Longevity creates new consumption opportunities Aneta Wynimko - PowerPoint PPT Presentation

Longevity creates new consumption opportunities Aneta Wynimko Portfolio Manager Fidelity International

Longer lifespans Roman Middle Industrial 2019 2070 Empire Ages Revolution ? 25 years 33 years 55 years 72 years 125 years Source: Fidelity International, 2019

Increasing percentage of population moving into the 3 rd act (>60) 1950 2000 2050 0.2 Billion (8%) 0.6 Billion (10%) 2.0 Billion (21%) Source: Fidelity International, OECD population forecasts, July 2015.

Baby Boomers are a big and attractive consumer group More Boomers than Millennials 60% 50% 40% 30% 20% 10% 0% Pakistan Nigeria Philippines South Africa India Mexico Indonesia Turkey Brazil US Thailand China UK France Canada Poland Russia South Korea Spain Japan Italy Germany Millennials Boomers Source: Fidelity International, US Census Bureau Population Estimates for 2020

Four themes I invest behind to benefit 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, Versace SS2020 Fashion Show

New Ad Spot For L'Oreal Age Perfect shows strong women age well Beauty industry is a big beneficiary of Baby Boomers desire to stay active and attractive Source: Fidelity International, British Vouge, December 2018

Skin care is key beneficiary from spending by older independent women Spend on prestige beauty, women 15-65y old, $ pa Labour force participation rate, female 2018 $300 65% $276 $255 61% $250 60% 56% $200 55% 55% $150 50% 50% 50% 48% $100 45% $50 $23 $21 $2 $0 40% US Korea India UK US France World China Brazil China Japan Source: Fidelity International, Estee Lauder, Investor day March 2019 Source: Fidelity International, 2019, The World bank

Estee Lauder’s strong track record in skin care Growth and profitability of skin care Strong growth in revenue and profitability ($m) 16,000 18% 35% 16% 14,000 30% 14% 12,000 25% 12% 10,000 20% 10% 8,000 8% 15% 6,000 6% 10% 4,000 4% 5% 2,000 2% 0% - 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 growth constant currency operating margin Revenue EBIT margin Source: Fidelity International, 2019, Estee Lauder, company accounts Source: Fidelity International, Bloomberg, 2019

High end spirits 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 US national off-premise average Beer consumption declines quite Proportion (%) of adults who drank spirits value pp per year dramatically with age, while spirits alcohol by income and education, consumption is more stable US 2015 95 100 $140 90% 90 81 80% $118 76 $115 70% 80 $120 60% 70 62 50% $100 $91 40% 60 30% 50 41 20% $80 $70 10% 40 0% $60 30 >$75,000 < $30,000 $30,000-$75,000 High school or less Some colleage Collegae graduate 20 $40 4.2 10 3.5 3.2 3.1 2.6 $20 0 21-34 35-44 45-54 55-64 65+ $0 Beer (litres) Pure Alcohol (litres) 21-24 25-34 35-49 50+ Source: Fidelity International, Indoscout 2016, Diageo Source: Fidelity International, Gallup annual 2017 investor day Source: Fidelity International, Nielsen consumption pool, July 2015

Spirits companies pay more attention to the ‘ageless consumers’ Diageo @ its 2018 investor day shifts focus to marketing Diageo shows impressive track record of growth and to the Ageless Americans profitability (£m) F16 F17 F18 14,000 35% 12,000 30% Ageless Millennials Multi-Cultural America 10,000 25% 8,000 20% On Premise On Premise On Premise 6,000 15% 4,000 10% Digital Search / Search / Foundation Always On Always On 2,000 5% - 0% Brand Brand Drive Purpose 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Stories Purpose Platforms Locally Revenue EBIT margin Insights, Targeting and Measurement / ROI Source: Fidelity International, Diageo investor day 2018 Source: Fidelity International, 2019, Bloomberg

