NCA International Strategic Plan Update

A custom report compiled by Euromonitor International for the National Confectioners Association (NCA)

January-February 2012

Welcome & Introduction

Karen Horan
Senior Director of International Trade Services National Confectioners Association

International Strategic Plan (ISP) Objectives & Deliverables

Frank Amato
Chairman of International Development Committee Director of International Development Just Born, Inc.

ISP Objectives
Define global market dynamics of the confectionery industry Determine the needs and objectives of NCAs members regarding International Business Development

Highlight opportunistic regions and/or markets, and recommend specific strategies and tactics to generate a long-term increase of U.S. confectionery exports Define toolbox currently utilized by members and identify key gaps
Review NCAs role in supporting international development and modify as necessary to better support members objectives

Enhance NCAs core international focus while addressing constraints that U.S. confectionery companies face

ISP Key Deliverables

Guide NCAs International Strategic Direction To produce a clearly defined Unified Export Strategy that will add value to member companies, both large and small To develop a plan that will positively enhance members opportunities to participate and thrive in international markets

Define how the NCA can best support members interested in developing or supporting an export or international business
Clearly defined NCA toolbox, inclusive of data, tactics, strategies, resources, etc.

Preliminary Research Findings & Market Entry Considerations

Zandi Brehmer & Heather Prekop
Consulting Group Euromonitor International

Research Update
PROJECT OVERVIEW MARKET OVERVIEW:
WHY EXPORT?

PRELIMINARY FINDINGS:
KEY MARKET ENTRY CONSIDERATIONS

CONCLUSIONS

OVERVIEW | WHY EXPORT? | MARKET ENTRY | CONCLUSIONS

Project Methodology
Evaluate Current Situation & Needs

Gain Further Insights

Provide Recommendations April Workshop

Qualitative Interviews
Market Entry evaluate current export activities of NCA members (large and small)
NCA Services understand current tools/services utilized by members

Quantitative Surveys
Market Entry better understand global market dynamics and member needs NCA Services review NCAs role in supporting members and identify key gaps in services/support

Market Entry identify key questions as well as broad strategies for NCA members to consider when entering new markets NCA Services recommend modifications as necessary to better support members objectives and establish international role

OVERVIEW | WHY EXPORT? | MARKET ENTRY | CONCLUSIONS

Project Timeline
Oct 31, 2011
Nov Jan Jan 31 Feb 1 Jan 24 Feb Feb March
Project Kick-off
Qualitative Interviews ISM Presentation of Preliminary Findings Quantitative Interviews Final Analysis and Validation

Feb March
April

Incorporation of Tactical Piece

ISP Workshop Presentation of Final Strategic Findings Final Report Tactical Recommendations

June

PROJECT OVERVIEW WHY EXPORT? MARKET ENTRY CONCLUSIONS

OVERVIEW | WHY EXPORT? | MARKET ENTRY | CONCLUSIONS

Global Confectionery

Source: Euromonitor Data, 2011.

OVERVIEW | WHY EXPORT? | MARKET ENTRY | CONCLUSIONS

4 Cases for U.S. Export

1 2
Go where the growth is look at actual dollar sales

Go where the growth is look at volume consumption

3 4

U.S. sales wont cut it represents shrinking slice of the pie

Just because you are small doesnt mean you cant think global

OVERVIEW | WHY EXPORT? | MARKET ENTRY | CONCLUSIONS 25,000

5.5%

6%

Global Average
Actual Growth

Actual Volume Growth (Tonnes)

20,000 VALUE GROWTH For U.S. Is Below Global Average (2011-16)% Growth

5%

3.6%

25,000

10,000

2.1%

1.9% 2.0%

5.5%
1.4% 1.0%

3%

% CAGR Growth

15,000 TOTAL CONFECTIONERY GROWTH (% and Actual) 3.0%

4%

6% 5% 4%

2%

Actual Value Growth (Tonnes)

20,000

5,000

3.6%
15,000
0

1%

3.0% 1.9%

0%

2.1%
10,000

3%

1.4%
5,000

2%

2.0%

1.0%
1% 0%

Source: Euromonitor Data, 2011.

