a strong co-brand equity
• 0 Trans Fat formulation targets health and wellness trends
p. 38
Innovation Drives the Brand: Away from Home
• Bulk Creamer dispensers complement Portion Control cups to provide full creamer solutions for Away FromHome coffee programs
• Seasonal, limited timeflavors add excitement and incremental sales
p. 39
WhiteWave Foods’Leading Brand Portfolio
* Note: excludes Marie’s
$182 M
2005 Net Sales
2% increase vs. 2004
p. 40
Strategic focus
Land O’ Lakes is a PremiumDairy Brand
• Invest to drive national brand equity and growth
• Introduce value-added products
• Leverage brand equityto build leadership in premium dairy categories
0%10%20%30%40%50%60%70%80%90%
100%
2005 Net Sales
$182 M
Half & HalfAt home(Pints & Quarts)
Half & Half Away from home(Portion Control)
Aerosol
Other
Building a World Class Organization
• Joe Scalzo namedPresident and CEO of WhiteWave– Proven executive with skills and
experience to realize WhiteWave’s potential
– Gillette, Coca-Cola, Procter & Gamble
– Brand management, marketing, logistics and supply chain management experience
– Passion for excellence
Focus on Shareholder Value Stock Price Performance, IPO – February 13, 2006
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
Apr-96
Oct-96
Apr-97
Oct-97
Apr-98
Oct-98
Apr-99
Oct-99
Apr-00
Oct-00
Apr-01
Oct-01
Apr-02
Oct-02
Apr-03
Oct-03
Apr-04
Oct-04
Apr-05
Oct-05
CAGR = 26%
Acquired Morningstar
Acquired Dean Foods
AcquiredWhite Wave
Acquired Horizon Organic
Began WhiteWaveconsolidation
TreeHouse Spin-off
TreeHouse Foods was Spun-off from Dean Foods on June 27, 2005. Chart includes the value of TreeHouse Foods on the day it was spun-off to show total shareholder return since IPO
Summary• Dairy Group continues to execute long-term
strategy– Growing marketshare– Driving efficiency
• Significant opportunities at WhiteWave Foods– Driving rapid growth in well-positioned brands– Pushing efficiency to grow profitability
• Intense focus on shareholder value creation– History of shareholder enriching activities
Dean Foods Company
CAGNY ConferenceFebruary 21, 2006
Scottsdale, Arizona