ABILIO DINIZ C H A I R M A N
PEDRO FARIA C E O
FEEDING THE WORLD
TOGETHER Partners Preparing FOOD Nurturing life with nature with love VISION FEEDING THE WORLD G L O B A L B R A N D I N G T H R O U G H G L O C A L H O U S E O F B R A N D S KEY CATEGORIES GEOGRAPHIC BIG TO BUILD EXPANSION FOCUS BETS Europe Value 1. New Central Europe STRATEGIC Cold Cuts added pork Businesses & chicken cuts Africa MARKET 2. South Gate China STRATEGY VISION Prepared Latam meals Cooked 3. Sadia Paraguay, Peru & Coated Halal MENA Egypt, Turkey Food On the go Service Asia portfolio Southeast Asia S U P P L Y F O O T P R I N T & M O D E L S Expand production platforms & new models KEY Sustainable Sales & Innovation People Quality Brand CAPABILITIES Chain Logistics
BRAZIL BRF Day Rafael Ivanisk & Leonardo Byrro General Managers Brazil
Today, less than …and to accelerate 35 % GROWTH in Brazil we embraced the of the global challenge and started our innovation in the INNOVATION food industry comes from the category leaders… engine to reach a new level Source: McKinsey
First let’s recap what happened in Brazil in the last 2 years... OUR SECTOR HAS MACRO IN BRAZIL HAS CHANGED A LOT... CHANGED A LOT... Oversupply in production Political crisis Overshoot in costs Contraction in disposable income New competitive landscape Decrease in consumer confidence Change in consumption habits Increase in unemployment Downtrade in products / categories Higher Inflation AND BRF HAS ALSO CHANGED
LET’S LOOK AT WHAT WE HAVE DONE DURING THIS PERIOD... Advance in Portfolio Brand/Consumer New distribution optimization at the center of Return of Segmentation (+40k POS) Project our strategy Perdigão Model (GTM) 2014 2016 From From Supply People One sales Channel to Push strategy to development team Region Market Pull & Talents
Portfolio From Optimization Push to Pull SOME Reduced significant Pull strategy makes sense for modern trade number of SKUs INITIATIVES Volumes flat in 1H16 (yoy) 10 lines back in Q4 WERE ALREADY Traditional trade is a different game... share of stock Opportunity for innovation ADJUSTED and new products Volumes down 15% in 1H16 (yoy) Supply & demand unbalanced + trade down in consumption profile FIFO 1 loss of R$207M in 1H16 vs R$121M in 1H15 Adjusting supply/demand and sales execution 1 FIFO (first in first out) – discounts associated with shelf life
One Perdigão Sales Team Return Brand equity larger New and larger portfolio than expected SOME OF With the same time at Change to One POS (point of sales) THEM ARE sales team VERY PROMISSING Proper segmentation Salami Perdigão (2016) was completely different Improved technology/ tools and training Different packaging Higher productivity Specific channels and efficiency BRF total volumes grew 13.7% 3Q vs 2Q
AND HERE ARE THE BIG WINS 1 2 3 4 5 GO TO SERVICE LOYALTY PEOPLE INNOVATION MARKET LEVEL PROGRAM
WE ARE SERVICE LEVEL IMPROVING THE to our clients... Fill rate Variable improving cost reducing Top 3 Key Accounts Variable Expenses Stock out -3% (1H16 vs 1H15) reduction 89% Fleet Optimization 86% Improve relationship 80% APP Improvement of delivery with clients Deliveries 75% phasing 73% 73% 5% increase in direct sales vs 2015 System monitoring routes Jan16 Jul16 Jan16 Jul16 Jan16 Jul16 A B C
LOYALTY Small/Medium Modern Trade Regional Supermarket (Top 100 Regionals Key Account) PROGRAMS Launched in Apr/16 Launched in Feb/16 GETTING CLOSER Loyalty program with Relationship program for adherence to price policy top 100 regional retailers Results: 1,265 clients Main Events: above target: Olympic Program 31% of clients achieved goal 2H16 Planning Meeting These clients performed 11.6 Jamie Oliver´s launch p.p. better than the others exclusive dinner
PAB (Talent Program) “Programa de PEOPLE aceleração Brasil” 91 “ PABs ” (Sales, Logistics and Finance areas) WE ENGAGED 21 promoted this year, two AND PROMOTED of them to sales managers Engagement 173 Promoted to leadership position this year 89% engagement in 2015 climate research with employees
Over 25 new products launched in 2016... Another 75 in the pipeline for 2017... Entering new categories... On the Go , Ready to Cook New products ’ average gross margin 17% higher than average portfolio AND MOST IMPORTANTLY, WE REIGNITED INNOVATION IN BRAZIL
