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Growth strategy of Lion Nathan National FoodsGrowth strategy of Lion Nathan National Foods
7 June 2010Lion Nathan National Foods Pty Ltd
1
ContentsContents
Overview of Lion Nathan National Foods
LNNF Marketing Strategy
Integration Progress
Appendix
2
1 Refer to slide 62 Sourced from Kirin FY09 Results dated 10 February 2010. Before brand amortization and amortization of goodwill.
Group Oceania businessSales: 422.6bn yen EBIT: 50.3bn yen
Australia’s #1 dairy & juice company1
FY20092
Sales: 265.6bn yenEBIT: 11.6bn yen
National Foods/Dairy Farmers
Australasia’s #2 alcoholic beverages company1
FY20092
Sales: 157.0bn yenEBIT: 38.7bn yen
Lion Nathan
Launch of new holding company “LNNF”Launch of new holding company “LNNF”
Progressing the integrated beverages group strategy in Oceania.
Through 100% ownership of LN, Kirin established the region’s largest food and beverages business company, LNNF on 21 October, 2009.
3
Strong brand portfolio in Alcohol beveragesStrong brand portfolio in Alcohol beverages
Australia
Wine
NZ
RTD
LNNF is a leading alcohol beverages company in Australasia
4
Strong brand portfolio in Dairy and JuiceStrong brand portfolio in Dairy and Juice
Milk (White and Flavoured)
Juice
Dairy(Yoghurt and dairy deserts)
Cheese
LNNF is a leading Dairy and Juice company in Australia
5
Beer - New Zealand1Beer – Australia1
Market share
Source:1 AC Nielsen MAT September 20092 AC Nielsen Only white milk (exclude flavoured milk)3 AC Nielsen
Chilled Juice – Australia3Milk – Australia2
LNNF Position in Primary CategoriesLNNF Position in Primary Categories
LNNF has strong market positions in a range of key beverage categories
43%51%
63%54%
6
Alcohol Beverage Production FacilitiesAlcohol Beverage Production Facilities
Key Breweries
Wineries
Swan Brewery,Perth
Swan Brewery,Perth South Australian
Brewing Co,Adelaide
South AustralianBrewing Co,
Adelaide
Lion Breweries,Auckland
Lion Breweries,Auckland
Lion Breweries (Speight’s),Dunedin
Lion Breweries (Speight’s),Dunedin
Knappstein Winery,Clare Valley
Knappstein Winery,Clare Valley
Wither Hills,MarlboroughWither Hills,Marlborough
12
Petaluma Winery, Adelaide HillsSt Hallett Winery, Barossa ValleyMitchelton Winery, Central VictoriaStonier Winery, Mornington Peninsula
Petaluma Winery, Adelaide HillsSt Hallett Winery, Barossa ValleyMitchelton Winery, Central VictoriaStonier Winery, Mornington Peninsula
12
Lion Breweries (Canterbury),Christchurch
Lion Breweries (Canterbury),Christchurch
Contact Bottling Co., AucklandContact Bottling Co., Auckland
Boag’s,Launceston
Boag’s,Launceston
Castlemaine Perkins,BrisbaneCastlemaine Perkins,Brisbane
Tooheys, SydneyTooheys, Sydney
3
4
34
LNNF has strong market positions in each region
Craft BreweriesSpirits/RTD
Malt Shovel, SydneyMalt Shovel, Sydney
Inner Circle Rum Distillery, BeenleighInner Circle Rum Distillery, Beenleigh
ArgyleOregon, USA
ArgyleOregon, USA
7
Dairy and Juice Production FacilitiesDairy and Juice Production Facilities
National Foods
Crestmead (Milk)
Penrith (Milk)
Lenah Valley (Milk)
Cobden (Milk)
Vitasoy JV (Soy)
Chelsea Heights (Milk)
Salisbury (Milk)
Bentley(Milk and juice)
Lytton (Juice)
Leeton (Juice)
Burnie & Heidi Farm(Cheese)King Island (Cheese)
Smithfield (Juice)
Riverland (Juice)Murray Bridge (Dairy & Cheese)
Campbellfield (Cheese)
Morwell (Dairy)
Malanda (Milk)
Booval (Milk)
Hexham (Fresh Milk, condensed milk and desserts, cottage cheese and milk powder)
Canberra - JV with Bega (Milk and cream)
Wetherill Park (dairy, sour cream and bottle and carton UHT)
Simpson (Cheese)Allansford (Cheese)
Jervois (Cheese)
Other JV
Kings Meadow (Cheese)
Baulkham Hills (Perfection dairies)
LNNF has manufacturing footprints across all regions of Australia
0
100
200
300
400
500
600
700
800
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 F2010
Kirin acquiredits stake in LN
EBIT Performance in OceaniaEBIT Performance in Oceania
EBIT (before goodwill amortisation and significant items). LN: EBIT for years FY2009 - FY2010 are per KH FY09 Financial Results. EBIT for years 1999 – 2008 as per LN FY08 Annual Report ten year summary. EBIT for years 1997-1998 as per LN FY06 Annual Report ten year summary. NFL: EBIT for years FY2008 - F2010 are per KH FY 08 and 09 Financial Results.F2010 EBIT includes only 9 months due to the change in reporting period.
