L’Oreal Regional TV Effectiveness Review June 2011

RTM is the marketing bureau for Regional free to air TV

Regional TV covers all areas outside capital cities and reaches 36% of population QLD NNSW SNSW TAS VIC REG. WA DIARY

Regional TV coverage includes large cities and fast growing coastal suburbs Newcastle & Central Coast Gold Coast Wollongong & Illawarra Canberra

Diary markets: A diverse mix of urban and rural Regional WA Port Pirie/ Broken Hill Satellite Griffith Mildura Darwin Loxton/Mt Gambier

Populations of major regional TV markets are comparable with the metros People Source: ATR & OZTAM 2011, Nielsen Media Research 2010 NNSW 2,079SNSW 1,410

Population Increase: 2001 vs Source: ATR & OZTAM 2011 Australian population moving North and to the coast. Over 30% growth in 10 years in some regional areas National average QLDNSWVICTASMETRO

Urbanisation and high population growth changing the profile of regional Australia Seachange: Baby boomers and young families Lower cost of living and lifestyle are main attractions Rural populations moving to regional hub towns Less than 4% of households depend on farming

Seachange… … for baby boomers …for families

“Typical” Seachanger Ryan, 36. Wollongong NSW Made the seachange from the “Shire” to the “Gong”. Owns a small business in building trade Above average income & primary focus is kids and lifestyle. Loves footy, cars and teaching kids surfing.

Regional consumers can be main growth driver for L’Oreal during next months Two years of sales and advertising response prove regional can contribute up to 40% of growth Relatively small realignments of TV spend to regional have made a positive impact for L’Oreal and key rivals Regional consumer spending is leading the recovery – greater affluence in regional – 40yrs + key growth demo

Source: Roy Morgan Single Source (12mths to Dec 2010) Regional consumers have similar demographic profile to metro

Regional willingness to spend been very consistent through GFC and in 2011 still positive vs. national downward trend Dollars allocated for spending from discretionary $1000 $ Spent per $1000 Source: foreseechange 2005 – 2010: annual average, 2011: June 2011 survey Regional Metro +9% YOY -12% YOY

The important Profligate Spender group has increased since late 2010 in regional while declining in metro % Pop. who are profligate spenders % of Pop. Profligate spenders are people both willing and able to spend Regional Metro Source: foreseechange 2005 – 2010: annual average, 2011: June 2011 survey

People with HHI $130k+ or Investments $500K+ Doubling in number of wealthy people living in regional Australia in past five years Source: Roy Morgan Single Source (12mths to Sep 2010, 2009, 2008, 2007, 2006, 2005 )

Why has regional spending been more stable and the outlook more positive? Lower cost of living – less debt Huge investment in infrastructure Population growth driving development of local economies Resources growth impacting many parts of regional: NSW, QLD, WA, SA.

Culturally Australia is a divide nation: Regional is representative of the dominant suburban lifestyle Experiential International Libertarian Practical Communitarian Self Reliant Upwardly Mobile Materialist Family Focused Pragmatic Functional Patriotic Youthful Technological Energetic Conservative Institutional Self-Controlled Inner Metro 23% Outer Metro 41% Regional 36%

According to David Chalke social researcher….

33 % of all Skincare sales are from regional consumers Source: Scan Data (4 W/E 16/9/07 to 20/7/08) Coles /Woolworths/Bi Lo (Excludes NT)

Total Skin care sales for Sept 2007 to July 2008 – Regional is 33%+ of national sales Total Skin Care category sales: Sept 2007 to July 2008 Source: Scan Data (4 W/E 16/9/07 to 20/7/08) Coles /Woolworths/Bi Lo (Excludes NT) 21% 19% 15% 5% 8% 14% 5% 8% 2% 4%

Brand shares of total category sales: Sept 2007 to July 2008 During FYR ‘08 L’Oreal had same market share in regional as metro Source: Scan Data (4 W/E 16/9/07 to 20/7/08) Coles /Woolworths/Bi Lo (Excludes NT)

