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Spotlight on Decorative Paints Amsterdam,, 1 December 2011
Welcome Keith Nichols
Spotlight on Decorative Paints – 1 December 2011
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Today’s program 1. 2. 3. 4.
Introduction Spotlight on Decorative Paints Marketing Innovation Lunch 5. Europe, Middle East & Africa 6. North America Q&A Break 7. South East Asia & Pacific 8. India & South Asia 9. China & North Asia 10. Latin America Q&A 11. Wrap up & closing
Keith Nichols Tex Gunning Sucheta Govil David O’Brien Richard Stuckes BobTaylor
Jeremy Rowe Amit Jain Liangqi Lin Benito Berretta Tex Gunning Spotlight on Decorative Paints – 1 December 2011
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AkzoNobel key facts 2010 • Revenue €14.6 billion • 55,590 employees • EBITDA: €2.0 billion* • Net income: €0.8 billion • 39 percent of revenue from high growth markets • A leader in sustainability Revenue by business area
33%
EBITDA* by business area
30%
33%
Performance Coatings Decorative Paints
44%
Specialty Chemicals
34%
26%
* Before incidentals Spotlight on Decorative Paints – 1 December 2011
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We want to be the world’s leading Coatings and Specialty Chemicals company •
Top quartile safety performance
•
Top 3 position in sustainability
•
Top quartile performance in diversity, employee engagement, and talent development
•
Top quartile eco-efficiency improvement rate
•
Grow to €20 billion revenues
•
Increase EBITDA each year, maintaining 13-15 percent margin
•
Reduce OWC/revenues by 0 0.5 5 p.a. towards a 12 percent level
•
Pay a stable to rising dividend
Spotlight on Decorative Paints – 1 December 2011
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Lowered 2012 global growth expectations Downward revisions in growth forecasts globally 7,0% 6,5% 6 0% 6,0%
Forecast GDP growth
6,0%
5,0%
4,0%
3,6%
3,0%
2,0%
2 0% 2,0% 1,5% 1,0% 0,4% 0,0% EU
US
July 2011E
EM
October 2011E
Source: Deutsche Bank research, Oct-11
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Economic headwind in Europe expected The market is expecting a European recession 3,5% 3,1% 3,0%
Annual GDP growth
GDP ()% Q-0-Q, annualised)
2,5%
2,0%
2011E:
1.5%
2012E:
0.4%
1,7%
1,8%
1,5%
1,0% 0,8%
0,6% 0,5%
0,2%
0,0%
(0,5)%
(0,4)%
(0,4)%
Q4 11
Q1 12
(1,0)% Q1 11
Q2 11
Q3 11
Q2 12
Q3 12
Q4 12
Source: Deutsche Bank research, Bloomberg
Spotlight on Decorative Paints – 1 December 2011
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AkzoNobel has strong fundamentals
Our key strengths: • • • • •
Leading market positions and brands Scale Strong balance sheet Diverse geographical spread High operational leverage
High operational leverage Raw materials, energy & other var. production cost
Diverse geographical revenue spread
9%
10%
4%
Mature Europe
Fixed production cost 39%
Selling, advertising, administration, R&D cost
47%
32%
20%
Emerging Europe Asia Pacific North America Latin America
EBIT margin 12%
21%
6%
Other countries
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Our performance improvement program: the next step in the evolution of AkzoNobel Portfolio transformation
• Divestiture of fibers and pharma • Restructuring of chemicals portfolio • Acquisition of ICI • Building global scale in paint and coatings • Onward sales of National Starch completed
Integration & restructuring
• Integration of ICI • €340 million structural synergies achieved by Q2 2010 • Footprint rationalized, key people retained • More than €200 million in cost savings f from restructuring t t i
Accelerated and sustainable g growth • New Value and Values growth strategy Sept. ‘10 • Performance improvement program logical next step • Combination of driving operational excellence and restructuring underperforming parts of the business
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Stepping up operational and functional excellence Underpin our growth and margin objectives • •
Enhance our ability to grow Expected to bring us at or above the mid-point of our 13-15 percent EBITDA margin i guidance. id
Deliver structural competitive advantage • • •
Leveraging scale, simplify support structures, reduce cost base Transfer best practices, standardize key processes Restructuring of underperforming parts of the portfolio
Full EBITDA impact of €500 million in 2014 • • •
Expected total incidental costs €425 million 2012: €200 million EBITDA, incidental costs of €200 million Reporting on program deliverables every six months
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A comprehensive program •
Comprehensive – all functions, all businesses • •
•
•
Margin management, R&D and restructuring (~50%) Supply Chain and Sourcing projects (~40%)
Improvements implemented over three years (2012 to 2014) All business areas contribute to delivering the €500 million • • •
>40 40 percent Decorative Paints >30 percent Performance Coatings Close to 25 percent Specialty Chemicals
Decorative Paints
Perf. Coatings
Specialty Chemicals
Finance Information Management Research, Dev’t & Innov. Human Resources Integrated Supply Chain Margin Management Academy
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Performance improvement initiatives examples Supply Chain – Creating a sustainable, customer-driven supply chain that operates at world-class safety, operational and customer service levels: • Improve the efficiency of all of our 225 factories • R d Reduce th costt off warehousing the h i and d transportation t t ti RD&I – Delivering bigger, bolder, better and faster innovation by focusing on four key areas: • Rationalizing RD&I’s footprint in Europe and North America • Reducing the number of raw materials we use • Improving the efficiency of our manufacturing processes • Linking customers’ needs more effectively to our research activities Decorative Paints – Restructuring will continue in mature markets: • In North America and Europe, focus will be placed on reducing product complexity, optimizing distribution and increasing employee productivity
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Organization and governance
• •
Joint responsibility of the Executive Committee, led by CEO The Executive Committee Support Office (ESO) will operate the implementation to track progress, intervene where necessary and support th overallll program the
Masterplans
• Set priorities and identify improvement potential from design stages, build into a business case and action plan • ExCo members to lead each plan
20
Initiatives
100
• • • •
Defined measures to address priority opportunities Clear objectives and deliverables identified Risks and dependencies identified ExCo member still accountable, execution assigned to operational management
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Decorative Paints 2010 key financials and regional breakdown 2010 • Revenue: €5.0 billion • 21,950 employees • EBITDA*: EBITDA* €548 million illi • 38 percent of revenue from high growth markets • Operating ROIC: 32% Revenue by business area
6%4% 7% 10% 52% 21%
Europe, Middle East and Africa North America Latin America China and North Asia South East Asia and Pacific India and South Asia
* Before incidentals Spotlight on Decorative Paints – 1 December 2011
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Decorative Paints EBITDA* margins excluding US are in group ambition range € million 1000
15% 14% 13% 12% 11% 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0%
900 800 700 600 500 400 300 200 100 0
2008 Total EBITDA*
2009
2010
Total EBITDA* margin
EBITDA* margin excl. US
* Before incidentals Spotlight on Decorative Paints – 1 December 2011
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Raw material pressure is currently holding back Decorative Paints EBITDA EBITDA* bridge Q3 2010 – Q3 2011 € million
98
(89)
1,964
198 148
Q3 10 Currency Volume
* Before incidentals
Price
Raw materials
Mix
Other
Increase
Q3 11
Decrease
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Year-to-date trends in Decorative Paints continue into seasonally weak Q4 € million
1000
15% 14% 13% 12% 11% 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0%
900 800 700 600 500 400 300 200 100 0
FY 2008 Total EBITDA*
FY 2009
FY 2010
Total EBITDA* margin
FY 2011E EBITDA* margin excl. US
* Before incidentals Spotlight on Decorative Paints – 1 December 2011
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Decorative Paints is low in capital intensity and high in operating ROIC*
35% 30%
31.5% 26.9%
26.0%
• Attractive operating ROIC* • 2010 capex around €154 million
25%
• Capex requirement going forward around 4% of revenue
20% 15% 10%
9.7%
5%
5.6%
4.7%
5.2%
2008
2009
2010
0%
Total ROIC % * Operating ROIC is calculated as EBIT before amortization divided by average invested capital excluding intangible assets
Operating ROIC* % Spotlight on Decorative Paints – 1 December 2011
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Spotlight on Decorative Paints Tex Gunning
The Decorative Paints market is attractive – it is big and it will get bigger
45 40 35 30 25 20 15 10 5 0
Global Decorative Paint sales,, 2010 to 2015 (€ billions)
30
32
33
34
36
37
• Demand growth closely correlated with GDP growth, consumer expectations • In high-growth markets, tends to outstrip GDP growth by up to 1.5x
2010 2011 2012 2013 2014 2015
Source: Orr & Boss, AkzoNobel analysis
Asia Pacific • Used for decoration as well as protection Latin America North America • Consumption per capita driven primarily by the EMEA frequency of repainting
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There is still significant market upside in the high growth markets Global paint market by volume (billion litres) 100%
2.3
2.2
3.0
6.8
6.8
Current = 10 Bln High case = 21 Bln
80 60 40
High case
20 0
Per capita cons. (litres)
• As high growth markets approach mature-market consumption levels, paint consumption per capita could eventually grow to double or triple their current levels
Medium case Current • North Western Latin America Europe America & Eastern Europe
China & South East Asia
India & South Asia
6.8
5.8
4.0
1.5
0.8
Population (mlns) 340
380
605
1,363
1,368
Construction activity will continue apace, driven by population growth and by changing demographics
