The strategic milestones of Emmi’s past and future success · 2000 2007 2014 2020 Regional...

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The strategic milestones of Emmi’s past and future success

Emmi Investor DayUrs Riedener, CEO Emmi Group

Emmen, 5 November 2013

Emmi today

Where we come from and where we want to go

The decisive factors in the past five years

The path to continue the success story

2

Sales 2012 § CHF 2,981 million (2011: CHF 2,721 million)

Net profit 2012* § CHF 90.3 million (2011: CHF 83.0 million)

Net margin* § 3.0 % (2011: 3.0 %)

Employees(FTE) § 5,000 (31 December 2012)

Processed milk in 2012 § 1,220 (2011: 1,017 million kilograms)

CEO § Urs Riedener

* Adjusted for extraordinary gains from the disposal of fixed assets, which were CHF 19.4 million (EBIT) and CHF 15.9 million (net profit, after tax)

Facts & figures about Emmi

Emmi Investor Day, 5 November 2013, Urs Riedener Page 3

Broadly diversified product portfolio

Product group (net sales 2012)


Dairy products28.3 % (CHF 843 mn)

Other products / services5.3 % (CHF 157 mn)

Powder / concentrates2.9 % (CHF 85 mn)

Cheese33.4 % (CHF 996 mn)

Fresh cheese5.6 % (CHF 168 mn)

Fresh products24.5 % (CHF 732 mn)

Group net sales 2012: CHF 2981 million

3

Most important production sites in Switzerland

Optimizing the production structure


Emmen LU(Fresh products and cheese)

Bever GR(Cheese, dairy and freshproducts)

Ostermundigen BE(Fresh products, ice cream)

Langnau BE(Fondue and melting cheese)

Dagmersellen LU(Mozzarella, milk powder)

Kirchberg BE(Processing of cheese, exports)

Suhr AG(Milk, cheese, butter)

Kaltbach LU(Cow and sheep milk cheese)

Bischofszell TG(Organic dairy and freshproducts)

Landquart GR(Raclette cheese)

Frenkendorf BL(Cheese, dairy and freshproducts)

Moudon FR(Cheese)

Emmi’s production sites outside Switzerland

International expansion through subsidiaries and cooperation

Emmi Investor Day, 5 November 2013, Urs Riedener

USA: Penn YanCASP

USA: MonroeEmmi Roth USA

Chile: PitrufquénSurlat Industrial (Kaiku)

USA: ArcataCypress Grove Chèvre

Chile: LoncocheChilesur (Kaiku)

Austria: Nüziders

Italy: Rancio ValcuviaA-27

Italy:Roverè della LunaTrentinalatte

Tunisia: MahdiaCentrale Laitière

Spain: PamplonaLácteos de Navarra

France: AvignonDiprola

USA: PlattevilleEmmi Roth USA

Italy: RamuscelloVenchiaredo

Image to follow

Italy: PeroRachelli

Page 6

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Emmi today




0.51.2

2.5

3.7

?

Emmi – an impressive development story

?

1993

2000

2007

2014

2020

Regional dairy companyEstablishment of Emmi AGAmbition: National market leader

National dairy company & exportProgress to no 1in the area of cheese and fresh products

National dairy company & export & local presenceAmbition 2014: 50/50 –CHF ~ 4 billion sales

Source: Emmi Annual Reports

A. GerberFarner&Co

Bürki&CieGebr. Joost

Fromalp

A-27

Käsezentrum

Molkerei Biedermann

Venchiaredo

International leader in premium dairy products

?

??

?

