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Business Overview Dec ‘06

An overview of the retail market in Brazil, including population and consumption statistics. Explore the socioeconomic segmentation, key regional retailers, and opportunities in the stationery, softlines, and toys sectors.

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Business Overview Dec ‘06

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  1. Business OverviewDec ‘06

  2. Brazil – Population & Consumption Population: 185 M GDP: $600 B GDP/Cap: $3,200 Pop. 28% Cons. 16% Pop. 15% Cons. 13% Pop. 42% Cons. 54% Pop. 57% (106 M) Cons. 71% Pop.15% Cons. 17%

  3. Brazil – Socioeconomic segmentation • Classes C-E (72% of HHs) represent approximately 39% of purchase power Avg. family income (US$/Mnth) % of Purchase Power % HHS 3,153 A 28% 23,3 5.0 56 1,119 22.8 61.5% B 38,2 610 37.9 C 72% 27,2 305 D 31.1 38.5% 10,7 102 E 3.2 0,6 Source: Target Market / Brazil em Foco 2005

  4. Indicators * Instead of 2010f, the number refers to 2009f Source: Brazil Telecommunications Report Q1 2006 and IBGE/PNAD

  5. Brazil - Retail Overview • The market, $275B, is highly fragmented • Consolidation among supermarket and hypermarket chains • The top five retailers only account for ~ 25%; no retailer has a market share >10% • The Brazilian retail market is highly internationalized, (exception: Pão de Açúcar)

  6. FY07 Q1 Fcst Full Year US$ in Million @ FY07B Rate

  7. Financial Overview CAGR 03-07 06-07 Earned Rev 14% 21% Total Rev 11% 16% US$ in Million @ FY07B Rate

  8. Financial Overview – FY03 to FY07 US$ in Million @ FY07B Rate

  9. Financial Overview – FY07 vs. FY06 US$ in Million @ FY07B Rate

  10. Business Breakdown (Total Revenue) FY07 $20.1 M US$ in Million @ FY07B Rate

  11. Franchise & Property Summary Other 3 US$ in Million @ FY07B Rate

  12. Franchise & Property Mix $100 $123 $155 $171 $209 Other WSS in US$ Million @ FY07B Rate

  13. Franchise Priorities • Little Einstein and Buzz are not so strong for Stationery and Softlines. Idem Nemo for Softlines. • Add: Disney Classics in Infant, Toddler and Adults, Princess in Preschool, Pirates on Tweens and Mickey Vintage and Muppets in Adults (Softlines).

  14. Key Regional Retailers – WSS and P&P 80% US$ in 000’s @ FY07B Rate

  15. Licensing FY07F - Top 20 US$ in 000’s @ FY07B Rate

  16. HOME - Summary US$ M @ FY07B Rate SKUs: 750 The main 5 licensees represent 74% of the revenue; top 10 are 84% - Develop a mass market furniture line (Casas Bahia) - Increase Bedding & Bath business with DTR (Pernambucanas & Riachuelo) - Focus on product development Top 5 JOLITEX 24% ($593K) STD 85%; Bed.&Home Textiles 59%, Inf.Bed.&Room Decor 37% COTEMINAS 21% ($500K) Mickey/STD 89% ; Bedding & Home Textiles 58%, Infant Bed. & Room 42% DERMIWIL 16% ($377) STD 29%, Princ. 29% ; Table & Kitchenw. 54%, Inf. Feeding 22% NOVARTIS 9% ($213K ) STD 63% & Pooh 23% ; Infant Feeding 100% PERNAMBUCANAS 5% ($112) STD 58%, Princesses 20% ; Bedding & Home Textiles 55%, Bathroom Accessories 25%

