COUGH/COLD CATEGORY REVIEW

METHODOLOGY This study focuses on the time frame starting October 1, 2012 through Dec 31, 2014. Flu season in this report is defined as October through February of every year. In cases where cold/flu season is reported in comparison to the off-season, the flu seasons used are the current season through Dec 31, 2014 as well as the two complete seasons prior, compared to the last two complete off-seasons. All retailers with 2 years of consistent promotional activity were used in this report. ECRM defines the Cough/Cold category as: Childs Cold Products, Cold Liquids, Cold Tabs/Caps/Gels, Cough Drops/Lozenges, Cough Liquids, Lip Balms/Medications, Medicated Rubs, Nasal Spray/Drops/Inhalers, Nasal Strips, and Throat Sprays. This report frequently uses the ECRM Effective Ad Count measure. This measure of promotional volume takes into account the number of products sharing an ad block. If 2 products are present, each receives 0.5 effective ad count, if 5 are present each gets 0.2. The basket of complementary items in our shared space analysis includes: Store Prepared Foods, Frozen Meals, Juice, Tea, Vitamins, Minerals, Supplements, Facial Tissue, Analgesics, Vaporizers, Humidifiers, and Hand Sanitizer.

COUGH/COLD ADS SHIFTING TO NOVEMBER FOCUS Month’s Share of Cough/Cold Annual Promotions November has seen a growing share of the year’s cough cold promotions in the past three years, largely at the expense of September and October promotions.

PROMOTIONS BALANCE STOCK UP, RELIEF TRIPS Month’s Share of Cough/Cold Annual Activity Comparing circular promotional activity to CDC and Google measures of Flu activity, we found that promotions peak before the season starts as retailers capture shoppers on seasonal stock-up trips. 2012-2014 average for respective values

2014 ADS SHIFT FROM SPRAYS TO DROPS Share of Cough/Cold Category Promotions Sub-Category 2013 2014 Change Cough Drops/Lozenges 15.9% 17.4% 1.4% Cold Tabs/Caps/Gels 31.2% 32.1% 0.9% Child Cold Products 6.2% 6.4% 0.2% Medicated Rubs 1.2% 1.3% 0.1% Cough Liquids 4.7% 0.0% Nasal Strips 1.6% Throat Sprays 1.1% 0.8% -0.3% Nasal Spray/Drops/Inhalers 7.2% 6.7% -0.5% Lip Balms/Medications 12.1% 11.2% -0.8% Cold Liquids 18.9% 17.9% -1.0% 2014 saw only a slight shift in category mix, with throat and nasal sprays giving ground to cough drops.

FLU SEASON ADS SHIFT TO SYMPTOM RELIEF Share of Cough/Cold Category Promotions Sub-Category Off Season Flu Season Change Cough Drops/Lozenges 11.0% 18.5% 7.5% Cold Liquids 13.5% 20.0% 6.5% Cough Liquids 3.4% 5.3% 1.8% Throat Sprays 0.5% 1.1% 0.6% Child Cold Products 5.8% 6.3% Medicated Rubs 1.3% 1.2% -0.2% Nasal Strips 2.3% 1.4% -1.0% Cold Tabs/Caps/Gels 32.9% 31.1% -1.8% Nasal Spray/Drops/Inhalers 11.2% 5.4% -5.9% Lip Balms/Medications 17.9% 9.8% -8.1% Flu Season compared to Off-Season has a much more drastic swing in category mix, with liquids and cough drops gaining strong ground.

MOST PROMOTED COUGH/COLD SUPPLIERS Share of Year’s Promotions Many of the top brands and Private Brand saw a drop in share of voice in 2014, with smaller suppliers taking on much of the difference. Calendar Years

TOP 5 COUGH/COLD VOICE-SHARE WINNERS Share of Year’s Promotions These ten brands combined grew from 15% of the category promotions in 2013 to 22% in 2014. Calendar Years

PRICE TRANSPARENCY SPIKES DURING FLU SEASON Off Season Cold/Flu product features were more likely to feature a specific price point during the flu season. This is partially due to many off-season features falling into category-wide or brand family promotions. % of Product Features with calculable price point

