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RISI - Latin American Conference
Trends and Challenges in the Brazilian Tissue Market
RICARDO BOTELHO – SANTHER CEO
17 August 2016
Confidencial
1
Gross Sales: R $ 1.75 billion.
Owner of highly recognized brands , positioned to capture the "premiumisation " in the Brazilian market.
The Bragança Paulista’s tissue plant is one of the 15thlargest in the world. Santher is now constructing the most advanced distribution center in Latin America at this unit.
2.112 employees. 635 outsourced
Established in 1938, with over 77 years of experience , Santher is one of the national leaders in the Brazilian market for tissue and personal care.
Three business units : Consumer , Professional and Specialty Papers.
Introduction
SANTHER ‐ One of the main Brazilian companies in the tissue industry and personal care
Source: Santher
4 plants
2 distribution centers
1 headquarter
• DC ‐ Alhandra
Location
Paraíba (NE)Paraíba (NE)
• Guaíba Unit
Rio Grande do Sul (S)Rio Grande do Sul (S)
Governador ValadaresUnit
Minas Gerais (SE)Minas Gerais (SE)
São Paulo (SE)São Paulo (SE)
Industrial and logistics large complex with versatile
plants for customized production.
• Headquarter (Capital)• Penha Unit (Capital)• Bragança Paulista Unit• Bragança Paulista new DC
Santher ‐ general profile
Confidential
• PERSONAL - purchase volume leading brand in Brazilian households
• SNOB – Kitchen Towels category Top Of Mind
SANTHER: Three business units and leading brands
Traditional and recognized brands in their respective sectors in Brazil
Consumer Unit
77%
9%14%
Specialty Papers
• Flexible packaging : food , fruit, sachets , bags, cigarettes and fast food
• 33% of Brazilian market share
• US$ 30 MM export
Professional ‐ AFH
• Food, office , education, industry, health, tourism and leisure
• 20% of Brazilian market share
Source: Santher; Super varejo Trade Magazine and Kantar World Panel ‐ 2016 Confidential
Personal Care Tissue
Importance %
Bragança Paulista’s new distribution center – SP State Aerial view ‐ construction in progress
Confidential
Bragança Paulista’s new distribution center – SP State Line Out ( Palletizing ) ‐ Robots
Confidential
The latest technology. It will be the most modern distribution center in Latin America.
Investments • R$ 90 million - Construction and Line Out automation
Project objectives
Construction of a new distribution center in Bragança Paulista beside Santher’s main plant
Replacing the current Arujá’s DC by Bragança Paulista’s DC;
Elimination of all products transportation between Bragança Paulista’s plant and Arujá’s DC;
Logistic efficiency (service and security) improved by grater automation and also logistics processes and customer service enhancement;
Significant change in firefighting technology;
Logistics cost reduction.
Source: Santher
TechnicalFeatures
Solution based on automatic cars and elevators
Storage Area - 11.000 m;
Stocks high densification;
Positioning capacity increased;
Automated input and output operation;
Automatic transport between factory and warehouse (elevators);
Line Out - Palletizing automated by robots.
.
Confidential
Palletizing (Line Out) automated by robots
In 2016 the Brazilian toilet paper segment presents a production retraction: ‐ 1.3%vs. 2015 ...
... but, in short‐term (May 2016), recovers due to Two Ply Toilet Paper growth
%
2
Source: Anguti Statistic – Montlhly Report June 2016 Confidential
SANITARY PAPERS PRODUCTION EVOLUTION – BRAZILtons
Economia
Mar Apr May Jun Jul Aug Sep Oct Nov DecFebJan
24
1716
11
8 87
5 54
0.1
Wide difference among worldwide countries in per capita consumption
Culture, economic growth (GDP) and country development (urbanization) impacts thetoilet paper consumption.
