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					SELL REPORT
 Indira Ajjarapu
   Fall’ 2010
Contents                                             Page
Executive Summary                                      2

Tupperware Brands Corp                                 2
       The Company’s Mission …………………………………………………..3

Tupperware Brands Corp. Core Products                  3
       Tupperware………………………………………………………………...3
       Beauty…………………….………………………………………………...3

New Product Introduction Strategy                      3

Business by Geography                                  4

TUP’s Distribution Strategy                            7
       The “Party” Method...……………………………………………………...7
       Integrated Direct Access Strategy…………………………………………7
       Beauty Products Distribution…...…………………………………………7
Procurement of Raw Materials                           8

SWOT Analysis of Tupperware                            9

Tupperware’s Performance                               11
       Performance by geography………………………………………………..12

Tupperware’s Valuation                                 14
       FCFF………………………………………………………………………..17
       FCFE ……………………………………………………………………….17

Summary                                                17

Appendix                                               18




Indira Ajjarapu                                             Page 1
Executive Summary

Tupperware is a well known branded company that offers premium priced Tupperware product
and is geographically well diversified. It however, offers relatively narrow product focus within
house wares and beauty products. I strongly recommend selling Tupperware Brand Corp (TUP)
in our portfolios though it has been held for a short period of time. My recommendation is based
on the following:
     Growing awareness of health risks associated with plastic use as a house ware product
     Very competitive cosmetic industry
     Decline in Top line sales
     Continued weakness in Beauty product line
     Stock unable to perform better than our portfolio benchmark (S&P 500)

Finally, based on my valuation detailed below the stock is overvalued with an intrinsic value of
$43.85, against the current market price of $47.79. Therefore, I recommend a sell on TUP.

Tupperware Brands Corporation
Tupperware Brands Corporation has its head quarters in Orlando, Florida in the United States of
America and is a publicly traded company which is engaged in the manufacturing and
distribution of two product lines -house hold products and beauty items. This company was
founded in 1945 by Earl Tupper and was formerly known as Tupperware Corporation. It was
named as Tupperware Brands Corporation in December 2005. The figure below shows
Tupperware Brand Corp‟s presence globally.




Source: Tupperware Brands: The Company – World Wide Presence. Accessed Nov9, 2010.
http://www.tupperwarebrands.com/company/wwpresence.html

Indira Ajjarapu                                                                            Page 2
The company’s mission1 is to be the premier global direct seller of innovative and premium
products. Tupperware is a member of the Direct Selling Association (DSA) and pledges to abide
by the codes of standards and procedures as a condition of admission and continuing
membership in the DSA as it relies very heavily on direct selling model. It is the seventh largest
direct selling company in the world. The company‟s direct sales in the U.S. account for
approximately $30 billion and its worldwide sales account for approximately $100 billion.

Tupperware Brands Corp. Core Products2
Tupperware: Tupperware‟s principle product line consists of design-centric preparation, storage
and serving solutions for the kitchen and home. It also has an established line of kitchen
cookware and tools, children‟s educational toys, microwave products and gifts. The company has
expanded over the years with products such as Modular Mates, FridgeSmart, One Touch
canisters, the Rock „N Serve microwave line, OvenWorks and silicon baking forms for
microwave or oven use, Open House, Elegant and Outdoor Dining serving lines, the Chef Series
knives and cookware, Flat Out, Stuffables, CheeseSmart and BreadSmartstorage containers, and
Quick Chef and Lil‟ Chopper Prep Essentials, Ultra Pro ovenware plus many specialized
products for the kitchen and home. About two-thirds of sales are under the Tupperware brand,
and include design-centric preparation, storage and serving solutions for the kitchen and home.

Beauty: The Beauty businesses manufacture and distribute skin care products, cosmetics, bath
and body care, toiletries, fragrances, nutritional products, apparel and related products, and in
some cases Tupperware brand products. Beauty (including personal care and nutritional)
comprises about one-third of sales; brands include Armand Dupree, Avroy Shlain (South Africa),
BeautiControl (U.S.), Fuller (Mexico), NaturCare (Japan), Nutrimetics (Australia), Nuvo
(Uruguay) and Swissgarde (South Africa). Unlike the housewares business, TUP‟s beauty
business is weighted more toward emerging markets (80% of total beauty sales), with only about
20% of beauty sales in established markets (essentially BeautiControl in the U.S.).

New Product Introduction Strategy
Tupperware: New Products Comprise at Least 25% of Sales Each Year. TUP manufactures
about 70%- 75% of its products in about 16 plants around the world (TUP has manufacturing
even in Venezuela and India). The company continues to introduce new materials, designs,
colors and decoration in its product lines, to vary its product offerings by season and to extend
existing products into new markets around the world. The development of new products varies in
different markets in order to address differences in cultures, lifestyles, tastes and needs of the
markets. New products introduced in 2009 included the 101° MicroGourmet, Microwave Rice
Maker, Rice Dispenser, Time Savers Herb Chopper, next generation Fridge Stackables, unique
food preparation products such as the Croissant Maker, Silicone Baking Forms and the Pro
Baking product line as well as line extensions to the Ultra Pro ovenware. New product
development and introduction will continue to be an important part of Tupperware‟s strategy.


