THE OC&C GLOBAL 50

2013
HITTING A
BRIC WALL
HITTING A
BRIC WALL
OC&Cs annual review of the Top 50 Global FMCG Companies
Produced in Association with
A d Agenda
Executive Summary
Key Exhibits Key Exhibits
Methodology
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Gl b l 50 Th L t Y P f R i (I)
Whilst the Global 50 have shown some resilience to the difficult macro-economic environment, their growth rate
has overall seen some decline
Global 50 The Last Year Performance Review (I)
Top-line growth has gone down from 7.3% in 2011 to 5.6% in 2012
Organic growth decreased by 1.8ppt, from 6.7% in 2011 to 4.9% in 2012
This organic growth was to a large extent driven by price inflation (accounting for 70% of total organic growth
vs. volume increases accounting for only 30%)
Although the Americas remained the primary source of revenue for the Global 50, rapid growth has been mainly
derived from Asia and Africa
Asia & Africa have grown in 2012 at c.12% vs c.7% for the Americas and c.1.5% for Europe
70% of the Global 50 growth is coming from the Americas, Asia & Africa, only 11% from the EU g g , , y
In the light of the tough macro economic environment and the margin hit experienced in 2011, the Global 50 have
turned their attention in 2012 more towards rebuilding margins & productivity improvements
Gross margins still remained under pressure (-0.1ppt in 2012 after -0.8ppt in 2011) despite a more stable
commodity environment with some minor commodity price declines, reflecting tough price pressure in many commodity environment with some minor commodity price declines, reflecting tough price pressure in many
major markets
Note: Retailer gross margins were also down (-0.2ppt) while food consumer price continued to increase at 2.7%
Operating margins of the Global 50 increased by 0.4ppt to 16.6% however, this increase was mainly due to
exceptional items; EBIT pre-exceptionals stabilized on 2011 levels
ROCE grew by 1.0ppt to 18.1%, ahead of levels in 2010
Despite having overall more focus on costs, the Global 50 still continued to drive growth initiatives, as marketing
(5.4% of sales) and R&D (1.3% of sales) spend remained at 2011 levels
I dditi th h b i i d l ti it b th Gl b l 50 ith th hi h t h f d l
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In addition, there has been an increase in deal activity by the Global 50 with the highest shares of deals
happening in Asia and North America
Number of acquisitions (31) by Global 50 companies was in line with 2011, but estimated total deal value was
up from $36bn to $43bn
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Gl b l 50 Th L t Y P f R i (II) Global 50 The Last Year Performance Review (II)
The usual suspects still dominate the Global 50 with Unilever continuing to outperform its closest rival,
outgrowing P&G on an organic basis for the 5
th
year in a row
The continued shift of power and influence towards emerging markets is however clear and shows itself in several
ways:
The rise of emerging market champions up the Global 50
JBS (from #15 in 2010 to #7 in 2012) and Grupo Bimbo (from #40 in 2011 to #31 in 2012) both rose in the
rankings behind strong sales growth: JBS emerged as organic growth champion with 24% sales increase
l t (i l l ) G Bi b d ll th h i h t t over last year (in local currency); Grupo Bimbo emerged as overall growth champion, however to some part
driven by M&A
With Brasil Foods and Marfrig also in the Global 50 and delivering >10% growth in 2012 there is some clear
evidence for the emergence of LatAm power
Chinas leading FMCG firms are close to breaking into the Global 50 Tingyi ranks 51
st
this year and will China s leading FMCG firms are close to breaking into the Global 50 Tingyi ranks 51
st
this year and will
surely break into the Global 50 next year, Wahaha (~$11bn) would already be in the Global 50 if financial
figures were available
The importance of emerging market consumers, and their thirst for premium products, as a rare source of
growth for truly global players was clear with Estee Lauder Pernod Ricard and SAB Miller all near the top of growth for truly global players was clear with Estee Lauder, Pernod Ricard and SAB Miller all near the top of
the organic growth rankings
In that vein, Africa continues to attract more attention as the next growth horizon for FMCG cos, with large
rewards available for those that can move fast to create strong leadership positions (partly driven via M&A) as key
African economies develop
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African economies develop
Africa also presents potential opportunity for mid-sized firms below the Global 50s scale that missed the boat
getting into BRIC markets but still have a chance to establish leading positions in key African markets
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D Di 1 Diffi lt T i i E i M k t BRIC Deep Dive 1: Difficult Terrain in Emerging Markets BRIC
Overall the Global 50 companies remain underexposed to the growth in emerging markets
Market share is low across the BRIC countries (c.27%), and particularly so in China where the Global 50 market share Market share is low across the BRIC countries (c.27%), and particularly so in China where the Global 50 market share
is even lower at 17%
Outside of health and beauty (44% share) and soft drinks (38% share) the global 50s position is relatively weak
In 2012 the Global 50 have grown revenue broadly in line with overall market growth
Consequently, Global 50 market share remained largely flat (exception: minor M&A led share improvement in Brazil)
However, Global 50 have been outpaced by Local Leaders both in terms of organic growth (12.6% vs. 14.4%) and
total growth including M&A (14.4% vs. 14.8%)
Over a longer period (2005-2012) the Global 50 have achieved similar organic growth rates as local leaders (c.12%); total
growth of local leaders has been however significantly higher (18.0% vs Global 50 growth of 13.5%) fuelled by more
aggressive M&A aggressive M&A
Local leaders appear to be better positioned to consolidate mid-sized local companies, driven by better understanding
of their home market environment / local synergy potential and easier financing (better access to cheap capital)
Global 50 M&A activities have largely focused on Brazil & Russia only (account for >90% of acquired revenues)
In order to accelerate growth and win share the Global 50 need to be both more aggressive in their organic and M&A led In order to accelerate growth and win share the Global 50 need to be both more aggressive in their organic and M&A led
growth strategies to enable them to reach local, critical mass and not lose out to local leaders
Cast the net wider to drive significantly increased M&A activity -- with a willingness to consider some different
ownership and management structures
Consider more flexible business models to drive distribution (eg more developed geographic management of regions,
using local parties to form JVs broaden category coverage to reach scale) using local parties to form JVs, broaden category coverage to reach scale)
On the other side, BRIC based Global 50 players are increasingly investing to broaden their geographical exposure via
M&A activities beyond their home markets
Grupo Bimbo, a South American Food and Drinks company have acquired Sarah Lees food business as a way of
gaining share in the US
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Smithfields, a US meat business and the worlds largest pork producer, focussed on the domestic US market was
recently aquired by the Chinese company Shuanghai Holdings as a way for them to get control of a cost competitive
meat supply and play off differing national tastes to optimise carcass balance
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D Di 2 Af i P t ti l G th E i f FMCG
Sub-Saharan Africa is increasingly finding itself in the limelight, for good reason
The s b continents pop lation is alread 1bn and gro ing rapidl b 2050 Africa ill acco nt for 20% of
Deep Dive 2: Africa as Potential Growth Engine for FMCG
The sub-continents population is already 1bn and growing rapidly by 2050 Africa will account for 20% of
the worlds population (Nigeria alone will be vying to be the 3
rd
most populated country alongside the USA)
GDP continues to grow at a high pace (even expected to outperform BRIC markets growth by 2017) as
does consumer expenditure
Wealth levels in some countries are getting to a level where branded consumer products become viable
Compared to BRIC markets Sub-Saharan Africa remains relatively un-competed by local players
African infrastructure is improving & some nations are already rated as easier places to do business than for
example Brazil or India
So far, 29 of the Global 50 have established an active presence in Sub-Saharan Africa beyond South Africa
Ni i K Gh d A l d b d h l i f f h Nigeria, Kenya, Ghana and Angola are most penetrated; beyond these larger countries very few of the
Global 50 have established a material presence today
European based Global 50 are clearly beating their US rivals which appear to be falling behind
Soft drinks, alcoholic beverages and tobacco players have gone deepest into Africa
Th Gl b l 50 l h i t d Af i l d b ilt l h b i d Those Global 50 players, having entered Africa early and built up scale, have been reaping rewards
Nestle, Unilever and Diageo are prime examples of winners in Africa: they enjoy strong market share
positions (higher than their global average) and generate significantly higher margins
For those Global 50 and also for mid-sized players not already seriously invested in BRIC there still may be a
potential opportunity to benefit from an early mover advantage and build leading positions in Africa but they potential opportunity to benefit from an early mover advantage and build leading positions in Africa but they
have to move fast
Building up a strong presence in Africa will require some kind of buy & build acquiring national champions on
a country by country basis (due to the lack of larger pan-African players; exception: Tiger Brands) and integrate
them
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LOreal has for example just acquired Interconsumer Products (Kenyan cosmetics business), Danone
Centrale Laitire (Moroccan dairy producer)
Next on the radar might well be players like Nigeria and Ghana focused Fanmilk
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D Di 3 Fi di G th i E
Whilst the Global 50 have proven to be resilient to difficult macro conditions in many regions across the globe, they
experienced a steeper decline in revenue growth in Europe
Deep Dive 3: Finding Growth in Europe
p p g p
European revenues have grown 1.5% in 2012 versus a global average growth of 5.6% for the Global 50 driven
by a weak overall economy with low/no overall growth in GDP and Private Consumption
This 1.5% growth in 2012 represents a decline of 4.2ppt. vs 2011, where the same set of players delivered a 5.7%
revenue growth
Nevertheless, Europe remains an important market for Global FMCG but its importance is shrinking as it is falling
behind other regions in terms of macro-economic conditions and consequently growth potential
Europe in 2012 accounted for 22% of total Global 50 sales (-2ppt. vs 2010) ...
