Strauss Group Ltd. Annual Report 2017 , 31 As At
Total Page:16
File Type:pdf, Size:1020Kb
STRAUSS GROUP LTD. ANNUAL REPORT AS AT DECEMBER 31, 2017 WorldReginfo - d66d8ff8-3e86-4b37-a043-9e1a09bac32e Board of Directors Ofra Strauss, Chairperson Adi Strauss Ronit Haimovitch Dalia Narkys David Mosevics Prof. Arie Ovadia Meir Shanie Galia Maor Samer Haj-Yehia Joshua (Shuki) Shemer President & CEO Gadi Lesin EVP, CLO & Company Michael Avner Secretary Auditor Somekh Chaikin KPMG Registered office Hasivim St. 49 Petach Tikva 4959504, Israel WWW.STRAUSS-GROUP.COM WorldReginfo - d66d8ff8-3e86-4b37-a043-9e1a09bac32e STAUSS GROUP LTD. TABLE OF CONTENTS • DESCRIPTION OF THE CORPORATION'S BUSINESS • BOARD OF DIRECTORS' REPORT TO THE SHAREHOLDERS AS AT DECEMBER 31, 2017. • FINANCIAL STATEMENTS AS AT DECEMBER 31, 2017. • SEPARATE FINANCIAL INFORMATION AS AT DECEMBER 31, 2017. • ADDITIONAL DETAILS OF THE CORPORATION • CORPORATE GOVERNANCE QUESTIONNAIRE • ISOX DECLARATION • INCLUSION OF THE FINANCIAL STATEMENTS OF AN INVESTEE PURSUANT TO REGULATION 44 OF THE SECURITIES REGULATIONS, 1970 WorldReginfo - d66d8ff8-3e86-4b37-a043-9e1a09bac32e STAUSS GROUP LTD. DESCRIPTION OF THE CORPORATION'S BUSINESS WorldReginfo - d66d8ff8-3e86-4b37-a043-9e1a09bac32e Unofficial Translation from Hebrew - 1 - Description of the Company’s Business Contents Part I – Description of the General Development of the Company’s Business 1. The Company’s activities and description of its business development 2. Operating segments 3. Investments in the Company’s equity and transactions in its shares 4. Dividend distribution Part II – Other Information 5. Financial information on the Company’s operating segments 6. General environment and impact of external factors on the Company’s activity Part III – Description of the Company’s Business by Operating Segments 7. General – the food and beverage industry 8. The Israel Operation 9. The Health & Wellness segment 10. The Fun & Indulgence segment 11. The Coffee Operation 12. The Israel Coffee segment 13. The International Coffee segment 14. The International Dips & Spreads segment 15. Other Operations Part IV – Matters Relating to the Group’s Overall Activity 16. Customers 17. Marketing and distribution 18. Fixed assets, real estate and facilities 19. Research and development 20. Human capital 21. Financing 22. Taxation 23. Environmental issues 24. Restrictions and supervision of the Group’s operations 25. Material agreements 26. Legal proceedings 27. Objectives and business strategy 28. Information on geographical regions 29. Discussion of risk factors WorldReginfo - d66d8ff8-3e86-4b37-a043-9e1a09bac32e Unofficial Translation from Hebrew - 2 - Description of the Company’s Business Part I – Description of the General Development of the Company’s Business 1. The Company’s Activities and Description of Its Business Development The Company’s Activities 1.1 Strauss Group Ltd. (formerly Strauss-Elite Ltd., hereinafter: the “Company”) and the companies it controls, including jointly controlled companies (for the sake of convenience, the Company and said companies shall hereinafter be called the “Group”) are a group of industrial and commercial companies that operate in Israel and abroad, primarily engaged in the development, manufacture, marketing and sale of a variety of branded food and beverage products. The Group is also active in the development, marketing, servicing and sale of water filtration and purification products for home and office use. 1.2 The Company was incorporated and registered in Israel in 1933 and became a public company in 1973, whose shares are listed for trade on the Tel Aviv Stock Exchange Ltd. (hereinafter: “TASE”). 1.3 The controlling shareholders of the Company are Mr. Michael Strauss, (indirectly) through his holdings in Strauss Holdings Ltd. (hereinafter: “Strauss Holdings”)1 and a direct holding in the Company, and Ms. Ofra Strauss, who is deemed holder of the Company’s shares together with Mr. Strauss (hereinafter: the “Controlling Shareholders”). The Group is a food and beverage company with manufacturing, marketing and sales operations in some 20 countries worldwide and a strong home base in Israel, which focuses on high value-added branded products. According to StoreNext2, the Company is the second-largest food group in 1 Strauss Holdings is a private company registered in Israel. To the best of the Company’s knowledge, the holders of the ordinary shares of Strauss Holdings are: (1) Michael Strauss Assets Company Ltd. [a company held by Mr. Michael Strauss (approximately 54.7%), Ofra Strauss (approximately 20.1%), Irit Strauss and Adi Strauss (approximately 12.6% each)] (hereinafter: “Michael’s Assets”); (2) Raya Strauss Ben Dror Assets Ltd. [a company held by Raya Strauss Ben Dror's sons, Gil Midyan (approximately 50%) and Ran