Avi Limited Class Y · JSE:AVI
Avi Limited Class Y — Corporate Update (June 2005)
39 slides from Avi Limited Class Y's corporate update, June 2005
Slide 1: Analyst Site Visit, Durban, June '05
ANALYST SITE VISIT DURBAN JUNE ‘05
Slide 2: Tea Category
rrovoir Of SOUTH AFRICAN NN NATIONAL BRANDS LIMITED TEA CATEGORY
Slide 3: Contents
Contents • Local market insights • Segment analysis • Strategic focus areas – Local Master Brands – African Master Brands • The South African tea supply chain
Slide 4: Local market insights
rrovoir Of SOUTH AFRICAN WY NATIONAL BRANDS LIMITED Local market insights Freshpak TRINCO Evy aL Refined Quality Tea
Slide 5: BMI estimates the total tea market to be 32245 tons
BMI estimates the total tea market to be 32245 tons, with a CAGR of 2.78% driven by exports 9473 t = 29% 20494 t = 64% CAGR +11.5% CAGR -0.09% 2278t = 7% CAGR 0.83% Exports Foodservices Retail/Wholesale BMI December 2004. CAGR 2003 vs 1999
Slide 6: Local volumes indicate a trend towards premium and healthier offerings
Local volumes indicate a trend towards premium and healthier for you offerings Total tea 18883t -3.9% Black tea Rooibos tea Speciality tea 13836t 4815t 232t Contribution 73% Contribution 25% Contribution 1% Growth -2.5% Growth -9.4% Growth +3% Prem. black bags Economy bags Branded bags VFM bags Flav
Slide 7: Brand investment and innovation drives real growth
There are positive signs within the category that brand investment and innovation drives real growth % 6 +1% 4 2 -5.1% +8% 0 -2 Volume -4 -4.9% Value -2.2% -6 +0.8% Inflation % -8 -10 Total Tea Premium VFM bags Loose Rooibos Speciality black black bags Nielsen Feb Mar 05
Slide 8: Tea penetration remains high in all consumer segments
Tea penetration remains high in all consumer segments 120 TOTAL TEA % Penetration 100.0 99.9 99.7 99.5 99.4 99.4 99.2 99.1 98.8 98.3 98.1 98.0 97.8 97.8 97.6 97.6 97.2 97.1 96.9 96.5 96.6 96.2 94.9 94.8 94.6 94.3 94.1 94.0 93.3 91.1 100 80 60 40 20 - TOTAL SA HAVE NOTS HAVE LOWER HAVE UPPER HAVE LOT
Slide 9: A summary of tea market conditions and share trends
A summary of tea market conditions and share trends • Over the last five years the total local market has been static and is mature • The strongest growth over this period is coming from exports • Locally high levels of penetration for tea indicate a strong tea drinking culture in SA – Key drivers a
Slide 10: Segment analysis
rrovoir Of SOUTH AFRICAN NN NATIONAL BRANDS LIMITED Segment analysis Freshpak TRINCO Evy aL
Slide 11: Black tea bag consumers are trading up
As seen previously, black tea bag consumers are trading up in their tea selection SHARE OF BLACK BAGS - TOTAL SA NFI 100.0 90.0 80.0 37.9 37.0 35.7 47.1 46.9 46.1 70.0 60.0 9.1 8.0 9.3 50.0 15.0 14.6 13.0 40.0 30.0 56.4 52.8 53.9 20.0 37.8 38.6 40.9 10.0 0.0 ANN 2 YRS AGO ANN PREV ANN CURR ANN 2 YRS
Slide 12: Five Roses gained share in premium bags
Within this segment, Five Roses gained share despite competitive threats T O T AL P R E M IU M B AG S - T O T AL S A N FI 0.0 0.0 0.5 0.0 0.0 0.3 100 .0 5.3 4.0 2.1 5.8 4.5 2.7 90 .0 80 .0 42.3 40.1 42.2 41.6 42.3 43.4 70 .0 60 .0 50 .0 40 .0 30 .0 47.1 48.0 51.6 49.3 46.2 46.7 20 .0 10 .0 0 .0 6.0
Slide 13: Trinco also gains share in the declining VFM segment
Trinco also gains share in the declining VFM segment TOTAL VFM BLACK BAGS - TOTAL SA NFI 100.0 1.6 2.8 2.2 1.5 2.7 2.2 0.1 0.1 0.0 0.1 11.0 11.0 11.0 8.9 8.5 8.5 90.0 80.0 70.0 60.0 51.8 50.3 48.5 54.9 54.9 53.7 50.0 40.0 30.0 20.0 35.2 35.6 38.0 34.3 33.5 35.2 10.0 0.0 ANN 2 YRS AGO ANN PREV ANN CU
Slide 14: Black loose leaf: Five Roses and Joko gain share
Within Black loose leaf, both Five Roses and Joko continue to gain share TOTAL SA NFI - DEFINED BLACK LOOSE 100.0 8.5 6.6 5.7 7.6 6.1 5.6 3.6 4.0 2.8 90.0 5.6 5.0 4.3 6.3 6.4 11.7 11.8 12.1 80.0 11.8 70.0 60.0 50.7 51.7 46.0 45.3 47.1 50.0 44.7 40.0 30.0 20.0 29.4 30.7 33.6 30.9 30.8 33.5 10.0 0.0 A
