MeadWestvaco Corporation (NYSE:MWV)
December 14, 2011 8:00 am ET
Bruce V. Thomas - Senior Vice President and President of Healthcare & Innovation
Mark S. Cross - Senior Vice President
Linda V. Schreiner - Senior Vice President of Human Resources and Communications
Stephen R. Scherger - President of Beverage Consumer Electronics
Robert A. Feeser - Senior Vice President of Packaging
John A. Luke - Chairman, Chief Executive Officer and Chairman of Executive Committee
Steve Kazanjian -
John A. Luke
Jason, thanks very much, and good morning to all of you. Again, thanks very much for joining us for those of you who've come from within Richmond and those of you who've traveled far to get here. We genuinely appreciate you taking the time to spend the day with us. We're excited about the opportunity to talk about our packaging strategy, to showcase our organization, as Jason noted, and as well to showcase the new capabilities that are part of MWV today.
We've got, as I indicated last evening, a full, interactive and fast-paced agenda planned. Two things at the outset that I would like to reference. First of all, we're not anticipating on this beautiful day any untoward event, but if there is something that warrants evacuation from the building, go out one of the 2 doors that you came in, go to the right, go out through the glass doors, turn right, as you will no doubt be directed, into the garage for egress. If the guards are out there and they tell you to go another direction, do that. As we move through the day, we'll be up and down the corridor that is out here, and you can just follow those very same instructions. We will move up at different points to the second and third floor, as I will comment when I review the agenda later. And if something happens at that point, follow the instructions of your guide.
The second thing I would mention as we move through the day, we will be covering a lot of information about our markets, and in particular, talking about customers. We will talk as specifically as we can to give you the texture of what we're doing. But there are certain things, as you would expect, regarding our customer relationships that are by definition proprietary. So we will keep an awful lot of what we say at levels that are no doubt well above the detail that you might prefer.
Packaging is very, very important to MWV. The reason why it is, is that this is a large and growing global market. It is a market where there is ample opportunity for economically profitable participation. It is a market that is growing ever more nicely today in direct benefit to the economic prosperity which is occurring in emerging markets around the world, most notably, places like Brazil, China and India, where this rapidly emerging -- or there are rapidly emerging middle classes and with that, dramatic increases in consumer spending.
Packaging is important in each of these markets because it is valued by brand owners. It is critical to the successful marketing of their products. It is important to consumers who care about quality, who care about convenience and increasingly, in many parts of the world, care deeply about sustainability and hygiene. And it's very important to driving supply chain efficiency.
The opportunities for innovation and value creation are abundant for companies like MWV who understand and can satisfy these market needs, whether they be from the factory packing line to the retail shelf or to the consumers' household.
As we begin our packaging strategy discussions today, I'd take just a moment at the outset to reframe for you the essence and scope of the transformation that we have led here at MWV over the last several years. And as I do, I'd like to ask you to listen and learn about MWV today through that lens. Our vision is to be the leading global provider of packaging, packaging solutions in the global markets we have targeted. We've crafted strategies to achieve that aim around our targeted end markets. Markets such as food, beverage, tobacco, beauty and personal care, health care, home and garden and our corrugated packaging markets in Brazil and potentially other emerging markets.
To support these strategies, we have redesigned our organization structure, rigorously applied past learnings and significantly enhanced our capabilities. Want to convey to you this morning that while we greatly value our strong manufacturing capabilities, we no longer think of ourselves in terms of what we make, but instead in the context of the markets that we serve and the range of solutions that we provide. We ask that you do so as well. Doing so will enable you to best understand and appreciate what we share today, and certainly, to do so as we discuss our strategies and our performance going forward. As you'll see, we're very excited by the opportunities that we have created here at MWV.
The plans that we will describe in the context of this transformed approach are grounded in deep market knowledge and equally deep customer knowledge. They will be continually strengthened by commercial excellence and the development and delivery of insight informed and technology and design-enabled innovation. We'll scale these strategies through the acquisition of technologies and business platforms, expanded participation in select geographies where we see significant opportunities for profitable growth and through the expansion into adjacent markets that enhance the range of solutions that we can provide to our markets.
Deep market knowledge, strong customer relationships and innovation all embedded with a rigorous economic profit discipline and focus are the keys to how we're going to grow profitably, how we will lead our industry on a global scale and how we will deliver value to our shareholders. The opportunities we see, as you'll hear today, will, we are confident, lead to 5% to 10% profitable revenue growth and top-quartile investor performance. That's the essence of the roadmap we've developed for where we wanted to take this company. And while there is always and will be a lot more to accomplish, thus far, we have set -- we've done what we set out to do. We've created a more powerful business model by finding cost savings across the business, enhancing our overall productivity, all while investing in critical commercial and innovation capabilities. We've made a series of deliberate decisions and taken swift action, most recently with the announced spin-off of our Consumer & Office Products business, that have allowed us to focus ever more intently on our core Packaging business, again, as I noted, with a clear economic profit discipline. We have delivered 2 years of record earnings. We firmly believe that the things that we have done have helped us place increasing distance between us and our competitors, and they will certainly help us outperform in the years to come.
Today, we have exceptional commercial capabilities, a robust innovation capability and pipeline. We have knowledge and great experience in emerging markets, and we've got the financial strength to invest in our business and capitalize as they come on opportunistic acquisitions that will enable us to continually grow it. With this strong foundation, our solid financial footing and clearly identifiable -- identified growth opportunities, we're confident that we can shape our future.
I emphasized market knowledge, customer relationships and innovation as 3 key elements of our profitable growth plans. To comment briefly on each of those and cite just a couple of examples as I do so to set the context for the day, first of all, market knowledge. Good example of that is in our healthcare space, where our deep market knowledge helped us identify unmet needs in the marketplace arising from patients not taking their prescribed medications correctly or regularly. This resulted in obvious health problems for the individuals, but it also has resulted in huge costs throughout the value chain, both for pharma manufacturers and for retailers. We address this need with our Shellpak adherence solution and related adherence products. The solution is successfully contributing to resolving this challenge, and we've engaged and conducted studies to give us good data to support this. Our sales are strong, and they're growing with pharma manufacturers and retailers, and we see outstanding global potential for this packaging solution.
Second example of market knowledge stems from what I already referenced, and that is the tremendous growth that's occurring in emerging markets and our strong experience there. I referenced the economic prosperity that is under way. Participating in those markets on the ground, understanding what is going on, has let us set the table and really begin to understand the kinds of opportunities that represent profitable paths for participation.
In Brazil alone, we're seeing -- we see a $20 billion packaging market, with growth in the range of 8% per annum. Our knowledge is letting us develop sound strategies on the ground and giving us good insight to ways that we can broaden our participation through activity in adjacent markets, markets that are important and responding to consumer preferences in these new parts of the world with materials like flexible packaging and caps and closures. Throughout the day, you're going to see and hear about examples of how we're putting this market knowledge to work.
The second key pillar is strong customer relationships. And with that, the growing number of customer partnerships that we're building. Partnerships, by definition, start with great market knowledge and consumer insights. But they're really forged by our ability to apply, which you'll hear about shortly, is a commercial excellence discipline. And that is all about developing deep multilevel and multifunctional relationships with our customers, listening to their unique needs and challenges, understanding their strategies and what drives value for their brands and then our ability to process all of that and create solutions that will generate growth for their businesses.
Two examples that I would cite are Johnson & Johnson and AB InBev. Very briefly, Johnson & Johnson, who you'll hear profiled a little bit later this morning, long-standing customer. Recently, they dedicated themselves to streamlining the number of packaging suppliers they're working with around the world, from several hundred or more to just a handful. We, as a trusted supplier, engaged vigorously with them to understand what their needs and motivations were, to understand what efficiencies, innovation, global breadth and new products were important to them. As a result of those conversations, we were chosen as one of their handful of packaging partners because we could deliver in all of these areas: efficiency, innovation, global breadth for the platform we have and good, as I said, innovation capabilities.
