Creating more value together Global Marketing Animal Nutrition, 2 November 2015 Amsterdam Richard Maatman 28 September 2015
Programme 1 Market Trends & Industry Drivers 2 How to compete 3 Where to compete 4 Where to compete with 5 Our organisation The Team 2
Strategy based on macro trends & industry drivers 3
The global need for scale Worldwide, food production must double by 2050 With minimum environmental impact Doubling food production Halving the pressure on the planet Feeding 9 billion people in 2050 4
Our mission 5
Our mission Our vision Our values In a world with limited natural resources and a growing population, there is a rising demand for high quality meat, fish and shrimp. We will be the global leader in providing innovative and sustainable nutritional solutions that best support the performance of animals, fish and shrimp. 6
Surging demand 7 0 % 5 0 % + Growing population Growing middle class Urbanisation Higher animal protein diets 7
World population in 40 years (mln.) 337 448 577 729 732 691 973 1998 4054 5231 8
Growing demand for animal protein 7 billion people consuming on average 37 kg of meat and 83 kg of dairy. 9 billion people consuming on average 50 kg of meat and 99 kg of dairy. Production increase needed by 2050: + 53% + 75% 9
Resources and emissions related to increased dairy demand 3500 Additional resources 3000 Additional emissions 2500 2000 1500 1000 500 0 Feedstuffs Bln kg fresh weight Land Mln ha Water Bln L Manure Bln kg fresh weight Carbon footprint Bln kg CO 2 eq 10
Struggling supply Climate change Raw material scarcity Land / water shortage War for talent 11
Trouw Nutrition is at the heart of change Struggling supplies Raw material markets Animal nutrition & fish feed producers Surging demand Farmers and Integrators Sustainable animal nutrition and optimum feed efficiency are crucial 12
Industry drivers reflect macro trends Raw materials price increase and volatility Food safety and animal Health & welfare Professionalisation 13
Forces & drivers in the value chain Forces & drivers in the value chain Crop (macro) Additives (micro) Premix & specialties Feed Industry Farmer MMEA processing industry MMEA Sales & Marketing Retail & Food service Efficienc y Biodiversit y GMO s Land/water shortage Antibiotic Food Safety Globalisation resistance Raw material Animal Professionalizati scarcity health on Price Margin Digitalisation volatility pressure Capital Manure Management Technology Sustainabilit y Waste Management Health & Wellness Animal welfare 14
Bargaining power of suppliers Crop (macro) Additives (micro) Premix & Specialties Final Feed/ Distribution Integrators Farmer Meat/egg /milk industry Retail Macro + Few worldwide players, strong concentration + Good market access - Limited knowledge of feed application and farm management Micro + Few global players: risk of forward integration into innovative specialty products - Many small single technology companies 15
Threat of new entrants & entrance barriers Crop (macro) Additives (micro) Premix & Specialties Final Feed/ Distribution Integrators Farmer Meat/egg /milk industry Retail New Entrants Hardly new entrants in our value chain, except in the functional feed additive domain 16
Bargaining power of buyers Crop (macro) Additives (micro) Premix & Specialties Final Feed/ Distribution Integrators Farmer Meat/egg /milk industry Retail Farmers + Consolidation and increase in average size + High professionalism + Home mixers have direct access to premix suppliers + Low switching costs from distributors Final Feed / Distribution + Threat of backward integration + Strong relation with the end-users + Low switching costs + Cost driven - Local players - Threat of being bypassed Integrators + Growth in market share + Highly professional DMU + Strong purchasing power, cost driven + Low costs to switch from supplier 17
Threat of substitutes Crop (macro) Additives (micro) Premix & Specialties Final Feed/ Distribution Integrators Farmer Meat/egg /milk industry Retail Substitutes In general, limited substitutes available, exception in CMR versus whole milk and in functional feed additives 18
Industry rivalry Crop (macro) Additives (micro) Premix & Specialties Final Feed/ Distribution Integrators Farmer Meat/egg /milk industry Retail Industry rivalry + Large number of (local) firms + Slow market growth - Low switching costs for the customer - Low levels of product differentiation + High investment needed in infrastructure 19
Forces in our value chain The essential link - Threat of new entrants Power of Suppliers + + Industry Rivalry + ++ Power of buyers Struggling supplies Raw material markets - Animal nutrition & Threat of substitutes fish feed producers - Surging demand Farmers 20
Industry drivers reflect macro trends Value chain evolution Food safety and animal Health & welfare Professionalisation 21
Industry drivers reflect macro trends Value chain evolution Raw materials price increase and volatility Professionalisation 23
Growing Consensus to Ban Antibiotics Pressure on industry and governments Consumer demand: major food industry players are moving away from animals raised on antibiotics: McDonald s, Tyson Foods, Costco, Chick Fil-A, Chipotle 26
Industry drivers reflect macro trends Value chain evolution Raw materials price increase and volatility Food safety and animal Health & welfare 27
