Juvenile Segment, China Analyst Presentation October 2015

President & CEO Dorel Juvenile, Jean-Claude Jacomin • Dorel Juvenile: Front runner in the industry

• The foundation: collaboration and integration

• Organizational blueprint: ongoing efficiencies

• Elevated R&D capabilities

Chief Operations Officer Dorel Juvenile, Dave Reilly Responsible to drive the operations activities of Dorel Juvenile China

• Driving our global operating capabilities

• Realizing consolidation, efficiencies, and a Manufacturing Center of Excellence

President & CEO Dorel Juvenile China, George Huang Responsible for unlocking the potential of the Chinese market

• Committed to establish a strong market presence

• Driving growth of the domestic sales

• Offering a broad and relevant brand portfolio, leveraging global capacities

1

Dorel Juvenile segment overview

Zhongshan,

October 28

2

3

All over the world

5

We care for

the future generation

6

Front runner in the industry

8

Always one step ahead

9

Establishing our own division

in China

10

Acquisition of the

juvenile business

of the Lerado Group

o Transaction closing date: 3rd of November 2014

o Scope of acquisition:

o Over 4500 employees;

o 6 sites

o China: Manufacturing, Domestic Sales, R&D

o Taiwan: R&D Center

Realizing a vertically integrated value chain

11

• Mastering our destiny

• Taking control of our supply chain

• Opening up the Chinese market

• Increasing our global innovation power

Dorel Juvenile China

Strengthening our global leadership, extending our

world-leading brands and competitive advantage

12

Global operating

capabilities Expansion into

Chinese market

Elevated R&D

capabilities

13

- Operations footprint

- Employee base (from 3,500 to 7,500)

- - R&D center in Taiwan

- Presence in the Chinese market

Adding Angel as strong local brand

14

Global brands

Regional and local brands

Status of organizational integration

Established a skilled leadership team

16

Seng Ming Lim

VP Operations

Sam Wu

VP HR &

Communications

Fan Mingfeng,

VP R&D

Scott Chen

VP Program

management & 3rd Party Sales

Rick Feener

VP Quality

Gary Kao

CFO

Harrison Cheng

GM Domestic

Sales

George Huang President & CEO

Building a Dorel Juvenile identity

19

Visible presence

Website: Building online presence in China

Care for Precious Life 呵护新生命

A unified culture: Adapted functional work wear enforcing our identity

and visual control

Integrating company cultures

20

Exchange of knowledge: European employee

working in Taiwan for dedicated period

Dorel Juvenile China competing in Dragon

Boat Race

USA celebrating first products shipped from

Dorel Juvenile China

Welcoming a new division: celebrations

across the world

21

Informing and engaging employees

Informing and engaging employees

Implementing global systems and processes

• Upgrading IT infrastructure and integration into Dorel Juvenile IT eco-system

• Dorel Juvenile product costing methodologies implemented

• Roadmap for upcoming MRP improvement plan in place.

• Along with Internal Audit team, work underway on CSOX internal control compliance obligations.

23

Q4 Q1

Product costing

methodologies

implemented

IT infrastructure

Integrated

MRP

roll-out

Q3 Q2 Q1 Q2 Q3 Q4

2015 2016

Realizing an optimal organization lean, smart, and well-equipped

24

Key elements

A new Senior leadership team

Upgraded skillbase under the senior management for a more efficient operation

Strong support teams for Finance & IT and HRM

Reduction of management layers in Operations

Creation of Dorel Juvenile Asia Sourcing team focusing on supplier management

Strong Domestic Sales team to sell Dorel Juvenile brands

R&D structure in line with Dorel Juvenile product categories

25

Optimization of the organization: a two-way approach

26

Indirect Headcount

Reduction

Direct Headcount

Reduction

1.Indirect headcount reduction • On-going process:

Organization Optimization focusing on the indirect headcount

• Purpose:

1.Align structures with new business model

2.Reduce costs

3.Revise structures and upgrade skills

• Results today:

First optimization round done: July and December

Result: indirect headcount reduction of 468 fte vs December 2014

= Annual savings of USD 3,400,000

27

2. Direct headcount reduction

Drive Consolidation: • Work more efficiently and cost effectively

• Reducing the level of complexity

Centralizing activities in Zhongshan:

• Closing facility in Yangjian – sewing

• Closing facility in Fei Long – warehousing

MAKE versus BUY: • Closing facility in Guohong (outsourcing)