  17. Stationery - Summary SKUs: 1891 The main 5 licensees represent 76% of the revenue while the top 10 are 91% - Work closely with Tilibra (#1 Lat Am Licensee) to have better BTS Cluster 07 implementation and also grow their line with Fairies - Focus on product development - Work closely with Specialized Distributors (Reval, DMP, Arcom & Martins) Top 5 TILIBRA 51% ($2,457) Pooh 49%, STD 23% ; School Stationery 93% REGINA 13% ($ 559) STD 30%, Princess 20% Pooh 16% ; Party Goods 100% FORONI 5% ($237) Witch 30%, Classics 26% ; School Stat. 98% CADERBRAS 5% ($234) Classics 79% Nemo 8% ; School Stat. 100% NOVA GRAFONS 4% ($202) Fairies 81%, Pooh 13% ; School Stat. 68%, Greeting Cards 15%

  18. FHB - Summary SKUs: 160 The main 5 licensees represent 56% of the revenue while the top 10 are 79% - Support SSR to maintain growth in current retail chain, develop the door-to-door distribution & achieve ER growth of 100% (by leveraging $7.2M free-TV invest.) - Grow diapers business by launching new franchises, improving retailers (50%) and leverage specialized distributors (50%) - Support biscuits business (Marilan) by refreshing the line with Ratatouille and key retailers promotions - Improve Disney Pet food line distribution among key retailers Top 5 MABESA 20% ($399) Diapers Standard 100% SSR 15% ($300) STD 96% ; Hair & Body 56%, Infant – Personal Care 42% GILLETTE 9% ($175) Oral-B Pooh 37%, Toy Story 16%, Princ. & Power Ranger 11% BBP 6% ($118) Cars 24%, STD 22%, Toothpaste 100% MARILAN 6% ($114) Cars 45%, Ratatouille 28%, STD 25%; Biscuits 100%

  19. Softlines - Summary SKUs: 1400. The main 5 licensees represent 71% of the revenue while the top 10 are 88% - 5 DTR contracts (C&A, Carrefour, Pernambucanas, Riachuelo & Wal-Mart) - Enhance Footwear Category - Increment DTR business model - Launch Disney jeans with Carrefour and Brascol (mass market oriented) - Keep focus on product development for Halo and mass market initiatives Top 5 MALWEE 27% ($1,547K) STD 63%, Pooh 33% ; Girls/Tween Apparel 53%, Boys/Tween Apparel 26% C&A 15%: ($845k) STD 40%, Pooh 15%, Power R. 14% ; Boys/Tween 32%, Girls/Tween,5 Apparel STD 25% TDB 11% ($649) STD 44%, Pooh 22%, Princ. 20%; Toddler 27%, Boys/Tween 26% RIACHUELO 10% ($580) STD29, Princ.24; Toddler 22%, Boys/Tween 22% GRENDENE 8% ($490) Princ.55%, Cars 10%; Kids Footwear 81%, Inf./Toddler Ft 15%

  20. Toys - Summary SKUs: More than 700. The main 5 licensees represent 44% of the revenue while the top 10 are 73% - Launch a Children’s week with LASA (June) to brake seasonal sales and anticipate Children’s and Xmas high season (Oct – Dec = 70% of total sales) - Launch new dolls line with new player to increase share in market (25% of Toys) - Introduce new locally manufactured Electronics by CCE to leverage lower duties - Improve ELA line with Vtech line Top 5 MATTEL 10% ($268) Princesses 35%, Cars 32%; Dolls 41%, Vehicles 30% PRO SERVICE 9% ($256) Pooh 37%, Toy Story 19%; Basic Plush 30%, Educat. 20% KORAICHO 9% ($242) Princ.25%, Power R. 21%; Role Play 32%, Audio & Elec. 25% MULTIBRINK 9% ($240) STD 74%, Princ.10%; 75% Basic Plush (dolls with vinyl face) Outdoor/seasonal 14% RIBALTA (Multitoys) 7% ($203) Cars 23%, Power Rangers 22% STD 13%; Sporting & Camping Goods 70%, Basic Plush 13%, Role Play 13%

