Nestlé in Japan winning in the new reality

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Presentation to the 2012 Nestlé Investor Seminar, September 25, Shanghai, China

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Nestlé in Japan winning in the new reality

  1. 1. Nestlé in Japan:Winning in theNew RealityKohzoh TakaokaPresident and CEONestlé JapanNestlé Investor Seminar, ShanghaiSeptember 25th, 2012
  2. 2. Agenda1. Introducing Nestlé Japan2. Winning in The New Reality3. Performance1 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  3. 3. Sales by category of Nestle in Japan 2011 2% 14% Powdered and Liquid Beverages Confectionery Milk products 10% Prepared dished and cooking aids 1% 58% PetCare 4% Nestlé Professional / Nestlé Health Science / Nespresso 11% Nestlé Waters2 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  4. 4. Sales Contribution in total AOA 2011 Japan 9%3 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  5. 5. Japan OverviewPopulation (2011) : 128 million 23% ≧65 yrs oldPopulation (2050 Proj.) : 97 million 39% ≧65 yrs oldNo. of Households (2011) : 52 million 32% “1 Person”GDP (2011) : 508 trillion yenGDP / Capita (2011) : 4.0 million yenUnemployment (2011) : 4.6%Life Expectancy (2010): 85.9 years (Female) 79.3 years (Male) Main Area Populations Kanto 43.5 million Kansai 20.9 million4 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  6. 6. Japan‟s Food and Beverage Market GDP 508 Trillion yen Living Expenditure 58% F&B 14% Out of home In home 32 Trillion yen 40Trillion yenData: Real GDP (expenditure basis) in 2011 5 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  7. 7. The New Reality – ChallengesNo More Overall Growth / Saturated Market Population (M) Today GDP Growth Population 130 15% 125 10% 120 GDP Growth 5% 115 0% 110 -5% 105 Declining population & limited GDP growth 100 -10% 1980 1990 2000 2010Sources: National Institute of Population and Social Security Research; UN; IMF 6 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  8. 8. The New Reality – Challenges & Opportunities:Ageing Population trend in Japan The elderly % of elderly % of elderly (≥65y.o.) 32% by countries in 2010 30 29% 25 23% 23 Japan Germany 20 20 Italy Developed 17 France Countries UK 15 13 US Russia 10 8 China Developing 7 Brazil Countries 5 5 India 0 1970 1980 1990 2000 2010 2020 2030Sources: UN (Estimated with: Developing countries-high variant / Developed countries-Low variant) 7 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  9. 9. The New Reality – Challenges & Opportunities:Changing Household Profiles Family Size 3.22 2.99 (Av # persons) 2.67 2.46 50.9 46.8 4.2 (8%) # Household (million) 40.7 5.4 (12%) 7.6 (15%) (# persons) 35.8 6.8 (17%) 7.9 (17%) 7.2 9.4 5+ (20%) 8.8 (22%) 8.8 (19%) 4 9.1 (25%) (19%) 13.8 7.4 (18%) 11.7 (27%) 6.5 3 6.0 (18%) 8.4 (21%) (25%) 58% 2 (17%) 37% 9.4 12.9 15.9 1 7.1 (20%) (23%) (28%) (31%) 1980 1990 2000 20108 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  10. 10. The New Reality – Challenges & Opportunities:Consumers Demand a lot of New Products Very large # of SKUs: ~40% of SKUs are replaced every year Beverage1) Chocolate2) New 42% 1,348 39% 116 98% of them are gone 2,082 one year after the Existing 157 launch Total 273 3,4301) 2011 for Canned Liquid Coffee2) 2011 for ChocolateSources: 1)ASD 2)Intage SRI 9 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  11. 11. The New Reality – Challenges & Opportunities:Consumers shopping smarter & looking for lower prices Consumer shopping style % of Consumer who buy Private Brands (% of Shoppers) 2009 2008 2009 +9% Multi-store Shoppers 89 74 68 Single Store Shoppers 11 Total (%) 100Sources: METI; Fuji Keizai10 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  12. 