Professionalisation 120,0% 100,0% 80,0% 60,0% 40,0% 20,0% 0,0% Herdsize EU-27 versus emerging markets 92,0% 108% 24,6% 23% 78% 38% Dairy Pig Poultry EU-27 Hifeed region, Turkey & Russia Advances in livestock production: Digitalisation Access to information Transparency Selective breeding Robotization Climate control systems Analytical & diagnostic tools 70% Share of dairy cows by farm size in China 60% 50% 40% 30% 20% 10% <20 <100 <500 >500 0% 2007 2008 2009 2010 2013 2014 2015 Source: Schneider (2011), Institute for Agriculture and Trade Policy (2014): 28
Industry drivers reflect macro trends Value chain evolution Raw materials price increase and volatility Food safety and animal Health & welfare Professionalisation 29
Strategy based on macro trends & industry drivers 30
How to realise a sustainable competitive advantage? Keywords: differentiation, value creation, end-user relation We will invest and develop innovative & branded specialties, complementing feed Industries and distributor s portfolio, to create additional value to end-users Through additional models and services and knowledge sharing (e.g. Nutri-Opt), we differentiate ourselves from our competitors, bring value to our customers and enhance the lock-in of end-users and distribution partners By building strong brands for our end-users and engage with them - based on innovative products, models and services-, we will create a preferred mind position and strengthen the relationship with our end-users To be seen as an innovative and strong supplier and an equivalent counterpart for professional buyers we need to strengthen our global position and identity.
Customers seek solutions for the challenges the industry faces Profitable Applicable Sustainable Needs Nee Solutions 34
Creating more value together Enables customers to optimise their business by gaining better insights and making better decisions Turning science-base expertise into practical, applicable nutritional solutions By offering a broad range of innovative products, models and services By investing and developing in strong product brands & communication we will strengthen the link to end-user Unique, only a few players worldwide can do / claim this. 35
Our nutritional solutions Brought to you by capable people Models Animal Economical Nutritional Services Quality assurance Precision feeding Laboratory services Farm management services Logistic support Product support People Products Feed additives Preventive animal health products Young animal feeds Premix Farm minerals Concentrates 36
Our broad portfolio Animal Health Young Animal Feed Feed Additives Premixes Farm Minerals Concentrates Models Services 37
Our company positioning value proposition R&D and innovative products Feedto-food safety and quality Sustainability Models & services mission vision values 38
Our company positioning R&D and innovative products value proposition Our mission is Values Enabling our customers to create more value Optimisie Feedto-food better decisions their business by gaining better insights and making Sustainability turning science-base safety expertise into practical, applicable and nutrition solutions/right product choice offering a broad range of innovative products, models quality and services mission vision values Models & services 39
Our company positioning value proposition Nutrition based business optimization Enabling our customers to create more value Optimisie Feedto-food better decisions their business by gaining better insights and making Sustainability turning science-base safety expertise into practical, applicable nutrition and solutions/right product choice offering a quality broad range of innovative products, models and services R&D and innovative products mission vision values Models & services 40
End-user centric approach From Product communication No integration of marketing and sales No presence in digital and social media No focus on collecting end-user data Distributors focus Limited marketing-communication capacity and competences To Sharing relevant content, science marketing & customer interaction Marketing & sales create leads and follow-up Prominent presence in digital and social media Commercial use of CRM systems and tools Partnerships with selected distributors Specialists in content, use of digital and social media and building customer databases 41
Where to compete? Poultry Swine Ruminants 45
Broilers, the winning species Value chain evolution Chain optimization and further integration Traceability/Transparency 70% 60% 50% 40% 30% 20% 10% 8.4m 4.9m 3.2m 5.5m Total Poultry Market vol. Nutreco SP Reduce Costs Improve FCR LifeStart Efficiency 0% Feed Industry Distributors Integrators Farmers Food safety, health and welfare Reduction of Antibiotic use Campylobacter & Salmonella contamination control Meat quality Animal welfare (restricted feeding Broiler breeders, negative growth image) Simplification Precision feeding Professionalisation 46
Layers, the overlooked steady grower Value chain evolution Home mixer Traceability/Transparency 70% 60% 50% 40% 30% 20% 10% 0% 8.4m Feed Industry 4.9m 3.2m 5.5m Distributors Integrators Farmers Total Poultry Market vol. Nutreco SP Food safety, health and welfare Reduction use of Antibiotics Salmonella contamination control Animal welfare (Beak trimming, sacrificing male layer DOC, ban on production in cages) Efficiency Reduce Costs Improve FCR LifeStart Egg production (500 eggs per cycle) Professionalisation Simplification Internal /external egg quality Precision feeding 47