AB InBev, long a major customer. What we've done having worked through the integration of InBev's acquisition of Anheuser-Busch with them is engaged, as you'll hear today, in a very positive way in packaging design initiatives that are all designed to promote their brands.
Third key element is insight-driven innovation. Everybody has innovation capabilities. We focus on ways that we can make our innovation not only different, but value-creating. Innovation has to be approached, as you'll hear today, through many lenses. We've got to understand our customers' needs. We've got to protect their products. We've got to deliver efficiencies to our brand owners and their factories as well as in the retail chain. We've got to supply or satisfy end consumer needs, often unmet needs that come from consumer insights. And we have to work efficiently to build value for the brands at the same time.
Two examples that I will mention, one of which you'll hear about specifically today, the other you'll hear reference to, is Captivate. Captivate is a retail shelf packaging solution. Through in-depth work with our brand owners and substantively increasing knowledge of the retail space, we've learned a lot. All this, as consumers I'm sure can relate to their experience of going into a supermarket or a large chain store and seeing the following needs, shelves where we can't find the product we're looking for and, very often, heavily picked-over shelves. What you don't see is what's behind the scene: logistical challenges; in-store efficiencies that are not being met; lots of packing and repacking; shelf stocking and restocking, refacing brands, packaging on the shelves; all resulting in lost sales for both retailers and brand owners. Captivate, that we have developed, is a shelf-ready, shopper-friendly display case that addresses all of these efficiencies while at the same time creating a billboard effect for the brand.
Another example I would cite is a corrugated packaging solution that we developed some years ago in Brazil to address the needs of the produce markets. As many of you may or may not know, in many developed parts of the world, fruits and vegetables are still harvested in the field and packaged, if packaged at all, in wooden crates. The product, the produce is often spoiled or significantly damaged on the way to the market. The time we got involved in this in Brazil, the damage rate was between 50% and 60%, pretty heavy cost to the supply chain.
Understanding these unique challenges in depth, we designed a special corrugated package that allowed the products to be harvested, placed safely in packages. We designed barrier coatings that provide the humidity-resistant protection that would preserve the products, take them safely to market in ways that could be displayed on store shelves or easily shipped, as is the case for Brazil today, to foreign markets.
As we look at markets like India, where the spoilage rate today is 60% or more, we see significant opportunities to take this know-how to that market as well, particularly today with the emerging advent of foreign direct investment relaxation for retail. These innovations make a very big difference for our customers and the consumers who buy their products. And they, along with market knowledge, deep customer relationships, are the keys to the success we have had and will have going forward. And going forward, we will continue to build on this foundation and further capitalize on the advantages we have built into this company today.
Beyond what I've already discussed, you're going to hear about a number of ways we expect to accomplish all of this, including specific plans to expand our leading positions in the world's fastest-growing geographies. You're going to hear about some of our new capabilities and technologies. You're going to hear about new team members who bring special market knowledge and new innovation capabilities. And you'll see our labs, our design space upstairs. And you'll also hear our thinking about the role acquisitions will play. Acquisitions that will enable us to bring innovations to market faster and to offer the best technologies and broader range of solutions to our customers and our markets.
As I commented, we firmly believe that our profitable growth model will allow us to achieve up to 5% to 10% growth and that our business model will deliver top-quartile investor performance.
After lunch today, you're going to from Jim Buzzard and Mark Rajkowski, who'll review a number of financial indicators that we track and will be tracking that give us great confidence that our growth plans and our return ambitions are real.
Everything that I've talked about this morning in setting up the day gives me great confidence that we can do everything that we're set out to do, do it well and shape the future that I've described.
The global packaging market is large and growing, as I commented. It's over $300 billion with the product lines that we have targeted. It's one of the larger companies in this space. With unique capabilities and exciting vision, we are well positioned to capitalize on this huge opportunity that you will -- with the capabilities that you will see and hear about today. Again, market knowledge, commercial excellence, insight-driven innovation and experience-grounded, knowledge-based emerging market participation, all embedded with a clear and rigorous economic profit discipline.
This concludes what I wanted to share at the outset with this introduction. We're about out of time, so you don't have questions for me right now, because we've got to keep on with the agenda. But there will be ample time, as I commented last evening, for Q&A as we move through the day.
Quick word on the agenda. Linda Schreiner will take the podium in just a moment and lead a discussion on commercial excellence. And she will be joined by Bob Feeser, I guess, both Steve Scherger and Mark Cross. We will then take you down the hall to participate in what we call a customer experience that will be dealing with AB InBev. We'll have the Q&A session. We'll then introduce you to a number of our innovation activities, take you upstairs for Center for Packaging Innovation tour. We'll have lunch served in one of the rooms that you may have seen as you came in this morning, where you'll be introduced to more people and have an opportunity to learn more about our businesses.
Following lunch, we'll have an emerging market discussion, where we'll focus specifically on Brazil, China and our aspirations for India. And then in the business model section, that is when Jim Buzzard and Mark Rajkowski will take you through the financial outlook. Again, we'll have opportunity for Q&A at the end of those sessions, and we'll commit to having you out of here by 2:00 as planned.
Since I've said there'll be no questions, I won't ask for questions and tail us off. So Linda, you're up.
Linda V. Schreiner
All right. Thank you very much. And it is Bob Feeser and Mark Cross joining me. So good morning, everyone. And welcome to our building. I know John talked about this building last night.
A couple of more comments for you. We've been in it about 2 years, consider it a package that represents the company that we are creating, the lines of this building, the location and the fact that it's a green building. And we built it to standards, the high standards that we could. It's an award-winning green building, and we live in it in a green way. So when you are discarding some of your breakfast equipment here, you may find that you have a choice between is this compostable, or is it recyclable or not. There are 3 different choices. It's -- we've educated those in the building. It's very confusing if you're in a hurry.
But in all seriousness, sustainability is something that is a core value to MeadWestvaco. Our customers value it tremendously. It's not lip service. This is an example of us walking that talk. And so I just wanted to make that point. See, that's not why we're here today though.
I want to talk about commercial excellence, something that we call a growth driver. For the past several years, we have been building this discipline, as John called it, because we believe there is tremendous competitive advantage in becoming recognized as the most commercially proficient company in our industry or beyond our industry. And you've watched us implement this EVA or economic profit discipline over the years. And we are taking the same focus and the same energy and bringing it to bear in that commercial space.
We think that we have a unique and distinctive approach. We are in the middle of implementing that approach. And this commercial excellence lever, if you will, has been built into our growth model, so we expect 1% to 2% growth year-over-year based on the activities that I'm going to talk with you about in just a moment. It's the foundation of our transformation.
You've seen us shift from an organization structure, oriented around what we make, what we produce to our strategic business or market-oriented SBUs. This follows on that shift, because when we moved in that direction, we needed to equip our commercial resources with the skills and capabilities and sensibilities to go out into the marketplace and bringing the full value of MeadWestvaco to bear customer by customer by customer.
In the past, it was not uncommon for us to be approaching one customer 2 or 3 different times business-by-business. So we have reoriented our organization structure, and we've reoriented our thinking about commercial excellence.
We've focused on 4 major areas, and we've invested significantly in 4 major areas. Last night, many of you had the chance to meet some of the talent that has joined MeadWestvaco from other companies, whether they be CPG companies, whether they be food companies, some customer companies. We took the time to think about how to enrich the DNA, the already solid DNA of MWV by going out and targeting those skills that we thought would assist us as we built our commercial expertise. Skills and talents, like design talent, innovation talent, a different level of business acumen, joining the already strong manufacturing and commercial talent that we had. So a very focused effort, and you'll meet some of these people today.
We then took our attention to our customer base business by business. And we said, "All right, we need to get more granular, more expansive in our understanding of that customer base and then identify those customers that we believe move the meter from an economic profit standpoint for MWV." So getting focused so that we can then deploy our talent appropriately customer by customer.
That was not enough, however, because once we begin to make those changes, we needed to go to market differently with different plans. So developing customer-level business plans that allow us to project forward what the possibility is, develop scorecards to measure our achievement of that possibility and develop the -- this a phrase, jargon phrase, line of sight, if you will, to what we see possible in the key customers that we target.