Note: Medium case is based on bringing consumption up to 2.5 litres per person (e.g. Taiwan is currently 2.6); high case is based on bringing consumption up to 5 litres per person. Based only on markets where AN has a presence. Spotlight on Decorative Paints – 1 December 2011
Source: AkzoNobel analysis
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The next stage of value creation will be in the mass markets Absolute paint market revenue (Asian country example)
Premium Mass Economy
2010
100%
2015
2020
Relative paint market revenue by segment (Asian country example)
80% 60%
Premium
40%
Mass
20%
Asian country example: • Spending power of the middle class in high-growth markets will increase dramatically through the decade • Middle class estimated to go from around 40% of total household expenditure to nearly 60% by 2020 • We estimate mid-tier revenue will account for 48% of the total by 2020 • Similar picture with mid-tier contribution which will grow to 45% by 2020
Economy
0%
2010
2015
2020
Source: Euromonitor, AC Neilsen, Perbanas, management estimates
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This is a profitable market to be in, despite current economic climate
EBITDA %
Total EBITDA (€m) 600
20%
548
15 400
• AkzoNobel is generating the greatest absolute EBITDA
321 10 199
200
100
0
Akzo Nobel
Sherwin Williams
Asian Paints
PPG Deco EMEA
• M Mostt companies i are generating returns above 10% (green lines)
5 75
Nippon Paint
43 DAW
Source: Annual reports and company presentations
0
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It is also a market in which brand strength really matters Consumer Drivers of Consideration for Paint (Asian market example)
20%
•
Brand reputation is the single most important category of factors driving consideration in this Asian market example
•
The Emotion and Colour categories are also best addressed by strong brands
15% 10% 5% 0%
* Factors that fall into the Emotion category include statements like “Inspires me to paint and decorate more often”, “Helps me to achieve my dreams”, and “Understands/meets my needs” ** Factors that fall into the Colour category relate mostly to making both colour selection and painting easier Source: Millward Brown factor analysis of consumer drivers of consideration for paint, 2011
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AkzoNobel has solid positions in some of the most exciting markets in Asia CHINA Population: 1.34 billion (world ranking: 1) GDP per capita (PPP): $8,620 ( (world ld ranking: ki 70) GDP 2011 Growth rate projection: 9% 2010 Paint market size: €3.4 billion Paint consumption per capita: 1.4 ltr AkzoNobel position: #2 VIETNAM Population: 86 million (world ranking: 13)
INDONESIA Population: 238 million (world ranking: 4)
GDP per capita (PPP): $3,380 $3 380 (world ranking: 84)
GDP per capita (PPP): $4,560 (world ranking: 80)
GDP 2011 Growth rate projection: 6% 2010 Paint market size: €150 million
GDP 2011 Growth rate projection: 6.5%
Paint consumption per capita: 1.5 ltr
2010 Paint market size: €300 million
AkzoNobel position: #1
Paint consumption per capita: 1.1 ltr AkzoNobel position: #1
Spotlight on Decorative Paints – 1 December 2011
Source: EIU, AkzoNobel analysis
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We have outpaced our competitors in the biggest market in Latin America BRAZIL Population: 191 million (world ranking: 5) GDP per capita (PPP): $11,920 (world ranking: 57) GDP 2011 Growth rate projection: 3.6% 2010 Paint market size: €940 million Paint consumption per capita: 4.6 ltr AkzoNobel position: #1 ARGENTINA Population: 40 million (world ranking: 31) GDP per capita (PPP): $17,370 (world ranking: 41) GDP 2011 Growth rate projection: 8.5% 2010 Paint market size: €175 million Paint consumption per capita: 3.2 ltr AkzoNobel position: #1 Source: EIU, AkzoNobel analysis
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We are the leader in Europe and have exciting positions in its fastest-growing markets EUROPE Population: p ~600 million GDP per capita (PPP): $34,810* GDP 2011 Growth rate projection: 1.5% 2010 Paint market size: €9.2 billion Paint consumption per capita: 5.6 ltr AkzoNobel position: #1
TURKEY Population: 74 million (world ranking: 18) GDP per capita (PPP): $14,310 (world ranking: 49) GDP 2011 Growth rate projection: 7.5% 2010 Paint market size: €500 million Paint consumption per capita: 2.3 ltr * Eurozone only (Eastern Europe: $17,960)
RUSSIA Population: 143 million (world ranking: 8) GDP per capita (PPP): $16,710 $16 710 (world ranking: 43) GDP 2011 Growth rate projection: 4% 2010 Paint market size: €620 million Paint consumption per capita: 3.4 ltr AkzoNobel position: #2
AkzoNobel position: #1
Source: EIU, AkzoNobel analysis
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None of our competitors has the global scale or position that we do 6 5
2010 Global Decorative Paints revenues* Top 14 companies (€ billions)
4 3 2
• We are the clear leader in EMEA (biggest market), and either #2 or #3 in the other main regions (North America, Latin America and Asia) • Only 2 of our major competitors have a significant presence in more than one region; neither has the global scale of AkzoNobel
1 0
• Our primary competitors in the emerging markets of Asia and Latin America are regional or national only Strong positions in all 4 major regions Concentrated in 2 or 3 regions Concentrated in 1 region only • •
Estimated for competitors where data is not disclosed Source: Company presentations and annual reports, AkzoNobel analysis
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AkzoNobel has the people, brands and competencies to win globally
People
• We can offer the best development opportunities in the industry, helping us to attract and retain the best talent
Brands
• We can invest more to develop and support more powerful brands and global brand identities and industry-leading, game-changing innovations
Competencies
• We can build and leverage experience and learning across markets and develop repeatable models to increase efficiency and effectiveness Spotlight on Decorative Paints – 1 December 2011
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We have built a very strong leadership team at the top end
Amit Jain India & South Asia
Jaap Kuiper Latin America
Liangqi Lin China & North Asia
Sucheta Govil Marketing
Jeremy Rowe South East Asia & Pacific
Richard Stuckes Europe, Middle East & Africa
Bob Taylor North America
David O’Brien Business Innovation
Spotlight on Decorative Paints – 1 December 2011
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We have also brought in the expertise we need at more operational levels
Senior* appointments split by origin 100%
•
80% 60% 40%
Of all the senior management appointments made within Decorative Paints since the beginning of 2009, over half were external hires One third of these came from the Consumer Packaged Goods industry
–
20%
Another 8% came from the Retail industry
–
0% EMEA
North Latin China & India & America America NA SA
* Appointments at one and two levels below Business Unit Managing Director
SEAP
BA
Internal Non CPG/Total CPG/Total%
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We have many strong brands in trade and retail, and in multiple product categories • We have a number of powerful, relevant b d occupying brands i a number of positions across different markets • Examples include Dulux (consumer), Sikkens (professional), Coral (Brazil), and Sadolin (woodcare) • Where it makes sense, we are rationalizing ti li i our brand portfolio – concentrating our investment behind fewer, bigger, better brands
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Strong brands generally command a price premium (multiple categories example)
Average price premium for manufacturers’ brands relative to store brands
60% 50% 40% 30% 20% 10% 0% Qm < Qs
Qm = Qs
Qm > Qs
• Even where consumers think store store-branded branded products are better than manufacturer-branded products (Qm < Qs), the average manufacturers’ brand premium is 21% • This premium jumps to 56% where consumers think manufacturerbranded products are superior in quality to store-branded products (Qm > Qs)
Qm – perceived quality of manufacturers’ brands Qs – perceived quality of store brands
Spotlight on Decorative Paints – 1 December 2011 Note: Based on a study of 3,900 French consumers across 75 consumer packaged goods categories Source: N. Kumar and J-B. Steenkamp, Private Label Strategy, Harvard Business School Press, 2007 (p 98)
33
Part of leveraging our scale is having a single global identity where possible
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We are supporting our brand and growth ambitions with increased A&P spend
• We have increased our overall A&P spend in proportion to revenue
Advertising & Promotion spend as a percentage of revenue
12%
• Higher spend % in the markets with the greatest growth potential
10% 8% 6% 4%
2009 2010 2011 (Est) 2012 (Est)
2% 0% EMEA
NA
• Investing in the North American market as part of our US turnaround / Glidden relaunch strategy
LATAM ASIA Global Spotlight on Decorative Paints – 1 December 2011
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Our scale means we can outspend our competitors on Research and Development Research & Development spend (total and %)
• AkzoNobel’s R&D spend in 2010 higher than that of our major competitors • We leverage technological capabilities across Business Areas
Source: Company annual reports and presentations
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We combine in-house technology and 3rd party supply to best advantage Core Technological Ingredients in paint manufacture With in-house technology:
Latex
• Having in-house technology gives us both product and cost advantages
With external supply:
• Unlike most paint companies, we do not rely heavily on third-party suppliers for our technological ingredients
Resins
• We can produce to the specification of our end formulations • We can develop AkzoNobel patented, truly differentiated products
Colourants Opaque polymers
• We can take advantage of price opportunities
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We address and solve end-user problems common to multiple markets “How can I get the right colour for my room when there are so many to choose from…?”