% CAGR Growth

OVERVIEW | WHY EXPORT? | MARKET ENTRY | CONCLUSIONS 25,000

5.5%

6%

Global Average
Actual Growth % Growth

Actual Volume Growth (Tonnes)

20,000 VOLUME GROWTH Actually Declining In The U.S. (2011-16)

5%

3.6%

1,600
1,400

3% 10,000

% CAGR Growth

15,000 TOTAL CONFECTIONERY GROWTH (% and Actual) 3.0%

4%

2.1%

3.9%
2.0%

1.9%

4.4%
1.4% 1.0%
2%

5%
4%

Actual Volume Growth (Tonnes)

1,200 1,000

5,000

2.9% 2.1%

1%

3% 2%

800
600 400 200

0.5% 1.2% -0.8%

1%

0%
-1% -2%

0
-200

Source: Euromonitor Data, 2011.

% CAGR Growth

1.8%

0%

OVERVIEW | WHY EXPORT? | MARKET ENTRY | CONCLUSIONS

Emerging Regions STEALING SHARE From Developed Markets

Retail Values: 2001 4% 2% 11% 35% 10%
Western Europe North America Asia Pacific

Retail Values: 2011 4% 2%

12%

32%

Latin America
Eastern Europe

13%

16% 22%

ME/Africa Australasia

17%

20%

Source: Euromonitor Data, 2011.

OVERVIEW | WHY EXPORT? | MARKET ENTRY | CONCLUSIONS

Significant OPPORTUNITIES REMAIN For Companies Of All Sizes

Global Confectionery Global Confectionary Companies Competitive Landscape

(2011, US$ value sales)

50%

46%

Top 5 Private Label Everyone Else

4%
Source: Euromonitor Data, 2011.

PROJECT OVERVIEW WHY EXPORT? MARKET ENTRY CONCLUSIONS

OVERVIEW | WHY EXPORT? | MARKET ENTRY | CONCLUSIONS

Preliminary Findings
Member needs & focus vary greatly
The right approach to exporting differs based on level of experience, size of company & type of product offered

NCA role should be broad and educational

Develop general export guidelines/factors to consider for members looking to enter new markets Provide foundational resources rather than specific tactics No one size fits all; teach members how to find the right approach for their organization

OVERVIEW | WHY EXPORT? | MARKET ENTRY | CONCLUSIONS

Market Entry Points to Consider

MARKET SIZE MARKET GROWTH REGULATORY ENVIRONMENT RETAILING ENVIRONMENT COMPETITION LOCAL TASTES

MARKET ENTRY: MARKET SIZE & GROWTH | REGULATORY | RETAIL | COMPETITION | LOCAL TASTES

Country

2011 32.3 12.8 12.5 12.2 11.8

MARKET SIZE (Value)

How DEVELOPED is the current market?
60

USA UK Brazil Germany Russia

2011 Market Size (US$ RSP, billion)

50

40

21.6

24.9

20

31.9

30

10

0 Asia-Pacific Australasia E Europe Latin America Middle East N America & Africa W Europe

Source: Euromonitor Data, 2011.

4.4

8.0

36.1

58.6

MARKET ENTRY: MARKET SIZE & GROWTH | REGULATORY | RETAIL | COMPETITION | LOCAL TASTES

Country

MARKET GROWTH (Value)

Which regions are GROWING?
12 10.7 10 8.7 10.9

2011-16 CAGR

India Peru Indonesia Brazil Saudi Arabia

13.9% 5.2% 4.9% 4.5% 4.5%

CAGR Growth %

8 6 5.2 4.1 3.6 2.9 5.5

4 2 0

3.0

2.0

1.9

2.3

1.4

1.0

Asia-Pacific Australasia

E Europe

Latin America

Middle East N America & Africa

W Europe

Historic CAGR (2006-11)

Source: Euromonitor Data, 2011.

Forecast CAGR (2011-16)

MARKET ENTRY: MARKET SIZE & GROWTH | REGULATORY | RETAIL | COMPETITION | LOCAL TASTES

Identify Hot Spots (Value)

12%
10%

Middle East & Africa gum expected to grow fastest over forecast period (11.5%)

o o o

Western Europe North America Latin America Asia Pacific Australasia Eastern Europe Middle East & Africa Chocolate Candy Gum

Forecast Growth (2011-16 CAGR)

8%

6%

Western Europe and North America markets are large, yet poised for slower growth

Asia-Pacific markets are sizable, with moderate growth

4%

2%

Latin America (and Eastern Europe) chocolate well positioned for growth

0% 0% 2% 4% 6% 8% 10% 12% 14% 16%

-2%

Historic Growth (2006-11 CAGR)

