Orkla Branded Consumer Goods - The multilocal model, Torkild

Orkla Branded Consumer Goods
The Multilocal Model
Torkild Nordberg, EVP Branded Consumer Goods
Capital Markets Day
31 May 2007
Orkla Branded Consumer Goods
•
Achieved 57 % growth over the last 5 years
•
Pursues a unique multilocal strategy that gives superior consumer insight
•
Strong focus on innovation – the main driver for category expansion, top line
growth and competitive advantage
2
Agenda
•
Historical performance - growth ambitions - mindset and strategy
•
Orkla BCG’s set-up and competitive advantages
•
The Orkla multilocal model and modus operandi
•
Innovation is our future
•
Case from our textile business
•
Summary
3
Consistent EBITA growth
-From NOK 1.6 to 2.5 billion in 5 years - Q1 in line
EBITA 12-month rolling
Orkla Branded Consumer Goods
NOKm
NOKm
2 600
1 Jan - 31 Mar
2007
2 400
Revenues
EBITA
EBITA margin
5 285
468
8.9 %
2 200
2 000
1 800
1 600
1 400
1 200
Q1-02
Q3-02 Q1-03
Q3-03
Q1-04
4
Q3-04
Q1-05
Q3-05
Q1-06 Q3-06
Q1-07
2006 Change
4 878
425
8.7 %
8%
10 %
Top-line ambitions 2007-2009
•
3 % annual organic growth
•
Continued structural growth – focused on acquisitions
5
There are always growth opportunities!
-Illustration from Home and Personal Care
6
Moving Jif outside chemical products…
7
…has tripled Jif’s turnover!
- strong and sustainable growth
Jif Sales in value (1000 NOK)
350 000
325 476
300 000
265 655
234 058
250 000
209 170
213 547 218 782
200 000
154 569
150 000
112 402
87 570
100 000
95 386
50 878
50 000
0
1996
1997
1998
1999
2000
2001
Jif Skurekrem/Sprayer
8
2002
2003
Jif Nye Metoder
2004
2005
2006
Our organic growth strategy
1. Innovation and continuous improvement of our customer offering – Moving Target
2. Constant improvement of our trade offering and increased ”sales push”
3. Securing competitive input cost and internal cost levels versus global competitors
9
Structural growth in Orkla BCG
-since last Capital Markets Day
Acquisition target
Annual revenue
Collett Pharma
Health Products, Nordic
340
Baker Nordby
Bakery, Norway
125
Brinkers
Margarine, Romania
120
Krupskaya
Confectionary, Russia
330
Dansk Droge
Health Products, Nordic
480
GL Johansson
Bakery ingredients, Sweden
25
Curamed
Health Products
10
MTR Foods
Food, India
Gaedbakstur
Bakery, Iceland
30
Saarionen
Vegetables, Finland
80
Setuza
Margarine, Chech Rep.
115
Pastella
Fresh Pasta, Nordic
140
10
230
Nordic Branded Consumer Goods
-The ”role” is basically unchanged
A recipient of central European development and sourcing
11
Orkla’s set-up – a very different animal
•
A ”multilocal” Branded Consumer Goods strategy
•
Strong positions – 80 % of turnover from brand leadership
•
Brand ownership
•
Orkla’s unique local value chains and cross-functional competence
•
Orkla´s unique local innovation capability
12
Orkla’s competitive advantages
•
Superior local consumer insight and proximity to markets
•
Strong consumer loyalty to our brands
•
Strong, preferred position and scale in retail trade
•
Tight cross-functional team
•
Continuous improvement culture; world class benchmarking
13
Orkla’s multilocal thinking
•
Responsibility for profit and decisions rests with the local companies
•
Central corporate governance to help and guide
•
Our strong positions are created and developed locally
•
Cross-border categories are supported by resources in our biggest companies
•
Innovation is increasingly flowing across borders
•
Corporate technical support resources are available in sales, marketing, production
and purchasing
•
Technical/professional forums develop and transfer best practices
•
Centralised functional and leadership training
14
Strong positions
n
tio
uc
od
Pr
Strong
position
e
Developm
Fi
na
nc
e/I
T
Purchasing
Marketi
ng
-the source of growth and high, sustainable profits
nt
15
Sales
Lo
gis
tic
s
Hallmarks of a strong position
•
Profit levels consistently above market average
•
Robust market shares over time
•
In spite of aggressive competitive activities
•
High customer loyalty levels
•
Trade ”cannot do” without the brand
•
Scale, pricing and shelf power
•
Strong and long track record in innovation
•
Moving target track record
16
n
tio
uc
od
Pr
Strong
position
e
Developm
Fi
na
nc
e/I
T
Purchasing
Marketi
ng
A strong position is always created by a
competent, cross-functional management team
nt
17
Sales
Lo
gis
tic
s
Orkla – a different ”animal” (1)
-Strategic elements
18
International
players
Orkla companies
Strategy
Central
Local + Central
Innovation
Central
Local + Central
Marketing
Central
Local + Central
Sales
Mainly local
Mainly local
R&D
Central
Local
Production
Central
Local + Central
Innovation is our future
• To make the total market expand
• To secure top-line growth
• To increase our competitive advantage
19
Innovation
-by Orkla definitions
•
Products for which the consumer is willing to
pay more
•
Products increasing the value of Orkla’s brands
for all stakeholders:
•
•
•
The Consumers
The Trade
The Shareholders
Functional + Taste + Emotional benefits
Price
We have to focus above the line !