... and only 11% of Global 50 growth (vs. 36% growth is coming from Asia & Africa)
Despite the challenging market conditions, some Global 50 players managed to deliver strong growth
Growth winners include like Diageo, Estee Lauder, LVMH and SCA all of them with 9-16% growth in 2012 ...
... as well as Global 50 players with a small footprint in Europe only but strong growth (eg. JBS or Brasil Foods)
Some of these players experiencing strong growth in Europe have achieved this through acquisition with plenty of
consolidation potentiall remaining in many categories
Examples include Diageo where almost the entire 16% growth in 2012 was due to an acquisition in Turkey, or SCA
Also the two European growth leader, American based Archer Daniels and General Mills have achieved their
impressive growth in 2012 via M&A, from a lower sales starting base though
H h h f i lik E L d d LVMH h h i h i ill ibl i However, the strong growth of companies like Estee Lauder and LVMH shows that organic growth is still possible in
Europe with continued focus and maybe also by benefitting from competitors focusing more on other regions
Estee Lauder and LVMHs impressive growth also indicates that there is still a strong market for luxury products in
Europe despite the current crisis
On the other hand some Global 50 players are actively trying to reduce their reliance on Europe and benefit from
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On the other hand, some Global 50 players are actively trying to reduce their reliance on Europe and benefit from
higher growth in developing markets
Eg. Diageo is heavily boosting marketing spend in Africa, Asia & LatAm and also heavily expanding in those areas
via M&A / Heineken has stated to focus on capturing the opportunities in emerging markets
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A d Agenda
Executive Summary
Key Exhibits Key Exhibits
Global 50 Ranking
Global 50 Performance Review Financials Global 50 Performance Review Financials
Global 50 Performance Review M&A Activity
Deep Dive 1: Difficult Terrain in Emerging Markets BRIC Deep Dive 1: Difficult Terrain in Emerging Markets BRIC
Deep Dive 2: Africa as Potential Growth Engine for FMCG
Deep Dive 3: Finding Growth in Europe Deep Dive 3: Finding Growth in Europe
Methodology
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2012 ki f th Gl b l 50 FMCG h i (1 f 2) 2012 ranking of the Global 50 FMCG champions (1 of 2)
Grocery Sales EBIT margin
1
Return on Capital Employed
1
Rank Change 2012/11 Company Country
Grocery Sales EBIT margin Return on Capital Employed
In $m in
2012
% Change in
Local Currency
2011 vs 2012
2012 2011 2012 2011
1
0 Nestle AG Switzerland 98,353 10% 16% 16%
17%
17%
2
0 Procter & Gamble US 83,680 3% 18% 20%
16%
16%
3
1 Unilever UK/Netherlands 65,998 10% 14% 14%
27%
23%
4
1 Pepsico US 65,492 -2% 14% 14%
18%
20%
5
1 Coca-Cola Company (The) US 47,890 3% 24% 24%
18%
19%
6
1 AB Inbev Belgium 39,758 2% 34% 32%
15%
15%
7
1 JBS Brazil 37,253 24% 4% 3%
6%
4%
8
New
E t t
Mondelez US 35,015 -2% 15% 15%
10%
9% 8
Entrant
Mondelez US 35,015 2% 15% 15%
10%
9%
9
0 Archer Daniels Midland US 34,715 6% 2% 4%
7%
12%
10
0 Tyson Foods US 33,278 4% 4% 4%
15%
17%
11
0 Phillip Morris International US 31,377 1% 44% 43%
82%
70%
12
0 L'Oreal France 28,885 10% 17% 17%
18%
19%
13
1 Danone France 26,835 8% 13% 14%
13%
13%
British American Tobacco
14
1
British American Tobacco
P.L.C
UK 24,075 -1% 40% 35%
33%
29%
15
1 Heineken Holding Netherlands 23,639 7% 21% 14%
15%
13%
16
3 Japan Tobacco Japan 23,324 -1% 23% 19%
21%
17%
17
0 Asahi Breweries Japan 19,408 8% 7% 6%
9%
9%
18
0 Kirin Breweries Japan 19,346 9% 8% 6%
7%
5%
19
14 Kraft Foods US 18 339 -2% 15% 15%
18%
16% 19
14 Kraft Foods US 18,339 2% 15% 15%
18%
16%
20
1 Altria Group US 17,350 2% 43% 41%
45%
39%
21
1 Colgate Palmolive US 17,085 2% 23% 23%
51%
52%
22
0 Diageo UK 17,057 8% 33% 28%
22%
19%
23
-1 SABMiller Plc UK 16,713 10% 37% 27%
14%
13%
24
-2 General Mills US 16,658 12% 16% 19%
19%
21%
25
4 Kimberly Clark US 16 103 1% 14% 12%
24%
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Source: Annual reports, 10K, OC&C analysis
1. Excluding major exceptional items (perimeter changes and litigations) EBIT after earnings from associates and other exceptional items
2. Grocery sales exclude excise duty payments
25
4 Kimberly Clark US 16,103 1% 14% 12%
24%
21%
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2012 ki f th Gl b l 50 FMCG h i (2 f 2) 2012 ranking of the Global 50 FMCG champions (2 of 2)
Grocery Sales EBIT margin
1
Return on Capital Employed
1
Rank Change 2012/11 Company Country
y g p p y
In $m in 2012
% Change in
Local Currency
2011 vs 2012
2012 2011 2012 2011
26 3 Brasil Foods Brazil 14,661 11% 5% 8% 6% 9%
27 2 Johnson & Johnson US 14,447 -3% 21% 20% 18% 17%
28 0 Kellogg Company US 14,197 8% 11% 11% 15% 18% gg p y ,
29 2 Reckitt Benckiser UK 13,836 0% 25% 25% 26% 29%
30 0 Conagra US 13,263 8% 7% 12% 12% 18%
31 9 Grupo Bimbo Mexico 13,176 30% 4% 7% 8% 10%
32 2 Nippon Meat Packers Japan 12,722 3% 3% 3% 7% 7%
33 2 Kao Japan 12,567 2% 9% 8% 16% 14%
34 3 Smithfield Foods USA 12 343 8% 5% 8% 13% 18% 34 3 Smithfield Foods USA 12,343 8% 5% 8% 13% 18%
35 8 HJHeinz US 11,649 9% 12% 15% 18% 21%
36 5 Carlsberg Denmark 11,612 6% 12% 16% 8% 11%
37 4 Imperial Tobacco UK 11,505 1% 10% 17% 10% 15%
38 9 Dean Foods US 11,462 -2% 4% -16% 13% -52%
39 7 Marfrig Group Brazil 11,376 13% 4% 1% 5% 1%
40 1 Bunge Limited Bermuda 11,186 4% 0% 2% 2% 7%
41 0 Yamazaki Baking Japan 10,946 2% 3% 2% 6% 6%
42 4 Royal Frieslandcampina Netherlands 10,755 7% 5% 4% 13% 13%
43 3 Ajinomoto Japan 10,647 0% 6% 4% 9% 6%
44 0 Pernod Ricard Sa France 10,564 7% 24% 24% 9% 10%
45 9 Avon US 10 546 -5% 3% 7% 7% 17% 45 9 Avon US 10,546 5% 3% 7% 7% 17%
46 1 Meiji Holdings Japan 10,463 -1% 1% 2% 3% 4%
47 5 Henkel Germany 10,413 5% 13% 11% 16% 14%
48 1 SCA Sweden 10,142 7% 8% 4% 7% 3%
49 1 LVMH France 9,966 15% 19% 20% 16% 15%
50 0
Estee Lauder Companies
(The)
US 9,714 10% 14% 12% 33% 28%
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Source: Annual reports, 10K, OC&C analysis
1. Excluding major exceptional items (perimeter changes and litigations) EBIT after earnings from associates and other exceptional items
2. Grocery sales exclude excise duty payments
(The)
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Th bi fi i th bi fi l d The big five winners vs. the big five laggards
Major Winners and Laggards
Continued to drive strong organic growth of 6.9%,
ahead of close competitors Nestle and P&G (the
fifth year running theyve delivered stronger
Bottom of the growth table with zero organic
growth and facing a strategic rethink after Coty
walked away from their takeover bid last year
Laggards Winners
organic growth than P&G)
Delivered continued rapid growth, breaking into the
top 10 of the Global 50 as they build a truly global
meat empire
Struggling to find growth and seeing margins fall in
2012, investors lost faith in Bob McDonald and are
hoping AG Laffley can restore some shine p
Delivering impressive organic growth of 10%
(highest of the global 50) and also growing in
Europe showing that if you get the proposition
i ht th till d E
hoping AG Laffley can restore some shine
Also struggling to find growth and accepted they
cant compete in the nappy market, signalling
Huggies exit from the mainstream nappy sector
