1. Unilever: entering Russian ice cream
market

2. Agenda
 Assessment of potential market entry
 Possible ways to enter Ice Cream
market
 Price of entering Ice Cream market
 Conclusion

3.  Assessment of potential market entry
 Possible ways to enter Ice Cream market
 Price of entering Ice Cream market
 Conclusion
Assessment of potential market entry
Should we enter the ice-cream
market?
Key factor we should consider
Market Company Potential
Analysis capabilities barriers to enter

4.  Assessment of potential market entry
 Possible ways to enter Ice Cream market
 Price of entering Ice Cream market
 Conclusion
Assessment of potential market entry
Market
Analysis
Client
Competitors Current situation
availability
• 60% are ice cream consumers
• Competitive environment •CAGR is 2.2$ in volume and
• Increase in DI drives ice cream • Biggest 15 companies hold 2.8% in value
demand 60% of the market • Long history of ice cream
• Per capita consumption of ice • Active consolidation process consumption
cream is likely to increase
Clients are willing Low resistance for High growth
to consume more potential market potential
entries
Market is
attractive

5.  Assessment of potential market entry
 Possible ways to enter Ice Cream market
 Price of entering Ice Cream market
 Conclusion
Assessment of potential market entry
Company
capabilities
International Local
Experience Strength
• Present in more that 40 different
markets
15+ of successful
• Leader in most of its markets performance on years
• Experts in ice cream on Russian marker
production
Unilever has experience
and desirability to succeed

6.  Assessment of potential market entry
 Possible ways to enter Ice Cream market
 Price of entering Ice Cream market
 Conclusion
Assessment of potential market entry
Potential
barriers to enter
Government Access to
Economy of scale
regulation distributors
No substantial Benefits from big Possibility to obtained
government regulation scale production access to distribution
network
Low entry barriers

7.  Assessment of potential market entry
 Possible ways to enter Ice Cream market
 Price of entering Ice Cream market
 Conclusion
Assessment of potential market entry
Should we enter the ice-cream
market?
Market Company Potential
Analysis capabilities barriers to enter
We should enter Russian
Ice-Cream market

8.  Assessment of potential market entry
 Possible ways to enter Ice Cream market
 Price of entering Ice Cream market
 Conclusion
Possible ways to enter Ice Cream market
Produce ice Produce ice
cream abroad cream in Russia
• High price
• Dependence on • Lower price
exchange rate • Ability to produce
• Unable to satisfy “true” ice cream
consumer • Relatively smaller
preferences logistic problems

9.  Assessment of potential market entry
 Possible ways to enter Ice Cream market
 Price of entering Ice Cream market
 Conclusion
Possible ways to enter Ice Cream market
Produce ice
cream
abroad
Produce ice
cream in
Russia

10.  Assessment of potential market entry
 Possible ways to enter Ice Cream market
 Price of entering Ice Cream market
 Conclusion
Possible ways to enter Ice Cream market
How to enter?
Start ice cream Acquire existing
Joint Venture
production player

11.  Assessment of potential market entry
 Possible ways to enter Ice Cream market
 Price of entering Ice Cream market
 Conclusion
Possible ways to enter Ice Cream market
Start ice cream
production
Pros Cons
• Ability to implement
Unilever corporate culture • Lack of brand awareness
• Build own management • No distribution network
hierarchy • Time consuming process
• Variety choices in technology
and quality selection
Not optimal

12.  Assessment of potential market entry
 Possible ways to enter Ice Cream market
 Price of entering Ice Cream market
 Conclusion
Possible ways to enter Ice Cream market
Joint Venture
Pros Cons
Less capital expenditures Dependence on partner
company
Not optimal

13.  Assessment of potential market entry
 Possible ways to enter Ice Cream market
 Price of entering Ice Cream market
 Conclusion
Possible ways to enter Ice Cream market
Acquire existing
player
Pros Cons
• Access to distribution
network and production
facilities
Huge Capital
•Brand awareness expenditures
•Relatively fast process
Optimal and Feasible

