FMCG Konsumgüter Branchenanalyse - 20894_global_50_in_2012.pdf

THE OC&C GLOBAL 502013

HITTING ABRIC WALLHITTING ABRIC WALLOC&C’s annual review of the Top 50 Global FMCG Companies

Produced in Association with

A dAgenda

Executive Summary

Key Exhibits Key Exhibits

Methodology

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© OC&C Strategy Consultants 201321 20

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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 EUg 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 manycommodity 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 v2

© OC&C Strategy Consultants 20133

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

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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 5th 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 tover 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 powerChina’s leading FMCG firms are close to breaking into the Global 50 Tingyi ranks 51st this year and will China s leading FMCG firms are close to breaking into the Global 50 – Tingyi ranks 51st 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 ofgrowth 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 co’s, 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 v2


African economies develop – Africa also presents potential opportunity for mid-sized firms below the Global 50’s 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 BRICDeep 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 shareMarket 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 50’s 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&Aaggressive 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 ledIn 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 Lee’s food business as a way of

gaining share in the US v2


– 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 reasonThe s b continent’s 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-continent’s population is already 1bn and growing rapidly by 2050 Africa will account for 20% of the world’s population (Nigeria alone will be vying to be the 3rd 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 AfricaNi 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 theypotential 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 v2


– L’Oreal has for example just acquired Interconsumer Products (Kenyan cosmetics business), DanoneCentrale Laitière (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 LVMH’s 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 v2


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”6 20

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A dAgenda

Executive Summary


– Global 50 Ranking

– Global 50 Performance Review – FinancialsGlobal 50 Performance Review Financials

– Global 50 Performance Review – M&A Activity

– Deep Dive 1: Difficult Terrain in Emerging Markets – BRICDeep Dive 1: Difficult Terrain in Emerging Markets BRIC

– Deep Dive 2: Africa as Potential Growth Engine for FMCG

– Deep Dive 3: Finding Growth in EuropeDeep 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 margin1 Return on Capital Employed1

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 Tobacco14 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% 21% v2

© OC&C Strategy Consultants 20139Source: Annual reports, 10K, OC&C analysis

1. Excluding major exceptional items (perimeter changes and litigations) – EBIT after earnings from associates and other exceptional items2. 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 margin1 Return on Capital Employed1

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% v2


1. Excluding major exceptional items (perimeter changes and litigations) – EBIT after earnings from associates and other exceptional items2. Grocery sales exclude excise duty payments

(The)

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Th ‘bi fi ’ i th ‘bi fi ’ l dThe ‘big five’ winners vs. the ‘big five’ laggardsMajor Winners and Laggards

Continued to drive strong organic growth of 6.9%, ahead of close competitors Nestle and P&G (the fifth year running they’ve 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

LaggardsWinners

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 shinep

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 can’t compete in the nappy market, signalling Huggies’ exit from the mainstream nappy sectorright 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 dsuccess 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 Lee’s 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 analysis10 20

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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, 2010-121

% Growth

2 8% -0.1%4 4%

Asia/AfricaEuropeAmericas

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 LC2. Includes Other and Undisclosed Revenues

2010-11 2011-12 2010-11 2011-122010-11 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 AfricaGlobal 50 Revenue and Growth 2010-12$bn, %

15.0%

550

600555

GrowthRevenue, 2012

Sales from the Americas make up

CommentaryAfrica 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

350355331

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

200smallest 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 OtherAsia & AfricaAmericas

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%

JBSLVMH

p %23.5%

15.3%Marfrig GroupGeneral MillsBrasil Foods

UnileverL’Oreal

SABmiller PlcEstee Lauder Companies (The)

13.2%11.9%

10.9%10.5%10.4%10.4%10.3%p ( )

Nestle AgKirin Beweries

HJ HeinzSmithfield Foods

DiageoDanone

Asahi BreweriesConagra

Kellogg CompanyP 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

SCAHeineken Holding

Royal FrieslandcampinaArcher Daniels Midland

CarlsbergHenkel

Bunge LimitedTyson 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 growth1: 5.64%