So customer excellence, investing in these areas, is ongoing and dynamic, work in progress. And this is an example of how we think about customer segmentation in the packaging space. Round about 4,800 customers in the total pool, we took the time to go through and analyze the strategic fit, so understanding those customers and their strategies and how that matches with our strategy and what we're trying to accomplish. In particular, focusing on the economic profit generation possibility in that customer set and then winnowing down. And this is not rocket science, it's the 80/20 rule. Basically coming down to a priority set of customers and deploying our best talent on those customers in a very dedicated and specific way. So we have done so thus far. This is a dynamic process, so each year, each quarter, we're evaluating how we're doing with these customers. Are we making the progress based on the scorecards? Is this relationship developing the way John mentioned, in terms of, is it a true partnership? We moved from supplier to preferred supplier to partner with a handful of customers.
And to give you an example of the granular level of detail, we tracked share of wallet, if you will. How much of the available opportunity customer by customer does MWV own? How many of our SBUs are involved with a particular customer? So we have these plans, and we put our annual customer-level business plans together, and we go out and address what's left or what is available. And we go to market and go to each customer as MWV turning back into our organization, bringing to bear multiple opportunities. So one solution may include an injection-molded plastic solution and a paperboard solution. And it's not 2 customer or 2 sales calls being made on the one customer. There's a single point of contact at the customer interface.
This is 6 logos, 6 customers. You'll hear about 3 of them today. We're going to talk about Kroger, AB InBev and Johnson & Johnson. It's a representative sample. It's not all in the priority customer list, but just to underscore the point that with the plans we have in place over the next 3 to 5 years, we see up to $500 million in upside in growth opportunity in this priority customer set. And we will continue to develop that level of awareness and those levels of clarity about future potential.
So that's, in a nutshell, what commercial excellence is. It's a discipline. Think EVA, think focus. We're applying that same focus to the customer set globally.
So with that, I'll turn it over to Mark Cross, who will give you a specific example.
Mark S. Cross
Thank you, Linda, and good morning. We are so thrilled to have you here at MWV headquarters. I'm going to be talking about customers' partnerships. I'm going to be talking about a story of both success and opportunity. I'm going to be building on the themes that John Luke and Linda Schreiner shared with you this morning and talk about how we're applying these principles in the customer partnership arena. Customer partnerships are an important -- a very important part of what we're doing in the commercial excellence area.
Partnership is one of those terms. It can be the most overused, tired words in the English language until you do it and until you do it well. And when you do it well, it's magical. It can drive to significant change in your business, and that's what we're seeking to do. That's what we are doing, in many cases, here at MWV.
As Linda pointed out, we're talking about representative customers today. So my colleagues and I are going to take you through some of the representative customers that we're working with, that we're dealing with, that we're driving deep partnerships with. But this is by no means an all-inclusive list. We are applying these principles across our company.
It is really important for you to understand that we are connecting, we are connecting in a bigger and broader way than we ever have, and in many ways, than people in our competitive set. The typical way that people have sold in our marketplace is one salesperson selling one product line in one geography to one purchasing person. And we are really blowing that model up. We're turning that model on its head, on its ear. And we are organizing broadly, our customers are organizing broadly around us. We're putting 20 people on our side and 20 people on the customer side in this building or in their headquarters, matching marketing people with marketing people, matching innovation people with innovation people, going well beyond the typical buyer/seller relationship.
In doing so, we have organized under global leaders on these key most important accounts. And these are global leaders not just with selling skills, but with general management skills. General management skills to handle the complexity required to drive these relations further.
We are bringing the absolute full power of MWV, and that's one of the key themes, the key messages that you will feel today when you leave. I want to share with you, this is a quote that I truly received this morning. So this is fresh off the press. It's not about one of the customers that we're going to be sharing with you today, but this is a email to us: "We are fundamentally changing our approach for the better." So it really talked about what we collectively, the customer and us, working together are changing for the better. Our supplier-led innovation, our supplier-enabled innovation is driving real benefits, real changes and relationships.
One of the relationships I'm going to talk about as a representative relationship as Johnson & Johnson. Johnson & Johnson is a company that we have done business with for 30 years. But again, we have fundamentally changed the way we do business with them over the last 12 or so months. Again, organizing around them in a much broader way and them organizing around us in a much broader way as they see the value we can bring.
When we do our customer segmentations, when we select customers for partnership and they, in turn, select us for partnership, there are some key criteria, some key themes. Johnson & Johnson and others like them are large and diverse market leaders. They operate across a variety of markets, across a variety of geographies. That matches up well with what we can do from a service provider status. They're guided by unwavering principles. We trust them, they trust us. We believe what they say, they believe what we say. That is important, obviously, in partnerships. They are product and brand leaders. They value brands. We value brands. And we can bring tremendous value to helping them grow and expand their brands. And we're focused on deep partnerships together for top line growth. It's more than just how low a price can we provide it. What can we collectively do together to grow our respective businesses?
We have served customers like Johnson & Johnson, others like them, very, very broadly. We serve across a variety of product lines, across a variety of geographies. Companies like Johnson & Johnson value us on a number of dimensions. They value the broad product line, they value the geography that we can play in. They value packaging and the role that packaging can play in what they're seeking to do and in turn, what we're seeking to do with them. And they value our supply chain capabilities.
One of the themes that many of our global customers are seeing is they've sought to take cost out of the supply chain. As they've sought to do more with less people, the ability for companies like MWV that can manage complex supply chains, can deliver solutions across a broad variety of brands and geography is valued by these customers. And that's why we feel like we are uniquely positioned in many of these areas to serve the customer in a bigger way than others in our competitive set.
In fact, when we do this and when we do it well, in many ways, we take our competitive set from thousands of packaging suppliers, and you guys know it, there are thousands of packaging suppliers in our space, to a handful of suppliers that can really do the things that we're talking about. How is that manifesting itself at Johnson & Johnson and others like that? We truly believe and we're demonstrating that we can collectively, with Johnson & Johnson and companies like that, deliver more than just what any individual company could do on their own.
We're bringing our full suite of solutions, from brand development, working with them on market development, customer and consumer insights, bringing our research and innovation capabilities, our design and creativity, the things you're going to see this morning, the things you're going to see that differentiate us in our competitive space. And then they value the solutions, the differentiated materials, our global footprint and our ability to serve them in emerging markets.
It is bearing fruit. We are picking up new business with these kinds of customers, with these kinds of approaches. We are increasing the stickiness of our business, with longer contracts and more significant contracts. And the pipeline of opportunity is just incredible. It's -- with these customers, we have identified a big, broad pipeline of opportunity that we collectively organized around. It's not just us selling, it's the power of both companies organized around that pipeline and developing that pipeline.
And as a result, we're going broader from a geography perspective in terms of serving these customers. We're going broader in terms of the number of divisions and brands we serve within these target customers. So it's working for us. The pipeline is big and real, and we look forward to continue to keep you apprised of the progress that we're making in this area.
So with that, I'm going to turn it over to Bob Feeser, who's going to take you through a retailer example.
Robert A. Feeser
Okay. Very good. Thank you, Mark. Good morning, everybody. I wanted to talk a little bit about some unique partnerships that we're developing with retailers. We're excited about developing these types of relationships with larger retailers who can truly influence the retail industry more broadly, but also food categories more broadly.
Kroger is a great example of that. Today, Kroger is 2,500 stores, $80 billion in revenue. And they have large private-label positions across key food categories.
Just as Mark talked about the relationship with J&J, we've developed similar relationships with key retailers like Kroger, really bringing the full capabilities of MeadWestvaco to those customers like Kroger to really advance their major priorities, whether it's advancing their private label sales, whether it’s reducing labor costs to improve their profitability or enhancing the overall shopper experience in the store, we're bringing our capabilities to solve those kinds of opportunities for retailers. You're going to get a good sense of that during the course of today the kind of capabilities that we can bring to these types of customers. We believe we're well positioned to really take advantage of some great scalable opportunities at retail.
