British American Tobacco P.l.c. · LSE:BATS
British American Tobacco P.l.c — Investor Day (March 2019)
42 slides from British American Tobacco P.l.c's investor day presentation, Mar 14, 2019
Slide 1: Investor Day | 14 March 2019
——EEE BRITISH AMERICAN TOBACCO Investor Day | 14 March 2019 * ae RANSFORMIN ACCELERATING DELIVERY —
Slide 2: Accelerating Growth in the New Nicotine World
ACCELERATING GROWTH IN THE NEW NICOTINE WORLD KINGSLEY WHEATON | CHIEF MARKETING OFFICER
Slide 3: Important Information
Important Information The information contained in this presentation in relation to British American Tobacco p.l.c. (“BAT”) and its subsidiaries has been prepared solely for use at this presentation. The presentation is not directed to, or intended for distribution to or use by, any person or entity
Slide 4: Important Information
Important Information Forward-looking Statements (continued) Additional information concerning these and other factors can be found in BAT’s filings with the U.S. Securities and Exchange Commission (“SEC”), including the Annual Report on Form 20-F to be filed on 15 March 2019 and Current Reports on
Slide 5: Kingsley Wheaton, Chief Marketing Officer
KINGSLEY WHEATON CHIEF MARKETING OFFICER Europe 23Yrs B AT Middle East Americas General Manager Russia Africa MANAGEMENT BOARD SINCE 2012 Director Director Regional Corporate & Next Director Regulatory Generation AMSSA Affairs Products
Slide 6: Key Messages
Key Messages 1 Driving value from combustibles as we continue to outperform the industry 2 The tobacco & nicotine industry is growing & fragmenting 3 Powerful consumer insights inform our multi‐category strategy 4 A step‐change in New Categories ‐ both pipeline & building global brands 5 Ambition fo
Slide 7: Strong Historical Performance
Strong Historical Performance +200 2010-2018 VOLUME +110 SHARE +100 Strategic +120 Brand +90 Share +90 +80 +40 +50 +40 +40 -1% to -2% +40 BAT +40 +10 +20 +10 Share 2010 2011 2012 2013 2014 2015 2016 2017 2018 -2% to -3% PRICE MIX % other REVENUE 5.0 FMC Source of BAT Revenue 4.2 6.2 6.1 5.5 7.0 THP
Slide 8: Built On Outstanding Capabilities & Global Reach
Built On Outstanding Capabilities & Global Reach 11mn 150mn OUTLETS CONSUMERS REACHED DAILY 30 PRRP MARKETS 8mn PRRP CONSUMERS Source: Internal Data
Slide 9: Diverse Consumers, Differing Needs
Diverse Consumers, Differing Needs FMC THP Oral Vapour High Low To b a c c o To b a c c o Affinity Affinity Our Ambition is Leadership
Slide 10: With a Clear View on Where to Win
With a Clear View on Where to Win Japan & SK - Predominantly THP Northern Europe - Oral Central & Eastern Europe - Mixed Usage North America & Western Europe - Predominantly Vapour Modern Oral Emerging Potential Source: Kantar & Internal Forecasts
Slide 11: PRRP ~£2bn, New Categories Approaching £1Bn in 4 Years
PRRP ~£2bn, New Categories Approaching £1Bn in 4 Years 1.9bn PRRP REVENUE (GBP) 1.4bn 1.0bn 0.8bn NEW CATEGORIES 936mn 476mn 91mn 205mn 2015 2016 2017 2018 Group Revenue Presented on a representative basis as though the group has owned the acquisitions made in 2017 for the whole period Source: Inter
Slide 12: Our Ambition is Leadership
Our Ambition is Leadership ~ 20bps pa Share of FMC 25-35% Share of THP 12-18% Share of Vapour >50% Share of Modern Oral FMC Source Internal Estimate: 2023/24. Share refers to Global Value Share.
