Merrill Lynch conference

Transcription

1 CLOVER INDUSTRIES LIMITED Merrill Lynch conference Sun City 15 March

2 AGENDA Introduction & background Business drivers Challenges Potential What keeps us awake 2

3 INTRODUCTION AND BACKGROUND 3

4 CLOVER IS A JSE listed Branded Consumer Goods (BCG) Company with a 114 year heritage One of the largest distribution companies in SA The largest chilled distributor in South Africa Substantial critical mass due to its milk delivery frequency Strong Beverages brand portfolio 4

5 CLOVER IS The of Italy The of New Zealand The of France The of Spain The of Argentina 5

6 Vision To be a leading branded foods and beverages group in South Africa and selected African countries, providing accessible nutrition to all consumers Mission Clover's mission is to reach the Group s widely dispersed customers on a daily basis, and to provide trusting consumers with quality products through its extensive network underpinned by its leading dairy business. Care is taken to develop or acquire brands which have the potential to occupy the number one or two positions in their chosen segments. It focusses on way better operations across the supply chain including services to the trade, and on delivering sustainable shareholder value by being a responsible corporate citizen and preferred employer 6

7 OUR BRANDS 7

8 KEY RECENT EVENTS 2003 National Co-operative Dairies Limited converted to Clover Industries Limited Change in mind-set at Clover Evolution of the business platform from a co-operative dynamic to a corporate dynamic Achieved with the full support of milk producers Fundamental shift from a supply driven company to a demand driven company Clover SA acquires Danone s 39.5% shareholding in Clover Beverages Sale of UltraMel custard brand to Danone Sale of 45% shareholding in Danone Clover for R1.08bn to Danone Dual share structure abolished Delinking of ordinary shares from milk delivery agreements together with the amendment to the rights attached to the preference shares Buy-back of Hosken Consolidated Investments ordinary shares Listing on the JSE Buy out of minority shareholders in Clover Beverages Limited Transfer of the Clover Beverages business into Clover SA Clover positioned to raise capital to implement growth and efficient plans 8

9 THE SOUTHERN AFRICAN DAIRY MARKET South African national dairy production is ±2,7bn litres The market is predominantly a liquid (drinking) milk market Fresh milk constitutes the majority of the liquid milk market The annual market is approximately R36bn for dairy based products Clover buys approximately 24% of national milk production (including milk for Danone) Import potential limited to cheese, butter, powders and long life milk Unlike Europe and the USA liquid milk is still very much a branded domain with DOB market shares in the top end (Spar, Shoprite, Pick n Pay) being: Fresh milk 31% UHT 45% Butter 28% Cheese 12% 9

10 THE SOUTHERN AFRICAN NON-ALCOHOLIC BEVERAGE MARKET South African national market for non-alcoholic beverages is ±R56bn Markets not currently serviced and investigated by Clover are: Carbonated beverages Long life fruit drinks 10

11 INDUSTRY FUNDAMENTALS 50 Increasing income levels and LSM migration % 0 LSM 1-3 LSM 4-5 LSM 6-8 LSM Increased level of consumption to be underpinned by stronger growth, increasing incomes, trend toward urbanisation and electrification 11

12 MILK CONSUMPTION PER CAPITA 12

13 100% JUICE AND NECTAR ANNUAL CONSUMPTION PER CAPITA Developed market median of 28 litres per capita Litres per capita 8.7 Germany Finland USA France UK South Africa Mexico Brazil Nigeria 13

14 KEY BUSINESS DRIVERS 14

15 KEY BUSINESS DRIVERS Strong brands with leading market position Extensive distribution platform Increasing efficiencies and capacity (Project Cielo Blu) 15

16 STRONG BRANDS WITH LEADING MARKET POSITION 16

17 STRONG BRANDS SA top 10 most engaging brands SA s most favourite brand Pick 'n Pay 134 Coca-Cola Coca-Cola 132 Vodacom 4.00 Clover 127 KOO 3.00 Shoprite 126 Nike 3.00 KFC 126 Clover 2.44 Woolworths 124 KFC 2.43 Standard 123 SAB 2.08 Nokia 123 Nokia 2.03 Handy Andy 123 Levi 1.95 Cadbury 123 BMW 1.92 This is a totally spontaneous mention question people can vote for any brand they love 17

