The Boston Consulting Group - Hu

Transcription

BCG VALUE CREATORS REPORT:
"SPOTLIGHT ON GROWTH"
Axel Roos, Partner, BCG Berlin
Berlin, 19 June 2007
The Boston Consulting Group
AGENDA
Introduction: BCG and BCG's Corporate Development Practice
Worldwide Value Creation: BCG Value Creators Report 2006
Managing Growth
•
Starbucks - A Case Example
•
Integrated Financial Strategy
Question? Comments? Discussion!
HU Berlin-ValueCreators(Presented)-19Jun07-ARO-BER.ppt
-1-
AGENDA
Managing Growth
•
•
-2-
BCG – THE FIRST ADDRESS IN STRATEGY CONSULTING
3,300 Strategists in 61 Offices and 36 Countries
Toronto
New York
Washington, D.C.
Detroit
Atlanta
Chicago
San Francisco
Los Angeles
Dallas
Monterrey
Mexico City
Houston
Miami
Boston
New Jersey
Amsterdam
London
Brüssel
Paris
Frankfurt
Stuttgart
Lissabon
Madrid
Barcelona
Zürich
Mailand
Köln
Düsseldorf
Oslo
Kopenhagen
Stockholm
Helsinki
Moskau
Hamburg
Warschau
Berlin
Athen
Prag
Budapest
Wien
Rom
UAE(1)
München
Peking
Shanghai
Seoul
Tokyo
Nagoya
Neu Delhi
Mumbai
Taipei
Hongkong
Bangkok
Kuala Lumpur
Singapur
Jakarta
São Paulo
Santiago
Buenos Aires
Sydney
Melbourne
Auckland
(1) 2007
Source(s): BCG analysis
-3-
SUSTAINABLE GROWTH – SATISFIED CLIENTS
265 m€ Revenues – 620 Consultants in Germany in 2005
Mio. €
300
Growth
Ø > 10 % p.a.
since 1974
250
New clients
200
BCG client since
… 2 to 4 years
150
… 5 years or longer
100
50
0
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
-4-
WE WANT TO HIRE 310 PROFESSIONALS IN GERMANY IN 2007
Permanent entry: Associate / Consultant

210 Associates / Consultants in 2007

Junior Associate: entry as Bachelor

„Entry for a time": Visiting Associate

Great opportunities for the best:
100 Visiting Associates for 2007
Associate: entry with diploma or PhD

Consultant: possible with 3+ years of
professional experience
Full integration as consultant in a BCG
project team

