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“THE NEW SCOTT WE’RE NOT JUST A PAPER COMPANY ANYMORE”

Worldwide Consumer Business. “THE NEW SCOTT WE’RE NOT JUST A PAPER COMPANY ANYMORE”. Worldwide Consumer Business. Purpose. To Explain Transition from Old Scott to New Scott. From:. To:. Grow, Grow, Grow. Declining Volume. PROFITABLY. Global Brands, Marketed Synergistically.

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“THE NEW SCOTT WE’RE NOT JUST A PAPER COMPANY ANYMORE”

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  1. Worldwide Consumer Business “THE NEWSCOTTWE’RE NOT JUSTA PAPER COMPANYANYMORE”

  2. Worldwide Consumer Business Purpose To Explain Transition from Old Scott to New Scott From: To: Grow, Grow, Grow Declining Volume PROFITABLY Global Brands, Marketed Synergistically Fragmented Products & Regional Brands Aggressive Innovation & Excellent Execution Slow to Innovate No Worldwide Leadership Global World Class Leadership

  3. Worldwide Consumer Business New ScottConsumer Regional Heads • North America • Europe • Asia & Pacific

  4. Worldwide Consumer Business Strengthened OrganizationalCapability • Hired 14 New Key Leaders - 150 Years of Consumer Packaged Goods Experience • From World Class Companies - Coca Cola - Kimberly Clark - Procter & Gamble

  5. Worldwide Consumer Business New Scott • Establish Global Brands • Grow These Brands Profitably • Grow Organizational Capability

  6. Worldwide Consumer Business Presenting theNew Scott Brands

  7. Worldwide Consumer Business Basic Bath Tissue Old New

  8. Worldwide Consumer Business Premium Bath Tissue Old New

  9. Worldwide Consumer Business Scott, Scott Extra, Scott Ultra

  10. Worldwide Consumer Business Basic Towels Old New

  11. Worldwide Consumer Business Premium Towels Old New

  12. Worldwide Consumer Business Wet Wipes – Babies & Children Old New

  13. Worldwide Consumer Business Wet Wipes – Adults Old New

  14. Worldwide Consumer Business All Products Old

  15. Worldwide Consumer Business All Products New

  16. Worldwide Consumer Business New Scott • New, Global Packaging • New, Global Positionings • New, Global Advertising • New, Global Initiatives

  17. Worldwide Consumer Business Overview • Scott Brands Marketed in 22 Countries

  18. Worldwide Consumer Business Overview • Scott Brands Marketed in 22 Countries • 1994 Worldwide Sales: Over $2.8 Billion

  19. Worldwide Consumer Business Overview • Scott Brands Marketed in 22 Countries • 1994 Worldwide Sales: Over $2.8 Billion • 1994 Worldwide Operating Income: $388 Million - Restructuring - Cost Savings - Mix Improvements T +$125 Million/ +47% T vs. 1993 Include Affiliates

  20. Worldwide Consumer Business Overview • Scott Brands Marketed in 22 Countries • 1994 Worldwide Sales: Over $2.8 Billion • 1994 Worldwide Operating Income: $388 Million - Restructuring - Cost Savings - Mix Improvements • But…1994 Sales 3% Lower vs. 1993. T +$125 Million/ +47% T vs. 1993 WE MUST FIX THIS AND GROW Include Affiliates

  21. Worldwide Consumer Business Overview • Largest Worldwide Tissue Producer • Cost Competitive • Proprietary Strengths • Technology • Brands We Must…

  22. Worldwide Consumer Business Choose to LeadChoose to Innovate

  23. Worldwide Consumer Business Strategic Plan Maximize Shareholder Value Significantly Increase Profits Fuel Profitable Growth Significantly Decrease Costs + =

  24. Worldwide Consumer Business Maximize Shareholder Value = + Significantly Decrease Costs Significantly Increase Profits Fuel Profitable Growth Significantly Decrease Costs • Restructuring Benefits • 1995 Benefit: $200 Million • Goal: 100% to the Bottom Line

  25. Worldwide Consumer Business Maximize Shareholder Value = + Significantly Decrease Costs Significantly Increase Profits Fuel Profitable Growth • Additional Cost Saving • Streamline Canada & Europe • Plant Productivity & Reliability • Worldwide Procurement & Logistics • Fiber Effectiveness Full Year Savings Potential: $100 Million T

  26. Worldwide Consumer Business New Scott:Continuous Cost Reduction • Eliminate Non-Essential Costs • Generate New Cost Savings • Execute Quickly

  27. Worldwide Consumer Business Maximize Shareholder Value = + Fuel Profitable Growth Significantly Increase Profits Significantly Decrease Costs Fuel Profitable Growth • Basic Brand Management • Accelerated Brand Growth

  28. Worldwide Consumer Business Maximize Shareholder Value = + Fuel Profitable Growth Significantly Increase Profits Significantly Decrease Costs Basic Brand Management • Global Branding - Global Packaging & Positioning - Global Advertising • Group Brand Promotions

  29. Worldwide Consumer Business Maximize Shareholder Value = + Fuel Profitable Growth Significantly Increase Profits Significantly Decrease Costs Basic Brand Management • Fully Capitalize on All Trade Channels - $250+ Million Incremental Sales Potential

  30. Worldwide Consumer Business Maximize Shareholder Value = + Fuel Profitable Growth Significantly Increase Profits Significantly Decrease Costs Basic Brand Management • Improve Basic Business Structure - National Brands & National Products - Rationalize SKUs - Mix Improvements - 100% Capacity Utilization

