Reunert Consumer and Commercial Reunert Consumer and Commercial Holdings LimitedHoldings Limited

South AfricaSouth Africa

Welcome to ReunertAnalysts & Fund Managers

09h00 – 09h15

09h15 – 09h45

09h45 – 10h45

Welcome – Mr G Pretorius

Presentation & DVD on MEI

Tour

* Panasonic Systems & Consumer Showrooms

* Futronic / Akai / Nintendo Showrooms

Itinerary

History19601960•• Barlows Manufacturing signed agreement with Matsushita Electric Barlows Manufacturing signed agreement with Matsushita Electric Industrial Company Limited of Industrial Company Limited of

Japan (Japan (““MEIMEI””) and goods were sold through Barlows Appliance Company and Tele) and goods were sold through Barlows Appliance Company and Telerama Rediffusion.rama Rediffusion.19751975•• Manufacturing of Barlowvision televisions,car radios and radios Manufacturing of Barlowvision televisions,car radios and radios commenced at a plant in New commenced at a plant in New

Germany, Durban for Telerama Rediffusion.Germany, Durban for Telerama Rediffusion.19801980•• By 1980 the Barlowvision and Fuchs products had been discontinueBy 1980 the Barlowvision and Fuchs products had been discontinued in favour of the National Brand. d in favour of the National Brand.

Products manufactured included Television, Car Radio, General AuProducts manufactured included Television, Car Radio, General Audio, Hidio, Hi--FiFi and Cooker Control and Cooker Control Panels. Panels.

•• National Panasonic Company (NPC) was established, based in Kew, National Panasonic Company (NPC) was established, based in Kew, and took over the distribution of and took over the distribution of all consumer products as a subsidiary of Barlows Manufacturing. all consumer products as a subsidiary of Barlows Manufacturing. Products were branded National, Products were branded National, except for Hiexcept for Hi--FiFi which was branded Technics.which was branded Technics.

19841984•• Telerama Rediffusion became National Office Automation, a part oTelerama Rediffusion became National Office Automation, a part of NPC Limited.f NPC Limited.19861986•• NPC and Nashua combined under one Managing Director in one buildNPC and Nashua combined under one Managing Director in one building based in Midrand (current ing based in Midrand (current

Nashua Ltd. Building)Nashua Ltd. Building)•• NPC launched a range of OA equipment which was sold through FranNPC launched a range of OA equipment which was sold through Franchise operations called Panash chise operations called Panash

(Panasonic / Nashua joint franchises)(Panasonic / Nashua joint franchises)19871987•• NPC launched the local logo NPC launched the local logo NN National and payoff line National and payoff line ““The Quest for Zero DefectThe Quest for Zero Defect””19881988•• MEI decided to become more serious in Office Automation productsMEI decided to become more serious in Office Automation products and requested the Nashua / and requested the Nashua /

Panasonic operations be split.Panasonic operations be split.1991 1991 •• The brand identity changed from National to Panasonic passing thThe brand identity changed from National to Panasonic passing though many steps.ough many steps.

History (contd.)19921992•• MEI withdrew all representation from South Africa on the groundsMEI withdrew all representation from South Africa on the grounds of apartheid after more than 20 of apartheid after more than 20

years of representation.years of representation.19931993•• Barlow Rand unbundled and Reunert Limited became our proud new oBarlow Rand unbundled and Reunert Limited became our proud new owners.wners.19941994•• MEI reMEI re--assigned a representative to our country on the declaration of fassigned a representative to our country on the declaration of freedom.reedom.19971997•• Panasonic OA business rePanasonic OA business re--launched as Panasonic Systems Company and commenced selling launched as Panasonic Systems Company and commenced selling

telecoms, broadcast, CCTV and other products.telecoms, broadcast, CCTV and other products.19981998•• Airomatic was absorbed into NPC.Airomatic was absorbed into NPC.19991999•• A strategy of vertical integration commenced and PanSolutions waA strategy of vertical integration commenced and PanSolutions was launched. s launched. 20012001•• The need for an alternative brand was The need for an alternative brand was recognisedrecognised and Futronic was launched.and Futronic was launched.2002 2002 •• MEI made a global decision to discontinue Technics branded produMEI made a global decision to discontinue Technics branded products. cts. 2003 2003 •• An agency agreement was concluded with Nintendo.An agency agreement was concluded with Nintendo.2004 2004 •• MEI requested NPC to drop the slogan MEI requested NPC to drop the slogan ““Quest for Zero DefectQuest for Zero Defect”” and use the global positioning and use the global positioning

statement statement ““ideas for lifeideas for life””..20052005•• An agency agreement with Akai was concluded.An agency agreement with Akai was concluded.

