PANDORA CAPITAL
When printing the dark MARKETS DAY front page or chapter pages, you might run into THAILAND, 7 JANUARY 2016 some issues if your default printer settings are black & white or greyscale. If you wish to print the presentation in black & white or greyscale, change the printer settings to color and use a black/white printer. AGENDA FOR THE DAY
Time Topic Speaker 8:00 Registration and breakfast 9:00 Becoming a global jewellery brand Anders Colding Friis, President & CEO 9:45 Australia – achieving growth in a developed market David Allen, President EMEA 10:30 Coffee break 10:45 Building a platform for growth in Asia Kenneth Madsen, President Asia 12:00 Introduction to tour of crafting facilities Thomas Touborg, SVP Group Operations 12:15 Transport 12:45 Lunch at crafting facilities 13:30 Tour of crafting facilities 15:30 Transport 16:00 Providing for an increasing global demand Thomas Touborg, SVP Group Operations Anders Colding Friis, President & CEO 17:00 Conclusions and final Q&A Peter Vekslund, CFO 18:30 Pre-dinner drinks 19:00 Dinner
1 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY WELCOME TO GEMOPOLIS IN THAILAND
PANDORA revenue (DKKm) >16,000 • In 1989, Per Enevoldsen, founder of PANDORA, chose to start manufacturing jewellery in 9,010 Thailand 6,658 3,461 • In 2005, the first large scale, fully owned production facility in Thailand was built 2009 2011 2013 2015 PANDORA EBITDA • In 2015, PANDORA shipped more than (DKKm) Approx. 100 million pieces of jewellery – all 37% hand-finished in Gemopolis – to more than 90 countries around the globe 2,881 2,281 1,572
2009 2011 2013 2015
2 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY INTRODUCTION – ANDERS COLDING FRIIS
2015 - CEO, PANDORA A/S
2006-2015 CEO, Scandinavian Tobacco Group
1999-2006 President, House of Prince
1998-1999 President, Schulstad A/S
1994-1998 Sales and marketing director, Schulstad A/S
1992-1994 Market manager, Estrella A/S
1987-1992 Product group manager, SCA
Current board positons: IC Group A/S (deputy chairman) Topdanmark A/S (member) Dansk Industri (member)
3 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY PANDORA’S MANAGEMENT BOARD
Anders Colding Friis, President & CEO
David Allen, Kenneth Madsen, Scott Burger, Stephen Fairchild, Thomas Touborg Peter Vekslund, President President President PANDORA SVP, Chief SVP, Group CFO PANDORA EMEA PANDORA Asia Americas Creative Officer Operations
4 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY EXECUTING ON 10 HORIZONS – REVISITING CMD 2013 Focus on branded sales channels • 76% of revenue from concept stores and shop-in-shops (2013: 68%) • eSTOREs available in 14 markets (2013: 3)
Capitalise on product offering • 13% of revenue from rings (2013: 6%) • Disney and PANDORA Rose collection launched
Tailored approach to new markets • Revenue in France and Italy almost tripled • Presence in China increased significantly • Concept stores more than doubled in Germany
Build a global brand • 73% of women in target group now know PANDORA (60% in 2013)
5 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY BECOMING A GLOBAL
When printing the dark JEWELLERY BRAND front page or chapter pages, you might run into some issues if your default ANDERS COLDING FRIIS, CEO printer settings are black & white or greyscale. If you wish to print the presentation in black & white or greyscale, change the printer settings to color and use a black/white printer. THE UNIQUE CONNECTION
7 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY IT’S ALL ABOUT THE PRODUCT
• PANDORA is built on a strong product offering
• The closest link between the consumer and PANDORA is the product
• Product and brand go hand in hand
8 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY FROM MOST RECOGNISED TO MOST LOVED Brand awareness female 18+ (2015)*
78% 73% 71% 65%
• A strong brand built on product quality, visibility and communication 13%
• High brand recognition across key markets PANDORA Tiffany Cartier Swarovski Thomas Sabo PANDORA brand track, 2015, Q: Which of the following jewellery brands do • On a journey to become a full jewellery brand you know or have you ever heard of? PANDORA assortment awareness female 18+ (2015)* • PANDORA’s vision is to become the most loved 61% jewellery brand in the world 36% 30% 28%
Charms Rings Earrings Necklaces PANDORA brand track, 2015, Q: Which of these product categories does PANDORA offer?
*Based on data from 25 key markets: AUS, AUT, BEL, CAN, DK, FRA, DE, IE, IT, NL, PL, PT, ES, SWI, UK, US, BRA, GR, HK, ISR, NZ, RU, ZAF, KOR, TUR 9 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY A BRANDED APPROACH TO AN UNBRANDED INDUSTRY Branded share of the jewellery industry 10% 13% 19% 19% 20% 30% - 40% Branded • PANDORA is building a branded position in an 90% Unbranded 87% 81% 81% 80% unbranded industry 70%
• The branded share of the jewellery industry is 2003 2005 2007 2009 2015 e2020
expected to increase Source: McKinsey analysis Branded vs. unbranded in various segments (2015) • Limited competition for share of voice 20% 38% 50% • Concept stores drive awareness and “capture” 60% 80% Branded new consumers in a unique store Unbranded 80% environment 62% 50% 40% 20%
Perfumes Watches Leather Eyewear Jewellery goods Source: McKinsey analysis
10 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY BUILDING THE BRAND PANDORA marketing spend per media
10% 10% 7% 19% Outdoor 33% 25% Print 32% • Visible across all media platforms, including 34% 29% Online extensive presence on social media TV 41% 27% 30% • Around 1,800 concept stores supporting the brand 2013 2014 2015
• Ambition to spend approx. 10% of revenue on marketing
11 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY HIGH BRAND AWARENESS PANDORA aided awareness female 18+*
73% 63% 67% 50% 43% 36% • Globally* 73% of women are aware of PANDORA, and 20% mention the brand spontaneously 2010 2011 2012 2013 2014 2015
PANDORA brand track, 2015 , Q: Do you know or have you ever heard of PANDORA? • More than every fourth women considers to Consider buying female 18+*
buy PANDORA jewellery 34% 29% 27% 2014 25% 25% • 14% of men 18+ have bought PANDORA 23% 17% 2015 jewellery, and of those 80% would 14% recommend PANDORA to others 4% 4%
PANDORA Tiffany Cartier Swarovski Thomas Sabo PANDORA brand track, 2015, Q: If you were in the market to purchase jewellery for yourself, which of the following brands would you consider?