• Scope of direct head count reduction: 294 fte

= Expected annual savings of USD 1,110,000

28

Dave Reilly

Role and responsibilities • Operations Strategy Development

• Quality assurance and control

• Sourcing, Manufacturing and Supply Chain optimization

• Logistics and Customer service

• Cost Savings initiatives

29

Global operating capabilities

Presentation Dave Reilly

Chief Operations Officer, Dorel Juvenile

Dorel Juvenile China: Strengthening our global leadership, extending our


31

Global operating


Chinese market

Elevated R&D

capabilities

32

Shanghai

Chiayi

Huangshi

Zhongshan

Overall presence of Dorel Juvenile China

Shenzhen

33

Shanghai

Chiayi

Huangshi

Zhongshan

Operations presence of Dorel Juvenile China

Shenzhen

Zhongshan and Huangshi

35

Production per

Product category (Jan ~ Aug.,2015)

Production per

Region (Jan ~ Aug.,2015)

57%

24%

15% 4%

Stroller

Car Seat

Home Equipment

Others

63%

21%

8%

2% 5% 1%

North America

Europe

Asia

South America

Oceania

AfridaAfrica

Zhongshan

36

Assembly -24 assembly lines

Sewing - 62 sewing teams

Fabric cutting - 9 auto - fabric cutters

Tube cutting, forming &

robotic welding,

powder coating &

liquid painting

- 7 robotic welders

Injection molding - 68 injection molding

machines

Huangshi

37

Assembly -7 assembly lines

Sewing - 9 sewing teams

Fabric cutting - 2 auto - fabric cutters

Tube cutting, forming &

robotic welding,

powder coating &

liquid painting

- 3 auto-tube cutters

- 8 auto tube sealing

Injection molding - 30 injection molding

machines

Strategy

Objectives

• Consolidate supplier base to reduce complexity and realize cost savings

• Drive maturity in the organization via competency assessments and

appropriate development

• Enhance Quality control and process improvement to raise the level of

output

• Establish Center of Excellence approach

39

40

Supplier consolidation

and leveraging Competency

assessment and

development

Quality controls and

process improvements Centre of Excellence

approach

Global operating capabilities Objectives DJC

41



assessment and

development



approach


Supplier consolidation and leveraging

Factory Supplier base: • Reduced by 25%

• Resin, steel, fabric, packaging

Savings: • 7.5% to date.

Rationalized both small plastic parts and wheels.

• Allowing for the consolidation of operations • Selling facility Guohong

• Terminating the lease Yangjiang

Savings: • Reducing expense by 6-8%

Finished goods insourcing

42

43



assessment and

development



approach


Competency assessment and development

• Global procurement team established concentrating on: • Supplier partnerships

• Savings programs

• Linkage with design groups.

• Completed assessment of manufacturing operations concluding in: • Large injection molding and metal forming competence.

• Investments in these areas will continue, as well as assembly methods.

• Core competency model defined: • Used to support insourcing / outsourcing opportunity development.

• High effort in educating employees in quality standards.

• A focused organization structure implemented to benefit professionalism

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45



assessment and

development



approach


Quality controls and process improvements

• Improvement of quality levels:

• From 54% in January to 93% in September

• Acceptance On Deviation (AOD) improved:

• from 40% to 1%.

• Implementing Kaizen lean techniques:

• Setup times reduced from 1.2 hours to 30 minutes.

• Cellular progressive manufacturing replacing batch / large lot size production.

• 6-month forecast established resulting in improved:

• Capacity planning

• Lead-time

• Utilization.

46

47

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

jan-15 feb-15 mrt-15 apr-15 mei-15 jun-15 jul-15 aug-15

Quality Level

0

10

20

30

40

50

60

70

80

2014 2015

Setup time

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

2014 2015

AOD

Working faster and better minutes

Quality controls and process improvements

• Established a tool life database and total productive maintenance system for proactive equipment and tool maintenance.

• Converted all manual welding:

• 8 robotic welders

• steel and aluminum

• Individual incentive system now accounts for non-conforming parts and finished goods.

• Harmonization of quality inspections / testing underway.

48

49



assessment and

development



approach


Manufacturing Centers of Excellence

• Evaluation of manufacturing landscape to integrate the role of Dorel Juvenile China

• Selection of Manufacturing Centers of Excellence based on:

• Competency / expertise level

• Cost effectiveness

• Ability to control manufacturability and quality

• IP protection

• Investment in both equipment and people are necessary to establish manufacturing leadership and competitive differentiation.

