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The strategic milestones of Emmi’s past and future success
Emmi Investor DayUrs Riedener, CEO Emmi Group
Emmen, 5 November 2013
Emmi today
Where we come from and where we want to go
The decisive factors in the past five years
The path to continue the success story
2
Sales 2012 § CHF 2,981 million (2011: CHF 2,721 million)
Net profit 2012* § CHF 90.3 million (2011: CHF 83.0 million)
Net margin* § 3.0 % (2011: 3.0 %)
Employees(FTE) § 5,000 (31 December 2012)
Processed milk in 2012 § 1,220 (2011: 1,017 million kilograms)
CEO § Urs Riedener
* Adjusted for extraordinary gains from the disposal of fixed assets, which were CHF 19.4 million (EBIT) and CHF 15.9 million (net profit, after tax)
Facts & figures about Emmi
Emmi Investor Day, 5 November 2013, Urs Riedener Page 3
Broadly diversified product portfolio
Product group (net sales 2012)
Emmi Investor Day, 5 November 2013, Urs Riedener Page 4
Dairy products28.3 % (CHF 843 mn)
Other products / services5.3 % (CHF 157 mn)
Powder / concentrates2.9 % (CHF 85 mn)
Cheese33.4 % (CHF 996 mn)
Fresh cheese5.6 % (CHF 168 mn)
Fresh products24.5 % (CHF 732 mn)
Group net sales 2012: CHF 2981 million
3
Most important production sites in Switzerland
Optimizing the production structure
Emmi Investor Day, 5 November 2013, Urs Riedener Page 5
Emmen LU(Fresh products and cheese)
Bever GR(Cheese, dairy and freshproducts)
Ostermundigen BE(Fresh products, ice cream)
Langnau BE(Fondue and melting cheese)
Dagmersellen LU(Mozzarella, milk powder)
Kirchberg BE(Processing of cheese, exports)
Suhr AG(Milk, cheese, butter)
Kaltbach LU(Cow and sheep milk cheese)
Bischofszell TG(Organic dairy and freshproducts)
Landquart GR(Raclette cheese)
Frenkendorf BL(Cheese, dairy and freshproducts)
Moudon FR(Cheese)
Emmi’s production sites outside Switzerland
International expansion through subsidiaries and cooperation
Emmi Investor Day, 5 November 2013, Urs Riedener
USA: Penn YanCASP
USA: MonroeEmmi Roth USA
Chile: PitrufquénSurlat Industrial (Kaiku)
USA: ArcataCypress Grove Chèvre
Chile: LoncocheChilesur (Kaiku)
Austria: Nüziders
Italy: Rancio ValcuviaA-27
Italy:Roverè della LunaTrentinalatte
Tunisia: MahdiaCentrale Laitière
Spain: PamplonaLácteos de Navarra
France: AvignonDiprola
USA: PlattevilleEmmi Roth USA
Italy: RamuscelloVenchiaredo
Image to follow
Italy: PeroRachelli
Page 6
4
Emmi today
Where we come from and where we want to go
The decisive factors in the past five years
The path to continue the success story
0.51.2
2.5
3.7
?
Emmi – an impressive development story
?
1993
2000
2007
2014
2020
Regional dairy companyEstablishment of Emmi AGAmbition: National market leader
National dairy company & exportProgress to no 1in the area of cheese and fresh products
National dairy company & export & local presenceAmbition 2014: 50/50 –CHF ~ 4 billion sales
Source: Emmi Annual Reports
A. GerberFarner&Co
Bürki&CieGebr. Joost
Fromalp
A-27
Käsezentrum
Molkerei Biedermann
Venchiaredo
International leader in premium dairy products
?
??
?
