Vina Concha Y Toro S.a. · BCS:CONCHATORO
Vina Concha Y Toro — Investor Presentation (October 2018)
34 slides from Vina Concha Y Toro's investor presentation, October 2018
Slide 1: Corporate Strategy Update
C O R P O R AT E S T R AT E G Y U P D AT E October, 2018
Slide 2: Forward Looking Statements
FORWARD LOOKING STATEMENTS This presentation contains forward-looking statements, that should be considered as good faith estimates. Such statements are subject to risks and uncertainties outside of Viña Concha y Toro’s control that could cause Viña Concha y Toro’s actual results to differ materiall
Slide 3: Contents
CONTENTS I. T H E C O M PA N Y AT A G L A N C E II. 2 0 2 2 S T R AT E G Y III. I NDUSTRY TR ENDS 3
Slide 4: The Company at a Glance
THE COMPANY AT A GLANCE • Top 5 - largest wine companies globally: • US 1 billion sales • 34,8 million cases • Multi origin portfolio - 3 production sources: • Chile – USA - Argentina • Top 2 - planted vineyard land: 11,319 hectares • Top 1 - Chilean wine exporter: 30% share in volume • Top 3 - Arge
Slide 5: Sales by Origin
SALES BY ORIGIN VOLUME VALUE CHILE CHILE 86.1% 81.6% ARGENTINA ARGENTINA 6.7% 6.6% EEUU EEUU 7.2% 11.8% Figures as of Dec. 2017 5
Slide 6: Breakdown of Sales by Geography
BREAKDOWN OF SALES BY GEOGRAPHY WINE VOLUME IN MILLION CASES 7.3 11.9 5.7 5.1 4.2 0.6 % OF SALES VALUE 20.4% 32.7% 19.3% 15.3% 11.0% 1.3% CHILE* EUROPE USA & CANADA LATIN AMERICA ASIA & AFRICA & M. OCEANIA EAST * Chile includes sales of “Other Non-Wine Products”, figures as of Dec. 2017 6
Slide 7: Leading Exporter of Chilean Wine
LEADING EXPORTER OF CHILEAN WINE Top 10 markets for Chilean wine % ON EXPORTED VALUE OF COUNTRY POSITION BOTTLED WINE China #1 9.0% USA #1 32.3 % UK #1 45.7% Japan #1 24.6% 28% Brazil #1 18.3 % of Chilean exports Holland #1 25.7 % by value Canada #1 36.4 % South Korea #1 25.7 % Ireland #2 30.8 % Mex
Slide 8: Top 5 - Largest Wine Companies
TOP 5 - LARGEST WINE COMPANIES MARKET SHARE RANKING COMPANY BY VOLUME 1° E&J Gallo Winery Inc 3.04% 2° Constellation Brands Inc 1.80% 3° Wine Group Inc, The 1.35% 4° Treasury Wine Estates Ltd 1.21% 5° Viña Concha y Toro 1.14% 6° Castel Groupe 1.07% 7° Accolade Wines Ltd 1.05% 8° Pernod Ricard Groupe
Slide 9: Top 2 - Surface of Planted Vineyards
TOP 2 - SURFACE OF PLANTED VINEYARDS Treasury Wine Estates 13,141 (AUS/USA/NZ/IT) VIÑA CONCHA Y TORO (CHI/ARG/USA) 11,319 E&J Gallo 9,312 (USA) Constellation 7,2478,623 (USA/CAD/NZ/IT) Peñaflor 6,104 (ARG) 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 (HECTARES) Source: Annual Reports , 6-K (2017,
Slide 10: Contents
CONTENTS I. T H E C O M PA N Y AT A G L A N C E II. 2 0 2 2 S T R AT E G Y III. I NDUSTRY TR ENDS 10
Slide 11: A New Strategy for a Changing Scenario
A NEW STRATEGY FOR A CHANGING SCENARIO In 2017, the Company made a throughout revision to its business model in response to the new reality of its markets: • Consolidation in distribution and retail industries. • Entrance of new consumers. • Strong consumption trends for Premium wine. Since 2017, th
Slide 12: 2022 Strategy Targets
2022 STRATEGY TARGETS To double the operating income from $70,000 MM IN 2016/17 TO $140,000 MM IN 2022 (CH$ MILLION) 2016 2022 CAGR SALES 658,000 854,000 4.0% OPERATING INCOME 70,000 140,000 12.0% OPERATING MARGIN 10.7% 16.4% +5.7pp 12