12. The New Reality – Challenges & Opportunities: From Traditional to Digital in Consumer Communication Traditional Media Digital Media (%) Declining access trend (%) Growing access trend 70 Read Newspaper Ad usually 70 Collect necessary information from Web usually 60 60 Watch TVCM usually 50 50 Ever clicked Banner Ad on Web 40 40 Read Magazine Ad usually 30 30 Watch Web Ad usually 20 20 Listen Radio CM usually Read Mail Ad usually 10 10 0 0 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010Source : Hakuhodo HABIT2011 11 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  13. 13. The New Reality – Challenges & Opportunities:Channel Structure Change Index 3,168 (1999 = 100) E- commerce Alternative channel 200 Drug store 181 150 Convenience store 127 Supermarket 101 100 Traditional channel 50 Department store 67 0 1999 2005 2010Source: METI / Fuji keizai12 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  14. 14. The New Reality – Challenges & Opportunities:Complex Traditional Trade Still a Reality 15% AEON TOP VALUE 85% Investment Rate HASEGAWA 15% AEON GLOBAL 85% 14.7% MERCHANDING AEON GLOBAL 85% NIHONBASHI SCM KABO About 10billion Yen 15% 1.82% MAXVALUE CHUBU 51% TOHO 5% MARUHISA DAIEI 28.41% MARUETSU 1.53% JOIS 2.2% TOBU STORE LAWSON 32.4% 3.61% 28.79 4.8% 1.56% 30.01% YAMABOSHIYA % LIFE CORP. SHUREN 73.8% MITSUBISHI KOKUBU KOKUBU MARUBENI 83.5% NACS 20%FINE LIFE 80%FOOD SERVICE SHOKUHIN Shosha 26.3% SUPER NAKAMURA NETWORK 19.53% YAMAE DAIEI 2.14% 100% KANSAI SUPER HISANO 2.3% ALBIS 1.96% KUZE 3.55% MARUICHI 60.6% SANSHO 3.2% 0.39% 2.22% 0.2% OK NIPPOON JAPAN Wholesaler 2% 4.71% SAKE OROSHI ACCESS INFOREX 5.05% AEON UNION<SOU> MITSUBISHI 4.25% 5.07% NIHON SHURUI MARUDAI6.66% ALLIANCE HANBAI NAGANOKEN TAKEDA HORIUCHI 91.9% 1.5% SEICO SHURUI FOODS NETWORK TOHKAN FRESH FOODS HANBAI SANESU KANAKAN 6.66% 6.66% 2.3% 98% FUJITOKU 4.69% SEICO MART Retailer BUSSAN ITOCHU UNIVERSAL SATOH ASAHI FOODS 2.08% AEON FOOD SHOWA 51.7% HOKKAIDO KATO SANGYO MITSUI 8.26% BUSSAN KAGOSHIMA 11.1% 31.58% ITOCHU FOODS FAMILY MART DOLCE 8.57% MAMMY MART MITSUI FOODS 1.83% 3% 34% SUMITOMO SUMMIT 2% SEVEN&I HOLDINGS IZUMIYA 3% 100% KONFEX YUASA ITO-YOKADO UNY FUNASHOKU SEVEN ELEVEN JAPAN13 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  15. 15. Challenges & Opportunities in The New Reality Declining total population, increasing single households and elderly population Increasing polarization of wealth and consumption High demands for quality, innovation, freshness and customization High "nutrition awareness" Highly developed alternative communication Shifting from traditional channels to emerging new channels Highly complex traditional trade still a reality14 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  16. 16. Agenda1. Introducing Zone AOA2. Winning in The New Reality3. Performance15 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  17. 17. The Nestlé Strategic Roadmap toWin in The New Reality16 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  18. 18. Strategic Enablers to Achieve Nestlé-in-Japan Mission Nestlé B to C / Continuous Direct Excellence Model Bigger Bolder From Mass Better Ad (B3) to P2P I &R17 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  19. 19. NESCAFÉ Barista enjoys great popularity B3 Innovation Now the Best selling coffee machine in Japan Launched in March 2010,„Drink instant coffee machine style‟ is catching on. Enjoy a cup of Café Latte for 25 yen ! 5 kinds of café 10% of machine menu with one purchasers are button R&G coffee drinkers Machine price reasonable18 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  20. 20. NESCAFÉ Dolce Gusto B3Creating new segment in coffee machine market Innovation Enjoy fresh taste & aroma and varieties anytime using capsule for „NESCAFÉ Dolce Gusto‟, completely new and different from traditional electric coffee maker.19 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  21. 