The European kitchen market Channels and competition Presentation by Lennart Rappe, CFO 18 September 2003 1 Contents • The European kitchen market • The UK market • The Nordic market • The German and Dutch markets 2 The European Kitchen Market 2001 MEUR % Germany 24 • The total European market UK 21 amounts to approx. Italy 17 EUR 11.4 bn at MSP France 9 • The four largest markets, Spain 4 Germany, UK, Italy, and France account for approx. Holland 4 70% of the market. Denmark 3 • Scandinavia accounts for Sw eden 3 approx. 10% of the market Sw itzerland 3 Norw ay 3 Austria 3 Belgium/Luxembourg 2 Finland 2 0 500 1 000 1 500 2 000 2 500 3 000 Source: Nobia 3 Market shares 2001 % Nobia (S) Alno + Wellman (D) • The five largest Nobilia (D) companies account for Snaidero (I) approx. 22% of the MFI ( UK) market Nolte Küchen (D) Kruse & Meinert (D) • No. 6-20 in size SALM (F) account for approx. Hacker Küchen (D) 19% of the market Groupe Fournier Frères + SSM (F) Gow er (UK) Scavolini (I) Siematic (D) Bauformat+Bürger (D) Leicht (D) Bulthaup (D) Schüller (D) Veneta Cucine (I) Bernstein Group (UK) Miele ( D) 01234567 Source: CSIL, Prognoscentret, and Nobia 4 Kitchen Furniture Export and Import in Europe Export/Production Import/Consumption % % DK 33,7 P 67,4 P 28,2 CH 43,9 D 22,5 B 41,4 A 21,1 N 38,4 B 20,2 NL 32,9 I 17,8 GR 32,2 EUR 16,0 A 24,2 S 14,3 F 15,6 F 11,2 IRL 11,6 E 10,9 EUR 10,3 UK 6,1 UK 7,6 NL 4,2 S 6,9 CH 2,2 E 6,6 FIN 2,0 DK 5,9 GR 1,7 D 3,0 IRL 1,3 FIN 2,4 N 1,2 I 1,1 0102030400 20406080 Germany and Italy are the largest export countries. France, Switzerland and the Netherlands are the Together they account for approx. 70 % of the European largest import countries. Together the account for Export trade. approx. 45% of the European import trade. Source: CSIL 5 Kitchen Furniture Consumption, Nordic Annual % changes at constant prices, index 1996=100 250,0% 200,0% Factors influencing kitchen demand: 150,0% • Consumer confidence • Housing transactions 100,0% • New-home construction & renovation 50,0% • Interest rates 0,0% 1996 1997 1998 1999 2000 2001 Denmark 100,0% 108,9% 117,7% 107,4% 112,7% 110,4% Finland 100,0% 123,9% 158,8% 183,3% 202,5% 208,4% Norway 100,0% 98,9% 98,0% 62,4% 71,9% 69,3% Sweden 100,0% 97,2% 95,7% 99,7% 106,0% 109,1% Europe 100,0% 99,5% 100,9% 104,5% 105,2% 103,2% Source: CSIL 6 Kitchen Furniture Consumption, Europe Annual % changes at constant prices, index 1996=100 200,0% Factors influencing 150,0% kitchen demand • Consumer confidence • Housing transactions 100,0% • New-home construction & renovation 50,0% • Interest rates 0,0% 1996 1997 1998 1999 2000 2001 France 100,0% 100,4% 105,9% 121,7% 123,5% 128,2% Germany 100,0% 93,5% 92,1% 90,9% 83,9% 75,3% Italy 100,0% 98,0% 102,2% 105,8% 108,4% 106,2% Netherlands 100,0% 98,6% 100,3% 111,9% 111,1%104,8% UK 100,0% 121,6% 120,1%141,3% 156,1%164,2% Europe 100,0% 99,5% 100,9% 104,5% 105,2% 103,2% Source: CSIL 7 The UK Market 8 UK UK Kitchen Market at RSP MGBP 3 000 CAGR 97-02 2 500 17% Installation +4.3% 6% 2 000 9% Sinks & Taps +2.4% 1 500 25% Worktops +9.1% 1 000 Appliances +8.8% 43% 500 Furniture +1.6% 0 1997 1998 1999 2000 2001 2002 Source: JKMR, Magnet 9 UK