NORTH AMERICAN TRENDS

Market Conditions in North America Rick Winslow, Nielsen Canada

Market Trends – Canada & U.S. The Boston Tea Party Market Trends – Canada & U.S. Rick Winslow, The Nielsen Company August 31, 2011 Thank you Today we are covering: Consumer confidence Retail trade performance Total beverage and hot tea performance Title of Presentation

For Today The Consumer What’s happening in the store? Tea Trends Nervous and looking for value What’s happening in the store? Store sales and trends Tea Trends U.S. / Canada Title of Presentation

The Consumer Start with consumer confidence A key indicator of market performance and market expectation Title of Presentation

Global consumer confidence climbed slightly as the year started Regional Summary: Emerging Driving Growth Consumer Confidence Index Q4 2010 Results LA 90 AP 107 MEAP 106 NA 85 EU 73 Emerging Developed Source: The Nielsen Company, Global Online Survey, Q1 2011 Title of Presentation

Optimism varies greatly over personal finances and job prospects Intersection: Global Legend CA Canada US United States GB Great Britain IT Italy FR France DE Germany ES Spain AU Australia CN China HK Hong Kong RU Russia BR Brazil AR Argentina % Optimistic over Personal Finances % Optimistic over Job Prospects Source: The Nielsen Company, Global Online Survey, Q1 2011 Title of Presentation

US and Canadian consumers differ greatly with their levels of confidence in the economy. Source: Nielsen Consumer Confidence Survey Title of Presentation 8

While Canadian economic perceptions are getting more bullish, U. S While Canadian economic perceptions are getting more bullish, U.S. Households continue to be mired in recession. % of HH that believe their country is in an economic recession at the moment? % of HH that believe their country will be out of a recession in the next 12 months? Despite optimism, still high numbers of consumer feel we are in a recession Canadians becoming less optimistic that a recession will end any time soon Will impact spending behaviours Source: Nielsen Consumer Confidence Survey Title of Presentation

Canadians are more optimistic than U.S. consumers +5 +3 +3 +2 -2 0 Source: Nielsen Global Online Consumer Confidence and Opinion Survey March 2011 Change vs. Q4 11 (Dec) Title of Presentation 10

Canadians and Americans have a mutual focus on paying off debt & saving while many report having no spare cash How Do North Americans Utilize Their Spare Cash After Covering Essential Living Expenses? Canada United States Source: The Nielsen Company, Global Online Survey, Q1 2011 Title of Presentation

Top Canadian Concerns Top U.S. Concerns Canadians & Americans have similar concerns, but in different sequence What are the top ten things consumers are most concerned with over the next six months? Top Canadian Concerns Top U.S. Concerns Increasing Prices and Healthcare are the main Canadian concerns while the state of the Economy / Debt and Fuel prices are on top of mind for Americans. Source: The Nielsen Company, Global Online Survey, Q4 2010 Title of Presentation

Summary – Consumer Confidence Similarities Both U.S. and Canadian consumers are concerned by rising fuel and food prices Both are hunting for value at retail – they want good everyday prices and deep features Everyone wants the uncertainty to slide into the background Differences Canadians are much more bullish on the economic turnaround Canadians feel more secure in their jobs and with their personal finances American consumers are much more concerned with the economy; personal housing Title of Presentation

In Store Trends… So, how has the Total Beverage and Hot Tea market fared? Title of Presentation

Total Receipts are flat! $ Vol % Chg 2 3 1 -8 Market Share $ per Trip Increased gas price continues to impact trips across the board. Most Canadian retailers (except Wal Mart) are experiencing decline in trips. 48.30 53.65 61.17 44.88 127.76 41.02 51.67 33.75 50.37 44.71 0.89 1.32 -0.64 0.41 -0.03 1.43 0.07 1.05 0.94 0.03 190.1 35.4 16.4 25.4 12.0 28.1 24.6 12.9 6.2 7.1 -6.3 -1.2 0.3 -0.6 -0.1 -0.7 -0.5 100.0 89.4 86.4 71.6 46.9 54.3 25.2 70.4 79.0 70.1 0.0 0.7 1.0 -0.8 -1.6 -1.0 -1.7 Pt Chg Trips Per Shopper Pt Chg Penetration Pt Chg Source: Nielsen, Homescan, Channel Watch, National. Tl Receipts. 52 Weeks Ending January 1, 2011 Title of Presentation

Units started to rebound while dollar growth slows Quarterly Periods Source: Nielsen MarketTrack, National All Channels – 12 wks Ending Mach 12, 2011 Total Tracked Sales excluding Fresh Random Weight Title of Presentation