*PANDORA brand track, 2015 - based on data from 25 key markets: AUS, AUT, BEL, CAN, DK, FRA, DE, IE, IT, NL, PL, PT, ES, SWI, UK, US, BRA, GR, HK, ISR, NZ, RU, ZAF, KOR, TUR 12 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY FOCUS ON CONCEPT STORE AND PANDORA concept stores SHOP-IN-SHOP DKKm and shop-in-shops Stores 14,000 3,500 12,000 3,000 • More than 75% of revenue is generated by 10,000 2,500 concept stores and shop-in-shops 8,000 2,000 6,000 1,500 4,000 73% 76% 1,000 • Concept stores and shop-in-shops are the 68% preferred store types across all regions 2,000 57% 64% 500 0 0 2011 2012 2013 2014 9M 2015 • Offer the customers a consistent brand CS and SiS revenue Revenue Other CS and SiS experience PANDORA stores Multibranded stores • Maintains full control of the PANDORA Light environment Often darker environment brand Prices shown Often no price tags Touch-and-feel displays Jewellery hidden behind glass • An efficient and uniform brand building tool Offer full jewellery assortment Charms and bracelets only PANDORA store staff
13 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY FURTHER POTENTIAL FOR CONCEPT STORES 200-300 new concept stores per year in 2016-2018 ~2,700 • PANDORA continues to see good potential for ~2,400 further expansion of the concept store >1,785 network 1,410 1,100 • PANDORA expects to open between 200 and 895 300 new concept stores every year from 2016 672 to 2018 2011 2012 2013 2014 e2015 e2016 e2017 e2018 • Approx. 60% in Europe • Approx. 20% in Americas • Approx. 20% in Asia Pacific
• In 2016, Jared will upgrade more than 200 stores to shop-in-shops
• PANDORA will continue to close unbranded stores where relevant
14 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY OFFERING THE FULL JEWELLERY ASSORTMENT
PANDORA revenue 9M 2015 3% 3% Charms and bracelets 13% • PANDORA offers a full jewellery assortment in Rings all concept stores and shop-in-shops Earrings
81% Necklaces and pendants • Following a dedicated effort to promote rings, the category is now considered an established Real jewellery market split by retail value, 2014 category, together with charms and bracelets 20% 26% 36% 28% 30% 32% 13% 12% • While moving focus to new categories, already 16% 21% 9% 24% 16% established categories will still be developed 12% 12% 32% 21% 22% 47% 45% 43% 27% 30% 31%
Australia China Italy UK US Global Rings Earrings Wristwear Neckwear and other
Source: Euromonitor, 2015
15 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY ACTIVATING NEW JEWELLERY CATEGORIES
• Design the right products DKKm PANDORA revenue from rings • Manufacture in PANDORA quality 1,500 12.7% 14% 10.0% 12% • Position category in the “right” place in the 1,200 10% store 900 6.0% 6.4% 6.1% 8% • Educate the store staff to sell new categories 600 6% 4% • Support category with advertising and 300 targeted promotions 2% 0 0% 2011 2012 2013 2014 9M 2015 • Charms, bracelets and rings are in focus in all Rings revenue Share of total revenue markets today
• From January 2016, the earrings category will be in focus in established markets
• Today, earrings accounts for around 3% of PANDORA’s total revenue
16 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY SUMMARY
• PANDORA is a strong brand built on high-quality products
• A high share of voice in an unbranded industry
• Focus on strengthening and expanding the branded store network, including 200-300 new concept stores annually from 2016 to 2018
• Charms, bracelets and rings are now established categories. Focus will include earrings from 2016
• On track to become a full jewellery brand
17 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY THANK YOU!
18 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY AUSTRALIA
When printing the dark – ACHIEVING GROWTH IN A front page or chapter pages, you might run into some issues if your default DEVELOPED MARKET printer settings are black & DAVID ALLEN, PRESIDENT PANDORA EMEA white or greyscale. If you wish to print the presentation in black & white or greyscale, change the printer settings to color and use a black/white printer. INTRODUCTION – DAVID ALLEN
2015 - President, PANDORA EMEA
2012 – 2015 President, PANDORA Australia and New Zealand
2011 – 2012 Vice President Sales, PANDORA Australia and New Zealand
2008 – 2011 General Manager Store Operations, Pretty Girl Fashion Group
2003 – 2008 Operations Manager, Dick Smith Electronics
2001 – 2003 National Operations Manager, Colorado Adventurewear
2000 – 2001 National Retail Manager, Bras N Things
19 7 JANUARY 2015 PANDORA CAPITAL MARKETS DAY AGENDA
• JEWELLERY MARKET IN AUSTRALIA
• BRAND REPRESENTATION – THE NEED FOR CHANGE
• THE BRAND TODAY
• CONTINUED FOCUS
• SUMMARY AND Q&A
20 7 JANUARY 2015 PANDORA CAPITAL MARKETS DAY THE JEWELLERY MARKET IN AUSTRALIA
Australian jewellery market (AUDm) • Jewellery sales in Australia have grown 13% 4,100 (CAGR) in value from 2010 to 2015 3,950 3,625 +13.1% -3.4% • Jewellery sales are anticipated to decline -3.4% (CAGR) from 2015 to 2020 to AUD 3.95 billion
2010 2015 e2020 • The online channel more than doubled its Source: Euromonitor 2015 share since 2010 to be 7% share of jewellery Australian market category split (2014) retail sales in 2015 20% Neckwear & 32% Other • Rings remains the most popular jewellery type, 13% Wristwear 16% supported by the rising price of engagement 21% 22% Earrings rings and the trend of stacking rings 47% 31% Rings
Australia World Source: Euromonitor 2015
21 7 JANUARY 2015 PANDORA CAPITAL MARKETS DAY THE COMPETITIVE LANDSCAPE
Competitors market share, jewellery • Highly fragmented market 8% 7% • Leading brands, Prouds, Angus & Coote and Michael +42% Hill Jeweller, are local, while the remaining are a mix 6% of local and international brands 5% 2012 2014
4% • The majority of jewellery is unbranded, however the landscape is changing 3% 2% • International brands PANDORA, Thomas Sabo and Swarovski are playing an increasingly significant role, 1% increasing presence brand identity 0%
Cartier
• PANDORA has been one of the fastest growing brands Zamels
Prouds
Coote
Goldmark
Swarovski PANDORA
increasing market share by +42% between 2012 and Angusand
Tiffany& Co MichaelHill 2014 ThomasSabo Source: Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources Note: Numbers include Australia and New Zealand
