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New Initiative. Clean and Beautiful. Highlight. LG Household & Heath Care. ◆ started its operation as Rakhee Chemical Industry in 1947 and has evolved as ‘a company of the Korean people’ which offers wide range of products from personal/home care products(tooth-

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New Initiative

Clean and Beautiful


Highlight

LG Household & Heath Care

◆ started its operation as Rakhee Chemical Industry in 1947 and has evolved as ‘a company of

the Korean people’ which offers wide range of products from personal/home care products(tooth-

paste, soap, shampoo, detergents, and etc.) to cosmetics,

◆ played a role as a footstep of the constant growth of LG Group including LG Chemical

with dominant market position and stable earning growth,

◆ recorded annual sales growth rate of 8% and maintained operating margin of 10% despite the

financial crisis(1998~2000) of Korea owing to its continuous commercialization of differentiated

products supported by extensive R&D activities and total logistics which integrate production,

sales, and distribution,

◆ demerged from LG Chemical as a new entity specialized in household products and cosmetics,

◆ will elevate corporate value and maximize shareholder value as a dominant player with

incomparable competitiveness, and

will pave the way towards a Super-Excellent Household & Health Care Company

realizing customers’ dreams to be clean, healthy, and beautiful while enriching lives of

consumers, shareholders, and employees, always with them.


Outline

Ⅰ. The Company

Ⅱ. Vision

Ⅲ. Corporate Strategies and

Growth Target

Ⅳ. Business Results and

Strategies

Ⅴ. Financial Highlight


Ⅰ. The Company


Company Profile

Established in 1947, LG H&H has positioned itself as the largest company in

the domestic household products and cosmetics markets.

■ Brief History

Yr 1947 Rakhee Chemical Industry established → Yr 1954Produced ‘Lucky toothpaste’

→ Yr 1966Commercialized synthetic detergents → Yr 1969Went public

→ Yr 1974Changed corporate name to ‘Lucky’ and established Ulsan plant

→ Yr 1980Built Cheongju Plant → Yr 1984 Commercialized cosmetics

→ Yr 1995 Changed corporate name to ‘LG Chemical’

→ Yr 2001Demerged from LG Chemical and established as LG H&H

■ Business Domains

· Household Products : Personal Care, Home Care

· Cosmetics : Basic Care, Make-up & Special Care

■ Plant : Cheongju Plant(household products, cosmetics), Ulsan Plant(household products)

■ Distribution Network : 14 warehouse centers,

180 sales agents for household products and 200 for cosmetics

■ Number of Employees : 3,400

■ Overseas Subsidiaries

· Manufacturing Subsidiary - 2 in China(toothpaste, cosmetics), 3 in Southeast Asia(shampoo, cosmetics)

· Sales Subsidiary - 1 in China and 1 in USA(household products, cosmetics)

· R&D Subsidiary - 1 in China(natural substance)

1/14


Business Domain

LG H&H engages in household products and cosmetics businesses, securing

market presence as the dominant leader.

Major Products

Major Brands

■Toothpaste

■ Soap

■ Shampoo/Conditioner

■ Diaper

  • ‘Bamboo Salt Urdex’, ‘Clinx’

  • ‘Say’, ‘Sense’

  • ‘Double Rich’, ‘Novid’

  • ‘Maman’

Personal

Care

Household

Products

(Since 1954)

■Laundry Detergents

■ Kitchen Detergents(Dish-washing)

■ Fabric Softener

  • ‘One Scoop’

  • ‘Pon Pon’, ‘Safe’

  • ‘Sayfran’

Home Care

&

‘LacVert’

‘ISA KNOX’

‘OHUI’

‘HERCYNA’

‘Retem’

■Cleansing

■ Essence

■ Skin Toner/Softener

■ Cream

Basic Care

Cosmetics

(Since 1984)

■Foundation, Powder

■ Two Way Cake, Lipstick

■ Whitening

■ Wrinkle Care

Make up &

Special Care

2/14


Results

Over the past 3 years, sales has shown CAGR of 8.5% and recurring profit will surge to exceed krw 100 bn by 2001.