• Different markets have more innovation requirements in common than they do differences
“II want to be sure that all products I use are safe for my family and for the environment” “I want my home to look unique and reflect who I am, but I’m not sure where to start” “I would love to paint myy bedroom, bed oo , but I do don’tt do DIY and can’t afford a decorator”
“I want to use products that are kinder to the environment i tb butt I don’t d ’t want to compromise on quality”
“Painting the outside of my home is expensive and difficult so, when I do a job, I want it to look good for at least 10 years” Source: Consumer research across 28 countries
• Coming up with a solution in one market and then leveraging it into others makes our innovation process faster and more efficient • We have made this possible ibl b by reformulating f l i some 80% of our product base, reducing the number of formulations and raw materials
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We are building global competencies by codifying and rolling out our best practises Repeatable models within specific functions Sales
Marketing
Stores operations
• • • •
Category management Pricing excellence S Sales force f effectiveness ff Global glossary
• • •
Insight generation Communications development & evaluation Point-of-Sale marketing
• •
Stores management Estate management
Research & p Development
Integrated Supply Chain
Support
Cross-functional repeatable models • •
Product Market Review process for prioritizing and reviewing innovation projects Integrated Business Planning for aligning short and medium term sales forecasts with manufacturing planning
•
Stage Gate process for pipeline management
•
LEAN methodology for manufacturing excellence Purchasing back-end processes
• • •
Project management Underlying culture of high performance and employee g g engagement
Key enablers •
The multi-year implementation of a global ERP system, to be completed by early 2013 (70% rolled out already)
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These efforts are a critical aspect of the journey we have been on since our transformational merger in 2008 Integrate Turnaround Transform Grow
the ICI business (eliminate overlap, overlap reduce complexity, build a common culture) underperforming businesses (e.g. US, Germany) from our multi-local, fragmented history into a global company with global scale By growing market share in both mature and emerging markets
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We are transforming from a multi-local to a global company Multi-local company (our past)
Global company (our present and future)
• Full-function country organizations operate largely independently from one another and compete locally
• A global company develops and deploys global people, brands and competencies to win in local markets Spotlight on Decorative Paints – 1 December 2011
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This involved reducing complexity to support fewer, bigger and better assets Area
Beginning 2008
End 2011
Cost reductions
n/a
~ €210 million
FTE reductions*
25,800
~ 4,000
100
75
SKUs
>90,000
75,000
Raw materials
>8,000
5,000
Factories
80
55
Warehouses
160
120
Packaging types
>900
500
Brands
* Clearly, we are adding FTEs, particularly in the high growth markets, to support growth. The reductions are estimated reductions due to integration, complexity reduction and related restructuring Spotlight on Decorative Paints – 1 December 2011
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Our productivity has also improved steadily in all regions Personnel cost as a % of revenue Index 100=2009 Q2 • O Our productivity d ti it is i increasing in all three major regions
110 100 90
Europe Americas Asia
80 70 60 2009 Q2
2010 Q2
2011 Q2
• Increase is highest in Asian markets, reflecting higher pace of growth • Increase in 2010 Q2 Americas reflects in estment in investment Walmart account
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We have integrated our mature markets businesses and sharpened our focus in Asia Decorative Paints Business Units 2009
Decorative Paints Business Units 2011
UK, Ireland and South Africa
EMEA
Northern and Eastern Europe
North America
Continental Europe
Latin America
Canada
China and North Asia
United States
South East Asia & Pacific
Latin America
India and South Asia
Asia
•
We have further consolidated our mature market businesses to maintain our drive for synergies and streamlining
•
Having the Asian business split out into different units keeps the focus on positioning and investing for growth
•
Overall there is a clear shift in emphasis from mature markets to high growth markets
Largely mature market businesses Largely high-growth market businesses Spotlight on Decorative Paints – 1 December 2011
44
The Performance Improvement Program is the logical next step in our transformation • Decorative Paints will account for some 40% of the overall target of €500m • The bulk of that will come from EMEA and North America • 90% of the EBITDA improvement will come from cost savings, and the rest from revenue and margin growth
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Current trading conditions are tough
Mature markets Demand factors
Supply factors
High growth markets
•
Macroeconomic factors (GDP, • growth, employment)
•
Consumer confidence
•
Housing slowdown
•
Raw materials pricing
GDP growth & consumer confidence
•
Urbanization and economic development, which drives construction and mobility
•
One exception may be China, as government acts to cool d down property t market k t
•
Raw materials pricing
•
Squeeze on talent
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TiO2 prices are a challenge Regional TiO2 Pricing – in USD/tonne
H1 2011 Decorative Paints raw material spend (Total = €1.1 billion)
USD/Tonne 4.000 3.500 3.000 2.500
10% North America
8%
+91%
29%
16%
2.000 1.500
20% Asia
1.000 500
0
17%
Resins & Binders Packaging Materials Titanium Dioxide Additives Solvents & Diluents Other
Europe
2001
2003
2005
2007
2009
2011
Source: ICIS Pricing
• Pricing has gone up steadily in USD over the last decade, across all regions • TiO2 accounts for 1/5th of our total raw materials spend (up from 17% in 2008) Spotlight on Decorative Paints – 1 December 2011
47
There has been a lag in new extraction capacity coming onstream Global supply & demand outlook for Ti mineral 2000 – 2020F • Alth Although h th there iis no shortage of feedstock in the ground (mostly ilmenite and rutile), the market fears an expected shortage in TiO2 supply
Source: TZMI
Consumption
Approved new projects
Likely new projects (not yet approved)
Existing production
• High current prices are bound to drive new investment in capacity – we have already seen ample evidence of this, particularly in China
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We are actively working both to increase security of supply and reduce dependence Sourcing
Research & Development
•
Leveraging strong relationships with major suppliers, including the emerging suppliers in China
•
Maintaining a safety margin of stock
•
Partnering with China-based Guangxi CAVA Titanium Industry to manufacture and distribute titanium dioxide With this deal a new titanium dioxide facility will be developed in Qinzhou with a production capacity of 100,000 tons, slated to begin operation in the beginning of 2014 –
•
Using our formulating science expertise and our high-throughput g g p experimentation p capability to reduce our TiO2 dependence in 3 ways: –
Using existing replacement technology
Working with key suppliers to develop new technology
–
Increasing efficiency of use through formulation improvements
–
•
Combined, these initiatives mean we can reduce d our total t t l TiO2 usage while hil maintaining cost efficiency and product attributes
Further guarantees security of supply for the Asian market
–
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Raw material inflation drives price increases
10
Quarterly price development in % year-on-year ((excluding g mix effect))
8 6 4 2 0 -2 2
Q1 Q2 Q3 Q4
2008
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2009
2010
Q1 Q2 Q3
2011
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50
We expect to emerge from the current storm with an even stronger position •
With industry-leading R&D and innovation, we are delivering the right products and services to meet the needs of consumers better and faster than our competitors
•
We are implementing focused and powerful marketing programs, strengthening our brands’ positions in every major region of the world
•
We continue to invest in the quality, extent and distribution of our production and distribution capacity
•
We are continuously developing our people, people for personal growth and community engagement as well as business growth
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In Summary – Winning Globally
• Our markets will continue to grow, especially in Asia, Eastern Europe and Latin America • AkzoNobel is the best placed to benefit from this growth – We have solid growth platforms in all key markets – We have a very attractive position in EMEA, the world’s biggest market – We have the best people, brands and competencies – We can leverage our global scale in way others cannot
• We will pursue share growth in all major markets, through superior functional execution and with opportunistic market consolidation
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Marketing Sucheta Govil
Our vision & plans
• Adding Colour to People’s Lives through inspiring and enabling decoration • Fewer, Clearly Positioned Stronger brands Spotlight on Decorative Paints – 1 December 2011
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End the tyranny of grey, dull spaces
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Adding Colour to People’s Lives
What business are we in?
BEAUTIFUL HOMES Spotlight on Decorative Paints – 1 December 2011
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Our brands will inspire beautiful homes, spaces
To Increase Penetration and Access for our Brands so Improving Spaces becomes easy
To Increase Frequency of Painting and Decoration with Our Brands
“We will Inspire Consumers and Painters to Create Beauty and fight the opportunity cost of grey and shabby” Source: 3D qualitative research, July 2009
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Consumers and professionals are equally important to us
Non‐Residential
What’s being painted
Residential re‐painting 70%
Res. New Public Commer. 12% Build 11% 7%
HID 17%
Who’s specifying
Consumers 53%
Professionals 47% Spotlight on Decorative Paints – 1 December 2011
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Let me introduce you to some home makers…
Sarah from Bristol Kajol from Mumbai
Noor from Lahore
Ineke from Indonesia
Fabi from Rio
Meili from Beijing Jeni from Toronto Spotlight on Decorative Paints – 1 December 2011
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All say "me and my home are one"
Home is an extension of ourselves
Improving our home is important to feel better
“For all cultures, the home is an expression of the people who live there” Spotlight on Decorative Paints – 1 December 2011
Source: 3D qualitative research, July 2009
FEA ARS
HOPES
Deep consumer insight: one universal point in the decorating journey
Decision to decorate
Finding inspiration, gathering ideas Æ exciting Anticipatio n of a job well done
PPR
DMVHMFMS
Segment names DMV: Deliver My Vision PPR: Perfect Professional Results HMFMS: Help Me Find My Style
Anxiety about making the right style/colour y / choice Realisation of everything that could go wrong (buy the wrong product, bad colour choice, lack of physical skill, disruption, family dissatisfaction)
Source: Based on Global 3D qualitative research, July 2009
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For all: pride/satisfaction in final end result
Satisfaction in doing something you’re good at or that appeals to your nature Recognition that there is physical p ys ca work o (boring/ difficult/disrupt ive) to do More difficulties emerge as job starts: prep, colour looks wrong, takes longer than anticipated, etc. Spotlight on Decorative Paints – 1 December 2011
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The fundamental elements of our global brand strategy Be easily thought of Be easy to buy
Strong Visual Identities
Be accessible Build distinctive mental assets
Our products and communications
Our vision : Adding colour to people’s lives
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We leverage our global scale and we keep the customer at the center GLOBAL MARKETING
LOCAL MARKETS
Global Brand Objectives
Local Business Objectives
Brand Idea
Comms Platform
Universal Market Relevant Insight
Campaign Idea
Comms and Activation Plan
(B d (Brand Territory) Brand Guidelines
Comms Guidelines
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Our main competitive advantage: a great global brand • Dulux (cluster) sold in more than 50 countries in the world
A a global As l b l brand b d we can leverage: l • A powerful positioning & strategy • Strong brand assets • Global Big Idea • Innovation products and concepts
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Our brands will also be the preferred partner of the professional painter
Fewer powerful, insight driven, business winning brands: • Sikkens ‘Sensations’ • Dulux Trade ‘No.1 • Herbol – ‘Schnell Sicher Productiv’ Prod cti ’
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Our vision and plans
Adding Colour to People’s Lives through inspiring and enabling decoration • Leadership in Colour • The Art, Science, Delivery • Lock-in • Bigger innovations • Leveraged faster • Sustainability Leadership
Innovation David O’Brien O Brien
Innovation will play a major part in achieving our growth objectives •
Growing our share through competitive advantage
•
Growing our categories by encouraging frequency and penetration
•
Locking professional users and specifiers into our brands
•
Improving our margins by adding value and enabling us to compete
‘More people, More often, More money......’
