consumer products limited - aceanalyser meet/132424_20100406.pdf · 2010-04-07 · soaps hair...

CONSUMER PRODUCTS LIMITED

Soaps Hair Colours

LiquidDetergents Toiletries

Household Insecticides

& Others

InternationalOperations

Indonesian Acquisition

Godrej Consumer Products Limited: Building An Indian MNCInvestor Presentation – April 6, 2010

GCPL strategy: Evolving into a

focused, emerging markets consumer

powerhouse

Target: Leading local household care player with

manufacturing and distribution capabilities

GCPL: Successfully integrating

acquisitions bymaximizing synergies

Key transaction highlights: Strongly

EPS accretive for GCPL

shareholders

Transaction rationale:

Access to leading local brands in a key

emerging geography

Potential upsides and next steps:

Godrej to leverage its

experience and brand

GCPL roadmap 2015: – Leading

position in India and emerging markets

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5

6

GCPL: An established FMCG

player competing effectively with

domestic & MNC players

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3

4

7

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PRESENTATION OUTLINE



powerhouse

GCPL roadmap 2015: – Leading

position in India and emerging markets

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shareholders



emerging geography




CORE STRENGTHS AND STRATEGY

5

Note: (1) Key businesses captured. Other businesses include the toiletries business(2) Owned by the joint venture, Godrej Sara Lee Ltd., in which GCPL holds 49%(3) Refers to share in the ethnic hair colour market

CONSOLIDATING PRESENCE IN CORE BUSINESSES

Source: Company Information; Nielsen (MAT Dec.09)

34.0%

Key categories (1) Key brands Category market share Rank

Soaps #2

Hair colour (India)

#1

Ethnic hair colour (South Africa)

Household insecticides (2)

(Godrej Sara Lee)#1

#188.0%

32.9%

10.1%

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5

6 3

4

7

8

2

(3)

✔ Leading presence in core categories and a portfolio of marquee brands

6

9 118

34.0%33.8%35.5%

2007 2008 2009

7 87

88.0%87.0%85.0%

2007 2008 2009

172119

31.7% 32.9% 32.9%

2007 2008 2009

668577

9.8%9.3%

10.1%

2007 2008 2009

Note: (1) Held through Godrej Sara Lee (2) Hair colour excluding “henna”Source: Company estimates, Nielsen (MAT Dec)

GCPL has been able to maintain a growing position in the majority of its business categories

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Household and personal care in India is becoming an increasingly competitive space

Soaps – India Hair colour – India

Household insecticides – India (1) Ethnic hair colour – South Africa

Toilet soaps market size (INR bn) GCPL soaps market share value Hair colour(2) market size (INR bn) GCPL hair colour market share value

HH insecticides market size (INR bn) GCPL HH insecticides market share value Ethnic hair colour market size (INR bn) GCPL ethnic hair colour market share value

Market size CAGR 13.9% Market size CAGR 17.4%

Market size CAGR 12.2% Market size CAGR 4.3%

STABLE MARKET POSITIONS

✔

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7

2,1081,619

3,023

2,1851,401

FY2008 FY2009 9M FY2008 9M FY2009 9M FY2010

11,02613,930

8,331

15,320

10,491

FY2008 FY2009 9M FY2008 9M FY2009 9M FY2010

STRONG FINANCIAL PERFORMANCE

INR mn

INR

(1)

Notes: (1) GCPL owns 49% in Godrej Sara Lee Ltd. Proportionate results have been considered for consolidation

INR mn

(1)

7.05 6.835.24

8.35

4.51

FY2008 FY2009 9M FY2008 9M FY2009 9M FY2010

Net sales EBITDA

EPS Contribution to sales (9M FY10)

(1)

(1)

GCPL’s increase in market share is coupled with consistent profitability

20% 15% 19% 13% 20%

EBITDA Margin (%)

36.6%

35.6%

26.2%

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5

6 3

4

7

8

2

✔

13.4%

17.0%

19.4%1.4%

42.8%

3.1%2.9%

SoapsHair ColourLiquid DetergentsToiletriesHousehold Insecticides & OthersInternational BusinessOthers

8

Focus on household, personal and hair care is in line with global FMCG success formula of focusing on core businesses

Rolling out new brands globally is a very expensive exercise. It’s much more likely that you will see the bulk of new innovations in our existing brands

– Bart Becht, Reckitt Benckiser

Strategically we were trying to do too many things, It wasn’t clear what our core businesses were and we had lost focus

