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Growth Opportunities for Personal Protective Equipment Industry in a
Recessionary Economy
Sanjiv BhaskarGlobal Director, Personal Protective Equipment
Frost & SullivanNovember, 2009
2
Agenda
• A snapshot of the global economy
• Personal Protective Equipment (PPE) industry economic impact analysis
• Opportunities for growth
• Best practices for business growth in the current economy
3
How Fear Drove the Recession – Fear is Now Bottoming Out
“The only thing we have to fear is fear
itself.”
-- Franklin Roosevelt
4
Global Response:Massive Government Stimulus
China: Interest rate cuts and $710 billion stimulus (infrastructure, rural)India: Interest rate cuts $8 billion stimulus package (infrastructure, exports, textiles)
Global Response • Governments infusing capital into financial institutions• Globally coordinated interest rate cuts • IMF offers bridge loan to meet foreign exchange requirements• Discussions, coordinated efforts (G20 summit)• Boosting spending on infrastructure projects
BrazilSupport to currency, infrastructure development under PDP (more than $64billion injected to financial system)
USA: $700 Billion bailout rapid interest rate cuts; $23 billion support for top 3 auto companies; plan to create 2.5 million jobs by 2011$819 billion Economic Recovery plan focused on infrastructure, energy, education and healthcare
UK: $340 billion bailoutGermany: $700 billion relief packageBelgium & Switzerland: Capital infusionECB Interest rate cutsFrance $50 billion stimulus package
Japan: Interest rate cuts; 500 billion yen stimulus package
South Korea:Interest rate cuts and efforts to keep currency stable $11 billion stimulus package
Australia:$52 billion pledged for supporting the economy
RussiaSupport for ruble; $64 billion stimulus package
6
Impact of the Downturn on Specific Industries The PPE Industry relies on end-user segments for its revenues
Source: Frost & Sullivan/Google Finance
The Relative Impact of the Economic Downturn on Specific IndustriesThe Value of the Industry Today Relative to its Value One Year Ago
77.8%
69.4%
63.5% 62.1% 61.4% 59.8%
51.6%
46.8% 45.7%
94.9%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%January 2008
7
61.4% 59.8%
51.6%46.8% 45.7%
112.9%
80.9% 81.0%
68.5%
80.6%85.8%
75.5% 73.4%
86.3%
62.1%63.5%
69.4%77.8%
94.9%
65.9%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
Food P
roce
ssin
g
Health
Care
Basic
Chem
icals
S&P 500
(Tot
al M
arket
)
Aerosp
ace &
Def
ense
Const
ruct
ion
Technolo
gy
Rubber
and
Pla
stics
Autom
otive
Iron
and
Steel
Value of Market in Jan 2009 Relative to its Value in Jan 2008
Value of Market Today Relative to the Value in Jan 2008
Signs of an Economic RecoveryThe PPE Industry relies on end-user segments for its revenues
Source: Frost & Sullivan/Google Finance
The Relative Impact of the Economic Downturn and Recovery on Specific IndustriesThe Value of Market in Jan 2009 Relative to its Value in Jan 2008
January 2008
8
Personal Protective Equipment Industry Economic Impact Analysis
Workplace Safety Can NOT be Compromised Despite a Slowdown
9
PPE Market Composition by Product TypesGlobal PPE Market Composition Estimates, 2008
2% 3% 6%4%
6%
13%
15%22%
29%Gas
Detection
Fall
HearingEye
Footwear
Respiratory
Protective Clothing
HandHead
Source: Frost & Sullivan
10
Trends in PPE Industry in 2009
Adaptability of ProductsAdaptability of Products
Comfort without sacrificing safetyComfort without sacrificing safety
Stylish productsStylish products
Innovative productsInnovative products
ConsolidationConsolidation
Pricing pressuresPricing pressures
Trending towards rental of workwearTrending towards rental of workwear
11
Market Market Size and Size and GrowthGrowth
Increased Awareness in the
Workplace
Niche Applications Offer Opportunities for
Higher Penetration
Geographical Expansion into Areas with Low Compliance and
Penetration Product
Innovation
High ImpactHigh Impact
Medium ImpactMedium Impact
Low ImpactLow Impact
What will Drive Growth in the PPE Industry in 2009 and Beyond
Alternative Distribution
Channels Offer Potential for
Growth into New Applications
Increase in Professional, Scientific and Technical Services in Healthcare are Driving the Need for More PPE.
