1. Company Acquisition Proposal
December 16, 2011

2. Agenda
Acquisition
Context
Organization
Recommendations
Responsibility
Financials
Conclusion
2

3. Acquisition Proposal
Why
DPC
Should
Buy Why
ConAgra
Will
Sell
Kid Cuisine is the dominant player in Smallest of ConAgra’s four frozen
children’s frozen foods prepared food brands
Kid Cuisine has more potential than Sales have declined by 4% (CAGR)
current value of $71 million over the past three years
DPC can increase the NPV of Kid Accounts for 0.58% of ConAgra’s
Cuisine to over $120 million overall business
Free Cash Flows in Millions Retail Sales in Millions (excluding Walmart)
$9 $120
$7 $115
$5 $110
$2 $105
Current Estimated FCF’s
Acquisition with Proposed Changes $100
$0
2010 2011 2012 2013 2014 2015 2008 2009 2010
* Data for this page was taken from the AC Nielsen Database - Sales exclude Walmart
**http://thomson.mobular.net/thomson/7/3004/4313/
3

4. Context
Frozen Prepared Dinners
Market
Sta8s8cs Sales Volume - Top 10
Overall sales are over $1 billion Overall Volume (Dollars)
% Frozen
Six brands account for 91% of the 52 Weeks Ending
Dinner
06/12/10
market share Market
*BANQUET $201,237,060 22%
Overall market shrank by over 5% *MARIE CALLENDER'S $171,419,784 18%
(CAGR) from 2006-2010
*HEALTHY CHOICE $164,614,390 18%
ConAgra owns four primary brands, HUNGRY-MAN $132,488,544 14%
accounting for 69% market share
*KID CUISINE $103,313,725 11%
*Banquet
9% *Marie Callender’s LEAN CUISINE $66,728,644 7%
7% 22% *Healthy Choice AMY'S $17,057,759 2%
14% *Kid Cuisine
Hungry-Man (Pinnacle) BOSTON MARKET $13,718,543 1%
18%
11% Lean Cuisine (Nestle) SWANSON $13,576,044 1%
18%
Others
CLAIM JUMPER $13,007,980 1%
*ConAgra Brands OTHERS $32,875,821 4%
* Data for this page was taken from the AC Nielsen Database - Sales exclude Walmart
4

5. Consumers’
Needs & Decisions
Decision
Making
Unit
Parent Child
Motivations Saving Time & Money Tasty & Fun Meal
Role Gatekeeper/Buyer Influencer
Criteria Nutrition, Good Value Flavor, Packaging
Power Very High Medium
Attitude Negative Positive
Emerging Consumption Patterns: serving size, ingredients,
ethnic variety
Threats: portion size, cooking is relaxing
Opportunities: open to new brands, useful under time constraint
5

6. Market Potential
Kids between 6-11: 24 million
59% of children between 6-11 eat frozen meals: 14 million
Average consumption: 4 meals per month
Average MSRP: $2.17
Total
Poten8al
Market
Size
for
Kid
Cuisine
$1.5 Billion
6

7. Competitive Analysis
Single-­‐Serve
Meals Mul8-­‐Serve
Meals
Variety Convenience
Price Price
Quality Quality
Nutritional Value
“The competitive landscape includes the
multi-serve world. Frozen pizzas and
Yes
lasagnas also compete for a share of the
Kid Friendly
[kid’s] stomach.”
David Cox - Senior Director of Consumer Insights. ConAgra, Inc.
100%
No
75%
50%
Hot
25%
Kid Cuisine Lunchables Pockets Low High
0% Price
Brand Awareness in Northeast**
7

8. Brand Positioning
Competitive Positioning
Organic
Healthy Alternative
Filling
Satisfying
Kid Cuisine Positioning to Kids
Focused on fun and creativity
Kid Cuisine Positioning to Parents
Reward your kids
Be a “YES-Mom”
8

9. Production
and Distribution
Supplier Manufacturer Distributor Retailer
Contracted
Farmers Supermarket
Hypermarket
Local /
Regional Food
Distributor
Farmers Processor
Open Other
Market Retailer
Excellent relationship with supplier network
Manufacturer margin of an estimated 25%
Key functions such as packaging and transportation outsourced
Core competency in food processing
9

