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Grupo LALA, S.A.B. de C.V.
Investor Relations Presentation
August, 2017
DISCLAIMER
This material does not constitute an offering document. This material was prepared solely for informational purposes and is not to beconstrued as a solicitation or an offer to buy or sell any securities. Any offering of securities will be made solely by means of an offeringmemorandum, which will contain detailed information about the Company and its business and financial results, as well as its financialstatements.
Securities may not be offered or sold in the United States unless they are registered or exempt from registration under the U.S.Securities Act of 1933, as amended.
This presentation includes forward-looking statements or statements about events or circumstances which have not yet occurred. Wehave based these forward-looking statements largely on our current beliefs and expectations about future events and financial trendsaffecting our businesses and our future financial performance. These forward-looking statements are subject to risk, uncertainties andassumptions, including, among other things, general economic, political and business conditions, both in Mexico and in Latin Americaas a whole. The words “believes”, “may”, “will”, “estimates”, “continues”, “anticipates”, “intends”, “expects”, and similar words areintended to identify forward-looking statements. We undertake no obligations to update or revise any forward-looking statementsbecause of new information, future events or other factors.
In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this presentation might not occur.Therefore, our actual results could differ substantially from those anticipated in our forward-looking statements.
No representation or warranty, either express or implied, is provided in relation to the accuracy, completeness or reliability of theinformation contained herein. It should not be regarded by recipients as a substitute for the exercise of their own judgment. We andour affiliates, agents, directors, employees and advisors accept no liability whatsoever for any loss or damage of any kind arising out ofthe use of all or any part of this material.
This material does not give and should not be treated as giving investment advice. You should consult with your own legal, regulatory,tax, business, investment, financial and accounting advisers to the extent that you deem it necessary, and make your own investment,hedging and trading decision based upon your own judgment and advice from such advisers as you deem necessary and not upon anyinformation in this material.
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1949 1980 1990 2000 2010 2015
ABOUT US
WHO WE ARE
LALA is a Mexican Company focused in the
healthy and nutritious food industry with over
65 years of experience in the production,
innovation and marketing of milk and dairy
products under the highest quality standards.
LALA operates 22 production plants and 160
distribution centers in Mexico, Central
America and the United States, and is
supported by more than 34,000 employees.
LALA operates one of the largest chilled
distribution networks in the region, with
7,000+ delivery routes. Our product portfolio
includes over 600 SKUs under 56+ brands,
which are available at more than 500,000
points-of-sale.
“Nourishing your life is our passion”
“To be the favorite dairy company in the Americas”
MISSION
VISION
5
OUR FOOTPRINT
MexicoUnited StatesGuatemalaHondurasEl SalvadorNicaraguaCosta Rica
6
7 600 56
34,000 22 160
500,000 7,000
OUR PRODUCTS
MILK
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Milk: Pasteurized, UHT and functional milks, pasteurized and UHT dairy-based beverages, and powdered milk.
60.5%
OTHER DAIRY PRODUCTS
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Other Dairy Products: Cream, butter, cream-based spreads, yoghurt, cheese, ice cream and desserts.
34.0%
BEVERAGES AND OTHERS
10
Beverages and Others: Beverages, juices, cold cuts and others.
5.5%
CONSUMPTION & DAIRY OUTLOOK
“Investing today to capture Mexico´s future growth opportunities”
CONSUMER OUTLOOK
12
Today’s market trends and consumption are movingtowards foods and beverages categories that havefunctional benefits
More than half of the consumers across allgenerations are willing to pay a premium forproducts that provide health benefits
The reinvention of dairy as a completely naturalfood plays an important role in this consumer trend
Creating new products that appeal to the healthtrend is not enough—marketing, processingtechnology and convenience are important factorsto be consider
Source: Euromonitor, Company information.(1) Others includes: Ecuador, Bolivia, Uruguay, Venezuela and other South America Countries.(2) Central America includes: Costa Rica, Dominican Republic, Guatemala, Nicaragua and other Central America / Caribean countries.
