Agenda. Peet s and Market Opportunity Our Growth Strategy and Focus Future Outlook

Transcription

1 January 2011

2 Legal Disclaimer These slides accompany an oral presentation by Peet s Coffee & Tea, which contains forward-looking statements. The Company s actual results may differ materially from those suggested here. Additional information concerning factors that could cause such a difference is contained in the Company s Report on Form 10K for the year ended January 3, 2010

3 Agenda Peet s and Market Opportunity Our Growth Strategy and Focus Future Outlook

4 Alfred Peet founded Peet s Coffee & Tea in 1966 and in the process launched a coffee revolution Alfred Peet Peet s first store Vine & Walnut, Berkeley

5 Over the past four decades, Peet s influence on the coffee industry has been far-reaching First Peet s store opens Jerry Baldwin opens the first Starbucks, which sells Peet s coffee Starbucks (Baldwin) purchases Peet s Baldwin sells Starbucks to focus on Peet s

6 For 45 years, Peet s has maintained its gold-standard quality position by focusing on 3 product tenets + + = Highly Selective Sourcing Artisan-Roasting Process Delivered Fresh The Best Cup

7 We ve retained the rich coffee and tea expertise Coffee and Tea Expertise Jerry Baldwin Board Member Co-Founder SBUX 39 years Jim Reynolds VP, Roastmaster Emeritus 37 years Doug Welsh VP, Coffee 17 years Eliot Jordan Tea Buyer 26 years

8 while adding an experienced, growth-minded management team Pat O Dea (2002) CEO CEO Mother s Cookies 12 years P&G Brand Management Tom Cawley (2003) Kay Bogeajis (2007) CFO VP Retail CFO Gap Brand CFO Pizza Hut 14 years PepsiCo/Yum 16 years PepsiCo/Yum 14 years Burger King Laila Tarraf (2006) Shawn Conway (2010) Eric Lauterbach (2010) Chief People Officer Chief Supply Chain Officer VP Consumer CPO Walmart.com SVP Supply Chain SKYY Spirits GM Dreyer s Ice Cream 5 years Clorox 8 years P&G

9 The opportunity, given our established premium quality/price position, is very large and growing Total U.S. Coffee Market $34 Billion Traditional $17-19 Billion Specialty $15-17 Billion Source: Specialty Coffee News, National Coffee Association 2009

10 Specialty coffee has become mainstream as younger drinkers have been raised on specialty By Age Group, % of Coffee Drinkers Who Drink Specialty Coffee % 48% 43% 36% Specialty 39% 52% 57% 64% Traditional Source: National Coffee Association, 2010 Drinking Trends

11 And we are ideally positioned to take advantage of this trend toward higher-quality, super-premium coffee consumption Price Peet s McDonald s Dunkin Donuts Green Seattle s Mountain Best Maxwell House Starbucks Quality

12 Our vision is to be the premier-quality, premiumpriced specialty coffee/tea company in the U.S. Artisan-Roasting Facility DSD Selling and Merchandising System Coffee and Tea Expertise Premium Quality/Price Brands IT and Business Intelligence Infrastructure

13 Agenda Peet s and Market Opportunity Our Growth Strategy and Focus Future Outlook

14 We have two primary business segments Retail Stores $203MM sales +4% vs LY 10% op margin (+4 pts since 2007) 192 company-owned stores 103 licensed stores Strategic focus: Margin expansion and brand building Non-GAAP results for last 4 quarters through Q3 2010, adjusted for 52 weeks

15 We have two primary business segments Retail Stores $203MM sales +4% vs LY 10% op margin (+4 pts since 2007) 192 company-owned stores 103 licensed stores Strategic focus: Margin expansion and brand building Consumer Packaged Coffee & Tea* $125MM sales +21% vs LY 27% op margin 9,000+ grocery/mass stores 48% ACV distribution Strategic focus: Growth; leading super-premium share in any segment *Includes Grocery, Foodservice/Office, Home Delivery Non-GAAP results for last 4 quarters through Q3 2010, adjusted for 52 weeks

16 Our retail stores are the physical embodiment of the Peet s brand and deliver strong profits $1.1M Annual Mature Store Revenue* Whole Beans & Related Items ~$300K Beverages & Pastries ~$800K Store Contribution 20%+ * 2010 results for stores 3 or more years old

17 Through 2008, we accelerated our store growth Peet s Retail Stores (year-end count)

18 During this time, Retail segment margins declined due to the upfront investment in new stores Retail margin % % of stores less than 3 years old 46%

19 Since 2008, our Retail segment margins have expanded as the mix of newer stores declined Retail margin % % of stores less than 3 years old 46% 17%

20 And our management team has delivered margin-enhancing operations initiatives Over the past 2 years, we have raised existing store* margins by over 200 bps Inventory Management Labor Productivity Other Coffee ordering and waste management Milk waste Pastry waste Merchandise shrink Labor deployment during peak hours Shift lead training Procurement savings Repairs & maintenance optimization Shipping cost reduction ~140 bps ~30 bps ~50 bps * Stores that opened prior to 2007

21 While improving existing company-owned store performance, we continued to expand licensed stores Licensed Locations (year-end count)

22 Near term, Retail focus will be on continued operations-driven margin expansion and enhancing the brand experience Inventory Management Labor Productivity Other Coffee SKU management Cups usage Pastry assortment rationalization Condiment bar management New labor scheduling system in 2011 Management complement Dishwasher replacement Aprons, towels, and cleaning supplies

23 Our consumer packaged coffee and tea business is led by the fast-growing grocery segment U.S Grocery Coffee $3.3 Billion A $1.6 Billion Business by 2013 All Other -4% decline Specialty $1.2 B +18% growth $ 1.2 B % Annual Growth $1.6 B Today 2013 Source: IRI for 52 weeks ending 11/28/10