right then you can still persuade European
consumers to part with their money
Another strong organic growth performance, ahead
of major competitor Diageo, and reflecting the
success Pernod has had in thriving Asian markets
Huggies exit from the mainstream nappy sector
Struggling to find growth in an increasingly hostile
regulatory environment (as all tobacco players are)
but with much lower margins than peers reflecting
k b d tf li d it d
success Pernod has had in thriving Asian markets
A Latin American company emerging as a true
global player, climbing up the Global 50 on the back
of the acquisition of Sara Lees bakery business
a weaker brand portfolio and write downs
associated with acquisitions in better times
Japanese food conglomerate which has
experienced declining sales and very weak
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giving them significant presence in the US margins suffering from high exposure to a weak
domestic market
Source: OC&C analysis
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A d Agenda
Executive Summary
Key Exhibits Key Exhibits
Global 50 Ranking
Global 50 Performance Review Financials Global 50 Performance Review Financials
Global 50 Performance Review M&A Activity
Deep Dive 1: Difficult Terrain in Emerging Markets BRIC Deep Dive 1: Difficult Terrain in Emerging Markets BRIC
Deep Dive 2: Africa as Potential Growth Engine for FMCG
Deep Dive 3: Finding Growth in Europe Deep Dive 3: Finding Growth in Europe
Methodology
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Growth rates in Europe and Americas have declined, Asian & African growth
i li ith 2011
Sales
was in line with 2011
Revenue Growth Rates, 2010-12
1
% Growth
2 8%
-0.1%
4 4%
Asia/Africa Europe Americas
9.9%
-2.8%
11.7%
11.8% 5.7%
-4.4%
7.1%
Growth
1.3%
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Source: Annual reports, 10K, OC&C analysis
1. Total grocery sales excluding excise in LC
2. Includes Other and Undisclosed Revenues
2010-11 2011-12 2010-11 2011-12 2010-11 2011-12
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Although the Americas remain the primary source of revenue for the global
50 id th h b d i d f A i d Af i
Sales
50, rapid growth has been derived from Asia and Africa
Global 50 Revenue and Growth 2010-12
$bn, %
15.0%
550
600
555
Growth
Revenue, 2012
Sales from the Americas make up
Commentary
Africa and Asia are
delivering the
highest growth rates
10.0%
550
450
400
500
Sales from the Americas make up
c35% of total revenues, growth is
driven by Latin American markets
Asia and Africa are responsible for
the fastest growth rate for the global
for the Global 50
350
250
300
350
355
331
the fastest growth rate for the global
50 and are already a significant
sales opportunity
The mature EU market offers the
smallest opportunity as the global 50
5.0%
50
150
100
200
smallest opportunity as the global 50
have achieved full market
penetration
As the underlying growth in BRIC
countries declines, companies may
Companies are
struggling to find
growth in a flat
Europe
0.0% 0
50
EU Other Asia & Africa Americas
countries declines, companies may
need to look towards Africa for their
new growth story
34 9%
22 3%
22 0%
20 8%
Share of
Total
Europe
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Source: Annual Reports, OC&C analysis
34.9%
22.3%
22.0%
20.8%
Total
Revenues
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Global 50 experienced an overall increase in sales in 2012, with average sales
th f 5 6%
Sales
growth of 5.6%...
Grupo Bimbo 35.6%
Grocery Sales Growth (Excluding excise duty) In Local Currency, 2012 vs 2011
%
JBS
LVMH
p %
23.5%
15.3%
Marfrig Group
General Mills
Brasil Foods
Unilever
LOreal
SABmiller Plc
Estee Lauder Companies (The)
13.2%
11.9%
10.9%
10.5%
10.4%
10.4%
10.3% p ( )
Nestle Ag
Kirin Beweries
HJ Heinz
Smithfield Foods
Diageo
Danone
Asahi Breweries
Conagra
Kellogg Company
P d Ri d SA
10.2%
9.3%
8.8%
8.3%
8.3%
8.0%
7.9%
7.8%
7.6%
7 5% Pernod Ricard SA
SCA
Heineken Holding
Royal Frieslandcampina
Archer Daniels Midland
Carlsberg
Henkel
Bunge Limited
Tyson Foods
Procter & Gamble
7.5%
7.5%
7.4%
6.9%
6.1%
5.7%
5.1%
4.0%
3.5%
3 2%
Grocery sales weighted average
growth
1
: 5.64%
Median Grocery Sales
Procter & Gamble
Coca-Cola Company (The)
Nippon Meat Packers
Altria Group
Yamazaki Baking
Colgate Palmolive
AB Inbev
Kao
Kimberly Clark
Imperial Tobacco
3.2%
2.9%
2.9%
2.5%
2.2%
2.1%
1.8%
1.7%
1.3%
1 0%
growth: 5.43%
Imperial Tobacco
Phillip Morris International
Reckitt Benckiser
Ajinomoto
Japan Tobacco
British American Tobacco P.L.C
Meiji Holdings
Pepsico
Dean Foods
Kraft Foods
1.0%
0.9%
0.1%
-0.3%
-1.1%
-1.4%
-1.5%
-1.5%
-1.5%
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Kraft Foods
Mondelez
Johnson & Johnson
Avon
1.7%
-2.2%
-2.9%
-5.1%
1. The weights used are grocery sales excluding excise, in $
Source: Annual reports, 10K, OC&C analysis
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hi h i l th th th t i 2011(8 39%)
Sales
which is lower than the average growth rate in 2011(8.39%)
Marfrig Group 35.4%
Grocery Sales Growth (Excluding Excise Duty) In Local Currency, 2011 vs 2010
%
32.5%
g p
Coca-Cola Company (The)
%
Danone 13.6%
Mondelez 13.7%
Grupo Bimbo 13.9%
Phillip Morris International 14.3%
Pepsico 15.0%
Archer Daniels Midland 16.1%
Tyson Foods 16.7%
Bunge Limited 30.4%
SAB ill Pl 6 7%
Colgate Palmolive 7.5%
AB Inbev 7.6%
Dean Foods 7.6%
Pernod Ricard SA 7.9%
Smithfield Foods 9.6%
JBS 12.9%
Estee Lauder Companies (The) 13.0%
Reckitt Benckiser 13.1%
Brasil Foods 13.3%
Grocery sales weighted
th
1
7 28%
4 6%
4.8%
Procter & Gamble
Kraft Foods
Kimberly Clark
Unilever
4.8%
5.0%
Royal Frieslandcampina 5.1%
Carlsberg 5.8%
LVMH 6.0%
Heineken Holding 6.1%
Kellogg Company 6.5%
SABmiller Plc 6.7%
Median growth: 5.06%
average growth
1
: 7.28%
4.6%
4.3%
3.7%
3.6%
3.5%
2.4%
2.0%
2.0%
1.9%
1 8%
Avon
Procter & Gamble
Conagra
Ajinomoto
LOreal
Nippon Meat Packers
British American Tobacco P.L.C
HJ Heinz
Johnson & Johnson
Imperial Tobacco
1.8%
1.6%
1.6%
1.5%
1.2%
0.6%
0.0%
-1.6%
-1.9%
-2 0%
SCA
Ajinomoto
Altria Group
Kao
Diageo
Kirin Beweries
Henkel
General Mills
Yamazaki Baking
Asahi Breweries
v
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2.0%
-3.7%
-4.9%
-23.0%
Kao
Meiji Holdings
Nestle AG
Japan Tobacco
Source: Annual reports, 10K, OC&C analysis
1. The weights used are grocery sales excluding excise, in $
15
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A th Gl b l 50 ll th h b i il i
Sales
Across the Global 50 overall growth has been primarily organic
Grocery Sales Weighted Average Growth of Global 50 Sales, 2012
Sample of 23 out of Global 50
with grocery sales more than 80%
1.10%
6.00%
of their turnover
4.90% 4.90%
0 00% 0.00%
Organic Growth Exchange Rate
Effect
Organic Growth +
Exchange Rate Effect
Effect of Acquisitions &
Divestments
Reported Growth
(Organic + Inorganic)
v
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Source: Annual reports, 10K, OC&C analysis
1. Includes FMCG champions with grocery sales representing more than 80% of their total turnover, and giving details on the exchange rate and perimeter variations
impact. The 23 companies account for 54% of Global 50 Grocery Sales
2. Organic growth refers to sales at constant perimeter and exchange rate as reflected in the AR. All figures correspond to local currency.
