Disclosures & Disclaimer This report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it. MCI (P) 094/06/2016 MCI (P) 085/06/2016 MICA (P) 021/01/2016 Issuer of report: The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch View HSBC Global Research at: https://www.research.hsbc.com A quality company with a valuation multiple to match Volumes, cost efficiency and premiumisation to drive growth Initiate coverage with a Hold rating and TP of IDR40,400 A major player. Unilever Indonesia (UNVR) is one of the country’s largest producers of fast-moving consumer goods. Its strong cash generation, high ROE (124% in 2015) and consistent dividend payments have resulted in its stock being a core holding for investors seeking exposure to Indonesia. This report takes a deep dive into its product portfolio and business strategy to identify what will drive growth over the next three years. Bright outlook: The economy is enjoying a broad-based recovery, which is increasing the purchasing power of consumers, and the country’s favourable demographics provide an ideal environment for consumption growth. This in turn creates opportunities for product premiumisation. Our research provides a differentiated way of looking at each of UNVR’s six leading categories which generate 73% of its revenue. We assess the performance of each category in terms of winners and losers. See page 10 for details. Earnings forecasts. In 2015 EPS growth slowed to 2% but we expect this to increase to 14.5% in 2016e and 16.6% in 2017e. We forecast earnings to increase at a CAGR of 16% over 2015-18e, driven by higher margins from premiumisation, volume growth, and improved cost efficiency. The capping of the royalty fee UNVR pays to its Dutch parent at a maximum of 8% of domestic revenue from 2015 after three years of increases is another positive. Valuation and risks. We initiate coverage with a Hold and a target price of IDR40,400. The stock is trading at 50.4x 2016e PE and 35.2x 2016e EV/EBITDA, which is above its historical trading range. At these multiples, we think the positives, including EPS growth at a 16% CAGR over 2015-18e, are already in the price. Our DCF-derived target price implies 9% downside. Our 2016-18e revenue and net income forecasts are 3-10% ahead of consensus because we have a more positive view of the home and personal care segment. Our bull and bear case scenario analysis (see page 8) shows that even under a bullish scenario, there is little further upside. Upside risks include stronger-than-expected GDP growth, industry consolidation, and acquisitions that are earnings accretive. Downside risks include the implementation of a plastic tax, increasing competition in the food segment, weaker-than-expected GDP growth, and health/food safety issues. 20 September 2016 INITIATE AT HOLD TARGET PRICE (IDR) PREVIOUS TARGET (IDR) 40,400 SHARE PRICE (IDR) UPSIDE/DOWNSIDE 44,300 -8.8% (as of 16 Sep 2016) MARKET DATA Market cap (IDRb) 338,009 Free float 15% Market cap (USDm) 25,670 BBG UNVR IJ 3m ADTV (USDm) 7 RIC UNVR.JK FINANCIALS AND RATIOS (IDR) Year to 12/2015a 12/2016e 12/2017e 12/2018e HSBC EPS 766.95 878.32 1024.27 1198.69 HSBC EPS (prev) - - - - Change (%) - - - - Consensus EPS 769.49 847.46 958.94 1093.13 PE (x) 57.8 50.4 43.3 37.0 Dividend yield (%) 1.7 1.9 2.2 2.6 EV/EBITDA (x) 40.2 35.2 30.2 25.7 ROE (%) 124.2 142.8 175.0 214.7 52-WEEK PRICE (IDR) Source: Thomson Reuters IBES, HSBC estimates Selviana Aripin*, CFA Analyst The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch [email protected]+65 6658 0610 Karen Choi* Head of Consumer & Retail Research, Asia Pacific The Hongkong and Shanghai Banking Corporation Limited, Seoul Securities Branch [email protected]+822 3706 8781 *Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is not registered/qualified pursuant to FINRA regulations. Unilever Indonesia (UNVR IJ) EQUITIES PERSONAL PRODUCTS Indonesia 32000.00 41000.00 50000.00 Sep 15 Mar 16 Sep 16 Target price: 40400.00 High: 47800.00 Low: 34600.00 Current: 44300.00 Initiate at Hold: Premiumisation and quality priced in
44
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Disclosures & Disclaimer
This report must be read with the disclosures and the analyst certifications in
the Disclosure appendix, and with the Disclaimer, which forms part of it.