Office Automation & IT Systems

Product CategoriesProduct CategoriesCopiersCopiersFaxFaxPrintersPrintersScannersScannersConsumablesConsumables

Number of opposition brandsNumber of opposition brands ++4040

Major CompetitorsMajor CompetitorsCopiers Copiers –– Minolta/Canon/NashuaMinolta/Canon/NashuaFax Fax –– Hewlett Packard/Canon/SamsungHewlett Packard/Canon/SamsungPrinters Printers –– Hewlett Packard/Brother/Epsom/Lexmark Hewlett Packard/Brother/Epsom/Lexmark

Warranties offeredWarranties offeredRetail Retail –– 1 year carry1 year carry--in / Systems in / Systems –– 33--5 years on site maintenance 5 years on site maintenance contractcontract

Panasonic No. 4

Current Distribution : Franchise network / Specialised dealers

Airconditioning Systems

Product CategoriesProduct Categories

Window UnitsWindow UnitsMidwall UnitsMidwall UnitsPackagePackage

Number of opposition brandsNumber of opposition brands ++6060

Major CompetitorsMajor CompetitorsSamsungSamsungLGLGDaikenDaiken

Warranties offeredWarranties offeredOn site On site –– 1 year main unit / 5 years compressor1 year main unit / 5 years compressor

Panasonic No. 2

Current Distribution : Specialised dealer network

Presentation SystemsProduct CategoriesProduct Categories

LCD Projectors LCD Projectors PlasmaPlasmaPanaboardPanaboardStorage DevicesStorage Devices

Number of opposition brandsNumber of opposition brands Projectors Projectors ++6060Plasma Plasma ++2020Panaboard Panaboard ++55

Major CompetitorsMajor CompetitorsLCD Projectors LCD Projectors –– Epson/BengEpson/BengPlasma Plasma –– Pvision/Samsung/LGPvision/Samsung/LGPanaboard Panaboard –– Nobo/SmartNobo/Smart

Warranties offeredWarranties offeredRetail Retail –– 1 year carry1 year carry--in / Systems in / Systems

–– 33--5 years on site maintenance contract5 years on site maintenance contract

Panasonic No. 1Panasonic No. 3Panasonic No. 1

Current Distribution : Franchise network / Specialised dealers

Telecommunication Systems

Product CategoriesProduct CategoriesPABXPABXPhonesPhonesCordless PhonesCordless Phones

Number of opposition brandsNumber of opposition brands ++1515

Major CompetitorsMajor CompetitorsPABX PABX –– Samsung / Marconi Samsung / Marconi Phones Phones –– Telkom / GE / SiemensTelkom / GE / SiemensCordless Phones Cordless Phones –– Siemens / GESiemens / GE

Warranties offeredWarranties offeredRetail Retail –– 1 year carry1 year carry--in in Systems Systems –– 33--5 years on site maintenance contract 5 years on site maintenance contract

offered by dealer/franchiseoffered by dealer/franchise

Panasonic No. 2

Current Distribution : Specialised dealer network Franchise network

Car Audio Systems

Product CategoriesProduct CategoriesCar Radios OEMCar Radios OEMCar Radios AftermarketCar Radios Aftermarket

Number of opposition brandsNumber of opposition brands ++3030

Major CompetitorsMajor CompetitorsPhillipsPhillipsSanyoSanyoJVCJVC

Warranties offeredWarranties offered48 hour swap out48 hour swap outRetail Retail –– 1 year carry1 year carry--ininP&A / OE P&A / OE –– 3 years carry3 years carry--inin

