Tikkurila in Russia

Update on Tikkurila's
Russian operations
Tikkurila Analyst Day on August 15, 2013
Simo Laitala, Managing Director, Russia and
Central Asia
Tikkurila in Russia
Facts about SBU East
Operational area
2012 revenue
Russia, other CIS countries, Ukraine
EUR 242.8 million, 36% of Group
Russia ~90% of SBU East revenue
2012 EBIT*
EUR 32.5 million, 44% of Group
Personnel
1,517 (on average in 2012)
Production sites
Retail
Paint
consumption
Current demand
structure
Russia (3) and Ukraine (1)
Tikkurila's products are sold in more than
5,000 retail outlets
~5-7 liters per capita*
Economy and medium segments
dominating, premium segment expected
to grow fastest
*Excl. non-recurring items
Source: Chem-Courier 2012 (paint consumption)
August 15, 2013
2
Good coverage of operations
Saint Petersburg
Yekaterinburg
Moscow
Samara
Kopeisk
Novosibirsk
Stariy Oskol
Krasnodar
Irkutsk
Khabarovsk
Production, logistic center, sales
Logististic center and sales
Sales office
•
•
•
Tikkurila sales function has regional structure with more than 200 employees
Tikkurila has established long term partnerships with local customers
Tikkurila's office and warehouse network has been expanded in 2012
August 15, 2013
3
Russian paint market is fragmented and there
have been no major changes recently
Russian decorative paint market shares in 2012
Market share development in Russia in 2010–2012
70%
Tikkurila
17%
Empils
63%
60%
50%
Lakra
6%
VGT
Dekart
5%
53%
4%
3%
3%
3%
3%
3%
40%
30%
Akzo Nobel
Akva
Meffert
20%
10%
ABC Farben
Others
17%
6%
5%
Lakra
2010
August 15, 2013
4
3%
2%
0%
Tikkurila Empils
*Source: Chem-Courier 2012 (volume)
4%
VGT
2011
Akzo
Nobel
2012
Caparol
Other
Low price segment is still dominating the
Russian paint market
•
TOP 10 paint producers account for
almost 50% of the market, the rest is
shared by more than 250 small local
companies
•
In terms of volume, economy and low price
segments account for the biggest part of
the market
•
Water-borne paints are gaining market
share in medium and premium segments
due to the arising ecological trends in
consumer behavior
•
Share of alkyd paints is decreasing in both
monetary and volume terms
August 15, 2013
5
Macro environment deteriorates
• GDP grew by 1.6% in Q1 2013 and
1.2% in Q2/2013
• FY GDP growth is estimated to be
modest (1-2%)
• Winter Olympics in 2014 and FIFA
World Cup in 2018 are expected to
support the GDP growth and
consumption
Source: Rosstat, several sources
August 15, 2013
6
Russian construction output has reached the
pre-crisis level
Construction output in Russia
Total floor space, million square meters
100
80
60
40
20
0
2000
2001
2002
2003
2004
2005
Residential
Source: Rosstat
August 15, 2013
7
2006
2007
Non-residential
2008
2009
2010
2011
2012
Paint market development in Russia
Million liters
EUR million
700
1800
618
616
614
600
583
1,579
-5%
1600
1400
500
1,398
1,426
1,312
400
+2%
1200
1000
800
300
Volume
Value
600
200
400
100
200
0
0
2010
•
•
2011
2012
2013F
Chem-Courier expects reduction in paint market volume and slight growth in value
Other researchers are more optimistic and forecast the market to increase by 4-9%
Source: Chem Courier
August 15, 2013
8
Tikkurila brand positioning in Russia
Premium
Medium
Economy
Low
August 15, 2013
9
Brand positioning of the main producers:
Price segment
#1:
Tikkurila
#2:
Empils
Premium
Medium
Economy
Low
August 15, 2013
10
#3:
Lakra Sintez
#4:
Akzo Nobel
Others:
Caparol
Distribution channels in SBU East
Tikkurila SBU
East
Customer segments
Direct disributors/customers
Indirect customers
Consumers
DIY big
boxes
Color
studios
Consumers
Professionals
Regional
wholesalers
Temaspeed
dealers
- Traditional retail outlets
- Professional painters
- Construction industry
•
•
•
High share and number of distributors
Chains are increasing slowly
Both international and local big boxes
• Located only in the central parts of Russia, i.e. in big cities
• Low coverage of regions
•
Tikkurila is present in all channels and has a long history of cooperation with the
customers
August 15, 2013
11
Industry
Tikkurila aims at diversifying its distribution
in Russia
Big boxes' share of Tikkurila sales in Russia
•
Tikkurila's products are sold
through more than 5,000 retail
outlets
•
Big boxes are increasing their
market share slowly
•
Majority of Tikkurila sales go
through distributors but their
relative share is decreasing
•
Tikkurila aims at balanced
development of different
distribution channels
25%
20%
15%
10%
5%
0%
2010
August 15, 2013
2011
2012
12
Examples of key accounts in Russia
International
Big Boxes
National chains
& Household
Regional chains
& Department
store chains
August 15, 2013
13
More active role in distribution to support
growth
Tikkurila's new paint shop concepts
Color Studio
•
•
•
For consumers and
designers
Brand offering: Tikkurila
First shop opened in St.
