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Decorative Architectural Products Jeff Filley/ President Masco Coatings Group
Decorative Architectural Products Jeff Filley/ President Masco Coatings Group
Agenda
The Business Today
Growth Plan
2
Decorative Architectural Products
Segment Overview
3
Revenue $2.0B
Margin 18.0%
% of Masco EBIT, As adjusted 42%
% Revenue outside N. America 0%
Masco Corp. (Breakdown of 2014 Revenue)
Rest of
Masco
Decorative
Architectural
Products
Segment
23% 77%
12/31/2014
Currency Exposure USD/CAD
Commodity Exposure TiO2 / Resins
/ Zinc
% Repair & Remodel Sales 99%
*Operating profit, as adjusted excluded $63M of net rationalization charges or Masco .
Our Brands are Industry Leaders
4
• #1 primer brand in
North America
• Strong Pro and
Consumer following
• Consistent winner of the
Harris Poll Brand of the
Year Award
• Most trusted paint brand in US
and Canada
• Quality leader
• Innovation leader
• Strategic partner to The Home Depot
• J.D. Power & Assoc. - # 1 Interior
Paint Satisfaction
• Leading provider of
• Decorative
hardware
• Bath hardware
• Cabinet
hardware
1947 1978 1986 1999 / 2000 2003 2009 2010 2013 2014
Initiated partnership with
THD
Introduction of Premium Plus®
Paint & Computer
Color Matching
Masco acquisitions of Behr &
Masterchem
Introduction of ColorSmart® digital color tool
Introduction of Premium Plus Ultra®,
the first paint & primer in one
Creation of PRO
business strategy
Introduction of Behr
DeckOver®
Stain
Introduction of Behr
Marquee®
Paint
Company formed
5
Behr has a Long Track Record of Innovation and Leadership in the Paint Aisle
Solid Performance Record
$283 $329
$353 $360
2011 2012 2013 2014
6
Adjusted Operating Profit ($M)
8% CAGR
*Excludes business rationalization charges for 2013 and 2011 of $2 million and $12 million, respectively. Excludes 2011
goodwill impairment charge of $75 million.
Agenda
The Business Today
Growth Plan
7
• Grow share in the PRO paint segment
• Extend our Consumer leadership position
• Leverage the KILZ® and Liberty® family of brands
Three Key Growth Strategies
8
1
2
3
Paint is a Large and Growing Growth Opportunity
9 Source: 2007-2010 US Census, Various Annual Reports, Internal Estimates
*2007 denotes market peak and 2009 market trough
Total U.S. Shipments (millions of gallons)
Total U.S. Architectural Market
$11.5B
Masco
a leader
Masco
untapped
opportunity
Pro
Market
$6.6B
Consumer
Market
$4.9B
777
643 705
778
2007* 2009 2014 2017
~3% CAGR
U.S. Consumer Market– $4.9B
Source: Various Annual Reports and Internal Estimates
Consumer
Market
$4.9B
10
28%
Behr
#1
S T R A T E G Y # 1 E X T E N D O U R C O N S U M E R L E A D E R S H I P P O S I T I O N
Behr is a Clear Leader in the Consumer Paint Industry
11
Share of consumer segment vs. closest competitor
Home Depot Innovation Award in 2013 & 2014
Product quality rating last 6 years in a row
Vitality Index - % of Sales from products
introduced in the last 3 years
S T R A T E G Y # 1 E X T E N D O U R C O N S U M E R L E A D E R S H I P P O S I T I O N
Behr’s Unmatched Leadership is a Differentiator
J.D. Power & Assoc. – Interior Paint Satisfaction
~2X
Winner
#1
56%
#1
Total brand awareness
Considered
Conversion rate
Purchased
Source: JD Power & Assoc. Study - 2015 12
Comparison of Behr Interior Paint vs. Other Interior Paints
S T R A T E G Y # 1 E X T E N D O U R C O N S U M E R L E A D E R S H I P P O S I T I O N
Behr is The Leading Consumer Paint Brand
85%
60%
65%
39%
79%
37%
65%
24%
57%
24%
49%
12%
BEHR
Paint
#2 Paint Ranking
Avg. Other Paints
S T R A T E G Y # 1 E X T E N D O U R C O N S U M E R L E A D E R S H I P P O S I T I O N
Behr Invests to Enhance the Consumer Experience
13
19.5’
Next Generation Merchandising Innovation
S T R A T E G Y # 1 E X T E N D O U R C O N S U M E R L E A D E R S H I P P O S I T I O N