22 7 JANUARY 2015 PANDORA CAPITAL MARKETS DAY SUCCESSFUL START TO THE AUSTRALIAN MARKET
PANDORA revenue split 2010
• In 2004, PANDORA was launched in Australia, and in 22% 2005 in New Zealand Branded
• 40 multi branded customers in the first year of Unbranded operation 78% • Opened first owned and operated concept store in 2008 and first franchised concept store in 2009 4% 1% Charms 4%
• After only five years, revenue peaked in 2009 at AUD 6% Bracelets 184 million in close to 800 stores Rings 15% • In 2010, 78% of the revenue was branded and of that Earrings 36% was from concept stores 70% Necklaces and pendants • In 2010, charms and bracelets represented 85% of Watches the revenue Note: Numbers include Australia and New Zealand
23 7 JANUARY 2015 PANDORA CAPITAL MARKETS DAY THE NEED FOR CHANGE Australia like-for-like sales-out growth 15% (concept stores)
• The distribution was overcrowded and not 5% planned -5%
• PANDORA jewellery was too expensive -15%
-25% • Brand execution across large parts of the Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 distribution was poor 2011 2011 2011 2011 2012 2012 2012 2012 PANDORA revenue development • Consolidated revenue declined from AUD 184 AUDm 200 CAGR: million in 2009 to AUD 110 million by close of - 15.8% 2012 – a decline of 40% 150 • Like-for-like sales-out growth in 2011 and most 100 of 2012 was negative 50 0 2009 2010 2011 2012 Note: Numbers include Australia and New Zealand
24 7 JANUARY 2015 PANDORA CAPITAL MARKETS DAY CORE FOCUS AREAS TO RE-IGNITE THE BUSINESS
• The distribution was overcrowded and we needed to reduce our multi-branded network • A strong concept store network prioritising A-locations strengthening our branded presence • Integrate commercial functions – merchandising, marketing and sales • Improve consumer experience • Tactical approach to marketing driving consumers into stores • Maximise return on inventory • Refocus the business on the core categories of charms and bracelets • Realise the potential of rings
25 7 JANUARY 2015 PANDORA CAPITAL MARKETS DAY NEW COMMERCIAL FOCUS
• The product category strategy is not a single function strategy – it is a collaborative integration of the merchandise, marketing and sales functions
Merchandise Marketing Sales
• Right products • Message • Engage team • Right amount • Medium • Consumer experience • Right place • Execution • Right time
• Create seamless alignment of clarity and purpose, enhancing execution
• Provide a great consumer experience
26 7 JANUARY 2015 PANDORA CAPITAL MARKETS DAY MAXIMISING THE RETURN ON INVENTORY
• Focus on what the PANDORA retailers sell out and on assisting them in buying better
Revenue and closing inventory • Investment in high quality people and technology, PANDORA concept stores AUDm continually developing merchandising systems and +35% processes 200 160 2011 2014 • Providing business intelligence, support and 120 -42% training helping our partners to buy better 80
40 • Focus on product and categories across the full lifecycle maximising performance and profitability 0 Revenue Inventory
Note: Numbers include Australia and New Zealand • From 2011 to 2014 revenue increased 35% and inventory across our concept store network decreased by 42%
27 7 JANUARY 2015 PANDORA CAPITAL MARKETS DAY ENHANCING BRAND AWARENESS AND DRIVING SALES Aided branded awareness female 18+ (2015) 94% 91% • Focus on maintaining and building strong brand 87% 84% 83% awareness 65%
• Carefully planned promotional campaigns bring 34% consumers into stores, driving stronger brand
awareness and delivering sales PANDORA Tiffany Cartier Swarovski Thomas Michael Angus and Sabo Hill Coote PANDORA brand track, 2015, Q: Which of the following jewellery brands do you know or have you • Re-engage existing consumers and further build ever heard of? brand loyalty PANDORA aided brand awareness Australia 94% 76% • In 2015, PANDORA branded awareness for 70% females (18+ years) was the highest for 2010 32% recognised international brands and local 2015 jewellery brands Female Male PANDORA brand track, 2015 , Q: Do you know or have you ever heard of PANDORA?
28 7 JANUARY 2015 PANDORA CAPITAL MARKETS DAY CHANGE IN MARKETING FOCUS
• Strong focus on TV and digital media moving away from the more traditional medium of print PANDORA media spend split
4% • Further strengthening digital media strategies - 7% Print +57% in visitors to PANDORA.net in 2015 34% 33% Outdoor
• Maximising gifting potential – focus on key 31% Digital trading periods of Valentines, Mothers Day and 12% 56% TV also Christmas 23%
2012 e2015 • 80% of PANDORA customers believe that the Note: Numbers include Australia and New Zealand brand is suitable for gifting
29 7 JANUARY 2015 PANDORA CAPITAL MARKETS DAY IMPROVING THE CUSTOMER EXPERIENCE
• Complete restructure – geographical approach as Units per transaction UPT (concept stores) 2.08 opposed to channel 2.1 • “The people who are accountable for the results 2.01 2.0 must be responsible for the relationship” 1.90 1.9 1.83 • Meticulous approach to building the store 1.8 network – focus on location, format and partner 1.7 2012 2013 2014 e2015 Note: Numbers include Australia and New Zealand • Brand representation and retail execution
• Customer experience - what PANDORA customer’s see and how they feel
• Store operational improvement driving incremental revenue
30 7 JANUARY 2015 PANDORA CAPITAL MARKETS DAY THE RESULTS OF THE CHANGE AUDm PANDORA revenue development 200 40% 30% 150 20% 10% 100 0% • Consolidated revenue grew from $110M in 50 -10% 2012 to $173M in 2014 and to Q3 2015 is -20% +34.2% YTD on 2014 0 -30% 2011 2012 2013 2014 9M 2015 Revenue Growth • The business has had 11 straight quarters of Note: Numbers include Australia and New Zealand uninterrupted LFL growth of > 15% Australia like-for-like sales-out growth (concept stores) 50% 40% 30% 20% 10% 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015
31 7 JANUARY 2015 PANDORA CAPITAL MARKETS DAY THE BRAND – TODAY Branded share of revenue • End of Q3 2015 PANDORA had 109 concept 92% stores – 94 franchise operated and 15 owned 78% and operated 70% 40% 2010 • Sales out of concept stores is over AUD 250 9M 2015 million
