Imperial Brands Plc · LSE:IMB
Imperial Brands — Investor Presentation (March 2022)
45 slides from Imperial Brands's investor presentation, Mar 25, 2022
Slide 1: Gaining Traction in the US Market
GAINING TRACTION IN THE US MARKET 25 1 | MARCH 2022
Slide 2: Disclaimer
Disclaimer Certain statements in this announcement and financial effects of the plans and events historical or published earnings per share of constitute or may constitute forward-looking described in this announcement. As a result, the Company. statements. Any statement in this you are cautioned no
Slide 3: A Clear Strategy to Enhance Performance
A Clear Strategy to Enhance Performance DEMONSTRATING PROGESS AGAINST OUR STRATEGY TODAY WE WILL… Introduce you to our strengthened US team Show how we are well-positioned in this market Showcase our investment activities in US market Demonstrate progress against our strategy 3 | Imperial Brands: Ga
Slide 4: Our US Business
Our US Business WE ARE WELL POSITIONED IN THE US MARKET OUR US BUSINESS A LARGE MARKET WITH AN ATTRACTIVE OUTLOOK £2.5bn £1bn 41% Net revenue Adjusted Operating China $262bn operating margin 33% of net revenue profit USA $97bn Strong cash flows Germany $26bn • Attractive market characteristics Japan
Slide 5: Agenda
Agenda GAINING TRACTION IN THE US MARKET President ITG Brands overview and strategy Kim Reed ITG Brands SVP Insights & Market environment Alex Mueller Intelligence Executive VP Gaining traction with our brands Rishi Dhingra Marketing Executive VP Gaining traction with our sales force Shane Sgambellu
Slide 6: Gaining Traction in the USA
Gaining Traction in the USA A CLEAR PLAN TO REALISE VALUE IN THE USA MARKET Well-positioned in a highly attractive market Multi-year transformation plan with clear self-help opportunities Proven track record to perform Targeted investment plan behind multiple brand and sales initiatives Plan will de
Slide 7: We are Well-Positioned: Our US Assets
We are Well-Positioned: Our US Assets SOLID FOUNDATION TO DRIVE CONSISTENT GROWTH CIGARETTE ESTABLISHED WINNING NGP STRONG BRANDS MARKET CIGAR GROWTH AND DIVERSE WITH POSITION FRANCHISE OPPORTUNITY TEAM POTENTIAL #3 cigarettes #2 mass market cigars 7 | Imperial Brands: Gaining Traction in the US Mar
Slide 8: Realising Value in the USA
Realising Value in the USA WHY THE USA IS AN ATTRACTIVE OPPORTUNITY ATTRACTIVE MARKET DYNAMICS Transparent Tobacco affordability Regulatory Modestly Strong Environment Growing declining pricing profit market track pool Ability to volumes record communicate with adult smokers OUR PLAN WILL Further st
Slide 9: Strengthened Leadership Team
Strengthened Leadership Team STRONG FMCG EXPERIENCE BLENDED WITH DEEP INDUSTRY KNOWLEDGE Kim Reed Andrew Clarke Rob Wilkey Rishi Dhingra Shane Antonio President and Chief Chief Financial Executive VP Executive VP Sgambelluri Gutierrez Executive Officer Officer Legal, Regulatory Marketing Executive V
Slide 10: Creating an Agile and Performance-Driven Culture
Creating an Agile and Performance-Driven Culture BUILDING A CONNECTED AND HIGH-PERFORMING ORGANISATION 60 senior US managers have invested a total of 1,200 hours on new behaviours Programme to be rolled out to whole organisation by the end of this year 10 | Imperial Brands: Gaining Traction in the U
Slide 11: Proven Track Record of Delivery
Proven Track Record of Delivery DELIVERING TOBACCO MARKET SHARE GAINS AND REVENUE GROWTH CIGARETTE MARKET SHARE MASS MARKET CIGAR SHARE AMERICAS TOBACCO NET REVENUE Targeted brand portfolio strategy is Local jewel brands are driving gains in Revenue growth driven delivering returns fastest growing s
Slide 12: US Consumer Trial of Refreshed blu Offer Underway