Sales in CHF billion

AVH Dairy Trade

Rutz Käse

Emmi – an impressive development story


Continuous expansion process

5

Building on the proven three pillars

The relevant strategic pillars

Defending the home market Switzerland

International growth

Cost management


Steady growth with the mid-term objective of 50 / 50 (Swiss / international)

Sales 2002 – 2012 and mid-term objective

International Switzerland


in CHF million

82% 77%

18%

22% 23%

23%

78%78% 78%

22%

22%

0

500

1,000

1,500

2,000

2,500

2002 2003 2004 2005 2006 2007

1,407

1,917 1,9262,027

2,3352,501

2008

3,000

77%

2,671 2,619

23%

77%

2009

26%

74%

50%

50%

in 2 – 3 years

27%

73%

2,684

2010

2,721

30%

190970%

2011 2012

2,981

62%

38%

3,500

2013*

~45%

~55%

6

0

50

100

2008 2009 2010 2011 2012

Local production Exports from Switzerland

Important acquisitions

2006: Trentinalatte (IT)

2009: Roth Cheese (USA)

2010: Cypress Grove Chèvre (USA)Fromalp (CH)

2011: Onken (UK), A-27 (IT), Rutz Cheese (CH)

2012: Kaiku (ES), Diprola (F)

2013: AVH (NL), Studer (CH), Rachelli (IT)

ca. 40%

ca. 60%

67%

33%

53%

47%

64%

36%

75%

25%

%

Local production share increased by recent acquisitions

Well-balanced international business


Emmi today




7

Overview of future opportunities and challenges

The market environment defining the strategy

Markets/liberalisation

1

§ Competitiveness§ WTO agreements will be

made later than forecast§ Swissness law

Suppliers2§ Gap with EU milk price

demands a niche strategy

Investors7§ Development of total

shareholder return

Employees6§ Secure jobs§ Develop talents

Competitors3§ Consolidation of competitors§ Pressure from foreign cost

leader§ Stronger pressure from

international brands§ Swiss competitors

increasingly unpredictable

Consumers5

§ Increasingly price-sensitive

§ Increasing nutritional awareness

§ Shorter product life cycles

§ Accelerated thrust of private labels

Clients4

§ Consolidation of retailers

§ Client risks in Switzerland / increasing price pressure

§ Potential/risks of hard discounters

Value chain


The four relevant streams for Emmi

The four relevant streams for Emmi

Existing product platforms New product platforms

New

mar

kets

Exis

ting

mar

kets Strong knowledge base in Switzerland Own development or acquisitions

Via distributors or acquisitions Own development or acquisitions

Penetration of existing platforms in existing markets

Geographic multiplication of existing platforms

Development of new platforms in existing markets

Development / acquisitions of new platforms in new markets

1 2

3 4

The multidimensional market approach


8

KALTBACH TV

Print

Visitor centre

Tastings

Online/newsletter

Friends of Kaltbach

Fairs and competitions

Launch ofcheese counter

1. Penetrating existing markets with existing platformsExample: Kaltbach


TV campaign

Posters, print campaign

Online/social media

PR activitiesFIS sponsorship

National mailing incl. coupons

Price promotions Samplings/ tastings2nd POS

Megaposters in train stations

2. Penetrating existing markets with new (sub)platformsExample: Jogurtpur


9

Productinnovation

Communicationpromotion

Channels/markets

New campaign Loyalty programmes

CaramelNY Edition

Longlife SpainLonglife Asia

Mr. Big

Online game/website

Vanilla

Sampling concepts

Packaging relaunch

Convenience battle

Coolers / POS activities

Seasonal packaging

3. Penetrating new markets with existing platformsExample: Emmi Caffè Latte


4. Penetrating (partly) new markets with new platformsExample: Bontà Divina

Traditional Italian desserts

Strengthening international market positions by using synergies with Emmi subsidiaries

Strengthening the Bontà Divina brandDevelop new markets


10

Focus on promising brands pays off, continued good development in 1HY2013

The results: Positive development of brand platforms

Million cups (from our plants)