Median Grocery Sales Procter & Gamble

Coca-Cola Company (The)Nippon Meat Packers

Altria GroupYamazaki Baking

Colgate PalmoliveAB Inbev

KaoKimberly 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 TobaccoPhillip Morris International

Reckitt BenckiserAjinomoto

Japan TobaccoBritish American Tobacco P.L.C

Meiji HoldingsPepsico

Dean FoodsKraft Foods

1.0%0.9%

0.1%-0.3%

-1.1%-1.4%-1.5%-1.5%-1.5%-1 7% v2


Kraft FoodsMondelez

Johnson & JohnsonAvon

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 th1 7 28%

4 6%4.8%

Procter & Gamble

Kraft FoodsKimberly Clark

Unilever4.8%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 growth1: 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

L’OrealNippon Meat Packers

British American Tobacco P.L.C

HJ HeinzJohnson & Johnson

Imperial Tobacco1.8%1.6%1.6%1.5%1.2%

0.6%0.0%

-1.6%-1.9%-2 0%

SCA

Ajinomoto

Altria Group

Kao

DiageoKirin Beweries

Henkel

General MillsYamazaki Baking

Asahi Breweries

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2.0%-3.7%

-4.9%-23.0%

KaoMeiji Holdings

Nestle AGJapan Tobacco

Source: Annual reports, 10K, OC&C analysis1. The weights used are grocery sales excluding excise, in $

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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 organicGrocery 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)

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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 2012commodity costs through 2012

Chain of Food Commodity Price Inflation, 2008-12 %

Food Commodity Price Inflation

Grocery Retailers’¹ Gross Profit Margins % Change

FMCG Manufacturers' Gross Margins

Food Consumer Prices²

2.7%3.9%

5.9%

0 4 t0.6ppts0 5ppts

22.8%18.1%

25.9%

%1.0%1.6%

2011201020092008 2012

-0.2ppts

2011

-0.1ppts

2010

0.4ppts

2009

0.3ppts

2008

0.3ppts

2012

-0.1ppts

-0.8ppts

0.6ppts0.5ppts

-1.6ppts-6.9%

2011201020092008 20122012201120102008 2009

pp

2008 2010 201220112009

-21.5%

FAO Food Commodity Price Index Gross Margin of Global 50 Gross Profit margin of 6 Top Retailers

OECD Food Consumer Price Index

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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, Delhaize2. 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 2011Profit 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 margin1: 16.2% (vs 15.8% in 2011)

M d l 14 6%Kraft Foods 14.8%

General Mills 15.9%Nestle AG 16.3%

L’Oreal 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%

v2


Source: Annual reports, 10K, OC&C analysis1. The weights used are grocery sales , excluding excise in $

Bunge LimitedMeiji Holdings

0.4%1.5%

Archer Daniels Midland 2.4%Yamazaki Baking 2.7%

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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%

Dis

tribu

tion1

Gro

ss M

argi

n

2011

EB

IT

Mar

ketin

g &

dmin

istra

tion1

R&D

epre

ciat

ion

&Am

ortis

atio

n

Inco

me

from

Asso

ciat

es

2012

EB

IT

epre

ciat

ion

& Am

ortis

atio

n

Inco

me

from

Asso

ciat

es

R&D

2010

EB

IT

Gro

ss M

argi

n

Exce

ptio

nals

2

Dis

tribu

tion1

Mar

ketin

g &

dmin

istra

tion1

Exce

ptio

nals

2

v2


G

Ad De

DeG EAd E

1. Some mixing between the categories as a number of companies do not fully split out their costs2. Includes Income from Discontinued Operations and Other ExceptionalsSource: Annual Reports, OC&C analysis

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A dAgenda

Executive Summary








Methodology

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The value of M&A activity in 2012 showed a marked increase over 2011 due to ythe announcement of several big ticket dealsSummary – Acquisitions & Divestments