18 STRONG BRANDS Edgars All Gold Huletts Mr Price Koo Sunlight Robertsons Coca-Cola Albany JC Le Roux Black Cat Jet Dulux MTN Sunlight Nokia Clover KFC Vodacom Ackermans Black & Crosswell Jik Pick n Pay Koo fruit Eskort All Gold Simba Aromat Average interviews over 10 months across brands in 450 product categories

19 STRONG BRANDS Clover awards: F2012/13 Awards Brand Comments Apex Awards Tropika Bronze Sustainable brand in marketing and business Arrow Awards Sunday Times Top Brands Sunday Times Youth Survey Products of the Year Icon Brands 2012 Tropika Clover Krush Clover Milk Clover Cheese Tropika Krush Tropika Top 10 Danao Clover UHT Prisma Clover 800g Cheese Clover Fresh Milk Clover Cheese Diamond Diamond 1 st (Gold) 1 st (Gold) Top 3 Winner Best marketing campaign Most successful product launch 6 th Cold drinks 4 th Dairy drinks category Winner Icon status Innovation 3 rd Dairy category 19

20 TANGIBLE BRAND PREMIUMS 40% 29% 32% 23% 23% 20% 10% 13% 8% 13% 11% 3% -7% -12% -10% Clover 2lt Fresh Clover 1L UHT milk Fresh Milk 1L Clover Feta cheese 400gr Clover Pre-pack Natural Cheese 240gr Elite Prepack Natural Cheese 300gr Clover Pre-pack Natural Cheese 450gr Tropika dairy fruit mix 2lt Krush pure fresh juice 1.5lt Manhattan ice tea 500ml Aquartz 500ml Still water Super M flavoured milk 300ml Fresh Cream 250ml Butter - Mooi River 500gr Danao 1L dairy fruit mix 20

21 MARKET POSITION Fresh and UP milk UHT milk Cream 28.4% 29.0% 31.0% 24.7% 25.6% 19.6% 40.0% 38.8% 41.7% Dec 10 Dec 11 Dec 12 Dec 10 Dec 11 Dec 12 Dec 10 Dec 11 Dec 12 Krush and Quali fresh juices Feta cheese Pre-packed cheese 47.0% 46.6% 46.6% 38.5% 30.2% 36.9% 47.2% 45.4% 40.2% Dec 10 Dec 11 Dec 12 Dec 10 Dec 11 Dec 12 Dec 10 Dec 11 Dec 12 Source: Aztec (Total Defined Supermarkets (Incl Pnp Grp, Shprt/Checkers Grp, Spar Scanning Grp) Note: The Krush & Quali fresh juices market shares include the real Beverage Co. market shares for all three years 21

22 MARKET POSITION (CONTINUED) Aquartz water Clover and Quali fruit drink/nectar 6.2% 5.6% 6.3% 25.3% 26.5% 27.8% Dec 10 Dec 11 Dec 12 Dec 10 Dec 11 Dec 12 Manhattan Ice Tea Tropika and Danao Super M 32.3% 33.9% 32.3% 64.7% 63.7% 69.0% 27.8% 33.1% 35.0% Dec 10 Dec 11 Dec 12 Dec 10 Dec 11 Dec 12 Dec 10 Dec 11 Dec 12 Source: Aztec (Total Defined Supermarkets (Incl Pnp Grp, Shprt/Checkers Grp, Spar Scanning Grp) Note: The Clover & Quali fruit nectar market shares include the real Beverage Co. market shares for all three years 22

23 EXTENSIVE DISTRIBUTION PLATFORM 23

24 EXTENSIVE DISTRIBUTION NETWORK Distribution network is a key enabling platform, is a sustainable competitive advantage and is central to the growth prospects of Clover Deep penetration with c. 14,000 delivery points with high frequency of delivery due to milk 24