10. Retail Channels
Average ACV of 71% ConAgra Distribution
18% 6%
41% of sales in south
4%
5%
15% of sales through non-
supermarket channels vs.
Super/Hypermarkets
industry average of 5% Walmart 67%
Drug stores and others
Alternative channel retailing Specialized retailers
growing faster than supermarkets Convenience stores
Kid Cuisine should keep the
production and distribution
processes similar to those
currently used by ConAgra
Frozen Food Industry Profile: United States; Nov2009
2010 STATE OF THE INDUSTRY REPORT. (cover story), refrigerated & Frozen Foods Retailer; September 2010, Vol. 8 Issue 8
Mintel Frozen Meals - US - September 2010
10

11. Understanding ConAgra
Strategy: Focused, socially responsible and
environmentally friendly “food company”
Structure: Organization structure shows focus on quality,
innovation and consumer experience
Systems: Emphasis on accountability, simplification and
collaboration
Shared Values: One Company. One Goal. Making foods
you love.
Style: Strong and focused - Gary Rodkin, CEO, ConAgra
Staff: Currently 24,400 employees
Skills: High investment in employee development
11

12. Transition to DPC
Maintain current 141 ConAgra employees
Provide attractive compensation packages for top managers
Lease new plant in the proximity of existing
ConAgra plant
Recruit employees based on expertise from:
PepsiCo
Jimmy Dean
Dave Cox
Whole Foods Kid Cuisine Brand Manager
IT Director Marketing Director Finance Director Operations Director HR Director
Kid Cuisine Kid Cuisine Kid Cuisine Kid Cuisine Kid Cuisine
Pepsi
Breakfast Brand Healthy Brand Dinner Brand Distribution Manufacturing
Manager Manager Manager Kid Cusine Kid Cuisine
Jimmy Dean Whole Foods Kid Cuisine
Pepsi
12

13. Recommendation #1
Healthier Ingredients
Goal: Drive consumers to eat twice as many Kid Cuisines per month
and expand current customer base
Product: Improved image; targeted
changes to select dinners
Survey
Results:
“How
much
more
Pricing strategy: Increase MSRP by would
you
be
willing
to
pay
for
a
$1 in the Northeast and West regions healthier
frozen
dinner?”
40%
Distribution: Grocery stores and
Peapod 30%
Promotion: Online and television 20%
Economic Analysis (est.) 10%
NPV= $14 million
0%
Incremental yearly sales=
i ng 0. 5
0 .00 .50 .00 ce
3.4 million (4% CAGR over 4 years) oth +$ $1 +$
1
+$
2 ren
N +
D iffe
No
13

14. A Need for Healthier Food
Childhood Obesity is on the
rise
More than 12% of adolescents
are overweight or obese.
46% of parents are concerned
Yes
that their children may
become obese.
Kid Friendly
The United States
Government is more focused
on children’s health
No
Competitors are introducing
healthier options
Lunchables
Low High
Lean Pockets
Other organic options more Healthy
prevalent
14

15. Relationships:
Price, Product & Promotion
Goal: Improve the image of Kid Cuisine by focusing on the healthy ingredients
Test: Determine if healthier ingredients or healthier positioning increase sales
Plan: Launch national
advertising campaign focused on
the idea that Kid Cuisine is made
from ingredients that are better Northeast:
Modified Product
for children. Modified Price
Central and South:
Original Product
“Our experience shows that there is a fine Original Price
balance between Mom’s stated desire to give
her kids healthy food and her actual desire to
get the kids to eat something.” West:
- David Cox, ConAgra Director of Consumer Insight Original Product
Modified Price
15

16. Healthy
Advertising Campaign
Positioning Statement: Kid Cuisine is made with ingredients that are good for
kids, allowing busy moms to spend less time preparing food and more quality time
with their kids.
Budget: $4.3 million annually
Media: Television advertisements and online
initiatives:
New website focused on nutrition facts
Facebook integration
Continue current promotions with
Krazy Kombos and Kidz Bop Music Mania
New promotion: Kid Cuisine Quest
Redesigned box
NPV(est.) = $14 million
16

17. Recommendation #2
Breakfast
Goal: Drive consumers to eat twice as many Kid Cuisines per month
Breakfast Lunch Dinner
Product
Expansion in the breakfast
category with three new products
Price and Distribution
Remain consistent
Promotion
8-week launch campaign
Total cost: $3.75 million
17

18. Why Breakfast?
Market potential:
Kids between 6-11: 24 million
48% eat frozen breakfasts: 12 million children
Average consumption: 4.6 frozen breakfasts per month
Average consumption: 643,004,928 units per year
64% of kids think “breakfast is the most Frozen Breakfast Category -
important meal of the day”* Forecasted Sales (in millions)
$1,100
$825
Primary competitor: Jimmy Dean 6.1% growth
$550
Reduced SKU’s by 30% while
increasing sales year $275
Recently launched Jimmy D’s $0
05 07 09 e .) e .) e .)
20 20 20 ( for ( for ( for
11 13 15
20 20 20
* Mintel “Breakfast Entrees and Sandwiches” November, 2010
18