Brand shares of total category sales: Sept 2006 to Aug 2007 In the prior year (’07) L’Oreal had higher share in regional – Olay main beneficiary Source: Scan Data (4 W/E 3/09/06-02/09/07) Coles /Woolworths/Bi Lo (excluding NT)

33 % of national L’Oreal sales are to Regional women Source: Scan Data (4 W/E 16/9/07 to 20/7/08) Coles /Woolworths/Bi Lo (Excludes NT)

L’Oreal DE regional sales are 33% of national but Reg. NSW bigger than Brisbane Total L’Oreal Dermo Expertise Skin Care sales: Sept 2007 to July 2008 Source: Scan Data (4 W/E 16/9/07 to 20/7/08) Coles /Woolworths/Bi Lo (Excludes NT)

L’Oreal BDI in Regional NSW is 11% above national average – growth opportunity in QLD L’Oreal Dermo Expertise share of total skin care category sales: Sept 2007 to July 2008 Source: Scan Data (4 W/E 16/9/07 to 20/7/08) Coles /Woolworths/Bi Lo (Excludes NT)

4 W/C Period Dermo Expertise share of total sales vs. TV Spend Source: Scan Data (4 W/E 16/9/07 to 20/7/08) Coles /Woolworths/Bi Lo (Excludes NT) 2007 Jul-Dec Total TV: $2.4m Reg share: 11% 2008 Jan-Jun Total TV: $2.0m Reg share: 14% L’Oreal Dermo Exp.regional BDI is very sensitive to relative weight of TV investment

RO 3 I x Source: Aztec/Nielsen, Sept 07 – July 08 Grocery channel Cost efficiency and ROI from L’Oreal regional TV is 3 times better than metro TV

Olay market share in regional lagged metro until Nov ‘07 when regional share of TV budget grew 4 W/C Period Olay share of total sales vs. TV Spend Source: Scan Data (4 W/E 16/9/07 to 22/06/08) Coles /Woolworths/Bi Lo (Excludes NT)and NMR Adquest Millenium Jan-Oct 2007 TV Spend: $5.8m RTV share: est. 4% Nov ‘07 –Jun ‘08 TV Spend: $2.7m RTV share: est. 16% TV spend p/month Category share by value

% 4 Based on 4pt growth to June 2008 in RTV markets and 3pt growth in metro markets for 12 months sales of Olay brand Sources: Aztec/Nielsen, Retail World, Adquest Nov 07 – June 2008 Of Olay national sales growth came from realignment of TV budget to regional … and 3 times rate of ROI 0

Regional women 30+ more likely to have children but still very involved with skincare Source: Roy Morgan Single Source (12mths to December 2008)

Wrinkle Decrease regional BDI grew relative to metro in ‘08 with RTV share 4 W/C Period L’Oreal Total Wrinkle Decrease share of total sales vs. TV Spend Source: Scan Data (4 W/E 16/9/07 to 20/7/08) Coles /Woolworths/Bi Lo (Excludes NT) 2007 Jul-Dec Total TV: $1.1m Reg share: 11% 2008 Jan-Jun Total TV: $335k Reg share: 17%

Collagen Definer product highly responsive to TV and RTV share of budget 4 W/C Period L’Oreal Collagen Definer share of total sales vs. TV Spend Source: Scan Data (4 W/E 16/9/07 to 20/7/08) Coles /Woolworths/Bi Lo (Excludes NT) 2007 Jul-Dec Total TV: $1.1m Reg share: 11% 2008 Jan-Jun Total TV: $335k Reg share: 17%

Total Wrinkle Decrease sales for Sept 2007 to July Regional is 33% of total L’Oreal total Wrinkle Decrease skin care sales: Sept 2007 to July 2008 Source: Scan Data (4 W/E 16/9/07 to 20/7/08) Coles /Woolworths/Bi Lo (Excludes NT)

