Longevity creates new consumption opportunities Aneta Wynimko - - PowerPoint PPT Presentation

Longevity creates new consumption

• pportunities

Aneta Wynimko

Portfolio Manager Fidelity International

Longer lifespans

Source: Fidelity International, 2019

?

Roman Empire Middle Ages Industrial Revolution 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% 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

More Boomers than Millennials

Source: Fidelity International, Versace SS2020 Fashion Show

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, 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 Korea China Brazil India 61% 56% 55% 50% 50% 48% 40% 45% 50% 55% 60% 65% China UK US France Japan World

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

• perating 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 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Revenue EBIT margin

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

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 < $30,000 Collegae graduate Some colleage High school or less 95 81 76 62 41 4.2 3.5 3.2 3.1 2.6 10 20 30 40 50 60 70 80 90 100 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 Ageless America On Premise On Premise On Premise Digital Foundation Search / Always On Search / Always On Brand Stories Brand Purpose Drive Purpose Platforms 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 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Revenue EBIT margin

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

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 2018 China US

Pet ownership (% of households)

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 America 39%* CAGR +5% EMENA 32%* CAGR +4% LATAM 11%* CAGR +13% AOA 18%* 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) Colgate Smucker's General Mills Others 0% 5% 10% 15% 20% 25% 2000 4000 6000 8000 10000 12000 14000 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 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, EssilorLuxottica Capital Market Day Source: Fidelity International, 2019, EssilorLuxottica Capital 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, EssilorLuxottica Capital Market Day

Consumer consumption per capita (Index) Growing presbyopia prevalence People, % of global population Large untapped opportunities in vision correction and protection

200 400 600 800 1000 1200 US France china Eyecare & eyewear Shoes Dentistry Apparel (women)

7.6bn

people worldwide

2.0bn

corrected (43%)

2.6bn

uncorrected

1.4bn

equipped with sunglasses (18%)

6.2bn

unequipped

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% Polarized Sun Rx Photochromic Progressive Blue-cut Thin (index>1.6) Anti-reflective Global penetration Highest penetration

Source: Fidelity International, 2019, EssilorLuxottica Capital Market Day

Penetration of value-added lenses on total prescription lenses Combined Essilor and Luxottica (€bn)

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 5000 10000 15000 20000 25000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 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

2000 4000 6000 8000 10000 12000 14000 16000 18000 EssilorLuxottica Walmart Hoya Fielmann National Vision Zeiss Safilo Costco Wholesale

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

• pportunity
• 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
• pportunity

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 economy

Investment Conference 2019

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