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Challenges for chocolate FMCG in Russia 2012-15. MARS Company.
Challenges for chocolate FMCG in Russia 2012-15. MARS Company.
Challenges for chocolate FMCG in Russia 2012-15. MARS Company.
Challenges for chocolate FMCG in Russia 2012-15. MARS Company.
Challenges for chocolate FMCG in Russia 2012-15. MARS Company.
Challenges for chocolate FMCG in Russia 2012-15. MARS Company.
Challenges for chocolate FMCG in Russia 2012-15. MARS Company.
Challenges for chocolate FMCG in Russia 2012-15. MARS Company.
Challenges for chocolate FMCG in Russia 2012-15. MARS Company.
Challenges for chocolate FMCG in Russia 2012-15. MARS Company.
Challenges for chocolate FMCG in Russia 2012-15. MARS Company.
Challenges for chocolate FMCG in Russia 2012-15. MARS Company.
Challenges for chocolate FMCG in Russia 2012-15. MARS Company.
Challenges for chocolate FMCG in Russia 2012-15. MARS Company.
Challenges for chocolate FMCG in Russia 2012-15. MARS Company.
Challenges for chocolate FMCG in Russia 2012-15. MARS Company.
Challenges for chocolate FMCG in Russia 2012-15. MARS Company.
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Challenges for chocolate FMCG in Russia 2012-15. MARS Company.

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This presentation was done for a final Assessment at Mars Russia for a position in the Finance department. Didn't get the job :) Still, I put some effort into this so hope someone finds it useful …

This presentation was done for a final Assessment at Mars Russia for a position in the Finance department. Didn't get the job :) Still, I put some effort into this so hope someone finds it useful ^___^

