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| 1 What we’ve done Who we’ve spoken to* McKinsey and the TPA have partnered to develop new insights on collaboration ▪ Surveyed 70 retailers & manufacturers and spoken with executives across supply chain, merchandising and sales/marketing functions ▪ Interviewed ~30 industry executives and experts on collaboration ▪ Incorporated insights from over 25 studies on collaboration *sample of companies

| 2 More than three 100% 17% 29% 22% 32% One None Two or three # of collaborations last year 83 % of companies engaged in collaboration efforts last year Collaboration efforts are already widespread in the industry SOURCE: 2011 McKinsey TPA survey, CCM survey 2010, McKinsey analysis

| 3 had not met expectations However, collaboration efforts have delivered mixed results to date Why do many collaboration efforts fail to reach their full potential? produced significant results SOURCE: 2011 McKinsey TPA survey, CCM survey 2010, McKinsey analysis added little or no value

| 4 ManufacturersRetailers SOURCE: 2011 McKinsey TPA survey, McKinsey analysis Transformation in one company is challenging, let alone across multiple Category growth Hundreds of categories Efficiency imperative Product margin Sales growth imperative A few categories Buying income Brand penetration These inherent characteristics result in different collaboration priorities

| 5 Increase in EBIT margin for retailers Increase in EBIT margin for manufacturers Note: Estimate of margin increase assumes collaboration across all categories and levers of collaboration; total industry value calculated using impact of collaboration for top 25 categories, top 3 brand manufacturers in each category, and top 10 retailers in each category Despite hurdles, the size of the prize from successful collaboration is large… … so don’t give up trying! $8-12 bn. EBIT value for industry given areas where collaboration applies 4 p.p. up to 5 p.p. SOURCE: McKinsey analysis, industry interviews

| 6 We have identified six initiatives that unlock the most value: many are supply chain related ImpactArea Cost Reduction Revenue Growth * Estimate limited to category expansion opportunities SOURCE: McKinsey analysis, industry interviews ▪ 20-30% warehouse & inventory savings ▪ Up to 50% labor savings in shelving ▪ 1 - 2% sales lift from reducing OOS Product flow from line to shelf ▪ % savings on inventory ▪ 30% obsolescence reduction ▪ 1 - 2% profit margin improvement Demand planning and fulfillment ▪ Up to 4% sales improvement* Merchandising and in-store layout Category assortment and promotion strategies ▪ Up to 5% procurement savings ▪ Up to 5% packaging savings ▪ Up to 20% sales lift for NPI ▪ 5% savings on raw materials and pkg. ▪ Up to 3% sales improvement* Collaborative sourcing Product development & packaging innovations

| 7SOURCE: Client engagement FY 2009 Q2Q3Q4 Shipments Q2Q3Q4 Both parties wanted to reduce volatility 3% profit margin improvement from reducing volatility Inventory reduction of 18% for CPG, and 16% for retailer Decrease in stock-outs by 1% Demand volatility After Demand volatility Before Consumption Developed joint demand prediction Optimized promo shipment flows Monitored real-time POS data Joint focus on critical SKUs Planning: Leading CPG and retailer created savings in inventory through reducing volatility

| 8SOURCE: Client engagement Product flow: Jointly developed retail ready packaging that drove sales and increased velocity Designed retail ready packaging Co-developed in-store display units Segmented distribution network Coordinated inventory replenishment Improvement in order cycle time Hours Reduced order cycle time from 144 to 13 hours Slashed consumer selection time from 58 to 8 seconds Increased sales by 5-8% through reduced stock-outs Both parties wanted to improve product flow to shelf % Manufacturer Retailer

| 9 What to collaborate on Whom to collaborate with How to collaborate ▪ Selecting partners mostly based on size ▪ Driving collaboration “top-to-top” while frontline drives day-to-day business ▪ Selecting partners based on size and strategic alignment ▪ Aligning incentives and empowering frontline to involve entire organization ▪ Dedicating limited resources to collaboration ▪ Giving up or declaring victory too quickly ▪ Consciously investing in infrastructure and people ▪ Committing to long-term actions and jointly measuring impact ▪ Collaborating in response to deficiencies ▪ Choosing only win-win opportunities ▪ Collaborating in areas where your house is in order ▪ Turning win-lose to win-win through benefit sharing models From…To… Effective collaboration requires a shift in mindset

| 10 Take the first step by reviewing your collaboration efforts What mindset shifts can you initiate to improve the odds of existing collaboration efforts? How can you better engage your organization and your collaboration partners? How do you assess and select the right partners for collaboration efforts? Where can you identify the next collaboration opportunities? What can you do tomorrow… What can you do long term…