LEADING THE WAY IN LATIN AMERICA Alfredo Costa Client Services Director, Nielsen Brazil September 30, 2014 BRAZIL

Copyright ©2013 The Nielsen Company. Confidential and proprietary. 2 AGENDA INTRODUCTION BRAZIL MACROECONOMIC HIGHLIGHTS FMCG’S PERFORMANCE CONSUMER NEW SHOPPING DYNAMIC OPPORTUNITIES TO GROWTH REFLECTIONS AND OPPORTUNITIES

Copyright ©2013 The Nielsen Company. Confidential and proprietary. 3 GDP and GDP per person, comparison between Brazilian states and world countries Source: The economist, IBGE (Brazilian Institute for statistics and Geography) and IMF A COUNTRY WITH CONTINENTAL DIMENSIONS From The Economist: Comparing Brazilian States With Nations (GDP and Population) BRAZILIAN EQUIVALENTS – COMPARE-CABANA

Copyright ©2014 The Nielsen Company. Confidential and proprietary. 4 DESPITE CHALLENGES, BRAZIL’S ECONOMY IS STRONGER Sources: ABEP and IBGE HOUSEHOLD CONSUMPTION INCOME/CREDIT INVESTMENTS SOCIAL POLICIES % of population by socioeconomic level

Copyright ©2014 The Nielsen Company. Confidential and proprietary. 5 FMCG CONSUMERS “TRADE UP” Categories that drive growth are developing in higher value segments ACCESS 11 WO MOVE + TRADE DOWN 9 TRADE UP ACCESSWO MOVE + TRADE DOWNTRADE UP W. O. MOVEMENT TRADE DOWN TRADE UP ACCESSMATURE CATEGORIES LIFECYCLE Source: Nielsen Retail Index and Homescan FMCG SALES: R$

Copyright ©2014 The Nielsen Company. Confidential and proprietary. 6 TRADING UP: FOUR KEY DRIVERS Source: Nielsen Retail Index and Homescan DEODORANTSYOGURT CLEANSERS CONVENIENT BEERS HEALTHY INDULGING TRADE UP SOFISTICATED

Copyright ©2014 The Nielsen Company. Confidential and proprietary. 7 GLOBAL BRANDS FOLLOWING “TRADE UP” TREND Source: Nielsen Retail Index - YTD 14 Avg Price vs T. Category – Based on 16 global brands OPPORTUNITIES TO DRIVE SUSTAINABLE GROWTH Global brands’ prices are an average of 37% above category The average relative distribution is around 17% (compared to category level)

Copyright ©2014 The Nielsen Company. Confidential and proprietary IS A CHALLENGING YEAR FOR BRAZIL Sources: IBGE, FGV and Nielsen Homescan INCOME USD EXPENSES USD MID-SOCIOECONOMIC LEVEL spends 15% more than it earns Income vs Expenses SOCIAL PROTECTION NETWORKEMPLOYMENT AND INCOMECREDIT Average % of income committed to credit

Copyright ©2014 The Nielsen Company. Confidential and proprietary. 9 INFLATION COULD AFFECT CONSUMPTION Sources: IBGE, FGV, Nielsen Analytics and Nielsen Homescan Food & Beverages 1.5% Government- managed prices 8.5% 6.5% HPC 5.9 % IPCS 2013 How much BR is sensitive to price? LatAm Average Brazil 40% 31% 22% SHARE OF POCKET OF FMCG EXPENSES (By Socioeconomic Level) LOW SEL MIDDLE SEL HIGH SEL

Copyright ©2014 The Nielsen Company. Confidential and proprietary. 10 WHOLESALERS PLAY AN IMPORTANT ROLE Volume Change vs – Total Brazil - Source: Nielsen| Retail Index| Cash & Carry Scantrack CASH & CARRY VOLUME CHANGE ( ) WHOLESALERDRUGBARTRADITIONALMINI MARKETS SUPER MARKETS HYPER MARKETS TOTAL PRODUCT AREA

Copyright ©2014 The Nielsen Company. Confidential and proprietary. 11 AND THERE STILL IS ROOM TO GROW Wholesaler household penetration % quarterly penetration in Wholesaler channel Source: Nielsen | Homescan Channel still reaching only 20% of households across the country

