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Dean Foods Presentation at 2010 Consumer Goods Analyst Conference
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February 19, 2010
2
The following statements made in this presentation are “forward looking” and are made pursuant to the safe harbor provision of the Private 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, including acquisitions and the integration of such acquisitions, (3) our branding initiatives, (4) our integration, innovation, and research and development 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, operating income, net income, debt covenant compliance, financial performance and adjusted earnings per share can vary based on a variety of economic, governmental and competitive factors, which are identified in our filings with the Securities and Exchange Commission, including our Forms 10-K and 10-Q (which can be accessed on our website at www.deanfoods.com or the website of the Securities and Exchange Commission at www.sec.gov). Our ability to profit from our branding initiatives depends on a number of factors including consumer acceptance of products. 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. Certain non-GAAP financial measures contained in this presentation, including adjusted diluted earnings per share, free cash flow, consolidated adjusted operating income and consolidated adjusted net income, have been adjusted to eliminate the net expense or net gain related to certain items identified in our press releases. A full reconciliation of these measures calculated according to GAAP and on an adjusted basis is contained in such press releases, which are publicly available on our website at www.deanfoods.com/investors.
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Gregg Engles, Chairman and CEOCEO Perspective and Strategic Update
Joe Scalzo, Chief Operating OfficerExtending our Advantage in 2010
Jack Callahan, Chief Financial OfficerFinancial Update
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The in fluid milk with 38% share
of next largest milk competitor
The country’s fluid dairy processing footprint
Retailer and processor consolidation continues,
Our scale advantage affords us opportunities to reduce costs and build capability that our We are aggressively attacking these opportunities
5
US leader in long shelf-life private label dairy
Nationwide capabilities
Strong foodservice and retail presence
Value-added brands in growth categories
#1 in global soy
#1 US organic milk
#2 US creamers
Note: Reflects full year 2009 information. *Proforma for Alpro acquisition that was completed in July 2009. Alpro net sales have been converted at a rate of $1.4 / €1 for purposes of this presentation
$1.8B$8.5B $1.0BNet Sales*
#1 US fresh milk
Cost leadership
National footprint
National selling with local execution
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Share and cost leadershipStable categoryDistribution strengthPass-through mitigates commodity impactResilient cash generation
Leading brandsGrowth categoriesGlobal soy platformSolid marginsBest-in-class capabilityTop-line growth opportunity
Focus on Cost Focus on Growth
Commodity Food Best in Class Packaged Food
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Procure$50M
Distribute$50M
WhiteWave$50M
NetworkOptimization
$65M
Convert$85
Procure$50M
Distribute$50M
WhiteWave$50M
NetworkOptimization
$65M
Convert$85
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National82 Plants
Regional6-31 Plants Each
Local1-4 Plants Each
Note: Dean internal analytics. Sources: NMPF 2010 Highlights, IRI, Retail Link, Dean internal data
Dean is the only national player in a highly fragmented industry
Dean has a third fewer plants, but equal share as local competitors combined
Share continues to grow as we extend our advantage
Fluid Milk Competitive Landscape in Geographies Dean Serves
Next Five Players
Balance of Industry
155+Players
160+ Competitors350+ Total Plants
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Local/Regional
Tribal knowledge and intuition
Complex product offering results in high costs
Little understanding of consumer product
preferences
Limited cost reduction abilities
Scale
Data
Focus
Capability
Cost
Traditional Dairy The Dean Model
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A Hotly Contested Category
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$1.50
$1.60
$1.70
$1.80
$1.90
$2.00
$2.10(per gallon, white milk)
Gap Between Retail Price and Class I Mover
25%21% 21%
32%
2006 2007 2008 2009
Dean Brand Price Premium over Private Label
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Profit pool has been compressed
Believe we will see a bottom in 2010
Margin pressure for retailers and commodity increases likely leads to price inflation
Processor margin pool limited
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$9
$11
$13
$15
$17
$19
$21
$23
J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D
Class I Mover ($/cwt)
5 year avg. $14.78
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Procure Distribute Convert
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1Q 08 2Q 08 3Q 08 4Q 08 1Q 09 2Q 09 3Q 09 4Q 09
Competition1
Fluid Milk Gallons (YOY change)
1 Competitor estimates derived from subtracting FDD pounds from USDA sales pounds
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WhiteWave Revenue1 WhiteWave Operating Profit
0
1,000
1,250
1,500
1,750
0
100
125
150
($ Millions) ($ Millions)
Note:Net Revenue: 2007 & 2008 adjusted for exited businessesSource: internal data
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$1.20
$1.54 –$1.64
$1.30
$1.59
$320
300+
Free Cash Flow* ($ Millions) Adjusted Earnings Per Share
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Dean is uniquely positioned to win
Near-term challenges underscore the importance of executing our strategies