Full responsibility for the assigned tasks

2 (+2) weeks entry training

Presence at the client

Immediate staffing on a project

Flexible start and end

Duration of 8 – 12 weeks
Application
Application

Comprehensive written application

Application after pre-diploma

Two rounds of interviews

One round of interviews
-5-
FAST CAREER DEVELOPMENT – FLAT HIERARCHIES
Focus
23 %
41 %
17 %
10 %
9%
Client relationship
Partner / Managing Director
Principal
Project management
Project Leader
Consultant
Module responsibility
Associate
0
1
2
3
4
5
6
7
8
Years
-6-
FURTHER DEVELOPMENT AFTER BCG
Selected BCG Alumni in Germany
Board Members
9%
Entrepreneurs/Private Equity 14 %
Ulrich
Biffar
Hanno
Petersen, MdV
Marcus Englert, MdV
Marc Bitzer, Präsident Europe
and Executive Vice President
Whirlpool Corporation
Johannes
Züll, GF
Tobias
Bachmüller
Stefan
Brand
Guido
Colsman, VdG
Michael
Hehn
Jens Deerberg-Wittram, GF
Eric
Strutz, MdV
Management
Matthias Gillner
Jochen Olbert
Philipp Busch, GF
47 %
Justus Klöker
Peter Löffler
Marcus Nadenau
Hubert Ströbel
Thomas Volland
Harald Schmidt
Stefan von Dobschütz
Academic Career
4%
Carla
Kriwet
Heinz Hackl
Johannes
Züll, GF
Felix Hufeld,
VdGL
Klaus Sørensen, GF
Strategy/Planning
17 %
Frieder Kuhn
Alexis von Hoensbroech
Prof. Walter Schertler,
Prof. Jens Hermsdorf
Strategisches Management
School of International Business
Arndt Rautenberg
Gernot Sauerborn
Annette Veltmar
9%
Susan Hennersdorf,
GF
Peter Dill
Hanns
Ostmeier
Bernhard Heizmann
Achim Schmitz-Mertens
Torsten
Ecke, CIO
Managing Directors
Assistant Professor Thomas Weber,
Stanford Graduate School of Business
Tihamér von Ghyczy,
Darden School of Business
Akio Ito
Timmo Sturm
Inga Jürgens
Helmut Meysenburg
Claudia Palme
John McNamara
Thomas Fischer
Total
Total number
number of
of BCG
BCG Alumni
Alumni in
in Germany:
Germany: ca.
ca. 1,100
1,100
-7-
CORPORATE DEVELOPMENT AS ONE OF OUR
WORLD-WIDE PRACTICE AREAS
Broad Industry and Functional Expertise
Consumer
Goods
High Tech
Telco
Financial
Services
Energy
Industrial
Goods
Health Care
Pharma
Corporate
Development
Operations
Organization
Information
Technology
Marketing
and Sales
Strategy
-9-
INTRODUCING BCG'S CORPORATE DEVELOPMENT PRACTICE—
OUR TOPIC MAP
Corporate
Strategy
Corporate
Finance
Post-merger
Integration
Integrated
Financial Strategy
Create
Execute
Integrate
Deliver
Corporate vision
Partnering/alliances
Pre-PMI planning
Industry landscaping
M&A
Portfolio strategy
IPO & divestitures
Growth strategy
Private equity
Value-based management
Strategic planning
PMI organization/
setup
Investor management
Capital structure
PMI execution
Risk management
- 10 -
AGENDA
Managing Growth
•
•
- 11 -
BCG WITH ONGOING RESEARCH ON VALUE CREATION
1999
“The Value
Creators"
Sources of
value creation:
• Cash flow
margin
• Asset
productivity
• Profitable
growth
2000
"New Perspectives
on Value Creation"
Key value
drivers from
the capital,
customer and
employee view
External market
expectations
2001
"Dealing with
Investors'
Expectations"
Importance of
expectation
premiums
Drivers behind
expectation
premiums
2002
"Succeed in
Uncertain
Times"
Agenda for
improved,
sustainable
value creation
Preventive crisis
management
necessary
2003
“Back to
Fundamentals"
Fundamentals
drive TSR
• Profitability
above cost
of capital
• Profitable
growth
• Dividends
2004
“The Next
Frontier"
Decomposition
of TSR into
fundamentals,
cash flow and
multiple
Relative multiple
regression
2005
“Balancing
Act"
Implementation:
• TSR fact base
• Appropriate
TSR aspiration
• Redesigned
management
processes
2006
“Spotlight on
Growth"
Role of growth:
• Achieving
superior value
creation
• Managing
critical tradeoffs
• Setting growth
targets
Note: Reports can be downloaded at http://www.bcg.com/corporatedevelopment/cfs_value.html
- 12 -
NOT ANOTHER "HOW TO GROW" STUDY, BUT HOW TO
EVALUATE GROWTH IN AN INTEGRATED FINANCIAL STRATEGY