1
    Annual Report (10K)
2
    Annual Report 10K

Indira Ajjarapu                                                                             Page 3
Beauty: New products introduced in 2009 in the Fuller businesses included a night version of
the Thalia Sodi fragrance and the launch of the fragrance Brizza X Chayanne Cologne.
Additionally, the Nekara brand at the top-end market was expanded through a new line including
Nekara Recovery (Night Facial Treatment), Nekara for Eyes, Nekara Outline Eye Cream and
Nekara Facial Lotion. New products introduced in 2009 under the BeautiControl brand included
Regeneration Tight Firm and Fill Dermal Filling Moisture Masque, Regeneration Overnight
Retinol Recovery Eye Capsules and Serum and Skinlogics Thermal Facial Scrub. BeautiControl
also introduced BC Spa Sculpt, BC Spa Detox and BC Color Mineral which are new skin care
and cosmetic product lines.

According to Caris&Company report, TUP‟s global beauty business has an operating margin of
only 10%-11%, compared with the 18% operating margin for the housewares business. Fuller‟s
operating margin in Mexico is about 18%, with the drags being BeautiControl in the U.S. with an
operating margin of only 4%-5%, and Beauty Other (mainly Latin America, Mexico and
Philippines) with an operating margin of only 7%. The operating margin of Beauty North
America (Mexico and U.S.) has declined in recent years due to tough competition in the beauty
segment.

Business by Geography3
Tupperware operates actively in North America, Europe, Africa, Middle East regions, Latin
America and the Asia Pacific region. Its global sales force consists of 2.3 million direct sellers.
It is one of the most international companies in the consumer products sector, with 87% of sales
outside the U.S. and over 54% of sales in emerging markets. Mexico is TUP‟s single biggest
market (17% of sales), followed by the U.S. (13%) and Germany (8%). Sales in emerging
markets carry lower gross margins than sales in established markets, but emerging markets
operating margins are generally a few percentage points higher than those in established markets.

Though the company operates mainly in three geographic segments: Europe (Europe, Africa and
the Middle East), Asia Pacific and North America; it reports in five segments: Europe, Asia,
Pacific, Tupperware North America, Beauty North America (Mexico and U.S.) and Beauty Other
mainly Latin America (ex. Mexico, Philippines and France). According to the company‟s annual
report (10 K), 54% of TUP‟s 2009 sales were in emerging markets, with 67% of global sales in
Tupperware and 33% in beauty. TUP‟s top three markets (Mexico, U.S. and Germany)
comprised 38% of sales in 2009; with 10 other markets each having annual sales of at least $50
million. TUP‟s top 13 markets (in alphabetical order), are: Australia, Brazil, France, Germany,
Indonesia, Japan, Malaysia/Singapore, Mexico, Philippines, Russia, South Africa, U.S. and
Venezuela. About 17% of TUP‟s sales are in Mexico, with 13% in the U.S. and 8% in Germany.
Emerging markets comprise about 40% of the Tupperware business and about 80% of beauty.
However, market penetration for Tupperware products varies throughout the world. Several
areas that have low penetration, such as Latin America, Asia and Eastern and Central Europe,
provide significant growth potential for Tupperware. Tupperware‟s strategy continues to include
greater penetration in markets throughout the world4.

3
    Rising Estimates and Price Targets: Caris & Company
4
    Annual Report 10K


Indira Ajjarapu                                                                             Page 4
                                Tupperware Net Sales
              1500
              1000
                  500
                    0
                        2005            2006            2007           2008         2009

                           Europe (a)           Asia Pacific (a)        North America




                                    Beauty Net Sales
              1000

                  500

                    0
                        2005            2006            2007           2008         2009

                                        North America (a)          Other (a)


Beauty products and image services are provided to clients via independent sales forces in over
20 markets throughout the world with particularly high shares of the direct selling and/or beauty
market in Mexico, South Africa, the Philippines, Australia and Uruguay.
Businesses operating in emerging economies, those with GDP per capita classified as “low” or
“medium” by the World Bank, accounted for 51 percent of 2009 reported sales, while business
operating in established market economies accounted for the other 49 percent. For the past five
fiscal years 78 to 86 percent of total revenues from the sale of Tupperware Brands‟ products
have been in international markets.
This statistics shows that future growth of Tupperware sales is going to come from emerging
markets and lesser growth comes from its established markets. Therefore penetration into the
emerging markets is very crucial for this company. The company is putting a lot of effort into
penetrating into these markets and trying to create brand awareness however more effort needs to
be emphasized as TUP‟s penetration levels are low in the emerging markets according to
Caris&Company.

The chart below shows that sales growth has tapered off from the year 2007 and essentially
remained flat or fell between the years 2008 and 2009.