Sale of Pepsi licence (1999) Transfer of Head Quarters to
Sydney (2000) Acquisition of Montana (2000)
Disposal of China beer business
Fine Wine Partners joint venture established
Acquisition of J Boag & Son
Acquisitionof Petaluma
Acquisition of Banksia
Disposal of Montana
Acquisitionof Wither Hills
Entered RTD business
EBITA$m
Join Kirin Group (Dec. 2007)
Acquisition of DF (Dec. 2008)
Establish LNNF (Oct. 2009)
LN
NFL
Fully owned by KH
EBIT in Oceania has grown steadily
10
LNNF Mid-Term Business Strategy (MTBP)LNNF Mid-Term Business Strategy (MTBP)
Kirin Holdings (KH) is pursuing “qualitative expansion”.
LNNF is delivering Approx.25% of KH 2010-2012 MTBP’s operating income target
LNNF is one of the Key initiatives to achieve KH MTBP
Area Main operating companies Operating income increase (bn yen)
Contents
Japan KB, KBC, Mercian, KHK, KKF
41.3 1.Domestic growth through integrated beverages and pharmaceuticals business, etc
2.CCT cost synergies
Oceania LNNF 18.3 Australian growth including synergy effects, forex, and goodwill amortization as a consequence of 100% ownership of LN
Total 59.6
2012 quantitative guideline: Sales of over A$6.0bn, EBIT in excess of A$1.0bn
2010 quantitative target Sales:389.0(bn yen)* Operating income: 24.3 (bn yen)*
2010 quantitative target Sales:389.0(bn yen)* Operating income: 24.3 (bn yen)*
Alcohol beverages business Invest in our power brands, premiumisation and
innovation Cost efficiencies due to brewery investment
Dairy and Juice business Further progress in integration of NFL and DF Invest in key brands and Innovation
*After goodwill amortization
11
Alcohol beverage marketing strategyAlcohol beverage marketing strategy
The beer category size remains stable
■There is a downward longer term trend in per capita consumption of beer across Australia, with population growth driving flat volumes
11Note: (1) Volume = Litres available for consumptionSource: ABS
1,738 1,712 1,717 1,702 1,711 1,724 1,735 1,746 1,714 1,693 1,700 1,691 1,673 1,677 1684
98.3 95.7 94.8 92.8 92.2 91.8 91.5 91.1 88.5 86.6 85.4 84.0 82.0 81.0 80.1
500
700
900
1,100
1,300
1,500
1,700
1,900
2,100
2,300
2,500
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2008-
20.0
40.0
60.0
80.0
100.0
120.0
Per capita consumption
Beer volume !Population growth offsetting
declining pcc
Australian Beer Consumption(1993-2006)
12
Alcohol beverage marketing strategy – InnovationAlcohol beverage marketing strategy – Innovation
B eer Segm ent Share | TO TAL 5 STATE NLI(& DARWIN) - YEAR 2004 | TO TAL B EERUnits of M easure: Units = UNITS (000'S) | Volume = LITRES (000'S) | Value = $ (000'S) Beer Segment S hare | TOTAL 5 STATE NLI(& DARW IN) - MAT TO 30 /04 /2009 | TOTAL BEER
Units of Measure: Units = UNITS (000'S) | Volume = LITRES (000'S) | Value = $ (000'S)
The profile of the beer market has changed dramatically in recent years
Low Carb significant driver of category growth
Premium and Mid-Strength share gains
Source: AC Nielsen , May 2009
Innovation delivered our growth and developed new consumer
New products generated 10% of net sales revenue in 2009
SEGMENT DEFINITIONS:
Full-strength ≥4%Mid-strength ≥3% but <4%Light <3%Premium - Based on positioning
- Price ≥$40 / case- abv ≥5% and / or
differentiated2009200919991999
13
Innovation – Low CarbInnovation – Low Carb
Low Carb + Mid-Strength
Low Carb + Clear bottled
Launched Apr, 2009
Leverage trademarkbrand reputation
Leverage trademarkbrand reputation
Premium Low Carb beer, Hahn Super Dry grew by 40.9%
Nation’s second largest beer, XXXX Gold grew by 6.2%
Launched Sep, 2009
14
Innovation – CreativityInnovation – Creativity
Develop new consumers Develop new consumers The biggest cider in Australia??
