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Opportunity in RETAILMENT ARTEE Industries Limited March 2013 Nigeria – Africa’s burgeoning economy RETAILMENT – The future The Opportunity The Challenges ARTEE Industries Limited – One of Nigeria’s leading conglomerates Head points ARTEE Industries Limited - Proprietary & Confidential 2 NIGERIA – Africa’s burgeoning economy A brief overview ARTEE Industries Limited - Proprietary & Confidential 3 Nigeria - GDP (in USD billions) 243.98 228.64 250.00 207.11 200.00 168.59 165.92 145.42 150.00 100.00 GDP % growth rate 112.24 67.65 10 87.84 9 8 50.00 7.8 7 6 2004 2005 2006 2007 2008 2009 2010 2011 2012 8.6 7.86 7.697.72 7.68 7.457.3 7.677.367.69 7.4 5.7 5.7 6.1 6.5 6.7 7.1 6.6 6.17 6.13 6.9 7.1 5 4.5 4 % growth rate 3 2 1 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2008 2009 2010 2011 2012 2013 Nigeria – GDP & GDP Growth Data Source: www.tradingeconomics.com / WORLD BANK ARTEE Industries Limited - Proprietary & Confidential 4 Nigeria's Global Competitiveness Rank • • Ranked 115 amongst 144 countries (improved from 127 / 142) Year 2009 - 10 2010 - 11 2011 - 12 2012 - 13 0 20 Market size ranking – 33 Rank • Improved rankings: Macro Economic environment :: 39 from 121 – Labour market efficiency :: 55 from 70 – 40 Nigeria 60 Lowest Quintile Rank 80 100 120 99 105 111 127 140 114 127 115 115 Nigeria's Ranking - Competitive Pillars Nigeria’s Global Competitiveness Health & primary education Infrastructure Institutions Higher eductaion & training Technology readiness Goods market efficiency Innovation Median rank Financial market development Business sophistication Labour market efficiency Macroeconomic environment Market size Data Source: WEF – GCR :: 2009 – 10, 2010 – 11, 2011 – 12; NESG Research ARTEE Industries Limited - Proprietary & Confidential 142 130 117 113 112 88 78 73 68 66 55 39 33 150 100 50 0 5 • • Amongst the ‘Next – Eleven’ Nigeria ranks 9th. , ahead of Bangladesh & Pakistan Nigeria's Ranking - Next 11 Pakistan 124 Bangladesh Amongst the BRINCS, Nigeria ranks 6th. 118 Nigeria 115 Egypt 107 Vietnam Iran 66 Phillippines 65 Mexico Nigeria's Ranking - BRINCS NIGERIA 75 53 Indonesia 115 50 Turkey RUSSIA South Korea 67 INDIA 19 150 59 SOUTH AFRICA 43 100 50 0 52 BRAZIL 48 CHINA 29 120 100 80 60 40 20 0 Global Competitiveness :: Nigeria v/s Emerging Economies Data Source: WEF – GCR :: 2009 – 10, 2010 – 11, 2011 – 12; NESG Research ARTEE Industries Limited - Proprietary & Confidential 6 Sectoral contribution to GDP : 2010 - 2011 • Agriculture, Wholesale & Retail, Crude account for more than 70% of the GDP Solid Minerals Hotels & Restaurants Business & Other services Real Estate Building & Construction Finance & Insurance Sectoral growth : 2010 - 2011 2011 Manufacturing 2010 Telecommunciation & Post Crude oil & Gas Others Finance & Insurance Crude oil & Gas Others Wholesale & Retail trade Agriculture Agriculture Manufacturing - Real Growth (Annual) 5.00 10.00 15.00 20.00 25.00 30.00 35.00 40.00 45.00 Business & Other services Real Estate • Wholesale & Retail trade Solid Minerals Hotels & Restaurants Building & Construction Telecommunciation & Post (5.00) - 5.00 10.00 15.00 2011 20.00 25.00 30.00 35.00 40.00 Non-oil sectors like Telecommunication & Post (34%); Wholesale & Retail (11%), Hotels & Restaurants (12 %+), Real Estate (12%+), building & Construction (12%+) recorded double digit growth 2010 Sectoral contribution to GDP (2010 – 2011) Data Source: NBS Outlook – 2010 :: 2015 ARTEE Industries Limited - Proprietary & Confidential 7 • The slow down in growth in 2012 is a resultant effect of external shocks (slow down in US & Europe, China); lower output of crude production, subsidy removal on PMS and its effect on household incomes 20.00 Projected Real GDP growth are: – – – • Projected GDP Growth rates 2013 :: 8.04 % 2014 :: 7.43 % 2015 :: 7.25 % 18.00 16.00 14.00 Nominal GDP for 2012 – NGN 43,134.77 bn, a 15.63% growth over 2011 % age growth • 12.00 Real GDP 10.00 Nominal GDP 8.00 6.00 • Projected Nominal GDP growth rates are: – – – 2013 :: 17.28 % 2014 :: 15.53 % 2015 :: 14.19 % 4.00 2.00 