Indira Ajjarapu                                                                            Page 5
Sales Productivity by Geography


                               Revenue per Geography
                     2500

                     2000
                                                                               Europe
        Axis Title




                     1500                                                      Asia-Pacific
                     1000                                                      N. America
                                                                               Other
                      500
                                                                            Total Revenue
                        0
                            2005    2006        2007        2008   2009


5
  TUP‟s market penetration varies throughout the world. Several areas that have low penetration,
such as Latin America, Asia and Central & Eastern Europe, provide significant growth potential.
TUP has particularly high shares of the direct selling and/or beauty markets in Mexico, South
Africa, the Philippines, Australia and Uruguay. According to Caris & Company analysis, average
annual sales per active rep in 2009 were highest in TUP‟s businesses in Europe and Asia Pacific
(about $6,800 in each region). About 35% of European sales are in emerging markets, compared
to about 55% of Asia Pacific sales. Tupperware North America (about two-thirds U.S. and one-
third Mexico) was significantly lower at about $3,400. In the beauty business, average sales per
active rep in 2009 were only about $1,200 in North America (including Mexico) and $1,400
outside North America. On the contrary, Avon, one of TUP‟s competitor‟s average sales per
active rep is about $4,500 in the U.S. (where 55% of sales are beauty), $1,500 in Mexico and
$1,000 in Brazil6. Though the breakdown of sales is a little different for both companies, the
above sales figure for each of TUP‟s rep show that they are unable to sell as many products. This
shows that beauty business is very competitive and branded beauty products are perceived as
best for use by consumers. Though Tupper brand is recognized it is associated with house ware
products and not beauty products.




5
    Bloomberg BusinessWeek
6
    Caris & Company “Rising Estimates and Price Targets”.

Indira Ajjarapu                                                                           Page 6
TUP’s Distribution Strategy

The “Party” Method7: TUP‟s products are distributed worldwide primarily through the “direct
selling” channel under which products are sold to consumers outside traditional retail store
locations. The system facilitates the timely distribution of products to consumers, without having
to work through intermediaries, and establishes uniform practices regarding the use of
Tupperware trademarks and administrative arrangements, such as order entry, delivery and
payment, along with the recruiting and training of dealers. Tupperware products are primarily
sold directly to distributors, directors, managers and dealers throughout the world. Where
distributorships are granted, they have the right to market Tupperware products using parties and
other non-retail methods and to utilize the Tupperware trademark. The vast majority of the sales
force is independent contractors and not employees of the company. In certain limited
circumstances, TUP has acquired ownership of distributorships for a period of time, until an
independent distributor can be installed, in order to maintain market presence. In addition to the
introduction of new products and development of new geographic markets, a key element of
TUP‟s strategy is expanding its business by increasing the size of its sales force. Under the
system, distributors and directors recruit, train and motivate a large number of dealers. Managers
are developed from among the dealer group and promoted to assist in recruiting, training and
motivating dealers, while continuing to sell products. As of year-end 2009, the TUP distribution
system had about 1,800 distributors, 61,300 managers and 1.3mm dealers worldwide.

During 2009, about 16.5 million Tupperware parties took place worldwide. TUP relies primarily
on the “party” method of sales, which is designed to enable the purchaser to appreciate through
demonstration the features and benefits of Tupperware products. Tupperware parties are held in
homes, offices, social clubs and other locations. Tupperware products are also promoted through
brochures mailed or given to people invited to attend Tupperware parties and various other types
of demonstrations. Sales of Tupperware products are supported by TUP through a program of
sales promotions, sales and training aids and motivational conferences for the sales force.

Integrated Direct Access (IDA) Strategies8: To support its sales force, TUP also utilizes
catalogs and television and magazine advertising, which help to increase its sales levels with
hard-to-reach customers and generate sales force leads for parties and new dealers. TUP uses
IDA strategies around the world to enhance its core party plan business and to enable consumers
to obtain Tupperware products other than by attending a Tupperware party. These strategies
include retail access points, Internet selling (which includes the option of personal websites for
the U.S. sales force) and television shopping. In addition, TUP enters into business-to-business
transactions, in which it sells products to a partner company (often a leading retailer) for sale to
consumers through the partner‟s distribution channel, with a link back to the party plan business
to generate additional Tupperware parties.

Beauty Products Distribution9: TUP‟s beauty products are sold through consultants and
directors who are primarily independent contractors. Of the larger beauty businesses operated by
TUP, BeautiControl North America and Nutrimetics Australia operate under the party plan, one-
7
  Annual Report (10K)
8
  Morning Star Report and Company website
9
  Annual Report (10K)

Indira Ajjarapu                                                                               Page 7
to-many selling system. In order to provide immediate product delivery, the sales force in these
businesses may maintain a small inventory of products. The other large beauty businesses
(including Fuller Mexico) operate primarily through one-on-one sales interactions; with product
shipments occurring after end consumers have placed orders. BeautiControl consultants in the
U.S. are encouraged to use company developed and sponsored personal internet web pages
called BeautiPage in order to utilize multiple selling opportunities. As of year-end 2009, the sales
force representing TUP‟s beauty businesses totaled 1.1mm, of which 570,000 were in North
America.