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Strategic context •
Consumer/user insight at the heart of innovation
•
Major progress on leveraging our scale by moving f from a multi-local lti l l to t a global l b l approach h
•
Focus of our resources on key initiatives (fewer, bigger, better and faster)
•
Short term AND long term perspective
•
Delivery of our sustainability objectives
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Beautiful homes
Long lasting performance
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Future Now
Developing the Trend Bank
Stage 1 Research
Stage 2 Validate
AkzoNobel and Your Future Research
Expert Panel
Stage 3 Identify
Trend
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Developing the platforms
Stage 3 Trends
Stage 4
Stage 5
Strategic Imperatives
Innovation Platforms
Walk around Three rooms: 1. Inspiring People Globally 2. Leading through Innovation 3. Winning in Professional Markets
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Europe, Middle East & Africa Richard Stuckes
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Decorative Paints EMEA Key facts 2010 • • • • •
Revenue: €2,585 million 11 200 Employees at year end 11,200 530 stores across Europe at year end 34 Countries in 4 Regions Main brands include Dulux, Sikkens, Levis, Herbol, Marshall, Glidden
Revenue by business region
Revenue by channel
6%
23% 24%
23%
27%
30%
17%
Northern Western Southern Eastern & African Building Adhesives
Large-scale outlets (LSOs) Small-scale outlets (SSOs) & other Own stores
50%
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EMEA will continue to represent a large proportion of the global market
Global Decorative Paint sales, 2010 tto 2015 (€ billions) billi )
40 35 30 25 20 15 10 5 0
€37 B €30 B
Asia Pacific Latin America North America EMEA 2010
• Although growth will be higher in Latin America and Asia than in North America and EMEA, these will still represent a very significant proportion of the overall market • EMEA is forecast to represent just under 40% of the global market by 2015
2015
Note: Includes all markets, not just ones in which AkzoNobel is present Source: Orr & Boss, management estimates
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There is still significant opportunity to grow share in EMEA AkzoNobel’s Decorative Paints Market in 2010* 100% = €12 billion
•
Top p 4 markets in Europe represent 46% of the EMEA total
•
Western Europe represents 77% of the EMEA total
•
Only France and the UK are more than 50% consolidated to the top 3p players y
•
Opportunities to grow share include organic growth, distribution consolidation and potential opportunistic M&A
* Markets where AkzoNobel is active. Does not include non-paints sales or integrated distribution
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Source: Management estimates
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AkzoNobel have a solid overall leadership position in EMEA 2010 Decorative Paints revenues 100% = €12 billion* RMS = 2.4
•
AkzoNobel is the largest paint manufacturer in EMEA, at more than double the size of our nearest competitor
•
The top 6 competitors still only account for just under 40% of the total market
Akzo Nobel PPG DAW Others
Tikkurila Jotun Materis
*Notes: Only includes markets where AkzoNobel is active. Does not include non-paints sales or integrated distribution.
Source: Management estimates
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We hold a range of positions across individual markets
Market leader
Competing very closely
Challenger position
• • • • •
Belgium France retail Greece Italy trade Netherlands
• Poland • Russia
• • • •
Switzerland Tunisia y Turkey UK
• South Africa • Spain
• Germany • Middle East • Scandinavia
•
AkzoNobel is the market leader in a number of countries,, together accounting for nearly 40% of our total EMEA market
•
Significant growth opportunities in key markets like Turkey, Poland and Russia
•
In some markets we are up p against g strong, g, mostly local incumbents like Tikkurila in Russia, DAW (Caparol) in Germany and Jotun in Scandinavia and the Middle East
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We are facing significant economic headwinds at the moment • Although construction is not the major driver of paint demand, it reflects the broader economic environment including consumer sentiment
Housing starts (Index 2005 = 100)
200 180 160 140 120 100 80 60 40 20 0
Source: OECD
Belgium Denmark France Poland Spain Spa Sweden UK
• Housing starts in a number of EMEA markets have yet to recover to their peak levels • Other issues dampening consumer confidence are uncertainty about the Euro and expected cuts in government spending
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We have already made excellent progress over the last 3 years on the integration, simplification and cost reduction agenda
Area
Impact
Cost reduction
Reduced by >€90 million
FTE reduction
Reduced by over 2,100 FTEs
Brand reduction
19 brands discontinued
SKU reduction
16,000 SKUs eliminated (nearly 30%)
Factory footprint
11 closed sites (nearly 30%)
Warehouse footprint
19 closed warehouses (20%)
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Further operational improvements will release additional funds to invest in growth Performance Improvement Program Key EMEA initiatives • SKU reduction to reduce cost of complexity both in selling and at manufacturing sites – generates margin opportunities and Opex / OWC savings • De-layering in the organisation – countries focus on selling and marketing activation and BU organisation will focus on Integrated Supply Chain and supporting processes • Building on SAP platform to optimise processes across the region – less complexity and more efficiency
•
Complexity reduction is a key driver of improvement
•
The integration and simplification program have created the necessary foundation for us to transform our business further
•
This further transformation will support our growth ambitions by releasing funds to invest in production, distribution and brand strength
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We have world-class assets in EMEA, strengthened by our scale People • Unparalleled industry depth combined with exciting new hires that bring us critical category management expertise
Brands • Market leading brands in both the Trade and Retail segments in several markets • Strong woodcare brands in UK, Scandinavia, Russia • Marketing organization restructured to leverage scale
Distribution infrastructure • 3 mega-sites (UK, Poland and France) to produce the bulk of our volume at highly competitive rates of efficiency • Opportunity to find distribution synergies across the AkzoNobel portfolio Spotlight on Decorative Paints – 1 December 2011
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A fantastic management team has brought great retail & consumer goods experience Guy Williams (North) • 8 years in the business • Led UK Stores turnaround in 2005/6 • Pre-AN experience p at major j retailers including Woolworths and Aldi Kees Ekelmans (West) • New appointment, joining from Hunter Douglas’ Division Components & Programs • Extensive finance, ops and management experience from nearly 20 years at Unilever Peter van Campen (South) • 1 year at AkzoNobel • Brings Category Management and branded consumer goods expertise from Shell, Heineken and LVMH Jan-Piet van Kesteren (East) • 18 months in AkzoNobel • Brings emerging markets marketing expertise from 14 years at Unilever in various international roles
Frank van Buchem (Marketing) • 6 months in AkzoNobel • Brings marketing and GM experience at Unilever, CocaCola and Sara Lee Spotlight on Decorative Paints – 1 December 2011
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The phased roll-out of the new Let’s Colour brand identity is already underway
From:
To: •
• •
Phased rollout beginning in 2011 with Austria, France and the Netherlands Continuing though to Q1 2013 Combination of modes: Launch, Phased and Hybrid
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We continue to implement world-class technology in our mega-factories Pilawa, 2006
Ashington, 2014 Montataire
Mobile vessels are moved to automatic dosing and mixing stations before progressing to filling
€4m of investments have nearly doubled the volume of product coming out of this site Leading-edge technology ensures accuracy and reliability in quality
A purpose-built, Agile plant in the North East of England making a complex range of products for the North West of Europe • Based on the Universal Blending Plant design developed in Pilawa • This £100m plant will represent a step change in technology, improving energy efficiency by 60% and reducing waste by 60% Spotlight on Decorative Paints – 1 December 2011
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Our plan for winning in this market is based on five critical elements
Have the most powerful & meaningful brands
Win in stores
Be the preferred partner of the professional painter
Be the best employer to work for
Attain industry leadership in all aspects of sustainability
Areas of focus for today Spotlight on Decorative Paints – 1 December 2011
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There are several components to our plan for winning in stores • Stores Excellence
Making our own stores best-in-class for the channel
• Category Management
Helping our biggest customers grow the category
• Point-Of-Sale competence
Capturing the sale at a critical point in the buying decision
• Distribution expansion
Recruiting independent store owners to join our network of soft franchisees
• Sales Excellence
Developing repeatable sales models and rolling them out across the region to drive cost efficiency and revenue effectiveness Spotlight on Decorative Paints – 1 December 2011
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We directly operate 530 stores in Europe, and soft-franchise more than 1600 •
The number of stores in our network is growing
•
1/3 of our EMEA employees work for our own stores
•
Over 1/4 of our revenue comes from our stores
•
With independent distribution channel under pressure, manufacturers’ owned/controlled stores become an increasingly important route to market
•
Stores are an excellent way to introduce and manage new product, marketing and sales initiatives
AkzoNobel owned and operated stores AkzoNobel branded stores (soft-franchised)
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High
Our Stores Excellence programme will increase total EBITDA significantly P2
Impact
P6 P5
P1
•
Priority areas for improvement (shorter term, higher impact) include Pricing, Assortment/ S Sourcing, i S Segmentation/ t ti / Customer management and Outlet operations
•
Organizational confidence is high due to very successful program run with the current management team in the UK in recent years
P4
Mediu m
P8
P9
Long-term
Short-term
Realization of impact
Specific improvement projects: P1
Pricing
P6
CRM (including promotions)
P2
Assortment / sourcing
P7
Promotions
P3
Store coverage management
P8
Logistics
P4
Outlet operations
P9
Estate management
P5
Segmentation / customer management (sales) Spotlight on Decorative Paints – 1 December 2011
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Turkey is a great growth platform for our business
Market
• • • •
Total market size in 2010 of about €500m Growing at approximately 2x GDP growth Extremely competitive: 5 players have between 10 and 25% share Mainly ‘Buy-It-Yourself’
Distribution
• • • •
Distribution to SSO via Wholesale is around 75% of the market Other channels are LSOs and construction SSOs are a competitive place without exclusivity Mainly ready-mix paint, limited color variety
AkzoNobel presence
• • • •
AkzoNobel operates with a single brand: Marshall Marshall is the oldest and most well known paint brand We are the market leader Largely local supply chain, operated from Gebze (80 km from Istanbul) Spotlight on Decorative Paints – 1 December 2011