Content
The Role of Growth in Achieving Superior Value Creation
The Impact of Growth on Valuation Multiples
• Growth, Margins, Multiple and the right kind of Growth
Evaluating Growth Investments Against Alternative Uses of Capital
• Growth versus Dividend, Debt Repayment and Share Repurchases
Setting Growth Targets That Drive TSR
• Initial TSR Target, Plan Assessment, Alternative TSR Scenarios
Ten Questions About Growth Every CEO Should Know How to Answer
Appendix: The 2006 Value Creators Rankings
Source(s): BCG Value Creators Report 2006
- 13 -
SOME INITIAL DEFINITIONS
Total shareholder return is often referred to as “TSR”
Value
creation
(TSR: Total
Shareholder
Return)
Change in share price plus dividend yield
TSR is presented on an annual basis—typically over 1, 3 and 5 year periods
Yardstick for all investors including hedge funds and mutual funds
Required reporting in proxy statements
Easily benchmarked on relative basis as shareholder’s true bottom line
Valuation
(P/E or
EBITDA
multiple)
Value based
management
(VBM)
Contains information about how investors value earnings
Change in relative valuation multiples is manageable
Calculated on a current or forward basis
Alignment of key management processes
• Target setting, performance metrics, budgeting, planning, resource
allocation, and incentives
- 14 -
CREATING SUPERIOR SHAREHOLDER VALUE
YEAR AFTER YEAR IS A DIFFICULT TASK
Relative TSR Analysis 1996-2005
Number of 600
companies(1)
569
532
500
400
347
324
300
200
Denmark
132
106
100
31
1
4
0
1
9
1
9
10
0
2
3
4
5
6
7
8
Number of years in which
they beat the local market(2)
(1) Sample characteristics: 2,056 companies excl. financial service companies; continuously listed for at least 10 years; market cap above $1B as of end 2005
(2) Relative TSR > 0
Source(s): Thomson Financial Datastream; Bloomberg; BCG analysis
- 15 -
HOWEVER, HIGH TSR POSSIBLE IN EVERY INDUSTRY
High, Low and Average TSR Per Industry 2001–2005
100%
TSR p.a.
‘01 – '05
Mining
& Mat.
Transp. Auto- Mach.
Chem.
& Log. motive & Constr.
Utilitity
Travel&
Tourism
88%
Retail
Cons.
Goods
Pulp &
MultiPharma
Paper business
Tech.
Media &
Entert.
91%
83%
80%
74%
70%
67%
61%
57%
53%
60%
50%
40%
43%
20%
38%
34%
40%
19%
12%
9%
9%
9%
8%
6%
5%
0%
5%
5%
0%
-3%
-2%
-1%
-6%
-6%
-12%
-20%
-19%
-20%
-26%
-40%
-35%
-60%
High
-18%
-25%
-26%
-28%
Weighted
Average
Total Sample
-31%
-38%
-41%
Low
Question:
Question: What
What are
are the
the success
success factors
factors of
of top
top performing
performing companies
companies in
in our
our client's
client's industry?
industry?
Source(s): Thomson Financial Datastream; BCG analysis.
- 16 -
TSR DECOMPOSITION IS A PRACTICAL FRAMEWORK LINKING
PERFORMANCE TO TSR
An Integrated Approach To Value Creation – Here: Based On EBITDA
EBITDA
growth
Capital gain
%
EBITDA margin
change
%
x
x
Growth variables,
e.g. asset growth
EBITDA
multiple
TSR
Sales growth
Profitability variables,
e.g. gross margin growth
%
ƒ
Cost efficiency variables,
e.g. inventory turnover
+
Leverage variables,
e.g. debt/capital ratio
Dividend
yield
Free cash flow
yield
ƒ
Share
buybacks
Debt
repayment
%
Other variables,
e.g. dividend payout ratio
%
Industry specific variables,
e.g. average store size
%
%
Contribution
to TSR
can be
calculated
- 17 -
WORLD TOP DECILE:
SALES GROWTH AND MULTIPLE MOST IMPORTANT
TSR Decomposition Profile of Top Decile vs. Total Sample(1)
Total shareholder return
Sales index (2000 = 100)
TSR index (2000 = 100)
700
EBITDA/revenue (%)
200
624
20%
177
152
600
445
500
400
150
100
316
300
200
EBITDA margin1
Sales growth
100
100
180
152
88
100
100
68
108
95
86
104
109
115
103
18%
128
106
16%
114
12%
'02
14.5% 14.7%
15.3%
14.7% 14.7%
14.2%
15.8% 15.8%
12.7%
10%
8%
0
'01
15.3%
14%
123
50
0
'00
18.5%
17.7%
'03
'04
'05
6%
'00
'01
'02
'03
'04
'05
'00
'01
'02
'03
'04
'05
ƒ
Simplified five-year TSR decomposition2
20%