Procurement of Raw Materials10

Tupperware: Products manufactured by Tupperware require plastic resins that meet its
specifications. Plastic resin comprises about 13%-14% of cost of goods sold (COGS).These
resins are purchased through various arrangements with a number of large chemical companies
located throughout Tupperware‟s markets. As a result, Tupperware has not experienced
difficulties in obtaining adequate supplies and generally has been successful in obtaining
favorable resin prices on a relative basis. Research and development relating to resins used in
Tupperware products are performed by both Tupperware and its suppliers.
Beauty: Materials used in the beauty businesses‟ skin care, cosmetic and bath and body care
products consist primarily of readily available ingredients, containers and packaging materials.
Such raw materials and components used in goods manufactured and assembled by the beauty
businesses and through outsource arrangements are available from a number of sources. To date,
the beauty businesses have been able to secure an adequate supply of raw materials for their
products, and they endeavor to maintain relationships with backup suppliers in an effort to
ensure that no interruptions occur in their operations.


           Exhibit 4: Impact of Resin on Operating Profits




           (Source: Grundy, Kevin. “Tupperware Brands: Remain OW, But Less Compelling Short-Term Risk/Reward.” Morgan
           Stanley. November 15, 2010.)




10
     Annual Report (10K)

Indira Ajjarapu                                                                                                 Page 8
SWOT11 Analysis of Tupperware

Strengths
New product introduction: Tupperware continually introduces new products and materials,
designs, colors and decoration in its product lines, to vary its product offerings by season and to
extend existing products into new markets around the world. The development of new products
varies in different markets in order to address differences in cultures, lifestyles, tastes and needs
of the markets. New products contribute to significant increase in sales and profit for the
company.
Penetration in Emerging Markets: Emerging markets accounted for approximately 54% of the
sales with 67% of global sales in Tupperware and 33% in beauty. This is the growing segment of
the market and penetration into this market is very crucial for its growth and Tupperware has so
far succeeded in penetrating into this high growth markets successfully.
Geographically Diversified Revenues: TUP‟s products are currently sold in 100 different
countries around the world, and revenues are collected in approximately in 30 different
currencies. The company is not dependent on any single market for its revenues. So long as
economic cycles are not global, the company is able to consistently generate revenues.
Large Independent Sales Force: Tupperware Brands Corporation currently has the third largest
independent sales force in the world. Since 2005, the number of contractors associated with the
firm has grown at a CAGR of 5.34 percent, and currently there are over 2.4mn people within the
sales force.
Party method of Distribution: The party method of distribution facilitates timely distribution of
products to consumers, without having to work through intermediaries, and establishes uniform
practices regarding the use of Tupperware trademarks and administrative arrangements, such as
order entry, delivery and payment, along with the recruiting and training of dealers. Hence it cuts
cost and adds to TUP‟s bottom line.

Weakness
Low Product Diversity: TUP operates in only two segments – Tupperware products and Beauty
products. Hence, decline in revenues from both these segments can significantly offset its
profitability.
Non-Integrated Sales Force: Tupperware Brands has two separate sales forces, one for each of
its operating segments. Only in select markets is there a single sales force that sells both -
Tupperware product and Beauty product. While this may make sense in terms of organization, it
does not make sense in terms of efficiency of operations. An integrated sales force able to sell
both product lines seems like it would seems like it would enhance productivity and efficiency of
the sales force.
Training and Supervision of Sales force: The vast majority of the sales force is independent
contractors and not employees of the company; only in certain limited circumstances, TUP has

11
     Company Annual Report (10K)

Indira Ajjarapu                                                                                Page 9
acquired ownership of distributorships for a period of time, until an independent distributor can
be installed, in order to maintain market presence. This could sometimes lead to sub standard
customer service or the sales person not having enough knowledge about the product. It could in
turn adversely affect the credibility and quality perception of the company‟s products by its
customers.
Opportunities

Increasing Wealth in Emerging Markets: Wealth in emerging markets is increasing and this
should create more demand for the products sold by Tupperware Brands. Considering historical
growth rates over the past year, these markets could account for a bigger percentage of their
revenues.
Threats

Health consciousness of Consumers12: Plastic containers are considered to be unhealthy for
heating and storing food. In the Family Health Guide, a Harvard Health Publication of Harvard
Medical School, published that when food is wrapped in plastic or placed in a plastic container
and micro-waved, the substance used in manufacturing the plastic (plasticizers) may leak into the
food; in particular, fatty foods such as meats, cheeses etc. and cause a chemical called
diethylhexyl adipate to leach out of the plastic causing cancer, reproductive problems, and other
illnesses. Though the FDA requires plastic containers to be of certain quality and tested before
use, test shows that some plastic containers still show migration of chemicals at temperatures
reached during ordinary use. The present generation is increasingly becoming conscious of not
using plastic to store and heat food. This is a major threat to the company‟s products. Hence, this
poses a huge threat to its sales going forward.
Environmental Threat13: Environmentalists around the world are concerned about the use of
plastic products in our daily life as they do not decompose easily. Beyond the immediate health
risks, our increasing use of plastics is causing an enormous amount of enduring pollution. Every
bit of plastic that has ever been created still exists (except for the little bit that has been
incinerated, which releases toxic chemicals)14. In the ocean, plastic waste is accumulating in
giant gyres of debris where, among other thing, fish are ingesting toxic plastic bits at a rate
which will soon make them unsafe to eat. India has made a big leap in this area. State
governments of several states such as Punjab, Goa, Himachal Pradesh, Jammu & Kashmir,
Kerala, Maharashtra, Sikkim and West Bengal have imposed a ban on plastic bags. Rajasthan,
the largest state of India joined this green league in July. According to a local news paper15,
environmentalists are protesting to ban use of all plastic for house ware use including children‟s