  21. Publishing - Summary • The top 5 licensees represent 97% of the revenue • Launch Disney Learning products to position Disney as an educational brand • Launch Disney Magic English multi-platform line (books, part-works, DVDs and games) • Increase Disney mass market share by developing a DTR with Wal-Mart, increasing Direct sales through Avon, identifying best door-to-door partner • Continue effort to launch sticker albums (renew contract with Editora Abril) • Top 5 • ABRIL 65% ($725) Comics (ST, Carl Barks & Mestres Disney), Magazines (Princ., Fairies, Witch & Power Rangers), sticker albums (Witch, Princ., Cars & Power Rangers) • BF 17% ($194) Book + Audio (The Prince and The Pauper, The Lion King, 101 Dalmatian, The Beauty and the Beast) • EDELBRA 8% ($90) Books: The Wild, Witch, Cars & Princesses • MELHORAMENTOS 4% ($50) Books: Fairies & WTP Plush Books, Princesses Puzzle • SICILIANO 3% ($32) Books: Princ.Diary, DK Essential Guide: Cars, My side of the story

  22. Publishing - Summary • -Brazil is still 99% PC market. • Transition from PC to VGs has still not happened due to high import duties. • Working with hardware & software industry to bring taxes down. • 2007 will be crucial for consolidation of main VG players in Brazil • New Generation of Consoles: • Microsoft recently released Xbox 360 in Brazil • Nintendo will be releasing Wii for this Christmas • Sony has still not informed release date of PS3 in the market • - Launch new gen VG software in the market • - Educate consumers to acquire legal software • - Create Disney corners in the videogame sections & include products in the toy section • - Synergy at retail of our products with other LOBs • - Promotions with hardware manufacturers (bundle)

  23. DCP High School Musical • Home (estim. ER until Dec/06 $10K) • Coteminas: blankets, bedding sheets e velour towel • Pozzani: mugs • Multitoys: pillows & cushions • Fast Frame (HALO): frames • Festcolor-Argos: pop-corn thermal container • Stationery (products are going to be at their regular assortment for BTS and rest of the year) • Tilibra: Notebooks, Agenda, Ring Binder and note pads (estim. ER $150K)  • Dermiwil: Pen/Pencil Holder (estim. ER $ 1K)  • Sícula: Gift Wrap Paper, Bags and Boxes (estim. ER $ 3K) • Under Negotiation – Cartona: Photo Albums / Scrapbook (estim. ER $ 5K) • Planning to have writing instruments for BTS 08. Licensee will wait for 07 HSM plans to decide to develop it. • FHB (Cris is pursuing licensees for Personal Care and Confectionery) • Softlines • Apparel: prospect a mass market licensee; sleepwear and underwear with OR2 (estim. ER 5K) • Accessories: launch of a BTS line with Dermiwil (estim. ER $10K); launch a fashion accessories complementary line with Art Manual (estim. ER $5K). • Footwear: launch 1 sku with Grendene (TBC) • DTR: complete collection with Pernambucanas (estim. ER $30K). • Toys • Multitoys: EVA balls and basketball sets • Toyster: puzzles • Publishing • Sticker Album and Novelization / Junior Novel (High East Series) / Scrapbook and Poster book

  24. Top 10 Priorities – BVHE FY07 • Deliver “Best Case” scenario Net contribution of $17.6M, 21% over Budget of $14.5M • Inventory: <1.5M units • Returns: <20% • A/R: overdue <5% of gross sales • Make CARS as the “must own” animated DVD and POC 2 the most profitable all-time LA title • Develop new and creative ideas and plans to differentiate Platinum from Catalogue, and gradually introduce the “Disney Vault” concept • Strengthen key partner relationships (LASA, Wal Mart, Carrefour, CBD) and rollout permanent Disney area in Casas Bahia • Leverage e-commerce opportunities without jeopardizing traditional channels • Maximize Catalogue and Promotional Calendar opportunities by securing shelf space through permanent fixtures with POS investments and improving relationships with merchandising team • Strengthen teamwork across the Company (Departments, LOB, Regional and Global) and maximize marketing efforts to synergistically reinforce the “One Disney at retail” philosophy • Leverage Disney Channel and Jetix to support and promote video release • Identify opportunities to drive sales/profitability for local content (theatrical, made for TV, DTV) • Develop tools to identify, monitor and reward talent to ensure a motivated “world class” team