• 92% of the revenue is now branded Branded Concept stores Note: Numbers include Australia and New Zealand • 70% of the revenue now comes from concept Average revenue per concept store stores (2011 = index 100) 153 128 • The average turnover of PANDORA concept 100 98 stores is >AUD 2.6 million
• Pitt Street and QVB in Sydney are number one
and 3rd highest sales volume from PANDORA 2011 2012 2013 2014 owned stores in the world Note: Numbers include Australia and New Zealand
32 7 JANUARY 2015 PANDORA CAPITAL MARKETS DAY A MORE DIVERSIFIED PRODUCT BUSINESS PANDORA category growth • All categories have had strong growth since 2013 2014 9M 2015 2012 Charms 14% 18% 31% Bracelets 26% 31% 16% • Focus on being a full jewellery brand and Rings 63% 52% 33% realising the potential of all categories Earrings 116% 23% 45% • Rings has shown significant growth since 2013 Necklaces 53% 27% 45% and today represents 19% of the consolidated Note: Numbers include Australia and New Zealand revenue up from 11% in 2012 PANDORA category split 3% 3% 4% 3% 5% Watches 11% • Whilst the contribution landscape is changing, 19% 17% Necklaces charms and bracelets are still performing very 16% well with more than 30% growth in Q3 2015 Earrings Rings 63% 56% • Earrings is becoming a stronger focus Bracelets Charms 2012 9M 2015 Note: Numbers include Australia and New Zealand 33 7 JANUARY 2015 PANDORA CAPITAL MARKETS DAY CURRENT FOCUS
• Next stage of growth of concept store network – regional locations • eSTORE opened in September 2015 – a critical component of providing the complete experience for the consumer • Improve consumer experience • Operational performance of concept stores • Continue the integration of commercial functions – merchandising, marketing and sales • Marketing focused on improving the perception of the brand and driving sales • Continuing to maximise the return on inventory • To become a full jewellery brand – focus to include earrings in 2016
34 7 JANUARY 2015 PANDORA CAPITAL MARKETS DAY PANDORA AUSTRALIA PRINCIPLES OF DOING BUSINESS
• Make all of your decisions with the customer in mind
• Provide clarity and a clear sense of purpose and direction for retail partners and the PANDORA team
Beware the hubris of success – It is when you are doing well that you must search for what can be done better “ ”
Get the right people on the bus – The right people do not guarantee success but the wrong people do guarantee failure “ ”
Change the complex to simple – Sometimes it takes real genius to see through all the clutter and grab the one, simple, unique thing that gives “ ” you the advantage
If you want to engage your customer – There is a direct relationship between the experience you need to engage your team your customer gets and how your team feel about where
“ ” they work
35 7 JANUARY 2015 PANDORA CAPITAL MARKETS DAY LOOKING AHEAD
• Revenue in Australia and New Zealand expected to increase more than 30% from 2015 to 2018
• Like-for-like sales-out growth is expected to be higher than 10% in 2016, and is expected to normalise to around 3-5% long term
• 5-10 concept stores to be added yearly until 2018 – unbranded will be reduced
• Concept store revenue expected to be more than 85% of revenue within the next 3 years
• Earrings expected to be around 8% of revenue in 2018
36 7 JANUARY 2015 PANDORA CAPITAL MARKETS DAY THANK YOU THANK YOU!
37 7 JANUARY 2015 PANDORA CAPITAL MARKETS DAY BUILDING A PLATFORM FOR
When printing the dark GROWTH IN ASIA front page or chapter pages, you might run into KENNETH MADSEN, PRESIDENT PANDORA ASIA some issues if your default printer settings are black & white or greyscale. If you wish to print the presentation in black & white or greyscale, change the printer settings to color and use a black/white printer. INTRODUCTION – KENNETH MADSEN
2012 - President, PANDORA Asia
2008 - 2012 Managing Director, PANDORA Central Eastern Europe & ME
2002 - 2008 Commercial Director, ECCO Shoes Central Eastern Europe & ME
1996 - 2002 EMI Capitol Music
1993 - 1996 Carlsberg Breweries
39 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY AGENDA
• PANDORA ASIA, INTRODUCTION AND HISTORY
• JEWELLERY MARKET, COMPETITORS AND PEERS
• DISTRIBUTION & BUSINESS UPDATE
• PRIORITY MARKET UPDATES
• HONG KONG
• CHINA
• JAPAN
• SUMMARY AND Q&A
40 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY A FAST GROWING REGION
PANDORA employees Asia 17 15 45 • Established in Hong Kong 2009
110 • Currently 110 employees in Hong Kong focused 35 on front-end operations and back-end 2013 Jan 2016 reporting/finance Hong Kong China Japan Singapore
• New office in Tokyo, Japan opened January 2015
• New office in Shanghai, China opened July 2015
• New office in Singapore opened January 2016
41 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY 80% OF INDUSTRY VALUE GROWTH GENERATED IN ASIA
Market sizes and 2015-e2020 growth, constant prices Jewellery industry value growth, 2015-e2020 3% 2% Market size 2015, USDbn Growth 2015-e2020, CAGR
17% China 96.8 6.9% China India
Japan 8.4 1.6% Rest of Asia 7% 53% Americas Europe Hong Kong 7.7 2.2% Other
US 63.3 2.9% 19%
UK 4.8 0.0%
Source: Euromonitor 2015
42 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY COMPETITIVE & PEER LANDSCAPE Concept stores in Asia vs. peers 2,114 • Chow Tai Fook has more than 80 years of history in Hong Kong and China. Operated through a mix of franchise and own stores 649 239 • Swarovski has more than 20 years of history in 196 114
Asia. Distributed through a mix of franchise and Chow Tai Swarovski Cartier PANDORA Tiffany own stores Fook
• Cartier has more than 40 years of history in Asia. Distributed through a mix of wholesale and own stores
• Tiffany & Co. has more than 40 years of history in Japan and 25 in Hong Kong and China. Exclusively operated through own stores
43 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY ESTABLISHING A PLATFORM FOR GROWTH
• Established in Hong Kong 2009
• Operating in 12 markets of which 5 are owned and operated (O&O)
• Offices in Hong Kong, Tokyo, Shanghai and Singapore
• In the past 1½ year focus has been on moving towards becoming a retailer by acquiring Japan, China, Singapore and Macau markets in addition to the Hong Kong market
44 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY REPORTED REVENUE & EBITDA DEVELOPMENT