2013 2014 2015 The future :: 2013 – 2015 Data Source: NBS Outlook – 2010 :: 2015 ARTEE Industries Limited - Proprietary & Confidential 8 RETAILMENT – The future The BIG Impact ARTEE Industries Limited - Proprietary & Confidential 9 SHOPPING MALLS / HYPER MARKETS RETAILMENT SUPER MARKETS DEPARTMENT STORES STANDALONE STORES MOM & POP STORES STREET WEEKLY VENDORS MARKETS The Evolution of RETAIL ARTEE Industries Limited - Proprietary & Confidential 10 In developed economies; the composition of organised retail is much larger than the unorganised retail. Therefore; it would be safe to presume that ... Economic growth has a direct correlation to Increase in organised retail Percentage of Organized Retail: United States of America: 80% United Kingdom: 80% Japan: 66% Australia: 78% India: 10% Nigeria: 3% The Organised Retail Industry – A macro overview ARTEE Industries Limited - Proprietary & Confidential 11 27% of the Global GDP is contributed by organised retail; 20% of the US economy is supported by retail Across the globe; retail employs 17.1% of the workable population and in the US it accounts for 14% Organised retail supports the development of various sectors across the economic environs of the country Organised retail conserves foreign exchange The Organised Retail Industry – A macro overview Source: Retail Trends and Economic Dependencies – www.marc.org ARTEE Industries Limited - Proprietary & Confidential 12 The BIG IMPACT of Retail ARTEE Industries Limited - Proprietary & Confidential 13 Current estimated yield loss is around 39% primarily due to an inefficient value chain & cold chain Effecting a loss in earning and increase in cost Organised retail would help improve the efficiencies of the value chain - Reduces wastage - Increase revenue - Effectively lowering down inflation rates RETAIL & AGRICULTURE ARTEE Industries Limited - Proprietary & Confidential 14 Organised retail helps increase the presence of brands in all categories Launching of new products & concepts to test markets leading to eventually setting up local manufacturing facilities Manufacturing infrastructure improves as technology transfer is facilitated Creates an improved platform for direct interaction with the consumers RETAIL & MANUFACTURING ARTEE Industries Limited - Proprietary & Confidential 15 • Organsied retail is the major impetus of realty developments – • India case study: • 2001 – 142,000 m² of modern retail • 2006 – 2.7 million m² • From 30 malls in 2003 to 230 malls in 2007 Organised retail has moved from mere shopping to ‘RETAILMENT’ RETAIL & REAL ESTATE ARTEE Industries Limited - Proprietary & Confidential 16 Case Point 1 Increase in organised retail Increase in consumer spend Increase in consumer finance Increase in capital investment Increase in project finance Case Point 2 Increase in organised retail SME Finance through a Supply Chain Contract with major Retailers RETAIL & BANKING ARTEE Industries Limited - Proprietary & Confidential 17 Technology is the backbone of organised retail The boom in retail will give an impetus to the IT industry in sphere of both hardware and software development Increase in telecom and IT infrastructure facilitates a cashless economy RETAIL & TECHNOLOGY ARTEE Industries Limited - Proprietary & Confidential 18 Organsied retail helps develop the value chain in the system Value Chain entities are SME drivers Development of ancillary units RETAIL & SME ARTEE Industries Limited - Proprietary & Confidential 19 Organised retail is by far one of the single largest employers in any economy In developed economies, 30sqm is managed by one person Organised retail generates 17% of total employment globally Organised retail develops entrepreneurship Franchise model employees become employers RETAIL & HUMAN CAPITAL ARTEE Industries Limited - Proprietary & Confidential 20 DUBAI :: 2010 – 10 million tourist 2015 – Estimated 15 million 25% - 40% visitors to Mega malls are tourists Average spend is 2 – 3 times higher than residents Organised retail and tourism are interdependent In Nigeria organised retail will develop domestic tourism RETAIL & TOURISM ARTEE Industries Limited - Proprietary & Confidential 21 TAX - Agriculture Sector Organsied retail increases the revenue base for the government TAX - SME TAX - Manufacturing TAX - Real Estate TAX Technology TAXBanking GOVT. TAX INCOM E RETAIL & FEDERAL REVENUE ARTEE Industries Limited - Proprietary & Confidential 22 RETAIL Industry Broad Market Sizing ARTEE Industries Limited - Proprietary & Confidential 23 Zone Food Exp % age of Food Exp Non-Food Exp. % age of Non-Food TOTAL % age of TOTAL North – Central 2,395.704 15.27 1,138.410 13.29 3,534.114 14.57 North – East 1,942.853 12.39 763.166 8.91 2,706.019 11.16 North – West 3,938.239 25.11 1,459.677 17.04 5,397.916 22.26 South – East 1,935.051 12.34 984.137 11.49 2,919.188 12.04 South – South 1,908.387 12.17 1,628.646 19.24 3537.033 14.67 South – West 3,566.435 22.74 2,573.147 30.04 6,139.582 25.31 TOTAL 15,686.67 8,567.00 24,253.67 Nigeria – Consumption pattern •Figures in NGN billion • Source: NBS 2009/2010 Consumption Report ARTEE Industries Limited - Proprietary & Confidential 24 2012 – Total no. of International Travellers :: 2.90 million Average spend per traveller – USD 4000 TOTAL Outflow of FX – USD 11.6 billion Nigeria – FX Spend •Estimated figures based on secondary research – Source - FDCL ARTEE Industries Limited - Proprietary & Confidential 25 In South Africa, a leading grocery chain (world’s largest) closed 2011 with a turnover of USD 6.00 billion This chain constituted 850 shops, and amassed a market share of 25% The TOTAL GROCERY RETAIL SALE in SA for 2011 – USD 24 billion; comprising 3800 outlets TOTAL South African Population – 65 million TOTAL SHOPPER Population – 45 million South Africa – A retail comparison - I •SPAR SA – Handbook 2011 ARTEE Industries Limited - Proprietary & Confidential 26 THE RETAILMENT FIGURE for SOUTH AFRICA • Grocery Sales – • Fashion / Electronics etc (ratio presumed 1:1) – • Entertainment (avg spend ratio to grocery 1:4) – • Food / Restaurants' etc (1 : 4 ratio) – • AN ESTIMATED TURNOVER OF USD 24 billion USD 24 billion USD 6 billion USD 6 billion USD 60 billion only from RETAILMENT South Africa – A retail comparison - II ARTEE Industries Limited - Proprietary & Confidential 27 The Challenges ARTEE Industries Limited - Proprietary & Confidential 28 RETAIL … recognition as a ECONOMIC SECTOR Infrastructure Consistency Human resource The Challenges ARTEE Industries Limited - Proprietary & Confidential 29 ARTEE Industries Limited Credentials ARTEE Industries Limited - Proprietary & Confidential 30 • Started in 1988 … one of the first organised supermarket in Nigeria … 250 m² ... branded as • 2011 – Nigeria’s largest Supermarket & Department Store with presence in Pan – Nigeria and in excess of 20,000 m² of retail space • Evolved as the most comprehensive supermarket and department stores in Nigeria Genesis & Evolution - RETCO ARTEE Industries Limited - Proprietary & Confidential 31 2010 – SPAR Nigeria introduced Evolution – RETCO ARTEE Industries Limited - Proprietary & Confidential 32 ARTEE Group PROPCO Residences Commercial RETCO SPAR MANCO PARK – n SHOP Furniture Table Water & PET & Preforms Business interests ARTEE Industries Limited - Proprietary & Confidential 33 Started in 1999; with over 6,000 m², CASCADE is one of the leading brands of Table Water in Nigeria 2006 – the largest & the most comprehensive furniture manufacturing facility in Nigeria spanning over 10,000 m² and over 85 CNC machines. This facility was commissioned within 11 months of starting the project from scratch MANCO ARTEE Industries Limited - Proprietary & Confidential 34 Developing one of the largest community type living residential complexes spanning over 23 hectares – 50 houses built within 12 months of start of work 2010 – Ultra modern shopping complex measuring over 6,000 m² completed with 14 months of start PROPCO ARTEE Industries Limited - Proprietary & Confidential 35 The opportunity is there for the taking But will only happen if we make it happen ARTEE Industries Limited - Proprietary & Confidential 36 Thank you ARTEE Industries Limited - Proprietary & Confidential 37