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Danone in Brazil: 42 years history...
4. WATER starts in 2008… 3. BABY (re)starts in 2007…
2. MEDICAL starts in 1996…1. DAIRY starts in 1970…
Economics: solid ground
1. GDP moderate growth… 2. … inflation under control
3. Robust Intl reserves… 4. … liberating Selic
x5
Demographics: robust domestic market
2005 175MM
7%
38%
27%
A/B (> USD
2,400 month)
C(USD 550 -
2,400 month)
D(USD 275 -550 month)
E: (USD 275/ month I D (275 – 550)/ C ( 550 – 2,400) / A/B (> 2,400)
Income Allocation: 20% pop. = 64% income / 40% pop. = 2% income
E(USD 275 month )
28%
2009 188MM
11%
51%
23%
A/B
C
D
E 15% E
2014 200MM
16%
57%
20%
A/B
C
D
8%
+7MM
People
+18MM
People
+11MM
People
+30MM
People
Brazil takes off
GDP
Toward the 5th rank!
Brazil
France
Germany
Internal MarketHuge emerging middle class
2003 2014AB C DE
Fresh Dairy Products: middle class pushing PCC, Danone earning market share
Fresh Dairy Product PCC (kg)
4.75.7
6.7
2004 2008 2012 2016
2,9
29.838.0
26.9
19.02004 2005 2006 2007 2008 2009 2010 2011 YTD
2012
192,9
Fresh Dairy Product market share
2004 2005 2006 2007 2008 2009 2010 2011 E1 2012
Actimel + Densia
Danoninho
Activia
Granadda
CAGR (2012 vs 2004) = 14.7%
Danone Brazil: mid-teens growth
KEY SUCCESS FACTORS (Growth)
1. PEOPLE DEVELOPMENTSenior (local) Management Team Intra Entrepreneurship Spirit
2. PORTFOLIO MANAGEMENTADDA (Activia / Danoninho) GranADDA (Danone Mother Brand)
3. SALES FORCE MACHINEExecution @POS (PUMA) BU Northeast
4. STRONG OPERATIONS MACHINEIndustrial & Supply Chain capabilities Common IT&IS platform (SAP)
2. Portfolio management (Activia)
1. COMMUNICATION…
4. TAILORED STUDY!
2. SALES X 10…
3. Exploring PACK Format…
2. Portfolio management (Danoninho)
1. Tailored STUDY…
4. Most visited WEBSITE!
2. SALES X 2…
2008 2009 2010 2011 2012
85% 84%86% 83%
3º1º
Top
two
boxe
s
2º 4º76%
5º
3. Building a DESIRED Character…
3. Sales force machine (Nordeste BU)
1. FOCUSED Team…
4. EARNED LEADERSHIP!
2. SALES X 3.5…
3. DEDICATED Factory…
2007 2008 2009 2010 20122011
BU NE - Diretoria
Gerente do Negócio
MKT Trade MktCanalIndireto
SupplyOperações
Vendas InspetoriaFinançasCanalKA
IndustrialCanalDireto
30.6
32.930.8
5.7
2007 2008 2009 2010 2011 YTD12
-14.3
DANONE Comp.1 Comp. 2 Comp.3
+2.1
Tons
DANONE BRAZIL moving forward...
We count with...
... PASSIONATED (entrepreneurial) PEOPLE
... GREAT EQUITY behind our BRANDS
... STRONG SALES FORCE MACHINE
... ROBUST OPERATIONS POWERHOUSE
We are bullish in…
… developing YOGHURT CONSUMPTION (1YD)... Growing FASTER than COMPETITORS (SOM)… Creating ACCRETIVE VALUE
THE BIG SIZE OF THE MARKET
Brazilian Water Market Per capita Consumption Bottled Water
THE VERY LOW PCP
€1.0bn
(Liters of Still Water – Zenith)
3x lower
In 2008 the decision to start up a water business in Brazil was based on ....