UK Kitchen Market Volumes and AOV (RSP) 920 4000 3500 900 £ CAGR 97-02 3000 e u s 0 0 880 val Volumes 0 r -0.2% e ns 2500 d r he o c e t i 860 Average +4.5% g K 2000 a Order er v Values A 840 1500 820 1000 1997 1998 1999 2000 2001 2002 Source: JKMR, Magnet 10 Consumer Confidence Indicator UK-EU 10 5 0 -5 -1 0 -1 5 -2 0 1998:1 1998:2 Sou 1998:3 rce 11 : Eu 1998:4 ropean Co 1999:1 1999:2 UK mmi 1999:3 ss 1999:4 ion 2000:1 2000:2 2000:3 2000:4 2001:1 2001:2 2001:3 2001:4 2002:1 UK 2002:2 2002:3 EU 2002:4 2003:1 2003:2 UK Private consumption, annual growth rate UK 6,0% 5,0% 4,0% 3,0% UK 2,0% 1,0% 0,0% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Source: EUROCONSTRUCT 12 UK UK Kitchen Furniture Market Channel Map 2002 Sales at MSP VerticallyVertically IntegratedIntegrated MFI £265m 29% Magnet IInndedepependendenntt Moben retailersretailers £303m 33% MerchanMerchanttss ManufacturersManufacturers DistribDistribuuttorsors £47m 5% ConsConsumersumers £920m MultiplesMultiples £118m 13% DirectDirect B&Q SalesSales Focus £57m 6% Wickes Homebase HouseHouse Source: JKMR/Magnet BuildBuildersers £130m 14% 13 UK Overall UK Market by Distribution Channel 2002 Sales at RSP The UK Kitchen market is dominated by five companies accounting for over half of the retail market. MFI/Howden is the largest retailer in the UK. Contract Market 10% Merchants 4% Magnet/CP Hart 7% Independents 37% MFI/Howden 25% Premium Manufacturers Moben 2% Focus/Wickes Homebase B&Q 4% 4% 1% 6% Source: Magnet 14 UK Upper & upper-middle Market 2002 sales at RSP The upper & upper-middle sector accounts for around half of the UK market and is dominated by the independent sector. Magnet is the leading retailer in this sector. Magnet Retail 10% Independents 69% MFI Schreiber 9% Moben High End 7% Manufacturers Source: Magnet 5% 15 UK UK Kitchen Retailers Magnet is the leading company in the upper- middle sector Source: Magnet 16 UK Main competitors in the UK upper-middle market • MFI: – vertically integrated manufacturer with its own store network – Strategic priorities: refurbishment of MFI out-of-town stores roll-out of Howden joinery stores extension of product offer to every room in the house • Moben – limited role of store network – sales mainly through direct sales force • Independent retailers – very fragmented structure – mainly local and small business supplied by a variety of local manufacturers and import companies 17 UK Main competitors in the UK flat-pack market • The flat-pack market is dominated by DIY-chains and builders’ merchants •B&Q – 320 points of sale – supplied by a few manufacturers – part of the Kingfisher Group • Focus Wickes – 440 points of sales – supplied by Gower – owned by financial investors and management • Homebase – 270 points of sale – supplied by Magnet/Optifit – owned by the GUS Group • Jewson/Graham – 650 points of sale – supplied by Gower – part of the StGobain Group 18 UK Profile - UK Market • The UK market has achieved strong growth in the past five years, particularly prior to the millennium • Vertically integrated manufacturers and a few large DIY-multiples occupy 50% of the market • The distribution structure at the upper & upper-middle