Panasonic No. 2

Current Distribution : Specialised dealer network

Broadcast & CCVE Systems

Product CategoriesProduct CategoriesCameras / Monitors / VTR / Lenses /Cameras / Monitors / VTR / Lenses /Digital Recorders / BiometricsDigital Recorders / BiometricsTapes / Editors / MixersTapes / Editors / Mixers

Number of opposition brandsNumber of opposition brands ++2020

Major CompetitorsMajor CompetitorsSonySonyAvidAvidReditronReditron

Warranties offeredWarranties offeredBroadcast Broadcast –– 1 to 3 years carry1 to 3 years carry--ininCCVE Main units CCVE Main units –– 1 year carry1 year carry--ininCCVE Systems CCVE Systems –– 3 to 5 years maintenance contract3 to 5 years maintenance contract

Panasonic No. 3

Current Distribution : Specialised dealer network

Direct Sales OperationsPansolutionsThree branches Three branches

Johannesburg / Durban / Cape TownJohannesburg / Durban / Cape Town

Pretoria still to be openedPretoria still to be opened

Employees Employees –– 400400

Number of Accounts Number of Accounts –– 10,00010,000

Product CategoriesProduct Categories

OA / IT / CCTV / PABX / Air Con./ PresentationOA / IT / CCTV / PABX / Air Con./ Presentation

Offer full installation / reticulation and service Offer full installation / reticulation and service backup packagebackup package

TOTAL SOLUTION ONE STOP SHOPTOTAL SOLUTION ONE STOP SHOP

Expansion into retail product sales via high Expansion into retail product sales via high street shopsstreet shops

Consumer Brown Goods & Photographic

Product CategoriesProduct CategoriesVCR / Camcorder / Digital Still Cameras /VCR / Camcorder / Digital Still Cameras /Keyboards / Hi Keyboards / Hi FiFi / General Audio / / General Audio / DVD Players & Recorders DVD Players & Recorders

Number of opposition brandsNumber of opposition brands ++8080

Major CompetitorsMajor CompetitorsLGLGSonySonySansuiSansuiSamsungSamsung

Warranties offeredWarranties offered1 to 5 years carry1 to 5 years carry--inin

Panasonic No. 4

Current Distribution : Discounters / Independents / Chain Stores

Panasonic Television

Product CategoriesProduct CategoriesFlat Screen/Round Screen/LCD/Flat Screen/Round Screen/LCD/

Plasma TV Plasma TV

Number of opposition brandsNumber of opposition brands ++5050

Major CompetitorsMajor Competitors

A Brands A Brands –– LG/Samsung/SonyLG/Samsung/SonyB Brands B Brands –– Sansui/TelefunkenSansui/Telefunken

Warranties offeredWarranties offered3 year carry3 year carry--in in –– Flat screenFlat screen1 year carry1 year carry--in in –– Round screenRound screen

Panasonic No. 4

Current Distribution : Independents/Mass Discounters/ Chain Stores/Export

Manufacturing

Manufacturing

Highly advanced SMD insertion equipment

Manufacturing

New lead free solder equipment

Manufacturing

Third party assembly work

FMCG

Product CategoriesProduct CategoriesBatteries / Industrial Batteries / Torches / Batteries / Industrial Batteries / Torches / Timer & Switches / Specialised Lighting Timer & Switches / Specialised Lighting

Number of opposition brandsNumber of opposition brands ++99

Major CompetitorsMajor CompetitorsBatteries & TorchesBatteries & Torches

Eveready/Duracell/EnergizerEveready/Duracell/EnergizerIndustrial BatteriesIndustrial Batteries

Yuasa/CSB/G S PortalecYuasa/CSB/G S Portalec

Warranties offeredWarranties offered1 year carry1 year carry--in in –– Industrial products Industrial products

Panasonic No. 2

Current Distribution :Wholesales/Supermarkets/Distributors

Small Appliances

Product CategoriesProduct CategoriesMicrowave / Breadmaker / Iron /Microwave / Breadmaker / Iron /Vacuum Cleaner / JuicerVacuum Cleaner / Juicer--Blender / Blender / Personal CarePersonal Care