• Significant growth in Asia in recent years Revenue and EBITDA margin development • Business and organisation scaled for future HKDm growth 1,400 54% 44% 50% 1,200 35% 1,110 1,170 • All priority markets (China, Japan and 1,000 30% Singapore) acquired either directly or through majority owned joint ventures (PANDORA 800 10% controlled) 600 488 -21% -10% 400 • EBITDA in 2015 is impacted by start-up cost in 183 -30% China and ramp-up in Japan 200 0 -50% • Significant investments in China and Japan will 2012 2013 2014 9M 2015 add pressure on the short/medium term Revenue EBITDA% EBITDA margin
45 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY WELL-DIVERSIFIED SALES-OUT DISTRIBUTION PANDORA Asia sales-out split, 9M 2015
11% • Hong Kong (O&O) is the biggest revenue driver 22% Hong Kong 8% China Japan • China (O&O) share of business increasing 12% Singapore Taiwan significantly 18% South Korea Malaysia 15% • Taiwan, Malaysia and South Korea are 12% Other significant wholesale markets 2% Sales-out development, Asia • From a sales-out perspective the business (HKDm)
across Asia is relatively balanced 1,921 1,848
1,072 523
2012 2013 2014 20159M Q32015 YTD
46 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY 100% BRANDED DISTRIBUTION
• PANDORA is distributed exclusively through concept stores and shop-in-shops throughout Concept stores and shop-in-shops by market Asia 57
2013 • Distribution footprint significantly increased in Sep 2015 the past two years 39 40
• Hong Kong, China, Taiwan, South Korea, 26 26 Singapore and Malaysia main drivers 22 21 15 15 14 15 11 • Still a lot of potential for new stores in most 7 markets 2
Hong Kong China Japan South Korea Taiwan Singapore Malaysia
47 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY THE BRAND RESONATES WITH ASIAN CONSUMERS
Facts from focus group studies in Hong Kong:
• The PANDORA brand is perceived as young and feminine
• The brand is seen as trendy, as new styles and colours are constantly being introduced
• Consumers find PANDORA a very stylish brand as it fits fashion colours
• Consumers appreciate that the brand offers a safe choice through recognition while the mix-and-match option allows for them to have their own unique product
48 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY A GLOBAL ASSORTMENT WITH A LOCAL RELEVANCE
• Since 2014, PANDORA has launched several Asia exclusive charms developed for the Asian consumer
• 75% of products launched made it into the top 10 sales-out category for new products
• Asian products are supported by locally relevant campaigns such as Chinese New Year
• Going forward, PANDORA expects to do more regional products to increase brand and product relevancy
49 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY ENHANCING RETAIL OPERATION
• Getting closer to the customer enables Stock availability vs. sales optimising store operation based on customer behaviour 35% • Stock and product availability play an important 49% role in PANDORA’s expansion 67% 66%
20% • Stock quality in stores has improved significantly in recent years 19%
35% • Having the right product available at the right 17% 17% time is the single most important in-store 29% 13% 12% purchase driver 10% 3% 3% 5% Stock Sales Stock Sales • Still room for improvement in top 200 products 2013 2015
Discontinued >400 Top 201-400 Top 200
50 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY 100% BRANDED DISTRIBUTION
51 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY PANDORA HONG KONG: MODEL MARKET FOR REST OF ASIA PANDORA revenue Hong Kong
(HKDm) • First market to open in Asia in 2009 387 400
• Fully owned and operated concept store 169 distribution 85
• Most developed distribution and brand in Asia. 2012 2013 2014 20159M 2015 Q3 YTD Average revenue per store is HKD 29 million Hong Kong jewellery retail sales, YoY change • Model market for rest of Asia 23% • Spearhead into mainland China 11%
• PANDORA has grown more than 50% in -5% 9M 2015 despite downturn in the Hong Kong -8% jewellery market 2012 2013 2014 9M 2015
Source: Euromonitor 2015
52 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY SIGNIFICANT GROWTH IN AWARENESS PANDORA aided awareness female 18+
Hong Kong 86% 63% 49% 35% 28% • Awareness has more than doubled from 2012 to 2015 2011 2012 2013 2014 2015 PANDORA brand track, 2015, Q: Do you know or have you ever heard of PANDORA? • 86% of women in Hong Kong recognise the Competitor awareness female 18+ PANDORA brand ahead of Cartier and Swarovski Hong Kong (2015) 88% 86% • 21% of women aged 18+ own a PANDORA 85% bracelet 77%
PANDORA Tiffany Cartier Swarovski
PANDORA brand track, 2015, Q: Which of the following jewellery brands do you know or have you ever heard of?
53 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY AD SPEND IS RELATIVELY LOW COMPARED TO PEERS
• Even though awareness of the brand is Advertising spend among increasing, PANDORA does not outspend competitors in Hong Kong competition 351 (HKDm)
2014 • PANDORA’s advertising spend roughly on par with 20159M 2015 YTD Tiffany 224
• Swarovski spends nearly twice as much and 153 149
seems to be ramping up 88 77 66 66 • Chow Tai Fook historically a major spender but seem to be scaling back significantly Chow Tai Fook Swarovski Tiffany & Co PANDORAPandora • Thomas Sabo, Chamilia and Links of London all Source: Admango, 2015 have very little ad spend
54 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY CONSUMER SOCIAL ENGAGEMENT VERY STRONG
(Hong Kong/ Tiffany & Thomas • The excitement around PANDORA PANDORA Swarovski1 Coach1 becomes evident on Facebook global) Co. 1 Sabo1
where PANDORA outgrows and Fans count2 159k/4.03M 28k/3.62M 71k/8.06M 15k/ 959k 48k/ 5.97M outranks competition Fan growth in 26k/593k 699/331k 5.7k/509K 861/ 99k 1,636/ 296k • PANDORA fans’ brand engagement last 6 months2 is also much stronger and point to a Fan growth rate 19.6%/ 17% 2.4%/ 10% 8.1%/ 6.7% 6.3%/ 11.5% 3.6%/ 5.2% winning formula Ranking in Hong Kong jewellery 1 11 4 27 n/a • The marketing strategy executed in 2 Hong Kong is now being replicated industry Engagement in China, Japan and Singapore 0.49/ 0.13 0.07 0.07 0.18 0.02 level3
Notes: 1) The brands do not have a local fan page in Hong Kong, so the number of “local fans” is filtered by geographic location, from Social Bakers. 2) Figures from Social Bakers 26 Nov 2015 3) Figures from Falcon 26 Nov 2015. Calculated as (Page Storytellers by Country / Page Fans by Country) * 100.