Enterprise value/EBITDA (x)
11.8
11.1
12
9.9
9.0
10
TSR contribution (%)
9%
4%
6%
4%
1%
2%
8
7.9
6
0%
4
-4%
Margin
change
Dividend/stock price (%)
6%
Multiple
change
6.0
9.1
4.9%
9.4
9.5
Dividend
DY
yield
8.3
2.8%
2.3%
9.0
1.9%
7.0
3.0%
2%
2.1%
1.3%
0
3.3%
2.5%
2.4%
'04
'05
1.7%
0%
'00
'01
'02
'03
'04
'05
Source(s): Thomson Financial Datastream; Thomson Financial Worldscope; Bloomberg; Annual Reports; BCG analysis.
Disclaimer: These financial analyses are based on data and assumptions that have not been verified by BCG and are
subject to uncertainty and change. Accordingly, results presented are intended only for relative comparison across alternatives.
Actual future values are subject to future capital market conditions and other influences.
3.7%
4%
2
-10%
Sales
growth
Dividend yield3
14
13%
10%
EBITDA multiple1
'00
'01
'02
'03
Top Decile, n = 106
Total sample, n = 1056
1
Industry calculation based on aggregate of entire sample.
Share change and net debt change not shown.
3 Industry calculation based on sample average.
- 18 2
BUT, TOP PERFORMERS IMPROVED ON ALL THREE DIMENSIONS
Global Sample versus Top Decile, 2001-2005
TSR Decomposition Profile
Fundamental value (%)
Cash flow (%)
Valuation multiple (%)
14%
13%
9%
6%
4%
4%
2%
1%
0%
-2% -2%
-4%
Sales growth EBITDA margin change
EBITDA multiple change
Top decile, n = 106
(TSR = 44% p.a.)
Dividend
yield
Share change
Net debt change
Total sample, n = 1056
(TSR = 2% p.a.)
Source(s): Thomson Financial Datastream; Thomson Financial Worldscope; Bloomberg; Annual Reports; BCG analysis
Disclaimer: These financial analyses are based on data and assumptions that have not been verified by BCG and are subject to uncertainty and change. Accordingly,
results presented are intended only for relative comparison across alternatives. Actual future values are subject to future capital market conditions and other influences.
Note: Bars show contribution of each factor in percentage points of five-year average annual TSR.
- 19 -
FOR TOP PERFORMERS, REVENUE GROWTH IS THE MAIN
SOURCE OF LONG-TERM SHAREHOLDER VALUE
Sources of TSR for Top-Quartile Performers,
S&P500, 1987-2005
Average 40%
annual
TSR
35%
(%)
30%
25%
Dividend
yield
20%
Change in
shares, cash
and debt
15%
Change in
Multiple
10%
31%
50%
58%
60%
5%
Margin
Improvement
Growth
0%
1 year
3 years
5 years
10 years
Note: Sample excludes financial companies; rolling analysis covers one, three, five, and ten-year time frames from 1987 to 2005.
Source(s): Compustat, BCG analysis.
- 20 -
AGENDA
Managing Growth
•
•
- 21 -
EXCURSUS STARBUCKS: A RETAIL STAR MORE THAN
QUINTUPLED SHAREHOLDERS' BUCKS
Total
Shareholder
Return
(indexed
and
cumulated)
515%
274%
183% 157%
168%
100%
'99
'00
'01
'02
'03
'04
Company
profile
• Vertically integrated brand: purchasing,
roasting and selling
• High-quality coffee beans and handcrafted
beverages
• First store in Seattle in 1971
• In 1987 Starbucks acquired Giornale chain
of coffee bars (founded by a former
employee)
• Today more than 6,600 stores in the US and
significant international activities
• More and more trying to diversify product
range and explore new distribution
channels for coffee and related products
Source: T.F. Datastream; T.F. Worldscope; Bloomberg; Starbucks; BCG analysis
- 22 -
TSR DECOMPOSITION OVERVIEW: STARBUCKS SHOWS
IMPRESSIVE GROWTH AND MULTIPLE ABOVE PEERS
Total shareholder return(1)
600
350
515
274
157
150
168
100
0
50
100
81
'99
'00
85
'01
93
81
65
'02
'03
15%
158
130
100
100
100
15.7% 15.3% 16.2% 15.3% 15.8% 16.1%
196
200
300
100
113
124
'99
'00
'01
130
136
146
'02
'03
'04
0
'04
20%
243
250
400
200
315
300
500
183
EBITDA margin clearly above peers(2)
Extreme sales growth(1)
10%
8,2%
8,2%
7,9%
7,9%
8,1%
8,3%
'99
'00
'01
'02
'03
'04
5%
ƒ
TSR decomposition(3) (five year)
30%
25%
20%
15%
10%
5%
0%
-5%
-10%
-15%
28%
EBITDA multiple(2) growing far above peers
28.7
30