US Consumer Trial of Refreshed blu Offer Underway GOOD INITIAL PROGRESS; DATA GATHERING STILL UNDERWAY • Trial underway in Charlotte, North Carolina • New consumer marketing approach includes: – Refreshed packaging – New marketing campaign – Enhanced point of sale presence – New on-line sales platfo
Slide 13: US Regulation Evidence-Based
US Regulation Evidence-Based REGULATORY CHANGE SUPPORTED BY SCIENCE AND DATA • Well established rulemaking process • Structured and consultative approach – evidence and science-led • Considers risks and benefits to whole population • Requires input from all stakeholders • Thorough and orderly proces
Slide 14: A Clear Plan to Enhance Performance
A Clear Plan to Enhance Performance FOCUSING BEHIND THE OPERATIONAL LEVERS SIX OPERATIONAL LEVERS IN OUR FIVE PRIORITY MARKETS Cigarettes 1 Increase participation in premium value segment 2 Drive and rejuvenate local jewel brands Rishi 3 Optimise our approach to the value segment Fine-cut 4 Maximise
Slide 15: Market Environment
MARKET ENVIRONMENT 15 | Imperial Brands: Gaining Traction in the US Market | 25 March 2022
Slide 16: Tobacco Fundamentals Remain Strong
Tobacco Fundamentals Remain Strong ROBUSTNESS OF TOBACCO DEMONSTRATED IN RECENT YEARS COVID-19 AFFECTED MARKET DYNAMICS STRONG PRICING REMAINS KEY VALUE DRIVER Imperial US tobacco price/mix FY17 FY18 FY19 FY20 FY21 LTM 11.7% 8.8% 9.3% -1.9% 6.9% -2.3% 5.2% -3.2% -4.6% -4.5% -5.5% US cigarette volume
Slide 17: Pricing Achievement has been Strong
Pricing Achievement has been Strong HIGHER AND MORE FREQUENT INCREASES PRICING HAS BEEN STRONG MANAGING PORTFOLIO BALANCE IS KEY Number of price Increase per increases per year carton % • Consistent price rises on premium and traditional value FY21 4x 5.6% • Market share determines shelf-space FY20
Slide 18: US Cigarette Affordability Remains High
US Cigarette Affordability Remains High WHEN COMPARED TO AVERAGE EMPLOYEE EARNINGS AFFORDABILITY OF TOBACCO CIGARETTE STICK AFFORDABLE VS AVERAGE COFFEE COST (# Packs earned per hour of work at average salary) $3.80 Average coffee cost USA Average price per stick Imperial significant presence (>5% v
Slide 19: Well-Placed to Capitalise on Consumer Trends
Well-Placed to Capitalise on Consumer Trends TOBACCO SHORT-TERM OUTLOOK Outlook for US Consumer Imperial is well-placed “By tailoring our offering, state by state, store by store, Headwinds on consumer wallet • Our tobacco portfolio offers we aim to provide consumers choice at different consumers wi
Slide 20: Market is in Flux, Creating Growth Opportunities
Market is in Flux, Creating Growth Opportunities SEVERAL FACTORS ARE INFLUENCING CONSUMER BUYING PATTERNS DEMOGRAPHIC NEW CATEGORY CUSTOMER/ REGULATORY POST-PANDEMIC SHIFTS SHIFTS CHANNEL SHIFTS SHIFTS SHIFTS 20 | Imperial Brands: Gaining Traction in the US Market | 25 March 2022
Slide 21: US Market has Many Nuances
US Market has Many Nuances WHICH CREATE UNTAPPED GROWTH OPPORTUNITIES ADULT CONSUMER TYPES REGIONAL PRESENCE TRADE PARTNERS 300,000 nicotine outlets #1 or #2 IMB ranked in 10% of cigarette volume stores Growing share in counties that represent 72% of industry volumes Recognising the roles of differe
Slide 22: Getting Closer to Consumers to Drive Sales
Getting Closer to Consumers to Drive Sales TAILORING OUR APPROACH TO TARGET CONSUMER PREFERENCES Detailed data-driven approach STATE MARKET CHARACTERISTICS IMPERIAL SHARE Industry volumes Traditional Premium 10% 43% c.10% Premium Value 14% Menthol +110bps 50 US States VIRGINIA Traditional Discount 1
Slide 23: Detailed Data and Consumer Insights