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Gross margins failed to recover from the hit of 2011, despite falling
dit t th h 2012 commodity costs through 2012
Chain of Food Commodity Price Inflation, 2008-12
%
Food Commodity Price
Inflation
Grocery Retailers Gross
Profit Margins % Change
FMCG Manufacturers' Gross
Margins
Food Consumer Prices
2.7%
3.9%
5.9%
0 4 t
0.6ppts
0 5ppts
22.8%
18.1%
25.9%
%
1.0%
1.6%
2011 2010 2009 2008 2012
-0.2ppts
2011
-0.1ppts
2010
0.4ppts
2009
0.3ppts
2008
0.3ppts
2012
-0.1ppts
-0.8ppts
0.6ppts
0.5ppts
-1.6ppts
-6.9%
2011 2010 2009 2008 2012
2012 2011 2010 2008 2009
pp
2008 2010 2012 2011 2009
-21.5%
FAO Food Commodity Price Index Gross Margin of Global 50 Gross Profit margin of
6 Top Retailers
OECD Food Consumer Price Index
v
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Sources: Annual reports, FAO, OECD, OC&C analysis
1. Weighted Panel of 7 global food retail leaders: Wal-mart, Carrefour, Tesco, Ahold, Metro, Casino, Delhaize
2. Excluding high inflation countries in 2008
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Average profit margins for the Global 50 increased to 16.2% in 2012 up from
15 8% i 2011
Profit Margin
15.8% in 2011
Profit Margin, 2012
%
Phillip Morris International 44.1%
Colgate Palmolive 22.8%
Pernod Ricard Sa 24.0%
Coca-Cola Company (The) 24.4%
Reckitt Benckiser 25.5%
Diageo 32.6%
AB Inbev 33.6%
SABMiller Plc 36.9%
British American Tobacco P.L.C 40.2%
Altria Group 43.4%
p %
Grocery sales weighted average profit
margin
1
: 16.2% (vs 15.8% in 2011)
M d l 14 6%
Kraft Foods 14.8%
General Mills 15.9%
Nestle AG 16.3%
LOreal 17.3%
Procter & Gamble 18.1%
Lvmh 18.7%
Johnson & Johnson 21.2%
Heineken Holding 21.2%
Japan Tobacco 22.6%
g
Median profit margin: 13.4%
(vs.14.3% in 2011)
Kellogg Company 11 2%
Carlsberg 12.0%
HJ Heinz 12.4%
Henkel 13.3%
Danone 13.4%
Kimberly Clark 13.6%
Estee Lauder Companies (The) 13.6%
Unilever 13.8%
Pepsico 13.9%
Mondelez 14.6%
Brasil Foods 4 9%
Smithfield Foods 5.4%
Ajinomoto 5.6%
Asahi Breweries 6.6%
Conagra 6.6%
Sca 7.6%
Kirin Beweries 8.2%
Kao 8.8%
Imperial Tobacco 10.3%
Kellogg Company 11.2%
Yamazaki Baking 2 7%
Nippon Meat Packers 2.8%
Avon 2.9%
JBS 3.6%
Marfrig Group 3.7%
Tyson Foods 3.8%
Dean Foods 4.1%
Grupo Bimbo 4.3%
Royal Frieslandcampina 4.8%
Brasil Foods 4.9%
v
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Source: Annual reports, 10K, OC&C analysis
1. The weights used are grocery sales , excluding excise in $
Bunge Limited
Meiji Holdings
0.4%
1.5%
Archer Daniels Midland 2.4%
Yamazaki Baking 2.7%
18
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Profit margin improvement in 2012 was however driven primarily by
E ti l it (1 f 2)
Profit Margin
Exceptional items (1 of 2)
Average Profit Margin Change, 2010-12
%, Weighted by Grocery Sales
17.2%
Operating Change: -0.4%pt Other Change: -1.0%pt Operating Change: -0.2%pt Other Change: 0.6%pt
0.8%
0.6%
0.2% 0.1%
0.0%
16.2%
0.1%
0.7%
0.2%
0.4%
0.1%
0.1%
0.1%
0.0%
0.0%
16.2%
15.8%
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G
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D
e
D
e
GE
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1. Some mixing between the categories as a number of companies do not fully split out their costs
2. Includes Income from Discontinued Operations and Other Exceptionals
Source: Annual Reports, OC&C analysis
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A d Agenda
Executive Summary
Key Exhibits Key Exhibits
Global 50 Ranking
Global 50 Performance Review Financials Global 50 Performance Review Financials
Global 50 Performance Review M&A Activity
Deep Dive 1: Difficult Terrain in Emerging Markets BRIC Deep Dive 1: Difficult Terrain in Emerging Markets BRIC
Deep Dive 2: Africa as Potential Growth Engine for FMCG
Deep Dive 3: Finding Growth in Europe Deep Dive 3: Finding Growth in Europe
Methodology
v
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The value of M&A activity in 2012 showed a marked increase over 2011 due to y
the announcement of several big ticket deals
Summary Acquisitions & Divestments
Deals
Overview
About 443 FMCG deals were announced in 2012, with 47 deals involving the Global 50 Champions
Number of deals completed by Champions was similar to last years figure of 49
Champions were involved in deals worth $51bn, significantly higher than the deal value of $38bn p $ , g y g $
recorded in 2011
In 2012, FMCG champions completed acquisitions worth $43bn, an increase over $36bn over 2011
Acquisitions
Overview
FMCG champions have acquired primarily to strengthen their existing market positions
16 acquiring companies of the total 31 (more than 50%) belonged to the Food and Drinks sector
which saw the highest level of activity in 2012
Companies also ventured into making a few cross-sector acquisitions with 9 such deals in 2012
Divestments
p g q
There were 18 divestments in 2012, together worth ~$14bn
Operational Restructuring was the main reason for divestments amongst the champions
Overview
Operational Restructuring was the main reason for divestments amongst the champions
Of the 18 divestments, 9 targets belonged to Food & Drinks sector
v
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Source: Mergermarket, OC&C analysis, Trade reports
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A i iti i 2012 t t ll d $43b i l d t $36b i 2011 Acquisitions in 2012 totalled $43bn in value as compared to $36bn in 2011
Value of Global 50 FMCG Champions Acquisitions, 2001-12
$bn, Number of Deals
113
88
The 3 acquisitions of Pfizer
Nutrition, Asia Pacific
Breweries Ltd and Ralcorp
Holdings Inc, by Nestle SA,
Heineken NV and Conagra
72
88
Heineken NV and Conagra
Food respectively, accounted
for 59% of the total value of
acquisitions completed in 2012
43
36
30
47
48
30
26
19 19
22
2003 2002 2001 2008 2007 2005 2006 2004 2009 2010 2011 2012
24
Number of
Acquisitions by
31 23 28 24 30 34 37 29 20 31 31
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FMCG Champions
Source: Mergermarket, Trade Reports, OC&C analysis
1. Undisclosed value deals are not considered
2. Dates refer to the deal announcement date. Deals that have been announced in 2012 have been considered for analysis. c
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Nestl's purchase of infant nutrition business from Pfizer was the largest
i iti i 2012 acquisition in 2012
Top 20 Acquisitions (by Value) by Global 50 FMCG Champions, 2012
$m
Baltic
11,601
Nestle SA
Danone SA
Royal Friesland
Diageo Plc
General
Heineken
N V
Diageo
Reckitt
Benckiser
G Pl
Baltic
Beverages
(Carlsberg)
Bidders
6,698
6,966
Kellogg
Company
Procter &
Gamble
Company
Campina N.V.
