Diageo: Asia Pacific Conference - Presentation Script - 13 May 2011

Transcription

1 Diageo: Asia Pacific Conference - Presentation Script - 13 May 2011 Southeast Asia Sam Fischer, Managing Director, Diageo Southeast Asia Slide 1 > Good afternoon to you all and thank you for giving me the opportunity to talk about our Southeast Asian business and the enormous opportunity we have in this region. Slide 2 > But..before we get into that, let me tell you a little about myself. > I am Australian; however I have not lived in Australia for 16 years. I joined Diageo over 4 years ago and prior to that I worked for Colgate Palmolive in various positions in both Asia and Central Europe. I have a commercial background in Marketing and Sales and I ve been working in General Management for the last ten years. Over ten years of my nearly twenty year working career have been spent in Asia. Slide 3 > Southeast Asia for Diageo consists of countries that are geographically south of China, east of India and north of Australia. The historical as well as socio-cultural similarities of this region have meant that most international companies manage the cluster of countries as a hub, and Diageo is no exception. > With a total population of over 500 million and a collective GDP of close to US$2 trillion, growing at mid to high single digits, SEA offers huge growth potential for Diageo. In addition to potential, there is track record: most markets in this region have doubled GDP per capita over the last 6 years. > Additionally, over 50% of the population in countries like Vietnam, Thailand, Malaysia and Indonesia are under 30 years old meaning we have over 7 million new consumers per year entering our categories. > Although Southeast Asia was not immune to the impact of the global economic crisis, it has together with the rest of Asia quickly recovered when compared to North America and Europe, mostly due to strong consumer confidence and their relatively self-sufficient economies. > So. Southeast Asia with incredibly favorable economics, demographics and a vibrant culture coupled with. Slide 4 >..an enormous TBA market currently valued at approximately 4billion in sales value and growing at high single digit % pa is a growth opportunity for us. > Clearly beer is the largest category and in this region, we are a significant beer player in the markets of Malaysia, Indonesia and Singapore. In the largest markets of Malaysia and Indonesia, we have been consistently growing share over the last 3 years. > Scotch is the largest international spirits category by a significant margin. It is triple the size of the second largest category and represents over 50% of the entire International Spirits business. With our amazing Scotch brand range led by Johnnie Walker and Singleton we have an enormous competitive advantage in this segment..

2 Slide 5 > Diageo is the number 1 spirits company in Southeast Asia and Johnnie Walker is the number 1 spirits brand and that is a wonderful position to have in a region with so much potential. > From the chart, you can see that we are participating in all the major categories. > In Scotch, Johnnie Walker is recognized as a globally iconic brand and continues to build brand equity especially in the largest markets of Vietnam and Thailand. We also see a growing demand for super deluxe variants of Johnnie Walker through our successful launch of XR21 in Vietnam, Gold Reserve in Thailand and of course, the growing demand for Blue Label across all markets. > Guinness is the best performing beer in Indonesia. It is the 6th largest market for Guinness globally and I will tell you more, later in the presentation about the secret to our success. Across Southeast Asia, Indonesia and Malaysia account for 93% of our total beer net sales and we continue to grow share in both of these markets year on year. > During the first half of F11, all 4 markets of Vietnam, Thailand, Malaysia and Indonesia delivered double digit top-line growth. This was largely driven by our successful Johnnie Walker and Guinness campaigns, terrific progress in Reserve and Innovation, and pricing gains. > Recently, we have also announced our acquisition in HALICO in Vietnam which signifies a breakthrough in our participation of the huge local spirits category. Slide 6 > Breaking down the TBA category into spirits we can see that Diageo is operating in the largest and the fastest growing categories. We have been consistently growing share particularly in the high growth categories of Vodka, Scotch and Beer with Smirnoff, Johnnie Walker and Guinness and recently through acquiring a minority interest in Halico in Vietnam, we are also participating in the huge local spirits category, as mentioned a while ago. > Halico is the largest producer of branded spirits in Vietnam, led by flagship brand Vodka Hanoi. It has seen double digit growth in the last four years and this trend looks set to continue as the enormous homemade spirits sector migrates into branded local spirit. > As income levels continue to rise, several new consumer groups begin to emerge and they look extremely attractive as we look ahead into the future. We are seeing an Emerging Middle Class that has an increasing appetite for spirits and premium alcohol brands..and.. Women are gaining greater financial and social independence, increasingly we see Asian ladies enjoying alcohol socially, making them another rising consumer group within which we can seek to grow share. With a brand range of established premium brands and a well established innovation pipeline that will offer fantastic new experiences to these consumers we are perfectly placed for these future opportunities as they emerge. Slide 7 > During the rest of this presentation, I am going to focus on 4 key markets in SEA Vietnam, Thailand, Malaysia and Indonesia. As I look at these markets, the stand outs for me are: 1.The strength of our brands across all 4 markets led by Johnnie Walker and Guinness 2. The scale we have in the markets together with. 3. The strength of our organization and talent that gives us a long term competitive advantage. > We will continue to grow our reach and participation as these developing economies flourish and as we keep gaining share. Our focus on building robust organizations in all 4