CPG prices rising & promotions increasing too 9 periods of price gains; 1% & 1.2% increases in last two periods All Departments Increased promotion as retailers increase efforts too During 2009 and Consumer packaged good (CPG) unit prices had been dropping sharply, and units on promotion (in the form of feature ads and/or displays) had been on the increase. Retailers had been cutting prices to gain competitive advantage or to react to other retailer price cuts. These patterns dissipated in 2010 as prices have been on a slight increase during the second half of 2010 and into 2011. For nine consecutive periods unit prices across the store are growing, with the largest increase of 1.2% in the most recent period. And brands have been promoting more to stimulate sales and win against private label efforts, while retailer store brand promotion support has been off. Retailers in the recent period have stepped up support. 4 Weeks Ending Source: Nielsen Scantrack, (U.S. FDM w/ Walmart), 4 week increments (vs. prior year); UPC-coded Title of Presentation

4 Weeks Ending vs Year Ago Weak total store performance – good prices & heightened promotions didn’t work All Departments Avg U Price Chg, 13 w/e 03/19/11: Positive: 78 Neutral: 2 Negative: 37 (major categories) But price cuts and heightened promotions didn’t work in 2010 as both dollar sales and unit sales were off in most periods. Or would the situation have been worse without these value efforts? In 117 categories examined, average unit prices in the latest quarter were positive or up in 79 categories, neutral for 0 and off in 38 – clearly a sign that inflation is coming back to our industry. We should expect to see some improvement in dollar sales with rising prices, but unit declines at the end of 2010 and into 2011 are deeper? 4 Weeks Ending vs Year Ago Source: Nielsen Scantrack, (U.S. FDM w/ Walmart), 4 week increments (vs. prior year); UPC-coded Title of Presentation

Tea Market So, how has the Total Beverage and Hot Tea market fared? Title of Presentation

The Tea Tale of 2 Countries…… Canadians loves theirs hot; Americans prefer it cold The U.S. hot tea consumer has more choices “at the shelf” – a huge irony! Coffee is growing on both sides of the border – driven by innovation and pricing Tea is growing too – however at a much more modest rate S0….how do we get our current users to drink more….and convert hot beverage consumers to add tea to their daily choices? Title of Presentation

Hot Beverages is leading growth in both Canada and the US Canada is more developed with Hot Beverages $ Vol (000,000s) TL Bevs 4,589 4,690 45,729 46,272 +6% $ Vol % Chg +12% 0% Total Beverages stable with a shift to Hot Beverages in both Canada and U.S. Canadian market about 1/10th that of the U.S. -1% $ Vol % Chg $ Vol Shr Source: Nielsen MarketTrack, National CAN All Channels, 52 Weeks Ending July 2, 2011 Nielsen Scantrack, National US All Outlet, 52 wks ending July 09, 2011 Shared to Close group of TL Bev based on Canadian categories for TL Beverages Title of Presentation

$ Share of Total Beverage Beverage categories have different development in Canada versus the U.S. with a skew to Coffee and Tea in Canada and FSDs, Water and RTD Iced Tea in the U.S. Hot Beverage $ Share of Total Beverage Cold Beverage FSD biggest in both countries but much less developed in Canada Canada continues to have more preference for Hot Beverages Again this year, Canada has a stronger Coffee and Tea market Source: Nielsen MarketTrack, National CAN All Channels, 52 Weeks Ending July 2, 2011 Nielsen Scantrack, National US All Outlet, 52 wks ending July 09, 2011 Shared to Close group of TL Bev based on Canadian categories for TL Beverages Title of Presentation

Top 10 Canadian Beverage Categories Cold Beverages accounts for over 75% of sales but growth is from Hot Beverages Top 10 Canadian Beverage Categories $ $ % Unit $ Sales (000’s) Share Chg % Chg Total Beverages (Hot & Cold) 4,690,815 100.0 2 1 Cold Beverages 3,563,937 76.0 -1 1 Hot Beverages 1,126,879 24.0 12 4 Rank Top 10 Sales Categories 1 Flavoured Soft Drinks 29.5 -1 1 2 Juices & Drinks - Shelf Stable 22.5 -1 0 3 Coffee - Roast & Ground 14.5 19 6 4 Flat Water 9.6 -1 3 5 Tea 4.5 3 3 6 Coffee - Instant 3.4 1 1 7 Vegetable Juices 3.3 -3 -5 8 Carbonated Water 2.0 5 3 9 Extreme Energy Drinks 2.0 10 11 10 RTD Iced Tea Cans 1.4 -1 1 Tea is a large and important category Its dollar growth is behind coffee but is growing at a steady pace Source: Nielsen MarketTrack, National All Channels, 52 Weeks Ending July 2, 2011 Title of Presentation