What I wanted to do is just provide a little bit of context about what's different about our strategy with retailers. And it is really grounded in the belief that packaging can play a key role in solving some of the key issues with consumers, with food manufacturers and retailers.
So John related the story about, I think that all of us can relate to, about going to a store, not being able to find product on the shelves. And in many ways, the food manufacturers contributed to that with many line extensions around brands faced with compressed margins and more competition from private label. They've actually cluttered the shelf. One of the key insights we've learned from retailers is with their rising labor costs and stocking costs, many of these categories in the center of the store are actually losing money. And in addition to missing sales opportunities for the retailer and the brand owner, we think that packaging can play an important role in addressing that issue. Again, bringing our capabilities around consumer insights and innovation will be critical in solving these kinds of challenges at retail.
We've been working with CPGs for the last 18 months or so working on our innovations. And one of the key things that we've learned in working with the CPGs is those problems can't be solved by the CPG alone. It's critically important that there is a partnership between the manufacturer and the retailer to actually bring those innovations to the market. We want to be the company that's in the middle of those discussions, and we think we're well positioned to do that.
So what I wanted to do is spend a little bit of time giving you a few tangible examples of how our solutions are impacting different parts of the store that are important to driving growth and improving profitability in the store.
So I'm going to start with the pharmacy. So we have partnered with Kroger and other retailers around our adherence packaging program, featuring our Shellpak solution. You're going to hear more about Shellpak in the Innovation zone later on this morning. But today, it represents 5 drugs that's nationwide in scope. We are very well positioned for this program to expand in 2012 and are excited about that.
Now Shellpak was part of a broader program with Kroger to really implement a health and wellness program to improve customer loyalty. And what Kroger is finding, they're seeing lower labor costs in the pharmacy. They're seeing increased sales of drugs through the pharmacy. More importantly, they're seeing more foot traffic through the stores with those customers. So our overall program is an important part of driving additional sales through retail.
In the center of the store, John mentioned about our patented Captivate solution, shelf-ready packaging solution. This is a solution that is organizing the center of the store, dealing with that clutter on the shelf and reducing labor costs. You'll hear more about Captivate during the Innovation zone, but we're excited about this solution going to a significant store trial in the first quarter of 2012.
We're also working with retailers around enhancing their private label brands. Leveraging existing solutions, like our Fridge Pack solution for private-label colas but also leveraging new solutions that we have to enhance packaging of snack foods and nuts. And our Evertain solution is an important innovation in that regard. You'll hear more about Evertain in the Innovation zone. We're excited about this solution as it's the first paperboard solution, all-paperboard solution, that provides the same freshness and shelf life as the traditional composite can. And it's a far less costly solution and a far more sustainable solution. So with think this solution has broad application, but we're working with folks around enhancing their private-label packaging.
Another area is around material selection. So not surprising, a lot of the retailers haven't spent as much time thinking about the selection of materials for their private-label brands. Selection of materials is critically important in a number of applications. In frozen foods in particular, our Coated Natural Kraft product performs better than any other product in the market through the freeze and thaw cycles that a typical frozen food would go through from distribution to retail. Why that's important is that it has a big impact in reducing waste on the shelf, reducing damage and then, ultimately, unsalables on the shelf. So that's another good example of how we're helping to enhance overall packaging for the retailer.
And then finally, in the perimeter of the store, we're developing packaging that's helping to enhance the sales of freshly prepared meals. So if you been into a large grocery store recently, you've seen that the perimeter of the store has grown substantially. This is an area that is growing rapidly freshly prepared meals, and it's also a high-margin item for the retailer.
These meals today are typically presented in a plastic tray, and there's a strong desire by the retailer and the consumer to have a much more sustainable packaging offering around that.
Our MWare tray is a paperboard tray that provides the same 12- to 14-day shelf life as plastic, the significant innovation and breakthrough. We believe that's going to be an important part of helping to enhance sales of freshly prepared meals for retailers.
So I quickly went over a number of example of how our solutions are actually playing out in different parts of the store. So hopefully, that gives you a good sense of how we're working with retailers, how our solutions are helping to drive their overall priorities. In particular, we're excited about working with retailers like Kroger who have the real potential to pull our innovations into the market at scale.
So I'm going to go ahead and turn it back over to Linda to make some concluding comments.
Linda V. Schreiner
Thanks, Bob. As a perimeter shopper myself, I'm looking forward to that solution coming to market quickly. We're going to keep you moving in the commercial excellence space right now. We're literally going to ask you to go with us out through the lobby to what we call our Customer Experience Center, where Steve Scherger and Steve Kazanjian will give you a feeling for what we do with customers when we bring them here. We'll then move you back. You're free -- if you're wired here, your equipment will be fine. The room down there is going to be a little bit tight with no tables, so you'll be seated in theater style. We'll make sure that everything will be just fine here. So we'll be coming back to this room after that experience. So if you all will head out the door, Steve Scherger is here. Steve Kazanjian is here, and we'll help guide you through the Customer Experience Center. It's on the other side of the building.
Stephen R. Scherger
All right. Well, good morning, and welcome to our Customer Experience Center. I'm Steve Scherger. I'm joined today by my colleague, Steve Kazanjian.
When we engage with our customers, as you've heard from the conversations this morning, we oftentimes do it right here. In the room to your right, our actual Customer Experience Center, is a room that's set up for engagement. It's a room, as Mark talked earlier, when we engage with our customers, oftentimes it's a group of our customers, representative of the their market folks, their brand folks, their product design folks, engaged with us with our commercial excellence, talents, our capabilities brought to bear to actually do work together. And oftentimes we do it here. We've got walls where we can do drawings. We've got display areas, and we can turn it into a room that's focused on their brand and their experience.
When you walked by on the way here this morning, you will have seen that we had the Anheuser-Busch InBev brands and products on the way in. That's what typically greets folks as they enter the building, enjoying their time with us.
But it's much more than just a room. As you'll get a sense today as you walk around, we bring the full set of capabilities that we have with MWV to bear on the conversation so that while here, we can engage in real dialogue that goes from strategy into ideation, all the way, as you'll see as Steve shares the specific example later, to a conversation with real prototypes, real prototypes. So we can take the conversation all the way there.
We'd like to share with you a recent experience that we've had with Anheuser-Busch InBev. And in a couple of moments, we'll ask you to kind of turn your engine on to be -- to imagine that you're actually a part of Anheuser-Busch InBev and that you're leading the brand investment that they're making and $1 billion investment that AB InBev is making to be the sole supporter of and advocate for beer with the NFL. And so that's example that we're actually going to take you through here in a couple of moments.
But to set the context for you, what we're doing, and as you've heard from the earlier conversations from Mark and Bob, is really engaging in a different conversation. A new conversation with our customers and our brand owners about them, about their brands, about what they're trying to achieve in the marketplace, about their products and how they're trying to differentiate their products in the marketplace. And that's the conversation that we're having with them.
To set the context around AB InBev, a company many of you I know are very familiar with, with the acquisition of AB InBev, new leadership, new direction, significant opportunity for global expansion of brands, with brands like Budweiser, Stella Artois, yet a relentless focus on cost and cost control and the recognition that they're working in some mature markets in North America and Europe.
We've had a long-standing and very valued relationship with AB InBev. But it's tended in the past to be one of long-term supplier, one of significant market position, but oftentimes we found that our dialogue was focused primarily on how to take cost out of the packages. And what we've been embarking on is engaging with them an entirely new conversation. A conversation that is about enabling their transformation, helping them be successful in the marketplace, turning the conversation towards their brands, towards their success. And so our approach has been a shift in dialogue, a shift in the who that we engage with and how we engage with them.