50

Global Manufacturing capabilities of Dorel Juvenile

51

Key milestones: Moving existing product platforms and launching new platforms

Moved existing platforms, NA:

• Travel Systems, Play-yards, High Chairs, Walkers

• 2 million umbrella strollers

New platforms, EU

• July: Manufacturing of premium stroller Stella of Maxi- Cosi/Bébé Confort using progressive cell manufacturing concepts.

• September: Manufacturing of premium stroller Dana of Maxi- Cosi/Bébé Confort

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Stella Dana

January 2015: Shipment of Safety 1st Step ‘N Go

Umbrella stroller

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2016

1. Manufacturing Centers of Excellence for strollers in Zhongshan, Huangshi (umbrellas), and Portugal

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2. Car seats Centers of Excellence in Columbus, Portugal, Helmond, Zhongshan and Brazil

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3. Transform Dorel Juvenile China’s operations into an established and lean organization

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• Rationalize injection molding (wheels, small parts) • Improve capacity and capability • Establish good balance of insourcing and outsourcing • Operate with high quality systems, labs, and testing • Commit to 95+% on-time deliveries • Commit to 95 +% quality

George Huang

Role and responsibilities

58

• Implement overall strategy and annual business plans

• Accomplish a successful integration of the Chinese organization into Dorel Juvenile

• Constantly drive a rapidly increasing domestic business growth

• Transform Dorel Juvenile China into a viable market organization and strong operations partner for our other divisions

• Successfully support the progression of our internal production capabilities

Unlocking the potential of the Chinese market

Presentation George Huang

President & CEO, Dorel Juvenile China

Dorel Juvenile China: Strengthening our global leadership, extending our


Global operating


Chinese market

Elevated R&D

capabilities

Strategy

Expansion into Chinese market 2 focus points

62

Shifting non-Dorel

Juvenile sales to private

label business

Growing domestic

market Sales

63

Shifting non-Dorel


label business

Growing domestic

market Sales

64

Market analysis

Source: IMF

Overview of the World Economic Outlook projections (percent change unless noted otherwise)

Economic indicators for China

66

2011 2010 2012 2013 2014 2018

3.3

1.8 1.5

1.2 1.0 0.82

Unit：Billion USD Source: Internal Estimation Exchange rate: 6.38:1

2015

2.08

Stroller & Car Seat Market in China Total Retailing Sales of Stroller & Car Seats in China: • 2014: US$ 1.8 Billion • Estimation 2018: US$ 3.3 Billion • The sales of billing from the brands in 2014: US$ 862 Million

New Borns

• The number of new born babies developed rapidly

68

15,7

15,8

15,9

16

16,1

16,2

16,3

16,4

16,5

2008 2009 2010 2011 2012 2013

New borns Millions

Source: National Bureau of Statistics of PROC

Competitive landscape

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Premium

HPP

MPP

OPP+

OPP

• Strollers: +/- 160 brands

• Car seats: +/- 90 brands

China market channel overview

70

KA

Hypermarket

(20%)

Wholesale

(5%)

Specialty

Store

(12%)

E-Commerce(11%)

Importer National Agents

Brand Owner

Consumer

Area/Provincial Distributor

In-house Sales Team

Baby Shop

(36%)

Department

Store

(16%)

Key Account Hypermarket

71

Baby Shop

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Specific E-commerce channel China Tmall.com

• Tmall.com is a Chinese-language website for (B2C) online retail.

• A platform for local Chinese and international businesses to sell brand name goods to consumers in mainland China.

• It allows foreign brands to enjoy the Chinese market without having an actual presence.

73

Key success factors

Brand awareness, company image &

reputation

Channel coverage & relationship

with channels

Product innovation & fashion design

Logistics & after-sales services

Product quality, 3C compliance & guarantee

China local manufacturing

74

75

Objectives

• To realize a sustainable growth

• To offer a brand portfolio with a full range of

products

• To lead the way in the market by offering omni-

channel solutions

Overview Strategic Implementation

1. To realize a sustainable growth

• Scale down unprofitable KA Hypermarket

• Have closed own stores

• Introduce new car seats, strollers and small furniture

• Gain market share via Pincer Attack strategy

2. To offer a brand portfolio with a full range of products

• Re-position: Angel brand (Mass Market whole product range)

• Expand:

• Quinny (Premium Stroller)

• Maxi Cosi (High-end Car Seat & Stroller

• Follow the Halo Effect strategy, driven by brand equity, to strengthen the brand positioning of the other brands

• Introduce:

• Bébé Confort (High-end Feeding & Home Equipment)

• Safety 1st (Medium-end whole product range)

• Leverage Dorel Juvenile product platforms to benefit the development of specific products for China

76

Overview Strategic Implementation

3. To lead the way in the market by offering omni-channel solutions

• Focus on Baby Shops and e-commerce channel.