25 INCREASING EFFICIENCIES AND CAPACITY (PROJECT CIELO BLU) 25

26 INCREASING EFFICIENCIES: PROJECT CIELO BLU Mayfair beverages production moved to Clayville facility Pretoria Johannesburg Clayville, Queensburgh and PE distribution capacity extensions Project Cielo Blu creates efficiencies in production and capacities in the distribution network to support current and future growth Clayville UHT facilities moved to Pinetown and Port Elizabeth Cape Town Durban Port Elizabeth Project Cielo Blu seeks to: Address historical inefficiencies in the supply chain Create capacity to sustain growth of the business Improve profitability 26

27 Annual capex spend (Rm) Cumulative capex spend (Rm) PROJECT CIELO BLU PRODUCTION: CAPITAL EXPENDITURE / / / /14 0 Capex expenditure: planned August 2010 Capex expenditure: updated January 2013 Original cumulative estimate Updated cumulative estimate 27

28 PROJECT CIELO BLU PRODUCTION: SAVINGS (EBITDA) Rm / / / /14 Original projected annual savings Updated projected annual savings 28

29 Annual capex spend (Rm) Cumulative capex spend (Rm) PROJECT CIELO BLU DISTRIBUTION: CAPITAL EXPENDITURE / / / /14 0 Capex expenditure: planned August 2010 Capex expenditure: planned December 2012 Original cumulative estimate Updated cumulative estimate 29

30 PROJECT CIELO BLU DISTRIBUTION: SAVINGS (EBITDA) R m 2010/ / / / /15 Orginal projected annual savings Updated projected annual savings 30

31 CHALLENGES FACING THE BUSINESS 31

32 CHALLENGES FACING THE BUSINESS Africa expansion Pilot project in Nigeria with Tropika dairy fruit mix Contract manufacturing by Nigerian company Sales and distribution partner Aim of pilot is to understand route to market Production facilities are key to sustainable model and search is on Eventual aim to expand product basket Existing presence in Southern African countries with view to expand influence 32

33 CHALLENGES FACING THE BUSINESS Balancing local milk production with local demand Milk producers require growth in excess of local market growth Traditionally not sufficient raw milk balancing capacity in SA Much more long life capacity created in last 18 months Locally produced product not always internationally competitive: Foreign farmer subsidies Economies of scale Strong growth in SA exports 33

34 POTENTIAL 34

35 ATTRACTIVE GROWTH PROSPECTS FMCG industry consolidation Africa clover Leveraging the sales and distribution network Leveraging the brand immense potential Route to market Product innovation Supply chain cost efficiencies Product extension 35

36 WHAT KEEPS US AWAKE 36

37 WHAT KEEPS US AWAKE Project Cielo Blu implementation: Within budget Achieving projected benefits On time Prioritisation of capital for productivity and expansion projects Balancing short term shareholder expectations with long term strategic direction 37

38 DISCLAIMER This report contains certain forward-looking statements. Forward-looking statements include, but are not limited to, those with respect to capital expenditures, cost savings associated with capital projects, timing of capital projects, currency fluctuations, national milk production, farm gate inflation and expected selling price movements. In certain cases, forward-looking statements can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or "does not anticipate", or "believes" or variations of such words and phrases, or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forwardlooking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievement expressed or implied by the forward-looking statements. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. It is important to note, that: unless otherwise indicated, forward-looking statements indicate the Group s expectations as at 26 March 2012; actual results may differ materially from the Group s expectations if known and unknown risks or uncertainties affect its business, or if estimates or assumptions prove inaccurate; the Group cannot guarantee that any forward-looking statement will materialise and, accordingly, readers are cautioned not to place undue reliance on these forward-looking statements; and the Group disclaims any intention and assumes no obligation to update or revise any forward-looking statement even if new information becomes available, as a result of future events, or for any other reason. 38

39 THANK YOU Questions and Answers 39