We've brought a very disciplined yet aggressive approach that is about combining, combining our capabilities, all the capabilities that we bring relative to the consumer insights, design, innovation and matching that up with their strategies and getting very clear on their strategies. What are their strategies for brand development? How are they thinking about taking Budweiser globally? What are the major investments they're making in their brands? Where are they heading geographically? And how can we, through packaging, be supportive of their strategies? And it's that deep, intense knowledge of their strategies that makes an enormous difference in how we engage and how we work with Anheuser-Busch InBev. Because we have a very clear view that there's an emerging space and an emerging role of packaging, the incredible role that packaging plays in the customer relationship, the relationship that you have with the brand, the role that the package plays in your decision making as customer. Because there's been an incredible shift in how we engage with brands, with social media and the literal proliferation of the Internet and how we all are contacted, interfaced. There's been a massive change in how CPG companies engage with you as consumers. And with the advent of social media, we're oftentimes touched, but we don't really feel. We're not actually physically engaged in the product.
And the reality is, is that the package, the actual package, is the best point of brand engagement that exists, because 100% of the brand's purchasers, those of us who buy the brand, 100% of us engage with the package. There is no other media that has 100% contact with you as consumers. Social media doesn't. Print advertising, television, they all have significant fact, but none of them touched 100% of the consumers.
And that's what we call a brand impression. That's the moment of engagement. That's the moment of truth where you and us, as consumers, engage with the package. And so our emphasis is around how can we help enable the strategy that our customers, like AB InBev, to help their brands become the brand of choice when you, as a consumer, are making that decision. And we have very real belief systems around the role of packaging and how packaging plays that role in the brand. And one is, is that packaging has to be more than just the container. The days of thinking about packaging as purely the box, the folding carton, the substrate, the simple carrier. We believe, of course, they have to be functional, but it is about the packaging playing a role in the brand.
And in order for us to bring that to bear and have it be meaningful, we have to bring real consumer insight about the consumer. In the example we'll talk about here in a moment, with the NFL, we're talking about the 21- to 27-year-old male who is the primary consumer of Bud Light, in this case, when engaged when watching the NFL. And so our insights were focused on what is he thinking about, if anything, when he's watching the NFL? What's he doing? How's he spending his time? How does he actually spend his time? What is he doing? And Steve will take you through some of the work we've done to focus in on the consumer. Because it's with the consumer knowledge that we can bring packaging solutions to help Anheuser-Busch InBev attract that consumer and acquire their products in a differentiated way versus others. Because our belief system is that packaging represents a very real, identifiable and tangible investment in the brand. The approach that we take when we engage with our customers, when we engage with Anheuser-Busch InBev in this example, is very clear, and it's also very disciplined. It is about understanding the strategies, first and foremost. Broad strategies and then specific strategies. In this case, an investment in the NFL, $1 billion over time to be a sponsor. How can we help them be successful with that investment that they've made in their business?
We then have a responsibility in a collaborative way to learn, listen and then teach, to actually push for new thoughts, to reengage, to push to readdress perspectives, readdress the point of view that says "No, it's just a 12 pack." No, it's not. Maybe it can have some function. Maybe it can play a different role in the engagement with the consumer, and so to push for different ways of thinking about the role of the package. That can only come from having insight. It can't come from just saying, "Hey, we've got great ideas. Listen." No, it's, "Let's talk about the consumer." And then for us, a massive differentiator is that we can align it with our capabilities, align it with what we can do to produce them. Because coming up with the most insightful solution in the world that could be highly intriguing, but you can only make 20 of them, is not relevant. We have to be able to scale it. We have to be able to make millions of them cost-effectively, ideally billions of them cost-effectively, so that you get the combination of a solution that can be made, produced and made available to us that is actually different and unique and consumer-insight-driven. And that's really the combination that we pursue when we engage with our customers, in this case, AB InBev. So I'm going to turn it over to Steve, and he's going to take you in a bit on the inside of the actual engagement that we had.
Thanks, Steve. All right. So let's role-play for a second. Each and every one of you is a Bud Light brand manager, and you just spent $1 billion. Let me say that again: $1 billion, right, on the NFL sponsorship for the next 6 years. And you're thinking to yourself -- well, actually, what I wanted to say -- I was told by legal I couldn't say, which is, "You're thinking to yourself," fill in the blank, but you're thinking to yourself, "Really, how am I going to leverage this investment," right? "How am I going to make the most of this? How am I going to make good on this $1 billion that I'm spending? More importantly, how is packaging going to help connect my brand to my consumer?" So what do you do? Well, naturally, you call MWV, right? And we're here. And what I want to do is walk you through that process.
So what we do is we look at this intersection, the nexus, if you will, between the target demographic, the category context and the brand proposition. And once we look at the intersection between the 3, we start understanding what are those unwritten kind of behaviors? What are those insights? What are those mindsets, motivators, if you will, in which we can make that connection between the brand and the package? And we're not talking about functionally. We're talking about a deep, emotional connection that can drive true brand lift.
So as we did it, the first thing we looked at is that target demographic. Okay. So the target demographic -- these are real photos. I actually took these, so. I'm just telling you. I don't know if that's Lake Havasu or if that's actually, like, the Hard Rock Casino, but anyway, the point being is you have dedicated users, right? And they're the people who always drink Bud Light. They're the people who call it out when they're at the bar. They're the people who look for it in their friend's house, right? The other ones, you have the switchers, right? They're the ones who are -- really badge themselves by the beer they drink, right, maybe a little bit different, kind of image-conscious, maybe they have a subset of about 6 beers that they go throughout. But what's interesting about both of them is they both fall in that same core demographic, the 21-year-old to 27-year-old male demo, otherwise known as the millennial male. And the millennial male is a very dodgy demographic. And what I mean by that, they're very different than the boomers and very different than Generation X. And so in order to understand how we were going to connect this opportunity, this NFL opportunity with that demographic, we need to gain some insight. We need to really look at it differently. What were those motivators that were going to make them kick, once again, connect back to that brand. So we did something somewhat unorthodox, probably the last place in the world you would look for a beer drinker, which is the school classroom. So what I mean by that is we went about 15 to 20 years in their past and said, "In their formative years, what were the epicenter of these era of connectivity? How did they learn to communicate? How did they learn to collaborate? How did they learn to understand how they would fit with everyone else?" And so for those of you who are boomers and those of you who are Generation Xers, this is your classroom, right? Aisles and rows. Kind of similar to where we are now, right? And so you sit in there and you learn to -- we call it share, right? Your independent thought, you come up with an idea, you reach out to the teacher, the teacher says you're right or you're wrong, and you go back and you think again. Right? And that was the way for a very long time. Then all of a sudden, something different happened. Right? The desk basically turned in on itself. And so what happened through this generation is they fostered a deep sense of group collaboration. So we went from independent thought into group thought to the sense of connectivity, collaboration, intercommunication. And through the years, as they came of age, something else happened: the Internet economy, right? Enormous explosion of technology and social media that allowed the consumers to connect in ways they never had before, right? So a sense of connectivity, a sense of collaboration was really key all the way through their life to the point where, and I just polled this, this is a quick snapshot. By a factor of more than 2 to 1, they'd rather give up their phones than their e-mail or their text messaging. Look where television falls within that, right? 15%. So think about that stuff. Very, very different than on the Gen X or the [indiscernible] or some of you who are boomers. And so we look and say, "Okay, there is an insight here about how packaging is really -- or how the demographic is really playing," right, "and how they're really connecting with each other." So we brought that to the brand lift. Something really interesting here. Here we go, right? It's not "Here I go," it's not "Here you go," or "You go," or "You go" or "All of those guys in the back room -- back row go," right? It's really about here we go together as a demographic, connecting, collaborating, communicating with each other. We're on this journey together.
