Japan Tobacco Inc. · TSE:2914
Japan Tobacco — Investor Presentation (September 2010)
36 slides from Japan Tobacco's investor presentation, Sep 28, 2010
Slide 1: JT International Investor Field Trip - Russia Market
JT International Investor Field Trip Russia Market St. Petersburg September 28, 2010
Slide 2: Forward-looking and cautionary statements
Forward-looking and cautionary statements This presentation contains forward-looking statements about our industry, business, plans and objectives, financial conditions and results of operations based on current expectations, assumptions, estimates and projections. These statements discuss future ex
Slide 3: Kevin Tomlinson, Russia General Manager
Kevin Tomlinson Russia General Manager 3
Slide 4: Agenda
Agenda Introduction Economy and Tobacco Market Overview JTI Strategy & Performance Conclusions 4
Slide 5: Introduction
- Introduction - 5
Slide 6: Russia market at a glance
Russia market at a glance Kaliningrad St. Petersburg Smolensk Moscow Yaroslavl Tula Nizhni Novgorod Voronezh Kazan Rostov-na-Donu Perm Surgut Russian Market Saratov Samara Ekaterinburg Krasnodar Volgograd 17.1 million sq. km Ufa Chelyabinsk Stavropol 142 million people Male/Female 46%/54% Omsk Novos
Slide 7: Market share of key players in Russia
Market share of key players in Russia Share of Market (%) Share of Value(1) (%) 36.4 36.9 Aug 08-July 09 33.3 34.5 30.9 30.5 Aug 09-July 10 25.3 25.7 23.4 22.1 20.3 19.8 8.7 8.3 6.0 6.0 JTI PMI BAT Imperial JTI PMI BAT Imperial JTI is the market leader in Russia both in terms of Share of Market an
Slide 8: Economy & Tobacco Market Overview
- Economy & Tobacco Market Overview - 8
Slide 9: Economic environment
Economic environment Unemployment, % Growth of real Real GDP growth, % disposable income, % 7.7 8.2 7.2 6.5 7.7 5.6 4.2 4.3 4.8 3.4 2.3 2008 2009 2010f 2011f 2008 2009 2010f 2011f 2008 2009 2010f 2011f -7.9 Severe economic crisis impact in 2009, but economic forecasts point to a gradual recovery N
Slide 10: Regulatory environment
Regulatory environment New tobacco regulations (enforced since July 2010) set product and packaging requirements compliant with the FCTC: Enlarged health warnings Ingredients reporting Reduced levels of tar and nicotine Notation on products with “lights” and “mild” descriptors Legislativ
Slide 11: Excise tax environment
Excise tax environment Three-year excise schedule in place since 2007 Average 2008-2010 growth rates at 25-30% Anticipated tax increase in 2011-13 in the range of 30-40% annually Current excise incidence for Winston is 19% of the retail price Ad Minimum Winston Excise YoY Valorem, Specific,
Slide 12: Industry size evolution
Industry size evolution 21 408 404 405 390 400 18 357 400 303 14 15 300 268 13 12 12 200 10 9 100 6 0 3 2006 2007 2008 2009 Volume, BNU Value, RUB Bn (1) Value, US $ Bn (2) The industry contracted sharply in 2009 as a result of the economic crisis, both in terms of volume and value Industry valu
Slide 13: Consumption pattern evolution
Consumption pattern evolution Index (Jan. 2007 = 100) 100 95.6 95.5 89.9 86.1 50 After the severe contraction of 2009, we are observing a return of the historical pattern of higher consumption during summertime Off-take data, although only available with 6 months‟ delay, shows a Q1 market contra
Slide 14: Down-trading is slowing down
Down-trading is slowing down Share of Market, % Q1 10 vs Q1 09 Value/Base Mid-Price Sub-Premium Premium Prestige Q2 10 vs Q2 09 100 10.9 11.2 11.1 11.1 11.1 11.1 11.1 11.1 -0.1 Prestige 0.0 5.3 5.3 5.2 5.0 4.7 4.6 4.6 4.6 -0.7 25.4 26.1 26.2 26.1 25.7 25.7 25.9 26.1 Premium -0.6 -0.4 Sub Premium 16.