– AG Lafley on the situation before he turned around P&G

The Company's focused business strategy has proven itself over time under many different economic conditions

– Reuben Mark on Colgate’s success

We are focused on growing our core business segments of household and hair care inorganically, through acquisition of strong local businesses in developing and emerging markets. We shall leverage our strengths and successful performance in India in these segments to enhance shareholder value

– Adi Godrej on GCPL’s growth strategy

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FOCUS ON GROWING CORE BUSINESSES AND BRANDS

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Brand focus

Category focus

Leadership focus

9

GCPL’s strategy is focused on building sustainable, “top 3” ranked brands in the identified categories

Personal care:− Soaps − Hair colour

Household care:− Household insecticides− Air care

To develop a network of strong brands and agile businesses in hair care and household care in identified geographies

Personal care:− Cinthol− Godrej no. 1− Godrej Hair Dye

Household care:− Good Knight− Jet− Hit

Personal care:− Market leader in

Hair colour

Household care:− Market leader in Household

insecticides, Air care

Focus on brands with high relative market share and strong consumer franchiseUse local expertise and a global product development funnel to tackle common competition

Leveraging its expertise to build global scaleUse scale economies in purchase, scope economies in product development

Established presence

Category focus Leadership focusBrand focus

Future objective

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CORE BUSINESS STRATEGY

✔Three brands with sales of ~US$100 million each – Godrej No.1, GoodKnight, HIT1✔

Notes: (1) Including India and Indonesia

10

Acquisitions in South Africa, Nigeria and Indonesia are in line with GCPL’s emerging market expansion strategy

GCPL is leveraging its expertise and experience to expand to key emerging markets in identified segments1

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SETTING THE STAGE FOR EXPANSION IN D&E MARKETS

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✔

• Build agility & competencies to compete with MNCs

• Dominated by few MNCsincluding strong local brands which GCPL can acquire

• Focus on household insecticides and hair care

• Emerging markets with similar consumer behaviour and high potential growth in each of the businesses

GeographyBusiness segment

Competition Market

• Leverage on past experience by entering markets with similar consumer demographics

Consumer profile

CONSUMER PRODUCTS LIMITED

11



powerhouse

GCPL roadmap 2015: – Dominate the Indian market and lead emerging

markets

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shareholders



emerging geography




SUCCESSFULLY INTEGRATING ACQUISITIONS

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SUCCESSFULLY INTEGRATING AND MANAGING ACQUISITIONS

Able to successfully acquire and integrate strong, local, personal and household care brands in key emerging markets

Keyline

Operates in toiletries and personal care sector

Key Brands: Cuticura, Adorn, Erasmic

Rapidol

Owns ethnic hair colourbrands in ten countries

Key Brands: Inecto, Soflene

Kinky

Offers hair products and hair accessories

Key Brand: Kinky

Megasari Group

Leading FMCG player in Household care sector

Key Brands: Hit, Stella, Mitu

Tura

Leading personal care player in Nigeria

Key Brand: Tura

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Ethnic hair colour

brands

OVERVIEW OF PAST ACQUISITIONSMarket position

KinkySouth Africa

RapidolSouth Africa

KeylineUK

Unique mix of an own store model and sales through the retail channel built around the storesLeadership positions in the top cities of South Africa

Dominant position in ethnic hair colour in South Africa – 85% + market shareLeadership position in 10 other countries in Southern Africa

Niche positions in skin care

GCPL’s contribution to the acquisitions

Since its acquisition, Kinky has opened 9 more stores across South Africa taking the total to 24Drawn up an organic plan to take Kinky products to all markets of Africa where Inecto has a strong export based presence

Inecto Powder Hair Colour and Henna, launched in 2007-08 and Renew launched in 2009 are doing exceedingly wellBackend synergies have almost doubled profitability of RapidolIntroduced Godrej No. 1 soap in South Africa through the whole sale channel

Back-end synergies have significantly improved profitability

Products

The Godrej Group has successfully managed to extend the Indian brands to South Africa

In addition, the Godrej Group has successfully implemented back-end synergies to improve profitability

Hair products and

accessories

Toiletries and

personal care

TuraNigeria

One of the well respected brands in the Nigerian personal care marketEnjoys a 12% market share in the medicated soaps category

Freshly acquired and integration plans are underwayTo serve as a platform for the hair care category into the West African markets

Medicated soaps, Skin whitening

lotions and other face cleansing

products

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SUCCESSFULLY INTEGRATING ACQUISITIONS

Kinky (2008) Rapidol (2006) Keyline (2005)

Net sales (INR mn)