So great. We know that the target is about that connectivity. We know that the brand is selling connectivity, so now let's look at the category. What -- I mean, what do we expect from the category? Well, definitely not that, right? Impersonal, cold, solitary, there's no sense of connectivity, there's no sense of collaboration, there's no sense of getting up to something bigger, right? Like a bunch of soldiers in a row. Uniform, impersonal, solitary. So we said if we are going to go in a place where packaging was going to make this connection, packaging, could it be the connector, could it be those proverbial desks that turned one in on themselves, right? That platform for connectivity. And could all these millennial males connect back to that package, which then would push you out to that NFL strategy? So we looked at Bud Light's digital platform strategy. We looked at what they were doing, what they're planning on doing with NFL. We looked across augmented reality, image recognition, QR codes, other forms of digital media. How were we going to connect that package? And unlike traditional manufacturers, we didn't just look at the in-store experience, right? Yes, that's a big part of the equation, right? The facing, the shelving and the kind of functional aspect, transportation. We looked across the entire chain of custody, consumer chain of custody. What's going on in a home? What's going on at the big game, before the big game, at the tailgate or after the party? What was the role of packaging to foster and connect that emotional bond between the consumer and the brand, which was going to be very different for the NFL, the NASCAR, then baseball, basketball, et cetera, right? Very, very different.
So we had a tall order. So in order to do that, we did something which we think is revolutionary, which is the reason why this -- all of this exists. We brought together key stakeholders from both side of the equation, AB InBev as well as MWV, across brand, strategy, structural, engineering, research, technology as well as manufacturing, for a 2-day immersive session. What we did had 3 main factors: how it works. What were their structural must-haves? What did the package actually engineering need to do? How much weight did it need to hold? Consumer must-have. How it feels. How do we evoke that "Here we go" proposition? How do we connect with a consumer? How does the brand connect with the consumer across an entire chain of custody in context to NFL? How it's made. What can be run on their existing lines now? What will require a slight modification, significant modification? What will need to be a co-pack solution, right? Truly bringing these agencies' sensibilities into manufacturing capabilities. Really, really unique, very different for this industry, and we think there's a key competitive advantage for what we're doing, right? And so the best part is they didn't just leave with sketches. They didn't leave with 3D renders. They actually left with physical prototypes after a 2-day. Let me say it again. Physical prototypes after a 2-day innovation session, basically decreasing that speed to shelf from 2 months into 2 days. Truly, truly unique. And when we did it, we had a metric where we said what's the variable incremental cost, what was the per-pack cost, what was the time to market for that pack and how well did we think it actually connected with that brand and evoke that NFL proposition? So unfortunately, these packs haven't hit market yet. They're hitting very soon, so obviously, I can't show them to you yet, but their final 3 packs hit 3 specific use occasions -- I know it's kind of a letdown, right? I built you all up for the thing. That means you're just going to have to buy Bud Light. But 3 specific use occasions across the NFL strategy with Bud Light connecting that millennial male back to that brand proposition via the package, or the package, once again, being the connector.
So when you think about it, to underscore what you were saying before, Steve, is we shifted from that functional role of package really as a container, as a vessel, into much more of an emotional brand play. And by having all these capabilities together in one roof and having a room like this, being able to co-ideate around it is truly a revolutionary way of working. It surely speaks to us and our commercial excellence. Back to you, Steve.
Stephen R. Scherger
Great, great. Steve, thank you. And we do apologize that we can't share the actual concepts with you. We'll make sure that Jason gives you a full view to them when they do become commercialized and in the marketplace, and then we'll, of course, not encourage you, we'll ask you to buy them.
But why does this matter? Why is this relevant? A couple of things to conclude. Speed to market. An incredible change in the speed at which we've gotten from strategy, concepts, prototypes into the marketplace. Measured in months as opposed to what oftentimes are literally years of conversation and dialogue. That speed is critical. The solutions, we believe, will drive value for Anheuser-Busch InBev. They believe it. That's why they're making the investments in the packages. But it will drive value for as well. Economic value, improvement in the mix of products that we sell, better margins from the mix of products that we sell to them from these products.
And finally, this particular focus on the NFL has now opened up doors within Anheuser-Busch InBev where we are called on the absolute front end, the beginning of what are now a series of innovation packaging sessions that they're having, and we're there as partner. As partner, coming to us. We like what you're doing, we like the approach, we've had success together, come in. That changes the long-term landscape for how we participate with them in developing packaging solutions that help them win in the marketplace. So a very significant shift in the from-to of how we were interacting to how we now are.
So appreciate you walking down here to experience the innovation center, our experience center with customers. Now we're going to turn it over to John to wrap up this morning's session. Thanks so much.
John A. Luke
Steve, thank you. Steve and Steve. Thank you very much. [indiscernible] business [indiscernible]. And then Steve [indiscernible] talked to you about the power [indiscernible]. It's all about [indiscernible] that through that millennial male and the [indiscernible] think about that, link that back to the brand. [indiscernible] the addition of this kind of leadership [indiscernible] very powerful. And as Steve also said [indiscernible] is the nature of the works [indiscernible] design [indiscernible] design, package design [indiscernible] right on to the dollars [indiscernible]. That is [indiscernible] This space and the others [indiscernible]. Questions? Yes.
This is very impressive. The question I had was [indiscernible] if I were [indiscernible] would I want to do this with you [indiscernible]? So in other words, is there a way you can get around [indiscernible] customers looking at you [indiscernible]?
John A. Luke
Our view is, absolutely, you can work very well with multiple customers in a competitive space. Having said that, what we've got to be able to do to do that well is earn, as Mark Cross commented earlier, speaking broadly, the trust and respect with which we do that. We've got to have bulletproof Chinese wall that exist in our organization to ensure that information is not shared. And with that, we will find we are confident that we can do things. We've already had some of the big soda companies. I mean, it's no secret, you'll hear more about it today. We have worked very, very extensively with Coke over time. Historically, that has, among other things, impeded our ability make hay with Pepsi to the degree that we would like. But as Pepsi has looked today at the capabilities that we have as an enterprise, they have looked to work with us. Our job is to ensure them, just as we have -- building on the creditability we've had in the tobacco industry over time, working with multiple brands, that this can be done. But it's a key question. If we drop the ball once on that, we're toast.
John A. Luke
Two things. And I'll ask Steve Kazanjian to bring some of his perspective into this as well, or Steve Scherger, anyone else who wants to pipe up.
First of all, we've worked very hard with advertising firms and marketing agencies to learn from them, understand how we can work together. We're not at all averse to doing that. And part of our differentiation, part of our own brand value is to be able to create those credible bona fides as well and to really build out what we can bring as a single source to these brand. Where it makes more sense, for a variety reasons, the one we talked to you about, otherwise [ph], we can partner with the [indiscernible] as well. One of the things that we've found in talking more -- we work very closely learning from and partnering with great boutique out here called The Martin Agency, Richmond-based firm that is one of the top advertising firms in the country. GEICO is all part of -- the Gecko and all those spinoff ads are just part of a series of creative things that they've done. One of the things that we have learned in working with them and others is that the marketing firms don't understand the nexus between the market need and the package. And as we have brought folks like Steve into the organization, this is what we can do bring it all together in one.
One of the things, if you think about the traditional relationship between, say, an agency and [indiscernible] agency, it can develop [indiscernible] brand, totally connect to the consumer, guaranteed to drive brand lift. [indiscernible]. However, most of the time, you see this -- and this is not a disparaging remark, it's the truth. Most [indiscernible] are not manufacturable. They can't hit the price point. They're outside of the scope. They can't run their lines. All those types of hard-core manufacturer issues. Conversely, if you look at a traditional manufacturer, traditional manufacturer can make it run at 500 units a minute, hit a price point, run the existing lines, but they don't know the difference between brand A and brand B. So if you think about what Steve was talking about is that you're seeing the shift in the space, right? One of -- what we just talked about is really not taking the place of that agency role. What it's doing is forming a bridge between the 2. We know the packaging is more emotional than it has been before, so how you have someone who has a hard-core manufacturing expertise but also has that agency sensibility? So we're basically, you as an agency develop that brand. We're not developing it. What we're doing is how do we interpret that into a physical manufacturable solution. Yes?
I think there's multiple-brand touch points. I mean, that's the best way you can answer that. There's definite process for us, but multipack was critical, because not only multipack was a functional aspect of the billboard in the store, but also restoring the emotional connection [indiscernible].