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  • 1. Challenges of Finance in FMCG forthe next 3 years. Mars company.Mikhail Subbotin
  • 2. 1. FMCG chocolate market 2012-152. Key challenges for a confectionery FMCG player3. The role of Finance in FMCG4. Action plan
  • 3. 1. Market 2. Challenges 3. Role of Finance 4. Action plan FMCG chocolate market in Russia CAGR 2012 2015 Volume 5-7% 3-5% growth, % Price 3-5% 4-5% growth, % • By 2015, prices will be rising faster than earnings. • This is due to an expected increase in cocoa beans prices. • => To sustain current profitability, we will need to exceed market dynamics in terms of sales, costs or both. Source: KPMG
  • 4. 1. Market 2. Challenges 3. Role of Finance 4. Action plan FMCG chocolate market in Russia • Major consumer markets in Russia lag substantially behind the European level in terms of per-capita consumption • => We have potential for further growth! Source: KPMG
  • 5. 1. Market 2. Challenges 3. Role of Finance 4. Action plan FMCG chocolate market in Russia • Apart from price dynamics, the development of non-chocolate snack alternatives (biscuits, wafers, candies) is slowing down the chocolate market. Source: KPMG
  • 6. 1. Market 2. Challenges 3. Role of Finance 4. Action plan Product segments • Snacking segments (chocolate bars and tablets) are expected to remain the most popular product categories in Russia. • The development of chocolate snacks and non-chocolate alternatives means 2 major trends: convenience and seeking variety Source: KPMG
  • 7. 1. Market 2. Challenges 3. Role of Finance 4. Action plan “Convenience” • Convenience means consumers are shifting from a “treat-oriented” approach to a “snack-oriented” approach. • => Although the average purchase size is declining, Snickers is somewhat an exception to the rule. The penetration index* of “Snickers Super” is 4% and of standard “Snickers” – just 3%. • Incidentally, Mars is leading in the choco bar segment while the main rivals – Nestle and Cadbury – are left far behind. Source: ROMIR
  • 8. 1. Market 2. Challenges 3. Role of Finance 4. Action plan “Seeking variety” Ω omega shoppers. Consumers who Δ delta shoppers. Open to new shop on habitual auto-pilot mode information, word of mouth, advertising, engaging in scrutiny mode shopping Source: Nielsen
  • 9. 1. Market 2. Challenges 3. Role of Finance 4. Action plan Chocolate price An opportunity: • A slower-than-inflation chocolate price growth means that chocolate has a chance of gaining a larger share of the consumer basket, BUT: • This doesn’t change the fact that we will need to deal with an expected decrease in volumes growth rate through new products and cost management Source: KPMG
  • 10. 1. Market 2. Challenges 3. Role of Finance 4. Action plan FMCG confectioneryRussia Confectionery Consumption (Mio kg) by Category, 2011–16 Russia Confectionery Market Value (RUB m) by Category, 2011–16 Although small in market share, in terms of both value and volume growth rates, gum will be the leading segment. => Wrigley acquisition will probably become a growth driver. Source: Canadean
  • 11. 1. Market 2. Challenges 3. Role of Finance 4. Action plan Trade channels development Among the fastest-growing distribution channels are large Discounters, Hypermarkets and Cash & Carry stores. This means a leaner, more consolidated supply chain, but creates a basis for competition with private labels. Source: GFK
  • 12. 1. Market 2. Challenges 3. Role of Finance 4. Action plan Market & price segmentation Price segment share, % 2009 2010 2011 Low (<150 Roubles/kg) 6,3 6,6 7,2 Middle (150-290 Roubles/kg) 68,3 70, 1 74,3 High (290-390 Roubles/kg) 9,9 8,8 6,2 Premium (390-600 Roubles/kg) 10,9 10,8 9,7 Luxury (>600 Roubles/kg) 4,6 3,7 2,6 Although Mars is currently the leading ‘standalone’ manufacturer of confectionery in Russia, current trends indicate that competition is getting fiercer in the lower price segments. This situation gives a relative advantage to domestic manufacturers and requires thorough cost-analysis and possibly new product solutions. Source: acvi.ru, sibac.info
  • 13. 1. Market 2. Challenges 3. Role of Finance 4. Action plan Key challenges for a confectionery FMCG player for the next 3 years • A slowing down market with a decreasing average purchase size while most ‘bite-size’ solutions not gaining much popularity • A picky consumer, expecting value-for-money and seeking snack alternatives with an emphasis on healthy products • Growing competition within the low and middle price segments as a result of overall price growth • More hypermarkets and discounters means further pressure to lower prices. Also, we may face competition with private labels • Attracting and retaining professional executives in a narrowing HR market
  • 14. 1. Market 2. Challenges 3. Role of Finance 4. Action plan The role of Finance in FMCG Implementing Setting short-term goals Setting long-term goals
  • 15. 1. Market 2. Challenges 3. Role of Finance 4. Action plan What should we monitor? External sources: • macroeconomics (GDP, currency rates, land, fuel, raw materials, packaging, income, employment etc.) • market dynamics (value, volume, types of product, consumer, distribution channel) • competitors (product performance, ad budgets) • our own suppliers and distributors (on-time delivery with minimal waste) Internal sources: • our sales (across various products) • our costs (materials, labor, logistics, marketing, advertising) • our profitability • our assets (both current and fixed)
  • 16. 1. Market 2. Challenges 3. Role of Finance 4. Action plan What should we control? • Our profitability margins (total and across business segments and individual products) – to see how each business sector and product performs • Revenue dynamics in relation to market dynamics – to benchmark our performance against competitors • Our costs, both direct and indirect, and their dynamics in relation to revenue – to see what factors are driving up the costs, thus decreasing profits • Our investments, the assets we own/purchase and their yield (ROI, ROA) • Working capital turnover ratio -> max. A MUST in FMCG. • The amount of FCF available to further finance our activities
  • 17. 1. Market 2. Challenges 3. Role of Finance 4. Action plan What should we plan? • Realistic KPIs based on all the indicators that we control and our previous performance • Select our best performers and optimize product assortment so as to maximize profits (for the foreseeable future, our best performers value- and volume-wise will be choco bars & tablets, but gum indicates the strongest growth) • The financials of new product launches • New ad & promotion campaigns, having thoroughly studied their effectiveness and competitors’ experience • Expand our supplier & distributor network so as to maximize financial and operational independence

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