sector remains fragmented • Upper & upper-middle sector is dominated by independents. Magnet (retail) is the largest individual retailer in this market • Vertically integrated manufacturers and DIY-multiples have grown the number of outlets and gained market share at the expense of the independent sector • The manufacturing structure is well consolidated with six manufacturers holding more than 50% of the market • Small import and export trade 19 The Nordic Market 20 Consumer Confidence Indicator Nordic - E 40 U 30 20 10 0 -1 0 -2 0 1998:1 1998:2 Sou 21 1998:3 rce : Eu 1998:4 ropean Co 1999:1 1999:2 mmi s 1999:3 s i on 1999:4 Nordic 2000:1 2000:2 2000:3 2000:4 2001:1 2001:2 2001:3 2001:4 2002:1 SE 2002:2 NO 2002:3 DK 2002:4 SF 2003:1 EU 2003:2 Nordic Housing Transactions, Nordic 18 000 16 000 14 000 12 000 10 000 8 000 6 000 Sweden 4 000 Norway 2 000 Denmark Finland 0 1 2 3 4 1 2 3 4 1 2 3 4 :1 :2 :3 4 1 99: 99: 99: 99: 00: 00: 00: 00: 01: 01: 01: 01: 02 02 02 02: 03: 0 0 0 19 19 19 19 20 20 20 20 20 20 20 20 2 2 2 20 20 Number of housing transactions per quarter, 1+2 family homes. Source: Prognoscentret 22 Nordic Market Share, Nordic Sweden Norway Nobia 21% Nobia Others 35% Nobia combined market 39% Others share approx. 28% in 2002: 45% – Sweden 21% IKEA 17% – Norway 35% IKEA – Denmark 28% Ballingslöv Huseby 14% Kvänum 3% 9% 4% –Finland 29% Vedum 5% 4% Strai 4% Drömmekjökkenet Denmark Finland Nobia Nobia 28% 29% Others 41% Others 48% Svane Topi-Kalustaja 7% 8% KVIK 7% JKE 4% Harjavalta IKEA TVIS 6% (Puustelli) 7% Isku 7% 8% 23 Nordic Main competitors in the Nordic market • The Nordic countries each have approx. 5-10 local actors • Ikea and HTH are brands that operate in all Nordic countries • Nobia’s main competitors per country are: – Sweden: Ballingslöv, Kvänum, Vedum and Ikea – Denmark: JKE (Ballingslöv), Kvik, Tvis and Ikea – Norway: Drömmekjökken (Ballingslöv), Strai, Huseby and Ikea – Finland: Harjavalta (Puustelli), Isku and Topi-Kalustaja 24 Nordic Distribution Structure Overview - Nordic Turnover shares in per cent Denmark Sweden Merchants 2% Merchants 40% DIY 8% DIY 5% Others/Direct Others/Direct sales 15% sales 10% Kitchen/Bathroom Kitchen/Bath- Specialists 67% room Specialists 18% Furniture Chains Furniture Chains (IKEA) 27% 8% (IKEA) Norway Finland Merchants 1% Merchants 0% DIY 23% DIY DIY 8% Others/Direct Others/Direct sales 15% sales 42% Kitchen/Bathroom Kitchen/Bath- 42% Specialists 42% room Specialists Furniture Chains Furniture Chains (IKEA) 19% (IKEA+3) 8% Source: KMC Research, Interviews 25 Profile - Nordic Markets • Stable overall YOY in total over the past years with variations between countries • The Nordic market consists of four countries with different distribution structures – kitchen specialists leading channel in Denmark – Builders’ merchants leading channel in Sweden • Nobia, Ikea and Ballingslöv are active in several Nordic countries • Ikea and HTH are the only pan-Nordic brands • Manufacturing structure reasonably well consolidated • Import/export trade mainly from Denmark to Norway 26 The German and Dutch markets 27 DE & NL Kitchen Furniture Consumption Kitchen furniture, actual consumption.