55 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY PANDORA CHINA: READY TO PENETRATE THE MARKET
• Six months since PANDORA entered China directly (majority-owned joint venture with Oracle)
• Dedicated organisation of 45 people located in Shanghai. Majority of team is local Chinese with 5-10 years of experience from major international brands
• Significant investments in marketing and retail operations (training) have accelerated sales-out
• PANDORA now have proof of concept from Beijing in the North to Shenzhen in the South. Several stores in tier 2 cities are performing on par (or even ahead) of tier 1
56 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY SIGNIFICANT GROWTH IN SALES-OUT
PANDORA sales-out China (HKDm) 331
232 • Encouraging growth in 2014/15 112 59 • Average retail store sales-out has increased significantly in the last few years and quickly 2012 2013 2014 9M 2015 closing in on ‘Asia Average’ Average sales-out per store (Asia = index 100)
• Presently, China is ramping up faster than any 100 100 100 other market in Asia 79
52 44
2013 2014 9M 2015 Asia China
57 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY CHINA IS INCREASINGLY IMPORTANT
• China represented 21% of regional sell-out in Total Asia/China sales-out split Q3 2015. 12% 15% 17% 21%
• Transition from wholesale/distributor model to China O&O Retail as of 1 July 2015 Rest of 88% 85% 83% 79% Asia • Like-for-like sales-out growth and new store openings are major drivers
• Share of business expected to grow significantly Q4 2014 Q1 2015 Q2 2015 Q3 2015 in 2016 and beyond
58 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY CONTROLLED STORE EXPANSION PLAN
China store forecast ~150 • 2016 ramp-up year with focus on clustering in ~125 ~100 and around tier 1 and selected tier 2 cities 57 • 2016 important in terms of building infrastructure to support future growth (organisation and legal entities/branches) Sep. 2015 e2016 e2017 e2018
• As a point of reference Swarovski has 253 stores in China today
• Many prime shopping malls and department store locations being offered to PANDORA
59 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY INVESTMENTS IN CHINA TO BE RAMPED UP
Advertising spend among competitors in China 230 (RMBm)
• Historically minimal marketing spend in China (distributor model)
• Slowly ramping up marketing investments in 122 127 2015 87
61 66 59 58 58 54 • In 2016, PANDORA will commit significant 50 46 marketing resources to support existing and 8 new stores 0.7
Chanel Swarovski Tiffany PRADA Chow Tai Coach PANDORA Fook 2014 9M 2015 Source: Admango, 2015
60 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY PANDORA JAPAN: MODERATE GROWTH
PANDORA sales-out Japan (HKDm) 42 • One year since PANDORA entered Japan 32 27 directly (majority-owned joint venture)
• Confidence in the brand has to be rebuilt both from a consumer and landlord point of view 2013 2014 9M 2015 • Progress slower than the rest of Asia Japan store forecast ~50 • PANDORA remain confident in Japan long-term, ~35 but short to mid-term, Japan will not be a ~25 major revenue driver 15
Sep. 2015 e2016 e2017 e2018
61 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY BRAND AWARENESS IS RELATIVELY WEAK IN JAPAN
• Historically minimal marketing Competitor awareness female 18+ spend in Japan (distributor Japan (2015) model)
• Positive development within 88% distribution and brand 74% 65%
• Flagship store opening in Ginza and upcoming opening in Omotesando has given the brand a major uplift 10%
• Slowly ramping up marketing PANDORA Tiffany Cartier Swarovski PANDORA brand track, 2015, Q: Which of the following jewellery brands do investments you know or have you ever heard of?
62 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY PANDORA ASIA: DISNEY LAUNCH ENCOURAGING
• Disney collection launched across 13 markets in 300+ stores early November (including Australia)
• The collection has been positively received and performing according to the US launch
• 100,000+ pcs sold out of stores in the first 4 weeks
• Mickey & Minnie and Disney princesses strongest performers
• Initial consumer rush expected to normalise early 2016
• First Disney Park sales point opened in December 2015. Further openings planned for Q1/Q2 with total PANDORA distribution counting 3 in Hong Kong Disneyland and 3 in Shanghai Disney Resort
63 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY SUMMARY
• Strong revenue development in Asia
• New distribution structure and framework in place with direct ownership of priority markets
• Brand awareness and ownership developing fast - Hong Kong is the benchmark model
• Disney is performing very well and in line with expectations
• Big potential for new store openings across Asia and in particular within China
64 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY THANK YOU!
65 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY PROVIDING FOR AN INCREASING GLOBAL DEMAND When printing the dark front page or chapter THOMAS TOUBORG, SVP, GROUP OPERATIONS pages, you might run into some issues if your default printer settings are black & white or greyscale. If you wish to print the presentation in black & white or greyscale, change the printer settings to color and use a black/white printer. INTRODUCTION - THOMAS TOUBORG
2015- SVP, Group Operations, PANDORA A/S 2011-14 SVP, Group Supply Chain, PANDORA A/S 2004-10 EVP, Supply Chain and Production, Fritz Hansen A/S 2002-04 Production Manager, Coloplast A/S 2001-02 Site Manager, Vitral A/S (VKR-group) 1996-01 Production and Logistic Manager, H+H A/S 1994-96 PTA-engineer, Lindab A/S
Current board positions: Board of Directors, Danish Standards Chairman, local community board
67 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY AGENDA
• DIFFERENT SUPPLY CHAINS SUPPORTING THE BUSINESS
• DONE GREAT IN THE PAST
• KEY FOCUS AREAS FOR HOW TO GEAR FOR THE FUTURE
• NEWBUILDS CRAFTING FACILITIES TO SUPPORT MARKET DEMAND
• SUMMARY AND Q&A
68 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY SETTING THE SCENE
“From entrepreneurial scalability to scalability of the future”
Supported by three key focus areas:
Reduce lead-time from Increase data Expansion of current raw material to transparency through- production capacity jewellery delivered out the value chain
69 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY GROUP OPERATIONS SUPPORTS THE EXPANDING PANDORA BUSINESS
• Deliveries in more than 90 countries across six continents
• Deliveries to approx. 9,500 points of sale including around 1,800 concept stores
• Deliveries of more than 100 million pieces of jewellery annually anchored in seven annual drops plus special drops, i.e. Disney and PANDORA Rose, and around 1,300 design variations
• Group Operations represents more than 11,000 employees at the crafting facilities in Thailand and around 500 employees in other locations
70 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY THREE DIFFERENT SUPPLY CHAINS SUPPORTING THE BUSINESS MODEL
Jewellery supply chain
Raw Retail, outlets, materials Manufacturing eSTOREs 1 Forecasting Distribution & Planning Centres
Fixtures & furniture supply chain Point-of-sale materials supply chain
Suppliers: Categories: Distribution Store network Suppliers: centres: • Fixtures • US expansion with more • Flooring • China than 375 concept • Light & music • Asia • Germany 2 • Netherlands stores in 2015. 3 • Facade • Europe • China • Denmark • Lounge • Belarus Equal to more than one • Logo new store per day.