Sales in CHF billion
AVH Dairy Trade
Rutz Käse
Emmi – an impressive development story
Emmi Investor Day, 5 November 2013, Urs Riedener Page 8
Continuous expansion process
5
Building on the proven three pillars
The relevant strategic pillars
Defending the home market Switzerland
International growth
Cost management
Emmi Investor Day, 5 November 2013, Urs Riedener Page 9
Steady growth with the mid-term objective of 50 / 50 (Swiss / international)
Sales 2002 – 2012 and mid-term objective
International Switzerland
Emmi Investor Day, 5 November 2013, Urs Riedener Page 10
in CHF million
82% 77%
18%
22% 23%
23%
78%78% 78%
22%
22%
0
500
1,000
1,500
2,000
2,500
2002 2003 2004 2005 2006 2007
1,407
1,917 1,9262,027
2,3352,501
2008
3,000
77%
2,671 2,619
23%
77%
2009
26%
74%
50%
50%
in 2 – 3 years
27%
73%
2,684
2010
2,721
30%
190970%
2011 2012
2,981
62%
38%
3,500
2013*
~45%
~55%
6
0
50
100
2008 2009 2010 2011 2012
Local production Exports from Switzerland
Important acquisitions
2006: Trentinalatte (IT)
2009: Roth Cheese (USA)
2010: Cypress Grove Chèvre (USA)Fromalp (CH)
2011: Onken (UK), A-27 (IT), Rutz Cheese (CH)
2012: Kaiku (ES), Diprola (F)
2013: AVH (NL), Studer (CH), Rachelli (IT)
ca. 40%
ca. 60%
67%
33%
53%
47%
64%
36%
75%
25%
%
Local production share increased by recent acquisitions
Well-balanced international business
Emmi Investor Day, 5 November 2013, Urs Riedener Page 11
Emmi today
Where we come from and where we want to go
The decisive factors in the past five years
The path to continue the success story
7
Overview of future opportunities and challenges
The market environment defining the strategy
Markets/liberalisation
1
§ Competitiveness§ WTO agreements will be
made later than forecast§ Swissness law
Suppliers2§ Gap with EU milk price
demands a niche strategy
Investors7§ Development of total
shareholder return
Employees6§ Secure jobs§ Develop talents
Competitors3§ Consolidation of competitors§ Pressure from foreign cost
leader§ Stronger pressure from
international brands§ Swiss competitors
increasingly unpredictable
Consumers5
§ Increasingly price-sensitive
§ Increasing nutritional awareness
§ Shorter product life cycles
§ Accelerated thrust of private labels
Clients4
§ Consolidation of retailers
§ Client risks in Switzerland / increasing price pressure
§ Potential/risks of hard discounters
Value chain
Emmi Investor Day, 5 November 2013, Urs Riedener Page 13
The four relevant streams for Emmi
The four relevant streams for Emmi
Existing product platforms New product platforms
New
mar
kets
Exis
ting
mar
kets Strong knowledge base in Switzerland Own development or acquisitions
Via distributors or acquisitions Own development or acquisitions
Penetration of existing platforms in existing markets
Geographic multiplication of existing platforms
Development of new platforms in existing markets
Development / acquisitions of new platforms in new markets
1 2
3 4
The multidimensional market approach
Emmi Investor Day, 5 November 2013, Urs Riedener Page 14
8
KALTBACH TV
Visitor centre
Tastings
Online/newsletter
Friends of Kaltbach
Fairs and competitions
Launch ofcheese counter
1. Penetrating existing markets with existing platformsExample: Kaltbach
Emmi Investor Day, 5 November 2013, Urs Riedener Page 15
TV campaign
Posters, print campaign
Online/social media
PR activitiesFIS sponsorship
National mailing incl. coupons
Price promotions Samplings/ tastings2nd POS
Megaposters in train stations
2. Penetrating existing markets with new (sub)platformsExample: Jogurtpur
Emmi Investor Day, 5 November 2013, Urs Riedener Page 16
9
Productinnovation
Communicationpromotion
Channels/markets
New campaign Loyalty programmes
CaramelNY Edition
Longlife SpainLonglife Asia
Mr. Big
Online game/website
Vanilla
Sampling concepts
Packaging relaunch
Convenience battle
Coolers / POS activities
Seasonal packaging
3. Penetrating new markets with existing platformsExample: Emmi Caffè Latte
Emmi Investor Day, 5 November 2013, Urs Riedener Page 17
4. Penetrating (partly) new markets with new platformsExample: Bontà Divina
Traditional Italian desserts
Strengthening international market positions by using synergies with Emmi subsidiaries
Strengthening the Bontà Divina brandDevelop new markets
Emmi Investor Day, 5 November 2013, Urs Riedener Page 18
10
Focus on promising brands pays off, continued good development in 1HY2013
The results: Positive development of brand platforms
Million cups (from our plants)
0
20
40
60
80
100
2008 2009 2010 2011 2012CH Export
+12%
+8%
2009 2010 2011 2012
International CH
2011* 2012 *) from 1 August 2011
- Launch targets exceeded- Three additional flavoursjust six months after launch