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We are pursuing an aggressive roll-out strategy with 1,000 stores in 2011 including in-store tinting equipment From a fragmented and messy look
To a revolutionary, exclusive store
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Proven results will drive our momentum for further expansion through 2012 YTD Revenue uplift is significant, up to 50% whilst tinting sales in store increased by 500%
Continuous upgrades of our concept provide even more strength
50 44
Target % Realized %
30 25 15 10
Perfect Stores
Store in Stores
Corner Stores
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Operating sustainability across all aspects of our business is critically important to us • Is the right thing to do, and protects the long-term health of the business • Additional short-term benefits include: • Top-line growth: revenue from our eco-premium products represent 22% of total sales and outgrew the market by a factor of 3 • Reduced costs: we have already reduced our energy use per tonne of production by 9% in two years, and by 4% in absolute terms
Our ‘5 Pillar’ approach to Sustainability Combines economic, environmental and social sustainability
• Improved margins: eco eco-premium premium R&D helps drive innovations •
Employee engagement: Employees have identified and pursued literally hundreds of smallscale improvement projects in every area of the business – these add up to big impact Spotlight on Decorative Paints – 1 December 2011
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We are proud of our achievements with sustainability and the recognition we have received for them AkzoNobel is supplying London 2012’s 2012 s Olympic Village •
Olympic Delivery Authority aiming to make 2012 “the most sustainable Games to date”
•
Dulux Light & Space Diamond Matt was chosen because it combines very high durability with the ability to reflect more light back into the room
• This allows up to 22% less light energy to be used and requires less frequent maintenance
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We have leveraged a successful ecopremium product across multiple markets
We call Ecosure a ‘Step Towards Greener’ because while these are the most sustainable products we have today, they are only a step on our journey toward a more sustainable future – so we need and intend to have even more sustainable products in the future * Volatile Organic Compounds
•
Ecosure product line developed and launched in the UK in 2007
•
Carbon impact evaluated with the support of an independent agency agency, Forum for the Future
•
Embodies sustainability improvements while maintaining premium product quality •
Less embodied carbon (10% to 30%)
•
Packaging includes at least 25% recycled material, up to 50% in some products
•
Reduced VOC* content, by a minimum of 40% and as much as 80%
•
Water-based
•
Has received a number of industry awards
•
Revenue growing at double-digit rates
•
Now rolling out into multiple markets across EMEA Spotlight on Decorative Paints – 1 December 2011
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In Summary • EMEA is the heartland of our business and will continue to be so • We will continue to pursue significant growth opportunities: share h gain i iin mature t markets k t and d substantial b t ti l growth th iin Eastern E t Europe, Turkey and Africa • Tough trading conditions will generate opportunities to drive consolidation in the market • We have everything we need to win here: the scale, the assets, the experience and the determination • We will not only weather the storm of current market conditions – we will emerge stronger than many of our competitors • We can do this while still protecting the best of our experience and our heritage in local markets
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North America Bob Taylor
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Decorative Paints North America Key Facts 2010 • • • • •
Revenue: €1,029 million 5,100 employees at year-end 13 manufacturing f t i / di distribution t ib ti ffacilities iliti 550+ company-owned stores 5,000 independent dealers
Revenue* by geography
Revenue* by business line
5%
8% 24% 17% Home Depot Company Owned Stores Caribbean Walmart Diversified Brands - Canada Diversified Brands - US
33% 62%
11% USA Canada Caribbean**
• Charts are based on 2011 Estimates ** Including Puerto Rico. Charts are based on 2011 Estimates
5%
35%
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Executive Summary • Relentless Focus: −
Drive profitable growth with an intense focus on margin, cost and innovation
• How: − New management team with clear priorities − Margin management – price, procurement, formulations − Capitalize on robust innovation pipeline − Drive cost synergies across North America − Invest in portfolio of strong brands − Leverage cross channel presence − Continue delivering solid Canadian performance • Build upon strong customer relationships & retail partnerships • A culture change underpinned by AkzoNobel’s core values
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Unfavorable North American Market Trend
750
Economic Triggers
-33%
• Persistent high unemployment
500 MM Gallons
• Prolonged US housing depression also weakened Canadian market
• Weak consumer confidence
250
0 2007
2008
2009
2010e
2011e
2012 market volume expected to be flat
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Source: 2010 AkzoNobel Estimates
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Market Structure
Residential
Commercial
35% 65% End User: PRO (100%) Where PROs Buy: • Stores 78% • Independent Dealers 16% • National N ti l Retailers 6%
Source: 2010 AkzoNobel Estimates
End User: DIY (70%) PRO (30%) Where DIYers Buy: • National Retailers 72% • Stores 16% • Independent Dealers 12% •
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Effectively Leverage the Glidden Brand Across All US Channels AkzoNobel
AkzoNobel
Others
PPG
Valspar Sherwin-W SW PPG
AkzoNobel
Others
Others
Valspar
Behr Behr
Benjamin Benjamin Moore Moore
AkzoNobel Oth Others PPG PPG
Sherwin-Williams Sherwin-Williams
Home Depot
Lowes
Walmart
Sherwin n Williamss
% of gallons sold
AkzoNobel
Independent dealers
Company-owned stores
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Source: 2010 AkzoNobel Estimates
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The Glidden Portfolio: Customer and Channel-Centric Brand Promise
DEALER
STORES
Portfolio Role
Simple Solution
Project Helper
Approachable Expert
Valued Partner
Hero Product
Glidden Brilliance
Glidden Premium
Glidden Spred Complete
Glidden Professional
Step-saving products at an excellent value
Quality paint for projects big or small, at an exceptional value
Best-in-class quality at the most competitive price
Customized service to deliver solutions for every need
Valspar Signature
Olympic Sherwin Williams
Benjamin Moore Aura Sherwin Williams
Sherwin Williams PPG
Competitive C titi Edge
Compares to
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AkzoNobel
AkzoNobel
AkzoNobel AkzoNobel
% of gallons sold
AkzoNo obel
Relative Market Position - Canada
Others General Paint
AkzoNobel
Others PPG Sherwin Williams
Home Hardware Cloverdale
Behr Benjamin Moore
Oth Others
General Paint
Masco Independent dealers
Walmart Canadian Tire
Home Rona Depot
Source: 2010 AkzoNobel Estimates
Company-owned stores
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Our Journey To Date
2008-2011 Rebuild brand position
2008 – 2011 Rebuild Brand Position
Glidden reinvention Irreplaceable partner at The Home Depot
Stores transformation
New growth programs
Rebuild brand position Total cost redesign
Specialty Businesses
Focus on people and culture
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Our Journey Going Forward 2013-2014
2012 2008-2011
Accelerate Profitable Growth
US: Breakeven at EBITDA level
Rebuild Brand Position
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2012 – 2014 Strategy: Leverage Scale & Scope to Accelerate Profitable Growth Change culture
• Clear priorities & accountability
• Sense of urgency
• New management team
Drive growth
Improve margin • Aggressive margin management • Improve mix • Commercialize new products
Reduce cost base
• Deliver supply chain & back office efficiencies
Protect investment in our brands and innovate
• New growth programs at The Home Depot • Target core Walmart shopper • Expand retail partner base • Drive PRO strategy • Expand Dulux stores in Canada • Drive Caribbean growth
• Reduce product complexity
• Improve • Drive North processes American and systems synergies productivity Spotlight on Decorative Paints – 1 December 2011
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Provide The Home Depot with industry-leading innovation Solution: A collection of new Glidden programs that simplify painting for the DIY & PRO end user
Color Palette
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Grow share among Walmart’s 140 million weekly shoppers Solution: A differentiated paint program for 3 3,400 400 Walmart stores in the US
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In Summary • Relentless Focus −
Clear priorities – sense of urgency
−
Aggressive margin management
−
Drive structural cost reduction
−
Improve productivity
−
Fuel growth thru innovation
• Decorative Paints North America’s strong cross channel market position is keyy to delivering p gp profitable g growth
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Spotlight on Decorative Paints – 1 December 2011
Q&A: Keith Nichols Tex Gunning Richard Stuckes Bob Taylor
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South East Asia & Pacific Jeremy Rowe
Decorative Paints South East Asia & Pacific – Key Facts 2010 • Revenue: €279 million • 1,400 Employees at year end • 7 manufacturing f t i sites it and d 15 15,000 000 retail t il points i t served d • #1 or #2 in every market served and #1 overall • High profitability • A Dulux business • JV’s in Indonesia with PT DWI Satrya Utama (AN share 55%) and in Malaysia with Amanah Raya Berhad/Skim Amnanah Saham Bumiputra (AN share 60%) Revenue By Country 10% 15%
30%
20%
Revenue by Brand
IIndonesia d i Vietnam Malaysia Thailand Others
30% Dulux Non-Dulux 70%
25%
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A large, growing region
• Over 600m people, growing at
around 1% per annum • Almost 30% of the population
<14 years old • Historic GDP growth of 7-8%
likely to continue in the medium-term • Wide range of incomes, with
GDP/Capita ranging from US$800 to US$43
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A dynamic, colourful region
• A dynamic, fast developing
region i • Where colour is ingrained
in the spirit of many diverse cultures • With a short painting cycle
of 3-5 years due to factors including the climate and the importance of home renewal for festive events
A large and profitable paints market Market Value By Category
• A market of around 1 billion litres and €1.5 billion value
15% 40%
15%
Interior Exterior Trim Others
30%
6% 28%
17% 16%
20%
• Relatively low consumption of ~ 1.7 litres/capita and pricing of ~ €1.50/litre • High proportion of exteriors due to habits and climate
Market Value By Country
13%
• 70%+ of the market in Decorative Paints
Indonesia Thailand Malaysia Philippines Vietnam Singapore & Others
• Five countries represent more than 90% of the region • A profitable market
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A market that is expected to grow in the medium term
• More urban households
10%
• A move from non-permanent to
permanent, and unpainted to painted houses
• Increased percentage of disposable
6%
income spent on decoration
• Continued development and
infrastructure investment
• Inflation & price growth gro th • Highest growth in the mass market • Growth spread across Tier 1, 2 & 3 cities
Volume
Value
Expected Market Growth 2010 – 2015 CAGR