Midyan (approximately 50%)] (hereinafter: “Raya’s Assets”); (3) Strauss Holdings (approximately 29%). The effective holding of Michael’s Assets and Raya’s Assets in Strauss Holdings, excluding the shares held by Strauss Holdings itself, is 73.4% by Michael’s Assets and 26.6% by Raya’s Assets. The voting shares in Strauss Holdings are held by Mr. Michael Strauss (99%) and Raya Strauss Ben Dror (1%). To the best of the Company’s knowledge, the voting shares in Strauss Holdings confer upon their holders the right to be invited, to participate and to vote in general meetings, not including with respect to resolutions relating to changes in Strauss Holdings’ share capital and articles of association; the holders of the majority of the voting shares have the right to appoint the majority (half plus one) of the directors on the board of Strauss Holdings. To the best of Company’s knowledge, the ordinary shares in Strauss Holdings confer upon their holders full proprietary rights (dividend and receipt of the Company’s residual value upon dissolution); the right to be invited and to participate without a voting right in general meetings, and to vote in general meetings only on resolutions regarding a change in any provision in Strauss Holdings’ articles of association or a change in share capital; and also the right to appoint one director for each 15% holding of ordinary shares of Strauss Holdings. 2 StoreNext measures the everyday consumer goods segment in the barcoded retail market (hereinafter: “StoreNext”). WorldReginfo - d66d8ff8-3e86-4b37-a043-9e1a09bac32e Unofficial Translation from Hebrew - 3 - Israel, and the subsidiary, Strauss Coffee B.V. (hereinafter: “Strauss Coffee”), according to Euromonitor3, is one of the ten leading companies in the world in terms of market share. In 2017, the Company held 11.7% of the total food and beverage market in Israel (in value terms4), not including the market share of Strauss Water Ltd. (hereinafter: “Strauss Water”), and it is the food group with the second-highest sales turnover among Israeli food companies5. The Group is also active in the coffee markets of Brazil6, Russia and the CEE countries. In the US, Canada, Australia, New Zealand, Mexico and Western Europe the Group is active in the development, manufacture, marketing and sale of refrigerated dips and spreads. In Israel and the UK, the Group is engaged in the marketing, sale and servicing of water filtration and purification products. Strauss Water also has immaterial business operations in a number of other countries, which are carried out through local franchisees. Additionally, Strauss Water has a substantial investment (49%) in an associate, which is a joint venture established by Strauss Water with the Haier Group of China (hereinafter: “Haier”) and is active in the purification and filtration of drinking water in China. 1.4 The Group has five operating segments: Health & Wellness, Fun & Indulgence, Israel Coffee, International Coffee, International Dips & Spreads, and Other Operations (the “other” operating segment includes the activities of Strauss Water and as other immaterial operations). For further information on the operating segments, see section 2 below. 1.5 The Group collaborates with four multinational corporations – the French concern Danone (Compagnie Gervais Danone S.A.) (hereinafter: “Danone”), the American corporation PepsiCo, Inc. (hereinafter: “PepsiCo”), the Haier Group, and the Virgin Group through its subsidiary, Virgin Enterprises Ltd. (hereinafter: “Virgin”). Development of the Company’s business 1.1 The Group began operating in 1934 with the production of chocolate bars and assorted sweet snack bars. In the mid-1950s, the Group began to manufacture instant coffee in Israel. In subsequent years, the Group expanded its snacks and coffee businesses by building new plants and acquiring companies active in these areas. In 1990, the Group began collaborating with PepsiCo in salty snack food. 1.2 In the early 1990s, the Group launched its international coffee business in Europe, principally in the roast and ground (R&G) coffee market. The Group expanded its global operation through the acquisition of companies active in this field, as well as through the establishment of new businesses. In late 2000, the Group began operating in South America following the acquisition of a coffee company in Brazil, the Três Corações Joint Venture. 3 Euromonitor is a provider of strategic market research. The company produces data and analyses of products and services worldwide (hereinafter: “Euromonitor”). 4 According to StoreNext data. 5 According to StoreNext data. 6 Through the Três Corações joint venture. 50% of the Três Corações joint venture’s shares are held by São Miguel Holding e Investimentos S.A. (“São Miguel”) (hereinafter: the “Três Corações Joint