3 markets builds a rock solid foundation from which we operate and we believe sets us up for greater success in the long-term. In Vietnam for example, we have a first mover advantage being the first global premium drinks business to have an in-market operation in this emerging market. > Our scale and strength, coupled with Diageo s world wide capability, global talent, systems and processes set us up for accelerated growth as we look ahead. We have the confidence to invest ahead, to drive momentum and to build our brands for the future. > The power of this combination is occurring daily; however one example springs to mind. The local team in Vietnam saw an opportunity for a Johnnie Walker variant in the brand range priced at 30% above Black Label. In 9 months we developed Johnnie Walker Gold Label Reserve through collaboration with innovation, global supply, global marketing and the local teams. Johnnie Walker Gold Label Reserve was first launched in the Vietnamese market with flawless execution and in its first year, exceeded 50,000 cases. No other company has the ability to access this type of innovation this quickly. Johnnie Walker Gold Label Reserve is now seen all over Asia Pacific as its success has been replicated in other markets. > I would now like to take you briefly through each of these four markets to give you greater insight into our local operations and our recent performance. Slide 8 > Firstly Vietnam: known as one of the new BRIC economies, Vietnam holds some amazing growth opportunities for global companies that have the right relationships and insights to succeed in this fast developing market. > After solid growth across 2010, GDP growth in Vietnam is expected to accelerate in 2011 and trend close to 8% growth per annum to Vietnam s consumer segment is exciting, in the long term, the consumer outlook is linked to the broader economic story which remains strong with very favourable demographic trends accompanied by strong growth in household incomes. Slide 9 > Our success in being the first premium drinks business to have a license to operate our own in-market company in Vietnam, has opened many doors for us and since inception in 2008, has put us significantly ahead of the competition. Whilst competition has arrived, no one to this day has an on ground presence near that of Diageo s. > There are now approximately 170 employees in Diageo Vietnam and we have a constant focus on building our talent base capability through a constant stream of development programs which are critical for the success of this young organization. We have a strong brand range underpinned by the Johnnie Walker trademark and we have a dedicated Reserve team focusing on building our super deluxe business in a market with a huge appetite for SDX. We service over 5,000 on and off trade accounts directly and we have developed a strong innovation pipeline across the entire brand range. > Additionally we reach over 60,000 consumers and key opinion leaders every year through our Johnnie Walker mentorship program, that aims to engage and inform key influences and target consumers of this iconic brand. > Most recently, we have launched Johnnie Walker XR 21, a super deluxe variant that was specially created for Asia. In the short 3 months since its launch, we have reached over 1000 trade partners and sold over Lcases and the orders continue to come in. > The Chinese New Year or TET celebration is a peak trading period in Vietnam with over 40% of the year s volume sold during this time. As you have heard from James, our offer was so compelling that some of our competitors removed their packs from shelves so as not to be embarrassed!