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But challenged in the shorter-term
• Flood situation in Thailand will take
6 months th or more tto recover • Political instability remains a
feature of the region, but is improving • Vietnam’s recovery from economic
overheating will reduce growth prospects in 2012 • Continued raw material price
inflation • Indonesia is best placed to weather
any global recession Spotlight on Decorative Paints – 1 December 2011
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A consumer-driven, colour-loving but fragmented market Market Value By Channel
•
A market of mostly “Buy It Yourself” (BIY) and “Have It Done” ((HID)) consumers
•
High use of colour
•
>55% on residential repainting
•
A highly fragmented, mostly traditional channel
•
In-store tinting established and growing strongly
•
Modern retail only growing slowly
21% Traditional 49%
11%
Wholesale Modern Retail Projects & Others
19%
Consumer By Type
40% 60%
BIY & HID (Use a Painter) DIY Spotlight on Decorative Paints – 1 December 2011
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A market where AkzoNobel is the leader Estimated Value Market Size and Share Top 6 markets in South East Asia
100%
The Rest
The Rest
The Rest
Th The Rest
Th The Rest
Th The Rest
80
28% 60
40
#2 Player #2 Player
#1 Player
Joint #1
#1 Player
42% Joint #1
18% 20
12% #1
0
Indonesia
#2
Joint #1 #
Thailand
Malaysia
Joint #1
#1 Philippines
AkzoNobel Nippon Paints TOA All Others
Vietnam Singapore
AkzoNobel
AkzoNobel also has #1 position in Brunei, Joint #1 in Papua New Guinea, and #3 in Cambodia Spotlight on Decorative Paints – 1 December 2011
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Leadership built on the Dulux brand
• 70% of business behind Dulux • A well-known and highly regarded
brand in terms of: - Leading - Premium - Quality • Especially strong in
- Premium segment - Exteriors market • Well-know Dulux propositions such as
Dulux Weathershield, the leading brand for exteriors in the region Spotlight on Decorative Paints – 1 December 2011
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Our winning objectives
• Ensure volume and revenue growth
> 10% per annum • Build to a Relative Market Share of
2.5x to the nearest competitor • Continued superior profitability from
brand, scale, mix and global leverage • Strong ROIC
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Investment centered around the brand and winning the consumer Product Offer & Portfolio Mass Market Penetration
Embedded Sustainability
Activation
Advertising
Brand Visibility
One-on-One Interaction
Deep Distribution
Partners & Advocates
Colour Delivery
Society Investment Spotlight on Decorative Paints – 1 December 2011
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A renewed and focused product offer and portfolio
• Focused product
portfolio aligned to consumer needs • Renewed livery across
the range • Regular innovation
and renovation • Simplification and
harmonisation of product, positioning and execution Spotlight on Decorative Paints – 1 December 2011
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A dramatic and successful entry into the mass market
• Mass market shaped historically by
competitors • Benchmarking to find the right price and
positioning for entry • Invest in product quality at the right price • Leverage the Dulux brand • “Beauty that lasts” and “easy choice” for
consumers • Dramatic success in Indonesia and
Thailand to date Spotlight on Decorative Paints – 1 December 2011
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Embedded sustainability in all of our major products
• Low-Odour Low VOC
implemented across the product range and underpinned by the Singapore Green Label Standard • Weathershield Keep Cool for
exteriors • Dulux Pure air-purifying concept
for interiors • Water-based versions of trim and
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Supported by locally-relevant and specific advertising and activation
• Increased brand investment
levels towards 10% of revenue • Brand campaigns based on
global position within a local context • Deep p local activations
around festive painting occasions
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Including significant one-on-one consumer interaction
• One-on-one colour design
and consulting cons lting ser services ices in many markets provide individualised brand experiences • Rolled-out at scale, visiting
and producing consultations for tens of thousands of consumer per year with high conversion rates • Measurable brand and
sales impact Spotlight on Decorative Paints – 1 December 2011
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Brand visibility across all touch points
Print Livery Outdoor
TV
Shops
Clubs
Collaterals Events
Tinting Machines
Clothes Web Sites
Facebook
Design Centres
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Increasing distribution depth and capability
• Increasing numeric and weighted
distrib tion be distribution beyond ond o ourr ccurrent rrent 15,000 end points • Engaging professional distribution
partners for large geographies – increasing numeric reach by 15% and weighted reach by 10% • Improvements see in market share share,
customer service, distributor stock, range completion, and overdues • Creating enhanced in-store
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Deep delivery of colour through the Discovery low-cost tinting machine
• Superior colour marketing,
leveraging le eraging global capabilities such as ColourFutures • Conversion to tinting for colour
delivery, Already over 5,000 tinting machines in place across the region • The Discovery tinting machine is
an important enabler of deep rural penetration into small shops
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Building professional partners & brand advocates
• Continued investment in:
- Painters - Architects - Professional Specifiers - Interior Designers - Developers
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And taking the brand into society
An engaged, creative, local team supported by global capabilities
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In summary
• The South East Asian and Pacific markets are attractive and offer
significant growth potential • We are the leading Decorative Paints company in the region, with
a #1 position in key markets such as Indonesia and Vietnam
• We are re-launching and further developing the Dulux brand to
secure long-term leadership for AkzoNobel
• This is an integrated investment program covering our brands,
capabilities and people and leveraging on global capabilities for competitive i i advantage d
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India & South Asia Amit Jain
Decorative Paints India & South Asia Key facts 2010 • Revenue: €185 million • 900 Employees at year end • Production Units : 3 • 75 warehouses servicing 7500 retailers nationwide • Strong position in premium segment • Undisputed market leader in Sri Lanka • Main brands Dulux and ICI Paints • India : Publicly listed, AN holding 56.4%, 3 Business Units (Decorative Paints largest)
Revenue by price tier
Revenue by country
16%
16%
Sri Lanka India
Premium 22% 62%
Mass Economy
84%
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We operate in the fastest growing decorative coatings market in the world
4
India & Sri Lanka Decorative Paints Market Progression (€ billions)
CAGR ~14%
3.1 3
2
•
The market Th k t is i expected t d to t double in the 5 years from 2009 to 2014
•
Growth drivers include: • Buoyant economy
2,5
• Greater prosperity • Infrastructure investment
1,6
• Consumers trading up 1
• GDP/capita increase 3.5x by 2020 •
0 2009
2012
2014
This growth rate is sustainable – 75% of the market is for re-painting
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Source: Internal Market Analysis
145
The market is trading up to superior products
4
India & Sri Lanka Decorative Paints Market Progression (€ billions) 3.1
3
15% Premium
1
10% 2009
2014
•
The premium segment is expected to grow much faster than other segments due to: • Accelerating middle class growth
1.6
0
The Indian market is some hat insulated somewhat ins lated from the global economic slowdown, given the nature of its demographics and economic structure
CAGR 18%
2
•
Mass
• Increasing number of nuclear family households
Economy
• Rapid rise in income levels • Housing demand and outlay • Services / manufacturing
Source: Internal Market Analysis
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Growth is faster in the Semi-Urban Towns segment than in Metros Metro vs. Semi Urban Decorative Paints Market Progression (€ billions)
3
• One of the main drivers of growth in the semi-urban market is the incentives offered by state agencies to invest in these cities, and the economic prosperity this engenders
CAGR
3.1
18% 2
1.6
13% 1
• This segment is largely an unaddressed market
Semi‐Urban Metro
• Main operational challenges relate to supply chain / distribution
0 2009
2014
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Source: Internal Market Analysis
147
AkzoNobel’s Dulux is a strong # 2 in the Premium market
Market size by segment and by manufacturer 100% Others Berger Nerolac Dulux (>20%)
Asian Paints
Premium (32%)
Source: Internal market analysis
Others
•
AkzoNobel Ak N b lh has a presence in all three of the main segments of the market
•
Our highest share is in the Premium end
•
We are also a distinct leader in Sri Lanka, Lanka with >40% market share
Others
Dulux (6%) Nerolac
ICI (5%) Nerolac
Berger Berger
Asian Paints
Mass (39%)
Asian Paints
Economy (30%)
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We have a high margin and are growing faster than our competitors Q3 YoY growth %
30% 25% 20% 15%
Revenue
10%
Gross Profit
5% 0% AkzoNobel India Ltd. Decorative Paints share of total Revenue*
~90%
Asian Paints
Berger
Kansai
Others
~ 90%
~80%
~55%
n/a
* Estimated for non-AkzoNobel companies Source: Published Quarterly Result
Industry
n/a
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We are aiming for significant growth Net Revenue (€ Millions)
500 400 300
•
We are aiming for a strong #2 position in the market overall, and a #1 position in the Premium category
•
Our strategy is based on three components:
~ 340 185
0 2010
35% 30% 25% 20% 15% 10% 5% 0%
We plan to increase revenue 2.5x in 5 years while ensuring good margins
~ 470
200 100
•
CAGR ~20%
2013
2015
•
Being selective about where we will aim to grow (Premium and Mass)
•
Changing the rules of the game in distribution
•
Leveraging our global repeatable models in innovation and marketing (Let’s Colour)
Premium Category Market Share
20% 2011
24%
2013
28%
30%
2016
2018 Spotlight on Decorative Paints – 1 December 2011
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Using breakthrough innovation we are creating a new proposition in Premium • We have leveraged a global innovation to address a clear market need / opportunity • Weathershield has been certified by India’s Centre of Energy Studies & Research • It has won the Economic Times Acetech Green Innovation of the Year award • North Delhi Power Ltd uses Weathershield in its facilities to save on electricity spend
• 24 of 28 states in India are hot for more than 8 months in a year • Temperatures regularly reach 40 to 48°Celsius • Even a marginal respite from heat is of great benefit
Advertisement… Spotlight on Decorative Paints – 1 December 2011
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Our volume growth with WeatherShield has more than doubled since launch WeatherShield volume growth 25%
21%
•
We launched the improved Weathershield product featuring the innovative SunReflect technology in May 2010
•
As a result we have gained 1% share in the Premium Exterior category in the last 12 months
20% 15% 10%
10%
5% 0% 12 months pre-launch
12 months post-launch
May ‘09 – April ‘10
May‘10 – April ‘11 Spotlight on Decorative Paints – 1 December 2011
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We are raising the bar substantially in terms of the mass market offering •