Number of opposition brandsNumber of opposition brands ++8080

Major CompetitorsMajor CompetitorsLGLGPhillipsPhillipsSamsungSamsung

Warranties offeredWarranties offered1 year free exchange1 year free exchange5 years on microwave magnetron5 years on microwave magnetron1 to 5 years carry1 to 5 years carry--in on smallsin on smalls

Panasonic No. 5

Current Distribution : Discounters / Independents

Consumer Electronics RevolutionBefore 2000 Environment Current Environment

Exchange rate Constant depreciation Great volatility FOB price erosion (GFK) 50% over 10 years 50% over 2-3 years Agents vs Multinational subsidiaries 90 – 10 20 –80

Retailers Consolidation (major) 40 12Discounter power (product change/market change) 15% 40%Brand differentiation Not required Key Issue Price premium for brand 15% 5%Number of competitive brands 10 80Retailer direct import Limited Common

Advertising consumer reach – Mass market Identifiable Highly fragmented Global pricing No knowledge High knowledge Product choices (consumer/retailer) ● By features ● By category ● By brand (quality/features)

Limited

Identifiable Definable

Multi various (+ 5x greater)

Merged Undefinable (further brand erosion)

Consumer type Knowledgeable about use Good care of product

Limited knowledge of use Limited care of product

Technical Service support All cost effective repair Variable Purchase psychology Functional Fashionable

Distribution Industry Change

Retailing Industry Change

Consumer Industry Change

Total Consumer Electronic and Photographic

-5

0

5

10

15

20

Units Value 000's

-3%

+17%

May-03to

May-04

May-04to

May-05

Unit Price ErosionCRT Television

0500

100015002000250030003500

Jan. 2003 Jan. 2004 Jan. 2005

Ran

d

DVD Player & Recorder

0500

100015002000250030003500

Jan. 2003 Jan. 2004 Jan. 2005

Ran

d

Digital Camera

0

1000

2000

3000

4000

5000

Jan. 2003 Jan. 2004 Jan. 2005

Ran

d

Camcorder

01000200030004000500060007000

Jan. 2003 Jan. 2004 Jan. 2005

Ran

d

Average Market Price Market Leader Model Price Panasonic Leader Model Price

Leader model price erosion = 56.6% Leader model price erosion = 68.9%

Leader model price erosion = 50.8% Leader model price erosion = 57.5%

Unit Price Erosion

Plasma Television

05000

10000150002000025000

Jul-04

Aug-04

Sep-04

Oct-04

Nov-04

Dec-04

Jan-05

Feb-05

Mar-05

Apr-05

Ran

d

Average Selling Price

31% Erosion in 9 months

Market Shift by Product Origin

1990 - 1995

Quantity

Pric

e

Prior to 1990

Quantity

Pric

e

2000 - 2005

Quantity

Pric

e

1995 -2000

Quantity

Pric

e

Futronic

Akai

Japanese

JapaneseJapanese

Panasonic

Japanese

Korean

European

KoreanKorean

Chinese Product / European & Japanese Brand

Chinese BrandChinese Brand

Futronic

Product CategoriesProduct CategoriesTelevision / DVD / Hi Television / DVD / Hi FiFi / / Microwaves / Mini OvenMicrowaves / Mini Oven

Number of opposition brandsNumber of opposition brands ++ 8080

Major CompetitorsMajor CompetitorsSansuiSansuiTedelexTedelexTelefunkenTelefunken

Warranties offeredWarranties offered1 year carry1 year carry--inin

Futronic No. 9

Current Distribution : Chain Stores / Independents

Nintendo

Product CategoriesProduct CategoriesGaming Consoles Gaming Consoles –– Game Boy/Game Cube/Nintendo Game Boy/Game Cube/Nintendo DSDSGames Games ––Activision/Ubisoft/THQ/Take2/Sega/Capcom/KonamiActivision/Ubisoft/THQ/Take2/Sega/Capcom/Konami

Number of opposition brandsNumber of opposition brands 33

Major CompetitorsMajor CompetitorsSonySonyMicrosoftMicrosoftNokiaNokia

Warranties offeredWarranties offered1 year carry1 year carry--inin

Nintendo No. 2

Current Distribution : Toy & Baby Stores/ Mass Discounters

Thank you