0

20

40

60

80

100

2008 2009 2010 2011 2012CH Export

+12%

+8%

2009 2010 2011 2012

International CH

2011* 2012 *) from 1 August 2011

- Launch targets exceeded- Three additional flavoursjust six months after launch


Indexed sales

Indexed sales

Emmi today




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Strategy assessment


Strategy assessment

Achievement of current strategy, impact for the upcoming strategy period

Degree of achievement

§ International share of sales at least 50 %

§ Focused growth in core international markets

§ Defend / maintain position in the Swiss market

§ Cost structure in line with Europe

Impact on content of “Emmi 2020”

§ Continue to build on current strategy, which worked out well despite economic headwinds§ Product portfolio has partly improved

§ Increased development potential with the current set-up

§ Strategic areas of activity to be carefully prioritised and structured

§ Simplification of business models with the aim of increasing the Group’s added value

§ Adjustment of the organisation to strategic priorities and the Group’s international structure

Building on the proven three pillars

The relevant strategic pillars

Defending the position in Switzerland

International growth

Cost management

Strengthening


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The two strategic pillars “International growth” and “Cost management” remain valid; with regard to “Switzerland”, however, we want to move on from our merely defensive approach and further “strengthen” our domestic market

Three business models: “Autarchic local model”, “Global categories” and “Global trading model”

More active role for the Group: from “financial sponsor” to “strategic guide”

Clear separation between Group-level and country responsibilitiesF ergo also a clear separation between the Group and the Swiss business

Acquisitions remain important, but focus is shifting increasingly to organic growth

Continuation of geographic expansion with a stronger focus on emerging markets

1

2

3

4

6

5


Where Emmi wants to go

Main changes for upcoming strategy period

New organisational structure


Corporate Development

CEOCEO

Switzerland EuropeAmericas

Global trading model

DrinksGlobal categories & marketing (incl. R&D coordination)

Cheese specialitiesSpoonableDesserts

Finance & Controlling / Legal

Corporate Communication

HRInternational Operations

Quality Management

New structure takes internationalisation into account


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Organisational structure:Marketing, until 31 December 2013

Centralized, Swiss focussed organisation


Chief Marketing Officer

Marketing Manager Private Labels

Group Brand Managers

Marketing Manager Emmi of Switzerland


Marketing Manager Caffè Latte, Cheese,

Wellbeing


Marketing Services

Media & Sponsoring

Marketing Research

Customer Service

International set-up for key brands


Chief Marketing Officer Global Categories

Global CategoryDrinks

Global Marketing Managers

Global CategorySpoonable


Global CategoryDesserts


Global CategorySpecialty Cheese


Process Intelligence& Innovation Market Insights

Controlling Media & Sponsoring

Organisational structure:Global Categories, from 1 January 2014

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Organisational structure:Marketing Switzerland, from 1 January 2014

A team fully dedicated to the important home market


Head of Marketing Switzerland

Brand ManagerDrinks

Sub Brand Managers

Brand ManagerSpoonable/ Desserts

Sub Brand Managers

Brand ManagerSpecialty Cheese

Sub Brand Managers

Brand ManagerPrivate LabelsFresh products

Sub Brand Managers

Brand ManagerPrivate Labels

Natural Cheese

Sub Brand Managers

Marketing Services& Processes

Consumer Services

Marketing Processes

GraphicDesign

Localheroes

Brand platforms

Product offerings based on differentiation and multiplication of USPs

Low(= high share ofprivate label)

High(= high share of

brands)

Brand share

Low(= high

local share)

High(= high share of

category units)

Share ofglobal

categoriesLocaladaptability

Globalintegration

Product logic Brand logic

0 % 50 % 100 %

50 %

100 %Growth driver with

above-average margins

Ensuring profitable local market relevance

Use of technical expertise to occupy strategic segments

Globalcategories

Local brands

Local private label

New focus on strategiccategory units...