World Dairy Market value is ~US$550 billion
Americas Dairy Market it´s projected to grow by ~US$16 billion in next 5 years
The U.S., Mexico and Central America represents 58.0% of total Americas Dairy Market
AMERICAS DAIRY MARKET
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TOTAL AMERICAS DAIRYMARKET VALUE IS ~US$160 BILLION
Brazil México
2% Chile
46%
USA
24%
Brazil
9%
8%
México
Canada
3% Central America (2)
2% Others (1)
3% Colombia
2% Argentina
1% Peru
LALA 2017 STRATEGIC PRIORITIES
“Sustainable Growth Strategy”
PROTECT OUR BASE BUSINESS MEXICO
Investing in our Brands
Accelerating Productivity Improvements
Optimizing our Infrastructure
1st
15
INVESTING IN OUR BRANDS
16
2013-20162003-2012
Nutri Leche
Increasing product offering under the Nutri brand among emerging consumers
1st
99%
97%
99%
77%
85%
79
37
32
31
20
Source: Kantar Worldpanel 2017(1) Penetration based on number of households that purchase a brand;(2) Frequency of purchase (# of times per year).
MEXICO TOP FIVE CONSUMER BRANDS
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FREQUENCY (2)PLACE BRAND PENETRATION (1)
The Largest Healthy Food Company in Mexico
Classified among Mexico´s top five consumer brands
OPTIMIZING OUR INFRASTRUCTURE
Creating synergies in our chilled distribution network in Mexico
Nutri Deli
Growing our product portfolio with the development of the cold cuts business under the Nutri Franchise
18
1st
OPTIMIZING OUR INFRASTRUCTURE
TO IMPROVE EFFICIENCIES 1st
19
Consolidating our Distribution Centers Mexico City Example
April 201617 CEDIS
January 201712 CEDIS &
1 Mega CEDIS
20195 Mega CEDIS
(1)
Reinforcing our Go-to-Market capabilities in Mom & Pop channel
• Adapting our service level via handheld pre-selling system to better meet customer needs
• Reaching the same customers with fewertrucks
• Optimizing 11% of our distribution routes
Driving consumption habits through innovation
LALA 100
The most innovative product in the fresh milkcategory for the last 20 years
Since the introduction of LALA 100 in July of 2016,the fresh milk category has growth 18.3% in theShel Service Stores channel, with 70% of thegrowth coming from LALA 100
*Considering the data reported by Nielsen in their Retail service for Self Services Stores for the Fresh Milk category (without milk formula).Growth comparing rolling year 2017 up to June vs the same period in 2016 in Total Mexico.
STRENGTHEN OUR PRODUCT PORTFOLIO
VIA INNOVATION
20
2nd
STRENGTHEN OUR PRODUCT PORTFOLIO
VIA INNOVATION
21
Growing our Other Dairy Products Category to enrich our sales mix
Panela Style Cheese
• New packaging technology• Non- lactose and Fat free presentations• New Queso Fresco
2nd
LALA Delicias
Introducing our first indulgent Yoghurt tostrengthen our presence in premiumcategories
2ndSTRENGTHEN OUR PRODUCT PORTFOLIO
VIA INNOVATION
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Soy Vita is the fastest growing brand in the largest segment of the plant
based dairy alternatives
Almond48%
35%
13%
Soy
Others
Soy Vita #2 in Almond segment with 30% of market share, growing +149% vs YA
Source: Nielsen Scantrack April 2017 (value)
+144%
-1%
Coconut
-11%
+26%
4%
8.5 8.911.9
16.819.6
21.925.2 26.3 26.6 26.0 27.4
29.6 30.0
Segment Growth vs YA
100%
Category growing 16% vs YA
Soy Vita Market Share
Plant based dairy alternatives category
CONSOLIDATE & EXPAND
CENTRAL AMERICA OPERATIONS
Growing our footprint in Central America
Nicaragua
Strengthening our leadership through the integration of our businesses
Guatemala & Costa Rica
Increasing the production capacitywith two new multicategory plants
3rd
Product Portfolio
Increasing our offer under the LALA Brand
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CONSOLIDATE & EXPAND
CENTRAL AMERICA OPERATIONS
Increasing product offering under the LALA and Nutri Lety Brand
3rd
Accelerating YoghurtCategory Growth
Leveraging on our Regional Brands
Expanding our Ice Cream Capacity
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(*) Company Data, in Mexican Pesos (mm).
(1) EBITDA=Earnings Before Interest, Taxes, Depreciation and Amortization.
(2) Figures include 2 months of consolidated results in 3Q’16
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TRACKING LALA U.S.