Japan Tobacco
General
Mills
LOreal SA
Diageo Plc
Kraft Foods
Maroc SA
N.V.
Plc
Asahi Group
Holdings, Ltd.
Group Plc
ConAgra
Foods, Inc.
1 382
1 461
3,386
3,489
Carlsberg
The Coca-Cola
Company
Diageo Plc
L'Oreal SA
SCA
153 181
226 257 278 297
432 445 465
611
707
977
1,029
1,198
1,382
1,461
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Source: Mergermarket, Trade Reports, OC&C analysis
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A d Agenda
Executive Summary
Key Exhibits Key Exhibits
Global 50 Ranking
Global 50 Performance Review Financials Global 50 Performance Review Financials
Global 50 Performance Review M&A Activity
Deep Dive 1: Difficult Terrain in Emerging Markets BRIC Deep Dive 1: Difficult Terrain in Emerging Markets BRIC
Deep Dive 2: Africa as Potential Growth Engine for FMCG
Deep Dive 3: Finding Growth in Europe Deep Dive 3: Finding Growth in Europe
Methodology
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Global 50 are weakest in China and do not dominate FMCG market in any
BRIC t BRIC country
Retail Sales of FMCG
1
by Country and Manufacturer Category, 2012
bn
All BRIC
56.8
24%
153.8 26.8 114.0 351.5
39%
52%
24%
45%
Others
43%
22%
15%
Local Leader
45%
30%
15%
3% Top 50 BRIC
36%
38%
Top 50
33%
1%
Russia Brazil
36%
China India
Top 50
33%
31%
17%
Total
27%
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Sources : Euromonitor, Oanda, OC&C analysis
Russia Brazil China India Total
1. Excluding alcoholic drinks
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Although the Global 50 continue to lead in Beauty & Home Care and Soft
D i k Drinks
Retail Sales by FMCG Segment and Manufacturer Category, 2012
bn
All BRIC
76.5 74.5 28.9 97.9 73.8 351.5
32%
40%
72%
Others 32%
38%
43%
47%
72%
Local Leader
Top 50 BRIC
25%
1%
21%
30%
19%
4%
56%
p
Top 50 42% 41%
1%
10%
18%
3%
Beauty & Home Care Soft Drinks Dairy Bakery & Snacks Dried Total
27%
v
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Sources : Euromonitor, Oanda, OC&C analysis
Beauty & Home Care Soft Drinks Dairy Bakery & Snacks Dried
Processed
Food
Total
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The Global 50s overall market share improved only in Brazil thanks to
i iti acquisitions
Change in Share by Country, 2011-12
ppts
Brazil China Russia
India
-1.0
Others
-1.2 -0.5 -0.1
-0.9
Local Leader
1.5 0.5 0.1
1.9
Top 50
-0.3 0.0 0.0
Effect of Kirin and General
Mills acquisitions v
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1. Excluding Global 50 BRIC
Sources : Euromonitor, OC&C analysis
Mills acquisitions
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Local Leaders have outpaced the Global 50 in BRIC largely through much more
i M&A ti it aggressive M&A activity
Total and 'Comparable' CAGR of Global 50, Local Leaders and Other Companies
% pa, 2005-09 & 2009-12
All BRIC
11 0%
2005-2009
18 3%
2009-2011
14 4%
2011-2012
+8.2 pts
Total
Growth
7.8%
19.2%
11.0%
-1.5 pts
6.6%
16.8%
18.3%
+0.4 pts
9.7%
14.8%
14.4%
+0.3 pts
Organic
Gorwth
7.4%
11.5%
11.2%
+0.7 pts
8.6%
14.4%
13.8%
+1.6 pts
9.0%
14.3%
12.6%
2005-2012
Total Growth
-4.5 pts
11 9%
7.7%
18.0%
13.5%
Others
Local Leaders
Global 50
1
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Sources : Euromonitor, OC&C analysis
1. Global 50 excluding Global 50 BRIC
Organic Growth
+0.3 pts
7.8%
11.6%
11.9%
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Case Study: JBS
From its base in Brazil JBS has built a company selling processed meats in
150 t i ld id 150 countries worldwide...
JBS Company Overview
Founded 1953 and headquartered in So Paulo
Company Overview
Largest multinational food processing company
in the world
Produces fresh and processed meat and by-
d t f t i products of meat processing
Exporting to 150 countries from its presence in
22 countries with focus on the Americas
142,000 employees globally
Revenue of c.$38.9bn in 2012 up 23% from
2011
EBITDA of c.$2.3bn in 2012 up 40% from 2011
Portfolio of 23 brands
30 acquisitions in past 15 years
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Source: Annual reports, Company website, OC&C analysis
30 acquisitions in past 15 years
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Case Study: JBS
... with strong increases in revenue and operating profit driven by a strategy
f di ifi ti d th i l dd d t of diversification and growth in value added segments
JBS Performance
JBS Revenue and EBITDA, 2007-12
$bn
Focus on branding to create customer
loyalty
Company Strategy
39
37
31
30
35
40
1 8
2.0
2.2
2.4
+40%
Revenue
EBITDA
Added emphasis on value-added
products with greater profitability and
price stability
18
20
25
30
1.2
1.4
1.6
1.8
Continue expansion into new markets to
enable scale gains and growth
Expand and diversify global production
platform both ith respect to prod cts
18
17
7
10
15
0.6
0.8
1.0
platform both with respect to products
and geographies
Ensure strong global distribution platform
0
5
0.0
0.2
0.4
2012 2011 2010 2009 2008 2007
The company is now comfortable with its global
footprint and doesn't need any more major
acquisitions. Instead, the focus is on improving
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Source: Annual reports, Company website, OC&C analysis
2012 2011 2010 2009 2008 2007
- JBS Chief Executive Wesley Batista
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A d Agenda
Executive Summary
Key Exhibits Key Exhibits
Global 50 Ranking
Global 50 Performance Review Financials Global 50 Performance Review Financials
Global 50 Performance Review M&A Activity
Deep Dive 1: Difficult Terrain in Emerging Markets BRIC Deep Dive 1: Difficult Terrain in Emerging Markets BRIC
Deep Dive 2: Africa as Potential Growth Engine for FMCG
Deep Dive 3: Finding Growth in Europe Deep Dive 3: Finding Growth in Europe
Methodology
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Although the total consumer spend in China is significantly higher that the
S b S h Af i t i Sub-Saharan African countries...
