1、THE FMCG GLOBAL 50 2019 Reaping the rewards Recent actions drive improving organic growth and margins uncommon sense 02 | OC 10K OC Annual reports 2008200132018 21 505050 1 8 5 20 7 2 0 4 19 19 7 17 17 3 US Europe Japan China RoW 46% 44%39% 1% 7%7% 5% 9% 43% 9% 2% 40% 40% 10% Over the las

2、t decade, the number of Asia-based companies in the Global 50 increased from 7 to 13. In this period, Chinese companies increased from zero to five, and outperformed their Japanese counterparts in terms of sales growth. This continued success may seem counterintuitive to the headlines telling us tha

3、t the Chinese economy is slowing. However, this is not the case for the Chinese food and drink sector, which is growing at nearly double the rate of its global peers. This is due to three reasons. The first is an emerging middle class in Chinas tier three and tier four cities. To date, these locatio

4、ns have been overlooked by Western brands, leaving them ripe for the picking by local players. Secondly, both Japanese and Chinese companies have invested heavily in product innovation and expanding their geographical reach and sales channels. The third element driving their growth, is expansion int

5、o emerging markets. These three factors ensure that there will no doubt be more Chinese entrants to the Global 50 in coming years. However, their success is not a shoo-in: the average profitability of Asian Global 50 companies in 2018 was 14%, significantly below the 18% global average. As domestic

6、competition heats up, there is also increasing downward pressure on margins, with the majority of Asian giants registering negative margin growth in 2018. The Chinese food and drink sector is growing at nearly double the rate of its global peers 14 | OC&C Reaping the rewards Star company Milking a g

7、rowth market CASE STUDY One of our star companies, Chinese dairy company Yili, grew sales by a staggering 17.8% in 2018 compared to the previous year. Since 2013, it has released over 200 new products in order to capture growth markets, such as the increasingly health conscious young Chinese consume

8、r. In 2017, for example, it launched new plant protein soya milk drinks complete with Millennial-friendly packaging. In echoes of Coca-Colas North American strategy, it also invested in a natural water project to gain a foothold in the bottle watered segment. In addition to innovation, Yili has also

9、 increased sales by increasing its geographical reach. Since 2005, it has focused on selling to lower tier cities, and increased its points-of-sale in villages from 110K in 2015, to 530K in 2017. The above two strategies are backed up by the highest advertising spend in the industry (c.12%), ensurin

10、g that the Yili brand is front of mind for both city influencers and village laborers alike. OC&C Reaping the rewards | 15 Ask any Westerner to name a premium spirit and you can bet that baijiu does not make the list. Yet it is one of the most popular tipples in the world. The ancient Chinese spirit

11、 is made from varying combinations of sorghum, wheat, rice, and corn, and packs a punch at 50-60+% proof. It is also the reason that Chinese alcohol producer Kweichow Moutai entered the Global 50 in 2018. Upping the price of its star baijiu product resulted in the company achieving annual sales grow

12、th of 25% the highest in the entire Global 50. This was achieved by a marketing push to position the brand as the go-to premium drink for festive and business events. Like Yili, Moutai cemented its market leading position by expanding its sales channels. Its network of small shops, for example, incr

13、eased from c.2000+ in 2015, to c.3000+ in 2017. It also partnered with online giants to increase sales. Star company Baijiu, the billion dollar beverage CASE STUDY Kweichow Moutai achieved annual sales growth of 25% the highest in the entire Global 50 16 | OC&C Reaping the rewards While its comeback

14、 was initially all the rage, a marked reduction in mentions of ZBB in 2018 annual reports suggests it is falling out of fashion again. This could be due to recent issues experienced by ZBB adopter Kraft Heinz. At the start of 2019, it wrote down US$15.4bn in addition to disclosing that the SEC was i

15、nvestigating its procurement accounting practices. Combined with stagnating EBITDA and sluggish organic growth, this has put the spotlight on its use of ZBB. Industry commentators, from analysts to the media, questioned whether it was to blame for the companies woes. Stinging comments calling the co

16、mpanys implementation of ZBB a black eye and a truly awful idea did little to boost the methods reputation. Is ZBB falling out of fashion? In 2015, there was a gold rush towards Zero Based Budgeting, a method of cost planning from the 1960s, revived in recent years by activist FMCG investor 3G. Desp

17、ite this, most of the Global 50 that have engaged in ZBB have seen an improvement in profit margins since adoption. However, as we mentioned last year, ZBB companies seem to underperform in organic revenue growth compared to non-adopters. This suggests that ZBB, while improving efficiency, is certai