Slide 13: Dynamics of the New Nicotine World
DYNAMICS OF THE NEW NICOTINE WORLD
Slide 14: Tobacco & Nicotine Consumers in Growth
Tobacco & Nicotine Consumers in Growth 1.6% CAGR Nicotine Consumers (T40 Mn) 0.8% CAGR 433 438 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: T40 Incidence Study & BAT Internal Estimates
Slide 15: Tobacco & Nicotine Value is Growing
Tobacco & Nicotine Value is Growing >3% Industry Revenue (T40 £Bn) CAGR 80 65 2011 2012 2013 2014 2015 2016 2017 2018 Source: T40 Incidence Study & BAT Internal Estimates
Slide 16: Combustible: Consumer Base Broadly Stable
Combustible: Consumer Base Broadly Stable 412 418 FINE CUT DUTY NOT PAID FMC Consumer Pool (T40 Mn) FMC DUTY PAID 2011 2012 2013 2014 2015 2016 2017 2018 Source: T40 Incidence Study & BAT Internal Estimates
Slide 17: 2023: ~500m Consumers & ~£100bn Revenue
2023: ~500m Consumers & ~£100bn Revenue ~4% CAGR 500 90 Industry Revenue (T40 £Bn) 2.2% Consumer Pool* (T40 Mn) CAGR 400 70 300 50 200 30 2007 2012 2018 2023 2007 2012 2018 2023 FMC-FC-Traditional Oral THP Vapour Modern Oral Modern Oral Expansion * Consumer Pool: Gross User Data by Categories (inclu
Slide 18: Dynamics of Vapour & THP Differ
Dynamics of Vapour & THP Differ Vapour over-indexes entrants THP driven by switchers 2.8% 2.4% 2.7% Tobacco & Nicotine adult switchers Tobacco & Nicotine adult entrants 2.0% Index 2.5% 110 1.0% 279 88 2016 2017 2018 2016 2017 2018 THP Vapour Combustibles THP Vapour Fine Cut + DNP Source: Incidence S
Slide 19: Compelling New Category Gross Margins
Compelling New Category Gross Margins 2017 2018 Projection Category Gross Margin % of Revenue* FMC 64% 65% + ve THP Consumables Excluding Devices 83% 81% - ve VAPING Consumables 29% 42% +++ ve MODERN ORAL 59% 66% ++ ve TRADITIONAL ORAL 75% 78% + ve PRRPs 67% 72% + ve Average GM > FMC * Adjusted, rep
Slide 20: UK: Total Nicotine Revenue Accelerating
UK: Total Nicotine Revenue Accelerating 2.6 1.9 REVENUE (£ bn) 2016 2017 2018 2019 2020 2021 2022 2023 Combustibles Vapour THP Modern Oral 2019-2023 Estimates on a constant currency basis Source: Incidence Study & BAT Internal Estimates
Slide 21: Sweden: Total Nicotine Revenue Accelerating
Sweden: Total Nicotine Revenue Accelerating 681 457 REVENUE (£ mn) 2016 2017 2018 2019 2020 2021 2022 2023 Combustibles Traditional Oral Modern Oral 2019-2023 Estimates on a constant currency basis Source: Incidence Study & BAT Internal Estimates
Slide 22: Japan: Industry Margin set to Grow
Japan: Industry Margin set to Grow 5.7 4.6 GROSS MARGIN (£ bn) 2016 2017 2018 2019 2020 2021 2022 2023 Combustibles THP 2019-2023 Estimates on a constant currency basis Source: Incidence Study & BAT Internal Estimates
Slide 23: Story so far
Story so far Consumer Base Track record of Growing & Founded in Delivering Fragmentating Reach & Capabilities BAT Price Mix Average 5.8% Industry Revenue Accelerates to ~4% CAGR New Category Gross Margin Accretive ~£100bn Industry Revenue Est 2023 Source: BAT Internal Data & Estimates T40 Markets
Slide 24: Creating a Better Tomorrow: Our Marketing Mission
Our Marketing Mission CREATING A BETTER TOMORROW Delivering pleasure through rewarding consumer experiences; powered by leading-edge innovation, technology and dynamic brands .
