Heritage Foods Limited · NSE:HERITGFOOD
Heritage Foods — Investor Presentation (2012)
48 slides from Heritage Foods's investor presentation, 2012
Slide 1: Investor Presentation FY2012
Investor Presentation FY2012
Slide 2: Disclaimer
Disclaimer The release contains forward-looking statements, identified by words like ‘plans’, ‘expects’, ‘will’, ‘anticipates’, ‘believes’, ‘intends’, ‘projects’, ‘estimates’ and so on. All statements that address expectations or projections about the future, but not limited to the Company’s strateg
Slide 3: Agenda
Agenda I. Heritage Foods (India) Ltd. – Introduction II. Dairy Industry Scenario III. Business Overview I. Business Overview – Dairy Division II. Business Overview – Retail Division III.Business Overview – Agri & Bakery Division IV Business Strategy IV. V. Share Holding Pattern 3
Slide 4: Heritage - Overview
Heritage - Overview Heritage Foods (India) Limited (“Heritage”) is a leading corporate based out of Hyderabad and operates in the high-growth Food and Retail business segments Four reporting divisions - Dairy, Retail, Agri, and Bakery ¾ Dairy (FY2012 Revenue:Rs10940mn EBITDA:Rs719mn Capital Emp:
Slide 5: Heritage - Founder
Heritage - Founder Mr Chandrababu M Ch d b b Naidu N id Nara N was the h Chief Chi f Minister Mi i off Andhra A dh P Pradesh d hd during i 1995 1995-2004. 2004 He holds the record of being the longest served Chief Minister of Andhra Pradesh. Heritage was founded by Mr. Nara in 1992 with an objective
Slide 6: Mission & Vision
Mission & Vision Mission • Bringing prosperity into rural families through Co-operative efforts and providing customers with hygienic hygienic, affordable and convenient supply of “Fresh and Healthy” food products Vision • To achieve this by delighting customers with “Fresh and Healthy” food product
Slide 7: Consolidated Financial Overview
Consolidated Financial Overview ¾ The decline in profit in FY2007 and the suppressed profitability thereon is on account of the initial year of losses in the nascent Retail business 7
Slide 8: Dairy Financial Overview
Dairy Financial Overview CAGR of 25% ¾ The decline in EBITDA margin in FY2011 is on account of very rapid inflation in milk procurement prices; depressed fat prices have kept the margin low in FY2012 8
Slide 9: Retail & Agri Financial Overview
Retail & Agri Financial Overview Retail Agri ¾ Bakery division has been clubbed with Retail ¾ Capital Employed in Retail (incl Bakery) is at Rs721mn and in Agri at Rs354mn 9
Slide 10: Organization Structure
Organization Structure BOARD OF DIRECTORS VC & MD ED CS PRESIDENT HEAD COO COO COO COO CFO Q&A DAIRY DIVISION RETAIL DIVISION AGRI DIVISION BAKERY DIVISION FUNCTIONAL FUNCTIONAL FUNCTIONAL FUNCTIONAL HODS’ HODS’ HODS’ HODS’ 10
Slide 11: Agenda
Agenda I. Heritage Foods (India) Ltd. – Introduction II Dairy Industry Scenario II. III. Business Overview I. Business Overview – Dairy Division II. Business Overview – Retail Division III.Business Overview – Agri & Bakery Division IV Business Strategy IV. V. Share Holding Pattern 11
Slide 12: Indian Dairy Scenario
Indian Dairy Scenario ¾ In India, as in many developing countries, dairying is a supplementary enterprise to crop farming and highly integrated with the crop production sector ¾ Milk production in India is a low-input, low-output farm activity with a smallholder production system, with about three-q
Slide 13: Indian Dairy Scenario
Indian Dairy Scenario I di DDairy Indian i SSector (FY2011) mn tons % share Milk production 122 Retained for consumption 61 50% Marketable surplus 61 50% Processed by Org. sector 23 19% Cooperatives 11 Private sector 12 Source: CLSA Asia-Pacific Markets 13
Slide 14: Agenda
Agenda I. Heritage Foods (India) Ltd. – Introduction II Dairy Industry Scenario II. III. Business Overview I. Business Overview – Dairy Division II. Business Overview – Retail Division III.Business Overview – Agri & Bakery Division IV Business Strategy IV. V. Share Holding Pattern 14
Slide 15: Spread of Operations
Spread of Operations • Widest regional footprint in India among privately held dairy companies. Spread across 6 states - Andhra Pradesh - Tamil Nadu - Karnataka - Maharashtra - Kerala - Orissa • Present in the highest milk producing states in India • One of the Top 3 private sector dairy companies i
Slide 16: Dairy Categories
Dairy Categories Revenue Split ¾ High growth of higher margin Branded Value-Added Products - Curd, Ice Cream, Paneer, Flavored Milk, Sweets ¾ Only packaging partner (curd) for Nestle in India India, and one of their only 2 Indian dairy packaging partners 16
Slide 17: Dairy Categories – Pouch Milk