Dividend yield(4)
3%
24.9
Starbucks: no dividend
2,3%
26
12%
2%
0% 1%
18
14
Sales
growth
Margin
change
Multiple
change
16.8
DY
Dividend
yield
16.7
2%
1,4%
15.5
1,1%
1%
12,1
12
8,7
6
'99
'00
'01
'02
9,8
9,8
'03
'04
0%
'99
'00
Starbucks
(1) Indexed and cumulated
(2) Calculation based on aggregated figures
Note: Analysis based on 63 companies; minimum market value 2004: $5bn
1,5%
1,1%
16,4
10
-10%
1,9%
19.9
22
8%
'01
'02
'03
'04
Retail sample
(3) Additional components: Share change, Net debt change
(4) Sample average
Source: T.F. Datastream; T.F. Worldscope; Bloomberg; Annual Reports; BCG analysis
- 23 -
STARBUCKS' GROWTH STORY: SALES MORE THAN
TRIPLED IN FIVE YEARS
Sales
development
(indexed
and
cumulated)
11%
20%
315%
243%
84%
196%
Retail sales: Sales in companyoperated stores
158%
130%
Sale of beans: JV with Kraft in
the grocery channel
100%
Licensing: Revenues from noncompany-operated stores
(royalties and sales from beans)
'99
'00
'01
'02
'03
'04
- 24 -
STARBUCKS ENTERED INTO A FADING COFFEE MARKET
After Folgers' & Maxwell's Market Share Wars, Starbucks with New Value Proposition
1980s: Declining consumption and
new value
proposition
market
share wars
Since 1990: Starbucks with steady sales growth
through new value proposition
Coffee consumption
(cups per person per day)
Starbucks sales(3)
•
•
•
3,0
2
2,0
1
1,0
1950
1960
1970
••Maxwell
MaxwellHouse
Housebrand
brand
established
with
established with"affordable
"affordable
luxury"
luxury"
(1)
••Loyal
Loyalcustomers
customers(1)
••Folger's
Folger's&&Maxwell
MaxwellHouse
House
highly
profitable
highly profitable
1980
1990
••Price
Pricecuts
cuts
••Reduced
Reducedquality
qualityto
to
lower
lowercosts
costs
••Weakened
Weakenedbrands/
brands/
consumer
loyalty
consumer loyalty
••Low
Lowgross
grossmargins
margins
••Losses
on
coffee
Losses on coffeein
in
the
late
80s
the late 80s
1990
••Gourmet
Gourmetcoffee
coffeeagain
againas
asaffordable
affordableluxury
luxury
(2)
(2)as
a
non-alcohol••Shops
as
"the
third
place"
Shops as "the third place" as a non-alcoholserving
servingbar
barwith
withsocial
socialinteraction
interaction
••Price
Pricepremium
premiumfor
forhigh
highquality
qualityand
andagreeable
agreeable
atmosphere
atmosphere
••Increased
Increasedsales
sales
(1) 80% of Maxwell House consumers would not switch if another brand were on sale
(2) Besides home and work
Source: U.S. Bureau of the Census; J.C. Bradford & Co.; Press Search; Starbucks annual reports; BCG-Analysis
2000
(3) Indexed on 1999
- 25 -
STARBUCKS' GROWTH WAS ALMOST EXCLUSIVELY ORGANIC,
BUT IN DIFFERENT GRADUATIONS
Different Growth Dimensions—Overview
Expand sales per store
Product range
• Coffee and related
products
Grow number of stores
Domestically
Explore new channels/products
Licensing stores
• Domestically
• Internationally
• Warm breakfast
• Lunch
Extended hours, efficiency
improvement in selling process
Merchandising
Other non-food
• "Hear Music"
Internationally
• Company
operated
• Joint ventures
Distribution channels for
coffee beans
• Grocery
• Club and
wholesale market
New products in JV
• Frappuccino
• Ice cream
• DoubleShot
Source: Starbucks; analysts reports; press articles; BCG analysis
- 26 -
SALES PER STORE EXPANDED BY INCREASING CUSTOMER
BASE, CUSTOMER LOYALTY AND ADDING PRODUCTS
Customer base
Expansion of customer base (Survey
in 1999 and 2005)
• From customer average annual
income of $81,000 to $55,000
• From 78% college grads to 56%
Concentrated in
metropolises
Product range
73%
54%
Top 50
markets have
73% of sales
32%
22%
5 10 25
50
Top markets
Survey: Most attractive WiFi
hotspot
Coffee and related
products
Warm breakfast
Lunch, dessert
• More than hotel lobbies
• and airport lounges
Loyal customers
Starbucks card already has
15% of sales
• Drives frequency
• Wins new customers when
sold as a gift
High customers frequency
• Best customers come
16.2 times per month