Slide 13: 2022 Strategy Pillars
2022 STRATEGY PILLARS 1. Restructuring process and cost savings. 2. Sales & Marketing strategy - Focus on premium wines. 3. Special focus on Casillero del Diablo brand. 4. Focus on other high performing brands. 13
Slide 14: 1. Restructuring Process and Cost Savings
1. RESTRUCTURING PROCESS AND COST SAVINGS • Progress according to plan • Net estimated savings Ch$18,800 million or 2,2% of sales in 2022. (CH$ MILLION) 2017 2018 2019 FULL YEAR EFFICIENCIES AND SYNERGIES 4,383 10,466 17,656 18,802 FROM PROGRAM SEVERANCE PAYMENTS AND (3,153) (4,460) (1,298) CONSULTA
Slide 15: 1. Restructuring Process - Positive Evolution of SG&A
1. RESTRUCTURING PROCESS - POSITIVE EVOLUTION OF SG&A (Ch$ MILLION) 27.7% 27.3% 27.1% 27.1% 26.8% 182,475 172,453 174,387 24.4% 159,300 24.0% 23.9% 23.4% 23.1% 127,610 109,295 101,368 86,220 67,099 64,543 2010 2011 2012 2013 2014 2015 2016 2017 6M17 6M18 SG&A SG&A / Sales * SG&A/Sales for 6M17 was r
Slide 16: 2. Commercial Strategy - Key Aspects
2. COMMERCIAL STRATEGY - KEY ASPECTS PREMIUMIZATION TREND • Premium wines: Seek strong growth in sales, focus in price segments > US$ 10. • Non premium wines: Low single digit growth for categories < US$ 10 PRICE REPOSITIONING • Price adjustments across the portfolio to meet profitability guidelines
Slide 17: 2. Focus and Investment in the Premium Category
2. FOCUS AND INVESTMENT IN THE PREMIUM CATEGORY • Brand Matrix: • Portfolio Rationalization: Tool for portfolio management; aligns sales Profitability targets and logistics optimization objectives and marketing investments. drove the exit from ~80 brands/labels that represented 1% of sales. High At
Slide 18: 2. Increasing Contribution of Principal and Invest Brands
2. INCREASING CONTRIBUTION OF PRINCIPAL AND INVEST BRANDS 100% 6% 16% 11% 15% 90% 13% 10% 80% 10% 10% 3% 4% 70% 11% 10% 19% 24% 60% 50% 28% 29% 27% 40% 24% 30% 17% 17% 20% 32% 27% 10% 18% 19% 0% Sales 1H17 Op. Profit 1H17 Sales 1H18 Op. Profit 1H18 Principal Invest Protect Watch Portfolio Others
Slide 19: 2. Key Markets to Develop High Performing Brands
2. KEY MARKETS TO DEVELOP HIGH PERFORMING BRANDS (% of sales by value) NORDICS 5.3% CANADA 3.5% UK 17% USA CHINA 15.7% 2.7% JAPAN MEXICO 5.7% 3.0% BRAZIL 5.6% CHILE 20.4% 19
Slide 20: 2. Merging Distribution Branches in the US
2. MERGING DISTRIBUTION BRANCHES IN THE US • As of July 2018, Viña Concha y Toro through its subsidiary Fetzer Vineyards, takes full control of Excelsior and unifies distribution in the US. • Fetzer increases its scale and becomes #12 marketer of wines in the US with a total volume of 5.2 million ca
Slide 21: 3. Special Focus on Casillero del Diablo Brand
3. SPECIAL FOCUS ON CASILLERO DEL DIABLO BRAND • Price repositioning and line extensions at higher price points, driving value growth. • Launch of Diablo in Europe, Central America and Chile. (TH. 9-L CASES) 5,424 6M18: 5,224 4,992 US$ SALES: +11.4% 4,431 VOLUME: +2.0% 2,416 2,463 2014 2015 2016 201
Slide 22: 3. Casillero del Diablo Portfolio
3. CASILLERO DEL DIABLO PORTFOLIO 22