...allocates each part of the offeringa clear role

Emmi uses existing USPs to defend, occupy and expand strategic segments

Localproducer

Globalcategories


Product offerings based on differentiation and multiplication of USPs

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Market

Margin

Marketrelevance

Momentum

1) Only cheese marketSource: Euromonitor: Retail Dairy Market, BCG Data Request, BCG Analysis

Assessment Growth alternatives

Cypress Grove

Multiplication

Growth

Cash

(Divestments)Spain

Netherlands

Italy

Switzerland

Germany

Austria

UK

A-27 / Rachelli

Tunisia

Chile

France

BELUX

Canada

USA1)

Parameters

Organic versusacquisitions

Organic andacquisitions


Country- and market-specific assessments of roles and ambitions

Targeted procedure instead of random approach

Relevance forcustomers

Relevance in the segments

Relevance to consumers

Relevance in therelevant market

Expand distribution§ Expand product

availability (push)

List new products§ Fending off the

competition§ Expansion of

segment competence (pull)

Expand brands§ Strengthen consumer

loyalty through brands (pull)

Expand portfolio§ Enhancement of position

through economies of scale(push and pull)

Appr

oach

§ Weighted distribution § No of customers§ Visibility

§ Share of shelf*§ No of products per

segment

§ Brand share in portfolio§ Brand awareness

§ Dairy market share in the niche / region§ Position vs. other dairy

manufacturers

Obj

ectiv

es

* at the retailer: e.g. Coop has 1 metre of cold coffee drinks; Emmi Caffè Latte covers 50cm F share of shelf of 50%

Definition of market relevance for Emmi


Gradual increase of relevance in the relevant market

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Brand jewel

Stra

tegi

c/in

tern

atio

nal

Tact

ical

/C

H

Studer cheese

CH

F 1,

000

mill

ion

CH

F 50

mill

ion

Technology leader/PL with added value

No

Possible

Market synergies/efficiency

Rutz Cheese

Roth Cheese/Fromalp

Organic

Biedermann

GläserneMolkerei (24 %)

Regional/ completion of product range

Molkerei Basel

Kaiku

Onken

Bontà Divina

Rachelli

CypressGrove

Strong focus on existing international key markets


Possible acquisition routes

Objective

Activities

Countries

Role of Emmi

Participations/ joint ventures

Secure market entryDevelop relevance for customers or in segments

§ Export/import/(production)§ Focus on expanding

distribution§ Assess potential risks

of partners§ Share best practice

§ Active shareholder

Conversion into subsidiaries

Increase relevance in the market, establish brands

§ Export/import/production§ Range management § Brand development§ Strategic initiatives

§ Strategic management

Export/import

Tap market, test potential

§ Export/import§ Initial market

knowledge§ Minimal use of

resources and sources

Far East

§ Distribution partnermanagement (retailers)

European key markets, USATunisia, Chile


Market entry playbook

How Emmi aims to enter new markets

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General conditions and key tenets of ambition

Market / external view§ Market consolidation among milk processing companies worldwide continues§ As a premium niche player, growth is key in order not to sink into oblivion§ A large part of Western Europe is saturated and the economy is partly stagnating; new

(emerging) markets show significantly more growth and open up market entry possibilities§ Emmi has proven that companies in various countries can develop successfully in

premium niches

Emmi’s view / internal drivers§ Wide-ranging expertise, successful introduction of knowledge and Swiss values locally§ Less is more! We want to anchor Emmi in those markets in which we gain a foothold§ Emmi has the financial strength to move beyond the current geographical borders§ Emmi is more robustly and broadly positioned as a group than ever§ Emmi’s wants to create value and applies the return component to top line and profitability§ Emmi employees want to work for a successful company

It is crucial to differentiate Emmi from its competitors in the long run


General conditions and key tenets of ambition

It is crucial to differentiate Emmi from its competitors in the long run

We are Emmi


We delight our consumers with naturally better tasting dairy products. We satisfy our customers with successful and innovative solutions based on our Swiss heritage, our associates’ expertise and our passion for quality.

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