Australian women 40+ have same profile regardless of location Source: Roy Morgan Single Source (12mths to December 2008)

DE Revitalift sales show skew to regional equal 35% + of national value Dermo Expertise total Revitalift skin care sales: Sept 2007 to July 2008 Source: Scan Data (4 W/E 16/9/07 to 20/7/08) Coles /Woolworths/Bi Lo (Excludes NT)

Regional women very responsive to Revitalift TV 4 W/C Period L’Oreal Total Revitalift share of total sales vs. TV Spend Source: Scan Data (4 W/E 16/9/07 to 20/7/08) Coles /Woolworths/Bi Lo (Excludes NT) 2007 Jul-Dec Total TV: $911k Reg share: 12% 2008 Jan-Jun Total TV: $694 Reg share: 15%

Regional women 55+ are affluent consumers and just as engaged with skincare Source: Roy Morgan Single Source (12mths to December 2008)

Regional women highly responsive to Perfect and Re-Perfect TVC’s 4 W/C Period L’Oreal Age Perfect & Re-Perfect share of total sales vs. TV Spend Source: Scan Data (4 W/E 16/9/07 to 20/7/08) Coles /Woolworths/Bi Lo (Excludes NT) 2007 Jul-Dec Total TV: $1.04m Reg share: 10%

Total Age Perfect & Re-Perfect sales. Regional is 36%+ of total Source: Scan Data (4 W/E 16/9/07 to 20/7/08) Coles /Woolworths/Bi Lo (Excludes NT) L’OrealTotal Age Perfect & Re-Perfect skin care sales: Sept 2007 to July 2008

Regional sales in the growing 55+ segment are 40%+ of national value Source: Scan Data (4 W/E 16/9/07 to 20/7/08) Coles /Woolworths/Bi Lo (Excludes NT) L’OrealTotal Age Perfect & Re-Perfect skin care sales: Sept 2007 to July 2008 Reg. NSW was no.1 market by value in FYR ‘07 for Re-Perfect

Garnier Re-Density: Reg. NSW is No. 1 market and total Reg. almost 40% of national Garnier Re-density sales: Sept 2007 to July 2008 Source: Scan Data (4 W/E 16/9/07 to 20/7/08) Coles /Woolworths/Bi Lo (Excludes NT) 18% 17% 14% 6% 8% 18% 5% 9% 2% 4%

Garnier: Grew YOY & higher regional BDI shows long term RTV investment (15%+ avg.) 4 W/C Period Garnier share of total sales vs. TV Spend Source: Scan Data (4 W/E 16/9/07 to 20/7/08) Coles /Woolworths/Bi Lo (Excludes NT) TV spend:$2.7m RTV share: 15%

STV test for Neutrogena in Reg. QLD generated minimal response vs. Free RTV 4 W/C Period Neutrogena Rapid Clear share of total sales vs. TV Spend Source: Scan Data (4 W/E 16/9/07 to 20/7/08) Coles /Woolworths/Bi Lo (Excludes NT) QLD STV Only

Category: Food (Dairy & Dairy Substitutes) & Beverages (Milk) Regional share of skin care category TV grew in FYR ‘08 Source: Nielsen Media Research AdEx Category: Skin Care - All Period: Jan to Dec 2008 Total TV Spend $4.1m $4.8m $683k $2.0m $820k $1.0m $1.6m $3.3m $1.3m $2.0 $3.4m $27.4m

Regional TV CPM rates are half metro equivalent – guarantees higher ROI Index TV market CPM indices National average CPM P18+ = 100 Source: Regional TV Agency Survey 2008

A relatively small realignment of TV $ to regional - circa 20% share will deliver higher growth and ROI Regional NSW and QLD are clear opportunities for growth L’Oreal mature age brands should be returning 40% of sales from regional women Ideal time to target regional as consumers increase discretionary spending