12
  Family Health Guide, The Harvard Medical School, health publication. Retrieved Nov 15, 2010
http://www.health.harvard.edu/fhg/updates/update0706a.shtml

13
     http://news.nationalgeographic.com/news/2008/04/080404-plastic-bags.html, Retrieved Nov 15, 2010
14
     http://news.bbc.co.uk/2/hi/south_asia/3132387.stm Retrieved Nov 15, 2010
15
     http://cityofvizag.com/home/spotlight/578-can-we-live-without-plastic-bags.html


Indira Ajjarapu                                                                                         Page 10
toys etc. Though this ban may not come into effect any time soon, it poses a big threat to
Tupperware.

Tupperware has been banned from China: According to Los Angeles Times, Tupperware
along with Avon, Amway and Mary Kay have been ordered to stop operating in China in an
effort to ban “pyramid selling”. These U.S. companies that have been enjoying phenomenal
growth across China have been swept up in China‟s push to rid itself of the Ponzi and Pyramid
schemes.

Impact of Dollar’s decline: As the value of the dollar falls the total revenues in U.S. dollars will
be low. This will have a big impact of the revenues of most multinational companies.



Tupperware’s Performance1617

The chart below shows TUP‟s performance compared to S&P 500 (SPY). The YTD performance
shows that TUP has been well below the S&P 500 for the past one year.




Source Yahoo Finance. Retrieved November 9, 2010.
http://finance.yahoo.com/q/ta?s=TUP&t=2y&l=on&z=l&q=l&p=&a=&c=SPY




16                          nd
     Quarterly Reports (10Q 2 Quarter)
17                           rd
     Quarterly Reports (10Q 3 Quarter)

Indira Ajjarapu                                                                              Page 11
Source Yahoo Finance. Retrieved November 16, 2010.
http://finance.yahoo.com/q/ta?s=TUP&t=2y&l=on&z=l&q=l&p=&a=&c=SPY

TUP‟s performance above compared to S&P 500 shows Tupperware has not been performing
well compared to S&P500. We use S&P500 to measure and benchmark our portfolio‟s
performance. Hence I recommend selling TUP stock that has not been performing better than its
bench mark (S&P500).

Tupperware‟s Q1 earning were a surprise as it reported better than expected Sales and margins.
These results can be mapped to pet up demand created due to recession and lower plastic resin
costs. The company lowered its 2010 earnings for the year‟s EPS of $3.51-3.61, below their prior
range of $3.68-3.78.

TUP‟s Q2 EPS came in at $0.93, below Bloomberg consensus of $0.97, and the company's
guidance of $0.95-1.00. The company claimed that this was entirely due to a $0.14 hit related to
errors identified in the financial reporting of a Russian subsidiary.

Tupperware (TUP) reported 3Q10 adj. EPS of $0.64 vs. $0.54, exceeding consensus of $0.58,
and guidance of 0.54-$0.59. Relative to guidance, a lower tax rate added $0.05 and better foreign
added $0.02. Local currency sales growth of 3% fell short of the 4%-6% guidance due to
softness in Russia, Australia and Fuller Mexico. TUP gave data points indicating local currency
sales growth should improve to 4%-6% in 4Q10. TUP increased 2010 EPS guidance to $3.60-
$3.65 from $3.51-$3.61, including a $0.11 improvement from foreign exchange.

     Therefore, 70% of the increase in EPS earnings is not a result of growing profits or sales.


Performance Break Down by geography

Emerging markets were +9% in local currency and established markets were -5%. Europe‟s
growth was 2%; Developed Europe was quite good at +4% (France and Austria were +20%-plus,
Germany flat). Emerging Europe weakened to -1% from +5% in 3Q10 due to a 36% decline in

Indira Ajjarapu                                                                          Page 12
Moscow, Russia ;( 25% of the region) was zero for half the quarter. Additionally, Asia was +4%
against the expected +10%.

        Established markets were -5%, though emerging markets did well
        Emerging Europe weakened to -1% from +5% in 3Q10 due to decline in sales in Russia.
        Asia was only 4% up against the expected 10% growth in sales.

TUP also cited weakness in Australia and Japan (both -20%), developed Asia actually did not get
worse (-23% vs. comp of +9%; 2Q10 was -21% vs. comp of +0%). Emerging Asia, slowed to
+22% from +34% in 2Q10. China was +3% but +20% expected. However, India showed +56%
and Indonesia was +29% growths.

        Weakness in both Australia and Japan (both -20%)
        Emerging Asia slowed to +22% from +34% in 3Q’10
        China was 3% but 20% was expected

Tupperware North America (NA) was -2% against +3% expected growth. In the U.S. Beauty and
Other was +16% against expected +12% increase in revenues, with Brazil +33%. Beauty NA
was -2% against expectations that growth will be flat for the quarter as BeautiControl posted a
smaller decline than in 2Q10. Additionally, Fuller Mexico was also flat soft with flat sales.