THE LACK OF INVESTMENT
Advertising InvestmentAVG M€ / YR Brazil
Clearly an underdeveloped market with no active competition
CSD = Carbonated Soft Drinks
Also based on...
AND LACK OF BRAND EQUITY
Source: Perceptor - Brand Equity researh
0
1
2
3
4
5
6
7
8
9
10
Brand Equity Evaluation Note 1 to 10 - Perceptor
1% No brand differentiation
Brand 1
Brand 2Brand 3
Brand 4
Brand 5
DEVELOP THE MARKET USING ATOUT
MODEL
Strong Media support & POS animation
3 strategic pillars to tackle the opportunity
ROLLOUT BONAFONT
MEXICAN MODEL
Elimination Positioning
REGIONAL FOCUSSÃO PAULO STATE
GDP (B€) 470POP (M INHAB) 40
Of total water market
Beginning of history in Brazil
NumicoIMF brands: Aptamil & Bebelac
Master brand: Support
A regional company playing only in SP metro
Danone bought
Numicoglobally
Danone became the master brand
Geographical expansion to SPI and RJ
+ MG and South
2007: the beginning of Danone Baby Nutrition history
+ West CenterNortheast
€ 168mln
The IMF market (2007)
PCC: 4.7kg
Penetration: 14%
Powder milk for healthy babies (0 to 12 months)
Unhealthy babies with special needs (0 to 12 months):Soy; Anti Reflux; Allergy & Preterm
Market sharesIMF Market Split
The Baby Food category in 2007
Regulatory environment: consumer communication forb idden
Competitor
Lack of innovation
2007 diagnosis
Under-developed market for “Specials”
Low investment in category development
Creating Category Recognition (Credibility )
Leading Category Innovation
Improving Presence Geographic Expansion
2007 action plan
2007 action plan
Creating Category Recognition (Credibility )
Leading Category Innovation
Improving Presence Geographic Expansion
1. Aptamil (Danone) 78%
2. Brand1 (competitor) 70%
Spontaneous Awareness
97%
95%
Total Awareness
99%
99%
HCP Recommendation (babies till 12 months)
Brand1: 83%
Aptamil: 87%Aptamil: 87%
Creating Category Recognition (Credibility )
Competitor
Competitor
2007 action plan
Creating Category Recognition (Credibility)
Leading Category Innovation
Improving Presence Geographic Expansion
Pregomin
Till 2007
MS: 7.8%
2012 MS:
38.9%
2008
2010
2011
AR (Anti-Reflux) best in class formula
PretermSoy 1 & 2
Aptamil PeptiExclusiveMild Allergy Treatment
Lactose Free
HA
Leading Category Innovation
Pregomin PeptiSevere Allergy
Treatment
2007 action plan
Creating Category Recognition (Credibility)
Leading Category Innovation
Improving Presence Geographic Expansion
WD: 83%2012
2007 2011
From 5 (2007) to 130 (2012) sales employeesSynergy with Medical: Tenders & Distributors
Synergy with Dairy : KA distribution
WD: 35%2007
We are moving to a national company
Improving Presence Geographic Expansion
Results
Mkt w/out DBN CAGR (07-11): 14%
DBN CAGR (07-11): 38%
Market CAGR (07-11) 20%
CAGR (07-11): 8,1%
PCC:5.8kg (+1.1kg) I Penet.:17% (+3pp)
€ 870mln
Baby Food market (2011) IMF market (2011)
DBN Sales EvolutionMarket Share Evolution (%)
€ 304mi
Voluntary work (Medical reps)
Objectives:
• Tell histories for hospitalized infant patients
• Create a happy moments in a delicate situation, contributing to health treatment
• Since Sep/12: open to All Danoners
PROJECT BENEFITS
• Provides a unique experience to all involved
• Engages Danoners with the company values
• Establishes partnership with key stakeholders
Being socially responsible
Large target populationand increasing purchasing power