DealsOverview

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 year’s 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 championsOverview Operational Restructuring was the main reason for divestments amongst the champions Of the 18 divestments, 9 targets belonged to Food & Drinks sector

v2


Source: Mergermarket, OC&C analysis, Trade reports21 20

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A i iti i 2012 t t ll d $43b i l d t $36b i 2011Acquisitions in 2012 totalled $43bn in value as compared to $36bn in 2011Value of Global 50 FMCG Champions Acquisitions¹, 2001-12² $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

4336

30

4748

3026

191922

200320022001 200820072005 20062004 2009 2010 2011 2012

24Number of Acquisitions by 31 23 28 24 30 34 37 29 20 31 31

v2


FMCG Champions

Source: Mergermarket, Trade Reports, OC&C analysis

1. Undisclosed value deals are not considered2. Dates refer to the deal announcement date. Deals that have been announced in 2012 have been considered for analysis. c

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Nestlé's purchase of infant nutrition business from Pfizer was the largest i iti i 2012acquisition in 2012

Top 20 Acquisitions (by Value) by Global 50 FMCG Champions¹, 2012² $m

Baltic

11,601

Nestle SA

Danone SARoyal Friesland

Diageo Plc

GeneralHeineken

N V Diageo Reckitt

Benckiser G Pl

Baltic Beverages (Carlsberg)

Bidders

6,6986,966

Kellogg Company

Procter & Gamble

Company

Campina N.V.Japan Tobacco

General Mills

L’Oreal SA

Diageo Plc

Kraft Foods Maroc SA

N.V. Plc

Asahi Group Holdings, Ltd.

Group PlcConAgra Foods, Inc.

1 3821 461

3,3863,489Carlsberg The Coca-Cola

Company

Diageo Plc

L'Oreal SASCA

1531812262572782974324454656117079771,0291,1981,3821,461

ntos

S.A

.

s Li

mite

d

Nut

ritio

n

Nut

ritio

non

al, I

nc.

ryso

n N

V

e La

itier

e

ding

s In

c

rpor

atio

n

erie

s Lt

d

pis

co lt

d

es (P

&G)

rew

erie

sar

lsbe

rg)

ndus

trial

onia

, S.L

.

Byen

P/S

an D

ecay

tics,

LLC

rpor

atio

n

onal

S.A

.

Brew

ery

a Bo

ttlin

g

dust

rielle

ghre

b SA

TargetYo

ki A

limen

Uni

ted

Spiri

ts

Pfiz

er N

Schi

ff In

tern

ati o Gr

Cen

trale

Ral

corp

Hol

d

Alas

ka M

ilk C

or

Asia

Pac

ific

Brew

e

Cal

p

Prin

gle

JSC

Bal

tika

B (Ca

Ypio

ca A

groi

Arbo

ra &

Aus

o

Car

lsbe

rg B

Urb

aC

osm

et

Ever

Beau

ty C

or

Cad

um In

tern

atio

Met

a Ab

o

Mik

uni C

oca-

Col

a

Bisc

uite

rie In

ddu

Mog

g

v2


Source: Mergermarket, Trade Reports, OC&C analysis

1. Undisclosed value deals are not considered2. Dates refer to the deal announcement date. Deals that have been announced in 2012 have been considered for analysis

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A dAgenda

Executive Summary








Methodology

v2


894_

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Global 50 are weakest in China and do not dominate FMCG market in any BRIC tBRIC countryRetail Sales of FMCG1 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 Leader45%

30%15%3%Top 50 BRIC

36%

38%

Top 50 33%

1%

RussiaBrazil

36%

ChinaIndia

Top 50 33% 31%

17%

Total

27%

v2


Sources : Euromonitor, Oanda, OC&C analysis

RussiaBrazil ChinaIndia Total

1. Excluding alcoholic drinks

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Although the Global 50 continue to lead in Beauty & Home Care and Soft D i kDrinksRetail 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%

v2


Sources : Euromonitor, Oanda, OC&C analysis

Beauty & Home Care Soft Drinks Dairy Bakery & Snacks DriedProcessed

Food

Total

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The Global 50’s overall market share improved only in Brazil – thanks to i itiacquisitions

