LVMH Perfumes and Cosmetics SSC

Secure Store Supply in China Luxurious Cosmetic Market

LVMH Perfume & Cosmetic

2013 Asian Logistics and Maritime Conference

Nov 7th, 2013 Hong Kong

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A world leader in luxury, LVMH Group possesses a unique

portfolio of over 60 prestigious brands. 2012 total sales

revenue is 28,103 million Euro. The group is active in 5

sectors:

Group Introduction

2

* Wine & spirits

* Watch & Jewelry

* Fashion & leather goods

* Perfume & cosmetics

* Selective retail

LVMH has a strong growth since its creation in 1987.

Today, more than 100,000 employees, 77% of whom are

based outside France, share the group’s value.

3 3

LVMH P&C China Brands & Sales by Channel

ACT 2011 Mix % ACT 2012 Mix % R1 2013 Mix %

Department stores 1,677,293 79.2% 1,858,063 75.7% 2,208,771 75.5%

Sephora 317,242 15.0% 425,736 17.3% 478,174 16.3%

Boutiques 11,998 0.6% 32,570 1.3% 70,742 2.4%

E-Commerce 2,166 0.1% 3,539 0.1% 2,700 0.1%

Brow Bar 9,051 0.4% 13,030 0.5% 20,500 0.7%

Agency 99,378 4.7% 123,022 5.0% 139,116 4.8%

Other 1,485 0.1% 0 0.0% 6,293 0.2%

TOTAL NET SALES 2,118,613 100% 2,455,961 100% 2,926,296 100%

NET SALES FRENCH GAAP

TotalFull Year

In ‘000 RMB

Brands 2006 2007 2008 2009 2010 2011 2012 A 2013 R1

PCD 80 87 94 97 101 110 129 148

Guerlain 60 70 74 77 82 87 100 105

Givenchy 15 31 47 55 61 69 75

Benefit 2 8 22 28 36 45 56

MUFE 19 35 43 45 52 64

Kenzo 6

ADP 3 7 9 11 13

Fresh 1 8

Fendi

Total 140 174 226 287 316 348 407 469

2013

49 cities with 469 Counters

13 Boutiques

(8 new planned)

SELL-IN

PRODUCTION

STORAGE

SUPPLIERS

Sell out: from department store to consumer

true market demand, related to future sell in

STORAGE

ASSEMBLY

Customer Service CN:

• Marketing info

• Trend

• Sales

• launch

LVMH P&C Supply Chain Flow

SELL-OUT

Supply planning CN

CN

Warehouse

Supply planning SGP:

4

Sell in: From Company sell to department store

related to P&L, forecast, production, supply

planning

Manage China Supply with Growth with annual growth rate 15% - 20% for past 10 years

• 1 central warehouse, in house managed, serves 9 brands, whole China

• 1 shared service center (SSC) + 9 individual brands

• Each brand operates sales & marketing with brand unique strategy

• SSC serves as shared back office, support IT, supply chain, HR, Legal,

Finance

5

WHY?

• Out source transportation to two 3PLs

• Expand geographic distribution through 3PL network

• Keep long term cooperation to secure service

Challenges at the counter POS

6

New items

innovation with

continuous

discontinue/new

launch

Product variety

& category

management

Seasonality &

promotional

impact

Longer lead-time

from China

warehouse to

faraway cities

8 days

Key of Supply Chain Service: Manage Volatility and Secure stock at counter

• Warehouse: Enhance warehouse operation flow to meet next day delivery for counter replenishment order

• Importation: Pursue importation lead-time shortcut to reduce supply lead-time

• Planning: Monitor loss sales root cause analysis, alert report, forecast consumption

• Customer service: Initialize counter replenishment order optimization

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Planning – Focus on Service & Stock Performance

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Monthly evolution of unfulfilled orders ratio / Benchmark with other Brands Root cause follow up to draw action plan

Counter stock presence rate Stock quality monitor

Counter Replenishment Order Now & Future C

ou

nte

r PO

S

Ord

er

Past 60 days sell out

POS on hand Inventory

In Transit order

BC modification

Current

• By door Parameter (order frequency setting by volume & lead-time)

• Product life cycle (new/basic/phase out)

• Stock value by class & stock cover

• Presence rate & Out of Stock

Focus Store Service

By SKU level targe

t Lead-time Impa

ct

Predict

sales volati

lity

Coming Q1 2014

Booming sales for past 10 years But great challenge at retail decline in 2013

• Consumer: purchasing confidence decline

• Labor & Rental cost: significant increase

• New door opening: huge investment

• E-commerce: big impact and changed people’s way of shopping

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Our Sales Target In ‘000 RMB

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

ACT 09 ACT 11 BUD 13 BUD 15

1,393,948

2,118,613

2,971,537

3,862,998

LVMH P&C Y09-Y15 Net Sales Evolution

ACT 09

ACT 11

BUD 13

BUD 1552%

40%

30%

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THANK YOU & QUESTIONS?

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