PBT (INR mn)

514407

584

FY2009 9M FY2009 9M FY2010

Under the Godrej Group management , sales and profitability have been significantly higher

Net sales (INR mn)

PBT (INR mn)

0.6% 12.0%5.3% 11.9% 10.1%8.5% 10.3% 14.6%15.9% 17.6%18.2% 24.4%

471 488378

519

FY2008 FY2009 9MFY2009

9MFY2010

1,675 1,6802,006

1,7321,571

FY2007 FY2008 FY2009 9MFY2009

9MFY2010

3

22

70

FY2009 9M FY2009 9M FY2010

75 8967

126

FY2008 FY2009 9MFY2009

9MFY2010

199142

203252

163

FY2007 FY2008 FY2009 9MFY2009

9MFY2010

Net sales (INR mn)

PBT (INR mn)

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5

6 3

4

7

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2

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Household insecticides

INSECTICIDES FOCUSED HOUSEHOLD CARE STRATEGY

To build a global scale enabling GCPL to

− Leverage a common innovation pipeline

− Compete in a consolidated industry with common competitors

− Leverage scale and scope synergies

Launch other GCPL categories in these geographies over time

Tropical developing countries

India, Indonesia, Malaysia, China, Brazil, Mexico

Strong local brands with relative market share of > than 0.5

INDIA

MALAYSIA

INDONESIA

BRAZIL

MEXICO

GCPL is focused on building scale in its household insecticides portfolio

Business focus

Ambition

Target geographies

Target business

CHINA

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ACQUISITION RATIONALE AND KEY HIGHLIGHTS



powerhouse


markets

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shareholders



emerging geography




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GCPL TO ACQUIRE THE MEGASARI GROUP

Godrej to begin integration by putting in place a cross functional team

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Adi Godrej Chairman

Godrej Group

A MahendranDirector

FMCG Portfolio Cell

“Megasari Group provides us a strong platform to establish a significant foothold in Indonesia, which is among the largest consumer markets in Asia. Given Megasari Group’s leading position in household product categories in Indonesia and the Godrej Group’s strong presence in this category in India, we believe this acquisition will provide significant synergies and create value for shareholders.

As an emerging market multinational, this acquisition is an important step in our global 3 by 3 strategy – presence in 3 continents – Asia, Africa and Latin America through 3 core categories - home care, personal wash and hair care. Over the last few years, we have been following a very disciplined and focused approach to identifying acquisitions that represent a strong fit with our business, both strategically and operationally. We have also developed strong processes to manage and integrate these acquisitions.

We look forward to working with the Megasari team to take the company to the next level along with creating a platform for other Godrej products in Indonesia.”

– Adi Godrej, Chairman, Godrej Group

“We welcome Megasari Group to the Godrej Group. Megasari Group fits in very well with our entrepreneurial culture and aspiration to become a global powerhouse in household insecticides. We will achieve this by leveraging our significant expertise in this space in related consumer markets that provide attractive growth prospects.

As one of the largest household insecticide and air care companies in Indonesia, the company has a strong track record in innovative high quality value-for-money products to the Indonesian consumer. We look forward to working with the seasoned Megasari team to further accelerate growth and leverage synergies between Megasari Group and the Godrej Group”

– A Mahendran, Director, FMCG Portfolio Cell, Godrej Group

PT. Megasari Makmur and its distribution company (together referred to as “Megasari Group”) are amongst the leading local household care companies

Megasari manufactures a wide range of household products with key focus segments being insecticides, wet tissues and air fresheners

Megasari’s products are ranked amongst the top 3 in each of the respective categories

18

4.35.8

Sin

gapo

re

Mal

aysi

a

Thai

land

Phi

lippi

nes

Vie

tnam

Indo

nesi

a

Indi

a

2009e 2010e Favourable economic indicators− Fitch has rated Indonesia’s sovereign credit fundamentals as “Stable”− Interest rates expected to be stable at 7% - 8% upto 2011− The new government is expected to focus on economic growthFavourable demographics− Population of 240mn with growth rate for FY09E at 1.2% − GDP per capita at US$ 2,300− Favourable demographic trends such as (1) rapid urbanisation (2)

high proportion of working women (3) increasing literacy levels Equity markets− Best-performing, emerging-equity market in 2009− Net FDI brought into the country in 2009 stood at US$ 3.7 bn

Stable and growing economy

Increase in urban population in Indonesia

One of the ASEAN outperformers in terms of FY09 GDP growth

INDONESIAN ECONOMY: FAVORABLE OUTLOOK

Indonesia’s large population coupled with its stable GDP growth makes it a highly attractive investment destination