19. Breakfast Launch
Positioning statement
Quick, guilt-free, and easy
alternative for your kid’s breakfast
or breakfast for dinner.
Total cost:
$3.75 million
Total reach: (over 8 weeks)
Greater than 60% of target
Media:
Economic analysis (est.)
Television NPV = $28 million
Online Market share = 5%
Point of purchase Incremental sales= 13.7 million units
Movie integration (25% CAGR over 2 years)
19

20. Corporate Social
Responsibility
An Active and Healthy Future
Goals
1. Increase brand awareness
2. Change brand perception to ‘a nutritious, energy-packed meal’
3. Create a sense of loyalty
Sustainable packaging
Four-sided packaging, $0.02 saving per box
100% recycled materials
Stewards of growth program
Employee development and safety
BPA-free packaging
More vegetables and whole wheat
20

21. Non-Profit Sponsorship
Five-year, strategic alliance with Boys and Girls Club of America
44% (1.85 million) of BCGA members 6-10 years old
65% (2.73 million) of BCGA members minorities
What
$5 million
Donate meals
Eating healthy educational series
Kid Cuisine Learn to Swim Program
Benefits
Enhance brand image
Increase brand awareness
Yearly $380,000 tax shield
Five-year increase in sales of 17 million
units, resulting in net revenues of $5 million
21

22. Sales and Margins
AC Nielsen Walmart Total
(18%)
Kid Cuisine Sales
(FY2010) in 000’s $103,314 $22,679 $125,992
Margin % Margin $ Sale Price
COGS $0.90
Manufacturer 25% $0.30 $1.20
Distributor 15% $0.21 $1.41
Retailer 35% $0.76 $2.17
Est. Units Revenue ($) in EBIT ($) in
Sold in 000’s 000’s 000’s
Kid Cuisine Sales
(FY2010) 58,061 69,673 6,914
* ConAgra 2010 10K - Page 80
** Beaman, J.A., Johnson, A.J., A Guide for New Manufacturers Food Distribution Channel Overview, Oregon State University, 2006.
*** Broker fee of 3-5% buried in SG&A
22

23. DCF Valuation
& Industry Ratios
Kid Cuisine DCF Valuation*
Present Value of Cash Flows (in 000’s) $18,258
Present Value of Terminal Value (in 000’s) $53,272
Estimated Firm Value (in 000’s) $71,530
Assumptions
Five-year growth rates were taken directly from Mintel reports**
9% depreciation charge based off current parent company***
Financing mix of 2:1 debt to equity
Tax rate: 38%
WACC: 6.02%
* Please refer to Appendix I & II for Income Statement and Balance Sheet
** http://academic.mintel.com.ezproxy.bu.edu/sinatra/oxygen_academic/search_results/show&/display/id=482903/display/id=548674?select_section=548675
*** ConAgra 10-K 2010
23

24. Monte Carlo Simulation
Overall:
Growth (taken directly from a Mintel report)
Unit price variation (+/- 2%) historically stable
Unit cost variation (+/- 5%) based on corn,
plastic, cardboard, and lean manufacturing
initiatives
Healthy line inputs:
Growth (twice the current rate) as compared to
comparable products
Variation (+/- 10%) as compared to comparable $ in 000’s
products
NPV Mean 124,838
Breakfast line inputs:
Growth (five times the current rate) new product
introduction in a healthy market growing at 6.1% 25th Percentile 82,801
vs -5% frozen dinner
Variation (+/- 25%) new contender in a growing 50th Percentile 118,561
market, with some proven success, but strong
competition
75th Percentile 159,903
24

25. Free Proposed Changes Estimation
Cash Flow in 000’s
Increase NPV from:
$71 million
$9,000 to
}
$120 million
$6,750
$4,500
Current Status
Healthy Line
$2,250 Breakfast Line
All Changes
$0
2010 2011 2012 2013 2014 2015
25

26. Summary
Kid Cuisine is a relatively neglected brand, and
ConAgra may be interested in selling
We believe that with a few changes:
We can increase the current market share
We can enter a similar, but growing market
ROI of 76% over life of project
“Don’t leave money on the table”
26

27. Acquire Kid Cuisine
a proud brand of
27

28. References
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Nielsen
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www.nielsen.com
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28

29. References
“Frozen
Foods
-­‐
US
-­‐
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2010”
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with
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Boston
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-­‐
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10,
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"A
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29