-2%

MARKET ENTRY: MARKET SIZE & GROWTH | REGULATORY | RETAIL | COMPETITION | LOCAL TASTES

Regulatory Environment
Key regulatory issues to consider:
Ingredients/Product Composition (e.g. Western Europe)

Labeling and Marketing Claims

Packaging Standards Product Documentation and/or Registration Trademark/Copyright laws (e.g. China, India) Other Market Access Considerations: Tariffs, Taxes & Free Trade Agreements

MARKET ENTRY: MARKET SIZE & GROWTH | REGULATORY | RETAIL | COMPETITION | LOCAL TASTES

Retailing Environment
WHERE are confections sold in-market?
100%

Channel Type National vs. Regional Coverage Product Placement

Retail Channel Share (2011 US$ RSP value, by region)

90% 80% 70% 60% 50% Supermarkets/Hypermarkets Discounters Small Grocery Retailers Confectionery specialists Other Grocery Retailers 30% 20%

40%

Non-Grocery Retailers
Non-Store Retailing

10%
0%

Asia-Pacific Australasia E Europe

Latin America

Middle East N America W Europe & Africa

Source: Euromonitor Data, 2011.

MARKET ENTRY: MARKET SIZE & GROWTH | REGULATORY | RETAIL | COMPETITION | LOCAL TASTES Concentration/Fragmentation Local vs. Foreign Players Total Number of Players (Saturation) Pricing & Retailer Profiles

Competitive Environment
Who are the TOP FIVE PLAYERS in each region?
80%
Company Share (US$ %, 2010)

70% 60%

Kraft Mars Mars Kraft Kraft

Player 1 Player 2

50%
40% 30% 20%

Kraft Lotte Mars

Kraft
Asia Pacific Australasia E Europe Latin America Middle East and Africa N America

Player 3
Player 4 Player 5

10%
0%

W Europe

Source: Euromonitor Data, 2011.

MARKET ENTRY: MARKET SIZE & GROWTH | REGULATORY | RETAIL | COMPETITION | LOCAL TASTES

Category Sales & Market Trends

What PRODUCTS are popular in each region? Are there any current TRENDS?
100%
27% 80% 60% 22% 44% 9% 16% 65% 19% 64% 20% 0% Asia Pacific Australasia Eastern Europe Chocolate Latin America Gum Middle East and Africa Candy North America Western Europe World 71% 42% 47% 20% 9%

Category (% of total confectionery sales, US$ RSP)

37%

37%

29% 14%

26%

31%

10% 14%

40%

57%

55%

36%

Source: Euromonitor Data, 2011.

PROJECT OVERVIEW WHY EXPORT? MARKET ENTRY CONCLUSIONS

OVERVIEW | WHY EXPORT? | MARKET ENTRY | CONCLUSIONS

Key Questions to Ask

Again, different approaches will depend on the needs and positioning of your company

Market Size/Growth: Strategic (go where the $$ is) vs. opportunistic approach (what makes the most sense for my company/products)?

Distribution: In-country operations vs. sale to in-country importers/distributors vs. use of U.S.-based export agent?
Retailing: Direct to retailer sales (e.g. Wal-Mart) vs. sell through local distributors? Competition: Go after whitespaces (innovator) vs. do what has proven to be successful for other companies in the past (imitation)?

Local Tastes: Create a custom product to appeal to local tastes vs. stick to standard format across markets for cost efficiency?

OVERVIEW | WHY EXPORT? | MARKET ENTRY | CONCLUSIONS

How to Get There

Keep it Simple!
Start small, focused and realistic

Go after the low hanging fruit

Do what is right for you

Approach new markets from an opportunistic perspective

Do not feel that you have to chase the largest or fastest growing markets to succeed

Formulating the Plan: Goals/Tactics/Measurements

Eric Rosenberg
Bryant Christie, Inc.

INTRODUCTION | MARKET OVERVIEW | MARKET ENTRY | CONCLUSIONS

Next Steps
Assess the NCAs role
Review existing NCA services Determine industry needs and market opportunities Define success

Define tactics (ISP Workshop)

Quick wins Longer-term strategic shifts

Final strategic/tactical plan

Thank You

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