18、nly not helping companies to address their growth challenges. With ZBB still in its infancy, it is still impossible to tell if it will deliver its promised returns: is Kraft Heinz just a blip, or a warning of things to come? This suggests that ZBB, while improving efficiency, is certainly not helpin

19、g companies to address their growth challenges OC&C Reaping the rewards | 17 18 | OC&C Reaping the rewards RANK CHANGE 2018/17 COMPANYCOUNTRY GROCERY SALES IN MILLION US$ IN 20181 GROCERY SALES % CHANGE IN LOCAL CURRENCY SALES 18 VS 172 1-Nestl AGSwitzerland $93,400 2.1% 2-Procter & GambleUS $66,335

20、 2.8% 3-PepsiCoUS $64,661 1.8% 4-UnileverUK/Netherlands $60,120 -5.1% 5-AB InBevBelgium $54,619 -3.2% 6-JBS Brazil $49,044 12.4% 7-Tyson FoodsUS $40,052 4.7% 8+6British American Tobacco P.L.CUK $32,656 25.2% 9-1Coca-Cola CompanyUS $31,856 -10.0% 10-LOralFrance $31,766 3.5% 11-2Philip Morris Internat

21、ionalUS $29,625 3.1% 12-1DanoneFrance $29,070 -0.6% 13+2Heineken HoldingNetherlands $26,499 4.0% 14-2Kraft HeinzUS $26,259 0.7% 15-2MondelezUS $25,938 0.2% 16-Archer Daniels MidlandUS $24,831 10.9% 17-WH GroupChina $21,283 -0.1% 18+1SuntoryJapan $20,383 4.3% 19-1Altria GroupUS $19,513 0.5% 20+2Japan

22、 TobaccoJapan $18,974 3.3% 21-Asahi BreweriesJapan $18,765 1.6% 22-2Kimberly ClarkUS $18,434 0.7% 23+3Reckitt BenckiserUK $16,796 10.0% 24+1DiageoUK $16,148 0.9% 25-2General MillsUS $15,740 0.8% 2018 RANKING OF THE GLOBAL 50 1. Sales exclude excise duty payment 2. Percentage change exclude excise du

23、ty payment OC&C Reaping the rewards | 19 RANK CHANGE 2017/16 COMPANYCOUNTRY GROCERY SALES IN MILLION US$ IN 20181 GROCERY SALES % CHANGE IN LOCAL CURRENCY SALES 18 VS 172 26-2Colgate PalmoliveUS $15,544 0.6% 27+1Grupo BimboMexico $14,993 7.8% 28-1Johnson & JohnsonUS $13,853 1.8% 29+1Este Lauder Comp

24、aniesUS $13,616 15.8% 30-1EssitySweden $13,614 8.4% 31+1LVMHFrance $13,249 5.6% 32-1Kellogg CompanyUS $12,312 6.0% 33-HenkellGermany $12,228 -1.4% 34+9Yili GroupChina $11,891 17.8% 35+1Kirin BreweriesJapan $11,748 5.7% 36-2Royal Friesland Campania Netherlands $11,563 -4.1% 37+1Nippon Meat PackersJap

25、an $11,494 5.6% 38-1KaoJapan $10,824 -1.7% 39+2Bunge Limited Bermuda $10,820 12.8% 40-5Molson Coors Brewing CompanyUS $10,770 -2.1% 41-2Pernod Ricard SA France $10,598 -0.3% 42+4Mengniu DairyChina $10,420 14.7% 43-3Imperial TobaccoUK $10,347 -0.8% 44-2Arla Foods A.M.B.A Denmark $10,301 -1.1% 45-Carl

26、sbergDenmark $9,891 3.0% 46+12Kweichow MoutaiChina $9,813 25.4% 47+2ShiseidoJapan $9,657 9.2% 48-4Hormel FoodsUS $9,546 4.1% 49+1TingyiChina $9,064 3.0% 50-2Yamazaki BakingJapan $8,973 0.9% 2018 RANKING OF THE GLOBAL 50 OC&C Strategy Consultants 2018. Trademarks and logos are registered trademarks o

27、f OC&C Strategy Consultants and its licensors. OFFICES Belo Horizonte Boston Hong Kong Istanbul London Milan Munich New York Paris Sao Paulo Shanghai Warsaw OC&C Strategy Consultants 2019. Trademarks and logos are registered trademarks of OC&C Strategy Consultants and its licensors. Key contacts Coye Nokes, Partner Will Hayllar, Partner Partner Adam Xu, Partner Leo Chiang, Associate Partner