longevity creates new consumption opportunities - fidelity international … · 2019-10-28 · pet...
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Longevity creates new consumption opportunities Aneta WynimkoPortfolio ManagerFidelity International
Longer lifespans
Source: Fidelity International, 2019
?
RomanEmpire
MiddleAges
IndustrialRevolution 2019 2070
25 years 33 years 55 years 72 years 125 years
Increasing percentage of population moving into the 3rd act (>60)
Source: Fidelity International, OECD population forecasts, July 2015.
1950 2000 2050
0.2 Billion (8%) 0.6 Billion (10%) 2.0 Billion (21%)
Baby Boomers are a big and attractive consumer group
Source: Fidelity International, US Census Bureau Population Estimates for 2020
0%
10%
20%
30%
40%
50%
60%Pa
kist
an
Nig
eria
Philip
pine
s
Sout
h Af
rica
Indi
a
Mex
ico
Indo
nesi
a
Turk
ey
Braz
il
US
Thai
land
Chi
na UK
Fran
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Can
ada
Pola
nd
Rus
sia
Sout
h Ko
rea
Spai
n
Japa
n
Italy
Ger
man
y
Millennials Boomers
More Boomers than Millennials
Source: Fidelity International, Versace SS2020 Fashion Show
Four themes I invest behind tobenefit from longevity
Skin care to keep us looking good Spirits to keep us in good mood Pets to keep us company Eyewear to keep our eyes sharp
Source: Fidelity International, British Vouge, December 2018
Beauty industry is a big
beneficiary of Baby Boomers desire to stay
active and attractive
New Ad Spot For L'Oreal Age Perfect shows strong women age well
Skin care is key beneficiary from spending by older independent women
Source: Fidelity International, Estee Lauder, Investor day March 2019 Source: Fidelity International, 2019, The World bank
$255$276
$23 $21$2
$0
$50
$100
$150
$200
$250
$300
US
Kore
a
Chi
na
Braz
il
Indi
a
61%
56%55%
50% 50%48%
40%
45%
50%
55%
60%
65%
Chi
na UK
US
Fran
ce
Japa
n
Wor
ld
Spend on prestige beauty, women 15-65y old, $ pa Labour force participation rate, female 2018
Estee Lauder’s strong track record in skin care
Source: Fidelity International, 2019, Estee Lauder, company accounts
0%
5%
10%
15%
20%
25%
30%
35%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
growth constant currency operating margin
Growth and profitability of skin care Strong growth in revenue and profitability ($m)
Source: Fidelity International, Bloomberg, 2019
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
2001
2002
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2005
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2007
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2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Revenue EBIT margin
High endspirits are a big beneficiary of Baby Boomers desire to enjoy their retirement
In beverages, spirits companies are key beneficiaries as people drink less but better
Source: Fidelity International, Nielsen Source: Fidelity International, Gallup annual consumption pool, July 2015
US national off-premise average spirits value pp per year
$70
$91
$115 $118
$0
$20
$40
$60
$80
$100
$120
$140
21-24 25-34 35-49 50+
Source: Fidelity International, Indoscout 2016, Diageo 2017 investor day
Beer consumption declines quite dramatically with age, while spirits consumption is more stable
Proportion (%) of adults who drank alcohol by income and education, US 2015
0%10%20%30%40%50%60%70%80%90%
>$75
,000
$30,
000-
$75,
000
< $3
0,00
0
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Hig
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ess
95
8176
62
41
4.2 3.5 3.2 3.1 2.60
102030405060708090
100
21-34 35-44 45-54 55-64 65+
Beer (litres) Pure Alcohol (litres)
Spirits companies pay more attention to the ‘ageless consumers’
Source: Fidelity International, Diageo investor day 2018
Diageo @ its 2018 investor day shifts focus to marketing to the Ageless Americans
Diageo shows impressive track record of growth and profitability (£m)
Source: Fidelity International, 2019, Bloomberg
F16 F17 F18
Millennials Multi-Cultural AgelessAmerica
On Premise On Premise On Premise
DigitalFoundation
Search /Always On
Search /Always On
BrandStories
BrandPurpose
Drive PurposePlatforms Locally
Insights, Targeting and Measurement / ROI
0%
5%
10%
15%
20%
25%
30%
35%
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
2005
2006
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2010
2011
2012
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2014
2015
2016
2017
2018
2019
Revenue EBIT margin
Pet foodindustry is a big
beneficiary of Baby Boomers
need for companionship
Petcare is a structurally growing market as the number of pet companions keeps growing
Source: Fidelity International Euromonitor 2019 edition, 2018
Source: Fidelity International, 2019, Petbusinessprofessor.com
Source: Fidelity International, US - 2019-2020 APPA National Pet Owners Survey; China - 13D Global Strategy & Research
Global pet population in 2018 vs 2017 Total spending on pets in the US ($bn)
16%22%