Pet food industry is a big beneficiary of Baby Boomers need for companionship

Petcare is a structurally growing market as the number of pet companions keeps growing Global pet population in 2018 vs 2017 Total spending on pets in the US ($bn) Pet ownership (% of households) Total: 884m 80% Silent Generation 67% 70% 64% 56% 60% Baby Boomers 50% 40% Gen X 30% 22% 471m +4.4% 16% 20% Millennials Millenials 10% 0% 0 20 40 1988 2013 2018 2017 2016 2015 2014 China US 373m +5.6% Source: Fidelity International, US - 2019-2020 APPA Source: Fidelity International Euromonitor 2019 edition, Source: Fidelity International, 2019, National Pet Owners Survey; China - 13D Global 2018 Petbusinessprofessor.com Strategy & Research

Pet food is a structurally growing market, as ‘pet parents’ increase spending Nestle expects category growth @ 7% in 2018-2023 Pet food category 2018: $81.5bn 6% CAGR in 2016-2018 Commercial coverage 80% North America 70% 39%* CAGR +5% 60% EMENA 50% 32%* CAGR +4% 40% LATAM 30% 11%* CAGR +13% 20% 10% AOA 18%* CAGR +11% 0% Developed markets Emerging markets *% of 2018 category sales Source: Fidelity International, 2019. Commercial coverage refers to % of overall pet Source: Fidelity International, Nestle, Euromonitor 2019 edition nutrition derived from commercially prepared pet food, Nestle

Pet food is a structurally growing market, as ‘pet parents’ increase spending Competitive landscape in pet food, 2018 market share Nestle: Pet care (CHFm) 14000 25% 24% 12000 20% 10000 15% 43% 8000 6000 10% 4000 5% 2000 21% 0 0% FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 3% 4% 5% Mars Purina (Nestle) Colgate Revenue EBIT margin Smucker's General Mills Others Source: Fidelity International, Bloomberg, 2018. Operational income from 2005- Source: Fidelity International, Nestle Investor Seminar 2019 2008 and adjusted operational income from 2009 onwards.

Eyewear industry will benefit from consumers taking better care of their vision

Eyewear – ageing and use of digital devices create a booming end market Large untapped opportunities in Consumer consumption per capita Growing presbyopia prevalence vision correction and protection (Index) People, % of global population 40% 1 1200 4.1bn 1000 2.0bn 30% 1 4.6bn corrected (43%) 800 2.3bn (60%) require 2.6bn vision correction uncorrected 600 7.6bn people worldwide 400 200 1.4bn 100% equipped with should protect sunglasses (18%) 0 their eyes China 2000 2010 Today 2030 2040 2050 US France china 6.2bn (sun, UV, blue light) unequipped Eyecare & eyewear Shoes Dentistry Apparel (women) Source: Fidelity International, 2019, EssilorLuxottica Capital Market Day; 1 Global population of ~7.6 Source: Fidelity International, 2019, EssilorLuxottica Source: Fidelity International, 2019, EssilorLuxottica billion people in 2020 and 10 billion people in 2050, Capital Market Day Capital Market Day United Nations, internal analysis

The eyewear market is a great investment opportunity Penetration of value-added lenses on total Combined Essilor and Luxottica (€bn) prescription lenses 25000 20% 120% 18% 100% 100% 20000 16% 80% 66% 14% 64% 60% 15000 12% 43% 36% 10% 40% 30% 25% 21% 16% 10000 8% 15% 20% 10% 8% 6% 2% 6% 0% 5000 4% Polarized Sun Rx Photochromic Progressive Blue-cut Thin (index>1.6) Anti-reflective 2% 0 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Revenue EBIT margin Global penetration Highest penetration Source: Fidelity International, 2019, EssilorLuxottica Capital Market Day Source: Fidelity International, Bloomberg, 2018

The eyewear market is a great investment opportunity EssilorLuxottica is the dominant player with a strong Lens brands Frame brands brand portfolio 18000 Premium 16000 14000 12000 10000 8000 6000 4000 2000 0 EssilorLuxottica Walmart Hoya Fielmann Safilo National Vision Zeiss Costco Wholesale Entry Source: Fidelity International, EssilorLuxottica Capital Market Day

Baby Boomers consumption is a very attractive and fast growing market Source: Fidelity International, Balenciaga SS2020 fashion show