THE EAST COAST SEES MORE COUGH COLD ADS Cough/Cold Category Share of Circular Voice There is only a slight regionalism in Cough/Cold share of promotional activity, due either to differences in retailer mix or variations in retailer strategies. Oct 1, 2013 through Feb 28, 2014

BIG 3 DRUG CHAINS DIFFER IN REGIONAL STRATEGY Walgreens Walgreens was the only one of the big three drug channel retailers with limited regionalism in circular emphasis for cough/cold promotions. CVS Rite Aid Oct 1, 2013 through Feb 28, 2014

GREAT PLAINS SEE FEWER NON-PRICE PROMOTIONS % of Cough/Cold Activity with Non-Price Offer There is a notable difference in the amount of non-price promotional activity, such as BOGOs or X/For deals, in the center of the country compared to the coasts. Oct 1, 2013 through Feb 28, 2014

LIMITED REGIONALISM IN PAGE PLACEMENT % of Cough/Cold Activity on Premium Pages There is no clear regional trend in the proportion of Cough/Cold promotions seen on premium pages, which include front, wrap, and back pages. Oct 1, 2013 through Feb 28, 2014

FSI’S ARE MORE SEASONAL THAN CIRCULAR ADS Month’s Share of Cough/Cold Annual Activity Cough/Cold FSI’s are nearly non-existent between April and September, while circular promotions tend to be less seasonally focused. 2012-2014 average for respective values

CROSS-MEDIA MARKETING OPPORTUNITIES EXIST Time Frame % of Cough/Cold Circular Ads with an FSI available the Same Week % of Cough/Cold Circular Ads with FSI Availability Referenced Flu Season 25% 5% Off Season 15% Circular - Page 83 (Middle) Circular - Page 1 (Front) Circulars often miss out on two opportunities: Aligning circular promotions with FSI drops and ensuring circular ad blocks reference available FSIs to drive sales. Full Time Frame

DRUG CHANNEL BEST IN CLASS AT CROSS MEDIA % of Cough/Cold Circular Ads with an FSI available the Same Week % of Cough/Cold Circular Ads with FSI Availability Referenced Dollar 23.4% 4.7% Drug 19.6% 11.2% Mass 27.0% 0.7% Supermarkets 24.1% 2.3% Circular - Page 10 (Wrap) Circular - Page 19 (Middle) Full Time Frame

FSI’S DETAIL CAN IMPACT PRICE PERCEPTION FSI - Chicago, IL - 10/26/2014 Shown here are the circular promotions during the week of 10/26/2014 in Chicago, when the Vick’s FSI on the left offered $1.00 off. 3 of the 6 promotions included some sort of reference to the promotion, with one actually showing the math on how this drives value.

NEW ITEMS GAIN GROUND DURING FLU SEASON New Product Share of Cough/Cold Promotions Manufacturer Off Season Flu Season Bayer 2.0% 1.7% McNeil 0.0% 0.6% Pfizer 3.0% 1.4% Private Brand 2.7% 0.4% Procter & Gamble Reckitt Benckiser 3.9% 2.8% Other Manufacturer 1.3% 1.5% Cough/Cold Total 1.9% 2.3% New items grow from 1.9% of circular promotions in the off-season to 2.3% during flu season as shoppers look for the newest and most effective solution.

NEW ITEMS GAIN GROUND DURING FLU SEASON New Product Share of Cough/Cold Promotions Time Price 4Q13 $7.60 1Q14 $7.99 2Q14 $6.99 3Q14 $8.43 4Q14 $8.42 1Q15 $8.96 NyQuil and DayQuil severe have seen strong promotional support during the fourth quarter month when the season is at its peak.

VOLUME DRIVING OFFERS SEE LIMITED SEASONALITY Basket Building offers, such as x/For deals and BOGOs, did not see a strong seasonal change. Could the off-season promotions used as ‘stock up’ purchases be more influenced by volume deals?