21. Kit Kat “Sweetness for Adults” B3Reinforces Kit Kat brand Innovation • Differentiated brand image from original Kit Kat • Gained market share. ⇒Real 2nd pillar to the brand! Crushed dark biscuits mixed into chocolate mass ・Unique texture ・Enhanced lightness ・Less sweet20 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  22. 22. Move to Digital accelerates Owned/Earned MassMedia Value Ad to P2P 2001 2011 201121 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  23. 23. KIT KAT strengthens brand value by PR exposure Mass5 times more PR exposure than TV every year Ad to P2P „KIT KAT Juken Campaign  Campaign born from consumers‟ word-of-mouth KIT KAT sounds like Kyushu‟s dialect „Kitto Kattoh (Surely win !)‟ and has become a lucky charm for Juken among students since around 2002.  Sending message through „third party‟ makes the news more public and sympathetic  Students bring it to test room, or teachers, family, or friends send it to students to cheer them up KIT KAT X Japan Railway KIT KAT X Japan Post22 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  24. 24. Our PR activities are on the right track Mass Ad Brand PR Investment vs. Exposure to P2P x 9.6 Investment Exposure 201123 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  25. 25. Nestlé Consumer Site contains E-commerce, Brand communication,Membership programme, Entertainment for wider access and CRM Registered members: 2.5 million (as of the end of July, 2012) The number of page views: 270 million (2011 in total) Brand contents nestle.jp Entertainment contents Online shopping24 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  26. 26. Channel Development DirectEstablished Direct Selling as growth driver Model ‟Nestlé On-line shopping‟25 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  27. 27. NESCAFÉ Barista DirectInnovations beyond products Model New Innovative business model exploration - NESCAFÉ BARISTA office  Unique opportunity : 5.3m small offices  New business model idea: • Installation of free NESCAFÉ BARISTA machine • NESCAFÉ ambassadors engagement • Direct sales of coffee  Test sales (Jun.-Jul. 2012) successfully done in Hokkaido region  Exploring national roll out. TV infomercial26 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  28. 28. Evolution of Nestlé Health Science in Japan Current Businesses 120 Ageing Care 111 Critical Care 100 Paediatric Future Opportunities Metabolic Health Gastrointestinal Brain Health 2009 2010 2011 Sales (2009 = 100) Market Share27 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  29. 29. Agenda1. Introducing Zone AOA2. Winning in The New Reality3. Performance28 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  30. 30. Return to Sales GrowthNestlé in Japan 100 91 85 2003 2007 2011 Organic Sales Index (Year 2003 = 100)29 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  31. 31. Acceleration of Working Capital ImprovementNestlé in Japan 2007 2008 2009 2010 2011 2012 H1 TNWC as % of sales30 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  32. 32. Winning in the New Reality in Japan The New Reality Nestlé Japan‟s Response  Unfavorable demographic trends – Return to Sales Growth shrinking and ageing population Accelerated Profit Margin improvement  Consumers becoming more demanding and value conscious Increased Capital Efficiency  Traditional Media giving way to Digital With emphasis on: Media B3 innovations  Sales channel structure evolving from “Traditional” to “Alternative” Direct business model From Mass Ad to P2P communication  Complex and expensive trade structure still remains relevant Nestle Continuous Excellence31 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  33. 33. Thank you!32 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  34. 34. Q&A33 September 25th, 2012 Nestlé Investor Seminar, Shanghai

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