Selviana Aripin*, CFA Analyst The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch [email protected]
+65 6658 0610
Karen Choi* Head of Consumer & Retail Research, Asia Pacific The Hongkong and Shanghai Banking Corporation Limited, Seoul Securities Branch [email protected]
+822 3706 8781
*Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is not registered/qualified pursuant to FINRA regulations.
Unilever Indonesia (UNVR IJ) EQUITIES PERSONAL PRODUCTS
Conditioner: Sunsilk (#1) and Pantene (#2) are dominant but slipped a little. Ellips (#3) is gaining market share. Garnier (#4) slipped significantly (-5.6% between 2010 and 2015).
Washing machine detergent Handwash: Daia (#2) and Attack (#3) are gaining market share; Rinso (#1), So Klin (#4), and Wings (#5) are losing market share. In spite of UNVR’s brands losing market share, we take a positive view on this because UNVR deliberately did not compete aggressively in the lower-end cream-based handwash detergent category.
Automatic detergent: Rinso (#1) and So Klin (#2) dominant and continue to gain market share
New flavours (such as honeycomb, dark chocolate) in impulse ice cream
Impulse ice-cream: Paddle Pop (#1), Cornetto (#2), Wall’s (#3) remain dominant. Campina (#4) and Diamond (#5) are losing market share
Take-home ice cream: Wall’s gained significant (+13.1%) market share between 2010 and 2015. Campina and Diamond are losing market share.
Oral care
8% -1.9% Toothpaste: Pepsodent/ Signal
Toothbrush: Pepsodent/ Signal
Toothpaste: Ciptadent (Lion), Formula (Orang Tua), Sensodyne (GSK)
Toothbrush: Formula (Orang Tua), Oral-B (P&G)
Oral care for people with sensitive teeth
Toothpaste: Pepsodent (#1) has lost significant (-5.8%) market share, mainly due to the entry of Sensodyne (#5) which gained 4.5% market share over the same period. Close up (#3) and Formula (#4) gained market share while Ciptadent (#2) slipped a little.
Toothbrush: Formula (#1), Pepsodent/ Signal (#2), and Oral-B (#3) gained market share.
Pre-prepared condiments/ marinade incorporating existing sauce (such as Bango)
New flavour variant (such as spicy sweet soy sauce)
Gel-based stock
Cooking sauce: Masako (#1) and Royco (#2) gained significant market share (+6.3% and +3.2%, respectively) while Sasa (#3) and Ajinomoto (#4) lost significant market share (-3.5% and -2.1%, respectively)
Soy sauce: Bango (#1), ABC (#2), Indofood (#3), and Sedaap (#4) gained market share. Nasional (#5) lost market share.
Others 27% Total 100%
Source: Euromonitor, HSBC estimates
11
EQUITIES PERSONAL PRODUCTS
20 September 2016
A young population and strong GDP growth
Indonesia, home to 256 million people, has a favourable demographic profile – 43.9% of the
population are under the age of 25 and 85.2% under 55. Over the past decade, Indonesia’s
GDP growth has been between 4.6% and 6.3%. This makes it a very attractive market for
producers of fast-moving consumer goods.
Indonesia: Demographics in 2016 Indonesia: GDP growth
Source: CIA World Factbook Source: CEIC, World Bank, HSBC estimates
High or moderate degree of concentration
The Herfindahl-Hirschman Index (HHI) is used to measure the degree of market concentration,
taking into account the market share of competitors in the industry. We estimate the HHI Index
of all the segments where Unilever Indonesia operates. We also show that Unilever Indonesia
has expanded its market share, particularly across skin care, hair care, ice cream, and sauces
categories in recent years. See the table on the next page.