PACK-SIZE IMPACTS TACTIC Tactic Share of Voice by Cough/Cold Tab/Cap/Gels Pack Size As the pack sizes grow larger, Non-Volume tactics such as savings become more prevalent, taking voice from the pricing and volume driving promotions. 2014

BRAND EQUITY ADS ARE SPARSELY USED Brand Equity ads, where the product promoted does not have an offer or incentive attached, are rarely seen, consisting of less than 1% of circular product features. These ads raise brand awareness and confidence, while not sacrificing margins on costly promotions.

TYLENOL LEADS IN BRAND EQUITY ADS Brand Share of Brand Equity Ads 2014

CATEGORIES COUGH/COLD WAS MOST SEEN WITH % of Cough/Cold Ads Sharing with ‘Comfort’ Items Products in the HBC department were most likely to be seen in the same ad block as a cough/cold promotion, while season-specific food and beverages don’t make the list. 2014

SHARING WITH COMPLEMENTARY ITEMS % of Cough/Cold Ads Sharing with Complementary Items We defined a basket of complementary items, consisting of items often purchased during cough/cold season, such as vitamins, cleaners, tissues, ready to eat foods, and hot beverages. Could the off-season promotions used as ‘stock up’ purchases be more influenced by volume deals? 2014

EXPLORING SHARED AD SPACE Circular - Page 1 (Front) Circular - Page 2 (Middle)

SHARING WITH RELIEF ITEMS Circular - Page 9 (Middle) Circular - Page 17 (Middle)

SHARING WITH RELIEF ITEMS % of Cough/Cold Ads Sharing with relief Items Taking a more granular view, we found that much of this sharing could be attributable to ‘relief’ items, such as vitamins, supplements, analgesics, tissues, and cleaners. 2014

SHARING WITH CONSUMABLES % of Cough/Cold Ads Sharing with consumables However, consumables (such as canned soups, store prepared meals, and beverages) were much less likely to presented with cough/cold category promotions. This presents an opportunity for retailers to not just promote symptom relief, but a solution geared towards helping their shoppers through the cold/flu experience. 2014

SHARING WITH CONSUMABLES Circular - Page 6 (Middle)

PRIVATE BRAND GAINS SHARE DURING OFF-SEASON Private Brand Share of Cough/Cold Promotions by Channel Private Brand’s Share of Cough/Cold activity peaks during the spring and summer off-season months. 2014

PRIVATE BRAND MORE LIKELY TO BE BASKET BUILDER Basket Building promotions, including BOGOs, x/For Deals, Free Item promotions, were much more prevalent among private brand cough/cold promotions. 2014

FEW RETAILERS PROMOTE MULTIPLE PRIVATE BRANDS % of Retailers Featuring Multiple Cough/Cold Private Brand Options 2014

WALGREENS PROMOTED DISTINCT PRIVATE BRANDS Brand Share of Private Brand Cough/Cold Liquids Promotions 2014

PRIVATE BRAND TIERS LESS DEFINED IN COUGH/COLD

PRIVATE BRAND COUGH/COLD AD IMAGERY

PRIVATE BRAND OFFERS SIGNIFICANT VALUE Cough/Cold Liquids Private Brand Branded Change 4 Ounce $3.13 $5.80 85% 6 Ounce $5.52 $10.35 87% 8 Ounce $4.26 $6.34 49% 12 Ounce $4.67 $7.81 67% Tabs/Caps/Gels Private Brand Branded Change 10 count $3.71 $6.27 69% 16 count $3.35 $6.58 96% 20 count $5.62 $7.53 34% 24 count $3.60 $7.00 95% Private Brand’s average pricing, even when controlling for size, regularly generates strong discounts for the consumer. 2014

BRANDED PRODUCTS SHARING WITH PRIVATE BRAND % of Branded Cough/Cold Ads Sharing with Private Brand Cough Cold Options While nearly 20 % of branded cough/cold promotions feature private brand alternatives in the same ad block, the majority don’t face private brand options anywhere else in the circular. 2014

CONTACT INFORMATION Vice President of Content Joe Tarnowski (440) 498-0500 ext. 1941 jtarnowski@ecrm.marketgate.com Lead Business Intelligence Analyst Tanie Andraos (440) 498-0500 ext. 1161 tandraos@ecrmdata.com