New approach: multi media campaign, includes TV, music video, radio, digital, PR, print, documentary, and on-and-off-premise activity
Launched Aug, 2009 Launched Oct, 2009
Launched Preece‘Lighter in Alcohol’.
Low alcohol wines have experienced 60% growth YOY
Leverage Boag’spremium and pure image
Develop Steinlager’s image
1515
Invest on our site Invest on our site
New Sydney Bevchain warehouseNew Sydney Bevchain warehouse
New Boags BrewhouseNew Boags BrewhouseThe Pride (Auckland)The Pride (Auckland)
The Boag’s trademark grew volume by 19% in 2009.
New Boags Brewhouse has significantly expanded capacity to meet the growing consumer demand for Boags brand.
New Sydney Bevchain warehouse enables consolidation of a number of warehouse sites into one resulting in reduced costs and also capacity for growth.
The Pride establishes a lower cost platform by consolidating operations into one site, improved productivity and efficiencies.
First brew completed mid Sep, 2009. The full transition to the new facility expected slightly ahead of schedule in 2011.
Investment has been targeted to improve infrastructure resulting in improved safety, flexibility, and productivity.
16
Dairy and Juice Marketing StrategyDairy and Juice Marketing Strategy
Growth DriversGrowth Drivers
Billion litres
*UHT: Ultra High Temperature
Reduced/Low Fat, Flavoured, and UHT milk are increasing
Australian Milk Consumption(1994-2009) *include Flavoured Milk
0
0.5
1
1.5
2
2.5
94-95 95-96 96-97 97-98 98-99 99-00 00-01 01-02 02-03 0304- 04-05 05-06 06-07 07-08 08-09
UHTFlavouredReduced&Low FatRegular Whole
Reduced/Low Fat increased 3.9% during 2003-2009
Flavoured increased 3.4% during 2003-2009
17
Innovation – CreativityInnovation – Creativity“New Milk”
Creates new category for consumers wanting the taste and goodness of full cream milk but only half the fat*. *Goodness of calcium and protein found in full cream milk
“Farmers Union Iced Coffee”
Launched new 750ml bottle
“Yoplait formé” brand re-launched and, launched “formé Satisfy”“formé Satisfy”
With no fat*, less than 1% added sugar, and only 85 – 93 calories per 170g tub. Additionally that is high in protein and fibre, and low GI to feel fuller for longer.