(15) (5) 5 15
0-4
10-14
20-24
30-34
40-44
50-54
60-64
70-74
80-84
80-84
90-94
100+
Millions
Female
Male
5.7%5.5%
6.3%6.0%
4.6%
6.2%6.2%6.0%5.6%
5.0%4.8%
0%
1%
2%
3%
4%
5%
6%
7%
05 06 07 08 09 10 11 12 13 14 15
GDP growth
Industry analysis
Indonesia has a favourable demographic profile and robust
GDP growth
Most FMCG categories have a high to moderate degree of
concentration, pointing to sustainable pricing and margins
For Unilever Indonesia, the key segments to watch include skin care,
hair care, laundry care, oral care, and ice cream
EQUITIES PERSONAL PRODUCTS
20 September 2016
12
Herfindahl–Hirschman Index (HHI) (2015)
Est impact on UNVR’s revenue HHI Index Interpretation of HHI Index
Home and personal care Skin care 25% 0.252 High concentration Hair care 12% 0.251 High concentration Laundry care 10% 0.249 Moderate concentration Oral care 8% 0.326 High concentration Bath & Shower 6% 0.214 Moderate concentration Deodorants 2% 0.412 High concentration Men’s grooming 2% 0.189 Moderate concentration Surface care 2% 0.170 Moderate concentration Dishwashing 1% 0.369 High concentration Baby & Children 1% 0.164 Moderate concentration Toilet care 0% 0.325 High concentration Sub-total 70% Food and refreshment Ice cream 9% 0.498 High concentration Sauces, Dressings, and Condiments 8% 0.140 Unconcentrated industry Oils and fats 7% 0.235 Moderate concentration Tea 4% 0.135 Unconcentrated industry Juice 2% 0.223 Moderate concentration Sub-total 30% Total 100%
Source: Euromonitor, HSBC estimates
Revenue contribution by segment (2015) EBIT contribution by segment, before unallocated expenses (2015)
Source: UNVR Source: UNVR
70%
30%Home andpersonal care
Food andrefreshment
82%
18% Home andpersonal care
Food andrefreshment
13
EQUITIES PERSONAL PRODUCTS
20 September 2016
Market share in Indonesian skin care (%) Market share in Indonesian hair care (%)
Unilever Indonesia is the leader in Indonesian skin care with a 47% share of the market, according
to Euromonitor, which estimates that the segment contributed 25% of 2015 revenue. Unilever
controls a number of leading brands in facial care (Pond’s) and body care (Citra and Vaseline).
Pond’s main competitor in the facial care segment in Indonesia is Proctor & Gamble’s (PG US,
Not Rated) Olay. Citra and Vaseline compete against Beiersdorf’s (BEI GR, Not Rated) Nivea
and Tempo Scan Pacific’s (TSPC IJ, IDR2,130, Buy, TP: IDR2,900) Marina. Skin care products
with whitening attributes remain popular among Indonesian consumers as fair, porcelain-white
skin is still widely perceived as the standard of beauty. According to Euromonitor data, the
Indonesian skin care market grew at a CAGR of 22% between 2010 and 2015, driven by facial
moisturisers and anti-ageing products which grew at CAGRs of 24% and 26%, respectively. We
think that this trend is driven by an increasing awareness of the importance of moisturising as
part of the consumer beauty regime, supported by rising disposable income.
Unilever Indonesia positions Citra as an Indonesian heritage beauty product which uses natural
ingredients. Examples include Citra Bengkoang White Lotion (whitening lotion which uses
turnips) and Citra Mangir Beauty Lotion (lotion which uses scaly ash, an evergreen rainforest
tree). Vaseline, on the other hand, is positioned as a mass-market skin care solution.
Based on Euromonitor’s data on market share the Indonesian skin care segment has a HHI
score of 0.252, which suggests a high degree of concentration. Furthermore, barriers to entry in
the skin care industry are generally high because of the need for economies of scale
(particularly in the area of distribution throughout Indonesia), brand equity, customer loyalty, and
initial capital requirement.
Indonesian skin care Herfindahl–Hirschman Index (HHI) (2015)
Market share Squared
Unilever Group 47% 0.222 Procter & Gamble 14% 0.021 L’Oréal Groupe 7% 0.005 Kao Corp 4% 0.001 Beiersdorf AG 3% 0.001 Others 25% 0.003 Total 100% 0.252
Source: Euromonitor, HSBC
We think that the skin care segments are driven by two major factors – whitening and anti-ageing.
Most major brands have SKUs that address these needs. Comparing Unilever Indonesia’s Pond’s,
which Euromonitor estimates has an 46.5% market share, with P&G’s Olay, the second most
popular skin care line with 16.1% of the market, Pond’s generally targets a broader, lower-income
market as the nominal prices of the products are cheaper.