Slide 23: 4. Focus on Other High Performing Brands
4. FOCUS ON OTHER HIGH PERFORMING BRANDS 2017 TH. CASES 1,394 713 559 113 2017 US$ SALES +4.8% +14.4% +16.9% +33.1% 23
Slide 24: Contents
CONTENTS I. T H E C O M PA N Y AT A G L A N C E II. 2 0 2 2 S T R AT E G Y III. I NDUSTRY TR ENDS 24
Slide 25: Wine Industry – Recent Trends
WINE INDUSTRY – RECENT TRENDS 1. Consumption growth driven by Premium wine. 2. Low 2017 global vintage impacting grape and wine cost. 3. A challenging context for global trade. 25
Slide 26: 1. Consumption: Growth Driven by Premium Wines
1. Consumption: Growth driven by Premium wines • Higher-end segments are driving growth, 19,6% increase in 2013-2017 Still Wine – Value Share by Price Segment % Absolute change last 5-years 31,0 Premium and 33,7 +19,6% above 39,9 Standard 39,4 +9,9% 17,0 Value 15,4 -1,1% 12,0 Low - Price 11,4 +2,2%
Slide 27: 1. Premium Wine Leading Growth in Several Markets
1. Premium wine leading growth in several markets 27
Slide 28: 2. Production: Global Production Strong Decline in 2017
2. Production: Global Production strong decline in 2017 • Global wine production at historical low level in 2017, -8.6% yoy • Europe down 15% yoy. (million hectoliters) 300 290.1 2017 vintage: 290 282.8 280 274.7 USA: -1% 272.9 Italy: -17% 268.1 267.8 Australia: 5% 270 277.7 France: -19% 273.4 269.2
Slide 29: 2. Harvest Volume Recovers in Chile and Argentina in 2018
2. Harvest volume recovers in Chile and Argentina in 2018 • Following two low-volume vintages, 2016&2017, harvested volume increased 36% in Chile and 31% in Argentina in 2018. • Latest estimates indicate a return to normal-size harvest 2018 for France, Spain and Italy (double-digit growth rate). CHI
Slide 30: 2. For 1H 2018: Chile Bulk Wine Price Remains at High Level
2. For 1H 2018: Chile bulk wine price remains at high level • 2018 grape prices and contracts were closed before the harvest season. They reflect the 2017 tight supply, low inventory stocks and higher bulk wine prices in 2017 and 1H2018. (Ch$ /arroba) 25,000 22,700 20,000 15,600 15,000 10,000 5,000
Slide 31: 2. Global Bulk Wine Markets in 2018
2. Global bulk wine markets in 2018 • The second half of 2018 has halted the upward trend on bulk wine prices, following larger harvests in Chile and Argentina, and higher estimates for the Northern Hemisphere. Country Variety Vintage Price (US$/liter) Trend Chile Cab. Sauvignon 2018 0.90 - 1.05 ↓ A
Slide 32: 3. A Challenging Context for Global Trade
3. A challenging context for global trade • June 2016 – Brexit. • March 2018 – Trade war (US & China). • May 2018 – Argentina and Brazil under tough economic conditions. • F/X volatility. • Wine demand from major distributors and clients affected by uncertainty. 32
Slide 33: Outlook
OUTLOOK • A more challenging environment for volume growth in external markets. • Concha y Toro has the correct strategy, with price repositioning phase completed. • Efficiencies and cost savings partially reflected in financials. Full year 2020. • Progressive recovery in profitability in domestic m
Slide 34: Corporate Strategy Update
C O R P O R AT E S T R AT E G Y U P D AT E October, 2018
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