Educational signage at POP
POP tailored to key sales events
19
Integration ProgressIntegration Progress
Focus on the Integration of NFL-DF, and NFL-LN
Invest to create strong business platform and strong brands
Manufacturing Platform Optimization
Integration Progress: NFL-DFIntegration Progress: NFL-DF
Site Category State Term Notes
Lidcombe Mik NSW - Requirement under DF acquisition undertakings
Sold to Parmalat
Clarence Garden
Milk SA - Requirement under DF acquisition undertakings
Sold to Parmalat
Schepparton Milk VIC - Closed March 2010
Hexham Milk, Dairy, Cheese
QLD End of 2010 Distribution center in Hexham in Nov 2009
Riverland Juice SA Mid July 2010 Production ceased 2 June 2010
Booval Milk QLD Fully integrated in early 2012 Consolidate into expanded Crestmead through $55 million investment
Crestmead expands to 250M litres
20
Integration ProgressIntegration Progress
Best practice alignment Completed to align the corporate function and share best practice
Integration Progress: NFL-LNIntegration Progress: NFL-LN
P&C Aligned people processes and systems – creates consistent approach to talent management and succession planning
Held an associated conference for leaders
Held a large conference (more than 700 people) attended by LNA, LNZ, LNWine, NFL, and LNNF
Sales Utilisation of planning process & technology
-Education, Sales management, Customer contact, etc
Marketing Utilisation of planning process & technology
-Portfolio management, Brand building, Insights, Promotional effectiveness
Strategy & Finance
Utilisation of strategic thinking skills & strategy setting
-Financial insights, risks and opportunities management
Safety To expand safety program to 100% of company sites
22
Appendix – Oceania Alcohol MarketAppendix – Oceania Alcohol Market
Beer represents the majority of alcohol consumed in both Australia and New Zealand, followed by wine and ready-to-drink spirits
Australian Alcohol Market(2009)
Beer(70.2%)
Wine(15.2%)
RTD*s(11.1%)
Spirits(2.5%)
NZ Alcohol Market(2009)
Beer(63.6%)
Wine(28.3%)
RTD*s(6.4%)
Spirits(1.2%)
Cider(1.0%)
Cider(0.5%)
Note: “Ready-to-drink” = Pre-mixed spiritsSource: AC Nielsen
Total combined market value:US$10-15bn
23
Appendix – Australian Beer Market 1Appendix – Australian Beer Market 1BY PACK TYPE | TOTAL BEER | TOTAL 5 STATE NLI(& DARWIN) - MAT TO 30/04/2009
Source : Nielsen Australia ScanTrack LiquorVolume Share and Growth by Pack Format(2008-09)
Most volume is sold in “stubbies” (single serve bottles), and this is increasing
Source: AC Nielsen, 2009
(330, 345 or 375mlbottle)
(375mlaluminium
can)
(250mlbottle)
(750ml bottle)
(Mostly 50L)
24
Appendix – Australian Beer Market 2Appendix – Australian Beer Market 2
Source: AC Nielsen Scantrack Volume share, MAT 2009, 24 Case sales only
Under $34.99
$35-$39.99
$40-$44.99
$45-$49.99
$50-$54.99
$55-$59.99 Over $60
-Almost half of total beer volume is sold for A$40-$44.99 per case in Australia-The strongest growth is in step-up and premium brands (A$45-$49.99)-In the volume and growth segments, LNNF has strong brands
Step Up
Tooheys Extra Dry
Hahn Super Dry
Premium
Boags Premium
James Squire
Tooheys New, Boags Draught,
XXXX Summer Bright,
XXXX Gold
Hahn Super Dry 3.5
Australian Total Beer Market Share by Price Segment
Hahn Premium LightBudweiser
Heineken
Becks
Boags Pure
Kirin
25
Appendix – Australian Dairy Market & Juice MarketAppendix – Australian Dairy Market & Juice Market
SMP/Butter25%
Other6%
Milk24%
Cheese33%
WMP12%
Australian Industry Product Mix 2008/09
Supermarket61%
Specialost retail12%
Food service27%
Freshlogic estimated share of retail spendingon food March Qtr 2010
68 68 68 67 66
32 32 32 33 34
2004 2005 2006 2007 2008
Australian 100% juice Ambient vs. Chilled
Ambient-1%
Chilled+2%
2.8
7.7
8
8
12.6
-1
NetarIce
d Tea
Squash
/Cord
ials
CSDs100%
Juice
Bottled W
ater
Average Consumer Price Increase 2006-2007
CPI 2.8%
Source: Dairy Australia Dairy 2010 Situation and Outlook
WMP=Whole milk powder SMP=Skim milk powder
Source: Estimated from The Soft Drinks Service Annual Report – Australia, Canadean, 2007
CSDs: Carbonated Soft Drinks
% Sales Volume% Increase