A Six Sigma Based Approach to TPO

Kevin KroymannDirector of Trade Marketing

April 6-8, 2014Chicago, IL

DestinationPromotion Optimization

Advancing your Journey withTPM-TPO-CollaborativeMarketing

Hormel Foods “Our Way”

The mission of Our Way is simple. As a leading food company with a focus on profitable growth inspired by our founder’schange to “Originate, don’t imitate,” we market a balanced portfolio of highly differentiated quality products. We encourageour employees by creating an environment where careers are fostered, people make a difference and integrity is absolute.

By doing things Our Way, the principles that have helped us grow and succeed for more than 100 years can guide our dailyaction to support four key areas - our people, our processes, our products and our performance.

“Building upon our heritage of innovation and quality, together we will elevate theeveryday experience by making Hormel Foods the favorite part of any eating occasions.”

Our Heritage:Meat Processor to Packaged

Food Company

1891

George A. Hormelopens meat packing company

in Austin, MN.

1928Geo. A. Hormel &

Co. became apublic company.

2012Company executives rang

The Closing Bell at theNYSE to commemorate the

75th anniversary of theSPAM® brand.

2012

Name of Geo. A. Hormel &Co. officially changed to

Hormel Foods Corporation.

Late1930’s:

19931942

1976

Creation ofHormel Foundation.

4

Achieved Growth Through Innovation

Hormel ®

REV ® wraps

Herdez® chilelimón tortilla chips

Wholly Guacamole®

100-calorie minis

Herdez® MexicanCooking Sauces

Herdez® bean andcheese dips

Farmer John®

chicken sausages

Hormel ® Natural Choice®

cherrywood smoked hamdeli meat and sun-driedtomato turkey deli meat

In millions

2012201020072004

Start of $1BChallenge

Achieved the$1B Challenge

(two years early)

Start the $2BChallenge

Achieved the$2B Challenge

2013

+ 10%

Total Company Growth

Sales EPS

$1.08$6.2

$8.8

In billions

201320122011201020092008

$1.95

20072013201220112010200920082007

Annual Dividend History

$0.68

$0.80

+ 18%

$0.38

+ 16%CAGR

Oct. 24,2008

$14.24

Oct. 23,2009

Oct. 29,2010

Oct. 28,2011

Oct. 26,2012

Oct. 25,2013

$43.62

Hormel FoodsCorporation

Food PeerAverage

S&P 500

Comparison of Cumulative Total Return

*$100 invested on10/24/08 in stock orindex -- includingreinvestment ofdividends.

Sharing Our Success with Our Team• Profit sharing• Special, discretionary $300 award

Outstanding Recognition• Best Places to Work for Recent Grads

• 50 Best Companies to Sell For list

• Best Places to Work for Veterans

• Top 100 Military Friendly Employers list

• 40 Best Companies for Leaders

Philanthropy Areas of Focus• Contribute to communities where we operate• Education• Hunger

Best of the Best

Sanitation optimization project

Austin Plant• Multi-department project team• Implemented world-class

sanitation process• Increased production capacity

significantly and reduced costsby nearly 18%

Six Sigma(6σ) At Hormel

StandardBest

PracticeProcess

Improvement• Existing

processes• Data analysis• Hypothesis

testing• Internal or

external focus

Process/ProductDesign

• New Process• Bench-marking• Pilots• Customer or

consumer focusedStandards Based• Quick way to eliminate

internal chaos• Segmentation• One best way

6σ Team Structure• Black belts• Orange belts• Continuous

Improvement Process(CIP)

• Discipline

6σ Define:Beware the creep!

Develop A Charter• Executive Sponsors• Stakeholders/Team• Scope• Specific Purpose/Facts

Things to Watch out For• Engagement• Team make up• “It’s a 16 week implementation”• Scope creep: “Just one more thing”

6σ MEASURE:Do you really know what your customer is saying?

Only 20% of what you each day matters!

To get the to “vital few!”• Ignore the “trivial many”• Focus on the 20% that gives you 80% of your

results• Let the other 80% slip• Beware of workload models

Distill the voice of the customer . . .• Executives to front line• Customers• Pain points• Where are things working?• Varied/apolitical team• Experts/benchmarks

Joseph Juran

“Everybody is busy - Are they doing the right things?”

6σ Analyze:Everything you need to know about statistical

analysis, hypothesis testing and predicting risk!• Virtually all of the foundations for

statistical analysis weredeveloped in bars while drinkingand gambling!

• A great deal of statistics are madeup on the spot!

• Correlation is not causation!• “Stay as high as you can for as

long as you can!”• Leave it to an expert!

6σ Keys: Improve:“You can’t fix everything!”

• Resist the urge to throw everything out and start over• Build on what you have• Find what is working - can it work on a larger scale?• Pilot a solution• Go for the quick win and then scale it up

Just because you can do something doesn’t mean you should!

6σ Control/Validate:“If it doesn’t last, you didn’t fix it!”

• Most overlooked step onany project or process

• #1 cause of failure of goodimprovements

• Sources of control• Training• Insight sharing• Score cards• Executive Reviews

6σ Standardization:“You really aren’t that special!”

“A social agreement established forperformance, procedure, and responsibility,for the purpose of unification andsimplification so that profit and conveniencemay be obtained with fairness among thepeople concerned.” -- Hosotani• Something we can “stand on”• Can and should change• Lead to consistency and repeatability• Make it easier to innovate and improve• Best practice that represents “packaged

knowledge”“Recognizes customer doesn’t care how wedo it!”

Where do you want to be?

My Role: Accelerate

Efficient &EffectiveUse ofTrade

StrategicPricing

Return onTrade

Marketing

TradeProcess

ShopperMarketing

SalesSystems

NewDistribu-

tion

6σ Example:Return on Trade Marketing

Trade returns are normally distributed!• CEO (Booz & Co.)• “What are our returns on trade?”Define

• 10 different ways• Need for consistent processMeasure• There’s a lot of outliers• Data scrubbing is criticalAnalyze• Standard Process• Analysts spread across countryImprove• Poor controls• Crashed and burnedControl Failure!

Set foundation for future efforts with systems and process.

6σ Example:Standard Best Practice for Trade

Promotion Management• People crazy with frustration• Time spent wastedDefine• Need to spend more time

sellingMeasure• 80% of payments - small

percentage of trade!Analyze• Account segmentation piloted• Implemented standards for

TPMImprove

• Shifted team from admin to salesprocess managementControl

Over 40,000 deals eliminated, AR going down, morale improved, clear accountability!

6σ Example:Strategic Pricing

• Need demonstrated• Executive supportDefine• Need to make pricing insights

actionableMeasure• Consultants• Benchmark with industryAnalyze• Created process• Designated budgetDesign

• Pilot ran to validate process andmodelsVerify

Process is still evolving after good start!

Questions?

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