We expect to gain share in 2010 and hold the adjusted EPS growth we achieved in 2009
Our long-term earnings trajectory for double-digit adjusted EPS CAGR remains on track
Confident we will win
19
Gregg Engles, Chairman and CEOCEO Perspective and Strategic Update
Joe Scalzo, Chief Operating OfficerExtending our Advantage in 2010
Jack Callahan, Chief Financial OfficerFinancial Update
20
71% 10%
5%
5%8%1%
Other Beverages
Other Fluid DairyOther
Cultured
Largest US milk processor
$8.5B revenue
50 regional brands and private label
5,800 company owned DSD routes
82 plants;160,000 locations served
Industry consolidating, but still highly fragmented
Ice CreamMilk
Highlights
Product Mix
Fluid Milk Share %
35 36 37 38
2003 2005 2007 2009
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2010 Plan: $90M
2009 Delivered: $75M
Cost Savings Target:
$300M+
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($ millions)
10% advantage achieved today by leveraging scale and capability
$11M in 2009 savings
Targeting $15 million in 2010
Focus on product standardization
Drive Procurement SavingsLeveraging Our Scale
50
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15
11$11
23*Includes capital projects
Problem solving & lean skills
SWAT team approach
Hands-on 20 week program
Cultural transformation
KPI enabled
Continuous ImprovementMarathon Campaigns Gain Momentum
($ millions) 85
54
30
24$24
40-60% line efficiency improvement in marathon plants
5-15% labor cost reduction in plant and cooler in marathon plants
Improved scheduling
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Fewer, more productive manufacturing facilitiesConsolidation to most efficient facilities
Closed eight plants in the last two years
Like products into focused facilitiesOptimize the network to reduce total costs
Simplify the NetworkRight Products in the Right Plants
($ millions) 65
23
13
10$10
25
Example Case: Texas Production Transportation Reduction
Before After
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Leveraging truck based GPS
Reduced administration timeLive truck dataStandardized delivery time
Routing tools
Future focusDelivery frequency managementDynamic routing
Distribution EfficiencyFewer, More Productive Routes
($ millions)50
32
17
15$15
Gallons of Fuel -4%
Routes Removed 220
Labor $ per Gal -1%
Avg. Cases per Load +3%
27Note: 1Alpro 2009 revenues while owned by Dean Foods $174MM.Source: Grocery data from IRI and Nielsen
Largest US value-added dairy case competitor
$1.8B Revenue (2009)1
2,200 employees, 10 plants
Strong 2009 operating profit growth
Highlights Strong Brand Positions
28Note: Alpro share of “EU9”: UK, NL, BE, DE, P, SW, AU, IT, FR. Approx 2009 share. 2009 Alpro sales translated back to US GAAP. Source: Grocery data from IRI and NIelsen; Internal Data
2009 Sales: $750MM54% combined shareNo. 1 in soymilk worldwideSoymilk category slowed in 2009 driven by economyMaintained clear leadership behind marketing investment of +10% in 2009Expanding beyond soy: PureAlmond
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Australia
US
EU6
Belgium
UK
US
Germany
Note: 67% Silk share for US grocery and Canada grocery + mass42% Alpro share for “EU9”: UK, NL, BE, DE, P, SW, AU, FR, IT Core countries = BE, NL, UK, DESource: Grocery data from IRI and Nielsen
DF Position and Share in Global Soy (by Brand)
Strong Opportunities to Growwithin Existing Regions
#1 position in N America and EuropeWorld-leading expertiseInternational growth opportunities
Dean Foods Soymilk Business
0.8
0.5
0.2
25.0
11.3
15.0
8.3
30Source: Grocery data from IRI and Nielsen; Internal Data
2009 Sales: $550M
7% increase vs. 2008
24% share, +2 pts
Strong core growth; Accelerating growth behind CoffeeHouse Inspirations
International Delight is the #2 fastest growing national grocery brand
Share growth accelerating
Q309 launch, at 80% ACV50%+ of ND creamer growth“Skinny” launching now
31Note: Horizon market share includes The Organic CowSource: Grocery data from IRI; Internal Data
2009 Sales: $435MMaintaining 41% shareCategory down in 2009 –starting to recover with better price gaps to conventionalFocus on cost and price management driving improved profit outlook Driving sales to differentiated products: single-serve and DHA
32
Gregg Engles, Chairman and CEOCEO Perspective and Strategic Update
Joe Scalzo, Chief Operating OfficerExtending our Advantage in 2010
Jack Callahan, Chief Financial OfficerFinancial Update
33
Gross Profit+ 6%
Adjusted Operating Profit+ 10% $693M
+ 22%Full Year Adjsted
EPS $1.59
Selling & Distribution< 1%
G&A+ 23%
Operating Cost+ 5%
34
ITR&DSupply-Chain
~$45M in Support of Strategy($ Millions)
Wages/Benefits Incentive CompPensionLegalInsurance
2008G&A
Base Growth /Corporate Items
StrategicCapability
Special ProjectsStrategic Consulting
2009G&A
Discretionary Spending
Acquisitions
43
3015
25
$486
$599
35
$109
$462
$390
$300 +
2007 – 2010E ($ Millions)
CapEx
36
$5,295
$4,459
$4,190
< $3,900
2007 2008 2009 2010 E
Net Debt($ Million)
Leverage Ratio*
*Year end, as defined by credit agreement
37
Flat Operating Profit Growth
Limited G&A Growth in 2010
38
Q1 Q2 Q3 Q4
Margin concessions in run-rate
Accumulating benefit of cost programs
Limited G&A growth
Minimal impact from dairy commodities
Easier overlap, including share count
2010 Estimated Adj EPS Growth Drivers of Second Half Growth
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Clear leadership positions in both fluid milk and our value-added branded portfolio
Current marketplace pressures make scale more important than ever, and Dean has a 5x advantage
Cost programs gaining momentum
WhiteWave-Alpro well positioned to sustain growth
Significant capability now in place, limited incremental investment
Resilient cash generation, and long-term EPS progression
February 19, 2010
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Appendix
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