Comparing Pond’s (UNVR) and Olay (P&G Indonesia)
Unilever Pricing (IDR) P&G Pricing (IDR)
Facial moisturisers Pond’s White Beauty Naturals Day Cream (50 g)
46,200 Olay White Radiance Advanced Whitening Moisturiser (50 g)
95,300
Facial cleanser Pond’s White Beauty Pearl Cleansing Gel (100 g)
24,100 Olay Regenerist Revitalising Cream Cleanser (100 ml)
47,990
Anti-aging Pond’s Age Miracle Day Cream (25g)
60,490 Olay Total Effects 7 Day Cream SPF15 (50 ml)
139,990
Anti-aging Pond’s Age Miracle Firm & Lift Serum (25ml)
199,490 Olay Regenerist Night Resurfacing Essense (50 ml)
219,990
Source: Euromonitor
Fair, porcelain-white skin is
still widely perceived in
Indonesia as the standard of
beauty
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EQUITIES PERSONAL PRODUCTS
20 September 2016
Targeting the lower end of the market does not necessarily mean lower margins. For example,
Pond’s Age Miracle Day Cream, which retails for around IDR60,000 weighs 25 grams, while
Olay Total Effects 7 Day Cream, which costs IDR140,000, weighs 50 grams. In this case, it
seems that Pond’s is sold for a lower nominal price to accommodate the smaller packaging.
Hair care
Unilever Indonesia is the leader in hair care with 39% market share, according to Euromonitor,
which estimates that the segment contributed 12% to 2015 revenue. Unilever controls a number
of brands such as Sunsilk, Clear, Lifebuoy, TRESemme, and Dove across shampoo and
conditioner categories, as well as styling agents Brylcreem and Clear.
Within the shampoo segment, Unilever Indonesia competes against P&G, which owns brands
like Pantene, Rejoice and Head & Shoulders. In the conditioner segment it competes with
P&G’s Pantene and Rejoice, Kino Indonesia (KINO IJ, Not Rated), which owns brands like
Ellips, and L’Oreal Groupe (OR FP, Not Rated), which has Garnier and L’Oreal Paris. According
to Euromonitor, the Indonesian hair care market grew at a CAGR of 13% between 2010 and
2015, driven by conditioners (16% CAGR).
The rising popularity of conditioning products is based on: 1) many Indonesians (and Asians in
general) are genetically predisposed to hair cuticles that are thicker, wider, coarser, and more
densely packed; 2) the hot and humid weather encourages people to wash their hair more than
once a day; 3) many Indonesians have frequent, direct exposure to the sun; 4) many
Indonesians like to straighten or curl their hair.
Based on Euromonitor data on market share, the Indonesian hair care segment has a HHI
score of 0.251, which suggests a high degree of concentration. Barriers to entry are generally
high because of the need for scale, difficulties in distribution, and customer loyalty or stickiness.
TRESemme is an example of how Unilever Indonesia responds to local market trends.
Introduced to Indonesia a few years ago, the product has been gaining popularity thanks to
rising disposable income that allows more Indonesian women to indulge in frequent visits to the
hair salon. Introducing salon-quality hair care products that consumers can use at home opens
up a new product sub-category.
Indonesian hair care Herfindahl Hirschman Index (HHI) (2015)
Market share Squared
Unilever Group 39% 0.154 Procter & Gamble 28% 0.077 L’Oréal Groupe 10% 0.009 Mandom Corp 9% 0.008 Kino Sentra Industrindo PT 5% 0.002 Others 10% 0.002 Total 100% 0.251
Source: Euromonitor, HSBC
Oral care
Unilever Indonesia is the market leader in oral care with a 52% share of the market according to
Euromonitor, which estimates that the segment contributed 8% of 2015 revenue. The company
controls brands such Pepsodent, which is known as Signal in other markets. Pepsodent is the
leader in the toothpaste category, in while Orang Tua Group’s Formula leads the toothbrush
category. According to Euromonitor, the Indonesian oral care market grew at a CAGR of 8%
between 2010 and 2015.