Sales & EBITDA

Recurring Profit & Margin

1,062

105

965

884

816

Sales

79

Profit

(krw bn)

(krw bn)

61

154

9.9

31

8.1

133

6.9

EBITDA

124

121

(krw bn)

3.7

Margin

(%)

‘98 ‘99

‘00 ‘01(E)

‘98 ‘99

‘00 ‘01(E)

3/14


Core Competence

From NPD* to logistics, LG H&H has been accumulating core competencies to

create values and will further enhance them to be world-class.

NPD

Marketing

Prompt development of new products

supported by intense R&D

Top-ranking brand equity and

expanding big brand

  • Operate self-designed NPD Process

  • and 7 NPD principles

  • Integrate tech and brand by MGPD

  • - Effectuate R&D with ‘Vitality Index’

  • Brand management through deep

  • analysis of customer and market

  • Carry out inexpensive marketing

  • as the market leader

  • Combine customer data and improve

  • advertising & promotion skills

Core

Competencies

Customer Relations

Logistics

Differentiated service offering and

customer satisfaction enlargement

Win-Win strategy of ECR* with

customers and cost reduction

  • Develop new services and sales promotions

  • as a leading company

  • - Implement various programs to vitalize

  • customer-oriented activities

  • (STAR, JUMP, CORE Program,and etc.)

  • Improve operation of infra system

  • (for control of inventories and cost )

  • -Co-work with distributors

  • * ECR: Efficient Consumer Response

* NPD : New Product Development

4/14


Ⅱ. VISION


Vision

A Super-Excellent Household & Health Care Company

to enrich customers’ lives through creating new values

Vision

With world best

productivity

and quality

With highly qualified

human resources

of utmost market value

With world class

profitability

and financial structure

Super

Excellence

6 Sigma

Leadership

Knowledge Management

- Developing world class core

competency through knowledge

systematization and reproduction

- Founding new business and

providing high value-added

products and service

- Best quality in product, service,

management,and human resource

- Breakthrough in

management innovation activities

- Cultivating & taking real

transformational leadership

- Embodying field-based and

performance-oriented culture

SIGMA 21st

Renovation

S uper Excellence

I nformatization

G lobalization

M anagement by Knowledge

A ction Leadership

5/14


SIGMA 21st - Long Term Corporate Renovation Program

Focus

Action Plan

  • Combine 6 sigma with existing renovation

  • programs

  • Expand higher value added products and

  • big brands

◆ Rationalization

◆ Revitalization

S uper Excellence

◆ Competitiveness of distribution

enhanced by IT

◆ E-biz diversification

  • Implement ECR/DB Marketing/ERP

  • Launch beauty care business on the internet

I nformatization

  • Focus on selective brands by region

  • Upgrade MIS of overseas subsidiary

  • and Global R&D network

◆ Profitable overseas business

◆ World-class management

G lobalization

◆ Knowledge management

◆ Core competence enhancement

M anagement by

Knowledge

  • Facilitate infra systems to share knowledge

  • Accumulate best practice of key knowledge

◆ High performing culture

◆ High motivating rewards

  • Operate CMU/AMU

  • Differentiate rewards based on performance

Action Leadership

6/14


Ⅲ. Corporate Strategies &

Objectives


Strategies

LG H&H will challenge the changes in market situation with 3 principal strategies.

Customer

& Market

◆ Change in consumer behavior

- Diversification of customer needs

- Enhanced buying power of teenagers and

expansion of silver market

◆ Sluggish market growth due to

depressed economy

◆ Drastic restructuring of distributors

- Convenience stores on the increase

- Supermarkets/Shops to be large-sized and form

sales network

Strategies

ⅰ) Focus on

profitability and cash flows

ⅱ) Acquire

globally-competitive core competencies

ⅲ) Develop

higher-value-added products and

new businesses

◆ Aggressive operation of multinational

companies

- Household products : P&G, Unilever

- Cosmetics : Shiseido, Kanebo

◆ Local makers’ selective concentration

- Pacific : cosmetics, shampoo, toothpaste

- Aekyung : toothpaste, detergents, cosmetics

Competitors

7/14


CAGR 11.6%

Growth Target

LG H&H is aiming at sales of CAGR 11.6% and recurring margin of 13.1% by 2003.