• Grow online sales

• Develop new channels

• Set up partnership program for the O-to-O (On-line& Off-line) strategy

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Objective



products


channel solutions

Dorel Juvenile China – Price point & Channel overview

79

Department stores

National baby chain stores

Community baby chain stores

Wholesale market in major market

Regional baby chain stores

Wholesale market In minor market

Hypermarkets

Premium

HPP

MPP

OPP+

OPP

80

Quality

high

low

Price

high low

OPP

Local brand

Pincer Attack

Strategy

• Quinny

-Premium

-Stroller

• Maxi Cosi

-High-end

-Car Seat & Stroller

• Bébé Confort

-High-end

-Feeding & Home Equipment

• Safety 1st

-MPP

-Whole range

• Angel

-OPP+

-Whole range

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Objective



products


channel solutions

Brand and product strategy

Brand portfolio strategy

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Shanghai CBME Fair

Introducing,

Bébé Confort, & Safety 1st

Expanding Quinny, Maxi-Cosi

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Shanghai CBME Fair

Re-positioning Angel

Car seats • Chinese consumers buy one car seat for their child from 1 year to 6 years old.

• Maxi-Cosi and Safety 1st are set-up to serve these consumers with convertible/ multi-group car seat solutions

• The various product launches are therefore aimed at convertible solutions

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Convertible solutions

• Launched in 2015 (Maxi-Cosi):

• the Group 0+ /1 and Group 0+/1/2 MiloFix and Opal

• Launched in 2015 (Safety 1st)

• Group 0+/1, Group 0+/1/2 Simply Safe

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MiloFiX Opal

Simply Safe

Broad range of stroller portfolio

For the affluent consumers of China:

From affordable Angel, to Safety 1st, Max-Cosi, and premium Quinny:

88

Adding Angel as strong local brand

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Global brands

Regional and local brands

• A diverse range of affordable juvenile products in line with the needs of Chinese parents.

• Product categories:

• strollers and home equipment

• 2016: Introducing car seats

• Reinforcing Angel by leveraging global capacities of other Dorel Juvenile brands

• Wide distribution channel across wholesale and hypermarkets enabling parents to shop Angel in many cities across China.

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'Where there are children, there is Angel'.

Re-positioning strollers

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3 key stroller categories in China:

Handle reversible | Car seat reversible |Buggy

92

Objective



products

• To lead the way in the market by offering

omni-channel solutions

93

Omni-

channel

strategy

Channel strategy

• Focusing on realizing growth in baby stores and online sales (tmall.com)

• Scale down unprofitable KA hypermarket stores and department stores

• Closed 5KA channels, and 600 stores

• Closed owned stores and shop-in-shop stores

• Reaching generation Y parents

• Focus on social networks and online communication

• Websites, Weibo, Wechat

• In-store-communication (trade marketing and consumer promotion

• Brand websites, online flagship stores

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Market Channel Strategy

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KA

Hypermarket

(20%)

Wholesale

(5%)

Specialty

Store

(12%)

E-Commerce(11%)

Importer National Agents

Brand Owner

Consumer

Area/Provincial Distributor

In-house Sales Team

Baby Shop

(36%)

Department

Store

(16%)

Focus

Focus

Channel development

96

0

200

400

600

800

1000

1200

1400

Baby Chain store Baby Shop (Wholesalers) KA Hypermarket

2015 2016

Number of stores % of Net Sales

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Specialist Mass Market Distributor Retail Online Sales

2015

2016

97

Online

approach

Specific Chinese Channels: WeChat – free messaging and call app

• Supports different ways of instant message

• Supports users to register as a public account, which enables them to interact with subscribers and provide them with service.

• Public accounts have become a common service or promotion platform for government,media and companies.