14.  Assessment of potential market entry
 Possible ways to enter Ice Cream market
 Price of entering Ice Cream market
 Conclusion
Possible ways to enter Ice Cream market
How to enter?
Start ice cream Acquire existing
Joint Venture
production player
Unilever should enter Russian
market through acquisition of
existing player

15.  Assessment of potential market entry
 Possible ways to enter Ice Cream market
 Price of entering Ice Cream market
 Conclusion
Price of entering Ice Cream market
Whom to acquire?
Two biggest Russian players
Talosto Inmarko
•Strong positions in Frozen •Ice cream is a core asset
food market •Largest distribution network
•Operates in high population among competitors
density regions •Large production capacity
• Wide distribution network •Brand awareness
•Brand awareness
Acquire Inmarko

16.  Assessment of potential market entry
 Possible ways to enter Ice Cream market
 Price of entering Ice Cream market
 Conclusion
Price of entering Ice Cream market
All figures in ‘000 of USD
% Real Growth 10%
2009 2010 2011 2012 2013 2014
Sales 217 620,70 239 382,77 263 321,05 289 653,15 318 618,47 350 480,31
EBIAT 17 409,66 19 150,62 21 065,68 23 172,25 25 489,48 28 038,43
% EBIAT margin 8,0%
Depreciation&Amortization 9 792,93 10 772,22 11 849,45 13 034,39 14 337,83 15 771,61
D&A as % of volume 4,5%
Capital Expenditures 20 000,00 20 000,00 20 000,00 20 000,00 20 000,00 20 000,00
Increase in Net Working Capital 1 978,37 2 176,21 2 393,83 2 633,21 2 896,53 3 186,18
Increase in NWC as % of change in Sales 10%
Unlevered Free Cash Flow 5224,2 7746,6 10521,3 13573,4 16930,8 20623,9
WACC 11,5%
Discount Period 0,5 1,5 2,5 3,5 4,5 5,5
Discount Factor 0,95 0,85 0,76 0,68 0,61 0,55
Present Value of FCF 4 947,03 6 577,85 8 011,02 9 267,34 10 365,48 11 322,17
Cumulative present value of FCF 50 490,89

17.  Assessment of potential market entry
 Possible ways to enter Ice Cream market
 Price of entering Ice Cream market
 Conclusion
Price of entering Ice Cream market
All figures in ‘000 of USD
Sensitivity analysis
Real Growth,%
0,06 0,08 0,1 0,12 0,14
0,105 113 805,24 153 502,56 196 262,56 242 270,40 291 719,21
WACC,%
0,11 91 092,51 125 049,37 161 601,84 200 906,10 243 125,01
0,115 72 979,59 102 364,88 133 974,32 167 941,06 204 403,95
0,12 59 738,45 85 786,84 113 788,66 143 860,31 176 123,12
0,125 48 518,65 71 744,16 96 694,47 123 471,82 152 182,80
Terminal Value 268 024,81
Present Value of Terminal Value 139 334,43
Enterprise Value 189 825,32
Implied Equity Value 133 974,32

18.  Assessment of potential market entry
 Possible ways to enter Ice Cream market
 Price of entering Ice Cream market
 Conclusion
Price of entering Ice Cream market
Based on DCF model
of Inmarko we
suggest that target
price of the company
should be roughly
190M USD

19.  Assessment of potential market entry
 Possible ways to enter Ice Cream market
 Price of entering Ice Cream market
 Conclusion
Post acquisition strategy
Improvement Strategy
Human
Distribution Quality
Resources
•Use Unilever distribution Ability to attract
network to promote ice Implement recent talents to work for
cream product innovations in ice Unilever
•Offer freezer chest to SME cream production
and sole entrepreneurs to
sell Unilever ice cream
Replication of worldwide success in
Russian market

20.  Assessment of potential market entry
 Possible ways to enter Ice Cream market
 Price of entering Ice Cream market
 Conclusion
Conclusion
 Unilever should enter Russian market due
to it attractiveness and company capabilities
and desire
 Marker entry should be done through
acquisition of Inmarko company
 Price of the acquisition is 190M USD