BUSINESS EVOLUTION
3rd
P&L 3Q´16(2) 4Q´16 1Q’17 2Q’17
Net Sales $548 $840 $870 $815
EBITDA(1) (80) (146) (35) (30)
EBITDA/Net Sales
(14.6%) (17.4%) (4.0%) (3.6%)
The decline in sales compared to 1Q 2017 is due to the
appreciation of the Mexican peso
CONSOLIDATE & EXPAND U.S. OPERATIONS
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“Building brands to grow the business”
3rd
LALA U.S. PRODUCTION FACILITIES
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OMAHA, NEBRASKA FLORESVILLE, TEXAS SPRINGS, COLORADO
• Drinkable Yoghurt• Spoonble Yoghurt• Sour Cream
• ESL Milk• Cultured
• ESL Milk
3rd
ESL, Extended Shelf Life Milk
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While blended yoghurt is declining, drinkable is growing high double digit
“Drinkable yoghurt represents 11.0% of the total yoghurt category value in the U.S.”
89% Yoghurt
(Blended)
11% YoghurtDrinks
U.S. YOGHURT CATEGORY OVERVIEW
+$3.85B USD
LALA U.S. YOGHURT MARKET
28Source: IRI Market Research, US MULO (MULti-Outlet) 26 Weeks Ending 06-11-17.
(4.0%)
17.0%18.0%
Total YoghurtCategory
Drinkable Yoghurt Lala DrinkableYoghurt
3rd
June 2017ACV: 63.7%
16,796 STORES
Presence in Big Retailers
with nationwide exposure
LALA U.S. PRESENCE
LALA U.S. is the Brand Leader in Adult Drinkable Yoghurts and the #2 in total Drinkables which
includes kids
Source: IRI, Market Research ; US MULO (MULti-Outlet) 26 Weeks Ending 06-11-17. ACV: All Commodity Value; “% of stores selling,”
3rd
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INITIATED FIRST STAGE OF EXPANSION FOR
EXTENDED SHELF LIFE MILK
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Promised Land Brand Expansion
• Extra Creamy Promised Land Super Premium Milk
• 100% Jersey Cow Milk, naturally high in protein
• Extended Shelf Life supports national expansion
3rd
Jersey Cows less than 10% of milk supply
Presence in 3,150 stores for the first stage of the expansion
M&A AND STRATEGIC ALLIANCES
31
OPPORTUNITIES
The Americas
Dairy & Dairy alternatives
Infrastructure, brands, value- added categories and talent
LALA HAS OPERATIONS IN 7 COUNTRIES
REGION
MARKET
ADDING
Our Strategy Follows
a Disciplined Process
4th
Mexico
United States
Honduras
Guatemala
El Salvador
Nicaragua
Costa Rica
KEY FINANCIAL INFORMATION
SALES CONTINUE GROWING QUARTER BY QUARTER
(*) Company Data, in Mexican Pesos. (mm).
(1) 1Q’17 Growth is composed by: Organic Growth 9.7% and Inorganic Growth 6.3%.
SALES EVOLUTION
12,903
13,701
14,354
14,799 14,967
2Q-16 3Q-16 4Q-16 1Q-17 2Q-17
YoY
Growth %8.9% 12.5% 14.6% 18.3% 16%(1)
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2Q-2017 NET SALES GROWTH DRIVEN BY VALUE
ADDED “OTHER DAIRY PRODUCTS”
(*) Company Data, in Mexican Pesos. (mm).
11.7%
Milk Other DairyProducts
Beverages &Others
27.5%
2.7%
YEAR-ON-YEAR GROWTH3M ended June 30th
Milk Other Dairy Products
Beverages and Others
BeveragesJuicesCold CutsOthers
Milk
60.5%
Other Dairy Products
34.0%
5.5%
SALES BY SEGMENT
FreshUHTMilk Formula
Beverages and Others
YoghurtCreamCheeseIce CreamDessertsButter 34
(*) Company Data, in Mexican Pesos (mm).
EBITDA=Earnings Before Interest, Taxes, Depreciation and Amortization.
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QUARTERLY CONSOLIDATED EBITDA REACHING SOLID
MARGINS
2Q-16 3Q-16 4Q-16 1Q-17 2Q-17
Axis Title
40 bps
50 bps
EBITDA MARGIN EVOLUTION
Margin
% Sales14.6% 10.8% 11.2% 11.7%
1,888
1,4831,601
1,725
14.0%
2,096
230 bps
FINANCIAL RESULTS (P&L)
Income Statement (1) 2Q-16 % 2Q-17 % Growth
Net Sales $ 12,903 100.0% $14,967 100.0% 16.0%
COGS 7,853 60.9% 9,180 61.3% 16.9%
Gross Profit 5,050 39.1% 5,787 38.7% 14.6%
Operating Expenses 3,532 27.4% 4,179 27.9% 18.3%
Operating Income 1,543 12.0% 1,634 10.9% 5.9%
EBITDA (2) 1,888 14.6% 2,096 14.0% 11.0%
Net Financial Income 89 0.7% 27 0.2% (69.7)%
Net Income 1,101 8.5% 1,148 7.7% 4.3%
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3 MONTHS ENDED JUNE 30TH, 2017
SALES BY TRADE CHANNELS
61.0% 39.0%
(*) Company Information, in Mexican Pesos (‘000 000).(1) EBITDA=Earnings Before Interest, Taxes, Depreciation and Amortization.(2) Net Income refers to consolidated Net Income.