        Tupperware North America (NA) was -2% against +3% expected growth
        Beauty NA was -2% against an expected flat growth for 3Q’10

The consolidated operating margin was 11.6% vs. 11.4% in 3Q09 however the expectation was
12.6%. Corporate expense for this quarter was $16mm (vs. $11mm in 3Q09) which was over the
expected $15 million. The operating margin before corporate expense was up a robust 210 bps
Y-o-Y (14.7% vs. 12.6%). Two of TUP‟s five segments Europe and Tupperware NA did not
have year-over-year operating margin expansion.

        operating margin was 11.6% 3Q09 however the expectation was 12.6%
        Europe and Tupperware NA did not have any Y-o-Y operating margin expansion

Accounting issues in Russia, but management claims that it is a onetime item. Accounting
errors include a $0.14/share charge related to the realization of certain promotional credits had
not been paid or accrued, prepaid expenses that were not allocated to the I/S during the
appropriate periods, and at certain times bad debt reserves were not high enough. They believe
the causes of these issues were due to: strong growth in Russia, segregated duties, and a
rudimentary IT system.
However, management reiterated that this will not shy them from growth opportunities going
forward.

JP Morgan18 forecasts that the top line performance will further decline for the next couple of
years. The forecasted growth is shown below.

18
     John Faucher. North American Equity Research, July 20, 2010. Retrieved Nov 16, 2010.

Indira Ajjarapu                                                                             Page 13
                                   TUP's Top Line Growth
                   12%
                   10%
                   8%
     Growth Rate




                   6%
                   4%
                   2%
                   0%
                   -2%
                   -4%

Source: JP Morgan Estimates. Retrieved November 16, 2010.

According to JPM Analyst, BeautiControl continues to disappoint in its performance and they
believed that it is a risk going forward because LC sales were down in the mid-teens for the
second consecutive year. Management however continues to highlight the division's focus on
sales force training and the development of the direct selling business. The company attributed
the tougher consumer environment in the US to some of the underperformance. The analysts
point out that weakness in BeautiControl is a risk for the profitability of the company.

TUPPERWARE VALUATION

I used a DCF valuation model based on FCFF and FCFE to estimate TUP‟s stock value and
made assumptions on revenue growth, future CapEx, future profitability, and cost of capital.
Revenue assumptions per geography are calculated based on historical information (Table 1) and
quarterly information (for 2010) and projected for the future.

                                           SHORT RUN                 INTERMEDIATE TERM                            LONG TERM DECLINING GROWTH
FORECAST ASSUMPTIONS                   2010         2011       2012       2013         2014        2015      2016       2017       2018      2019      2020
European Revenue Growth Rate             -5.00%        2.00%     4.00%      6.00%          5.00%     5.00%     5.00%      5.00%      4.00%     4.00%     4.00%
Asia-Pacific Revenue Growth Rate          9.00%       13.00%    15.00% 17.00%             16.00%    15.00%    13.00%      9.00%      7.00%     7.00%     7.00%
N. America Revenue Growth Rate            2.00%        4.00%     6.00%      5.00%          5.00%     4.00%     4.00%      4.00%      4.00%     3.00%     3.00%
Other Revenue Growth Rate                 8.00%       15.00%    16.00% 16.00%             16.00%    14.00%    12.00%      8.00%      6.00%     6.00%     6.00%
Total Revenue Growth Rate                   1.7%          7%        9%        10%            10%        9%        8%         6%         5%        5%        5%

Cost of sales, S&A expense, other expenses, working capital, property plant & equipment, long
term debt are projected into the future based on historical information. They have been projected
as a percent of revenue. Table 1 in Appendix shows historical information in percent for the past
5 years and also gives the forecast parameters used for future projections. The figure below
shows forecasted parameters based on historical information.




Indira Ajjarapu                                                                                                                Page 14
                                                  SHORT RUN                 INTERMEDIATE TERM
FORECAST ASSUMPTIONS                          2010         2011       2012       2013         2014
European Revenue Growth Rate                    -5.00%        2.00%     4.00%      6.00%          5.00%
Asia-Pacific Revenue Growth Rate                 9.00%       13.00%    15.00%     17.00%         16.00%
N. America Revenue Growth Rate                   2.00%        4.00%     6.00%      5.00%          5.00%
Other Revenue Growth Rate                        8.00%       15.00%    16.00%     16.00%         16.00%
Total Revenue Growth Rate                          1.7%          7%        9%        10%            10%
Cost of sales as % of revenues                  33.00%       33.00%    33.50%     33.50%         33.50%
SG&A as % of revenues                           54.00%       53.50%    53.00%     52.50%         52.00%
Other income as % of revenues                    0.45%        0.45%     0.45%      0.45%          0.45%
Deprec and amort as % of prior year net P&E     24.31%       24.31%    24.31%     24.31%         24.31%
Effective tax rate                              18.20%       18.20%    18.20%     18.20%         18.20%
Current assest other than cash as %
revenues                                       28.04%       28.04%     28.04%    28.04%         28.04%
Current liabilities as % of revenues           21.00%       21.00%     21.00%    21.00%         21.00%
Prior Yr Net P&E as % of Current Yr
Revenue                                        12.85%       12.85%     12.85%    12.85%         12.85%
Growth rate of net P&E                          3.50%        3.50%      3.50%     3.50%          3.50%