20
Orkla – a different ”animal” (2)
-Innovation strategy
21
International players
Orkla thinking
Market research based
Consumer insight
Volume
Value
Competitive pricing
Premium pricing
Brand based
Category based
Low risk (global)
Higher risk
Central sourcing
Flexible sourcing
We strive for the best consumer insights
22
•
Our competitors have access to the
same data and information as we do
•
Orkla’s competitive edge comes from
combining this with real life consumer
insight
23
Source: Paul Walton, the value engineers
Insight is about going beyond the numbers
Being close to consumers:
• In their kitchen
• In their bathroom
• In the shower (?)
• In the store
• In their fridge
• Etc.
Research reports are very poor
substitutes for live, candid and direct
consumer feedback!
24
Our starting point is our categories
- not our brands
•
Categories represent relevant consumer and retailer needs
and should guide all our actions
•
A category perspective provides the highest growth potential
and best growth mindset
•
•
•
Our brands are ”tools” to meet certain needs
Can we meet relevant needs through existing brands – or do we
need new ”tools”/brands?
We must not miss opportunities for growth!
•
Our retail customers are only interested in categories and
what drives growth and profitability
•
”Zero-profit games” among branded goods suppliers are of
little interest to retailers
25
Example: New Brand - Explore
26
Example: Kalles and Abba brands
-expand into new categories
27
Our strategy is to develop products with superior
quality
Functional + Taste + Emotional benefits
Price
Value =
•
Product quality is always at the core of consumer preference
•
Pressure on margins must not reduce the perceived benefit
•
In the tough market of today we will not compromise on quality
•
We actively seek ways of improving the quality of our brands as a basis for
increasing prices
28
Developing superior quality products
-and making them even better
• Adding ”more of the good stuff”…
• …while charging an acceptable
premium
Functional + Taste + Emotional benefits
Price
Value =
29
Premium launches
- examples
30
Brand Case:
Kristin Olstad Schea
Managing Director Textiles
31
Orkla - female underwear innovation is a success
MNOK
60
+92 %
50
Pierre Robert
40
41.4
30
20
28.3
10
12.7
0
2005
Other lady underwear
2006
Pierre Robert underwear
Source AC. Nielsen
32
Nordic Position
2005
•
La Mote strong brand name in Norway, but
only related to hosiery
•
Big private label threat in Sweden, also
present in Norway
•
Declining profit
•
Distribution:
•
•
3 out of 4 trade retail customers in Norway
Limited numbers in Sweden and Finland
33
Underwear represents the greatest value in our
categories
Total market –consumer value
NOK 3.1bn (2004)
Socks 22 %
•
BUT…it was difficult to attract new
customers to the grocery trade
•
The grocery channel had only 8 %
of total underwear sales in Norway
•
Women aged 40+ were heavily
over-represented in the grocery
channel
•
Huge potential!