165(12.3%)

OP(Margin)

150 (11.2%)

123 (11.6%)

RP(Margin)

105 (9.9%)

1,340

(krw bn)

Sales

1,062

42%

(krw bn)

Cosmetics

38%

58%

Household

Products

62%

01(E) 03(E)

8/14


Ⅳ. Business Results

and Strategies


Household Products

① Results

Sales of household products has increased by 6.2 % p.a. and LG H&H is maintaining No.1 M/S in the domestic market.

Sales

Market Share

(krw bn)

(Year 2000)

662

  • Toothpaste

624

602

L G

50.6

Pacific

18.4

Aekyung

16.8

Others

541

  • Shampoo

L G

28.9

Aekyung

16.5

P&G

15.0

Pacific

20.4

Others

  • Soap

Dong

San

12.5

L G

41.0

Pacific

12.7

Unilever

9.6

Others

  • Laundry Detergents

L G

36.5

CJ

20.9

Aekyung

24.8

Others

  • Kitchen Detergents

L G

45.6

CJ

14.4

Aekyung

32.7

Others

98 99

00 01(E)

☞ Nilson Data

9/14


Strategies

Backed by strong market position, LG H&H will elevate profitability and

pioneer household products market with hit brands in a stream.

Secure leadership in major businesses

and growing channels

- Develop hit brands and accumulate brand equity throughNPD process and brand management

- Expand ECR system for new distribution channels

Seek growth engine for sustainable growth

- Develop new categories and focus on them

· junior products, hair-dyes, body cleansers, anti-depilatory agents, and etc.

- Enhance wholesale distribution business

· outsourcing of hit brands and strategic alliances with foreign/domestic companies

Strengthen cost competitiveness

- Activate TCR projects and accelerate production innovation

- Reduce manufacturing costs incessantly and allocate marketing expenses efficiently

10/14


Cosmetics

① Results

Sales has surged by 13.3% p.a. despite the financial crisis in Korea and LG H&H’s status in cosmetics market has risen to be strong No.2 player.

Sales

Market Share

(krw bn)

(krw bn)

1,910

400

1,765

Market

Size

1,650

341

16.9%

282

275

LG H&H→

15.6%

15.0%

98 99

00 01(E)

00

98 99

* Market exclusive of door-to-door sales

11/14


Strategies

LG H&H will strengthen growth momentum to be No.1 player in cosmetics by

expanding leading products and differentiating strategies by distribution channel.

Differentiate strategies by

distribution channel

Enhance product leadership

◆ Attain No.1 market shares

◆ Shop

- Narrow the gap between No.1 player and LG H&H

- Concentrate on ‘LacVert’ and ‘ISAKNOX’

- Run clubs for shoppers

2002

Lipstick

2003

Essence

2000

Two-way

Cake

2001

Wrinkle Care,

Whitening

◆ Mass Market

- Maintain No.1 market shares in new distributors

such as large discount store

- Focus on ‘Retem’

◆ Increase ‘Big Brands’

- Over 10 brands to exceed krw 10 bn in sales

respectively

- ‘LacVert’, ‘ISAKNOX’, ‘HERCYNA’, ‘OHUI’,

‘Retem’, and etc.

◆ Department Store

- Diversify customer DB marketing

- Focus on ‘OHUI’

◆ Sales Agent

◆ Cultivate ‘Blockbusters’

- LacVert or ISAKNOX to exceed krw100 bn in sales

- Launch personalized marketing

- Differentiate marketing by customer’s skin type

12/14


Ⅴ. Financial Status


Key Financials

(krw bn, except per share data)

13/14


Debt Reduction

Cash generated from business operations will be spent primarily on repayment of

borrowings.

Cash Flows

Debt Reduction

(krw bn)

219%

Cash-in

Debt to

Equity

168%

Cash-out

163

Net Cash Flows

264

114%

75

139

128

71%

186

53

78

141

88

86

Borrowings

77

(krw bn)

49

*

01(E)

02(E) 03(E)

01.1Q 01(E)

02(E) 03(E)

* Excluding 1Q results

14/14


Thank you!

This presentation contains forward looking statements which are based on management’s

assumptions and estimates . The forward looking statements involve certain risks and

uncertainties that could cause actual results to differ materially from those contained in this presentation. Potential risks and uncertainties include, but are not limited to, such factors

as general economic conditions, foreign exchange fluctuations, and any change in the relevant laws and regulations.


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