GD

P gr

owth

(y-o

-y) i

n %

Source: HSBC Asia Economics Q1 2010, Fitch Ratings, EIU, EuromonitorInternational Household Care – Indonesia

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6 3

4

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8

2

58 56 53 49 47

42 44 47 49 51 53

51

2000 2002 2004 2006 2008 2009

89.8 97.8 106.0 114.1 126.3

Urban population (mn) Rural (%) Urban (%)

122.2

50.6%

5.9%10.0%

33.4%

Laundry care

Insecticides

Surface care

Others

c.70% of the household care market is dominated by top 5 players

Population (mn)

5 28 67 98 24087 1,166

Household care sales: US$ 980 (mn)

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19

The Megasari group is a leading local consumer products manufacturing company operating in the household and cleaning products space

It has 6 factories across Indonesia located close to Jakarta

The Megasari Group has a total of 652 employees of which 80 are managerial and 572 are non managerial

The revenues for 2009 were c. US$120 million (growth of 20% y-o-y)

The company has a wide spread distribution network across Indonesia including 11 branches, 619 salesmen, c.90,000 outlets and 74 regional distributors

Regional distributors (47%)

Modern Market (37%)

Traditional Market (16%)

Sales of household care products - 2008

Business segments Megasari Group

Source: Company Information

Insecticides

Air care

Wipes

Others

- Food

- Cleaning

TARGET OVERVIEW: LEADING LOCAL HOUSEHOLD CARE CO.

Well established household and cleaning products player with manufacturing and distribution capabilities

Distribution

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20

15.0%

35.0%

TARGET OVERVIEW: LEADERSHIP ACROSS SEGMENTS

80.0%

#2

#1

#1

N/A

Obtained a leadership position through the launch of innovative and globally competitive brands at economical prices

Key categories Key brands RankCategory market share

Household insecticides

Air care

Wipes

Breakfast cereals

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Exchange Rate US$ 1=Rp 9400Source: Market sources, management estimates

(1)

Note: (1) Market size and market share of household insecticides excludes the coils category

Market size (US$mn)

98125

150

2007 2008 2009

3248

68

2007 2008 2009

1014

21

2007 2008 2009

AerosolElectricConcentrateLiquid SprayChalk & Bait

AerosolLiquidSolidMaticLiquid Electric

Baby productsKid tissuesWet tissues

1316 17

2007 2008 2009

HIT, Stella and Mitu are key brands in the Target’s portfolio with a combined contribution of 71.8% to total sales

CerealOatmealSnackInstant Food

45.0%

CAGR 24%

CAGR 45%

CAGR 45%

CAGR 13%

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KEY TRANSACTION HIGHLIGHTS

Propels GCPL to a top 2 position in Indonesia’s household insecticides, air care and wipes segment and No. 2 Household insecticides player in Asia (ex-Japan)

GCPL has also built-in an integration mechanism, by way of continuity of key management personnel of the Target

As part of the transaction, GCPL has acquired the assets, trademark rights, manufacturing and distribution capabilities of the Target

The Target is one of the largest local household insecticides and air care company in Indonesia. It also has a leading presence in the wipes segment

The Target is a vertically integrated company engaged in supply, manufacture and distribution of its products

The acquisition is expected to be EPS accretive for GCPL from year 1 itself

On April 06, 2010, GCPL has entered into a definitive agreement to acquire 100% stake in PT. Megasari Makmur Group and its distribution arm PT Intrasari, Indonesia

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45

6

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TRANSACTION RATIONALE

Overall, the Indonesian acquisition meets the internal GCPL criteria for its international foray

Immediate access into the high growth Indonesian market

Geographical diversification due to an expanded presence in emerging markets

Further build-up of GCPL’s household insecticides and air care portfolio

Continued support of key local employees in Indonesia

Brands acquired are amongst the top 3 brands in their respective product segments

Similarity between Indonesia and India in terms of consumer demographics and distribution

Strategic rationale

Strongly EPS accretive transaction

Business rationale

Positive diligence results with no major contingencies expected

One of the largest local household insecticides and air care companies in Indonesia

Economic rationale

~~

Incremental shareholder value expected through potential upsides

Low cost debt funding to enhance the IRR and payback on the transaction

GCPL will acquire a strong foothold in Indonesia – #4 market amongst emerging geographies in household insecticides1

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POTENTIAL UPSIDES

Potential synergies

• Ability to replicate Godrej’s success in India in the Indonesian market, due to similarities such as consumer demographics and distribution

