Transcript The European Pasta Complex

New
III
Pasta
perspectives
World Congress
European Pasta Complex
In A State Of Flux
Barcelona, 25th October 2005
New perspectives
Introduction
3
Strategy Rabobank Group
• To become the largest, best and most innovative Allfinanz provider
in the Netherlands
• To be the most sustainable and socially involved bank
• Global no. 1 in financing in the food & agri market
– International network in 35 countries
– International market leader Food & Agri wholesale
– Domestic retail banking in selective countries
– Knowledge based banking
4
New perspectives
EU pasta complex in a
state of flux
Shift in consumer demands
• Food expenditure as proportion of household income is declining
• Consumer have become more and more price sensitive
• Serving an ageing and declining consumer base
• Obesity has vast societal dimensions
• Diets come and go
• Continuing popularity of the Mediterranean diet
• Increasing on the go and out of home consumption
Manufacturer’s challenge:
“How to capture a greater share of
consumer’s food expenditure”
6
A gradually growing pasta market
In Euros (m)
EU Pasta Market
10.000
9.000
8.000
7.000
6.000
5.000
4.000
3.000
2.000
1.000
0
CAGR 99-09:
3.6%
CAGR 99-09:
6.3%
1999
2001
Dry pasta
Source: Datamonitor, 2005
7
2003
2005
2007
Fresh pasta
2009
Supermarkets remain main channel for
pasta purchases, but …
Distribution by Value, 2004
Convenience
stores
0,4%
Traditional
grocers
10,6%
Others
3,7%
Discounters
16,0%
Supermarkets/
hypermarkets
69,3%
Source: Datamonitor,Rabobank estimates, 2005
8
,… discounters will become an even more
dominant force in Europe, …
Discount percentage
shares in total grocery retailing
Main discount labels
60
50
40
30
20
10
U
el K
et gi
u
h
m
S erl
w
an
it
ze ds
rl
a
Fr nd
an
c
S e
p
ai
n
It
al
P
o
rt y
u
g
G al
re
ec
N
e
o
rw
D
en a y
m
S ar
w
k
ed
Fi en
n
la
n
d
9
N
B
G
e
rm
a
n
y
0
Source: M + M Planet Retail, Rabobank estimates
…, as is seen in the stunning growth of
Aldi and Lidl outlets
7.000
Number of outlets in EU
Number of discount outlets in EU
35.000
6.000
30.000
5.000
25.000
4.000
20.000
3.000
15.000
2.000
10.000
1.000
5.000
0
0
Aldi
1990
1995
Source: GfK
10
Lidl
2000
2004
EU
1990
1995
2000
2004
30%
45%
20%
40%
35%
10%
30%
Sp
ai
n
Fr
Ne a n
c
th
er e
la
nd
Ca s
na
De da
nm
ar
k
US
Sw A
ed
en
Ita
Hu ly
Cz nga
ry
ec
h
Re
p.
G
er
m
25%
UK
0%
an
y
Spend on private labels
Consumer's willingness to pay a premium for private
label
Spend on private labels
11
Price difference brand over
PL
Private label gaining acceptance at the
expense of brands
Price difference PL and brand
Source: IGD 2004, Rabobank
Italy still the major producer, but Russia
and Turkey can have a major influence in
the midterm
Australia
0,4%
Asia
Africa
2,1%
4,5%
Global pasta production, volume
Middle East
0,3%
Central and
South America
19%
Italy
27,1%
Europe
53%
Russia
8,0%
Turkey
4,0%
North America
21,4%
Source: UNIPI, Rabobank estimates, 2004
12
Germany
3,0%
Others
10,1%
Italian pasta producers depend heavily
on export; Germany main destination
•
Italian export destinations
By volume, 2003
Italian exports account for 48,5% of
production
•
Export volume CAGR 1990-2003: 8%
•
Significant price differential between
national and export markets
•
Others
32%
Italian producers are the main private
label suppliers for EU retail trade
•
Germany
22%
In addition export to fill up production
Nether
lands
3%
France
14%
capacity
•
As a result the European pasta market
is suffering from overcapacity
Sweden
3%
Japan
5%
USA
10%
UK
11%
Source: UNIPI, 2004
13
Polarisation in EU pasta market:
as is the case in the German market
Structure of German dry pasta market
Price per
500g pack
€0.29-0.59
Discount
market 30%
14
Source: Industry sources, AC Nielsen and Rabobank estimates
€0.89-1.19
Middle
market 60%
€1.80-2.50
Premium
market; 10%
Policy developments will continue to
impact the pasta industry
•
CAP reform:
– 1992 reform
– Price volatility (reduction of the intervention price)
– Non-traditional areas switched production from durum to other
crops (e.g. soft wheat)
– Mid Term Review
– Impact of production in tradional areas will be limited
– EU will remain a net importer
•
Eastern EU enlargement (May 2004):
– Better access to these markets
– Per capita pasta consumption is close to EU-15 levels
•
Turkey, a future EU member?