  31. Worldwide Consumer Business Maximize Shareholder Value = + Fuel Profitable Growth Significantly Increase Profits Significantly Decrease Costs Accelerated Brand Growth & New Product Development Range of Consumer Needs Brand Positioning Technology Value Base Meet Basic Needs Traditional Extra Traditional Mainstream Meet Basic Needs with One Superior Attribute Ultra Proprietary Premium Meet the Most Demanding Needs Specialty Ultra Plus Proprietary • Meet Special Needs • Added Value Ingredients • Niche Product Formats

  32. Worldwide Consumer Business Maximize Shareholder Value = + Fuel Profitable Growth Significantly Increase Profits Significantly Decrease Costs New Worldwide Initiative: Cottonelle Current Competition: Soft -Charmin: Squeezably Soft -Northern: Quilted Softness -Angel Soft: Cushiony Soft -Cottonelle: Cottony Soft Irritation & Allergies Odor Dry vs. Wet Consumers Have Unmet Needs: “Advanced Personal Hygiene” New Cottonelle Brand Positioning: Product Execution: Hypoallergenic Baking Soda Dry & Moist U.S. & Market Share Current: 6% Potential: 10-12%

  33. Worldwide Consumer Business Consumers Have Unmet Needs… • 39% Have Concerns with Inks, Dyes, Sensitive Skin • 39% Have Concerns with Odor Control • 55% of Bath Tissue Users Supplement Dry Tissue Cleaning

  34. Worldwide Consumer Business Maximize Shareholder Value = + Fuel Profitable Growth Significantly Increase Profits Significantly Decrease Costs New Worldwide Initiative: Cottonelle Current Competition: Soft -Charmin: Squeezably Soft -Northern: Quilted Softness -Angel Soft: Cushiony Soft -Cottonelle: Cottony Soft Irritation & Allergies Odor Dry vs. Wet Consumers Have Unmet Needs: “Advanced Personal Hygiene” New Cottonelle Brand Positioning: Product Execution: Hypoallergenic Baking Soda Dry & Moist U.S. & Market Share Current: 6% Potential: 10-12%

  35. Worldwide Consumer Business Adult Moist Wipes:New Incremental Business • Current U.S. Category $80 Million • >50% of Consumers Use Additional Cleaning Methods • >40% of Consumers Convert when Sampled • If 20% of U.S. Homes Convert, Category Size Would Increase to $500+ Million • Worldwide: Multi-Billion Dollar Opportunity

  36. Worldwide Consumer Business Maximize Shareholder Value = + Fuel Profitable Growth Significantly Increase Profits Significantly Decrease Costs New Worldwide Initiative: Viva Ultra Current Competition: “Speed of Absorbency” Only “Absorbent Capacity” Only T • COMBINATION • Speed of Absorbency • Absorbent Capacity • Wet Strength Consumers Have Unmet Needs: Like Cloth New Viva Ultra Brand Positioning: “Cloth-like Performance at a Fraction of the Cost” Product Execution: Ultra (Kitchen) Scrub Cloths (Portable Box) U.S. & Market Share Current: 6% Potential: 8-10%

  37. Worldwide Consumer Business Maximize Shareholder Value = + Fuel Profitable Growth Significantly Increase Profits Significantly Decrease Costs New Worldwide Initiative: Scott Clean Current Competition: “Speed of Absorbency” Only “Absorbent Capacity” Only • COMBINATION • Absorb Spills • Clean Surfaces Consumers Have Unmet Needs: New Scott Clean Brand Positioning: “The Paper Towel That Leaves Surfaces Truly Clean Because Its Thirsty FiberWeve Doesn’t Leave Lint as it Absorbs” Product Execution: Single Roll Double Roll Triple Roll Extra Big Sheets Choose-A-Size U.S. & Market Share Current: 10% Potential: 14-17%

  38. Worldwide Consumer Business Consumers Have Unmet Needs… Most Common “Frequent” Uses of Paper Towels No Lint Towel Required

  39. Worldwide Consumer Business Maximize Shareholder Value = + Fuel Profitable Growth Significantly Increase Profits Significantly Decrease Costs Key Initiatives – Implementation Plan

  40. Worldwide Consumer Business Maximize Shareholder Value = + Fuel Profitable Growth Significantly Increase Profits Significantly Decrease Costs Beginning a Revolution in Brand Growth • Breakthrough Products • Highly Distinctive and Proprietary Positionings • World Class Advertising • Global Execution • Key Initiatives Full Year World Impact on Sales: $700-800 Million

  41. Worldwide Consumer Business Maximize Shareholder Value = + Fuel Profitable Growth Significantly Increase Profits Significantly Decrease Costs Accelerated Brand Growth • Adapt Proven Away-From-Home Innovations: - Wipes - Cleaning Systems - Dispensing Systems

  42. Worldwide Consumer Business SummaryKey Strategic Imperatives • “Profitize” 100% of Restructuring Savings • Offset Pulp and Other Inflation - Additional Cost Savings - Mix Improvements - Pricing • Drive Volume Growth & Profit Margin - Sales Growth: +10%/Year Minimum -Operating Margin: 20% Minimum

  43. Restructuring & Cost • Reduction PROFIT • Basic Brand Management PROFIT • Incremental Sales from • Initiatives PROFIT

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