Slide 15: 2010 Industry outlook
2010 Industry outlook Economic forecasts point to gradual recovery and resumption of up-trading FCTC will continue to drive regulation Excise tax regime is expected to remain predictable Industry volume contraction expected to slow down by year end, with FY contraction at circa. 3% 15
Slide 16: JTI Strategy & Performance
- JTI Strategy & Performance - 16
Slide 17: Russia performance
Russia performance Volume and Net Sales 2010 Net change vs. same period in 2009 (%) 21.5% 12.6% 8.4% Q1 10 4.8% Q2 10 0.5% Jul/Aug 10 -7.1% -7.4% -10.1% -12.8% Volume GFB Volume Reported Net Sales During July/August, total volume grew slightly, mainly driven by slowing market contraction and SOM g
Slide 18: JTI Russia key strategies
JTI Russia key strategies Leveraging our scale to increase profitability by seizing pricing opportunities Focusing investment behind GFB and portfolio premiumization through innovative new launches and extensions, to capture opportunities from up-trading in the mid- and long-term Continuing to
Slide 19: JTI share of market & share of value evolution
JTI share of market & share of value evolution Share of Market Share of Value (1) 36.8 37.0 35.7 34.7 33.9 32.0 2008 2009 Jan-Jul 10 2008 2009 Jan-Jul 10 Strengthening leadership, with accelerated gains in SOV driven by pricing strategy (1) Share of value based on retail selling price 19 Source: A
Slide 20: JTI SOM growth is driven by growth in Mid Price+
JTI SOM growth is driven by growth in Mid Price+ JTI Share of Market by Price Segment 2008-July 2010(1), (%) 36.6 36.7 36.8 37.0 36.9 37.0 37.2 35.7 2.6 2.5 2.4 2.2 2.1 2.1 2.1 2.4 12.8 12.7 12.5 12.6 12.8 13.1 11.9 12.7 8.5 9.0 9.3 9.7 10.1 10.3 10.5 10.6 12.9 12.2 12.0 12.1 12.2 11.7 11.5 11.4 FY
Slide 21: Pricing evolution
Pricing evolution Pricing first Pricing evolution 2009-2010 (RUB/20 pack) announced by JTI 43 Russian 40 Style 40 35 37 33 35 31 Winston 30 29 25 27 20 20 18 LD 15 16 15 Jan- Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan- Feb Mar Apr May Jun Jul Aug Sep 09 10 JTI as the leader in the market has
Slide 22: Reported net sales per '000 evolution (indexed)
Reported net sales per ‘000 evolution (indexed) Index (Year 2007 = 100) 150 140 131 130 120 121 117 110 100 100 90 80 2007 2008 2009 Jan-Aug 2010 Sustainable strategy to improve reported net sales per „000, reflecting pricing and mix improvement 22 Note: 2007 figures include pro-forma Gallaher
Slide 23: Our volume is driven by strong brands
Our volume is driven by strong brands THIS SLIDE HAS BEEN DEVELOPED TO EXPLAIN JTI’S PERFORMANCE TO OUR INVESTORS. IT IS NOT INTENDED TO PROMOTE THE PURCHASE OF OUR PRODUCTS. Maximum Retail selling 65 50 43 41 33 31 22 20 price (RUB) Share of Market 10.2 July 2010(1), % PROFIT ENGINE 5.2 3.7 2.5 1.1
Slide 24: GFB/non-GFB volume evolution
GFB/non-GFB volume evolution 100% 57.8% 57.4% 54.0% 52.1% 51.9% 53.1% 52.2% Non-GFB volume 42.2% 42.6% 46.0% 47.9% 48.1% 46.9% 47.8% GFB volume 0% H1 H2 H1 H2 H1 H2 Jan-Aug 2007 2008 2009 2010 We are focused on driving GFB volume growth 24 Note: 2007 figures include pro-forma Gallaher
Slide 25: Winston is the No1 brand in Russia
Winston is the No1 brand in Russia, its leadership is constantly strengthened by innovative propositions THIS SLIDE HAS BEEN DEVELOPED TO EXPLAIN JTI’S PERFORMANCE TO OUR INVESTORS. IT IS NOT INTENDED TO PROMOTE THE PURCHASE OF OUR PRODUCTS. Share of Market (%) 1 1 1 1 10.1 10.3 9.6 0.0 0.2 8.7 0.8