John A. Luke
Just to build on that, I think that it's a logical question. In some cases, it may make sense. We don't, in any way, we just take the example we talked about, see the need to get into bottle or can production or into label production. But there may be other areas where we've got touch points that adjacent participation can add value to what we do in the range of solutions we can bring. In this case, if it made a whole lot of sense to work with the can or bottle manufacturer, that's -- we could bring them into the picture as well.
John A. Luke
If I get to -- I think -- go back to something that I may have alluded to, or I did allude to, in my opening comments, is we, in partial answer to your question, would fit with that. And that is that as we look around the world on opportunities to participate, one of the things that we see as a significant opportunity as we develop plans for broader emerging markets just to make it [ph] in Brazil, China and certainly, as we look at India, retail, modern retailing, they call it, with FDI on the verge of, we hope, being improved, the opportunity to broaden our range of products to include flexible package. Flexible packaging is the predominant choice for food packaging in India. Today, it is very crude. There's not much in the way of sophistication in bringing the barrier functional properties that are important. Applying that can get right into the kinds of thought process that you've got right here in the Bud Light example. Another would be in the area of caps enclosure where you can both enhance a flexible package as well as perhaps bring a way to leverage the knowledge we have built in the injection mold and plastic space. There are any number of things like that, that would be logical additions to our suite of product offerings.
John A. Luke
Oh, I think this enhances it substantially, because in some cases, it really gives us an opportunity to talk right back to the structure and the efficiencies. We don't have machinery placements everywhere we might like it. So I think this -- Steve?
Yes. No, I completely agree. We're actually finding that, again, going to this our ability to solve more holistically, sometimes with solutions, there are machinery requirements, there are opportunities that, frankly, are being created from bringing this approach, because we can actually -- and we actually have some great examples recently where we're combining secondary packaging with the downstream tertiary packaging with our machinery solutions to give our brand owners higher degrees of flexibility around taking their products to marketplace in a wider variety of solution sets. So it's actually doing a nice job of opening up more dialogue around the full value proposition and the value of the machinery.
Yes, we actually can...
John A. Luke
Good, but I think, just wrapping that up, I think it's important, building on your observation and Mark's, we're not trying to be all things to all people. I want to be sure we don't in any way convey that to you today. We are selectively participating where our investment and capabilities or materials lets us enhance the value we can bring to our customer and, through an economic profit blend, ensures us that we're getting a requisite return for that. And it's as much the kinds of things that you saw here, capabilities matched up with materials, where appropriate, matched up with machinery placement that really will let us do that power. Mark?
John, it's interesting to look at this through the lens of beverage packaging, because through most of the time I've dealt with the industry, even though this is pretty much a duopoly, it's been a brutally competitive duopoly. And I just wondered, is there anything you can share with us that would demonstrate a lift in the profitability for the returns in the business as a result of all this?
John A. Luke
One, I think you will see that, and you can hold us to it as we go forward, right, Steve?
John A. Luke
[indiscernible] this is powerful, and it's that, that is going to make the difference.
That's exactly right. And it's our perspective. And these products specifically are enhancing for us, better margins improvement. We'll talk -- you'll hear today about Captivate, retail-ready solutions. We believe there's some very significant opportunities in the beverage space as well as on the food side there. And so it really is about taking the work and the insights, applying them, and then, of course, being paid for it appropriately. And we will see it in the -- in our economics as these products and others begin to take their way into the marketplace.
How long do you think, Steve, it will take us on the outside to be able to kind of see this in the numbers?
I think we certainly, we're executing on these in 2012, and so there will be -- we will certainly -- we would expect to start to see positives in -- literally as we roll into next year.
John A. Luke
Right. And what we will try to do, we'll look to ensure that we get this, is where we can link upward trajectory in our return profile to these sorts of things, we will do it. We'll call it out. We'll pull some of these things out so that we're constantly linking back to the kinds of [indiscernible] today.
All of this is like a flywheel. We've got good financial performance. Some of this has been already contributing to it. But as we go forward, that flywheel is going to get going, and you'll see more and more of what you're talking about.
I guess we obviously take on your word about the [indiscernible] the packages. I remember Fridge Pack didn't necessary lift category as your customers had expected. What in the data thus far that you've seen from these new packages makes you expect that the overall beer category from Bud Light will be lifted? You don't think category lifted as much as you felt functionality [ph] connected with the customer [indiscernible] migrate back more towards the price that you'd like. And the second question -- again, I know you can't give that much detail. Is there a way for you to relate how much connection the consumer has actually with your carton, your package, relative to the primary package and with the latest [indiscernible]?
John A. Luke
A lot of elements of your question, and I'll ask Steve to comment -- to supplement the general comments I would make. First of all, I think what you're seeing here is whether it's a response to $1 billion investment in the NFL, whatever, a recognition by brand owners that they need to invest in promoting their brands, in promoting with that category. The role we play lets us help their brand share grow. That's -- obviously, the proof is going to be in the pudding, but we feel pretty good about it, and I think they're feeling very good about it as well. In terms of the -- and so our relative share in this category will, without question, grow, and that's what we're very much focused on. I think that was the name of the game with Fridge Pack, and I think our experience was very good. We all were fighting with Fridge Pack a decline in the consumption of carbonated beverages. You've got some of the same trends that have influenced beer market certainly here over the last -- that you're referring to over the last couple of years. And I think when you have AB InBev making that kind of investment, they're looking, if not to change the trajectory for the whole category, certainly to do it for themselves. Where we're smarter here, and we can answer your question more as we go forward, is the kinds of things that we're talking about here, we would like to believe that we were -- we thought it was pretty sophisticated when it came out, Fridge Pack and all of that. We are a light year ahead of that in terms of the ability to think about the market and integrate it with the brand and all the supply needs. Steve?
You summarized it beautifully. I've nothing to add.
One my question, John. [Question Inaudible] Where does that happen?
John A. Luke
You want to pick that up? Because I think one of the things that -- we want to give you a very strong sense of, clearly, we will evaluate this at various stages of the process. But one of the things we want to give you confidence in as we go forward -- and this is hard to draw picture of, but chatting with Diana [ph] at dinner last evening, we were talking about that in a more holistic sense. Now how do you really build a return [indiscernible]. It is not something that I and the people that you're seeing today can make happen just by fear [ph]. Yes, we need to reinforce it, but it is talking about it. It is giving tools. It is providing discipline. It is raising questions at every part of the process. It is about developing better financial planning and report out disciplines early on in the process. So whether it is how much creative time is being invested as part of an innovation project, all of these things are things that we look at to ensure that we're being smart in how we're spending things relative to the projected return. And I would also note, Paul, that at the outset, before we even launch into a project, we go through a rigorous assessment of the upside EP-generating potential before we even move forward. Because everything at the end of the day is a bit of a vet [ph], but you got to have that, because nothing is risk-free. But we do build all of this into our plan.
Yes, you've mentioned it at the outside, this notion of assessing all of our investments through the EP lens. This is something that we've brought to the company. We're going into our fourth year now, and I think if you looked at our financial performance over the last several years, you can see the influence of that. And as John said, there's a level of granularity, a level of discipline around all of the investments we made, not just bolt-on acquisitions, not just capital, but also investments that we're making in new products, in commercial programs. So as John said, it doesn't happen overnight. We've been working on instilling this culture in our company, not just in the financial teams, but in the business leaders, the folks who are running the businesses day in and day out. And we've got great confidence that as we embark on programs like this, as we look at programs like our expansion of our platform in Brazil, each of these gets evaluated along an economic profit basis. That is, are we -- do we have high confidence that we can generate return, not just growth, not just higher operating profit, but returns after charging for cost of capital? And that's very important and something that we've really built up over the last several years.
John A. Luke
Right. Everything is looked at through an EP profitable growth lens. People understand that at many, many levels of our organization. We're not going to rest easy on two counts. One, until everybody understands. The most successful companies applying this discipline have that. And the second thing is ensuring that you say the vows each and every day so that you commit to having it a very much sustainable part of your strategy [indiscernible] plan.
I am told that we are out of time, and we're going to go right back down [indiscernible].