4 Slide 10 > During the CNY season alone, we sold over 800,000 gift boxes. This was 80% higher than last year and delivered strong top line growth in the business. > In a recent report by AC Nielsen, Diageo Vietnam was recognized as the number one sales organisation in the country and this was as compared not only to industry peers but also other leading FMCG companies. > All these factors have lead to high double-digit top line growth in Vietnam with Johnnie Walker being the number 1 international sprits brand and Smirnoff the number 1 international vodka, base on total retail value. Slide 11 > Now to Thailand: Over the last two decades, operating conditions in Thailand have become significantly more attractive as the country has grown and modernized; in recent times, the political situation has improved such that GDP has again reached solid growth status. > Consumer demand has rebounded strongly in the last three quarters of 2010 and looks set to continue. This coupled with attractive demographics and a strong market position, lead us to believe Thailand will remain a growth market for Diageo long into the future. Slide 12 > Diageo Moet Hennessy Thailand is the Diageo-managed joint venture operation that was established with Moet Hennessy in 1964 and distributes the full brand range of both Diageo and Moet Hennessy brands. > Our transformational marketing agenda in Thailand has meant that Johnnie Walker is a truly iconic brand in this market; this has been driven through fantastic brand experiences in our 600 on-premise outlets that match consumers desire for more premium brands and experiences. > We also have built a consumer database of 500,000 who frequent our on-premise outlets, this represents about 30% of the total universe of alcohol consumers in Thailand and means we have our own web-based channel from which we can communicate regularly with a highly targeted and desirable audience. > Our award-winning work in digital marketing has been recognized for how we have made online experiences a real joy to our consumers that leave a lasting brand impact. > In the off-premise we have focused on building win win relationships with our customers providing them with insights into their shoppers and category solutions. We have been particularly active in the area of gifting, piloting year round gifting concepts that have led to significantly higher category growth rates for them. > Our focus on driving premiumisation through consistent execution by our 85 sales people is beating our competition! Slide 13 > All of these programs have resulted in terrific performance over the last 4 years where most recently, we have delivered double-digit top-line growth in the first half of this financial year. Our premiumisation agenda focusing on trading up consumers from JW Red Label to JW Black Label and beyond has meant very significant gross margin improvement. This has been further supported by regular price rises as a result of the strength of our brands. This strategy has clearly rejuvenated the Scotch category in Thailand which has been cannibalized by local spirits in recent years. In fact, Deluxe Scotch lead by Johnnie Walker Black is back in growth for the first time in years. > Since 2007, we have gained 13 percentage points of value share in the Scotch category led by some fantastic work around Johnnie Walker and Benmore, a Scotch whisky brand that was specially launched to appeal to the Thai consumer.

5 > As a result our top line has grown double digit in the first half of this year. Slide 14 > This is a chart I could show all day and really reflects everything I have said in the preceding slides on Thailand. > Consistent and aggressive share growth driven by Johnnie Walker and Benmore has given us leadership in Scotch as per our last share read. Slide 15 > Now to Malaysia: Malaysia is one of the wealthiest countries in SEA after Singapore based on GDP per capita. The population continues to grow at a rate of 2.4% per year and this is another young population with approximately 58% under 30 years old. This is a politically stable country with a multicultural population predominantly made up of Malays, Chinese and Indians. > Mid single digit GDP makes Malaysia another attractive growth market especially when our strong TBA presence is considered. Slide 16 > We have leading positions in the beer and spirits categories through partnerships with Asia Pacific Breweries and Moet Hennessy. > Guinness Anchor Berhard, a publicly listed joint venture with Asia Pacific Brewery was established 22 years ago in The GAB business brews and markets Guinness, Tiger and Heineken beers and has delivered consistent net sales, volume and share growth over the last 9 years. As Gilbert has already mentioned, this business is the leading beer business in Malaysia by some distance. > The business leverages a winning brand range with strong consumer programs run at scale such as our Arthur's Day Guinness activity. For those of you in the audience who are musically minded, we recently hosted The Black Eyed Peas, an event held for Arthur's Day that created a huge buzz in Malaysia. > Our spirits business, managed through our JV with Moet Hennessey has also gone from strength to strength. > Johnnie Walker is the no. 1 spirits brand in Malaysia driven by our leading outlet partnerships and the strong brand experience delivered in these outlets. Our Inside the Circuit F1 Activation is also hugely successful in a market that hosts an F1 Grand Prix. Slide 17 > As mentioned by Gilbert, our beer business in Malaysia has seen strong growth and volumes share gains for 9 consecutive years to over 60% of the entire market at the end of the first half. This has been delivered through ruthless execution of our winning brand range of Guinness, Tiger, Heineken and Anchor and a commercial strategy focused on outlet partnerships across Malaysia. This strategy has been supported by equity building activities across all brands, Football for Tiger, Music for Heineken and Arthur s Day for Guinness, & combined brand range promotions at key events / festive occasions, Oktoberfest, Christmas and Chinese New Year. A consistent holistic strategy supported by flawless execution has been the key to this growth. > Our spirits business in H1 F11 has also seen double digit growth for Johnnie Walker driven by strong focused marketing programs particularly behind F1 and our Keep Walking campaigns as well as increased investment in super deluxe and outlet partnerships. We have launched Johnnie Walker Gold Label Reserve and significantly increased our investment behind Johnnie Walker Blue Label.