1,969
946
Nominal Private Consumption, 2012
$bn
117
25 25
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18
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E
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Source: EIU, OC&C analysis
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...when we look at spend per head many of the African countries are already
t hi Chi matching China
10 755
Nominal Private Consumption per Capita, 2012
$
Potentially Interesting Markets
10,755
y g
Certain countries have
been excluded because
they are islands, are too
Wealth in Equatorial Guinea is
highly concentrated; 70% of the
population live under the UN
Poverty Threshold
small or where the data is
not reflective of reality
o e y es o d
3,413
2,880
2,652
2,247
4,060
3,422
,
995 973 970 950 906
877 873 845 835
766 723
631 599 587 547 526
465 464 463 443 438 433 431 421 403 390 387
371 364
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C
o
n
C
e
n
t
r
a
l

A
E
q
Source: EIU, OC&C analysis
Other Of Interest China Excluded India
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The global 50 have a strong presence in a number of key African countries
i l d ith 50% ti i S th Af i d Ni i include, with over 50% operating in South Africa and Nigeria
Global 50 Presence in Sub-Saharan African Countries 2012
1
# of Global 50 Firms
Mix of US / Non-US firms in
sub-Saharan Africa is
36
29
35
similar to overall Global 50
14
12
15
26
29
US Firms
7
11
15
18
17
21
11
15
21
3
7
11
Europe /
Other Firms
8 8
South Africa Kenya Nigeria Ghana Angola Sub-Saharan
Africa
Sub-Saharan
Africa v
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Source: Annual Reports, OC&C analysis
1. Presence based on review of office or manufacturing locations or evidence of significant distribution / share in country
2. Includes all firms listed as present in Nigeria, Kenya, Ghana or Angola, and selected reviewed other Sub-Saharan African countries
Africa Africa
Excluding ZA
2
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Those Global 50 with a presence in Africa are already reaping the benefits in
f f hi h th t d t t form of high growth rates and strong returns
Example of Growth and Return in Nigeria
%
Sales 2011 CAGR of Sales 2010-11 Operating Margin 2011 ROCE 2011 (Pre-Tax)
1
Sales 2011 CAGR of Sales 2010-11 Operating Margin 2011 ROCE 2011 (Pre-Tax)
Global Nigeria Global Nigeria Global Nigeria Global Nigeria

$13 4b $670m 13% 14% 4% 12% 11% 92%

$13.4b $670m 13% 14% 4% 12% 11% 92%

$94.8b $630m 6% 20% 14% 22% 16% 41%


$64.8b $350m 10% 15% 14% 15% 22% 85%


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Source: Annual Reports, OC&C analysis
1. Calculated based on local company annual report stating earning and capital employed
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Global 50 in general are increasingly investing in African business units as
th th ti t th k f f t th they see the continent as the key area for future growth
Level of Investment in Africa, 2012
Africa offers a significant growth opportunity in the long
term...
Large companies are investing in facilities and improving
infrastructure...
Additional Investments Planned over 5-10 Years Investment in African Units
Brasil Foods have few opportunities remaining Brazil and
believe future growth will come from diversifying to Asian
and African markets that are demanding more protein
Diageo: Africa dominate the list of the worlds fastest
growing economies as well as providing some of the
Nestle has invested $850 million in Africa over the past
five years to develop an infrastructure and meet demand.
A total of investment of $1.4bn is planned by 2015 to
expand production capacity
Unilever will invest 75 million in building capacity and
g g p g
longest established and largest markets for the Guinness
brand
Bunge acknowledge that Africa, is characterized by
compelling growth in population and income, and
agricultural potential
capability in South Africa by 2014
Heineken has invested $2.2bn in Africa since 2005
Diageo have invested well over 1bn in Capex and
acquisitions since 2007
...as well as acquiring successful local brands
...and many companies are already committed to long-term
growth investments
Coca-Cola plans to invest $12bn in Africa by 2020
SABMiller are planning to invest up to $2.5bn in Africa
over the next five years to build and revamp breweries
g
Diageo acquired Meta Abo Brewery (Ethiopia)
Henieken acquired 7 Nigeria and Ethiopia based
breweries (2011-13)
Investment in product innovation centres has driven share
Heineken invested in Radler a low-alcohol beer made over the next five years to build and revamp breweries
FrieslandCampina is looking to expand sales in Africa as
part of its 2020 strategy
Unilever aims to double African revenue in 5 years; rolling
out direct-to-consumer distribution in Africa
Heineken invested in Radler, a low-alcohol beer made
from malt and lemon, to attract the elusive female drinker
Diageo Africa launched Snapp, an apple flavoured faux
cocktail, targeted at women in Kenya
Nestle have released Nespray, an instant milk powder,
containing calcium, zinc and iron all essential for v
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containing calcium, zinc and iron all essential for
children. It is sold in a pouch costing only a few rand
Source: Annual reports, Press Search, OC&C analysis
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D & LO l h f l j t d t l l Af i l Danone & LOreal have for example just snapped up two local African players
Africa: Recent Major Deals
Deal Date: April 2013 Deal Date: June 2012
LOreal Interconsumer Products Danone Centrale Laitire
Deal Value: est.23m
Target Country: Kenya
Category Focus: Cosmetics
Deal Value: 441m (stake incr. from 29% to 67%)
Target Country: Morocco
Category Focus: Dairy products
Deal Rationale:
The acquisition broadens our product offer with
accessible brands, and strengthens the group's
position in the mass market It will also accelerate
Deal Rationale:
The deal will make Morocco one of Danones top
10 markets in terms of sales.
position in the mass market. It will also accelerate
our development in Eastern Africa
Geoff Skingsley, LOreal
Market potential driven by a rising middle class and
Centrale Laitire has annual sales of 600m and
nearly 60 per cent of the Moroccan dairy market
The acquisition fits Danones policy of making
medium-sized acquisitions in fast-growing markets
long tradition of beauty practices
Interconsumer Products had revenues of c.13m in
2012
Since 1997, the share of Danones sales in
Western Europe has declined from 80% to 40%,
while emerging markets have grown from 20% to
50%
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Source: Mergermarket, Press Reports, OC&C analysis
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Other local African players like Fanmilk might well be on the radar
f th t f Gl b l 50 i iti for the next wave of Global 50 acquisitions
Fanmilk Overview
Case Study: Fanmilk
FanMilk is headquartered in Denmark but operates in
West Africa
Fanmilk Overview
Countries: Ghana, Nigeria, Togo, Cote D'Ivoire,
Liberia, Benin and Burkina Faso
Revenues: c. 96m in 2012, up 20% from 2011 (7-8%
revenue CAGR 2007-2011) revenue CAGR 2007 2011)
EBITDA margin: 29% in 2012
Distribution: The company sells through a wide
network of shops (through agents) and street vendors
Revenue Distribution by Geography, 2012
network of shops (through agents) and street vendors -
engaging with over 25,000 agents and vendors
Key Brands:
FanIce - Vanilla Ice Cream
36
11
3
96
Other
Togo
Ni i
y g y
m
FanIce - Vanilla Ice Cream
FanChoco - Frozen Chocolate Milk
FanDango - Orange Juice
FanYogo - Frozen Yoghurt
46
36
Nigeria
Ghana
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FanYogo Frozen Yoghurt
Source: Annual reports, OC&C analysis
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The African FMCG environment consists mainly of smaller local players
( ti l h i ) Ti B d i th l l Af i l t (national champions), Tiger Brands is the only larger African conglomerate
Case Study: Tiger Brands
Tiger Brands is a South African FMCG company that was founded in
1925 as Tiger Oats
Tiger Brands
The company now owns roughly 30 brands, spanning a number of
FMCG categories from Energy Drinks to Packaged Food
It had a turnover in 2012 of R22.7bn (c.$2.6bn) which represented
an 11% increase on 2011
Operating profit increased 7.1% to R3.5bn (c.$394m)
It has expanded its footprint rapidly over the past years, making
three full acquisitions in 2011, and taking a 63% stake in Nigerias
2nd largest flour milling company, Dangote Flour Mills PLC, in 2012
Tiger Brands distributes to the majority of Sub-Saharan Africa, as
well as North America, Chile, Australia, UK, Germany, Sweden,
Portugal, Taiwan, Malaysia, Saudi Arabia and Jordan
Manufacturing facilities in South Africa, Zimbabwe, Nigeria,
Cameroon, Ethiopia, Kenya and Chile
Its strategic aim is to derive 30% of its revenues internationally over
the medium term to be achieved through increased exports along
with further acquisitions
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Source: Company Reports, Press Search, OC&C analysis
The latest major international acquisition was the 209m purchase
of US based C&T Malt in 2006
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A d Agenda
Executive Summary
Key Exhibits Key Exhibits
Global 50 Ranking
Global 50 Performance Review Financials Global 50 Performance Review Financials
Global 50 Performance Review M&A Activity
Deep Dive 1: Difficult Terrain in Emerging Markets BRIC Deep Dive 1: Difficult Terrain in Emerging Markets BRIC
Deep Dive 2: Africa as Potential Growth Engine for FMCG
Deep Dive 3: Finding Growth in Europe Deep Dive 3: Finding Growth in Europe
Methodology
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GDP th i E i ti i t f ll b hi d th i GDP growth in Europe is continuing to fall behind other regions ...