Tights 15 %
Underwear 63 %
Source: GfK Norge 2004, MMI qualitative research 2005
34
Consumer insight
•
Scandinavian women differ from
Southern-European women
•
Cultural values:
•
•
•
Lifestyle:
•
•
independent lifestyle
own income
combines career and family life
Clothing and fashion:
•
•
•
practical, casual, relaxed
attractive, but not super - feminine
cooler climate influences the dress
code
Source: Qualitative research, Opinionen 2004
35
Fierce competition among a few established players
• Sloggi & Triumph are market
leaders
Sparkjøp
2 %
Ellos
2 %
la Mote
3 %
Cubus
7 %
Andre
24 %
• The textile stores uses their
own brand names
Kappahl
8 %
• Frequent price campaigns in
order to generate traffic
H&M
11 %
• Expansion of new stores
Sloggi, Triumph
26 %
Lindex
17 %
Source: GfK Norge 2004
36
37
Potential in ”tailor made” underwear
-designed for the Scandinavian woman’s preferences
•
Scandinavian woman wants underwear designed for her lifestyle:
•
•
•
Comfortable fit and consistent models
Accessible in her personal favourite model and material (cotton and micro fibre)
High grocery barriers when buying underwear:
•
•
•
Low quality
Out of fashion
Need hygienic packaging in order to buy in grocery stores
38
– strong appeal among Scandinavian women
39
•
Long history in cosmetics and skin
care – big in the ’80s
•
High brand awareness in Nordic
countries – 65 % in Norway, 65 % in
Sweden
•
Positive customer associations;
international, textiles, a brand I trust
•
Origin in Sweden - ”sleeping brand”
•
Developed by Orkla in Norway since
the 1950s
The Pierre Robert concept
•
Everyday products tailor-made for
Scandinavian lifestyles and needs
•
Comfortable high-quality products,
feels good, and look attractive
•
Pierre Robert women:
•
•
•
•
•
•
Well-dressed
Self-confident
Natural and healthy
Intelligent and smart
Quality oriented
Fashion oriented
40
Pierre Robert
-Underwear collection
•
Six models developed in close cooperation with an
underwear designer and leading supplier.
•
Two product materials: cotton two-ways stretch and
microfibre two-ways stretch.
•
Basic colors: black and white
•
Two seasonal collections
•
Exclusive packaging design
41
Stockings for Scandinavian woman
Launched 1 February 2007
42
Underwear for men
Launched 1 May 2007
43
Critical factors for success
•
Identified opportunities for growth in the textile category
•
•
Gain essential consumer and shopper insight
•
•
Transfer it to grocery stores
Higher project risk in launching of a ”new brand”
•
•
analyses of Scandinavian women
Identify the ”category language” for the prestige brand
•
•
not in our existing brand
increasing the price by 50%
Benchmarked best practices from global competitors and Orkla
•
transfer expertise from Orkla and textile companies
44
The project has significantly strengthened
Orkla’s textile division
•
Scandinavian women are very positive to the launch and use of the established
brand
•
Category turnover and profitability in grocery is increasing
•
”Premium price” of 50 %
•
Our market share has increased
•
Our position in the retail trade has improved
•
Sales and profitability of our textile business have increased remarkably
45
Summing up -
Market and Performance
•
Orkla’s Branded Consumer Goods businesses are exposed to global competition
in the areas where they operate
•
Orkla has achieved substantial and consistent EBITA growth over the last 5 years
•
Future growth will continue to be a mix of organic and structural development
•
Acquisitions, development and strengthening strong positions will be the main
focus
46
Summing up -
Modus operandi
•
Orkla pursues a unique multilocal strategy
•
Strong consumer and trade positions
•
Proximity to markets and a local value chain
•
Broad, cross-functional competence
•
Superior consumer insight
•
Profit responsibility lies with the local company
•
Support from central resources
•
World class benchmarking against bigger scale players across the value chain
•
Culture that promotes continuous improvement
47
Summing up -
Innovation
•
Orkla’s main driver for category expansion, top line growth and enhanced
competitive advantage
•
”Trading up” focus;
•
Innovation is only used for products for which consumers are willing to pay more
•
Focus on superior product quality and premium price
•
The goal is to increase value for all stakeholders
•
The category is always the starting point – the brands come second
•
The multilocal model facilitates higher risk/reward projects
48
Orkla Branded Consumer Goods
•
57 % growth over the last 5 years
•
Pursues a unique multilocal strategy that gives superior consumer insight
•
Strong focus on innovation – the main driver for category expansion, top-line
growth and competitive advantages
49