The number of middle class households is expected to reach over 100 million illi by b 2015
•
This market tends to be treated as one homogenous mass by competitors
•
This class is made up of value conscious consumers – they are not willing to compromise on finish, colour and the final economics of usage
•
We are addressing this market with new propositions: 1. Promise of great finish, high coverage and no colour fade 2. Magic of emulsion finish at price of distemper (economy paint) Spotlight on Decorative Paints – 1 December 2011
Source: NCAER, SOI, India, EIU market dat, BCG analysis
153
Our mass market launches are growing at 3-4x category growth rates Dulux Promise Exterior Paint Annual volume growth
•
We have launched two products in the mass market this past year
•
Dulux Promise is growing 3x as fast as the category (mass exterior emulsion), and has gained 1% of market share this year
•
ICI Paints Magik has been placed in 50% of retailers in just 3 months, and is present in 700 towns across India (growing 4x as fast as the economy interior market)
60%
€1.50/ltr Launched Jan 2011
‐3%
5%
2009
2010
2011
ICI Paints Magik Interior Paint Y Y volume YoY l growth th
30% ‐1%
‐11%
Q1
Q2
€1.00/ltr Launched Aug 2011
Q3 Spotlight on Decorative Paints – 1 December 2011
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Innovation helps us create a product ladder to maintain brand relationship with consumers as they evolve
> € 5 €3 € 2.50 •
We have innovated & renovated 70% of our portfolio over last 1.5 years
•
We align the brand to consumer needs and then ensure we have the right value equation behind specific offerings at each price point
€ 1.50 € 1.30 Price per Ltr
< € 1
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We are changing the rules of the game in distribution: expanding our footprint with a differentiated model • More than 500 Semi-urban towns with over 50 million households • Growing faster than larger towns • Located far from major warehouses (service a need) • We are setting-up a ‘Distribution Network’ to expand availability to 400 towns – for the first time in the paints industry • Pilot Test: 2010 – 2011 • These exclusive AkzoNobel distributors will service i over 2000 retail t il outlets tl t • This raises the customer service benchmark • AkzoNobel delivers in 1 day versus competitors taking 2 -3 days • We are building an IT system to manage stocks of our distributors Spotlight on Decorative Paints – 1 December 2011
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Our plan is to grow at double the rate of the Semi-Urban market Semi-urban towns revenue growth (year on year)
50%
40%
40%
• We entered 200 new towns in 2011 through 16 new distributors
35%
30%
• We will enter into 200 new towns in 2012 through another 16 distributors
21%
20% 10% 0%
2010
2011
Plan 2012
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Our growth profile is gaining momentum
Decorative Paints revenue growth (year on year)
35%
30%
30%
26%
25%
25%
18%
20% 14%
15% 10% 5% 0% ‐5% H1 2009
H2 2009 H1 2010
H2 2010 Q1 2011 Q2 2011 Q3 2011
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AkzoNobel India shareholder value has doubled in the last 2 years
Market Value (€ millions)
600 500 400 300 200 100
External shareholders Akzo Nobel
-
Mar/2009 Mar/2010 Mar/2011 Oct/2011
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In Summary
• The Decorative Paints market in India & Sri Lanka is very attractive, embedded in a broader economic context driven by demographics and i t internal l consumption ti • Within this market, we remain focused on the premium segment while also building share in the growing mass market of South Asia • Over the past 18 months we have built a strong foundation through − Innovative product portfolio offering strong & distinct consumer proposition g service proposition for retail − Breakthrough − Distribution expansion • This translates into a profitable growth model which positions the business to grow ahead of market growth rates
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China & North Asia Liangqi Lin
Decorative Paints China & North Asia Key Facts 2010 • Established in 1990 as a JV with Swire Pacific (AN share 70%) • Revenue: €377 million • 1,600 Employees at year end • High profitability with negative OWC • 4 factories (3 in China and 1 in Taiwan) • Leading business in Hong Kong & Taiwan • Strong Dulux Brand Revenue by segment
Revenue by channel 16%
23%
5% 6% 73%
Traditional* Modern** Professional Project
31%
18% 28%
Premium Mass Economy Woodcare & Others
* Small-scale outlets selling to both consumers and professionals ** Larger -scale, ‘big box’ retailers, more consumer-oriented Spotlight on Decorative Paints – 1 December 2011
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The market for Decorative Paints in China measures some €3.4 billion 2010 China Decorative Paints market (€ millions)
Project Market 37% Project 1.239
• Strong project market di driven b by iinfrastructure f t t investment • Retail market driven by Emulsion
Retail woodcare 909
• Woodcare is shrinking due to increasing of prefabrication in wood • Growth in redecoration will increase market size
Retail emulsion 1.210
Retail Market 63%
• AN/Nippon relative market share is 0.7
Note: This figure differs from previous market size estimates given because we are now addressing a broader market in terms of cities and projects. Exchange rate: 1 Euro = 9.05731RMB Source: Internal market sizing analysis
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The central government has imposed measures to cool down the property market •
Extended curbs on home purchases –
42 more cities imposing property-purchasing restrictions in September
–
Growth turning negative in property transaction volumes and prices
•
5-year residency requirement for Beijing before non- permanent residents can buy
•
Central bank interest rate increases –
Further 0.25% in July
–
Third rate hike this year year, fifth since October 2010 (total 125bps)
–
Capital reserve ratio raised in June, for the 12th time since 2010
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GDP growth expected to remain strong while paints market growth falls behind China growth expectations 12%
• Overall GDP growth in China expected to remain in the high single digits
10% 8% 6%
• Paints market growth expected to be dampened in GDP 2011/2012 and then Paint market recover in 2013
4% 2% 0%
Market Size (€ millions)
2010
2011
3358
3428
2012 Est. 2013 Est.
3528
3775
Note: Paint market includes exterior paints, interior paints, floor paints and roof paints. Exchange rate : 9.05731 Source: Oxford Economics, China National Coatings Industry Association & Industrial Research Institution with adjustment (1)外墙涂料，(2)内墙涂料，(3)顶棚涂料，(4)地面涂料，(5)屋面涂料
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Given challenging market conditions, redecoration is crucial for future growth RMB Billions
Emulsion sales in China by end use Absolute value and % of total
% of total
60
70% 60
50
50
40
40 30 30 20
20
% New build
10
0
% Redecoration
10
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Source: McKinsey, Synovate, internal analysis
0
RMB Redecoration RMB New build
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We are investing to accelerate growth and further improve our position in the market
Revenue trend
Past – Build the foundation for growth
Now – Invest and build the momentum to further accelerate the growth
2005 2006 2007 2008 2009 2010
Future – Sustain the momentum and increase profitability
2011
2012 2013 2014 2015
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We are focusing our investment on fewer, bigger, more powerful brands Paint Woodcare Pre-Deco generalist Consumer – Super premium to Mass (Traditional & Modern channels)
Contractor / Painter (Professional channel)
• We are continuing Other to rationalize our specialist brand portfolio to reduce complexity • We have one major brand for each end user segment that cuts across the main product categories
B2B – Super premium to Mass (Project channel)
Consumer – Economy (Traditional channel)
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This investment reinforces our mission: Adding Colour to People’s Lives • •
We have used high profile, high-impact campaigns in 2010 and 2011 to introduce this mission to a range of stakeholder groups (customers, consumers designers consumers, designers, architects and employees) These have consisted of a number of coordinated projects across multiple cities, generating very high impact and driving brand preference
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We will improve our position by focusing on a few ‘must-win battles’ • Depth of penetration – We will aggressively drive increase share in the key
high growth cities
• Win in the mass market – We will win with Dulux in the dominant mass segment
by building winning value propositions for the mass market
• Educate the market & win in Redecoration – We will grow the market & our share through inspiring
people to redecorate and removing the barriers to doing so
• Aggressively grow the Project business – We will achieve double market growth in Projects
through being a professional solution partner for key customer segments Spotlight on Decorative Paints – 1 December 2011
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We have extensive geographic coverage across regions and city tiers Geographic coverage
City coverage Revenue by city tier
8%
Beijing Shanghai
36%
27%
Chengdu East South North West
29% Guangzhou
Tier 1 (12 cities) Tier 2 (60 cities) Tier 3 (233 cities) Tier 4 (364 cities)
5
• Regional headquarters in each of China’s four main regions • Highest growth in China is expected in the West, where we are increasing our capacity and investing in distribution and talent
• Expansive controlled distribution model covering Tier 1 to Tier 4 cities (670 cities)
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The Dulux Decorator Center Network of controlled stores is at the heart of our channel strategy • We initiated a new store design in 2010 to: –
Strengthen g color leadership p
–
Inspire consumers to decorate
–
Be more interactive with consumers and enhance conversion rate
–
Better integrate emulsion and woodcare
–
Be flexible to handle real store situations
• We aim to have ~400 DDC stores by 2016 (from 250 today) • Overall we plan to expand our distribution from over 4,000 outlets today to ~7,000 by 2016 (with 2000 CSS and 4600 ISS) Note: DDC is for Dulux Decorator Center; CSS is for Colour Solutions Store; and ISS is for Image Solutions Store
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The mass market is the dominant segment in China, with 44% of total value
Market and Revenue by price segment, 2010 (€ millions) 3400
29%
44%
• AkzoNobel is weighted toward the premium segment
377
40%
• The mass segment is slightly underrepresented in terms of share of our revenue relative to its share of the overall market
42% Premium
28% Market
19%
Mass
• Th The mass market k t is i th the fastest growing segment
Economy
AkzoNobel
Note: Total market size includes both urban and rural market and both retail and project channel Exchange rate: 9.05731 Spotlight on Decorative Paints – 1 December 2011
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Dulux is closing the gap with our competitor in the mass segment • Mass market range (Guardian) launched in 2005 – 10 years after Nippon, though they still have substantial leading position • Successful launch of Dulux Guardian odorless range in 2007 has gradually closed the gap with Nippon in the mass segment while building leadership in Super Premium and Premium • Proposition for mass segment is clearly differentiated from Super Premium in terms of product portfolio, city and channel focus, minimizing cannibalization