Top 10 US Beverage Categories Cold Beverages accounts for nearly 85% of total beverages but is softer in its performance than Hot Beverages. Top 10 US Beverage Categories $ $ % Unit $ Sales (000’s) Share Chg % Chg Total Beverages $46,271,655 100.0 1 -1 Cold Beverages $39,292,781 84.9 0 1 Hot Beverages $6,978,875 15.1 6 -1 Rank Top 10 Sales Categories 1 Flavoured Soft Drinks 40.0 0 0 2 Juices & Drinks – Shelf Stable 20.1 2 5 3 Flat Water 12.3 1 3 4 Coffee – Roast & Ground 10.7 8 -1 5 RTD Iced Tea 4.2 6 7 6 Flavoured Drink Mixes 2.3 -5 -2 7 Tea 2.1 1 0 8 Extreme Energy Drinks 1.9 -9 -11 9 Carbonated Water 1.5 7 5 10 Coffee - Instant 1.1 3 3 Although Hot Tea is not as important of a beverage category in the US, it remains in the top 10 categories. Hot Tea is soft in the US as Americans prefer their RTD Iced tea which is posting a strong growth this year Source: Nielsen Scantrack, National US All Outlet, 52 wks ending July 9, 2011, Shared to Close group of TL Bev based on Canadian categories for TL Beverages Title of Presentation

While Canadians like it hot, Americans prefer it cold Total Beverages: CDA : $320.2 Million (+1%) USA : $3,342.5 Million (+2%) Share of Tea categories $ % Chg 3% 50% -1% -11% Tea performing well in both countries given economic conditions $ % Chg 1% 2% 6% -10% Source: Nielsen MarketTrack, National CAN All Channels, 52 Weeks Ending July 2, 2011 Nielsen Scantrack, National US All Outlet, 52 wks ending July 09, 2011 Shared to Close group of TL Bev based on Canadian categories for TL Beverages Title of Presentation

Per Caps Hot Tea Consumption – Canada Rules! Population 34,551,080 311,995,946 Tea Sales (pounds) 16,977,956 94,150,180 0.49 lbs 0.30 lbs Hot Tea consumption per capita Title of Presentation

Specialty / Upscale Tea continues to gain in popularity and now holds nearly 60% of the $ market Share USA CANADA $ Share $ Vol % Chg +7% +5% $ Vol % Chg -2% -4% TL Tea % Chg +3% +1% Specialty Tea continues to be the growth engine of Hot Tea for both countries Still room for Specialty to grow in Canada given share size in U.S. Source: Nielsen MarketTrack, National GB+DR+MM+GM+WC, Latest 52 Wks ending July 2, 2011. Nielsen Scantrack, National US All Outlets, 52 Wks ending July 9, 2011 Title of Presentation

In terms of Pounds, Regular Tea dominates but Specialty Tea has continued to gain share of the category. CANADA USA Pounds Share Tonn % Chg +8% +4% Tonn % Chg -1% -3% TL Tea % Chg +1% -1% However, tonnage volume is not keeping pace with dollars and is slowing. More premium offerings driving growth? Source: Nielsen MarketTrack, National TL GR+DR+MM+GM+WC, Latest 52 Wks ending July 2, 2011. Nielsen Scantrack, National US All Outlets, 52 Wks ending July 9, 2011 Title of Presentation

While overall tea reach is down in both countries, Specialty in the US is gaining some new consumers % Households that purchased… Pt Chg -0.6 -1.9 -0.6 -0.4 -1.5 +0.9 Title of Presentation

Specialty Black and Herbal Tea segments are key growth contributors Specialty Black and Herbal Tea segments are key growth contributors. Increased health concerned consumers and many new launches are fuelling the growth. $ Share of TL Tea (Vol% Chg) 2% 27% 3% 11% -9% -25% TL Upscale/ Specialty 57.2 $ Shr (+7%) 9% 4% 3% 6% -1% -16% Black Core: Earl Grey, English Breakfast Black Flavoured: Earl Grey Vanilla, Chai, Black currant, chocolate mint, orange, lemon twist, etc. Any black tea with flavours… Herbal: Chamomile, lemon grass, peppermint, etc. Any tea with no caffeine (excl. Rooibos) Herbal Red: Any Rooibos tea White: Any white tea TL Upscale/ Specialty 59.4 $ Shr (+5%) Source: Nielsen MarketTrack, National GR+DR+MM+GM+WC, Latest 52 Wks ending July 2, 2011. Nielsen Scantrack, National US All Outlets, 52 Wks ending July 9, 2011 Title of Presentation

“Functional” Tea? Is there a co-relation between OTC and Tea? Title of Presentation

Summary While Canadian consumers are becoming more confident in the economy, US consumers have experienced a setback this past quarter Both consumers have similar concerns and intend to continue their new “frugal” shopping behaviour The retail market continues to fuel consumers desire for less expensive products, although there are signs that this is starting to slow The growth is fairly static however Beverages are a key segment for retailers in size Hot Tea for Canadians and Cold Tea for Americans Specialty Tea is the driver of Total Hot Tea growth but volume is flat Specialty black and Herbal are the engines of growth for the segment Title of Presentation

Thank You! rick.winslow@nielsen.com Title of Presentation

GREATER ASSORTMENT Title of Presentation