Intensive conditioning
products are very popular
TRESemme is an example of
how UNVR responds to local
market trends
EQUITIES PERSONAL PRODUCTS
20 September 2016
16
The strategy of capturing market share and growing the segment has been successful. It has
resulted in: 1) the launch of variants such as Pepsodent Sensitive Expert Whitening, Pepsodent
Whitening and Pepsodent Herbal; 2) multiple SKUs with different sizes (50g, 65g, 100g); 3)
different price points (Pepsodent Gigi Susu Strawberry Bubble at 50g selling for IDR5,800;
Close-Up Diamond Attraction at 100g selling for IDR26,490; 4) different customer segments
(Pepsodent Gigi Susu Orange Fruity/Pepsodent Gigi Susu Strawberry Bubble for kids with milk
teeth and Pepsodent Sensitive).
Based on Euromonitor’s data on market share, the Indonesian oral care segment has a HHI
score of 0.326, which suggests a high degree of concentration. The main barrier to entry is
strong brand equity, built through years of advertising and marketing.
Rising disposable income and education levels have increased demand for oral care from
people with sensitive teeth. Sensodyne, GlaxoSmithKline (GSK LN, GBp1,624, Buy, TP:
GBp1,970) has filled this need and its market share grew from 3.3% in 2010 to 7.8% in 2015.
Unilever Indonesia’s Pepsodent Sensitif Expert has not gained traction as quickly, resulting in a
loss of market share within the toothpaste category.
Indonesian oral care Hirschman Index (HHI) (2015)
Market share Squared
Unilever Group 52% 0.268 Orang Tua Group 18% 0.033 Lion Corp 14% 0.018 GlaxoSmithKline Plc 6% 0.003 Procter & Gamble Co, The 4% 0.002 Others 6% 0.000 Total 100% 0.326
Source: Euromonitor, HSBC
Laundry care
Unilever Indonesia has the second largest market share (33%) according to Euromonitor, which
estimates that the segment contributed 10% to 2015 revenue. Unilever Indonesia controls
brands such as Rinso, Molto (a leading fabric softener) and Surf. According to Euromonitor
data, the Indonesian laundry care market grew at a CAGR of 11% between 2010 and 2015,
driven by automatic detergent (12% CAGR). Rinso is a leader in the automatic detergent
segment with a 54% market share.
We believe Unilever Indonesia’s strength in the detergent market is a result of its strategy to
avoid competing directly in the hand wash cream detergent segment. The overall detergent
category is dominated by hand wash detergents, which make up around 76% of the market. This
is due to the relatively low rate of washing machine ownership (32%). We think that as more
Indonesian households own a washing machine, the market will shift from hand wash detergents
to automatic detergents. Within the hand wash laundry segment, Unilever’s Rinso and Surf
compete against Wings Group’s Daia, So Klin, and Wings. Rinso is the most popular brand.
Rising disposable income
and education levels increase
demand for oral care from
people with sensitive teeth
17
EQUITIES PERSONAL PRODUCTS
20 September 2016
Indonesian laundry care segment by retail value
Source: Euromonitor, HSBC
The pricing for hand wash detergent is designed to be both affordable and available in small
packages. This caters to the lower end of the market, especially consumers on day wages. For
example, Wings Sabun Cream Ekonomi Putih (Wings White Ekonomi Cream Soap) is available
in 230g packs and retails for IDR2,300. Compare this with machine wash detergent, Rinso Matic
Front Load, which is available in 1kg packs and sells for IDR29,600.
We are optimistic about growth in the higher-priced machine wash detergent segment. The
washing machine ownership rate is 32%, relatively low compared to other Asian countries. The
shift from hand wash to machine wash detergent will be driven by: 1) improved electricity
supply; 2) the rate of urbanization; and 3) disposable income.
Based on Euromonitor’s data on market share, the ice cream market has a HHI score of 0.498,
which suggests a high level of concentration. Entry barriers are very high because the ice cream
business is capital intensive, has high storage costs, and requires an efficient distribution network.