Toilet paper share is expected to grow, considering the total paper market demand,due to the increase of in‐development countries' demand.
per capita consumption of sanitary paper
kg / inhabitant / year
4,8x
ConfidentialSource: Pöyry
55%
68%
82%89%
49%
68%
95% 95%
81%
92%
97% 97%
Brazilian tissue and personal care categories still have growth potential compared to other countries
Penetration ‐ Kitcehen towels Penetration ‐ Diapers Penetration ‐ Sanitary Napkins
Source: Nielsen; Non‐Wovens Industry 2013/2014 Confidential
Economia Bra
Given the Brazilian economic crisis , there is a consumption retraction and a change in purchase habitsBrazilian economy is slowing
Source: Santher; BACEN; Ipeadata; IBGE; Nielsen Retail Index; Nielsen Global Survey of Consumer Confidence & Spending Intentions, Q1 2016 Confidential
Q vs PY Q vs PQ
Situation impacts the Brazilian’s income
Source: Santher; BACEN; Ipeadata; IBGE; Nielsen Retail Index; Nielsen Global Survey of Consumer Confidence & Spending Intentions, Q1 2016
Confidential
Given the Brazilian economic crisis , there is a consumption retraction and a change in purchase habits
Consumer loses confidence
Confidential
Given the Brazilian economic crisis , there is a consumption retraction and a change in purchase habits
Source: Santher; BACEN; Ipeadata; IBGE; Nielsen Retail Index; Nielsen Global Survey of Consumer Confidence & Spending Intentions, Q1 2016
Brazilian Consumers usually changes the consumption dynamic
Economia
Confidential
Shopping channel change = > C&C grows
Population increase the number of store visiting but decrease the spent per occasion
Trade Down: change for value for money brands
Cash & Carry*
56% 58% 63%
44% 42% 37%
2014 2015 2016
Two Ply
45% 50% 53%
55% 50% 47%
2014 2015 2016
Sanitary Napkins
Search for multipacks increase
Share of Brands – Value (%)
Leaders
Vice Leadears
Others
Toilet Paper
Source: Nielsen |Retail Index & Homescan ‐ base: 66 Product Categories
Despite the crisis, the toilet paper category is trading up from one ply to two ply
Consumer continues to increase Two Ply consumption
Economia Bra
2007 = 100
Source:BACEN; IBGE; Nielsen Retail Index Confidential
Source: Nielsen | Retail Index. Brasil ‐ INA | 100% Toilet Paper
Two ply toilet paper gain importance in toilet paper market
IMPORTANCE OF SEGMENTS (% )
VOLUME VALUE
3 PLY 1 PLY 2 PLY
Confidential
Toilet Paper Market ‐ R$ 4,6 Bi
Source: Nielsen Retail Index ‐ Quantitative research 2015 ‐ IPSOS
PERSONAL is the Top of Mind brand in Toilet Paper Market ( 41%).
High brandawareness (94%)
Superior purchasepreference
Strong brand INNOVATION Logistical efficiency
Best value for moneybrand in the category
Full Promopack Portfolio
Confidential
Diapers & Baby Wipes Market ‐ R$ 5 bi
Full Multipacks Portfolio
PERSONAL is the Top of Mind brand in Toilet Paper Market ( 41%).
CAGR volume: 11‐15 : 16,4%
Above market growth (3,3%)
4ª Brand in Braziland
2ª in Rio de Janeiro
Best value for money in Tier 3
Strong brand INNOVATION Logistical efficiency
ConfidentialSource: Nielsen Retail Index ‐ Quantitative research 2015 ‐ IPSOS
Feminine Care Market ‐ R$ 2 bi
INNOVATION Full Promopack PortfolioBuild trust Brand
SYM has 42 % of household penetration in
Minas Gerais State
In this same area has a prominent position with 23.6 % market share
SYM grows 17% in volume as the market drops 5%
(2014 x 2015)
Best value for money in the
segment
ConfidentialSource: Nielsen Retail Index ‐ Quantitative research 2015 ‐ IPSOS
Kitchen Towels Market ‐ R$ 0,5 bi
Full Portifólio
SNOB is the market leader
Top of Mind in towels and napkins.
Quality reference
Premium Price
Strong brand INNOVATION
ConfidentialSource: Nielsen Retail Index ‐ Quantitative research 2015 ‐ IPSOS
SANTHER – brands and products positioning
Focus on markets in the “premiumisation” process : Diapers and Two Ply Toilet Paper.
Professional and Specialty Papers strengthening.
Brands with great proximity to the Brazilian consumer.
Premium brands portfolio with good perception of value for money by the consumer.
Source: Santher
Competitive advantage through constant innovation and product differentiation.
Confidencial
Growth in high value markets : Sanitary Napkins and Feminine Panty Liners.