Slide 25: Marketing 2.0
Marketing 2.0 Leading-edge Insights & Foresights Powered by Creating Talent, Remarkable Skills & Products Capabilities Globally Powerful Aggregated & Exciting Solutions & Global Activation Brands
Slide 26: Portfolio Eco-System, Inspired by Insights
Portfolio Eco-System, Inspired by Insights
Slide 27: Consumer Pleasure Drivers Inspire Primary Choices
Consumer Pleasure Drivers Inspire Primary Choices Source: KANTAR and BAT Proprietary Methodology
Slide 28: Brand & Variant Maps to Consumer Segmentation
Brand & Variant Maps to Consumer Segmentation LEADERSHIP AFFILIATION OUTER DIRECTED INNOVATIVE MAIN ENTHUIASTS STREAMERS CONSCIOUS TASTE MASTERS INDIVIDUAL PROGRESSIVE ASPIRING SOCIAL ECONOMIZERS LOCAL PRIDE CONSIDERATE PRICE STRUGGLERS SELF INNER DIRECTED VALUE Source: KANTAR and BAT Proprietary Me
Slide 29: Activating Our Portfolio System to Accelerate Growth
Activating Our Portfolio System to Accelerate Growth
Slide 30: Combustible Portfolio Drives Growth
Combustible Portfolio Drives Growth SH!RE OF M!RKET (%) FY’18 SH!RE OF M!RKET (%) Jan’16 vs Dec’18 (T40 incl US – FMC only) (T40 incl US – FMC only) 26.9 25.8 +106 bps 15.4 Jan’16 Dec’18 -63 bps -86 bps Brand Revenue 2018 £3.9bn £3.3bn £2.0bn £1.5bn £1.8bn £1.5bn £1.1bn £0.9bn BAT owns the Camel & N
Slide 31: Accelerating Our T-Vapour Journey
STRONGER DEVICE & EUROPEAN CONSUMABLE POSITIONS PIPELINE JAPAN KEY PRIORITIES MARKET BRAND SHARE BUILDING GROWTH Accelerating Our T-Vapour Journey INDUSTRY LEADING LEADING CORPORATE STRENGTHS AMONG CONSUMABLES CONSIDERATES* BLEND CAPSULE SENSORY INNOVATION PERFORMANCE Source: *Considerate segment sh
Slide 32: Accelerating Our Must-Win E-Vapour Markets
ACCELERATE RAPID IN EUROPE & INNOVATION CANADA DEPLOYMENT REGAIN KEY PRIORITIES BRAND USA LEADERSHIP BUILDING Accelerating Our Must-Win E-Vapour Markets NO 1 PURETECH IN UK & CORPORATE STRENGTHS BLADE FRANCE* TECHNOLOGY US SCALE & WINNING EXECUTION CLOSED CAPABILITIES SYSTEM PORTFOLIO * Closed Syste
Slide 33: Accelerating Modern Oral
CONTINUE NEW NORDICS TEST GROWTH MARKETS KEY PRIORITIES LAUNCH BRAND USA BUILDING Accelerating Modern Oral MARGINS PRODUCT CORPORATE STRENGTHS 2-3x SUPERIORITY FMC EXCELLENT RAPID EU – US PROGRESS CAPABILITIES IN EUROPE
Slide 34: Capabilities to Accelerate Growth
CAPABILITIES TO ACCELERATE GROWTH
Slide 35: Our Digital Marketing Eco-System
Our Digital Marketing Eco-System Insight & Foresight Smart Devices Data-driven Consumer Analytics Artificial Intelligence Personalised Consumer Speed & Precision Engagement Message, Moment, Channel eCommerce Retail Engagement & Loyalty Consumer & Retailer Strengthening Partnerships
Slide 36: Our Digital Transformation is Progressing at Speed
Our Digital Transformation is Progressing at Speed B2B B2C Retail Engagement & Loyalty 20mn+ actively engaged consumers in 36 markets 6000+ reps Leading Markets 20 markets with direct online sales to consumers eCommerce £2.8bn online sales Advanced consumer to trade partners analytics supporting mar
Slide 37: New partnership quote
“We’re extremely proud and excited about this new partnership, further enabling us to accelerate the pace at which we innovate and transform ourselves. It gives us a truly global platform with which to drive greater resonance of our potentially reduced-risk products.” 34
Slide 38: Accelerating Delivery
: LYFT | EPOK NICOTINE TOBACCO oTP weny STRIKE DUNHILL TOMORROW | igs oo 4 Delivering pleasure thro rewarding consumer experi powered by leading-edge"in technology and dynamic brands. ACCELERATING DELIVERY al
Slide 39: Strong Revenue Growth at Mid/Upper-End of our Range
Strong Revenue Growth at Mid/Upper-End of our Range ~£5bn New 10-20% 40-50% CONTRUBTION TO REVENUE GROWTH % Categories 3-5% CAGR BAT REVENUE 2023- 2018 2024 15-20% 20-30% 1 2 Combustibles + Traditional Oral Vapour THP Modern Oral Source: BAT Internal Estimates
Slide 40: Key Messages
Key Messages 1 Driving value from combustibles as we continue to outperform the industry 2 The tobacco & nicotine industry is growing & fragmenting 3 Powerful consumer insights inform our multi‐category strategy 4 A step‐change in New Categories ‐ both pipeline & building global brands 5 Ambition fo
Slide 41: Thank You
THANK YOU KINGSLEY WHEATON | CHIEF MARKETING OFFICER
Slide 42: Appendix
Appendix A1: Representative basis Where appropriate, the Group is also presenting (as a supplement to the results) the 2018 performance against 2017, as though the Group had owned the acquisitions made in 2017 for the whole of that year. Comparison of results on this basis are termed “on a represent