Emmi Investor Day, 5 November 2013, Urs Riedener Page 19
Indexed sales
Indexed sales
Emmi today
Where we come from and where we want to go
The decisive factors in the past five years
The path to continue the success story
11
Strategy assessment
Emmi Investor Day, 5 November 2013, Urs Riedener Page 21
Strategy assessment
Achievement of current strategy, impact for the upcoming strategy period
Degree of achievement
§ International share of sales at least 50 %
§ Focused growth in core international markets
§ Defend / maintain position in the Swiss market
§ Cost structure in line with Europe
Impact on content of “Emmi 2020”
§ Continue to build on current strategy, which worked out well despite economic headwinds§ Product portfolio has partly improved
§ Increased development potential with the current set-up
§ Strategic areas of activity to be carefully prioritised and structured
§ Simplification of business models with the aim of increasing the Group’s added value
§ Adjustment of the organisation to strategic priorities and the Group’s international structure
Building on the proven three pillars
The relevant strategic pillars
Defending the position in Switzerland
International growth
Cost management
Strengthening
Emmi Investor Day, 5 November 2013, Urs Riedener Page 22
12
The two strategic pillars “International growth” and “Cost management” remain valid; with regard to “Switzerland”, however, we want to move on from our merely defensive approach and further “strengthen” our domestic market
Three business models: “Autarchic local model”, “Global categories” and “Global trading model”
More active role for the Group: from “financial sponsor” to “strategic guide”
Clear separation between Group-level and country responsibilitiesF ergo also a clear separation between the Group and the Swiss business
Acquisitions remain important, but focus is shifting increasingly to organic growth
Continuation of geographic expansion with a stronger focus on emerging markets
1
2
3
4
6
5
Emmi Investor Day, 5 November 2013, Urs Riedener Page 23
Where Emmi wants to go
Main changes for upcoming strategy period
New organisational structure
New organisational structure
Corporate Development
CEOCEO
Switzerland EuropeAmericas
Global trading model
DrinksGlobal categories & marketing (incl. R&D coordination)
Cheese specialitiesSpoonableDesserts
Finance & Controlling / Legal
Corporate Communication
HRInternational Operations
Quality Management
New structure takes internationalisation into account
Emmi Investor Day, 5 November 2013, Urs Riedener Page 24
13
New organisational structure
Organisational structure:Marketing, until 31 December 2013
Centralized, Swiss focussed organisation
Emmi Investor Day, 5 November 2013, Urs Riedener Page 25
Chief Marketing Officer
Marketing Manager Private Labels
Group Brand Managers
Marketing Manager Emmi of Switzerland
Group Brand Managers
Marketing Manager Caffè Latte, Cheese,
Wellbeing
Group Brand Managers
Marketing Services
Media & Sponsoring
Marketing Research
Customer Service
International set-up for key brands
Emmi Investor Day, 5 November 2013, Urs Riedener Page 26
Chief Marketing Officer Global Categories
Global CategoryDrinks
Global Marketing Managers
Global CategorySpoonable
Global Marketing Managers
Global CategoryDesserts
Global Marketing Managers
Global CategorySpecialty Cheese
Global Marketing Managers
Process Intelligence& Innovation Market Insights
Controlling Media & Sponsoring
Organisational structure:Global Categories, from 1 January 2014
14
New organisational structure
Organisational structure:Marketing Switzerland, from 1 January 2014
A team fully dedicated to the important home market
Emmi Investor Day, 5 November 2013, Urs Riedener Page 27
Head of Marketing Switzerland
Brand ManagerDrinks
Sub Brand Managers
Brand ManagerSpoonable/ Desserts
Sub Brand Managers
Brand ManagerSpecialty Cheese
Sub Brand Managers
Brand ManagerPrivate LabelsFresh products
Sub Brand Managers
Brand ManagerPrivate Labels
Natural Cheese
Sub Brand Managers
Marketing Services& Processes
Consumer Services
Marketing Processes
GraphicDesign
Localheroes
Brand platforms
Product offerings based on differentiation and multiplication of USPs
Low(= high share ofprivate label)
High(= high share of
brands)
Brand share
Low(= high
local share)
High(= high share of
category units)
Share ofglobal
categoriesLocaladaptability
Globalintegration
Product logic Brand logic
0 % 50 % 100 %
50 %
100 %Growth driver with
above-average margins
Ensuring profitable local market relevance
Use of technical expertise to occupy strategic segments
Globalcategories
Local brands
Local private label
New focus on strategiccategory units...