42%
58%
Modern trade
General trade
94%
6%
Modern trade
General trade
Barriers to entry in the ice
cream category are very high
19
EQUITIES PERSONAL PRODUCTS
20 September 2016
Indonesian ice cream Herfindahl–Hirschman Index (HHI) *(2015)
Market share Squared
Unilever Group 68% 0.458 Royal FrieslandCampina NV 18% 0.032 Diamond Cold Storage PT 8% 0.006 Indofood Sukses Makmur Tbk PT 2% 0.000 Indo Van Houten PT 1% 0.000 Others 3% 0.001 Total 100% 0.498
Source: Euromonitor, HSBC
Sauces, dressings and condiments
Unilever Indonesia is the dominant player in sauces, dressings, and condiments with a 19%
market share according Euromonitor, which estimates that the segment contributed 8% to 2015
revenue. The company controls brands such as Bango and Royco that compete with Kraft
Heinz’s (KHC US, Not Rated) ABC brand table sauce, Ajinomoto’s (2802 JP, Not Rated)
Masako brand, Indofood CBP’s (ICBP IJ, Hold, IDR9,475, TP: IDR8,650) own brand, and
privately-owned Rodamas Group’s Sasa brand.
The market features a large number of products made by companies. Based on Euromonitor’s
data on market share, the sauces, dressings and condiments market has a HHI score of 0.140,
suggesting an unconcentrated market.
Indonesian sauces, dressings, and condiments Herfindahl–Hirschman Index (HHI) (2015)
Market share Squared
Kraft Heinz 24% 0.055 Unilever Group 19% 0.037 Ajinomoto 16% 0.024 Indofood Sukses Makmur Tbk PT 13% 0.016 Rodamas Group 6% 0.004 Others 23% 0.004 Total 100% 0.140
Source: Euromonitor, HSBC
Bottom line
To recap, four out of Unilever Indonesia’s six leading categories compete in very concentrated
markets. They are: 1) skin care: the top three players have a 68% market share; 2) hair care:
top three 77%; 3) Oral care: top three 84%; and 4) ice cream: top three 94%.
We estimate that 57% of the company’s revenue is attributable to segments with a high degree
of concentration. The generally high barriers to entry confirm our view that top line growth and
margins remain sustainable and resilient.
EQUITIES PERSONAL PRODUCTS
20 September 2016
20
Company profile
Unilever Indonesia is one of the country’s leading fast moving consumer goods (FMCGs)
companies. It produces and distributes home and personal care products as well as food and
beverage products. Unilever Indonesia is an important component of the Jakarta Composite
Index (JCI) with a 6.0% weighting as at 30 August 2016. Unilever Indonesia is majority owned
(85%) by Unilever NV/ Plc (UNA NA, Not Rated).
The company has a track record of delivering growth. Over the past decade, revenue growth
has always exceeded the Indonesian inflation rate. Furthermore, in eight of out the past 10
years, EPS has grown at a rate that exceeds GDP growth.
Investment thesis
We initiate coverage on Unilever Indonesia with a Hold rating and a target price of IDR40,400, which
implies 9% downside to the current price. Our investment thesis is based on the following factors:
We expect premiumization to drive revenue growth. We believe this is the right strategy at a
time of robust GDP growth. We forecast 14.5% and 16.6% EPS growth in 2016e and
2017e, respectively, supported by 4.9% and 5.1% GDP growth over the same period.
We expect operational efficiency and the stabilization of the royalty expense rate (at a
maximum of 8% of domestic revenue) to boost margins, while further improvements in
working capital management will support cash flow.
We think that the expected improvements are already in the price. UNVR’s current price
implies 35.2x 2016e EV/EBITDA and 50.4x 2016e PE, which is at a premium relative to its
own trading range. Even at this level, we do not think that the valuation is unreasonable. It
reflects UNVR’s superior ROE (2015: 124%), consistent dividend pay-out, and potential
growth. The stock has historically traded at a premium relative to consensus, reflecting its
cash generating ability and strong growth of 16% CAGR over 2015-18e.
Unilever Indonesia
Earnings to benefit from a broad-based economic recovery,
operational efficiency and the stabilization of the royalty rate
However, we think that these positive factors are already in the price
Initiate with a Hold rating and target price of IDR40,400
21
EQUITIES PERSONAL PRODUCTS
20 September 2016
UNVR: Delivered positive real growth UNVR: EPS growth generally ahead of GDP
Source: Company data, Indonesian Statistics Board, HSBC Source: Company data, CEIC, World Bank, HSBC
SWOT analysis
Unilever Indonesia
Strengths Weaknesses
Strong product range and established distribution channel. Significant exposure to the Indonesian market with little external exposure to offset domestic weaknesses.