Change in Share by Country, 2011-12ppts

Brazil China Russia India

-1.0Others -1.2 -0.5 -0.1

-0.9Local Leader 1.5 0.5 0.1

1.9Top 50 -0.3 0.0 0.0

Effect of Kirin and General Mills acquisitions v2


1. Excluding Global 50 BRICSources : 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 itaggressive 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 ptsTotalGrowth

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 ptsOrganicGorwth

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%

OthersLocal LeadersGlobal 501

v2


Sources : Euromonitor, OC&C analysis 1. Global 50 excluding Global 50 BRIC

Organic Growth +0.3 pts7.8%

11.6%11.9%

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Case Study: JBSFrom its base in Brazil JBS has built a company selling processed meats in 150 t i ld id150 countries worldwide...JBS Company Overview

Founded 1953 and headquartered in São Paulo

Company Overview

Largest multinational food processing company in the world

Produces fresh and processed meat and by-d t f t iproducts 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 v2


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 tof diversification and growth in value added segmentsJBS Performance

JBS Revenue and EBITDA, 2007-12$bn

Focus on branding to create customer loyalty

Company Strategy

3937

3130

35

40

1 8

2.0

2.2

2.4

+40%RevenueEBITDA Added emphasis on value-added

products with greater profitability and price stability

1820

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 cts1817

710

15

0.6

0.8

1.0platform both with respect to products and geographies

Ensure strong global distribution platform

0

5

0.0

0.2

0.4

201220112010200920082007

“The company is now comfortable with its global footprint and doesn't need any more major acquisitions. Instead, the focus is on improving”

v2


Source: Annual reports, Company website, OC&C analysis

201220112010200920082007- JBS Chief Executive Wesley Batista

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Executive Summary








Methodology

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Although the total consumer spend in China is significantly higher that the S b S h Af i t iSub-Saharan African countries...

1,969946

Nominal Private Consumption, 2012$bn

117

25252418171716141099877776555554433333222211111

iarialaiayanaiaredaonC)iauealariaeaali

adnasoonda naineaerwiiandgoe)nedieahoicw

eutiiaau

Ind

Nig

e rAn

goEt

hiop

Keny

Gha

nTa

nzan

Cot

e D

’Ivoi

rU

gand

Cam

eroo

Con

go (D

RC

Zam

bM

ozam

biq u

Sene

gM

adag

asc a

Nam

ibEq

uato

rial G

uineM

aC

haBo

tsw

anBu

rkin

a Fa

sG

abo

Rw

and

Chi

n

Ben

Gui

n eN

ige

Mal

awM

aurit

anSw

azila

nTo

gon

go (B

razz

aville

Sier

ra L

eon

Buru

nEr

itre

Leso

th A

frica

n R

epub

lZi

mba

b wD

jibou

The

Gam

bG

uine

a-Bi

ssa

v2


E

Co

Cen

tral

Source: EIU, OC&C analysis32 20

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...when we look at spend per head many of the African countries are already t hi Chimatching China

10 755

Nominal Private Consumption per Capita, 2012$ Potentially Interesting Markets

10,755y 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

3,4132,880

2,6522,247

4,0603,422

,

995973970950906877873845835766723631599587547526465464463443438433431421403390387371364258241241185121

adaoeaanaaailan)daaueaoicaaaer aaoirie

China

naa)

Ango

laSw

azila

ndC

hina

Leso

tho

Cot

e D

’Ivoi

reG

hana

Mau

ritan

iaC

amer

oon

Indi

aN

iger

iaZa

mbi

aD

jibou

tSe

nega

Keny

aBe

nin

ngo

(Bra

zzav

ille)

Cha

dR

wan

daU

gand

aG

uine

a-Bi

ssau

Moz

ambi

que

Gui

nea

Togo

Mal

Afric

an R

epub

licTa

nzan

iaTh

e G

ambi

aEr

itrea

Sier

ra L

eone

Mad

agas

car

quat

oria

l Gui

nea

Ethi

opia

Burk

ina

Faso

Buru

ndN

iger

Mal

aw

Zim

babw

e

Gab

onBo

tsw

ana

Nam

ibia

Con

go (D

RC

)

v2


Con

Cen

tral A Eq

Source: EIU, OC&C analysis Other Of Interest China ExcludedIndia33 20

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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 iinclude, with over 50% operating in South Africa and NigeriaGlobal 50 Presence in Sub-Saharan African Countries 20121