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Specific Chinese Channels: Weibo- microblogging platform

99

• Weibo" (微博) is the Chinese word for "microblog“ and is increasingly being used in China

• Similar functionalities to Twitter, using 140 (Chinese) characters

• Western companies are utilizing Weibo to gain access to the Chinese market

Online Marketing 2016

• Quinny, Maxi Cosi, SF1, & BBC

• 4 Websites & Translation

• Weibo/ Wechat communication

• Angel

• Redesign Angel website & Photography

• Weibo/ Wechat communication

• Tmall flagship stores for all brands

100

Weibo & WeChat

Specific marketing approach China: Online micro-movies

• Micro movies have become increasingly popular

• In China’s vast metropolises long commute times mean millions spend hours watching content on their smartphones

• Micro-movies are shot over a short period of time, last from three to thirty minutes

• One reason for the growing popularity of micro-movies is that they are streamed on video sites with built in social media features that make them easier to share further.

101

Dorel Juvenile China: Including micro-movie in marketing • Develop a series of micro-movies to

promote online and offline sales

• Include consumers in defining the narrative of the story

• Introduce brand and products

• Engage with consumers via local marketing forum and WeChat

• Use of well-known blog sites and key opinion leaders

102

http://v.youku.com/v_show/id_XMTg3ODg3NTA4.html?from=s1.8-1-1.2

http://www.tudou.com/programs/view/GHpCJc_LLQQ/

Micro-movie: An extensive online interlinked approach

103 103

Key Opinion Leader

(KOL)

WOM Marketing

(Forum)

Weibo

(2nd Official Website

WeChat

(CRM Tool)

• Engage fans to receive attention for movie and product

• Make some “noise”: talking as consumers

• Introduce brand idea and products

• Solve online consumers problem and guide them to retail

Online & Offline Promotion

Embedded

Micro Movie

Mini-Site

• Embedded core product features by using attractive story.

• Elaborate product information: interaction with consumers

Online & Offline Sales

• Post suggested products and direct links to online and offline shop information

http://v.youku.com/v_show/id_XMTg3ODg3NTA4.html?from=s1.8-1-1.2

http://www.tudou.com/programs/view/GHpCJc_LLQQ/

104

Shifting non-Dorel


label business

Growing domestic

market Sales

Non-Dorel Juvenile sales Business Strategy

105

• Harvest Strategy for market competitors

- Maximizing the profit and cash in-flow

• Strengthen the business development of the private label business of retailers

106

Retailer Model Picture

Carrefour HA1360

Carrefour FA0050

Carrefour RA2041

Carrefour WA1240

Carrefour EB3950

Elevated R&D capabilities

Strengthening our global leadership, extending our


108

Global operating


Chinese market Elevated R&D

capabilities

4 Global R&D centers of excellence

Consolidate global R&D footprint To drive innovation & synergies

Consolidate global R&D footprint To drive innovation & synergies

• Focused innovation to support strategic Brands & categories

• Car Seats and technology

• Maxi-Cosi & Quinny Mobility

• Safety 1st Home Safety & Infant Health

• Tiny Love developmental play

• Clear roles for our development centers

• Operational efficiencies leveraging processes & infrastructure

• Time to market reduction

• Global Engineering excellence for Strollers and Home Equipment

• Global OPP/PL Design to Manufacturing for all brands

• Regional development for China /South East Asia markets

Asia R&D Key development center to support stroller expertise & regional consumer needs

R&D capabilities

• Dynamic Crash Test Lab for CRS

• In-house test facilities for Strollers and Home, raw materials

• In-house measurement and dynamic test facilities

Europe R&D Leverage strong expertise

113

• Global design development for Maxi-Cosi and Quinny mobility solutions

• Global Advanced Car Safety Solutions

Research & technology expertise

Automotive and biomechanics

USA R&D Leverage strong expertise • Global design development for

Safety 1st

• Global development for Home Safety and Infant Health , Connected Home solutions

• Regional developments

supporting NA consumer needs

and customer requirements

• Global Tiny Love design and advanced concept developments

• Digital play and connected solutions

115

Tiny Love: Center of Excellence for development play

Global Strategy

We took control of our global leadership position, and now have the ability to design our leadership for the future

117

118

Focus

2016-2018

119

1. Grow our global leadership Omni-channel solutions:

New markets

120

2. Deliver 5-star products Global NPD centers

Use of consumer insights

121

3. Reduce brand & category

complexity

Profitable brands & categories

Rationalization product platforms

122

4. Consumers know our brands,

buy our brands

Best-in -class digital capabilities

Increasing marketing investment

123

5. Achieve synergies & cost

savings

Simpler organization

Optimal use of our operations

124

6. World-class organization

capable of transformation

Employee accountability

Change management capabilities

Transformation

126

One journey.

Worldwide. Team up to Transform.

Juvenile Segment, China Analyst Presentation October 2015

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Transcript of Juvenile Segment, China Analyst Presentation October 2015