That most of Unilever Indonesia’s products are Halal certified gives a lot of comfort to Indonesian customers, the majority of whom are Muslims.
Exposure to the highly competitive and lower margin sauces, dressings, and condiments segment.
With the exception of the increase in royalty income starting 2013, Unilever Indonesia is generally recognized for having strong corporate governance.
Given the size of Unilever Indonesia, there are very few M&A opportunities that can significantly move the needle.
Opportunities Threats
Unilever Indonesia benefits from favourable demographics. Around 44% of the 256 million population is under the age of 25.
Possible introduction of excise tax on plastic bottles and packaging (the "plastic tax") is potentially negative. The exact framework of the plastic tax is currently unknown but it is likely to start in 2017.
Deep understanding of the consumer psyche presents opportunities to grow local products. For example, Unilever Indonesia recently introduced shampoo targeted at hijab wearers.
Increasing competition, particularly within the food & refreshment space, may be negative for Unilever Indonesia.
Acquisitions that are earnings accretive may be positive for Unilever Indonesia.
Health/food safety issues related to the products that Unilever Indonesia sells may result in lost revenues, loss of reputation, and impairment of brand values.
Source: HSBC
Corporate governance and management
Corporate governance practices at Unilever Indonesia include the Unilever Sustainable Living
Plan, which aims to reduce environmental impact while improving social consequences.
Unilever Indonesia, through its head office, is also committed to sourcing 100% of its palm oil
from sustainable sources. Key executives include:
0%
5%
10%
15%
20%
25%
30%
05 06 07 08 09 10 11 12 13 14 15
Revenue growth Inflation rate
0%
1%
2%
3%
4%
5%
6%
7%
-5%
0%
5%
10%
15%
20%
25%
30%
05 06 07 08 09 10 11 12 13 14 15
EPS Growth (Left HS) GDP growth (Right HS)
EQUITIES PERSONAL PRODUCTS
20 September 2016
22
Unilever Indonesia: Key executives
Name Title Biography
Maurits Daniel Rudolf Lalisang
President Commissioner He was appointed President Commissioner effective 1 December 2014. Prior to that, he served as President Director of Unilever Indonesia from May 2004 until December 2014. Since joining Unilever Indonesia in 1980, he has held several other prominent posts, including that of Corporate Relations Director, Foods Director, Home Care Director, and Sales Director.
Hemant Bakshi President Director He was appointed as President Director effective 1 December 2014. He joined Hindustan Unilever Limited (HUL) in 1989. Previous senior posts include Executive Director for the Home and Personal Care Business at HUL, and HUL’s Director, Customer Development.
Debora Herawati Sadrach
Refreshment & Marketing Service Director
She was appointed Director in 2002. She joined Unilever Indonesia in 1988 and currently serves as Refreshment & Marketing Services Director. Previous senior posts include Personal Care Director, Home and Personal Care Director, General Manager Marketing Services Department, Marketing Controller Personal Care Division, Marketing Manager Marketing Manager Oral Care & Leader of Oral Care Support Center for SEA/NEA.
Enny Hartati Sampurno Customer Development Director She joined Unilever Indonesia in 1991. She was appointed Director in 2011 and has served as Customer Development Director since January 2016. Previous senior posts include Human Resource Director (until 31 December 2015), General Manager Supply Planning; Commercial Manager, HPC; Commercial Manager, Customer Development; Senior Finance Business Partner; and Manager, Customer Development.
Tevilyan Yudhistira Rusli
Finance Director and Chief Financial Officer
He has served as Finance Director and Chief Financial Officer since 2013. He joined Unilever Indonesia in 2000. Senior posts include Commercial Manager - Food, Financial Planning & Analysis Director of Unilever Vietnam, Global Corporate Audit Director based in Singapore and Regional Finance Director for Asia Africa Food Solutions.