Detailed Data and Consumer Insights DRIVING SALES WITH A TARGETED APPROACH Leveraging data capabilities to win in local growth pockets STATE COUNTY SIZE LOCAL MARKET SALES ACTIVITY VIRGINIA 450k inhabitants Tr. Premium 16% Assortment optimisation beyond core range BEACH Independents 300M cigarettes
Slide 24: Gaining Traction with Our Brands
GAINING TRACTION WITH OUR BRANDS 24 | Imperial Brands: Gaining Traction in the US Market | 25 March 2022
Slide 25: Applying a Simple Formula to Grow our Brands
Applying a Simple Formula to Grow our Brands GETTING THE BASICS RIGHT COMBINED WITH FOCUSED INVESTMENT CONSUMER INSIGHT Channelling resources SALES INCREASED GROWING OUR based on consumer EXCELLENCE TARGETED BRANDS insight INVESTMENT Setting ourselves up to by effectively meeting MARKETING maximise
Slide 26: A Brand Portfolio to Meet a Range of Consumer Needs
A Brand Portfolio to Meet a Range of Consumer Needs WE HAVE SIMPLIFIED OUR BRAND PORTFOLIO SINCE ACQUISITION OUR CIGARETTE BRAND PORTFOLIO FOCUS BRANDS % OF % of CIGARETTE VOLUMES 9.1% total ITG mix Tail Tail Brands 17 Brands $7.50 28 2.1% Premium 83% 45% Value Focus 2.0% 72% Brands Average Focus pr
Slide 27: Winston & Kool Share has Stabilised Under Our Ownership
1 Winston & Kool Share has Stabilised Under Our Ownership THESE ICONIC BRANDS ARE AN IMPORTANT PART OF OUR PORTFOLIO LATENT EQUITY WITH STRONG POTENTIAL • After decades of decline we 2.15% have stabilised market 2.02% shares 1.96% 1.75% • Strong heritage supports good consumer recognition • Key part
Slide 28: Our Approach: Starts with the Consumer
1 Our Approach: Starts with the Consumer CONSUMER PROFILING DRIVES OUR TARGETED BRAND MARKETING Common but not exclusive consumer profiles… WHO Suburban City dwelling WHAT Deeply patriotic Thrill seeking HOW WE SHOW Believes in living in the moment and From fashion, to music, to nightlife, UP IN THE
Slide 29: Addressing Winston Opportunities
1 Addressing Winston Opportunities KEY DRIVERS TO REIGNITE THE WINSTON BRAND WITH TARGET CONSUMERS CONSUMER FEEDBACK QUALITY AND TASTE BRANDFOR BRAND FORSOMEONE SOMEONE PREMIUM PREMIUMQUALITY QUALITYAT 1 PERCEPTION 2 LIKE ME LIKE ME 3 AFFORDABLE COST Non-trialists Users 86% 22% 54% 49% 47% 8% 23% 12
Slide 30: Targeted Winston Investment
1 Targeted Winston Investment ADDRESSING KEY DRIVERS WITH FOCUSED BRAND INITIATIVES QUALITY AND TASTE BRAND FOR SOMEONE PREMIUM QUALITY AT 1 PERCEPTION 2 LIKE ME 3 AFFORDABLE COST Contemporary advertisement Clear pricing strategy linked to Scores highly once in consumers campaign with national roll-
Slide 31: Hearing the Consumers Voice
1 Hearing the Consumers Voice OUR ACTIONS ARE RESONATING WITH OUR TARGETED CONSUMER EXPANDING NATIONALLY • Positive consumer feedback validated the trial of Winston’s new pack design • The pack met its objective to resonate with consumers • But don’t just take our word for it… “Winston is appearing
Slide 32: Reigniting KOOL with Adult Smokers
1 Reigniting KOOL with Adult Smokers INCREASING INVESTMENT BEHIND A CONSISTENT CONSUMER PROPOSITION KOOL scores highly with Key challenge is consumers across historical brand FEEDBACK purchase intent metrics under-investment CLEAR PLATFORMS TO CONNECT Festivals and music Fashion and art Social and l
Slide 33: Increasing Investment behind Targeted Kool Initiatives
1 Increasing Investment behind Targeted Kool Initiatives FOCUSED ACTIVATION AND INITIATIVE STRATEGY TO BUILD CONNECTION CONNECTING VIA SOCIAL AND LEVERAGING KOOL’S HERITAGE PRODUCT MESSAGE DIGITAL PLATFORMS 3 IN MUSIC AND FASHION Meeting them where and Tapping into the brands rich Reiterating produc
Slide 34: Winning with Value Consumers