• Average is six times a
month
Survey: Sixth among US brands
- 27 -
"HEAR MUSIC" IS ANOTHER NEW IDEA
TO IMPROVE INTRA-STORE SALES
And Fits Starbucks' History of Selling Innovative CDs
Idea and investment
What customers can do and how to earn money on it
1. Hear music
Customers pick their preferred music at a
terminal while …
… having no interaction with salespersonnel
Customers spend more time in store
and potentially buy more coffee
2. Burn customized CD
Customers can choose from over 200,000
tracks and …
… assemble a personal collection of songs
and burn them on a CD
Investment:
Investment: $20,000
$20,000 per
per store
store
(1) Prices: $7.99 for the first and $0.99 for each additional song
At a price of about $10 per CD(1), breakeven(2) is 11 CDs per store per day
(2) Without consuming coffee while listening calculated in
- 28 -
DOMESTIC EXPANSION: GOAL EXCEEDED MANY TIMES OVER …
Analysts' Quotes
May 2005
"We think Starbucks' 15,000 store target is
reasonable (from 6,600 today)."
November 2001
"Our analysis suggests that there is room for a total of
between 5,000 and 7,000 company-owned Starbucks
ultimately in the US."
September 1999
"Our analysis ... concludes that, on a very conservative
basis, the company still has room to double the number of
stores ... to well over 4,000."
- 29 -
... BUT WHERE IS THE LIMIT ?
Possible Saturation of the Domestic Market
Situation today
Historic growth
From 961 stores in 1999 to
present number today
About 6,600 stores in the US …
… with highest concentration still
on the West Coast where the
company has its roots
(about 40 % of US stores)
Borders/constraints
McDonald's: 13,500 in the US
• Starbucks with no clear no. 2
(such as Burger King,
Wendy's, ...)
• But less accepted in rural areas
Maximum of 7,000; premises
• Metropolitan areas: average
Seattle(1), Portland, San Francisco,
San Diego, Denver: 40,000
residents per store
• New regions: Median incomes 10%
over national average and more
than 175,000 residents in MSA(2)
If Starbucks reaches the saturation
point, deterioration in new-unit
productivity will be seen; this has
not yet been observed however
(1) Seattle has average of 20,000 per store
(2) MSA: metropolitan statistical areas. For details on methodology, see DB Report from Sept. 24, 1999; for recalculation Nov. 27, 2001
- 30 -
EBITDA MARGIN REMAINS CONSTANT ...
... And Clearly Above Peer Group
20%
Interpretation
15%
Majority of sales comes from branded, high margin
lifestyle coffee products
10%
5%
Total retail sample
Starbucks
Additional increase of margins by royalties from
non-company-operated stores
0%
'99
'00
'01
'02
'03
'04
Leverage of brand and margins by licensing coffeerelated products
Transfer of proven high margin product and store
concept by impressive sales growth (no erosion of
margins)
- 31 -
STARBUCKS' MULTIPLE FAR ABOVE PEERS
BUT FIRST DOUBTS ARISE IF SUSTAINABILITY IS STILL GIVEN
Almost Doubled between 2002 and 2004
Interpretation
24.9
16.8
EBITDA
multiple
28.7
19.9
16.7
15.5
16,4
12,1
'99
'00
12
'01
8,7
9,8
9,8
'02
'03
'04
Starbucks
Total retail
sample
Stock price reflects future expectations, but
EBITDA multiple reflects past (or its extrapolation)
Î future growth expected
No dividends distributed, thus earnings are
distributed to shareholders via price—treasured
Brand has a high value, resulting in high
immaterial assets (goodwill(1) or premium)
Although marketing investment remains
reasonable (1.3% of sales in 2004)
November 2004:
"20% to 25% growth is not an issue ... what's 20% to 25% worth? ...
We ... believe the current valuation either assumes at least 30%
growth in FY'05 or the market's pricing SBUX off FY'06 EPS. ...
Starbucks' multiple appears to have peaked."
(1) Goodwill can only be accounted for if acquired or costs could be activated in certain cases
- 32 -
SUMMARY - LESSONS LEARNED
Starbuck's performance is a clear growth story