# of Global 50 Firms Mix of US / Non-US firms in sub-Saharan Africa is

36

29

35similar to overall Global 50

14

12

1526

29

US Firms

7

11

15

18

1721

1115

213

7 11

Europe /Other Firms

88

South Africa KenyaNigeria Ghana Angola Sub-Saharan Africa

Sub-Saharan Africa v2


Source: Annual Reports, OC&C analysis

1. Presence based on review of office or manufacturing locations or evidence of significant distribution / share in country2. Includes all firms listed as present in Nigeria, Kenya, Ghana or Angola, and selected reviewed other Sub-Saharan African countries

Africa Africa Excluding ZA2

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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 tform 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%

v2


Source: Annual Reports, OC&C analysis1. 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 ththey see the continent as the key area for future growthLevel 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 YearsInvestment 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 glongest 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 v2


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 analysis36 20

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D & L’O l h f l j t d t l l Af i lDanone & L’Oreal have for example just snapped up two local African playersAfrica: Recent Major Deals

Deal Date: April 2013 Deal Date: June 2012

L’Oreal – Interconsumer ProductsDanone – Centrale Laitière

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 Danone’s top 10 markets in terms of sales.

position in the mass market. It will also accelerate our development in Eastern Africa”

– Geoff Skingsley, L’Oreal

– Market potential driven by a rising middle class and

– Centrale Laitière has annual sales of €600m and nearly 60 per cent of the Moroccan dairy market

– The acquisition fits Danone’s 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 Danone’s sales in Western Europe has declined from 80% to 40%, while emerging markets have grown from 20% to 50%

v2


Source: Mergermarket, Press Reports, OC&C analysis37 20

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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 itifor 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, 2012network of shops (through agents) and street vendors -engaging with over 25,000 agents and vendors

Key Brands:

– FanIce - Vanilla Ice Cream36

11396

OtherTogo

Ni i

y g y£m

– FanIce - Vanilla Ice Cream

– FanChoco - Frozen Chocolate Milk

– FanDango - Orange Juice

– FanYogo - Frozen Yoghurt46

36 Nigeria

Ghana

v2


FanYogo Frozen Yoghurt

Source: Annual reports, OC&C analysis38 20

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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 conglomerateCase 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 Nigeria’s 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

v2


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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Methodology

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GDP th i E i ti i t f ll b hi d th iGDP growth in Europe is continuing to fall behind other regions ... GDP Growth Overview by Region

7.2%

Sub-Saharan AfricaLatin AmericaAsia 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 2011-122009-10 2010-11 2011-122009-10 2009-10 2010-11 2011-12 2011-122010-112009-10

North AmericaEastern Europe Western Europe

2.1%

3.9%3.4%

2.2%1.9%2.5%

1.8%2.3%

v2


Source: EIU, OC&C analysis

2011-122010-112009-10 2011-122010-112009-10 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 diti2012 – despite the unfavourable macro-economic conditions

211.3Archer Daniels Midland

Global 50 European Revenue Growth Rates1, 2011-12%

Growth Rate 2010-11

-3.2%

8 69.610.612.616.120.4

97.1

LVMHSCA

Estee Lauder Companies (The)Brasil Foods

DiageoJbs

General MillsArcher Daniels Midland 3.2%

5.3%56.1%-4.1%-4.9%13.9%-2.0%13 0%

2 42.82.95.55.76.38.38.6

L’OrealUnilever

KaoBunge Limited

Hj HeinzKellogg Company

LVMH 13.0%4.7%

-2.9%18.9%-3.2%1.9%2.0%

0.40.70.81.41.61.92.4Carlsberg

AjinomotoHenkel

DanonePernod Ricard SAHeineken 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 FrieslandcampinaColgate PalmoliveImperial Tobacco