STRONG FINANCIAL POSITION
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Key Metrics(1) 2016 2017
Net Debt / EBITDA (1.2)x (0.3)x
EBITDA / Interest Paid 509.8x 214.3X
Earnings Per Share $ 1.69 $ 1.51
Financial Position 2016 2017
Total Assets $ 36,483 $ 38,268
Cash 8,824 2,229
Non-Current Assets 17,652 23,929
Total Liabilities 9,855 10,614
Total Debt 260 96
Shareholder Equity 26,628 27,655
AS OF JUNE 30th
1st Installment of 2016 cash dividend
0.1538 pesos per share paid on May 24th, 2017
(*) Figures in Mexican Pesos (´000 000).(1) Last 12 Months ratios calculated in local currency
LALA B OVERVIEW
38Source: Company Information.Ratios are calculated in local currency.
July 18th, 2017 (LALA B)
US$3.6mm
AVERAGE DAILY LIQUIDITY 2017
2,475,932,111 shares
OWNERSHIP STRUCTURE
55.0% Control Trust
21.4% Free Float
1.1% Others
22.5% Underwriting
Trust
$36.29
26.00
28.00
30.00
32.00
34.00
36.00
38.00
40.00
42.00
44.00
46.00
19
-07
-16
08
-08
-16
28
-08
-16
17
-09
-16
07
-10
-16
27
-10
-16
16
-11
-16
06
-12
-16
26
-12
-16
15
-01
-17
04
-02
-17
24
-02
-17
16
-03
-17
05
-04
-17
25
-04
-17
15
-05
-17
04
-06
-17
24
-06
-17
14
-07
-17
SHAREHOLDERS STRUCTURE
CAPEX INVESTMENTS 2017
A total investment of +3,600mm MXN
NEW PASTEURIZATION PLANT,
NORTH MEXICO
40
Construction of a new state of the art pasteurization facility
* All figures and dates are according to Company´s estimations.
Investment: +300mm MXN
Opened on June 2017
Location: Cd. Obregon, Mexico
NEW COLD CUTS PLANT,
CENTER MEXICO
41* All figures and dates are according to Company´s estimations.
Investment: +900mm MXN
Production beginning in Q3-2017
Location: Hidalgo, Mexico
Our First Cold Cuts Facility
PRODUCTION EXPANSION,
CENTRAL AMERICA
42* All figures and dates are according to Company´s estimations.
Muticategory Production Facilities
Investment: +915mm MXN
Production beginning in 2018
Location: Costa Rica & Guatemala
NANO FILTRATION - LALA 100 MILK,
CENTRAL MEXICO
43
Investment: +400mm MXN
Production beginning in Q4-2017
Location: Irapuato, Mexico
* All figures and dates are according to Company´s estimations.
Production capacity usingNano-Filtration Technology
DISTRIBUTION CENTER & SUPPLY CHAIN
CONSOLIDATION
44
Investment: +300mm MXN
* All figures and dates are according to Company´s estimations.
Efficiencies & Productivity in our distribution centers
OTHER INVESTMENTS
45* All figures and dates are according to Company´s estimations.
Investment: +760 mm MXN
30% increase in Sour Cream production capacity
Water treatment plant in Veracruz
Increase cooler space at point of sale
Hand held equipment
Digital Technology
Transport
CONTACT INFORMATION
Investor RelationsMariana Rojo & Estefania Vazquez+52 (55) 9177 [email protected]
Forward-looking statementsThis document contains certain assumptions, projectionsand forward-looking statements regarding the Company’sfinancial situation, operative results and information, GrupoLALA’s business and that of its subsidiaries as well as withregards to the Company’s related plans and objectives.This executive summary does not constitute a publicsecurities offering on behalf of LALA and is intended to beused for informational purposes only.
Stock InformationGrupo LALA has been traded under the ticker ‘LALA’ on the Bolsa Mexicana de Valores (BMV) since October 16th, 2013.
For more information: www.grupolala.com
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