(1) Sources: Observador Brasil 2010 – Ipsos/Cetelem; Brazilian Institute of Geography and Statistics; Grupemef and internal data(2) Note: use of WRI available countries (27) to calculate NBC segments through extrapolations in different zones and overall ITC
(3) Sources: World Resource Institute; EIU; UN human development report; BCG analysis * Target Brasil/IMS
2010 2050
Social-economic profile evolution*
Middle class growth (+ 28%)
Purchasing Power is increasing,especially in emerging middle class
Demography is changing very fast.Country is getting older,
but still with a high number of children
Country% of GDP*
Public Private Total
France 8.7% 2.3% 11.0%
UK 6.9% 1.5% 8.4%
Italy 6.7% 2.0% 8.7%
Significant Expenditure in Healthand Growing Pharmaceutical Industry
• Pharma Market is expect to grow more than 50% by 2013 (1)
• OTC represents more than 30%of Pharma market
• Non-reimbursed market Source: * Total Private and Public Health Expenditure OECD 2007
**Sistema de Informações de Beneficiários - ANS/MS - 06/2009 e Cadastro de Operadoras/ANS/MS - 06/2009
Health Insurance
€ 22.8
Others€ 9.6
Medicines € 12.6
Private€ 45.0
Public€ 41.3
Source: MS (estimated 2008)
28% ofall Privateexpenses
22% ofPopulation
withaccess**
3.9%of GDP
3.6%of GDP
Brazilian Pharmaceutical Marketto become the 4 th in the ranking
Total of Expenditure with Health86.3 Billion and 7.5% of GDP
Nutricia is a leading player in Hospital.Community shows a huge potential
COMMUNITYHOSPITAL
Potential€ 200 m
Nutricia14%
Potential€ 287 m
Nutricia39%
Hospital€ 152 m
Out-Patient Mkt€ 25 m
Nutricia
56%
PAED/Allergy€ 54 m
Nutricia
26% CommunityAdult/Pediatric
€ 53 m
Brazilian company
SUPPORTfounded (medical
nutrition and generic-type company)
Brazilian company
SUPPORTfounded (medical
nutrition and generic-type company)
NutriciaLeader
in the Hospital Market:
34%
NutriciaLeader
in the Hospital Market:
34%
Danone Medical Nutrition History in Brazil
NUTRICIAInternational
acquiredSupport
NUTRICIAInternational
acquiredSupport
Introduction
GI-Allergy and
Metabolic
Introduction
GI-Allergy and
Metabolic
DANONEacquired
Numico
DANONEacquired
Numico
6th subsidiary in Sales
4th in absolute Sales growth
6th subsidiary in Sales
4th in absolute Sales growth
4th subsidiary in Sales
3rd in absolute Sales growth
4th subsidiary in Sales
3rd in absolute Sales growth
Nutricia Brazil plays important role in the Medical Division
Strong Growth and Profitability
Sales EBIT EBIT margin
Nutricia holds the leadership of the Total Market
Nutricia holds the leadership of the market• Market: Hospital + OTX Pharmacy + Allergy (Public + Pharmacy)• Excludes Souvenaid and FortiFit markets
33,38% 34,90% 35,24%
2010 2011 2012
Nutricia market share
Vision
Stronger Organization and very competitive player in the market
Leader in the Hospitaland Out-Patient segments
Recognized as Innovative Companyin the Elderly Care thanks to the success of Souvenaid and FortiFit
New route to market with Directto Consumer approach
Sustainable business model with Hospital, OTX (Adult) and Paediatric pillars
4 separate independent CBUs
specialization to maximize focusand respect business specificities
Business Focus
to maximize presence, opportunities, productivity …
STRENGTH
Joint actionsRoute to market
Media Congresses
Stakeholder ManagementTender Management
Shared ServicesBack officeSystemsOffices
SynergiesBonafont birth through FDP
Baby re-start-up through Medical
Great Place to WorkGreater People Development opportunities through “migrations”
Group Strength