Petersburg in May 2013
•
•
•
August 15, 2013
Inspiration Gallery
Profe Shop
For small-scale construction
professionals
Brand offering: Tikkurila,
Finncolor, Teks and
Tikkurila Coatings
First shop opened in St.
Petersburg in May 2013
14
•
•
•
In cooperation with a parquet
producer (Karelia Upofloor) in
Russia
Idea: Total interior design
service, including follow-up
services and installation work
First showroom opened in
Krasnodar in March 2013
Russian paint market
Characteristics
Trends
High brand awareness
Sustainability
At the same time: low awareness of brands
and how to apply paints
Water-borne paints gaining market share
Ecological production
Services
Competition
Need for sales consultancy
Additional production capacity to the market
Price sensitivity
Production optimization
Tendency to buy low-cost products
Several no-name producers
Investigating new applications and enhancing
product performance and quality
Substitutes
Growing demand
Wall papers are still very popular
from the construction industry
August 15, 2013
15
Water-borne paints have clearly increased
market share in Russia
Market
Tikkurila
100%
100%
30%
90%
90%
80%
80%
70%
70%
70%
60%
60%
50%
50%
40%
40%
30%
30%
20%
20%
10%
10%
0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Water-borne
Solvent-borne
Source: Rosstat, Chem-Courier, Tikkurila
August 15, 2013
16
0%
2012
Water-borne
Solvent-borne
Findings of a consumer survey in Russia
Decision is made at the store
1%
Factors impacting choice
Quality
Makes the final
decision at the
store
18%
Makes the
decision in
advance
Price
Not able to
answer
81%
Color palette
Most popular place of purchase: Big boxes (e.g. Leroy Merlin, OBI, Castorama)
53%
11%
Big boxes
Construction market
Shopping center of construction materials
Source: GFK, 2012
August 15, 2013
17
10%
10%
Big retail (Starik Hotabych, etc.)
Special painting shop
Household shop
9%
5%
Russian consumers' main sources for paint
information
Advice from relatives or friends
Advice from professionals
Google
Advice from the shop keeper
Own experience
Source: GFK, 2012
August 15, 2013
18
Adjacent markets offer interesting
opportunities
Belarus
Population: 9.6 million
Urban population: 75%
GDP per capita: $16,000 (country comparison: 82)
GDP growth rate: 4.3% in 2012
Paint market size: 43.2 million liters
Paint consumption per capita: 4.5 liters
Tikkurila presence: Representative office,
warehouse
Ukraine
Population: 44.6 million
Urban population: 69%
GDP per capita: $7,600 (country comparison: 136)
GDP growth rate: 0.2% in 2012
Paint market size: 165.0 million liters
Paint consumption per capita: 3.7 liters
Tikkurila presence: Production unit in Kiev, raw
material sourcing, representative office, warehouse
Source: CIA The World Factbook, Tikkurila estimates
August 15, 2013
19
Kazakhstan
Population: 17.7 million
Urban population: 59%
GDP per capita: $13,900 (country comparison: 96)
GDP growth rate: 5% in 2012
Paint market size: 60.0 million liters
Paint consumption per capita: 4 liters
Tikkurila presence: Representative office, warehouse
Growth potential on the Kazakhstan paint
market
Market
Distribution
Our presence
• Market size some 60 million liters
• Two main producers (local
companies) hold 40-45% of the
market
• Upcoming events include
EXPO2017, Winter Universiade
2017, new G4 city
• Tikkurila brand mainly sold through
special paint shops
• TEKS brand sold through retail
network and directly to
construction and industrial
companies
• Tikkurila operates with Tikkurila
and Teks brands
• Our market share is around 10%
Source: Management estimate
August 15, 2013
20
Key growth drivers, Russia
GDP growth
Market forces
Trading up
Changes in sales organization
New approach in marketing
Own operations
New shop concepts
Broad service offering
August 15, 2013
21
Near-term focus in Russia to support growth
•
Upgrading product mix towards
higher quality and environmentally
sound paints
•
Boosting particularly point of sale
marketing efforts
•
Increasing the sales of paintrelated services (design services,
painting work etc.)
•
Increasing the amount and
geographical scope of our Color
studios and Profe shops
August 15, 2013
22
Q&A