GROWTH AND INNOVATION AGENDA DRIVING THE STRATEGY CHANNEL BRANDS CATEGORIES
SEGMENTATION WAS KEY TO GO TO MARKET (GTM) WHAT IT MEANS... Increase Service Level “segmentation” of Customized Cost to Serve profitable Stores (Traditional Trade) Visit frequency equalization More time at POS Delivery grid rationalization Large increase of merchandisers Internal sales force implementation Focus in perfect store execution Better understanding of customer profile
SEGMENTATION WAS KEY TO GO TO MARKET (GTM) 26% reduction in sales rep From 30% to 65% daily displacement segmented net revenue 18% increase in next Implementation day deliveries 30% more merchandisers ended Sep.16 and in large stores Rio State had a 7.7% volume the results so far... growth since implementation Extra 48 minutes Segmented clients: +10.9% per visit to attend profitable customers Non segmented clients: + 3.8%
TECHNOLOGICAL INTELLIGENCE TOOLS IN A BOX Sales Process Technology in our hands FOCUS MIX OUT OF STOCK Knowledge Intelligence in a Box GOLDEN FAMILY Focus Mix: usual mix history and Execution offering others products for sale by VISIT the client cluster: innovation, out of REVIEW stock and profitability (Golden Family) Productivity
GROWTH AND INNOVATION AGENDA DRIVING THE STRATEGY CHANNEL BRANDS CATEGORIES
1st MOST VALUABLE FOOD BRAND in Brazil BRANDS Source: Kaantar Vermeer – Isto é Dinheiro The Power of BRF Brands: Sadia , Perdigão and Qualy amongst the 5 most preferred masterbrands in food Preference 31 32 12 5 4 4 Top3 Preference 62 60 34 17 28 23 Consideration 92 95 96 95 94 93 Brand Awareness 98 95 96 95 94 93 Sources IPSOS
SADIA AND PERDIGÃO TWO LARGE EQUITY BRANDS Occupying different spaces in consumers minds And how to do that? Positioning them Focusing on With specific in a different way distinct occasions portfolios of products
SADIA BRAND Transparency Healthier products Leadership Communication on animal welfare, Offer products with a better nutritional Intellectual leadership real food, natural and better ingredients profile – balance (healthier) of the category
PERDIGÃO BRAND DELICIOUS Prepared with love: for family Democratic: for PRODUCTS: gathering moments, friends reunion everyone, accessible affordable quality and having food at the center of (100 Price Index) special moments
QUALY BRAND “AN EXTRA ‘Q’ OF TASTE AND HEALTHINESS THAT WILL SURPRISE YOU” Super ingredients: ingredients Healthy benefit: origin, characteristics and Energy Transfer functional benefits
THE HOUSE OF BRANDS STRATEGY IS AN IMPORTANT LEVER OF IGNITING GROWTH... Brazil Northeast PPC/unit 500G R$ 6.95 7 6 R$ 4.61 5 R$ 5.16 4 R$ 4.61 R$ 4.09 R$ 3.81 R$ 3.63 3 R$ 3.44 R$ 3.24 R$ 2.92 2 BRF BRF Source: Nielsen Retail JJ 2016 | 500g pack Market Share Value | Total Brand
GROWTH AND INNOVATION AGENDA DRIVING THE STRATEGY CHANNEL BRANDS CATEGORIES
Perdigão Chicken Cuts Assa Fácil Sadia Easy “Na Brasa ” range In-natura Bake Oven , Barbecue “100% Easy Bake cooked and Line to bring natural” Chicken with with vegetables vegetables I N N O V A T I O N C A N Innovation securing P R O T E C T T H E C O R E LONG TERM market share and margins… O F O U R B U S I N E S S and promoting TRADE UP
INNOV AT ION CAN M A R K E T S H A R E (Ready Meals*) INJECT GROWTH IN CURRENT CATEGORIES 73% NEW READY MEALS LINE 68% Fact Objective In 2015, the ready Develop the category through 2B16 4B16 an increase of portfolio with meals market was different price points R$1bi in Brazil Source: Niesen Retail Sadia: focus in convenience *Ex - lasanha BRF is the market and healthiness leader in the category leader Perdigão: focus in family size packs and traditional dishes Reduce dependency of a single product
INNOV AT ION CAN M A R K E T S H A R E (Salami) INJECT GROWTH 4% IN NEW AVENUES THE SALAMITOS CASE 0% Fact Objective In 2015, the snacks Build a snack 1B16 4B16 market was R$6.4bi platform, bringing in Brazil Sadia closer to Youngsters Source: Niesen Retail Expected CAGR (value) of 8% until 2019 Salamitos, since launch, selling full Highly concentrated capacity. Investments market: Pepsico is to increase capacity 63% of it and launch new flavors
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