  25. BVHE Historical Performance Net Contribution by Channel Net Units by Channel Millions CAGR(03-07): 11% FY06B Rate $2.50

  26. BVHE Key Metrics ($ thousands @ 07 Rate)

  27. BVHE – 07 Financial Summary

  28. BVHE FY07 Key Titles Summary ($ millions @ 07 Rate)

  29. BVHE FY07 Key Titles Summary ($ millions @ 07 Rate)

  30. BVHE Historic Trend Key Drivers – by CBL

  31. BVHE Historical – Top 10 Rental & Sell Through

  32. BVHE P&L by Price Point

  33. BVI Historical Performance CAGR (03-07F) 4.4% (*) FY07 Figures to be provided in the next issue FY07B Rate

  34. BVI Historical Performance – Top 5 Films FY07B Rate

  35. Theatrical Performance

  36. TV – Background & Free Background • TV households are 45 mil (95% HH penetration) • Cable households are approx. 4 mil of which 1.3 mil are DTH (9% HH penetration) • DVD households are 15 mil (33% HH penetration) • Theatrical admissions totaled 96 mil or .53% ADM per capita • Overall advertising expenditure totaled US$ 15,6 billion • Free TV US$ 7.5 billion Newspaper US$ 5.1 billion • Magazines US$ 1.4 billion Cable TV US$ 1.0 billion • Radio US$ 438 mil outdoor US$ 80 mil Free TV • Brazil’s largest television networks are • “Rede Globo” (average of 53% gross rating points; 99,84% penetration within 5,043 Brazilian cities with 110 affiliates), • “SBT” (average of 20% gross rating points), • “Rede Record” (average of 13% gross rating points) • Other free TV networks are “Bandeirantes TV” (average of 5% of gross rating points) and “Rede TV!” (average of 4% gross rating points) • Most popular programs are “soap operas” (with as much as 55 rating points on prime time), sports (soccer matches), reality shows (Big Brother) and live shows (“Gugu show” and “Faustão show”) • ABC’s series “Lost” debuted on Free TV on Feb-2006 on “Globo TV”, and has improved Globo ratings by 4% (compared to the “24 hour” series) on Sunday’s 11 PM time slot

  37. TV - Cable Cable TV • Brazil’s top cable network is “Cartoon Network” with an average of 1.57% gross rating points among kids 4-11, followed by “Nickelodeon” with an average of 1.14% gross rating points. • Main cable operators are NET 39% share, Sky 21% share, “DirecTV” 12% share and “TVA” 8% share with a total of 13 mil viewers which 80% belong to AB classes • Share of technology: 60% cable, 34% DTH and 6% MMDS • Average monthly subscription fee is US$ 27.30 (R$ 60.00) • Desperate Housewives second season opened Feb 16th, 2006, on the Sony channel • The Disney Channel ranks as #12 amongst total universe of cable TV viewers; #5 towards kids 4-11 (all day) and #4 towards kids 4-11 (from 5PM to 12AM) • The Disney Channel ranks as #3 towards kids 12-17 (from 5PM to 12AM) • TDC reaches 1.7 mil subscribers with a 44.7% penetration among total cable TV market • Jetix ranks as # 13 amongst total universe of cable TV viewers; #4 towards kids 4-11 (all day) and #5 among kids 4-11 (from 5PM to 12AM) • Jetix reaches 2.6 mil subscribers with a 68,4% penetration among total cable TV market

  38. TV Ratings • 1) TV (6:00 – 30:00) Disney Channel is in 10th position with 0.16 rating Jetix is in na 15th position with 0.12 rating • 2) Viewer segment between 4 and 11 years old (6:00 – 30:00) Disney Channel is in 3nd position with 0.65 rating Jetix is in 5th position with 0.48 rating • 3) Viewer segment between 4 and 11 years old (17:00 – 24:00) Disney Channel is in 5th position with 0.91 rating Jetix is in 6th position with 0.62 rating

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