Sancoyo Antarikso Governance and Corporate Affairs Director
He was appointed Director in 2012. He has been with Unilever Indonesia since 1990, and currently serves as Governance and Corporate Affair Director and Corporate Secretary. Previous senior posts include Financial Controller; Group Audit Manager; Commercial Manager, Home Care; Commercial Director, PT Kimberly-Lever Indonesia; and International Project Manager, Ice Cream Take Home Innovation Centre, Unilever Europe, UK. He is currently the Chairman of Indonesian Advertising Council Presidium, Chairman of APPINA (Association of Indonesian Advertising Companies), Secretary General of APJP (Association of Corporate Priority Line) and Secretary General of PERKOSMI (Indonesian Cosmetics Association).
Annemarieke de Haan Personal Care Director She joined Unilever in 1999 and was appointed Director effective 1 January 2015. Currently, she serves as Personal Care Director. Previous senior posts include Vice President, Refreshment and Home and Personal Care Benelux; Vice President, Brand Building Home and Personal Care Benelux; Marketing Director Home and Personal Care Benelux; Marketing Director Hair Care Europe; Marketing Manager, Hair Care Netherlands; Brand Manager Robijn Netherlands.
Willy Saelan Director He joined Unilever Indonesia in 1995 and was appointed Director effective 1 January 2016. Previous senior posts at Unilever are Head of HR for Marketing, and Sales at PT Unilever Indonesia Tbk, (Acting) Head of HR at Unilever Australia and New Zealand, HR Director Marketing & R&D South East Asia, HR Director Leadership Supply & Organization Effectiveness, AACEE (Asia Africa Middle East, Eastern Europe Region), and Indonesia & Philippines Reward Director.
Amparo Cheung Aswin Supply Chain Director She was appointed Director in the role of Supply Chain Director since 1 January 2016. She joined the Unilever group in 1997 and previous senior posts include VP Supply Chain Foods Asia, Africa, Middle East, Turkey and Russia in 2009 to lead innovation and capacity deployment, VP Logistics Excellence Asia, Africa, Middle East, Turkey and Russia in 2011 to form and set up the central logistics excellence function and strategy prior to moving to her role as VP Manufacturing, Foods and Refreshment, SEAA.
Vikas Gupta Director He was appointed as a Director in the role of Vice President Home Care effective 1 September 2016. He joined Unilever in 1998 as a management trainee. Over the past 18 years, he has worked in sales, brand building and brand development across home and personal care categories, in local, regional and global roles. The last 2 roles have been as the VP, Laundry, India and South Asia based in Mumbai and Global VP, “Dirt is Good” initiative (marketing campaign run by Unilever) of OMO/Persil (aka Rinso in Indonesia) based in Singapore. He has developed deep expertise in marketing to consumers in the developing world in Asia, Africa and South America. This includes his particularly deep engagement with the Indonesian consumers and Unilever Indonesia over the years in various roles. He worked across offices in Delhi, Mumbai, London, Singapore, and Sao Paulo before coming to Jakarta.
Hernie Raharja Director for Foods She was appointed Director for Foods effective 1 September 2016. She joined Unilever Indonesia in 1997. Previous senior posts include Global Brand Director Pepsodent since 2014, leading innovations, marketing mix creation, business development and strategy: SEA, SA, Middle East and Africa; Regional Brand Director Oral Care SEA in 2013 leading innovation deployment and category strategy of Pepsodent and Close up; Hair Care Indonesia Marketing Director leading Indonesia Hair Care category business and expansion in 2010-13, and Oral Care Indonesia Marketing Director, leading Brands and business building in 2006-10 – PT Unilever Indonesia Tbk.
Source: Company data
23
EQUITIES PERSONAL PRODUCTS
20 September 2016
Management strategy
The modern trade channel in Indonesia has evolved over the past decade as a result of
changing shopping habits and the entry of multinational retailers. Despite this, traditional trade
will remain relevant in the future. Across the various product categories in which Unilever
Indonesia has exposure, traditional retailers account for between 19% and 72% of the
distribution. Unilever Indonesia’s dominance of the traditional trade channel is a source of
competitive advantage, given the difficulty in penetrating this channel. As a result of Unilever
Indonesia’s leading market share, the company has become the go-to supplier for modern
retailers, further enhancing its leading position and raising its bargaining power.
Home care: Distribution channel (%) Personal care: Distribution channel (%)
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