GDP Growth Overview by Region
7.2%
Sub-Saharan Africa Latin America Asia and Australasia Middle East and North Africa
5.9%
5 3%
4.2%
4.1%
3.0%
4.3% 4.3%
2.6%
5.3%
4.6%
3.4%
3.8%
2010-11 2011-12 2009-10 2010-11 2011-12 2009-10 2009-10 2010-11 2011-12 2011-12 2010-11 2009-10
North America Eastern Europe Western Europe
2.1%
3.9%
3.4%
2.2%
1.9%
2.5%
1.8%
2.3%
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Source: EIU, OC&C analysis
2011-12 2010-11 2009-10 2011-12 2010-11 2009-10 2009-10 2010-11 2011-12
-0.1%
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However, some Global 50 have managed to deliver strong European growth in
2012 d it th f bl i diti 2012 despite the unfavourable macro-economic conditions
211.3
Archer Daniels Midland
Global 50 European Revenue Growth Rates
1
, 2011-12
%
Growth Rate
2010-11
-3.2%
8 6
9.6
10.6
12.6
16.1
20.4
97.1
LVMH
SCA
Estee Lauder Companies (The)
Brasil Foods
Diageo
Jbs
General Mills
Archer Daniels Midland 3.2%
5.3%
56.1%
-4.1%
-4.9%
13.9%
-2.0%
13 0%
2 4
2.8
2.9
5.5
5.7
6.3
8.3
8.6
LOreal
Unilever
Kao
Bunge Limited
Hj Heinz
Kellogg Company
LVMH 13.0%
4.7%
-2.9%
18.9%
-3.2%
1.9%
2.0%
0.4
0.7
0.8
1.4
1.6
1.9
2.4
Carlsberg
Ajinomoto
Henkel
Danone
Pernod Ricard SA
Heineken Holding
Nestle Ag
4.2%
3.9%
-5.0%
-7.4%
-0.5%
-1.1%
14.0%
-2 9
-2.6
-2.2
-1.1
-0.9
-0.6
0.1
Royal Frieslandcampina
Colgate Palmolive
Imperial Tobacco
Johnson & Johnson
Pepsico
Sabmiller PLC
Procter & Gamble
a o e 0%
4.6%
-3.2%
41.2%
10.4%
2.8%
8.9%
5 9%
8 2
-7.1
-6.7
-6.7
-6.2
-4.5
-4.4
-2.9
AB Inbev
Mondelez
Avon
Coca-cola Company (The)
Kimberly Clark
British American Tobacco PLC
Royal Frieslandcampina 5.9%
n/a
7.0%
8.0%
2.5%
14.9%
2.6%
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-10.4
-8.2 Phillip Moris International
Marfrig Group
1. Companies with no available data and outliers omitted
Source: Company Reports, OC&C analysis
6.1%
24.9%
Median Growth: 1.1%
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The majority of Global 50 companies seeing strong growth in Europe have
hi d thi th h i iti achieved this through acquisition
Europe Revenue CAGRs by Company
1
, 2011-12
%
Key Growth Drivers
97%
General Mills
Archer Daniels 211% Acquisitions of Elstar Oils and Golden Peanut
Acquisition of Unimilk
0
O
16%
20%
Diageo
JBS
Limited presence in European market, low
absolute growth
Acquisition of Turkeys Mey ki; very limited organic
Growth in Eastern Europe through Marketing
O
O
11%
13%
Estee Lauder
Brasil Foods
Limited presence in European market, low
absolute growth
New Product Launches in UK, Germany and Italy;
New Store Rollout in Europe and ME
O
O
9%
10%
SCA
LVMH
New Store Rollout in Europe and ME
Acquisition of Georgia-Pacific Tissue Range;
Organic Growth through Expanded Product Range
New Product Launches & Marketing; New
Distribution Channels
O
O
6%
8%
Kellogg Company
Hj Heinz
Distribution Channels
Acquisition of Pringles, Organic Sales in Decline
Price Increases and Reduced Promotions;
O
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Source: Company Annual Reports, OC&C analysis
Hj Heinz
1. In reporting currency
Positive Exchange Rate Fluctuation
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O Diageo Case Study:
Diageos strong European revenue growth was driven almost exclusively by
it i iti f T k M ki its acquisition of Turkeys Mey ki
Acquisition of Turkeys Leading
Case Study: Diageo European Revenue Growth
4,966
4,279 700
+16.1%
22
35
In August 2011, Diageo
acquired 100% of Mey ki for
1 26bn
Acquisition of Turkey s Leading
Spirits Company, Mey ki
European Revenue
1
2011-12
m
Organic growth has been slow
in Europe with volume declining
by 1% sales growing by 1%
Slow Organic Growth
35
1.26bn
Market leaders in major local
spirits Raki and Vodka (79%
share of Raki market)
by 1%, sales growing by 1%
and net sales (after duties)
falling 1%
This is in spite of a 3% organic
i i k ti d i
Growth driven by
acquisition
Organic growth
<1%
2011 2012 Organic
Movement
Acquisition Exchange
2
Direct acquisition of customer
base accounts for c.700m of
sales (over 95% of European
revenue growth)
increase in marketing spend in
Europe
Poor performance in Western
Europe has been supported by
Growth opportunity for sale of
Diageo Premium brands
through MI sales and
distribution network
growth in the Eastern Europe,
Russia and Turkey (driven by
post acquisition revenue
synergies)
-1
Europe
European Net Sales Growth 2011-12
%
distribution network
Spirits has been the only
product to experience positive
growth in net sales due
popularity in Eastern Europe
and marketing investment
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Russia & Eastern Europe
Turkey
Western Europe
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1. Sales pre excise duties (Net sales is net of duties)
2. Historic revenue adjusted to current exchange rate
Source: OC&C analysis
and marketing investment
u ey
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O Diageo Case Study:
Apart from this Turkish acquisition, Diageo seems to focus more and more on
d l i k t t id E developing markets outside Europe
Beer & Spirits Company Focus on Emerging Markets
Date Acquired Value (m) Location
Recent Acquisitions
Organic Marketing Spend Growth, FY12 vs FY11
%
LatAm 17%
United Spirits Ongoing
TBC
(c.700)
India
Ypioca Aug 2012 284 Brazil
Meta Jan 2012 153 Ethiopia
Africa 11%
AsiaPac 11%
Philippines Dec 2011 15 Philippines
Kenya Breweries Nov 2011 134 Kenya
Halico May 2011 - June 2012 60 Vietnam
North America 7%
Africa 11%
Mey igki Aug 2011 1,260 Turkey
Quanxing and ShuJingFang Jan 2007 - July 2011 69 China
Zacapa July 2011 148 Guatemala
3% Europe
Serengeti Oct 2010 60 Tanzania
22 Marquis Sept 2010 6 United States
Nuvo June 2010 29 United States
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Source: Annual Reports, OC&C analysis
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O Estee Lauder Case Study:
Estee Lauder have managed to grow organically in Europe despite
diffi lt k t diti d i d f ti l l l difficult market conditions and mixed performance on a national level
E t L d E G th St
2
Case Study: Estee Lauder achieve European revenue growth
Managed organic growth in Europe in 2012 despite the sluggish economic
performance in the region
The overall growth masks mixed national performances with strong
Estee Lauders European Growth Story
2
9.7
Revenue by Geography, 2012
$bn
The overall growth masks mixed national performances with strong
revenues in the UK, Germany and Italy, but falling sales in Spain and the
Balkans
Growth in UK, Germany and Italy primarily attributable to new product
launches in skin care and makeup from heritage brands
EMEA
The Americas
3.6
4.1
New company-operated store rollouts:
In 2012 over 50 M.A.C, Bobbi Brown and Jo Malone stores opened
primarily across Europe and the Middle East
Successful new store in Londons Covent Garden and new Paris
Asia Pacific
2012
2.0
Successful new store in London s Covent Garden and new Paris
flagship on the way
Impressive growth in travel retail sales globally (100% increase over the
last three years) driven by increasing airline passenger numbers
Initiatives such as pop-up stores, make-up demonstrations
Growth in Net Sales by Geography 2011-2012
%
8
The Americas
p p p , p
Europe and Asia Pacific remain the largest retail travel markets and
have benefitted from growth in this segment. Skincare has been the
most successful product area
Enhanced relationship with Europes largest cosmetics and fragrance
14
11
Asia Pacific
EMEA
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retailer Parfumerie Douglas
Source: Annual reports, Press, OC&C analysis
1. Further segmentation unavailable from annual reports. EMEA growth likely driven by the Middle East, but commentary implies growth was achieved also in Europe
2. Based on commentary from the 2012 annual report
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A d Agenda
Executive Summary
Key Exhibits Key Exhibits
Methodology
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D t il di th d l Details regarding methodology
Methodology
Currency and exchange
Financial figures have been converted into US$ to ensure comparability across FMCG groups (since many
companies have released their accounts in $, Yen, , , DKK , CHF etc.)
