British American Tobacco P.l.c. · LSE:BATS
British American Tobacco P.l.c — Citi Asia Tobacco Field Trip, Seoul (2010)
33 slides from British American Tobacco P.l.c's conference presentation, 2010
Slide 1: Strategy in Action: BAT Korea
STRATEGY IN ACTION BAT KOREA Stephan Liechti Richard Bakker
Slide 2: Important Information
IMPORTANT INFORMATION This presentation has been prepared by British American Tobacco Korea ("British American Tobacco") for information purposes only and does not constitute, or form part of any offer or invitation to acquire, or any solicitation of any offer to acquire any securities of British Am
Slide 3: Agenda
AGENDA Strategy in Action Korea The Cigarette Market A Decade of Success The Strategy Summary and Conclusion
Slide 4: Agenda
AGENDA Strategy in Action Korea The Cigarette Market A Decade of Success The Strategy Summary and Conclusion
Slide 5: Korea
Korea Population 48.7 million Democratic People’s 98,000 km2 Area Republic of (Size of Hungary) Korea Almost half of population in Seoul Density 50% Seoul Area Seoul US$21,000 (2009) Kyunggi GDP per Capita US$11,000 (2000) Province Republic of Korea Inflation 3.1% (2009) Export driven Trade / Growth
Slide 6: Economic Outlook – Strong Performance
GDP Growth (%, y-o-y) Economic Outlook 6 5 – Strong Performance 4 3 $820 Billion GDP in 2009 2 1 (15th biggest economy) 0 Fastest recovery amongst OECD 2005 2006 2007 2008 *Source : BOK (Actual) / Asia Pacific Consensus Forecasts (Forecast) 2009 2010 (F) 2011 (F) Won appreciation USD/KRW Rates 1
Slide 7: Agenda
AGENDA Strategy in Action Korea The Cigarette Market A Decade of Success The Strategy Summary and Conclusion
Slide 8: A Dynamic Cigarette Market
A Dynamic Cigarette Market Market size and price evolution 2005 2009 CAGR: -1.0% 82.2 94.7 billion 104.9 106.8 CAGR: 1.5% Size billion 6th largest* 98.1 96.9 94.8 94.6 94.4 91.3 91.6 87.5 82.1 Adult 21.3% 22% Incidence Billions 2500 Consumption 19.3 sticks 19.5 sticks per day Pack 2000 Price 1800 (K
Slide 9: Regulatory Environment
Regulatory Environment - Text Health Warning - Proposals in the National Assembly on Advertisements - PPS Restrictions - Graphic Health Warnings - Further PPS - Korea Ratified - Ban of Descriptors Restrictions FCTC - PPS Restrictions - Advertisement Restrictions 1997 2001 2002 2003 2004 2005 2008 20
Slide 10: Agenda
AGENDA Strategy in Action Korea The Cigarette Market A Decade of Success The Strategy Summary and Conclusion
Slide 11: Superior understanding of the consumer resulted in outstanding growth for BAT
Superior understanding of the consumer resulted in outstanding growth for BAT 18.0 23% CAGR BAT Shipments (b`ns) 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Industry Shipments
Slide 12: Consistent evolution in Dunhill has resulted in 15% share growth
Consistent evolution in Dunhill has resulted in 15% share growth over the last 10 years Launch Top Leaf / Cigar Flagship Launch Dunhill store Balance Orchestra – Focus – Pack Change Launch Pack modification 0.1mg for Dunhill KS&SS 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Launch La
Slide 13: A very successful build up of BAT in Korea
A very successful build up of BAT in Korea 1998 British America Tobacco Korea established 1999 Merger with Rothmans Korea (Dunhill) with 200 employees Direct sales system established 2002 Construction of BATK factory 10bn off-take sales 11% share of industry with 600 employees 2003 First local produ
Slide 14: BAT – A successful company in Korea and large opportunity available
BAT – A successful company in Korea and large opportunity available Unit: % Unit: % 40 100 90.60 84.80 79.20 77.10 76.70 75.12 72.06 80 30 69.06 65.50 61.00 60 17.62 18.14 20 17.20 16.19 13.00 13.66 14.56 40 12.60 10.90 11.78 9.68 10 8.00 8.35 6.50 7.40 6.24 5.70 5.02 20 3.40 4.06 2.80 3.20 4.10 3.8
Slide 15: Agenda
AGENDA Strategy in Action Korea The Cigarette Market A Decade of Success The Strategy Summary and Conclusion
Slide 16: Our strategy is fully aligned with the group: leadership of the tobacco industry
Our strategy is fully aligned with the group: leadership of the tobacco industry Group No.1 Region Korea Growth Productivity Responsibility 9 Winning Portfolio 9 Consumer centric 9 Preferred Partner local agility 9 Leader in Innovation 9 Shaping Environment Korea 9 Leader in product 9 World class TM
Slide 17: Growth: Winning Portfolio