Dairy Categories – Pouch Milk ¾ #2 in Pouch Milk sales in India amongst private sector dairy companies ¾ Liquid milk is a “fresh” product. Requires daily replenishment ¾ 90% of Heritage liquid milk is door delivered through milk agents on a daily basis ¾ 99% of liquid milk procured is sold within 24
Slide 18: Dairy Categories – Branded Value Added Products
Dairy Categories – Branded Value Added Products Paneer Curd Lassi *Product Highlights ¾ #1 in Curd sales in India ¾ #3 regional Ice-cream company and among the top 10 in India (started only 3.5 years back) ¾ #1 in Butter Milk sales in India ¾ #2 in Lassi sales in India ¾ #1 regional company in ghee
Slide 19: Pouch Curd – The growth driver
Pouch Curd – The growth driver Market Share in Pouch Curd % share Hyderabad 56% AP 51% Chennai 28% TN 22% Bangalore 7% Karnataka 6% ¾ Branded Curd Sales accounts for approx.. 60% of Branded Value added products Sales ¾ Pouch h Curd d accounting for f more than h 80% off volume l sales l (with h the
Slide 20: Pouch Curd – The growth driver
Pouch Curd – The growth driver AP Pouch Curd Sales Chennai Market Shares % Urban Pop Sales Split Pouch Pouch (mn) % Curd Milk Hyderabad & Rangareddy 7.7 31% H it Heritage 28% 7% Rest of AP - 7 Districts 8.4 69% Private Competitor 1 21% 10% Remaining AP 12.2 0% Private Competitor 2 4% 9% Total 28 4 2
Slide 21: Activity Flow chart
Activity Flow chart Procurement Production Sales and Marketing Milk and Milk Products Milk Milk Excess Fat Converted Products To By-Products Collection of Milk from Packed Milk to Distributors Farmers Distribution Pasteurization, Pasteurization Point Homogenization, Modern *Kirana Standardization of
Slide 22: Distribution Network Structure
Distribution Network Structure One Level Two Level T L l Three Level Th L l 87% sales 11% sales 2% sales Sales Office Sales Office Sales Office CFA/CA A Agents/Retailer/Parlours /R il /P l Distributors/Stockists Agents/Retailers ge ts eta le s Distributors/Stockists Consumer Consumer • No of Sales o
Slide 23: Range of Products
Range of Products Fruit n Curd Lassi Cooking Butter PT Butter & Cheese 23
Slide 24: Range of Products
Range of Products Buffalo Ghee eee Paneer Clrius), a on Hop . a Ae ith "ane i ~~ | Bring Howe Health, & Happiness 24
Slide 25: Welfare Activities for Milk Producers
Welfare Activities for Milk Producers Input Activities • Cattle insurance • Cattle productivity improvement - Health camps, deworming, immunization etc. - Supply of high quality seeds, fodder, feed, mineral mixes - Sourcing high quality breeding bulls given to f farmers att subsidized b idi d rates
Slide 26: Welfare Activities for Milk Producers
Welfare Activities for Milk Producers Farmers Welfare Trust (FWT) • Cooperative effort between milk producers and Heritage to create village-based village based fund pool (50-50 (50 50 contribution) used for local individual and community developmental activities. • Non-supply members can also parti
Slide 27: Quality Assurance & Technology
Quality Assurance & Technology Offering ff premium quality l milk lk and d dairy d products d to customers at reasonable bl prices • Scientific methods of quality checks at different levels – Industry benchmarks • Dedicated Quality Assurance & Product Development team • St t off th State the art, t
Slide 28: Heritage Parlour
Heritage Parlour • H Heritage it g Parlor P l iis a M Modern d “Ki “Kirana” ” incubated and pioneered by Heritage • Currently there are 1055 parlors with an average shop h area off 100 100sft f • Vision is to nurture entrepreneurship and to enhance inclusive growth opportunities - Owned and managed
Slide 29: Heritage Parlour - Product Range
Heritage Parlour - Product Range • Every Category has its own SM (Sales Man) • Timely payment and supply: A SM travels with the delivery vehicle to deliver indent, collect cash, and the next indent • Currently Parlous benefit from existing dairy and retail distribution centers and logistics • Mercha
Slide 30: Agenda
Agenda I. Heritage Foods (India) Ltd. – Introduction II Dairy Industry Scenario II. III. Business Overview I. Business Overview – Dairy Division II. Business Overview – Retail Division III.Business Overview – Agri Division IV Business Overview – Bakery division IV.Business IV. Business Strategy V. S
Slide 31: Business Profile – Retail Division
Business Profile – Retail Division • Started in 2006 as a logical extension to dairy division to benefit from the food and grocery retail boom in India • Average store A t area iis ~3,000 3 000 sft ft and d contains t i over 6,000 SKUs • A typical store is on 9 years lease • IInternational t ti l co
Slide 32: Quality & FRESHness