– Turkey seems to have a competitive (export) position in the entire pasta
complex
15
New perspectives
Adaptation of business
model
Changes have urged players to adapt
their business model
Top
line
Increase market share
Internationalisation
Diversification of
products and
services
Access new markets
Growth
Rationalization
of portfolio
Innovation
Higher margin
Increase buying
products
power
Restructuring
Raise
efficiency
Bottom
line
17
Rationalization in pasta complex
5.000
4.500
250
Production
3.500
225
3.000
200
2.500
2.000
175
1.500
Number of
companies
150
1.000
500
125
0
1992
1997
Source: UN.A.F.P.A (2003), Rabobank estimates
18
4.000
2002
2007 (est.)
2012 (est.)
Production (x 1000 tons)
Number of EU pasta companies
275
Fragmented industry offers growth
potential
Main producers*
Key characteristics
• Several dominant branded players, but
strong demand for private label suppliers
• No pan-European player with exception of
Barilla
• Diversity of consumer demand has resulted
in many small factories, short runs and
manufacturing complexity
• Fragmented market with many small scale
players (<EUR 50m)
• Most larger players have traditionally held a
strong position in their domestic market
• No uniform business model
• Polarisation between short and long shelf
life operators
* Selection of main producers
19
•
•
•
•
Market place remains competitive
Oversupply concerns
Majority of companies are family owned
Ample room for growth, both organically as
by acquisition
Sizeable players already active in Central
and Eastern Europe
Per capita consumption of pasta in Eastern
Europe
Pasta production (volume)
Agros
Romania
Poland
Makfa
Lat via
Adriana
Lit uania
Altan
EU-14 (excl. It aly)
Lubella (Maspex)
Slovak Rep
UMC
Turkey
Est onia
Malma
Russia
Vermani
EU-15
0
Hungary
Czech Rep
0
20
1
2
3
4
kg /capit a
5
6
50
100
(in th. tonnes)
7
Source: UNIPI, Rabobank estimates
150
Will the pasta industry create its own
Actimel?
• New product development will be
a key element for sustainable
success in the pasta industry,
although very complex
• The pasta industry has not been
very innovative over the last
decade
• Innovation has been
predominantly incremental-me
Organic
growth
too’s and brand extensions
• Focused on health and quality
• Relevant innovation will be
21
rewarded…
Strategies in European pasta industry
Europe
Brands
N.P.D.
Disintegration?
Commodity
Source: Rabobank,, 2005
22
Domestic
Volume
Cost leadership
Generic
Value added
Premium
Geographic expansion
Global
Multiple strategies across country borders
Pasta industry has the tools to overcome
these challenges
Challenges
Cost input price
inflation
Inability to pass this on
to customers
Competitive pricing
Commoditization
Weather risks in supply
Involvement of food
multinationals
Fall in
demand/volumes
Cross sector
competition
Current debate on
obesity
23
Tools
Focus on higher margin
products
Established key brands with
strong support
New product development
Strong market share
Distribution power with critical
mass
Customer retention and
loyalty
Reduction of cost base
Efficient capacity utilisation
Secure ingredient supply
Access to stable growth
markets
Access to optimum financial
resources
Strategy
Clearly defined
strategy, based on
understanding of
individual markets
and industry drivers,
supported by a strong
and in-demand
portfolio of products
New perspectives
Outlook
Rabobank’s view on the European pasta
complex
Outlook
• The pasta market will remain a value growth market throughout Europe
characterised by many, highly professional competitors
•
•
•
•
Cost side of the pasta industry needs to improve
Retail-supplier relationships will become even more intense
The share of private label products on offer will continue to grow
Some segments will become commoditized, making cost leadership in these
segments a necessity
•
•
•
•
There is an urgency for further industry consolidation
New product development will be a key element in further value growth
Expansion to non-traditional growing areas
CAP reform will lead to more open markets and more volatility in durum
prices
• As a result of CAP reform, EU durum production could fall
25
New
III
Pasta
perspectives
World Congress
European Pasta Complex
In A State Of Flux
Barcelona, 25th October 2005
Strategy Rabobank Group
• To become the largest, best and most innovative Allfinanz provider
in the Netherlands
• To be the most sustainable and socially involved bank
• Global no. 1 in financing in the food & agri market
– International network in 35 countries
– International market leader Food & Agri wholesale
– Domestic retail banking in selective countries
– Knowledge based banking
27