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We aim to win in the mass segment with product, communications & channel initiatives Integrated communication to drive preference & purchase Win in Mass Market Continuous product innovation & price rationalization
Aggressive growth in Mass channel
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We are driving the development of the redecoration segment We will become the market leader in redecoration in both consumer and B2B markets, educating the market and delivering share growth through tailored repainting solutions To do this we will: –
Grow the market & shorten repainting frequency through powerful & inspiring communication aimed at educating & inspiring consumers (category growth stimulation)
–
Lock in those considering redecoration through targeted BTL activity and by providing hassle free, fast and reliable painting p g service through g the Easy y Paint Service ((Brand stimulation)
–
Develop differentiated products and ranges designed for the redecoration market
This will all be developed through the Dulux & Dulux Pro Brands
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Our Easy Paint service addresses this emerging segment •
Consumers call 400 hotline 400 hotline introduces EP service
• Service clerk arranges site visit & consultation Surveyor gives price & product / colour advice
•
• •
Painter conducts paint job on site
A high quality, one-stop painting service from Dulux Makes re-painting hassle free and delivers the perfect end result with the minimum disruption Operating in 25 cities with highly trained surveying and painting teams Removes the barriers for consumers to repaint High levels of consumer satisfaction
400 hotline calls back for service quality check
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In Summary
• With great brand awareness and an extended distribution network, Ak N b l iis wellll positioned AkzoNobel iti d ffor accelerated l t d growth th & share h gain i – Balanced business portfolio & well positioned to deal with market
uncertainty – Clear focus on key opportunities & growth areas – Development and positioning of product portfolio remains key – Continued investment necessary in supply chain, brand & people
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Latin America Benito Berretta
Decorative Paints Latin America Key facts 2010 • • • • •
Revenue: €513 million 1,800 Employees at year end Coral (Paints) and Sparlack (Woodcare) leading brands in the Brazilian Paints Market #1 position in Argentina and Uruguay with Alba and Inca brands 4 production facilities in 3 countries, including the world’s largest decorative paints factory (Mauá) Revenue by country
Revenue by Channel
4% 12%
4% 18% 28% 74%
Brazil Argentina Uruguay Other
60% Paint Shops Other Independents Home Centers Spotlight on Decorative Paints – 1 December 2011
180
Brazil is a largely consumer market, with a large share of ‘Mom & Pop’ stores
Brazilian market by value
100% 80%
Home Centres Professionals
Builders' Merchants
•
Roughly two-thirds of paint is purchased by consumers
•
Independent paint shops account for the majority of the market
•
Home Centres have a relatively small and stable share of the market
60% 40% Consumers
Paint shops
By end user
By channel
20% 0%
Source: Shopper research (2010)
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Middle class consumers in Brazil are growing as a proportion of the total Number of consumers in Brazil by household income level (millions)
Source: IBGE / FGV
•
The middle class in Brazil (‘C’ class consumers) is growing faster than any other segment
•
Drivers of this include: •
Sustained GDP growth
•
Reduced inflation
•
Government income redistribution policies
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The Brazilian market is largely driven by emotional / aesthetic considerations
Types of decorative paints market
•
Roughly 2/3 of our consumers are emotional buyers with aesthetic motivations; this is reflected in per capita consumption
•
We are positioning ourselves clearly in the aesthetic / renewal space; historically, most brands have focused more on conventional / maintenance drivers.
•
We are aiming to grow the overall market and our own share by leveraging our distinctive brand assets
Emotional 5-6 litres per capita
Maintenance driven
Renewal driven 3 litres per capita it
Conventional Colour as % of total market
Source: Shopper research (2010) and consumer segmentation research (2008)
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This fits beautifully with our mission: Adding Colour to People’s Lives
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We have developed a powerful program to do this – Tudo de Cor
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We started in the Bixiga neighbourhood of São Paulo in August 2009 Houses painted p
20
150 Employees involved
2000 Litres of paint
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We had a champion supporter from the community – Mr. Walter
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The results we achieved with this first effort were phenomenal High quality media ed a co coverage e age worth €1 million
Mayor of São Paulo support
Massive engagement from our people Gilberto Kassab
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188
We have since replicated it in a number of key markets across the country Bixiga‐SP Aug/09
Fundição Progresso‐RJ Nov/09
Salvador‐BA Jan/10
Sta. Marta‐RJ Apr/10
Olinda‐PE Mar/10
Porto Alegre‐RS Aug/10
Ouro Preto‐MG Oct/10
Porto Seguro‐BA Feb/11
Florianópolis SC Jul/11
Fortaleza‐CE Aug/11
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We use our own footage of each event to produce TV advertising copy Florianópolis SC Jul/11
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These advertisements significantly outperform the industry average Copy Effectiveness Index Pre-Test
300 258 58
250
•
People are more likely to recall the Tudo de Cor films than they are most other advertisements
•
The advertisement scores extraordinarily high on Persuasion, which reflects its power to drive consideration of the brand in consumers’ next purchase
•
Measured impact of our Tudo de Cor program in terms of press coverage is estimated to be worth 3 TV campaigns*
200 150 Normative range
100 50 0 Tudo de Cor film
Paint market average
Recall index
138
93
Persuasion index
187
66 Spotlight on Decorative Paints – 1 December 2011
* 6000 GRPs at 3+ frequency on 55% of coverage Source: Ipsos Next TV Research, Perspectiva, Digital Top Clip
191
Nearly two-thirds of the shopping decision is made in-store
Consumer purchase intention at store entry
31% 37%
Skip
•
Over 60% of consumer purchase decisions can be strongly influenced by the sales attendant’s recommendation in the store (Switch and Undecided consumers)
•
This means that winning at the point of sales is the other side of the coin.
•
Building B ildi b brand d equity it and d winning at the POS must be done hand-in-hand to drive revenue
Switch Undecided
32%
Source: Shopper research (2010)
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192
We are converting brand equity into share growth by winning at the Point of Sale
Strong Brand Make them proud
Trade marketing Driving Customer Growth
Winning at Point of Sale
Trusted Partner Commercial policy
•
We have an integrated program that leverages our brand equity with elements on the commercial, product and promotion side
•
We are also progressing with our distribution expansion strategy, both deepening our existing relationships p and broadening our network
Innovation Unique propositions
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Our innovations have supported our offer across the main segments Total market by value and by segment
Segment and average price points per litre
Premium (~R$20)
Mass (~R$15)
Coral Coral
•
Coral has a solid position across all three of the major segments, and is particularly strong in Mass
•
A specific product offering for each segment allows us to operate across the spectrum while leveraging the benefits of a single brand
Economy (~R$10)
Coral
Main product offering for each segment
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Our mass market product is the only one to offer up to 500m2 of coverage •
Our ‘Rende Muito’ product has been a great success with retailers and shoppers alike
•
The graphic on the left shows the difference between how much can be painted with Rende Muito compared to a competitor product
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Our brand equity has improved on every dimension with both shoppers and retailers
Consumer (shopper) brand equity Relative strengths g and changes g over time
Customer (retailer) brand equity Relative strengths g and changes g over time Solid
Quality
Modern
Popularity Relevance
Market Leader
2009 2010 Familiarity
Differentiation
2008
A&P Support
2010 Consumers Ask For It
Source: Shopper research (2009 and 2010) and retailer research (2008 and 2010)
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The program has yielded substantial results in market share growth
Coral market share
20%
21%
23%
Absolute revenue growth 2008 to 2011 25%
50% 26% 2008
2009
2010
Market
2011
Coral
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Financial results have been equally impressive
EBITDA in Brazil Index 2008 = 100 185 145 122 100
2008
2009
2010
2011 Spotlight on Decorative Paints – 1 December 2011
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Community sustainability is an important feature of the Tudo de Cor program
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Edimar is a great example, someone who embodies what we are trying to achieve
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In summary
• We have a great position in the biggest market in Latin America g our g growth by y • We are accelerating – building brand equity through the activation of our mission:
Adding Colour to People’s Lives – converting that brand equity into market share and profit
through our superior Point-of-Sale and innovation execution • The Tudo de Cor program is a compelling repeatable model that taps into a emotional and aesthetic market
Spotlight on Decorative Paints – 1 December 2011
Q&A: Keith Nichols Tex Gunning Jeremy Rowe Amit Jain Liangqi Lin Benito Berretta
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In Summary – Winning Globally
• Our markets will continue to grow, especially in Asia, Eastern Europe and Latin America • AkzoNobel is the best placed to benefit from this growth – We have solid growth platforms in all key markets – We have a very attractive position in EMEA, the world’s biggest
market – We have the best people, brands and competencies – We can leverage our global scale in way others cannot
• We will pursue share growth in all major markets, through superior functional execution and with opportunistic market consolidation
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Safe Harbor Statement
This presentation contains statements which address such key issues as AkzoNobel’s growth strategy, future financial results, market positions, product p p products in the p pipeline, p and p product approvals. pp Such statements development, should be carefully considered, and it should be understood that many factors could cause forecasted and actual results to differ from these statements. These factors include, but are not limited to, price fluctuations, currency fluctuations, developments in raw material and personnel costs, pensions, physical and environmental risks, legal issues, and legislative, fiscal, and other regulatory measures. Stated competitive positions are based on management estimates supported by information provided by specialized external agencies. For a more comprehensive discussion of the risk factors affecting our business please see our latest Annual Report, a copy of which can be found on the company’s corporate website www.akzonobel.com.
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