Slide 15: NBL has a 67% share of the rooibos market
NBL has a 67% share of the rooibos market with slight declines in Freshpak share TOTAL BRANDED ROOIBOS - SA NFI 100.0 90.0 17.5 18.2 17.4 19.3 20.3 19.2 80.0 19.2 18.0 17.1 16.8 14.8 70.0 16.2 60.0 50.0 44.1 45.2 40.0 45.5 45.9 46.4 46.1 30.0 20.0 4.6 4.0 3.5 3.5 2.3 3.1 3.2 2.8 2.1 2.0 6.3 2.5 2.3
Slide 16: NBL tea is gaining share in both volume and value
In summary, NBL tea is gaining share in both volume and value Volume share Value share 45 50 40 45 35 40 30 35 30 25 NBL 25 NBL 20 UBR 20 UBR 15 15 10 10 5 5 0 0 2003 2004 2005 FM 2005 2003 2004 2005 FM 2005 We continue to grow ahead of the market Nielsen Feb/Mar 05
Slide 17: Strategic focus areas
prouny GY’ SOUTH AFRICAN NN NATIONAL BRANDS LIMITED Strategic focus areas Freshpak TRINCO Evy aL Refined Quality Tea
Slide 18: Two key focus areas that drive our growth strategy
We have two key focus areas that drive our growth strategy Tea strategic thrusts Key drivers: 1. Real top line growth 2. African expansion “Local Master-Brands” •Innovation “African Master-Brands” •Invest in Master brands •Upgrade manufacturing facilities Grow master •Drive costs down Grow brands ge
Slide 19: Local Master Brand growth has four key themes
Local Master Brand growth has four key themes 1.Premium Black 3. Value for money Tea Bags Tea Bags Theme: Theme: “Everyday quality “Smart shopper/ enjoyment” consumer” 2. Loose Black Tea 4. Rooibos Theme: Theme: “Managed “Growth through conversion” leadership” South African Market data: Nielsen * vo
Slide 20: Themes take the different segment dynamics into account
These themes take the different segment dynamics into account • Premium Black Bags: Everyday quality enjoyment – Ensure Five Roses remains relevant to it’s target market – Protect the quality of our blend – Ongoing innovation – Support for the brand – Relevant pack sizes • Value for Money black bags
Slide 21: Investment in innovation contributed 24.5% to turnover
Investment in innovation over the last three years has contributed 24.5% to turnover to December 2004 New products Line extensions New pack formats 30 25 20 15 10 5 0 %NSV %Tons %GM Future innovation plans focus on maintaining interest in the category and leveraging different channels e.g. food serv
Slide 22: Speciality tea range and pack format development
Examples are the speciality tea range and increased affordability through pack format development
Slide 23: Summary - Local Master Brand
Summary - Local Master Brand • There has been strong domestic sales volume delivery as our brands strengthen – Innovation – Trade support – Shopper and consumer off-take • A commitment to investing in the master brand portfolio and our factory has translated into profit growth • Whilst competitors w
Slide 24: Second strategic pillar: African expansion
Moving on to the second strategic pillar, African expansion Tea strategic thrusts 1. Real top line growth 2. African expansion “Local Master-Brands” “African Master-Brands” Grow master Grow brands geographically
Slide 25: Exports to SADC play a meaningful role in bottom line delivery
Exports to SADC play a meaningful role in our bottom line delivery SADC l SADC 20% 19% NSV F04 Domestic 81% SADC 29% NOP F04 Domestic 80% Volume F04 Domestic 71% Our Brands, most notably Five Roses, have been favourably received. Price premiums due to import tariffs currently restrict our growth pot
Slide 26: Marketing investment in surrounding countries
Marketing investment in surrounding countries has helped boost brand awareness and trial Botswana Trinco launch: Women’s groups Botswana Banner group consumer promotion Namibia and Mozambique NBL cross category consumer promotion
Slide 27: Success with Five Roses in Botswana