Quality & FRESHness • FRESH is not just a part of our name — It is the essence of the relationship we have built with our customer — It stands for the freshness of the products we sell — It’s also about the originality of our business model • Direct procurement of fruits & vegetables from farmers/He
Slide 33: Highest Productivity
Highest Productivity • Highest Hi h productivity d i i off Rs1040 R 1040 FY 12 (USD 22) per sft f per month ( FY 12 ) in food & grocery retail (supermarket format) business in India • Customer satisfaction due to high quality and wide range of product availability — Total 14,613 SKUs in FMCG + Dairy
Slide 34: Well Integrated Supply Chain
Well Integrated Supply Chain • Distribution Di t ib ti C Centers t (DC (DCs)) strategically t t i ll llocated t d close to stores. Each of the 3 cities has a DC Distribution Centre Details Unit Hyd Bangal -ore Chennai Total - Supply chain cost @ 2.4% of sales Ownership Leased Leased Leased* - The lo
Slide 35: Key Operational Metrics: FY2012
Key Operational Metrics: FY2012 Hyderabad Bangalore Chennai Total No. of Stores 35 15 23 73 Total Carpet Area (sq ft) 120404 49204 47504 217114 Effective Carpet Area (sq ft) 116509 36836 47196 200542 ABV (Rs) 193 185 180 188 No. of Bills 597 385 433 497 Ave. Sales (Rs/sq ft/month) 979 885 1311 1040
Slide 36: Trend of key operational & financial metrics
Trend of key operational & financial metrics Rs m n FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 No. of stores 15 70 75 75 75 73 Total carpet area ('000 sq ft) 43 149 159 158 166 217 Ef fective carpet area ('000 sq ft) 8 90 158 158 160 200 Avg store sales (Rs/ sq ft/m onth) 731 943 974 968 1113 1040 YO
Slide 37: Agenda
Agenda I. Heritage Foods (India) Ltd. – Introduction II Dairy Industry Scenario II. III. Business Overview I. Business Overview – Dairy Division II. Business Overview – Retail Division III.Business Overview – Agri & Bakery Division IV Business Strategy IV. V. Share Holding Pattern 37
Slide 38: Integrated Agri operations
Integrated Agri operations • Pioneers in “Custom Farming” in retail industry. Working closely with farmers and providing assistance regarding • Good G dA Agricultural i l lPPractices i • Annual crop calendar • Integrated Pest management • Credit linkage • Input supply • Pre/post harvest management •
Slide 39: Integrated Agri operations
Integrated Agri operations • State of the art Pack Houses (processing centers) • Air-conditioned and humidity controlled pack houses with cold storage facilities and ripening chambers at 2 strategic locations with a combined capacity it off 300MT per d day • Combined capacity expandable to 450MT wit
Slide 40: Pack Houses Infrastructure
Pack Houses Infrastructure 40
Slide 41: Business overview - Bakery Division
Business overview - Bakery Division • State-of-the-art bakery production facility • Provides backend production services for Heritage Fresh and Private Label • Manufactures a range of breads, puffs, pastries, puddings and custards • European equipment - spiral mixers, digitally controlled laminated
Slide 42: Agenda
Agenda I. Heritage Foods (India) Ltd. – Introduction II Dairy Industry Scenario II. III. Business Overview I. Business Overview – Dairy Division II. Business Overview – Retail Division III.Business Overview – Agri & Bakery Division IV Business Strategy IV.Business V. Share Holding Pattern 42
Slide 43: Dairy strategy – Moving up the value chain
Dairy strategy – Moving up the value chain ¾Focus on own brand value added products Curd Butter milk Ice I cream ¾Consolidation in existing markets p ¾Expansion to new markets 43
Slide 44: Farm to fork – Integrated Retail Business
Farm to fork – Integrated Retail Business Farmer Pack Houses (F&V) FMCG Bakery Dairy Bulk Sourcing & staples Distribution centers/warehouses Flagship stores Institutional Sales Home Delivery Urban Consumers 44
Slide 45: Economic Activity - Manpower
Economic Activity - Manpower S No Division Regular Part timers/Casuals Total Jobs Jobs 1 Dairy 1788 1652 3440 2 Retail 1868 340 2208 3 Agri 87 76 163 4 Bakery 41 44 85 Grand Total 3784 2112 5896 45
Slide 46: Agenda
Agenda I. Heritage Foods (India) Ltd. – Introduction II Dairy Industry Scenario II. III. Business Overview I. Business Overview – Dairy Division II. Business Overview – Retail Division III.Business Overview – Agri & Bakery Division IV. Business Strategy gy V. Share Holding Pattern 46
Slide 47: Current Share holding pattern
Current Share holding pattern As on June 2012 m n shares % holding Promoters 5.3 46% FIIs 1.1 9% Domestic Institutions 0.1 1% Others 5.1 44% Total 11 5 11.5 47
Slide 48: Thank You
Thank You Bring Howe Health & Happiness