3 Winning with Value Consumers OUR VALUE PORTFOLIO PLAYS AN IMPORTANT ROLE CLEAR ROLE OF BRANDS IN DEEP DISCOUNT SEGMENT Differentiated strategy with clear objectives to support • Meet adult smoker demand in this fastest growing segment wider portfolio growth • Provide margin contribution and overhe
Slide 35: Mass Market Cigars: Our Iconic Brand Portfolio
2 Mass Market Cigars: Our Iconic Brand Portfolio FOCUSED TO MEET THE DIFFERENT NEEDS OF MMC CONSUMERS STRONG 2021 DELIVERY % IMB MMC VOLUME $1.25 - $1.50 >20% share of market 51% #1 in natural leaf segment Average price #2 volume manufacturer per MMC 31% 2% +500bps share growth 12% +45% volume growt
Slide 36: Driving Growth through our Brand Initiatives
2 Driving Growth through our Brand Initiatives KEY LEVERS OF OUR SUCCESS PORTFOLIO & INNOVATION ACTIVATION & PARTNERSHIPS TRADE & DIGITAL More choices and excitement Building long term relationships Amplify and resonate genuinely Pipeline driving Reinforcing the sense of Branded websites with sustai
Slide 37: Gaining Traction with Our Sales Force
GAINING TRACTION WITH OUR SALES FORCE 37 | Imperial Brands: Gaining Traction in the US Market | 25 March 2022
Slide 38: Clear Opportunities to Enhance Performance
Clear Opportunities to Enhance Performance PLAN INFORMED BY DETAILED STRATEGIC ASSESSMENT STRATEGIC REVIEW IDENTIFICATION OF FINDINGS OPERATIONAL LEVERS • Sales force undersized • Lacked store opportunity segmentation 5 Drive performance in under- penetrated channels and regions • No routing optimis
Slide 39: Enhancing Sales Coverage & Effectiveness
5 Enhancing Sales Coverage & Effectiveness DRIVE GROWTH THROUGH FIELD FORCE EXPANSION INCREASING SALES FORCE STAFFING PROGRESS Proportion of sales roles filled Today, we’re driving performance through an expanded sales team, improved frequency and Area 100% an optimised routing plan Region 100% Focu
Slide 40: Challenging the Status Quo
5 Challenging the Status Quo DISCOVERING WHERE WE HAVE A RIGHT TO WIN WITH OUR CUSTOMERS Convenience stores is the largest FMC route to market by volume Retail excellence Split of IMB Gas station/Convenience store Cigarette store with the sales volume All other stores perfect store by channel Buildi
Slide 41: Enhancing our Technology and Capabilities
5 Enhancing our Technology and Capabilities DRIVE GROWTH THROUGH SALES FORCE ENABLERS AND OPTIMISATION Tomorrow, we’re wiring the business to unlock further value… ENHANCING TECHNOLOGY BUILDING CAPABILITIES MEASURING PROGRESS • CRM platform upgrade • Perfect call procedure • Monthly frequency and co
Slide 42: Delivering the Perfect Store
5 Delivering the Perfect Store DRIVE GROWTH THROUGH FOCUSED SALES APPROACH In process of building and implementing perfect store visit PERFECT STORE Elements of POS Focus on Assortment Right SKUs Merchandising brand strategically strategic optimisation on shelf off-shelf awareness, placed brands pro
Slide 43: Elevating our Key Accounts
6 Elevating our Key Accounts DRIVE MUTUAL GROWTH THROUGH CREATING FLEXIBLE SOLUTIONS STRUCTURE AND COVERAGE PROCESS PARTNERSHIP OPTIMISATION OPTIMISATION OPTIMISATION 2020: Dedicated National Account Team Created Retail Chain FMC vol. Excellence Headcount coverage coverage 14 23 26% Joint Key Accoun
Slide 44: Gaining Traction
GAINING TRACTION 44 | Imperial Brands: Gaining Traction in the US Market | 25 March 2022
Slide 45: Gaining Traction in the USA
Gaining Traction in the USA A CLEAR PLAN TO REALISE VALUE IN THE USA MARKET Well-positioned in a highly attractive market Multi-year transformation plan with clear self-help opportunities Proven track record to perform Targeted investment plan behind multiple brand and sales initiatives Plan will de