Tikkurila in Russia Carnegie 06062013

Tikkurila in Russia
Carnegie Field Trip
June 6, 2013
Simo Laitala,
Managing Director, Russia and Central Asia
Disclaimer
In this presentation, all forward-looking statements in relation
to the company or its business are based on the
management judgment, and macroeconomic or general
industry data are based on third-party sources, and actual
results may differ from the expectations and beliefs such
statements contain.
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Contents
• Tikkurila in brief
• Tikkurila in Russia
• Conclusions
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3
Tikkurila in brief
Tikkurila in brief
Tikkurila in a nutshell
Tikkurila's locations
Customers:
Consumers and professionals
Market position:
Leading market position in decorative paints in
Finland, Sweden, Russia and the Baltic countries,
one of the leading in Poland
Sweden
Finland
Estonia
Poland
Germany
Ukraine
Market area:
Northern Europe, Central Eastern Europe, Russia
and other CIS countries, Ukraine
Products and services:
Decorative paints, industrial wood and metal
coatings, customer training, comprehensive
advisory service (e.g. Customer hotline), Designer
and Contractor Pool etc.
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Russia
Kazakhstan
Serbia
China
Production, logistics center, sales
Logistics center, sales
Distribution center, sales
Tikkurila key facts 2012
Revenue
EBIT*
Personnel
9%
19%
25%
17%
36%
42%
45%
16%
17%
32%
29%
East
•
•
•
Scandinavia
Finland
CEE
East
Scandinavia
13%
Finland
CEE
Revenue EUR 671.8 million
EBIT (excl. non-recurring items) EUR 73.9 million
Personnel at year-end 3,227
*Excl. non-recurring and Group items
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East
Scandinavia
Finland
CEE
Tikkurila in Russia
Tikkurila's key milestones in Russia
1980’s Export to the Soviet
Union started with
industrial coatings for
automotive industry
1862
1862
Tikkurila
established
in Finland
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1970
1980
1990
2006
Acquisition of Kraski
Teks in Russia
2007
Acquisition of Gamma
and Ohtek in Russia
2009
Logistic center in
Mytischi, Moscow
2000
1990’s Tikkurila is the first
western paint
company to start
promoting tinting
technology in
Russia
1970s
Entering the Eastern trade.
Tikkurila was known as
"Firma Miranol" in Soviet
Union. The acquisition of
Kraski Teks in 2006 made
Tikkurila the leading
decorative paint company in
Russia.
1995
8
Opening of the first
western paint factory in
St. Petersburg
2010
2010
New production line in
St. Petersburg for
water-borne products
2011
Divestment of Powder
Coatings business
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, 42% of Group
Personnel
1,517 (on average in 2012)
Production sites
Retail
Paint
consumption
Current demand
structure
Russia (4) 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
*Source: Chem-Courier 2011 (decorative paints, volume)
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Tikkurila brand positioning in Russia
PREMIUM
MEDIUM
"Teks Profi"
ECONOMY
"Teks Universal"
"Teks Optimum"
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Russian paint market is fragmented and
changes have been minor
Russian decorative paint market shares in 2012
Market share development in Russia in 2010-2012
70%
Tikkurila
17%
Empils
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
0%
Tikkurila Empils
Lakra
2010
*Source: Chem-Courier 2013 (volume)
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VGT
2011
Akzo Caparol
Nobel
2012
Other
Macro environment deteriorates
• GDP grew by 1.1% in Q1/2013
• FY GDP growth is estimated to be
modest (1-2%)
• Russia's dependency on oil has
increased
• Winter Olympics in 2014 and FIFA
World Cup in 2018 are expected to
support the GDP growth and
consumption
• Deteriorating of state institutions and
corruption
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Paint consumption is still on a relatively low
level in Russia
Europe
8–15 liters per capita
Russia
~6 liters per capita
Paint consumption per capita
Russian population
142.5
million people
* Source: paint consumption, IPPIC
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= high
= middle
= low
Good coverage of operations
Saint Petersburg
Yekaterinburg
Samara
Moscow
Kopeisk
Novosibirsk
Irkutsk
Stariy Oskol
Krasnodar
Khabarovsk
Population of Russia's largest cities
Moscow
St. Petersburg
Novosibirsk
Yekaterinburg
Nozhny Novgorod
Kazan
Samara
Omsk
Chelyabinsk
Rostov-on-Don
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10.56
4.6
1.41
1.34
1.28
1.14
1.14
1.13
1.1
1.05
Production, logistic center, sales
Logististic center and sales
Sales office
Source: Global insights, Rosstat, E&Y
14
Track record in SBU East
SBU East revenue and EBIT margin 2007–2012
EUR million
%
300
250
200
Development of Russian GDP and SBU East revenue*
16
11.9%
13.4%
14
243
12
12.4%
11.3%
227
11.5%
10.6%
204
20
10
220
10
195
0
2008
167
150
%
2009
2010
2011
2012
8
6
100
-10
4
-20
50
2
0
0
2007
2008
2009
Revenue East
2010
2011
2012
-30
Russian GDP growth, %
EBIT margin
Source: Rosstat (GDP)
*Euro-denominated revenue growth
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East revenue growth, %
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
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Water-borne paints have clearly increased
market share in Russia
Market
Tikkurila
100%
100%
90%
90%
30%
38%
80%
80%
70%
70%
60%
60%
50%
50%
40%
40%
62%
30%
70%
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
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0%
2012
Water-borne
Solvent-borne
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, i.e. Russian, big boxes
• Located only in the central parts of Russia, i.e. in big cities
• Low coverage of regions
• Big boxes account for approximately 20% of Tikkurila sales in Russia
•
Tikkurila is present in all channels and has a long history of cooperation with the
customers
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Industry
Findings of a consumer survey in Russia
Decision is made at the store
1%
Factors impacting the 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
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10%
10%
Big retail (Starik Hotabych, etc.)
Special painting shop
Household shop
9%
5%
Growth through increased number of sales
points
Tikkurila's new paint shop concepts
Color Studio
•
•
•
For consumers and
designers
Brand offering: Tikkurila
First shop opened in St.
Petersburg in May 2013
•
•
•
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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
20
•
•
•
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
Customer service improvements
•
•
•
•
•
Training centers
Order Desk
Customer Hotline
Consumer Hotline
Technical support
• for 'deco customers'
• for industrial customers
• for professionals
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New training center in St. Petersburg
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Conclusions
23
Key growth drivers
GDP growth
Market forces
Trading up
Changes in sales organization
New approach in marketing
Own operations
New shop concepts
Broad service offering
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Thank you