Copyright ©2014 The Nielsen Company. Confidential and proprietary. 12 CHANNEL STRATEGY SHOULD BE REINFORCED Volume Change vs – Total Brazil - Source: Nielsen| Retail Index| Cash & Carry Scantrack Changes in trip frequency vs. average expenditure, HYPER MARKET SUPER MARKET NEIGHBORHOODWHOLESALERBAR/TRADITIONA L GROCERY STORE TOTAL CHANNELS DRUG FREQUENCYAVERAGE TICKET $

Copyright ©2014 The Nielsen Company. Confidential and proprietary. 13 PACK STRATEGY ALSO OFFERS AFFORDABILITY 60% of the top 20 categories Family-sized packages have gained importance for 40% of the top 20 categories. Smaller packages have gained importance for += Source: Nielsen Retail Index DIVERSIFIED CHANNELS Increasing importance of larger packages COOKIES up to 100g BEER up to 349ml LOWER FREQUENCY

Copyright ©2014 The Nielsen Company. Confidential and proprietary. 14 CONSUMERS WANT TO MAINTAIN NEW LIFESTYLES They are making choices to keep the level of comfort they have acquired Diversify channels LOOK FOR VALUE Reduce trips to the point of purchase MONTHLY GROCERY SHOPPING Package sizes SPEND ALTERNATIVES Switch to cheaper brands TRADE-DOWN Reduce volume RATIONALIZE PURCHASES REDUCE OUT-OF- HOME CONSUMPTION and discretionary services

WHERE TO LOOK FOR GROWTH IN THE NEXT YEARS? STREAMLINE EFFORTS BROADEN HORIZONS

Copyright ©2014 The Nielsen Company. Confidential and proprietary. 16 THE INTERIOR IS KEY TO FMCG’S FUTURE ACTUAL GDP 2013* vs NIELSEN PRODUCT AREAS 2013 vs % +3.0% +4.0% +4.9% Leading brands’ average share 7.5% inferior Key accounts’ Average share 39% interior Source: Nielsen Retail Index and IBGE CAPITAL INTERIOR

Copyright ©2014 The Nielsen Company. Confidential and proprietary. 17 INTERIOR: STILL ROOM FOR FMCG DEVELOPMENT Higher access and trade-up are still great leverages to be used in BR interior PENETRATION INDEX (INTERIOR/CAPITAL) Source: Nielsen Homescan | Penetration of the interior divided by penetration of the capital CONSUMERS IN THE INTERIOR ARE AT AN EARLIER STAGE OF CONSUMPTION Soy-based beverage Packaged Toasted Bread Mouthwash ACCESS CATEGORIES 118 READY-TO-DRIN K JUICE POWDERED JUICE READY-TO- USE SAUCE TOMATO PASTE TRADE-UP IS CAPABLE OF REACHING MORE HOUSEHOLDS TRADE-UP CATEGORIES

REFLECTIONS AND OPPORTUNITIES

Copyright ©2014 The Nielsen Company. Confidential and proprietary. 19 INFLATION SHOULD HOLD UP AND CONTINUE THREATENING CONSUMERS’ POCKET THE INTERIOR SHOULD CONTINUE TO PLAY AN IMPORTANT ROLE IN GROWTH, AND LEADERS’ BRANDS STILL HAVE ROOM TO GROW ACROSS SMALL CITIES REFLECTIONS BRAZIL CONSUMERS ARE MAKING CHOICES TO MAINTAIN THEIR LIFESTYLE LEVEL, SO AFFORDABILITY IS A KEY DRIVER TO BE CONSIDERED

Copyright ©2014 The Nielsen Company. Confidential and proprietary. 20 OPPORTUNITIES BRAZIL FOCUS ON PRICE AND PORTFOLIO STRATEGIES TO DELIVER THE AFFORDABILITY NEEDED BY THE CONSUMER SHORT TERM DEVELOP BRAZIL’S “WHITE SPACES” FOCUSING ON THE POCKETS OF OPPORTUNITY IN ORDER TO SUSTAIN FUTURE MARKET LEADERSHIP LONG TERM DELIVER QUALITY BRANDS, PUTTING TOGETHER AS MANY GROWTH DRIVERS AS POSSIBLE MID TERM