For FCFE calculations

Debt to Total Liabilities and Net Worth           40%          40%        42%       42%            44%
Interest rate                                   5.31%        5.31%      5.31%     5.31%          5.31%
Effective tax rate for interest*               18.20%       18.20%     18.20%    18.20%         18.20%




The table below shows the Free Cash Flows to the Firm from 2010 – 2020.




Indira Ajjarapu                                                                      Page 15
                                                  SHORT RUN     INTERMEDIATE TERM HIGH GROWTH                                           LONG TERM DECLINING GROWTH
FREE CASH FLOWS TO THE FIRM (FCFF)            2010         2011     2012          2013        2014                2015             2016     2017          2018     2019                      2020
Revenue by Region
   Europe                                $      712.12   $     726.36    $     755.42   $ 800.74 $ 840.78 $ 882.82 $ 926.96               $       973.31   $   1,012.24   $   1,052.73   $   1,094.84
   Asia-Pacific                          $      419.65   $     474.20    $     545.34   $ 638.04 $ 740.13 $ 851.15 $ 961.80               $     1,048.36   $   1,121.74   $   1,200.27   $   1,284.29
   N. America                            $      697.58   $     725.48    $     769.01   $ 807.46 $ 847.83 $ 881.75 $ 917.02               $       953.70   $     991.85   $   1,021.60   $   1,052.25
   Other                                 $      333.72   $     383.78    $     445.18   $ 516.41 $ 599.04 $ 682.90 $ 764.85               $       826.04   $     875.60   $     928.14   $     983.83
Total Revenue                            $    2,163.07   $   2,309.83    $   2,514.94   $ 2,762.66 $ 3,027.78 $ 3,298.62 $ 3,570.62       $     3,801.40   $   4,001.43   $   4,202.73   $   4,415.20
Cost of sales                            $      713.81   $     762.24    $     842.51   $ 925.49 $ 1,014.31 $ 1,121.53 $ 1,214.01         $     1,292.48   $   1,360.49   $   1,428.93   $   1,501.17
SG&A expenses                            $    1,168.06   $   1,235.76    $   1,332.92   $ 1,450.39 $ 1,574.45 $ 1,698.79 $ 1,821.02       $     1,938.72   $   2,000.72   $   2,101.37   $   2,207.60
Non-operating Income                     $        9.73   $      10.39    $      11.32   $ 12.43 $ 13.63 $ 14.84 $ 16.07                   $        17.11   $      18.01   $      18.91   $      19.87
Depreciation and amortization            $       59.66   $      72.16    $      78.56   $ 86.30 $ 94.58 $ 103.04 $ 111.51                 $       118.72   $     124.96   $     131.25   $     137.88
EBIT                                     $      231.28   $     250.07    $     272.27   $ 312.90 $ 358.07 $ 390.10 $ 440.15               $       468.60   $     533.27   $     560.10   $     588.42
After-tax EBITDA                         $      248.85   $     276.72    $     301.29   $ 342.27 $ 387.50 $ 422.16 $ 471.57               $       502.05   $     561.20   $     589.43   $     619.23
    Change in non-cash W.C.              $       28.38   $      10.33    $      14.44   $ 17.44 $ 18.66 $ (6.90) $ 17.01                  $        14.43   $      12.51   $      12.59   $      13.28
   Change in Net P&E                     $       51.41   $      26.36    $      31.83   $ 34.07 $ 34.80 $ 34.82 $ 29.65                   $        25.70   $      25.86   $      27.29   $      22.28
 Add depreciation                        $       59.66   $      72.16    $      78.56   $ 86.30 $ 94.58 $ 103.04 $ 111.51                 $       118.72   $     124.96   $     131.25   $     137.88
  Gross capital expenditures             $      111.07   $      98.51    $     110.39   $ 120.37 $ 129.39 $ 137.86 $ 141.16               $       144.41   $     150.82   $     158.54   $     160.17

FCFF                                     $ 109.40 $ 167.87 $ 176.46 $ 204.46 $                           239.45 $ 291.20 $ 313.41 $ 343.21 $ 397.87 $ 418.30 $ 445.78

                                                     SHORT RUN         INTERMEDIATE TERM HIGH GROWTH                                       LONG TERM DECLINING GROWTH
Free Cash Flows to Equity (FCFE)                  2010        2011      2012      2013         2014                      2015         2016       2017       2018      2019                   2020
FCFF                                                109.40      167.87 176.46 204.46              239.45                  291.20       313.41 343.21 397.87 418.30                            445.78
Debt and other non-current liabilities              854.52      869.19 888.63 910.26              933.79                  947.08       969.30 988.40 1006.67 1025.67                         1042.60