71 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY GLOBAL OPERATIONS JEWELLERY FOOTPRINT
TORONTO COPENHAGEN
HAMBURG SHANGHAI BALTIMORE
BANGKOK
SÃO PAULO
SYDNEY Headquarters Crafting facilities Main distribution centres Local distribution centres/e-Commerce distribution centre
72 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY THE PANDORA JEWELLERY SUPPLY CHAIN
THE JEWELLERY SUPPLY CHAIN
Forecasting & PANDORA sales Raw materials Manufacturing Distribution centres planning channels
~9,500 points of sale: • Concept stores • Shop-in-shops • Others (gold, silver, white) • eSTORE • Outlets
73 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY VALUE PROPOSITIONS IN OUR VALUE CHAIN
• Approx. 80% of all orders globally are captured Supporting different types of PANDORA sales channels through an online ordering system for retailers Types of sales channels • Shipping from distribution centre to customer Concept Shop-in- location within two days of receiving order Others stores shops eSTORE Outlets (~7,000) (~1,800) (~1,500) • Picking accuracy at the distribution centres improved to a robust level above 99.5% Strong brand DNA profile in concept stores • Value-adding retail services, i.e. deliveries to PANDORA concept store Multibranded jewellery store stores with displays and trays ready to be placed into the sales area without further in-store handling
• Efficient return logistics processes, i.e. permanent stock balancing programme in the US
74 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY THE PANDORA JEWELLERY SUPPLY CHAIN
THE JEWELLERY VALUE CHAIN
Forecasting & PANDORA sales Raw materials Manufacturing Distribution centres planning channels
• 4 main distribution centres • 4 local/eSTORE distribution centres
75 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY FOOTPRINT CONSOLIDATION FOCUSING ON CUSTOMER VALUE AND OPERATING COSTS Footprint 2010
• Footprint 2010 is characterised by more than 20 local Manufacturing 20+ local warehouses warehouses and inefficient scalability impacting cost Central Western Europe Australia to inventory carried US Nordic Bangkok • Footprint 2010 has been consolidated to align Hong Kong UK structure to reflect business requirements and gain Eastern Europe benefits of scale 10+ distributors
• Footprint 2015 supports a global and effective supply Footprint 2015 of jewellery with short replenishment lead-time Main distribution Manufacturing centres Local centres • Ease and speed of implementation of improvements Bangkok Shanghai Bangkok much easier with four main distribution centres Hamburg E-com EU Chiang Mai • Prepared for business needs and opportunities for Baltimore São Paulo further development of eSTORE Toronto 3rd party Sydney suppliers E-com US
76 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY BENEFITS FROM CONSOLIDATION OF FOOTPRINT FOR DISTRIBUTION CENTRES Continue to take out logistic costs as a • Higher product availability compared to percentage of revenue… demand from markets due to four main -57% distribution centres strategically placed 5.3%
2.3% • Higher transparency of operations giving the simplified structure 2012 e2015 • Efficient processes and scale of business have …and improve pick-per-hour at significantly reduced the operational costs of distribution centres distribution centres: +118%
• Logistic cost in percentage of revenue 709 improved by 57% from 2012 to 2015 326
• Productivity improved by 118% from 2012 e2015 2012 to 2015
77 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY THE PANDORA JEWELLERY SUPPLY CHAIN
THE JEWELLERY VALUE CHAIN
Forecasting & PANDORA sales Raw materials Manufacturing Distribution centres planning channels
• 1 manufacturing plant in Gemopolis, Bangkok • 2 new manufacturing plants to be constructed • 3rd party suppliers
78 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY A TRUE MASS-PRODUCTION SETUP BASED ON HIGHLY SKILLED CRAFTSMANSHIP
Number of employees in Thailand has grown significantly
• All manufacturing processes are today +174%
clustered within Gemopolis using 16 buildings >11,000 7,933 and 61 floors to the entire PANDORA business 5,921 4,019 • Increasing market demand is reflected in a growing number of specialised craftspeople to 2012 2013 2014 2015 the hand-finished jewellery production Shipped units from Thailand have almost doubled between • Manufacturing has reached the milestone of 2012 and 2015 (million units) producing and shipping more than 100 million +95% pieces of jewellery in one year >105 79 91 55
2012 2013 2014 2015
79 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY NEWNESS ABSORBED BY SCALE, STREAMLINING NO. OF STOCK KEEPING UNITS AND HIGHLY SKILLED CRAFTSPEOPLE
More complexity due to increased The last years show balance between Rapid production introductions have number of collections active and new stock keeping units (SKU) significant impact on revenue
Drops Essence Disney Rose Active SKU New SKU Revenue from SKU launched within last 12 months 14 9,500 13 1 2 1 8 3 4 51% 50% 49% 2 42% 1 3,300 3,500 4 2,500 2,900 2 20% 7 7 7 750 1,100 1,000 4 600 700 2 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 9M 2015 Note: Currently PANDORA operates with approx. 1,300 design variations
80 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY PRODUCTIVITY GAINS ARE USED TO CAPTURE INCREASING PRODUCT COMPLEXITY SUCCESSFULLY
The new silver bangle version requires more casting flasks The new silver ring version requires more craftspeople 2013 2015 2007 2014
Numbers of casting flasks required to produce 1,000 pcs of: Manpower required per day to produce 1,000 pcs of: • Year 2013 silver bangle is 8 casting flasks • Year 2007 silver ring, Mother of Pearl is 40 craftspeople • Year 2015 silver bangle with cubic zirconia is 72 casting flasks • Year 2014 lace silver ring is 158 craftspeople
81 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY THE MANUFACTURING MODEL OFFERS A COMPETITIVE ADVANTAGE TOWARDS COMPETITORS
• Scale of the operational model elevates market entry barriers
• Solid integration of product development activities throughout the value chain
• Product complexity and delicate styles require highly skilled craftspeople with the Thai sense of quality and aesthetics
• Each piece of jewellery passes through 25-75 pairs of hands depending on complexity and process Recruiting craftspeople to open positions: Open positions in Thailand in March 2015 where 8,000 people showed up for an interview
82 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY THE FOUNDATION OF THE MANUFACTURING MODEL IS THE TALENTED CRAFTSPEOPLE • Employee turnover of craftspeople of around 3.7% helped by stabile jobs, high safety/health standards and extensive skills training
• Certified within Environment (ISO 14001), Health & Safety (OHSAS 18001), Energy (ISO 50001) and a certified leading member of the Responsible Jewellery Council
• Relevant and fun benefits i.e. pension/health schemes, PANDORA Got Talent, Family Day and Beach Day which are central in Thai culture
• More than 1,000,000 km driven by 120 busses Pregnant employees / transporting people to and from work classes / education
• PANDORA radio and TV station with employees as DJs
• Pregnant employee benefits include extra breaks and maternity classes
83 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY THE PANDORA JEWELLERY SUPPLY CHAIN
THE JEWELLERY VALUE CHAIN
Forecasting & PANDORA sales Raw materials Manufacturing Distribution centres planning channels
• Demand & Supply Planning • Sales & Operations Planning • Inventory planning • Logility and AX Planning
84 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY HIGH PRODUCT AVAILABILITY RELIES ON SOLID INFRASTRUCTURE AND ORGANISATION