...allocates each part of the offeringa clear role
Emmi uses existing USPs to defend, occupy and expand strategic segments
Localproducer
Globalcategories
Emmi Investor Day, 5 November 2013, Urs Riedener Page 28
Product offerings based on differentiation and multiplication of USPs
15
Market
Margin
Marketrelevance
Momentum
1) Only cheese marketSource: Euromonitor: Retail Dairy Market, BCG Data Request, BCG Analysis
Assessment Growth alternatives
Cypress Grove
Multiplication
Growth
Cash
(Divestments)Spain
Netherlands
Italy
Switzerland
Germany
Austria
UK
A-27 / Rachelli
Tunisia
Chile
France
BELUX
Canada
USA1)
Parameters
Organic versusacquisitions
Organic andacquisitions
Emmi Investor Day, 5 November 2013, Urs Riedener Page 29
Country- and market-specific assessments of roles and ambitions
Targeted procedure instead of random approach
Relevance forcustomers
Relevance in the segments
Relevance to consumers
Relevance in therelevant market
Expand distribution§ Expand product
availability (push)
List new products§ Fending off the
competition§ Expansion of
segment competence (pull)
Expand brands§ Strengthen consumer
loyalty through brands (pull)
Expand portfolio§ Enhancement of position
through economies of scale(push and pull)
Appr
oach
§ Weighted distribution § No of customers§ Visibility
§ Share of shelf*§ No of products per
segment
§ Brand share in portfolio§ Brand awareness
§ Dairy market share in the niche / region§ Position vs. other dairy
manufacturers
Obj
ectiv
es
* at the retailer: e.g. Coop has 1 metre of cold coffee drinks; Emmi Caffè Latte covers 50cm F share of shelf of 50%
Definition of market relevance for Emmi
Emmi Investor Day, 5 November 2013, Urs Riedener Page 30
Gradual increase of relevance in the relevant market
16
Brand jewel
Stra
tegi
c/in
tern
atio
nal
Tact
ical
/C
H
Studer cheese
CH
F 1,
000
mill
ion
CH
F 50
mill
ion
Technology leader/PL with added value
No
Possible
Market synergies/efficiency
Rutz Cheese
Roth Cheese/Fromalp
Organic
Biedermann
GläserneMolkerei (24 %)
Regional/ completion of product range
Molkerei Basel
Kaiku
Onken
Bontà Divina
Rachelli
CypressGrove
Strong focus on existing international key markets
Emmi Investor Day, 5 November 2013, Urs Riedener Page 31
Possible acquisition routes
Objective
Activities
Countries
Role of Emmi
Participations/ joint ventures
Secure market entryDevelop relevance for customers or in segments
§ Export/import/(production)§ Focus on expanding
distribution§ Assess potential risks
of partners§ Share best practice
§ Active shareholder
Conversion into subsidiaries
Increase relevance in the market, establish brands
§ Export/import/production§ Range management § Brand development§ Strategic initiatives
§ Strategic management
Export/import
Tap market, test potential
§ Export/import§ Initial market
knowledge§ Minimal use of
resources and sources
Far East
§ Distribution partnermanagement (retailers)
European key markets, USATunisia, Chile
Emmi Investor Day, 5 November 2013, Urs Riedener Page 32
Market entry playbook
How Emmi aims to enter new markets
17
General conditions and key tenets of ambition
Market / external view§ Market consolidation among milk processing companies worldwide continues§ As a premium niche player, growth is key in order not to sink into oblivion§ A large part of Western Europe is saturated and the economy is partly stagnating; new
(emerging) markets show significantly more growth and open up market entry possibilities§ Emmi has proven that companies in various countries can develop successfully in
premium niches
Emmi’s view / internal drivers§ Wide-ranging expertise, successful introduction of knowledge and Swiss values locally§ Less is more! We want to anchor Emmi in those markets in which we gain a foothold§ Emmi has the financial strength to move beyond the current geographical borders§ Emmi is more robustly and broadly positioned as a group than ever§ Emmi’s wants to create value and applies the return component to top line and profitability§ Emmi employees want to work for a successful company
It is crucial to differentiate Emmi from its competitors in the long run
Emmi Investor Day, 5 November 2013, Urs Riedener Page 33
General conditions and key tenets of ambition
It is crucial to differentiate Emmi from its competitors in the long run
We are Emmi
Emmi Investor Day, 5 November 2013, Urs Riedener Page 34
We delight our consumers with naturally better tasting dairy products. We satisfy our customers with successful and innovative solutions based on our Swiss heritage, our associates’ expertise and our passion for quality.