We have enjoyed success with Five Roses in Botswana % improvement yoy Market Share: December 2004 40 35 16% 30 Five Roses 7% Joko 25 2% 73% Laager 20 Volume 2% Freshpak Tanganda 15 NOP 10 5 0 Source: Briggs and associates F04 F05 est Which we would like to replicate in other countries
Slide 28: Immediate focus on countries where we have presence
Our immediate focus area will be in countries where we already have some presence Uganda Kenya Tanzania Angola Malawi Zambia Zimbabwe Mozambiqu Key: Namibia e Existing presence: Botswana Swazilan High consumption d countries: South Africa Lesoth o There are other large tea consuming nations on our r
Slide 29: Strategic focus areas
Strategic focus areas • Local Master Brand growth through: – Increasing master brand health – Managing the brand and product portfolio – Balancing investment in brands and factory with tight cost management – Leveraging Food Service businesses • African expansion – Improve our brand portfolio availa
Slide 30: The South African tea supply chain
The South African tea supply chain
Slide 31: Black Tea
Black Tea • Black tea is a member of the “Camellia Sinensis” family - evergreen tropical plant • Originally indigenous to both China and India • First brewed in 2737 BC by a Chinese Emperor Shen-Nung • Tea was first planted in RSA by Leige Hulett in 1877 • Industry established in 1963 by government
Slide 32: The Production of Rooibos
The Production of Rooibos • Rooibos is a member of the Fynbos family – Not related to tea in any form at all • Rooibos “Asphalathus Linearis” is only commercially grown in the Cedarberg region of the Western Cape • Crop harvested by hand, mechanically cut and left to ferment in the sun on concrete s
Slide 33: Background to the Durban Tea Factory
Background to the Durban Tea Factory • TW Becketts moved to this site in 1924 – Additional land leased over time • In 1995 the factory block and the blending section leaseholds were purchased from the municipality – significant investment was made in upgrading the factory. • Raw material warehouse l
Slide 34: Production Capability and Performance
Production Capability and Performance • SA market is essentially a tag less teabag market = 80% of NBL volume – International norm is tagged = 2% of NBL volumes • Largest factory packing tag-less teabags in the pouch format in the world • Third largest packer of tag-less teabags in any format – Find
Slide 35: Production Statistics
Production Statistics • Annual Production – 12,600,000 Kilograms • One IMA C51 machine can produce 2.2 million bags day on a 24 hour shift. • Durban tea factory produces – 4.2 billion tea bags per year
Slide 36: The Buying and Blending Process
The Buying and Blending Process • Raw tea represent approximately 60% of our cost of sales • Tea offers are received from all over the world weekly for auction – Sri Lanka – Kenya – South Africa – Malawi – Zimbabwe • Analysed for sizing, density, moisture and physical attributes • Buyers are instruc
Slide 37: The Production Process
The Production Process • Tea picked from a blend sheet issued by the tea master • Tea is cleaned and blended in rotary blender in 1 ton batches – blend on average 50 ton per day • The blend is discharged into one ton hoppers • Gravity feed to the packing machines on the floor below
Slide 38: Recent Capex
Recent Capex • Replacement of leaf tea line -2004/5 • New dust extraction system and sealed conveyors on the blend floor - 2005 • Additional IMAC51 teabag machine purchased to enhance capacity for our pouch line – 2005 • New office and lab for QC – 2005 • In the process of converting to pneumatic fe
Slide 39: Confident future prospects of the Tea category are robust and sustainable
We are confident that the future prospects of the Tea category are robust and sustainable