• Established a Demand Planning department PANDORA has built a strong organisation and ensuring conversion of market demand into processes resulting in true benefits manufacturing
Forecast Accuracy Mix Forecast Accuracy Volume • Established Sales & Operations Planning process,
anchored across functional areas in the 94% organisation 78% 81% 60% 55% • Implemented an advanced IT planning system to 43% support forecasting processes
• Strong hierarchy of metrics within forecasting 2013 2014 e2015 and planning
85 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY CLEAR BUSINESS BENEFITS FROM IMPROVED FORECAST ACCURACY
• High product availability at retail level and less stock outs
• High transparency and accuracy in demand from markets strengthen the processes between planning and manufacturing regarding the needed product mix
• More stabile planning of production resulting in reduced fluctuations especially upstream in the value chain
• Inventory reduced significantly from 33% to 17% of revenue between 2011 and 2014
86 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY THE PANDORA JEWELLERY SUPPLY CHAIN
THE JEWELLERY VALUE CHAIN
Forecasting & PANDORA sales Raw materials Manufacturing Distribution centres planning channels
• Silver • Gold • Gem stones • Glass • Others
87 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY RESPONSIBLE BUSINESS PRACTICES THROUGHOUT THE VALUE CHAIN IS A FOUNDING PRINCIPLE FOR PANDORA • PANDORA benefits from a large, strong and segmented network of suppliers
• In 2015, PANDORA invited 150 key suppliers to the Raw materials share of PANDORA’s production costs Thai crafting facilities to showcase ethical aspirations Silver Gold Other raw materials Other and best practice solutions 13% 25% • 100% recycling of gypsum, rubber, murano glass and 9% 36% 47% wax 20% 14%
15% 14% 12% • 99% of the silver and 90% of the gold entering 14% PANDORA originated from recycling 11% 58% 46% 36% • Man-made stones provide traceability and low 30% environmental impact 2012 2013 2014 9M 2015 • Diamond, gold and silver suppliers are certified responsible
88 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY MAJORITY OF THE PRODUCTS ARE MADE OF SILVER OR GOLD DECORATED WITH GEMSTONES OR STONES
The manufacturing setup in 2015 The high-level numbers
• ~2.5 billion cubic zirconia stones Hand-set cubic zirconia stones equal to: (1.3 billion stones in 2014) • ~6.8 million stones per day every single day for 365 days • 225 tonnes of silver shipped yearly • ~300,000 stones per hour • 1.4 tonnes of gold shipped yearly 24 hours per day for 365 days
• Mixing more than 4 tonnes of enamel per year
89 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY SUMMARY OF REPLENISHMENT LEAD-TIMES THROUGHOUT THE VALUE CHAIN
Time to replenish out of stock situations:
• Retail stores will have their orders shipped within 48 hours from the associated centre
• Distribution centres receive products from the crafting facilities after 3-7 weeks depending on the type of product
• Excess share between distribution centres is also an opportunity
90 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY THREE KEY FOCUS AREAS SUPPORTING SCALABILITY OF THE FUTURE
Targets
Capacity expansion Double Implementing the Production Capacity Expansion programme between 2015 and capacity 2019 to strengthen the manufacturing setup to gear for future demand
Lead-time Reducing lead-time from order receipt to delivery of products is important to Reduce 50%* secure rapid product introductions. Improving flows throughout the production processes is key to reducing lead-times
Data transparency Improving data transparency throughout the entire value chain to secure a Increase strong foundation for fast decision making. The ambition is to reach next level by significantly implementing a new Enterprise Resource Planning (ERP) system
* With current product mix
91 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY WHY THAILAND?
• From a skill-set and cultural perspective, Thailand has a strong history in fine jewellery manufacturing and especially within sterling silver jewellery Manufacturing clusters
• Thailand exported fine jewellery, diamonds, coloured stones, Chiang Mai etc. for more than USD 10 billion globally
• Tax privilege status Bangkok
• Transferring of employees from Bangkok to Chiang Mai to ensure a high skill-set from day one
• Mitigating for natural disasters by having two manufacturing clusters
* Source: The Customs Department, data calculation by The Gem and Jewelry Institute of Thailand, 2014
92 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY THE PRODUCTION CAPACITY EXPANSION IS AN IMPORTANT INVESTMENT FOR PANDORA • The production capacity expansion Production capacity expansion programme programme includes an investment of DKK LAMPHUN FACILITY 1.8 billion Lamphun, Chiang Mai • Factory construction started in October 2015 • Two new crafting facilities: • Commercial operation from Q1 2017 Lamphun, Chiang Mai • Employees: 5,000 Gemopolis, Bangkok GEMOPOLIS NEW Gemopolis, Bangkok • Optimisation of existing crafting facilities in • Factory construction starts in May 2016 Gemopolis • Commercial operation from Q1 2018 • Employees: 5,000 • Approximately 700 km between the two manufacturing clusters GEMOPOLIS EXISTING Gemopolis, Bangkok • All facilities located close to international • Ongoing optimisation within the period 2015-2019 • airports Employees: 8,000
93 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY FACTS ON THE LAMPHUN FACILITY
• Land area is ~75,000 m2 and building area is ~25,000 m2
• Production setup designed on flow principles to reduce lead-time
• Semi-automation of areas i.e. casting and burnout
• Green building standards and principles
• Optimised primarily for rings, earrings and more complex and sophisticated products
• Built for a maximum of 5,000 employees
94 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY THE ARCHITECTURAL DRAWING OF THE NEW FACILITY IN LAMPHUN
Starting Finished for point shipping
95 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY LEARNINGS FROM LAMPHUN WILL BE USED IN GEMOPOLIS
• The new Gemopolis facility (2nd new facility) will be based on learnings and experience from Lamphun
• This includes flow principles for how the production is planned and executed
• Existing facilities in Gemopolis will be optimised and streamlined according to the standards from the two new facilities
• New Enterprise Resource Planning (ERP) system will be implemented at all facilities to support data transparency and fast decision making
96 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY FUTURE SITUATION IS BASED ON PANDORA’S THREE KEY FOCUS AREAS
LAMPHUN FACILITY • Potentially double the production Lamphun, Chiang Mai capacity to 200+ million pieces of jewellery
GEMOPOLIS NEW • Shorten lead-time with 50% as a result Gemopolis, Bangkok of flow principles in production including an agile orchestration
• Increased data transparency by GEMOPOLIS EXISTING implementing a new Enterprise Gemopolis, Bangkok Resource Planning (ERP) system
97 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY SUMMARY
• Reached the milestone of producing and shipping more than 100 million pieces of jewellery in 2015
• Employing more than 11,000 craftspeople in Thailand
• Solid footprint of distribution centres including a strong forecasting and planning organisation
• Start-up of new crafting facilities on time which will provide another dimension of scalability based on efficient processes
• Future production capacity to potentially double to support the growing PANDORA business
98 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY THANK YOU!
99 7 JANUARY 2016 PANDORA CAPITAL MARKETS DAY