Mid-large Broiler integrators +25 million chicken/year Home mixing farmers + 400 000 layers Professional to Highly professional Have a tendency to do everything themselves Price buyers. Very rational decision making (show me the money!) Need for further business optimisation and costs reduction per kg of meat production. Not interested in individual products, but are interested in applicable know-how to improve efficiency and profitability 48
Swine, growing professionals Value chain evolution Total chain traceability 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 12m 11.7m Feed Industry Distributors Integrators Farmers 1.7m Market vol. Nutreco SP Food safety, health and welfare Antibiotic reduction Neonatal piglet mortality Animal health Zoonoses (e.g. Salmonella) reduction Welfare issues (e.g. tail docking, castration, early weaning, individual housing sows) 3m Efficiency Uniformity in batches of pigs Sow fertility and lactation Environmental impact of pig production Cost of production Professionalisation Focus on high quality and quantity, New production technologies 49
Swine Integrators + 10k Sows Professional Swine Farmers + 1k Sows Americas, China, Russia and Europe Highly Professional, results oriented Demand for technical services and advice Total farm solution Key Account Management & Value selling Long-term focus 50
Dairy, new global marketplace drives change Value chain evolution Processing industry will orchestrate the valuechain --> increasing need for partnerships 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 19.2m 22.5m 0.8m Feed Industry Distributors Integrators Farmers 7.7m Total Ruminants Market vol. Nutreco SP Food safety, health and welfare Movement toward welfare-friendly environment in direct relation to increasing productive capacity of cows Lameness remains a key challenge on modern farms both grazing and intensive Efficiency Trends for greater accuracy of per cow production feed, health, fertility monitoring of animal data Focus on young animal investment to increase the production potential of the animal Feed efficiency gains desired from reduction in methane emissions Professionalisation 100+ cow farms professionalizing over the next 5yrs Home mixers large enough to justify direct supply of inputs from source, cutting out distributor channel 51
Home mixers and professional farmers + 100 cows Europe, Russia, Brazil, North America, China. Highly professional, searching for new technologies and production efficiencies Production trends in this target group: Investing in calves Integrated data management (insight), technology and information driven Flexibility to increase/decrease output as market volatility requires Searching for and identifying direct suppliers of credible knowledge, advice and solutions Increasing scale enables to purchase from source Direct relationships are cutting out the distributor/feed Focus on: End user engagement. Credibility, high quality products, service and knowledge 52
Beef, increased demand vs supply opportunity Value chain evolution Processors to become more integrated in their supply chain 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 19.2m 22.5m 0.8m Feed Industry Distributors Integrators Farmers 7.7m Total Ruminants Market vol. Nutreco SP Food safety, health and welfare Focus on grass vs grain fed animals welfare driven by consumer trends Efficiency Increased desire to control meat colour and stability shelf life management Feed efficiency gains prominent in the focus on young animal management, greater genetic manipulation and precision feeding to finish animals Professionalisation Consolidation continues in major markets Increasing global demand leading to pressure to expand in large scale +1000 animal finishing units 53
Large integrators + 1000 animals North America, Brazil Highly professional Production trends: Expansion of global demand & shortages of quality supply (environment) lead further investment and consolidation in large scale feedlot production Investing in calves Integrated data management (insight), technology and information driven Flexibility to increase/decrease output as market volatility requires Recognize the value of a global, well resourced nutritional partner Focus on End user engagement. Credibility, high quality products, service and knowledge 54
Creating more value together Nutrition Based Business Optimization Enables customers to optimise their business by gaining better insights and making better decisions Broad Portfolio consisting of solutions (products models & Services), Focus on integrators and home-mixers Engage with these end-users 50% 40% 30% 20% 10% 0% Market vol. Nutreco SP 55
End-user engagement Engage when the customer is actually in touch with you: using your product, on the phone with you, on the web, reading your content etc. 56
End-user engagement Be relevant at the right time on the right place in a customer journey. 57
End-user engagement 60% - 70% of research is done online. Are we comfortable in our position? 58
End-user engagement Collect the data that will provide you the insights about your audience behavior so you will be able to personalize the content individually. Are we collecting, enriching, monitoring data from farmers and integrators in a professional way? Using CRM? 59
End-user engagement Are we moving fast enough? 60
Thank you 81