6 Slide 18 > Our final country to look at in detail today, Indonesia, is the world s 4th largest country by population. Again, it s another young country that is expecting year-on-year population growth in the high single digit into the foreseeable future. > Strong GDP growth of around 7% is expected going forward, and with a strong government focus on economic and fiscal reform, the future looks bright for this emerging giant. > As a result, we expect continued growth in real consumer spending with improved political stability and growing job opportunities especially amongst the urban population, again, another highly attractive market for Diageo Slide 19 > We distribute Guinness through our 40+ year relationship with Dima, an Indonesian family-run conglomerate. Guinness is the lead brand within the DIMA business, and the company is structured around this. DIMA s intimate understanding of the Indonesian archipelago affords Guinness the position of one of the most widely available beers. Through DIMA s focus, passion & local knowledge, Guinness has grown to become an iconic brand in Indonesia and the 6th largest Guinness market for Diageo globally. > In Indonesia, we brew Guinness at MBI a wholly owned business of Asia Pacific Breweries. This is a world class production site where Guinness represents over 50% of its current volume. > The success of Guinness is driven by growth drivers like Arthur s Day and Guinness World Series of Pool. The latter remains the largest event by any beer brand in Indonesia. More than 100,000 consumers interacted with the events nationally which attracted more than 2000 regional pool players. The program was also activated at scale across different channels in the country. > We have expanded through Dima into RTD in the form of Smirnoff Ice with over 40,000 cartons sold YTD and also local production of Gilbey s spirits where we are expecting huge potential for growth. > In addition, we see the potential for our premium spirits brand range, in particular Johnnie Walker and Smirnoff, to become increasingly successful in this market. Slide 20 > This has led to Indonesia being the fastest growing Guinness market for Diageo in F09 & F10 and growing volume share by 3ppts over the past 3 years. We have seen sales growing at double digit year-on-year over the last 5 years. > As mentioned earlier, the launch of Smirnoff Ice has also driven our participation in this large beer market. This has not only helped us tap into the beer occasion but has also supported us in improving brand equity on the total Smirnoff trademark. > Indonesia also presents a huge opportunity with a large emerging middle class that is developing quickly. Approximately 50 million households will come into the middle income bracket by 2020 and Gilbey s is a brand that presents a huge opportunity for us to target this consumer group. > We have seen encouraging success since our recent launch of Gilbey s Vodka and Gin and intend to increase the momentum it has built with a Distiller s Blend in Q4 F11. Slide 21 > As you can see, I stand here proud to be able to tell you about Southeast Asia as an major market with enormous future growth potential... where we have a strong platform in place... We already have strong momentum and we are growing share in all of our markets.

7 > We have the right brands within our brand range to catch the wave of premiumisation that we see in these markets, as consumers trade-up to more premium brands. > Our innovations that are rooted in consumer insights have helped us tap into new consumer opportunities and drinking occasions and the strength of our future innovation pipeline fills us with even more confidence going forward. > And our partnerships with very strong local businesses enable us to achieve the portfolio and scale that gives a long term and sustainable competitive advantage. Slide 22 > Not only do we have confidence in our businesses and plans, we also have a strong track record to rely on with great teams already in place. > Over the past 5 years, we have consistently gained share across the key Southeast Asia markets: we have been winning, are winning now and will continue to win. Slide 23 > To sum up... > I hope the last 20 minutes have given you a clearer picture of what this part of emerging Asia looks like, and where we expect to see big opportunities for growth in the future. I would like to leave you with two points: > The first is that Southeast Asia represents a strong region for us to fully leverage the strength of our total beverage alcohol brand range. In the coming years, you will see us investing more and participating at greater scale in the key markets as we make our play at this 4billion opportunity. > The second is that we have leading brand positions and a good track record in all the major markets in Southeast Asia. We are winning share and we are confident that we will continue to do so through our strong local partnerships and our amazing brand range in each market. > Thank you for listening. I am now going to hand to Joe who will talk about China.