Philips 2012 Annual Report Download - page 72

6 Sector performance 6.2.3 - 6.2.4
72 Annual Report 2012
business creation organizations in Austria, Brazil, China,
India, Indonesia, Italy, Netherlands, Romania, the UK and
the US.
Regulatory requirements
Consumer Lifestyle is subject to significant regulatory
requirements in the markets where it operates. This
includes the European Union’s Waste from Electrical and
Electronic Equipment (WEEE), Restriction of Hazardous
Substances (RoHS) and Energy-use of Products (EuP)
requirements. Consumer Lifestyle has a growing portfolio
of medically regulated products in its Health & Wellness
and Personal Care businesses. For these products we
strive to meet the requirements of the US FDA, the
European Medical Device Directive, the SFDA in China
and the regulations stipulated by Health Authorities in
India. Through our growing skincare product portfolio the
range of applicable regulations has been extended to
include requirements relating to cosmetics and, on a very
small scale, pharmaceuticals.
With regard to sourcing, please refer to section 14.5,
Supplier indicators, of this Annual Report.
6.2.4 Progress against targets
The Annual Report 2011 set out a number of key targets
for Philips Consumer Lifestyle in 2012 that are steps
towards achieving our Accelerate! mid-term 2013 goals.
Our progress is outlined below.
Implement Accelerate! transformation
In Consumer Lifestyle, Accelerate! is showing solid
results. Taking a granular approach to growth, we now
have 150 BMC plans in place. We have moved from a
functional, centrally-led organization to an organization
built around businesses and markets. We have clear
accountability in our operating model, for both businesses
and markets. We have seven end-to-end transformation
pilots in place with clear deliverables: reduced time-to-
market, reduced inventories and better gross margin
management.
Right-size the organization post TV joint
venture establishment
We have significantly reduced overhead costs and
stranded costs related to the establishment of the TV joint
venture with TPV, TP Vision, which was established on
April 1, 2012. Key actions taken include streamlining the
headcount in the Supply Chain Management,
Manufacturing and Support functions, realigning
International Key Account Management, rationalizing the
central Marketing set-up, reducing logistics and
warehousing costs through structural improvements, and
reducing the real estate footprint.
Address Lifestyle Entertainment portfolio
and execute turn-around plan
We continued to transition the portfolio towards growing
categories like docking and connected entertainment,
away from rapidly declining categories like MP3, MP4 and
DVD players. We reduced the business’s cost base to
reflect the lower revenue base. In North America we
entered into a distribution agreement with Funai, a long-
standing Philips business partner, in 2012. We also
divested the Speech Processing business in Lifestyle
Entertainment, selling it to Invest AG. In January 2013 we
announced an agreement to transfer our Audio, Video,
Multimedia and Accessories businesses to Funai.
Continued growth investment in core
businesses towards global category
leadership
In our key growth businesses of Male Grooming, Oral
Healthcare, Kitchen Appliances and Coffee (which
includes our Espresso and Beverage Appliance
categories), we made significant progress in 2012. In Male
Grooming, we have increased our share of the total
market (including blade shaving), strengthening our
leading position. In Oral Healthcare, we are entering new
channels, including pharmacies, with the launch of the
Sonicare PowerUp power toothbrush.
In Kitchen Appliances, acquisitions and local product
creation have driven a strong increase in new product
offerings, with leadership in key markets strengthened
through local relevance. In Coffee, a new, long-term
agreement with DE Master Blenders has further
strengthened the Senseo business.
Regional business creation; leverage fill-in
acquisitions in China and India
Leading kitchen appliances companies Preethi and Povos,
acquired in 2011 in India and China respectively,
continued to show strength. Povos contributed to an
incremental 30% growth in China by strengthening our
Chinese product offering. Preethi’s leadership in the south
of India complements our position across India, where we
have over 30% market share in mixer grinders, the largest
category. We are also leveraging the Preethi brand to
build a portfolio beyond kitchen appliances.
Deliver on EcoVision sustainability
commitments
Sustainability continues to play an important role in the
product development process at Consumer Lifestyle. In
2012 we made progress in implementing our voluntary
commitment to phase out polyvinyl chloride (PVC) and