A 365 days average exchange rate has been used, adapted to each group fiscal year A 365 days average exchange rate has been used, adapted to each group fiscal year
Average figures for the Global 50 FMCG groups (sales growth, ROCE etc.) are grocery sales (in US $) weighted
z. This is in line with last 3 years methodology
Sales
Sales have been systematically adjusted to exclude excise duty (if any)
Sales growth has been calculated in the local" currency of each FMCG group (ie sales growth is not the growth
between 2012 US $ converted sales and 2011 US $ converted sales for the non US $ groups. But this has also
been stated separately)
Profit
Profit = earnings including income (or losses) from associated companies, restructuring expenses and
exceptional items where relevant, but before interest income and expenses and tax and excludes items like gain
from sale of assets, discontinued operations, minority interest allocation, amortization/impairment of intangibles , p , y , p g
and re measurement to fair value, wherever significant.
This is in line with last 3 years methodology
Capital employed = shareholder equity book value + long and short term financial debt
ROCE fit / it l l d
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ROCE = profit / capital employed
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Definition of "Grocery Sales" by company (1/2)
Company
Grocery Turnover
2012 ($m)
Total Turnover
2012 ($m)
Grocery Perimeter Definition
All l ( d d d li id b + t + ilk d t d i + t iti + d di h d ki id + f ti
Nestle AG $98,353 $98,353
All sales (powdered and liquid beverages + water + milk products and ice cream + nutrition + prepared dishes and cooking aids + confectionary
+ pet care)
Procter & Gamble $83,680 $83,680
All Sales (Beauty, Grooming, Healthcare, Fabric Care, Home Care, Baby care & Family Care, excluding corporate). Snacks no longer a
reporting segment
Unilever $65,998 $65,998 All Sales (Personal Care, Home Care, Foods, Refreshment)
Pepsico $65,492 $65,492 All sales
Coca-Cola Company (The) $47 890 $48 017 All sales Coca-Cola Company (The) $47,890 $48,017 All sales
AB Inbev $39,758 $39,758 All Sales
JBS $37,253 $38,916 All sales except Mercosul's Other
Mondelez $35,015 $35,015 All Sales (Biscuits, Chocolates, Gum & Candy, Beverages, Cheese & grocery)
Archer Daniels Midland $34,715 $89,038 Oil Seed Processing + "Processing" revenues from Others Segment which includes wheat processing, cocoa processing
Tyson Foods $33,278 $33,278 All Sales Excluding Others & intersegment sales
Phillip Morris International $31,377 $31,377 All Sales
L'Oreal $28,885 $28,885 All Sales( Cosmetics, Body-shop and Dermatology)
Danone $26,835 $26,835 All Sales ( Fresh Dairy Products, Water, Baby Nutrition , Medical Nutrition )
B iti h A i T b P L C $24 075 $2 0 All S l British American Tobacco P.L.C $24,075 $24,075 All Sales
Heineken Holding $23,639 $23,639 All sales
Japan Tobacco $23,324 $25,423 Tobacco and Food (Pharma, others and revenues from contract manufacturing, distribution and peripheral businesses are excluded)
Asahi Breweries $19,408 $19,738 All sales except others
Kirin Breweries $19,346 $23,383 Alcoholic -> International & Domestic, Others, Non Alcoholic $19,346 $23,383 Alcoholic International & Domestic, Others, Non Alcoholic
Kraft Foods $18,339 $18,339 All Sales
Altria Group $17,350 $17,500 Includes Cigarettes, smokeless products , cigars and wines excluding financial services
Colgate Palmolive $17,085 $17,085 All sales (Oral Care, Personal Care, Home Care, Pet Nutrition)
Diageo $17,057 $17,057 All sales (wine, beer, spirits, ready to drink and others)
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Source: Annual reports, 10K, OC&C analysis
1. Turnover and Grocery Sales figures exclude excise duties
SABMiller Plc $16,713 $16,713 All Sales except hotels and gaming business in South Africa
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Definition of "Grocery Sales" by company (2/2)
Company
Grocery Turnover 2012
($m)
Total Turnover
2012 ($m)
Grocery Perimeter Definition
General Mills $16 658 $16 658 All sales General Mills $16,658 $16,658 All sales
Kimberly Clark $16,103 $21,063 Personal Care and Consumer Tissue only. Healthcare, KC professional and Corp & other excluded
Brasil Foods $14,661 $14,661 All Sales
Johnson & Johnson $14,447 $67,224 Only Consumer Product sales
Kellogg Company $14,197 $14,197 All Sales (NA snacks, NA retail cereal, international snacks, int. cereal)
Reckitt Benckiser $13,836 $15,163 All sales except pharma
Conagra $13,263 $13,263 All Sales
Grupo Bimbo $13,176 $13,176 All Sales
Nippon Meat Packers $12,722 $12,722 Includes hams, sausages, processed foods, fresh meat, marine & dairy products and affiliated division
Kao $12,567 $15,201 Only Consumer Product sales
Smithfield Foods $12,343 $13,094 Pork segment and international (excluding others); inter-segmental sales has been excluded
HJ Heinz $11 649 $11 649 All sales (Ketchup & Sauces Meals & Snacks Infant Nutrition & others) HJ Heinz $11,649 $11,649 All sales (Ketchup & Sauces, Meals & Snacks, Infant Nutrition & others)
Carlsberg $11,612 $11,612 All Sales
Imperial Tobacco $11,505 $23,254 Sales of Tobacco only
Dean Foods $11,462 $11,462 All Sales
Marfrig Group $11,376 $12,198 Fresh Foods + Processed Foods of Marfrig Beef and Seara Foods only
Bunge Limited $11,186 $60,991 Edible Oil Products and Milling Products excluding intersegment sales
Yamazaki Baking $10,946 $11,894 Food Business only. Retail and other business excluded
Royal Frieslandcampina $10,755 $13,256 All Sales Excluding Ingredients, Others and Intersegment Sales
Ajinomoto $10,647 $14,966
Domestic Food Products(Seasonings & Processed Food, Bakery Products, Delicatessen, Frozen Foods, Beverages), Overseas Food
Products(Seasonings, Processed Food), Business tie-ups (Edible Oils, Coffee Products) and does not include Bioscience, Pharma
Pernod Ricard Sa $10,564 $10,564 All Sales
Avon $10,546 $10,717 All Sales (Beauty, Fashion, Home) excluding others $ , $ 0, ( y, , ) g
Meiji Holdings $10,463 $13,866 Food business excluding others
Henkel $10,413 $21,230 Laundry and homecare/cosmetics and toiletries
SCA $10,142 $12,615 Tissue & Personal Care (Baby care)
Lvmh $9,966 $36,138 Wine & Spirits + Perfumes & Cosmetics
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Source: Annual reports, 10K, OC&C analysis
1. Turnover and Grocery Sales figures exclude excise duties
Estee Lauder Companies
(The)
$9,714 $9,714 All Sales
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8 FMCG giants (including 1 Chinese) remain excluded due to lack of
A l R t l k f l fi i l d t Annual Report or lack of granular financial data
Firm HQ FMCG Segment
Estimated Grocery Turnover 2012
($ bn)
Cargill USA Agriculture 33 5
1
Cargill USA Agriculture 33.5
Mars Inc USA Sweets 33.0
2
Groupe Lactalis France Dairy 20 7 Groupe Lactalis France Dairy 20.7
Vion Food Group Netherlands Food 12.4
2
Dairy Farmers of America USA Dairy 12.1 Dairy Farmers of America USA Dairy 12.1
Wahaha China Food & Drinks 10.3
Ferrero Italy Sweets 9.8 y
S.C. Johnson USA Detergent, Hygiene 9.0
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Sources: Annual reports, Press, OC&C analysis
1. Estimated as 25% of total sales and others revenues ($134bn in 2012)
2. FY ending 31 December 2011
3. FY ending 31 June 2011
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BELO HORIZONTE
BOSTON BOSTON
DUESSELDORF
For more details please contact
HAMBURG
HONG KONG HONG KONG
LONDON
Will Hayllar
will.hayllar@occstrategy.com
MUMBAI
NEW DELHI
Christoph Treiber
NEW DELHI
PARIS
christoph.treiber@occstrategy.com
ROTTERDAM
SHANGHAI
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WARSAW
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