12
Market Market Size and Size and GrowthGrowth
High ImpactHigh Impact
Medium ImpactMedium Impact
Low ImpactLow Impact
Price Pressure from Generic PPE
Products Restricting Growth
Insufficient Enforcement by OSHA Restrains
Growth of the PPE Industry
Cost Conservation Measures
Resulting in Lower Replacement
Rates
Increased Automation and Outsourcing in Manufacturing
Facilities Reducing Demand for PPE
What will Restrain Growth in the PPE Industry in 2009 and Beyond
Economic Downturn Reducing
Workforce and the Demand
for PPE
13
What Does this Mean for Your Market? Economic Impact Analysis of the PPE Industry
Source: Frost & Sullivan
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Head, eye and face Hearing Respiratory Hand
Workw ear Fall Footw ear
14
11%
8%
9%
7%
7%10%
9%
8%
21%
10%
Where Will The Opportunities Be?Expected PPE Revenues from Different End-user Segments (2014-2015)
Source: Frost & Sullivan
Automotive Metal Fabrication
Pulp & Paper
Transportation
ConstructionOil, Gas & Petrochem
Utilities
Others
Fire Services
Healthcare
15
Automotive IndustryShort term production trends
55
65
75
85
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Production
Sales
Vehicle Scrappage schemes help sales
increase / stabilization
All figures are rounded; the base year is 2008. Source: JD Power Forecasting; Frost & Sullivan
Increasing demand for small cars constituting
more than 10% of global sales by 2015
Affordable Low-cost cars to drive sales growth in Emerging
markets
Automotive Outlook: Light Vehicle Sales and Production – Recession and Recovery (Europe), 2006 - 2016
Un
its (
Million
)U
nit
s (
Million
)
Prod
uction
CAGR –10%
Product
ion
CAGR +6.4
%
Q2/Q3 2008 EU Enters
Recession
Sales back to
2007 levels only by 2012
YearYear
16
HealthcareIf current trends hold, by 2050 Healthcare spending will almost double claiming 20% – 30% of GDP for some economies
In almost all countries worldwide, per capita healthcare spending is rising faster than per capita income.
No country can spend an ever-rising share of its output on health care, indefinitely. Spending growth must eventually fall in line with growth in per capita income.
$2,884
$3,647
$2,493 $2,665 $2,451 $2,693$2,337 $2,527
$2,110$2,614
$1,927$2,469 $2,371
$1,938 $1,927 $1,829 $1,609
$3,517
$717
$1,684$854
$914 $680$989 $760
$1,018$494
$1,165$449
$352$593 $431 $514
$646
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$2,884
$3,647
$2,493 $2,665 $2,451 $2,693$2,337 $2,527
$2,110$2,614
$1,927$2,469 $2,371
$1,938 $1,927 $1,829 $1,609
$3,517
$717
$1,684$854
$914 $680$989 $760
$1,018$494
$1,165$449
$352$593 $431 $514
$646
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
Private Per Capita Spending (2007) Public Per Capita Spending (2007)
Spending as % of GDP (2007) Estimated Spending as % of GDP in 2050
17
Aviation - A Key Industry for Career-wearTrends in Passenger Numbers
• Current economic crisis will impact the travelling public, but passenger traffic will continue to grow from 2011 onwards
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Pas
sen
ger
Nu
mb
ers
(Mill
ion
)
Domestic Traffic International Traffic2008 2018
63.0%
37.0%
38.7%
61.3%
2.3 Bn.
3.5 Bn.Annual passenger numbers, by service type 2008-2018 (Global)
Recession restrains growth
Expected open-skies in ASEAN
region
18
Food Industry
• Food industry includes many sub-sectors, all with different specific needs:
• primary food processing e.g. abattoirs
• processed food production
• high-volume, low-price catering (fast-food stores etc.)