Johnson & JohnsonPepsico

Sabmiller PLCProcter & 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 InbevMondelez

AvonCoca-cola Company (The)

Kimberly ClarkBritish American Tobacco PLC

Royal Frieslandcampina 5.9%n/a

7.0%8.0%2.5%

14.9%2.6%

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-10.4-8.2Phillip 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 itiachieved this through acquisition

Europe Revenue CAGRs by Company1, 2011-12% Key Growth Drivers

97%General Mills

Archer Daniels 211% Acquisitions of Elstar Oils and Golden Peanut

Acquisition of Unimilk

16%

20%

Diageo

JBS Limited presence in European market, low absolute growth

Acquisition of Turkey’s Mey Ìçki; very limited organic Growth in Eastern Europe through Marketing

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

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

6%

8%Kellogg Company

Hj Heinz

Distribution Channels

Acquisition of Pringles, Organic Sales in Decline

Price Increases and Reduced Promotions;

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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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Diageo Case Study:Diageo’s strong European revenue growth was driven almost exclusively by it i iti f T k ’ M Ì kiits acquisition of Turkey’s Mey Ìçki

Acquisition of Turkey’s Leading

Case Study: Diageo European Revenue Growth

4,9664,279 700

+16.1%

22

35

In August 2011, Diageo acquired 100% of Mey Ìçki for £1 26bn

Acquisition of Turkey s Leading Spirits Company, Mey Ìçki European Revenue1 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 2012Organic Movement

AcquisitionExchange2

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)

-1Europe

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 investment28

16

-3

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 rateSource: OC&C analysis

and marketing investmentu ey

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Diageo Case Study: Apart from this Turkish acquisition, Diageo seems to focus more and more on d l i k t t id Edeveloping markets outside EuropeBeer & Spirits Company Focus on Emerging Markets

Date Acquired Value (£m) Location

Recent AcquisitionsOrganic 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%EuropeSerengeti 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 analysis45 20

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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 ldifficult 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 Lauder’s European Growth Story2

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 brandsEMEA

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 London’s 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%

8The 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 Europe’s largest cosmetics and fragrance 14

11

Asia Pacific

EMEA1

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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 Europe2. Based on commentary from the 2012 annual report

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A dAgenda

Executive Summary


Methodology

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D t il di th d lDetails regarding methodologyMethodology

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 yearA 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 $) weightedz. 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 alsobeen 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 gainfrom sale of assets, discontinued operations, minority interest allocation, amortization/impairment of intangibles, p , y , p gand 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 v2


ROCE = profit / capital employed

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Definition of "Grocery Sales" by company (1/2)

Company Grocery Turnover2012 ($m)

Total Turnover2012 ($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 tiNestle 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 salesCoca-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 lBritish 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) v2


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 salesGeneral 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 SalesGrupo 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 excludedRoyal 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 SalesAvon $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

Estee Lauder Companies v2


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 tAnnual Report or lack of granular financial data

Firm HQ FMCG Segment Estimated Grocery Turnover 2012($ bn)

Cargill USA Agriculture 33 51Cargill USA Agriculture 33.5

Mars Inc USA Sweets 33.02

Groupe Lactalis France Dairy 20 7Groupe Lactalis France Dairy 20.7

Vion Food Group Netherlands Food 12.42

Dairy Farmers of America USA Dairy 12.1Dairy Farmers of America USA Dairy 12.1

Wahaha China Food & Drinks 10.3

Ferrero Italy Sweets 9.8y

S.C. Johnson USA Detergent, Hygiene 9.03

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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 20113. FY ending 31 June 2011

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BELO HORIZONTE BOSTONBOSTONDUESSELDORF

For more details please contactHAMBURGHONG KONGHONG KONGLONDON

Will Hayllar

[email protected] DELHI

Christoph Treiber

NEW DELHIPARIS

[email protected] v2SHANGHAIWARSAW 52 20

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FMCG Konsumgüter Branchenanalyse - 20894_global_50_in_2012.pdf

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