Slide 26: Opportunity for innovative development in Premium and above
Opportunity for innovative development in Premium and above THIS SLIDE HAS BEEN DEVELOPED TO EXPLAIN JTI’S PERFORMANCE TO OUR INVESTORS. IT IS NOT INTENDED TO PROMOTE THE PURCHASE OF OUR PRODUCTS. Share of Volume (%) July 2010(1) 36.9 13.8 JTI Share of Market JTI Premium and above price segment shar
Slide 27: LD Striving for No1 position in Mid-Price
LD Striving for No1 position in Mid-Price THIS SLIDE HAS BEEN DEVELOPED TO EXPLAIN JTI’S PERFORMANCE TO OUR INVESTORS. IT IS NOT INTENDED TO PROMOTE THE PURCHASE OF OUR PRODUCTS. LD Share of Market, % 3 2 4 5 5.2 4.8 4.2 4.1 2007 2008 2009 Jan-July 10 1 Rank in the market International proposition
Slide 28: Peter I is among the top brands in the market
Peter I is among the top 5 brands in the market THIS SLIDE HAS BEEN DEVELOPED TO EXPLAIN JTI’S PERFORMANCE TO OUR INVESTORS. IT IS NOT INTENDED TO PROMOTE THE PURCHASE OF OUR PRODUCTS. Peter I Share of Market, % 5 7 9 3.9 13 3.5 3.2 2.8 2007 2008 2009 Jan-July 10 5 Rank in the market Strong herita
Slide 29: Continuous improvement: integrated processes for Trade Marketing Excellence
Continuous improvement: integrated processes for Trade Marketing Excellence 360º Customer View Trade Marketers Distributor Consumers & Customer Key Retail Accounts, Traditional, Leisure TME is an advanced system allowing better trade-related data storage, access & usage by all the parties involved
Slide 30: Continuous improvement: innovation at Points of Sale
Continuous improvement: innovation at Points of Sale THIS SLIDE HAS BEEN DEVELOPED TO EXPLAIN JTI’S PERFORMANCE TO OUR INVESTORS. IT IS NOT INTENDED TO PROMOTE THE PURCHASE OF OUR PRODUCTS. Total Universe in Russia at 386,000 POS Modern Trade Traditional HoReCa Permanent/ Shop Temporary/ Cycle Speci
Slide 31: Corporate philanthropy activities
Corporate philanthropy activities US$2.8 million invested in philanthropy activities in 2009 Strategic approach Sustainable projects relevant for the communities Adequate geographical spread of projects in Moscow, St. Petersburg and regions Balance between cultural and social programs On
Slide 32: JTI Russia talent development
JTI Russia talent development JTI Russia is the fastest-growing organization in the region: In 2006: 3478 employees, 3 factories In 2010: 5540 employees, 4 factories JTI in Russia offers attractive working conditions: Our pay policies and practices are among the most competitive on the mar
Slide 33: Conclusions
- Conclusions - 33
Slide 34: Conclusions
Conclusions We are seeing initial signs of recovery, evidenced by more stable industry volumes and signs that down-trading is slowing. We expect a 3% market contraction in 2010. As leaders on the market, we pursue pricing opportunities to increase profitability We will continue to invest in ou
Slide 35: Appendix
- Appendix - 35
Slide 36: Route to market
Route to market THIS SLIDE HAS BEEN DEVELOPED TO EXPLAIN JTI’S PERFORMANCE TO OUR INVESTORS. IT IS NOT INTENDED TO PROMOTE THE PURCHASE OF OUR PRODUCTS. Manufacturers Distributors Wholesalers / Cash&Carry 87% 6% 7% 0.1% Gas and organized Traditional Hyper/Supermarkets Leisure / HoReCa convenience
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