56%64% 67%
0%
10%
20%
30%
40%
50%
60%
70%
80%
1988 2013 2018China US
Pet ownership (% of households)
0 20 40
Millenials
Gen X
Baby Boomers
Silent Generation
2017 2016 2015 2014
Millennials
Total: 884m
471m +4.4%
373m +5.6%
Pet food is a structurally growing market, as ‘pet parents’ increase spending
*% of 2018 category sales Source: Fidelity International, Nestle, Euromonitor 2019 edition
Nestle expects category growth @ 7% in 2018-2023
0%
10%
20%
30%
40%
50%
60%
70%
80%
Developed markets Emerging markets
Pet food category 2018: $81.5bn 6% CAGR in 2016-2018 Commercial coverage
Source: Fidelity International, 2019. Commercial coverage refers to % of overall pet nutrition derived from commercially prepared pet food, Nestle
North America39%*
CAGR +5%
EMENA32%*
CAGR +4%
LATAM11%*
CAGR +13%
AOA18%*
CAGR +11%
Pet food is a structurally growing market, as ‘pet parents’ increase spending
Source: Fidelity International, Bloomberg, 2018. Operational income from 2005-2008 and adjusted operational income from 2009 onwards.Source: Fidelity International, Nestle Investor Seminar 2019
Competitive landscape in pet food, 2018 market share Nestle: Pet care (CHFm)
24%
21%
5%4%3%
43%
Mars Purina (Nestle) ColgateSmucker's General Mills Others
0%
5%
10%
15%
20%
25%
0
2000
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FY 2
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FY 2
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FY 2
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FY 2
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FY 2
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FY 2
018
Revenue EBIT margin
Eyewear industry will benefit from
consumers taking better care of their
vision
Eyewear – ageing and use of digital devices create a booming end market
Source: Fidelity International, 2019, EssilorLuxotticaCapital Market Day
Source: Fidelity International, 2019, EssilorLuxotticaCapital Market Day; 1 Global population of ~7.6 billion people in 2020 and 10 billion people in 2050, United Nations, internal analysis
Source: Fidelity International, 2019, EssilorLuxotticaCapital Market Day
Consumer consumption per capita (Index)
Growing presbyopia prevalencePeople, % of global population
Large untapped opportunities in vision correction and protection
0
200
400
600
800
1000
1200
US France china
Eyecare & eyewear Shoes
Dentistry Apparel (women)
7.6bnpeople
worldwide
2.0bncorrected (43%)
2.6bnuncorrected
1.4bnequipped with
sunglasses (18%)
6.2bnunequipped
100%should protect
their eyes(sun, UV, blue light)
4.6bn(60%) require
vision correction
2000 2010 Today 2030 2040 2050
30%1
2.3bn
40%1
4.1bn
China
The eyewear market is a great investment opportunity
Source: Fidelity International, Bloomberg, 2018
2% 6% 10% 15% 16% 21%
66%
8%
30% 25%36%
43%
64%
100%
0%
20%
40%
60%
80%
100%
120%
Pola
rized
Sun
Rx
Phot
ochr
omic
Prog
ress
ive
Blue
-cut
Thin
(ind
ex>1
.6)
Anti-
refle
ctiv
e
Global penetration Highest penetration
Source: Fidelity International, 2019, EssilorLuxottica Capital Market Day
Penetration of value-added lenses on totalprescription lenses
Combined Essilor and Luxottica (€bn)
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
0
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20000
25000
2001
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2007
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2010
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2018
Revenue EBIT margin
The eyewear market is a great investment opportunity
Source: Fidelity International, EssilorLuxottica Capital Market Day
EssilorLuxottica is the dominant player with a strong brand portfolio
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Premium
Lens brands Frame brands
Entry
Baby Boomers consumption is a very attractive and fast growing market
Source: Fidelity International, Balenciaga SS2020 fashion show
Factors I look for when investing behind longevity
Source: Fidelity International, 2019
Market opportunity
Category that allows innovation and premiumisation
Scope to increase market share &/or enter new markets
History of sustainable organic growth
High returns High and stable gross margins High ROIC
High investment rate
Efficient spend on A&P and R&D, which create intellectual property and brand value
Capex allocated to capture the market opportunity
Brand power Attractively valued long-term winners with strong
brand, intellectual property and pricing power Global and Emerging Markets leadership
Technology and innovation
Use of technology to connect and collaborate with consumers
Margin accretive innovation and premiumisation
Agility Global scale - local agility Multi-channel approach
Excellent management
Management team with clear vision and coherent execution; strong focus on details and quality
Customer retention and development
Capitalising on the longevity economyInvestment Conference 2019
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