Behr Invests to Enhance the Consumer Experience
19.5’
24.5’
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Paint Center within Color Solutions Display
15
S T R A T E G Y # 1 E X T E N D O U R C O N S U M E R L E A D E R S H I P P O S I T I O N
Behr Positioned as Home Depot’s “Best Paint”
+
+
16
Estimated
Sales Opportunity:
~$150-$250M over the next
three years
+
Leverage Behr brand
Continue innovation leadership
S T R A T E G Y # 1 E X T E N D O U R C O N S U M E R L E A D E R S H I P P O S I T I O N
Key Execution Initiatives
Elevate the consumer experience
Maintain quality value proposition
Masco 4%
Source: Various Annual Reports and Internal Estimates 17
U.S. Pro Market– $6.6B
S T R A T E G Y # 2 G R O W S H A R E I N T H E P R O P A I N T S E G M E N T
Pro Market Represents a Large Untapped Opportunity for Behr
Pro
Market
$6.6B
S T R A T E G Y # 2 G R O W S H A R E I N T H E P R O P A I N T S E G M E N T
Behr has Partnered with Home Depot to Capture Significant Segments of the U.S. Pro Market
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Property
Management
Residential
Repaint
U.S. Pro Market
$6.6B
25%
25%
Near Term Focus Future Potential
2011 2014 2017E
Strong Behr Growth
In Pro Segment
Source: Various Annual Reports and Internal Estimates
20% CAGR
New Home
Construction
Commercial 39%
11%
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S T R A T E G Y # 2 G R O W S H A R E I N T H E P R O P A I N T S E G M E N T
Key Execution Initiatives
Estimated
Sales Opportunity:
~$125-$175M over the next
three years
+
+
+
Leverage Behr brand to drive
Pro business
Innovate for the Pro
Dedicated sales force
Design service model
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Strong
Platform
• #1 market share in primers in N. America
• Sold in 25,000 outlets in US & Canada
• Strong brand equity with consumers and pros
S T R A T E G Y # 3 L E V E R A G E T H E K I L Z B R A N D
Key Execution Initiatives
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S T R A T E G Y # 3 L E V E R A G E T H E K I L Z B R A N D
Key Execution Initiatives
Estimated
Sales Opportunity:
~$80-$110M over the next
three years
+
+
+
Defend the core
Expand into adjacent categories
Develop Kilz branded paint
Pursue acquisitions
22
S T R A T E G Y # 3 L E V E R A G E T H E L I B E R T Y F A M I L Y O F B R A N D S
Liberty Hardware’s Competitive Strengths are Enablers to Growth
Design
Innovation
Category
management
Masco scale
& leverage
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S T R A T E G Y # 3 L E V E R A G E T H E L I B E R T Y F A M I L Y O F B R A N D S
Key Execution Initiatives
Estimated
Sales Opportunity:
~$35-$50M over the next
three years
+
Grow core business
Expand into new channels,
categories and geographies
Decorative Architectural Products (DAP) 3 Year Sales Outlook
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DAP is expected to generate ~18% operating margins in 2017
with sales growing at 6%-9% CAGR during the next 3 years
2014 DAP NetSales
2017 DAP NetSales
$1,998M
$150M-$250M $125M-$175M
$115M-$160M
~$2,400M-
~$2,600M
Core Sales
Growth
(Consumer)
Pro Growth
Diversified
Products
(incl. Liberty
Hardware)
I N S U M M A R Y
Recognized Leader in Consumer Paint with Multiple Avenues for Growth
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• Behr has strong track record of execution – recognized by our strategic channel partner
The Home Depot and the industry
• Behr has identified clear strategies to drive gallon growth – through Consumer and Pro by leveraging it’s strong brand, category
leadership, innovation and quality with The Home Depot
• Kilz and Liberty Hardware will leverage their capabilities – to expand into new product categories, channels and geographies