Growth No.1 Growth 9 Winning Portfolio 9 Leader in Innovation 9 World class TM&D 9 Pricing
Slide 18: Dunhill - No.1 International Brand in Korea
Dunhill - No.1 International Brand in Korea Growth Dunhill is number 1 ASU 30 with 28% share Dunhill Lights = No.1 SKU in Dunhill flagship store Korea Dunhill 1mg = No.1 SKU in 1mg segment DHL campaign Dunhill Frost = No.1 SKU in menthol segment Dunhill Fine Cut SS = No.1 SS in internation
Slide 19: Dunhill will continue to be the premium benchmark brand
Dunhill will continue to be the premium benchmark brand in the future Growth Launch of Dunhill Nanocut – Driving ASU30 inflow through innovation compact offer
Slide 20: Building our future with Kent
Building our future with Kent Growth ASU25 wanting ‘individual choice’ Innovation platform based on technology positioning Utilise global pipeline for future rollout
Slide 21: Direct Sales: Close To Our Consumers
Direct Sales: Close To Our Consumers Growth Processing Retail universe of 134,000 with Communication Routing 90,000 customers 4.7million store visits every year BAT direct sales distribution trade coverage 74% incl. distributor (26% K/A) Sale Picking Delivery End to end supply chain managed in
Slide 22: Direct Sales – A Real Competitive Advantage
Direct Sales – A Real Competitive Advantage Growth Direct feedback about Close to the consumer consumer behaviour Higher trade coverage in Higher distribution for BAT Retail brands Faster speed to market New launches and than most competitors higher flexibility Improved retailer influence Relationsh
Slide 23: The Pricing Opportunity In Korea
The Pricing Opportunity In Korea Growth Cigarettes are very affordable Cigarettes are very affordable 8,000 8,000 6.38 6.15 4.81 4.5 5,000 3.57 KRW GBP 4,100 3,400 2,500 2.21 1.54 1.23 1,000 Cinema Imported Local Beer Starbucks Big Mac Cigarettes New spaper Australia UK Canada France Italy Japan Mal
Slide 24: Market Value
Market Value Growth Total NTO (KRW in tn) CPI (base on 2000) 3.8 Pack Price (KRW) 3.5 3.4 3.4 3.4 3.4 3.2 3.3 3.1 2.9 130 133 121 124 115 118 104 107 111 100 2,500 2,500 2,500 2,500 2,500 2,000 2,000 2,000 1,600 1,800 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 CPI and our cost base increase
Slide 25: Productivity
Productivity No.1 Productivity 9 Consumer centric local agility 9 Leader in product quality 9 Leveraging global scale
Slide 26: Driving Productivity to Fuel Growth
Driving Productivity to Fuel Growth Productivity 2006 (Base) 2007 2008 2009 BATK Overheads Index 100 105 95 92 Consumer Price Inflation 100 103 108 111 Average Salary Increase 100 106 111 116 Leveraging global scale 2008-2009 zero base costing in Korea CPMH (Cigarette Per Million Hour) : BAT r
Slide 27: Responsibility
Responsibility No.1 Responsibility 9 Preferred Partner 9 Shaping Environment 9 #1 Reputation
Slide 28: Responsibility
Responsibility Responsibility “Our objective is to continue leadership as a responsible corporation in Korea.” Continuous Dialogue with Stakeholders. 5 BAT Korea case studies included in our 2009 Group Sustainability Report. CSR and CSI programs. International Marketing Standards Implementat
Slide 29: Recognition
Recognition Responsibility Excellent 5Mn Dollar Corporate Export Tower Governance Award 2007 2006 3Mn Dollar NCSI Award Export Tower Exemplary 2006 (5yrs) Taxpayer Award Citation for 2004,2005,2006 Contribution to 2008,2009 2006 2010 10Mn Dollar the Tobacco Industry NBCI Award Export Tower YSP Effor
Slide 30: Winning Organisation
Winning Organisation No.1 Winning Organisation Leading International Employer in Korea
Slide 31: People: Our Winning Organisation
People: Our Winning Organisation Winning Organisation Senior management team with 120 years of international tobacco experience in 30 countries. Very strong result oriented and passionate sales force: we can, we will!! One of the best and most efficient factories in the world: people make the
Slide 32: Agenda
AGENDA Strategy in Action Korea The Cigarette Market A Decade of Success The Strategy Summary and Conclusion
Slide 33: Summary and Conclusion
Summary and Conclusion What will drive success? How is BAT positioned? Clear brand propositions for different Leading in differentiated portfolio consumer needs marketing International brands Strong brands geared for growth Innovations Kent → Kent → the the international international i
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