•
No dividends distributed: retained to finance further growth
•
Mostly organic because the market is young and no serious competition
is in the market yet
•
Establishing a strong brand does not necessarily imply enormous
marketing investments
JV and licensing can be important alternatives to pure organic growth
•
Reducing capital investment, reduce risk and improve margins
•
Profiting from the partner's knowledge when entering new markets or
launch new products
•
But: they necessitate proper control and decision processes can take
longer
Chances in different regional markets can differ greatly according to regional
circumstances – a success story cannot simply be rolled out
Source: Starbucks; Analysts Reports; Press Articles; BCG analysis
- 33 -
AGENDA
Managing Growth
•
•
- 34 -
DRIVING SUPERIOR TSR REQUIRES AN INTEGRATED
CORPORATE AND FINANCIAL STRATEGY
M&A
strategy
“Integrated corporate
and financial
strategy”
Investor
strategy
Revenue
growth
Margin
(%)
Capital
structure
target
TSR
Portfolio
strategy
FCF and
ROI
P/E
multiple
“Value-based
management
capability”
Real
Estate
strategy
Metrics
“Diagnose issues,
opportunities,
constraints,
alternative TSR
strategy scenarios”
Dividend
policy
Share
repurchase
Planning
Budgeting
Resource
allocation
Role of
center
Target
setting
Compensation
Training
Reporting
“Ensure current
facts, signals,
effective processes
to enable
organization to
deliver superior TSR
results”
This
This effort
effort will
will focus
focus on
on “TSR
“TSR strategy”
strategy” where
where we
we will
will integrate
integrate business
business strategy
strategy and
and competitive
competitive
advantage
advantage concepts
concepts with
with TSR
TSR “facts”
“facts” and
and principles
principles to
to ensure
ensure success
success
- 35 -
CLIENT’S STRATEGIC OPTIONS MAP TO DIFFERENT ELEMENTS
OF THE “TSR STRATEGY”
Elements Are Highly Interdependent – Must Assess in an Integrated Fashion
4
M&A
strategy
Acquisition of segmentcentric/ segment adjacent
players?
Investor
strategy
Real
Estate
strategy
6
Revenue
growth
Margin
(%)
7
Impact of company
sell/ LBO?
Capital
structure
target
Impact of share
repurchase?
TSR
Portfolio
strategy
2 “What if scenarios” for spinoff
options?
Impact of sale/ lease-back / 5
reduction of key fixed
assets?
FCF and
ROI
P/E
multiple
Share
repurchase
Dividend
policy
3
1
Future prospects of
CLIENT’s underlying
business?
Portfolio trimming
potential?
Need
Need to
to diagnose
diagnose issues,
issues, tradeoffs,
tradeoffs, and
and options
options across
across all
all levers
levers
- 36 -
A FEW COMMENTS FROM OUR CLIENTS REGARDING
INSIGHTS FROM TSR STRATEGY DISCUSSIONS
“It was critical to complement the ‘hard’ financial and valuation analysis with the investor
perspective (the ‘soft’ side). All this time we had been listening to the analysts and not the
investors. Boy, did we get it wrong!
The investor dialog and financial analysis gave us critical insight into how to refine our corporate
and financial strategies into an overall “TSR strategy”. We are now heading down a path that we
believe will significantly increase our valuation”
Chief Financial Officer
“The investor insights enabled me to finally realize that we have been talking right past our
investors. We are excited about growth, so we have been speaking mostly about growth with
investors and analysts... When what matters to them as value investors are our true strengths–
high ROIC and our great free cash flow generation. This is a critical insight for us”
Chairman and CEO
“I was dead-set against doing this work because I felt there was little to learn from the investors
that I did not already know. I am a full convert and recognize the great value and insights of the
work.”
Vice President of Investor Relations
Source(s): BCG client
- 37 -
AGENDA
Managing Growth
•
•
- 38 -
QUESTIONS? COMMENTS? DISCUSSION!
- 39 -