Prior year debt and other non-current liab.          822.60             854.52      869.19      888.63       910.26       933.79       947.08       969.30        988.40      1006.67        1025.67
  Net increase (add)                                  31.92              14.68       19.43       21.63        23.53        13.29        22.22        19.11         18.27        18.99          16.94
Interest before tax                                   45.37              46.15       47.19       48.33        49.58        50.29        51.47        52.49         53.46        54.47          55.36
Subtract after-tax interest expense                    8.26               8.40        8.59        8.80         9.02         9.15         9.37         9.55          9.73         9.91          10.07
FCFE                                                 133.06             174.15      187.31      217.30       253.95       295.34       326.26       352.77        406.41       427.38         452.64

The net present value of all the free cash flows for the next 10 years is $1,421 million. The net
present value of terminal cash flows discounted to present day is $1,638 million. Free cash on

Indira Ajjarapu                                                                                                                                                 Page 16
hand is $445.78 million. Hence the total value of the firm is $3,059 million. Tupperware‟s debt
on the balance sheet is 426 million. Hence the equity value of the firm is $2,745 million. Number
of TUP‟s shares outstanding are 63.40. Therefore the value of each share is $43.30.
                                         Valuation
Terminal growth rate assumption                                        3%

                                                              FCFF                FCFE
W.A.C.C.//Cost of Capital                                       11.87%            13.70%
Cash flow in 2020                                        $      445.78       $    452.64
Terminal value at 2020                                   $    5,176.64       $  4,357.75
Present value of Terminal Value                          $    1,686.25       $  1,207.00
Present value of intermediate CF                             $1,467.63         $1,395.33
Total                                                    $    3,153.88       $  2,602.33
Add Cash                                                 $      112.00       $    112.00
Subtract value of debt                                   $      486.00
Equity value                                             $    2,779.88       $    2,714.33
Shares outstanding                                                63.40               63.40
Value per share                                          $       43.85       $       42.81
Current Price (11/15/2010)                               $       47.24       $       47.24




Summary
Tupperware is a well known branded company that offers premium priced products and is
geographically well diversified. However, it offers relatively narrow product focus within house
wares and beauty products. Of the two core products it offers Tupperware and Beauty. The
cosmetic industry is highly competitive industry. Beauty sales makes up approximately 35% of
its revenues and the company‟s beauty products are not considered premium or brand
recognized. Hence to survive in this industry is very difficult. Added to this, with growing
awareness of health risks associated with plastic use as a house ware product its future success of
the company is at great risk.

Additionally, given the fact that US economy is slowly getting out of recession, European
economy is still struggling and the consumer discretionary sector is still slow due to lack of
consumer confidence and spending we should sell TUP and cash in any positive profit from
TUP. Also, the consumer discretionary sector in our portfolio is toward the higher end of the
range (this is only due the fact that TUP has been significantly down in the past couple of weeks
and prior to that this sector was over the range specified in the policy statement), hence I am
recommending a sell on TUP.

According to DCF valuation TUP should be trading at approximately $43.20. It has been trading
around $47.20 (11/10/2010). This means that TUP is overvalued. This stock was unable to
perform better than its competitors, industry average and S&P 500 for the past one year. Hence,
this stock should be sold.




Indira Ajjarapu                                                                            Page 17
Appendix
Table 1
                                                     HISTORICAL VALUES             AVERAGE
                                               2006     2007     2008    2009
European Revenue Growth Rate                    2.22% 11.74% 11.83% -2.60%            8.60%
Asia-Pacific Revenue Growth Rate               17.21% 21.99% 14.95% 14.55%           18.05%
N. America Revenue Growth Rate                 61.19% 10.71%      1.69% -10.48%      24.53%
Other Revenue Growth Rate                     308.38% 19.09% 17.07%       5.79%     114.85%
Total Revenue Growth Rate                      42.42% 13.63%      9.10% -1.59%       21.72%
Cost of sales as % of revenues                 31.09% 31.89% 32.54% 33.77%              32%
SG&A as % of revenues                          56.29% 54.68% 53.71% 52.60%           54.32%
Other income as % of revenues                   0.92%    0.48%    0.07%   1.23%       0.68%
Deprec and amort as % of prior year net P&E    28.64% 24.75% 22.78% 21.07%           24.31%
Effective tax rate                              9.25% 17.33% 20.06% 26.15%           18.20%
Current assest other than cash as %
revenues                                       27.78%   30.12%   26.78%   27.47%       28.04%
Current liabilities as % of revenues           21.88%   22.73%   20.89%   21.65%       21.79%
Prior Yr Net P&E as % of Current Yr
Revenue                                        14.60%   12.95%   12.30%   11.53%       12.85%
Growth rate of net P&E                          0.83%    3.66%   -7.74%    3.75%        0.12%

For FCFE calculations

Debt to Total Liabilities and Net Worth        54.32%   43.23%   45.31%   36.11%       47.62%
Interest rate                                   5.92%    5.37%    5.07%    4.88%        5.31%
Effective tax rate for interest*                9.25%   17.33%   20.06%   26.15%       18.20%




Indira Ajjarapu                                                              Page 18

				
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