24 Our unique Direct Store Delivery (DSD) system is a major competitive advantage in the grocery aisle Peet s Estimated Time from Roast to Grocery Shelf: 7 to 14 Days Produce-to-order roasting Peet s DSD Sales & Merchandising Team Grocery Store Visit each store 1-5x / week Sell, build, maintain displays Ensure fresher product Strong relationships with grocers Ready pipeline for new products

25 As a result of our super-premium quality product, brand position, and superior selling/merchandising (DSD), we command a premium price $9.30 Average price (per 12 oz bag) $8.13 $7.46 $6.68 Source: IRI for 52 weeks ending 11/28/10

26 And we ve been rapidly growing our super-premium brand consumer packaged business Consumer Segment Sales ($MM) * 2010 Roll 4 Qtr to Q310 * 2009 adjusted for 52 weeks

27 Where distributed, Peet s is the #2 specialty coffee brand nationally Specialty Share ACV % Share in Stores Where Available Starbucks 25% 94% 27% Dunkin Donuts 13% 95% 15% Peet s 8% 48% 17% Seattle s Best 4% 65% 6% Source: IRI for 52 weeks ending 11/28/10

28 the #1 specialty coffee in California, and a strong #2 in the western U.S. Specialty Share California West Peet s 32% 20% Starbucks 30% 32% Dunkin Donuts 6% 7% Seattle s Best 4% 6% Source: IRI for 52 weeks ending 11/28/10

29 Our objective is to build the leading super-premium brand share in every major consumer segment Grocery Specialty Coffee ($1.2B) +1,110% growth Flavored +15% Single Serve +194% Dark Roast +9% +18% growth Light/ Medium Roast +5% Source: IRI for 52 weeks ending 11/28/10

30 There are three core strategies to continue this strong consumer packaged growth CPG Growth Strategies 1) Existing market share growth (Peet s/godiva) Comments Existing market share ranges from 2% to 48% Drivers: category growth, DSD system, targeted premium consumer marketing 2) Geographic and channel expansion Currently in 48% ACV traditional grocery Mass customer expansion (WalMart, Target) Club and drug expansion 3) Expand new products and enter new segments Currently in dark roast (Peet s) and flavored (Godiva) Expand into new segments and forms

31 With our existing brands business we expect to achieve a 15% to 20% share of specialty coffee 2010 Future Specialty Grocery $1.2B $1.6B Peet s Inc. Share 9% 15-20% Peet s Inc. IRI Sales $108M $ M Grocery store sales Peet s Wholesale ~$76M $ M Peet s sales Source: IRI for 52 weeks ending 11/28/10; Peet s wholesale based on 30% grocer margin

32 and expect to triple the profitability of grocery Grocery Sales and Profit 2010 Future Sales ~$76M $170M -$220M Margin % ~27%* 20-30% Profit ~$21M $35-65M * Peet s Consumer segment margin for last 4 quarters through Q3 2010

33 Agenda Peet s and Market Opportunity Our Growth Strategy and Focus Future Outlook

34 Today, Retail represents 62% of Peet s sales, but CPG drives 62% of profits Retail 62% Sales Mix % Grocery 23% 5% 10% Home Delivery Foodservice/ Office Sales & Profit Mix %* Sales Profit Consumer 38% 62% Retail 62% 38% Total 100% 100% * Non-GAAP results for last 4 quarters through Q3 2010, adjusted for 52 weeks

35 The CPG business has much higher margins Sales Mix & Margin %* Sales Margin % Consumer 38% 27% Retail 62% 10% * Non-GAAP results for last 4 quarters through Q3 2010, adjusted for 52 weeks

36 The blending of these margins and our overhead result in our 8%+ operating margin Sales Mix & Margin %* Sales Margin % Consumer 38% 27% Retail 62% 10% Total 100% 16% G&A (8%) Op Margin 8% * Non-GAAP results for last 4 quarters through Q3 2010, adjusted for 52 weeks

37 Our plan is to: 1) Continue to drive CPG business growth. Sales Mix & Margin %* Sales Margin % Consumer 38% 27% 20% plus growth Retail 62% 10% Total 100% 16% G&A (8%) Op Margin 8% * Non-GAAP results for last 4 quarters through Q3 2010, adjusted for 52 weeks

38 2) Drive Retail margins and improve the brand experience Sales Mix & Margin %* Sales Margin % Consumer 38% 27% Retail 62% 10% Total 100% 16% Low to mid single digit growth improve margins G&A (8%) Op Margin 8% * Non-GAAP results for last 4 quarters through Q3 2010, adjusted for 52 weeks

39 and 3) leverage our overhead Sales Mix & Margin %* Sales Margin % Consumer 38% 27% Retail 62% 10% Total 100% 16% G&A Op Margin (8%) 8% Leverage * Non-GAAP results for last 4 quarters through Q3 2010, adjusted for 52 weeks

40 With this strategy, we have delivered strong sales and EPS growth in a tough economic environment CAGR = 10% 249 Sales ($MM) CAGR = 26% EPS E* 2011E* All years Non-GAAP results on a comparable 52-week basis * 2010 and 2011 figures reflect guidance provided on 11/2/10

41 And by investing in our high-return businesses, we have lowered capital spend and improved ROIC Capital Spending ($MM) ~13 10% 12% ROIC 14% 16% ~19% E* 2011E* All years Non-GAAP results on a comparable 52-week basis * 2010 and 2011 figures reflect guidance provided on 11/2/10

42 Q & A