John A. Luke
Good morning, everyone. We're now going to talk about innovation. You've seen examples of our innovation this morning. You'll see a lot more as we go forward, including in a session right after this. But to frame our approach to innovation, including reference to some of the questions that came up earlier, how the financial disciplines fit into all of this, I'll ask Bruce Thomas, who oversees this, among other things, for MWV, to tee it up. Bruce?
Bruce V. Thomas
Great. Thanks, John. So welcome back, and good morning. So Steve and Steve, I think, gave you a wonderful example of kind of how we innovate at MWV and, importantly, the change that it's bringing to the nature and quality of our interaction with customers. We're going to go next door in just a few minutes, and you're going to see 4 more examples of that sort of impactful innovation. Between now and then, what I'd like to do is review with you 3 things. First, as John said, sort of the role of innovation at MWV. Secondly, drill down a little bit into some of the capabilities that we've added that are accelerating innovation at MWV. And then, talk about how we are managing innovation for both overall improved effectiveness and better speed to market.
And in my remarks, I hope that you take away a few key messages. And they are these: first, that innovation is and will be a driver of profitable growth, improved margins and competitive differentiation for us. And to support that headline, these 3 key messages, we have added new robust set of capabilities that really are enabling and fueling this growth. Those capabilities include industry-leading marketing consumer insights capabilities that are changing the way that we innovate, the front end of our innovation process and the way that we interact with our customers. And then strong open innovation capabilities that are improving the overall efficiency of our R&D investment and accelerating speed to market. And then lastly, and most importantly, we have brought a long series of important innovations to market, and our innovation pipeline is quite robust and becoming more so.
The first point that I'd like to make as we go a little bit deeper on this innovation process and our mindset at MWV is that this innovation growth is sustainable. So each and every year, we plan on profitable growth from innovation. And as you think about and build your models, you should, too. Because for us, the process of innovation, the results of innovation are not random or episodic, but we manage it for repeatable, predictable, sustainable results. And the source and drivers of that repeatable performance are listed here. The 2 that I want to focus on in my remarks are the right and new capabilities that we've added and the right portfolio.
So let me talk first about capabilities, because as you spend your time with us today and certainly when you go up to the second and third floor, you're going to see capabilities that if you followed us for a while you haven't seen before. That's a big change at MWV. But before I [indiscernible] so we have been [indiscernible] that we have been and remain a leader in paper and paper science innovation. That leadership capability remains, and we continue to invest in that capability. But we've done a lot more over the past several years, and I would just like to -- Alex, can you just raise your hands [indiscernible] there for package innovation. Alex comes to us [indiscernible] very distinguished [indiscernible] with at Procter & Gamble [indiscernible] have an opportunity [indiscernible] with his leadership [indiscernible] expanding our capabilities very significantly to allow us to innovate substrates beyond paper. So that we can now bring a full range of packaging and packaging solutions to our customers. So we've added capabilities like these. We've added polymer science, mechanical design, modeling and simulation, and on your tour of the second floor, you will see those capabilities demonstrated, and you'll meet the people that we brought to the organization to add those skills.
So this is a big change for us, really multi-substrate innovation in a world-class way. The other things that we have added that are entirely new are the 2 that we start here, our marketing consumer insights capability and our open innovation capability. And it's around those 2 new capabilities that I'd like to talk next.
So let's talk about this marketing consumer insights capability. We have over the past 2 years built this capability, and it really is unique in the packaging industry. We have attracted talent from the top universities, and, importantly, we've attracted talent from virtually every market that we serve. So we've added professionals from Anheuser-Busch, from Procter & Gamble, from GSK, from Campbell's Soup. And with these people and with these capabilities, we systematically develop insights around the role that packaging can play -- that would be next door. They're so anxious to talk to you next door. So that was a little preview of our food presentation, I think, if I recognize it right [ph]. Okay. So where was I? So with these capabilities, what we do is develop these insights about the role that packaging can play, that it should play in enhancing the product usage experience at the point of sale, at the point of use and beyond. And as you've seen from Steve and Steve's discussion, that really is driving the way that we innovate, and it's changing the way that we interact with our customers.
Okay, so you say, "Bruce, every consumer products company I've ever talk to has talked about our insights capabilities. So why is yours different?" Well, it's different like this. Because those companies, our customers, develop insights around product. Our insights are around package, and that is different. It is highly complementary, and in a time when, as Bob Feeser highlighted, there really is a lot of brand clutter out there, our customers are really seeing this as interesting and impactful. So it is different, it is a competitive advantage for us, and it's a capability that truly is unique in the packaging industry. It's doing 2 really important things for us: one, it is as you have heard, it is changing the way that we interact with our customers. It is a key driver of the sort of commercial excellence agenda that Mark and Bob and Linda discussed. The second thing, and this is equally important, is that it is allowing us to focus on the packaging and packaging-related issues that consumers care about most, okay?
So the second thing I'd like to talk about is our open innovation capability, which is equally unique in the packaging industry. So first question, what is open innovation? So it is the process of collaborating with anyone, anywhere to develop innovations or inventions and to accelerate speed to market. So you say, "Okay, that didn't help me a lot. Can you maybe give me an example?" So an example would be, so from a healthcare space, I might ask a question like, has anybody developed a unit-dose dispenser of preservative-free ophthalmic product? We have a team of people that can quickly, efficiently, systematically go out and answer that question for us. So that is a very strong and impactful capability. It does not replace the sort of in-house development and innovation that you will see today, but it is highly complementary, allowing us to find cooked or semi-cooked solutions that we can incorporate into the innovation that's under way or commercialize directly. So the so-what about this open innovation capability is 2 things. It is driving efficiency in our R&D investments. So we are getting more things through the pipeline for the same relative R&D spend, and it is significantly accelerating our speed to market. So this very colorful picture here is basically to make this point. We are very, very well connected with this open innovation ecosystem, so we can contact very efficiently and very effectively all possible sources of this outside end innovation. And in a world -- because this world really is this. In a world where the know-who is at least as important as that know-how, MWV has, in the past 2 years, become very well connected. We are very well engaged, and we are very highly regarded.
So we've described these capabilities, this insights capability, open innovation, multi-substrate capability. So what in the world does it all mean? I mean, what does it mean to you? What does it mean to the shareholders? It means this. As I talked about at the beginning, this is driving a very robust, an increasingly robust and an increasingly interesting pipeline of innovation, the sort of innovation that can drive real sustainable growth going forward. But I'd like -- I think it's a lot more than that, and maybe this is a way that we can think about it. So let's kind of step back and think about packaging industry investment thesis, right? So one of the things that you might ask is okay, in the packaging industry, maybe you want to focus on the people that are really working on the big ideas. So we can probably go a little bit deeper. So you might ask yourself questions like, "So who is really focusing on packaging solutions to help on-the-go food taste better?" Or, "Who's working on solutions that really do help people take their medication as prescribed?" Or, "Who is close to coming up to with a solution to this terrible messy tube?" Or, "Who is really helping me come up with ways to find the brands I want at a price that I like?" And I think importantly, the answer to that question is MWV, which means, what about the math? So before we added all of these capabilities, we had a very solid track record of delivering consistent, predictable, really very credible growth from our innovation pipeline. With these capabilities and because we are focused on these big packaging issues, these big packaging opportunities, because we have these capabilities that now allow us to bring a uniquely broad range of solutions to our customers, because these capabilities really are transforming and enhancing the conversation that we're having with our customers, and because we're managing this innovation for predictable, sustainable results, we expect and you can expect that we can accelerate this growth trajectory and that we can deliver more profitable growth and even better margins as we proceed.
So as an exclamation point of sorts to these remarks, what we want to do now is send you next door, where we have 4 specific innovations that we are and our customers are really quite excited about. And you'll meet some of the people that have brought those solutions to fruition and are in the process of bringing these solutions to market. So with that, we'll ask you to up, next door. And what I'd like you to do is -- and it's going to be sort of unwieldy, but we've got 3 specific presentations. We need you to go in one giant mass to the food group, and then we'll guide you from there. Thank you very much.
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