• Potential to leverage Godrej’s expertise in the household insecticides and air care segments

• Manufacturing cost: Raw material synergies due to economies of scale

Professionalize supply chain

• Optimize the cost structure by replicating the successful supply chain model from India

• Increase investment in modern retail channels to increase distribution reach and provide greater visibility to products

• Rationalize inventory management systems

Improve corporate governance

Leveraging the existing distribution network

Expansion into neighboring markets

such as Malaysia

Pote

ntia

l ups

ide

Successful implementation of GCPL’s strategy for the target can lead to a strong growth in the EPS

• Implement GCPL’s own corporate governance practices

• Board of commissioners to provide expertise in their areas of specialization and share learnings with the best interests of the company in mind

• To launch new products within existing segments such as coils

• To introduce new categories such as personal care

• To launch existing GCPL brands in Indonesia

• Consider expanding to neighboring countries given climate similarities and potential size of the insecticides market

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LONG TERM VISION AND STRONG EXECUTION ABILITY



powerhouse


markets

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shareholders



emerging geography




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STRATEGIC ROADMAP

• Leading market share in India

• Building a foundation in identified geographies and business segments

• Continue to lead the Indian market

• Obtain leadership positions in identified geographies

− Where: In the household insecticides, air care, personal wash and hair care segments

− How: Replicate GCPL’s successful Indian business model

2010

2015

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SUMMARY

The Godrej Group believes that…

It will be able to successfully integrate the acquisition

The acquisition is another step towards leapfrogging the Godrej Group to a global household insecticides player

Acquisition summary

Is very complementary to the Godrej Group’s business and international strategy

Gives the Godrej Group access to the high growth Indonesian market and a strong local household care brand

Is strongly EPS accretive with significant potential upside

✔

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This presentation may not be copied, published, distributed or transmitted. The information in this presentation is being provided by Godrej Consumer Products Limited ("Company"). This presentation has been prepared for informational purposes only and should not be used as a basis for any investment and any investment related decisions/ analysis. This presentation does not constitute an offering document.

All statements contained in this presentation that are not statements of historical fact constitute "forward-looking statements". Such forward-looking statements are based on the currently held beliefs and assumptions of the management of the Company, which are expressed in good faith and, in their opinion, reasonable. All statements regarding expected financial condition and results of operations, business, plans and prospects are also "forward-looking statements". These forward-looking statements include statements as to our business strategy (including organic and in-organic), our revenue and profitability, planned projects and other matters discussed in this presentation regarding matters that are not historical facts.

These forward-looking statements and any other projections contained in this presentation (whether made by us or any third party) are predictions and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements or other projections. Given these risks, uncertainties and other factors, recipients of this presentation are cautioned not to place undue reliance on these forward-looking statements. Important developments that could affect the Company's operations include changes in the industry structure, significant changes in political and economic environment in India and overseas, tax laws, import duties, litigation and labour relations.

The Company, as such, makes no representation or warranty, express or implied, as to, and does not accept any responsibility or liability with respect to, the fairness, accuracy, completeness or correctness of any information or opinions contained herein. The Company assumes no responsibility to publicly amend, modify or revise any forward-looking statements, on the basis of any subsequent development, information or events, or otherwise. Unless otherwise stated in this presentation, the information contained herein is based on management information/ estimates and sector reports. Further, any information or opinions stated in this presentation may not materialize and may differ from what is stated in this presentation.

Any financial projections given are illustrative only, none of the projections or assumptions should be taken as forecasts or promises on the part of the Company nor should they be taken as implying any indication, assurance or guarantee that those assumptions are correct or exhaustive. The information contained herein is subject to change without notice and past performance is not indicative of future results. The Company may alter, modify or otherwise change in any manner the content of this presentation, without obligation to notify any person of such revisionor changes.

You will be solely responsible for your own assessment of the market and the market position of the Company and its subsidiaries and that you will conduct your own analysis and be solely responsible for forming your own view of the potential future performance of the business of the Company and its subsidiaries.

In no event shall the Company be liable for any direct, special indirect or consequential damages, or any other damages of any kind, including but not limited to loss of use, loss of profits, or loss of data, whether in an action in contract, tort (including but not limited to negligence), or otherwise, arising out of or in any way connected with the use of this presentation or the materials contained in, or accessed through, this presentation.

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DISCLAIMER

consumer products limited - aceanalyser meet/132424_20100406.pdf · 2010-04-07 · soaps hair...

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