• low-volume, high-price catering (restaurants)
• beverage manufacturing
• Everybody needs to eat so, even when one of these sectors of the industry declines, another benefits
Lower in price to end-user therefore more favoured during recession
Needed for direct sales to end-users and to supply all sectors below
Alcoholic beverage sector holding up better during recession
19
1
3
54
2
Small (<$1,000 million)
Large(>$2.500 million)
Market Size of Market Segments (2008)
Low(0-2%)
High(>6%)
CA
GR
for
Mark
et
Seg
men
ts
Medium($1,000-$2,500 million)
Medium(2-6%)
Sectors with highest total growth potential
Head, eye and face Protection1
Hand Protection
2 Respiratory Protection
3
4
5
Hearing Protection
CAGR is calculated from 2008 - 2015
Where Will The Opportunities Be?Key Product Segments to Focus On
Source: Frost & Sullivan
6
Protective Apparel
6
Foot Protection
7
7
Fall Protecion
20
China: Industries that will benefit from the stimulus packages are•Heavy Construction•Manufacturing•Mining•Oil & GasIndia: Industries that will benefit from the stimulus are:•Banking•Heavy Construction•Oil and Gas
Global Opportunities in • Infrastructure construction- Heavy Construction• Clean Energy construction• Healthcare• Mining• Oil and Gas• Utilities
BrazilIndustries that will benefit from the stimulus packages are•Automotive/transportation•Construction•Oil & Gas•Water and Waste Water Treatment
USA: Industries that will benefit from the stimulus packages are
•Banking•Green Construction•Heavy Construction•Hospitality•Healthcare•Housing•Utilities
Industries that will benefit from the stimulus packages are
UK: - BankingGermany: - Automotive and BankingFrance: - Automotive, Banking,
Healthcare and HousingItaly: - Automotive and
Construction
Industries that will benefit from the stimulus packages are Japan: Automotive/Transportation, Construction, Healthcare and Others South Korea: Banking, Commercial construction, Housing and OthersAustralia: Banking, Construction and Others
RussiaIndustries that will benefit from the stimulus packages are:•Banking•Construction•Others
Where Will The Opportunities Be?Potential end-user segments by regions (2009-2012)
Source: Frost & Sullivan
21
Where Will The Opportunities Be?PPE Used in Different Industries
Automotive & Transportation
X X X X X
Construction X X X X X X XFire Fighters X X X X X XFood Processing X XGlass Manufacturing X X X XHealthcare X X X XMining X X X X X X XOil & Gas X X X X X X X XPulp & Paper X XUtilities X X X X X
22
What Can We Do About It?Best Practices on How to Grow in a Bottoming Market
Product Differentiation
Coordinated Efforts to Increase Compliance
Strategic Mergers and Acquisitions
Expansion to other End-User Segments,
Geographies
Preferential Pricing and Product Positioning
Deploying Technology and
Automation across
the
Functions
Source: Frost & Sullivan
23
What Will Catalyze the Turnaround?Best Practices on How to Grow in a Bottoming Market
Turnaround Turnaround CatalystsCatalysts
Taking Advantage of Niche Opportunities
Technological Innovation to Reduce
Costs
New Materials to Improve
Technical Features of the
Products
Strategic Mergers and Acquisitions
Concentrate on Industries that are receiving help from
the Stimulus Package such as
Heavy Construction and
Mining
Increase Efforts in End-user Segments that are not impacted
by the economic downturn like
Healthcare, Food Processing and
Hospitality
24
How Can We Get in Front of the Turnaround?Best Practices on How to Grow in a Bottoming Market
Short Term Mid Term Long Term
Source: Frost & Sullivan
Reach
Brand ReputationReliability
QualityTechnology
Price
25
Summarizing
• Global economy has slowed down considerably since August 2008
• Global response to this crisis has been overwhelming
• Personal Protective Equipment (PPE) industry is being impacted by this global event
• Despite these events Personal Protective Equipment Industry is showing resilience and is poised for a turnaround
• Increase in infrastructure spending will improve PPE outlook
• Every company has to adopt or improvise Best practices for business growth in the current economy
26
For Additional Information
Beatrice ShepherdDirector CEE & CISP: +48222440865 [email protected]
Sanjiv BhaskarGlobal Director, Personal Protective Equipment(210) [email protected]
Mark HicksNorth America Sales [email protected]
Stephen TaylorEuropean Sales Manager(44) (0) 20 7343 [email protected]