Delivering a Shopper-Centric Beer Retail Environment:

Name: Delivering a Shopper-Centric Beer Retail Environment:
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Description: Delivering a Shopper-Centric Beer Retail Environment:

Delivering a Shopper-Centric Beer Retail Environment:
Shopper Decision Tree Anheuser-Busch • Marketing Planning & Research • National Retail Sales • Jan 2005

Background What is a Decision Tree? Why Have One?

Decision Tree: Background and Methodology
What is a Consumer Decision Tree? A CDT is a hierarchical marketing model used to understand consumer choices made at the point of sale. CDTs illustrate the considerations consumers use to focus on their choices from a total category assortment. Why do a decision tree? CDTs allow the ability to visually portray product relationships based on real consumer perceptions. CDTs allow manufacturers to provide retail accounts with suggested actionable solutions based on how consumers think about and shop their category. How do manufacturers and retailers use CDTs? Some of the preferred implementations of CDTs include: Strategic promotional choices Shelf space allocation Optimizations of product assortments Development of new planograms Product acceptance/deletion criteria Other in-store ventures such as promotion and merchandising decisions, marketing communications, new product introductions

The Decision Tree Shoppers’ Decision Process
Structure of Decision Tree Differences Between Each “Branch”

Alcohol Beverage Shopper Decision Process (General Sequence of Shoppers’ Conscious Decisions)
OCCASION…Defines Amount and Scope of Product(s) Needed / Desired  Category(ies) Brand(s) / Price Segment(s) Class Of Trade / Shopping Experience Sales/Deals (Within Evoked Set of Occasion-Appropriate Items) Package Size & Container Order may switch depending on occasion Order may switch depending on occasion Source: A-B In-Store Decision Tree Study, 2005

Alcohol Beverage Shopper Decision Process Examples
Sequence Example 1 Example 2 Occasion…Defines Amount and Scope of Product(s) Needed / Desired Personal refreshment only; one occasion; limited means Casual home party with contemporary adult friends; one occasion Category(ies) Beer Liquor and Beer Brand(s) / Price Segment(s) (not necessarily in that order) Busch Light; Value Segment Good beer variety and need to pick up other stuff for party Grocery Chain X near friend’s house Class of Trade / Shopping Experience C-store; just need beer; easy in & out Tequila (Jose Cuervo), Vodka (Smirnoff), Premium Light (Bud Light) and Micro (Fat Tire) Store C-Store Chain X, on my way home Sales / Deals Large single, can Maybe, if any other occasion-appropriate brands are on sale Package size & container Would willingly switch brands for a better deal 750 ml of Liquor; Multi-pk bottles of beer (pack sizes depend on # of people) Source: A-B In-Store Decision Tree Study, 2005

Brand(s) / Price Segment(s)
Alcohol Beverage Shopper Decision Process (General Sequence of Shoppers’ Conscious Decisions) Sequence Example 1 Example 2 Occasion…Defines Amount and Scope of Product(s) Needed / Desired Personal refreshment only; one occasion; limited means Casual home party with contemporary adult friends; one occasion Category(ies) Beer Liquor and Beer Brand(s) / Price Segment(s) Busch Light; Value Segment Good beer variety and need to pick up other stuff for party Grocery Chain X near friend’s house Class of Trade / Shopping Experience C-store; just need beer; easy in & out Tequila (Jose Cuervo), Vodka (Smirnoff), Premium Light (Bud Light) and Micro (Fat Tire) Store C-Store Chain X, on my way home Sales / Deals Large single, can Maybe, if any other occasion-appropriate brands are on sale Package size & container Would willingly switch brands for a better deal 750 ml of Liquor; Multi-pk bottles of beer (pack sizes depend on # of people) THE DECISION TREE, DESCRIBED ON THE FOLLOWING SLIDES, REPRESENTS HOW THESE SEGMENT / BRAND DECISIONS ARE MADE

Shopper Decision Tree - Segments and Brands (What’s In Each Segment)
B E E R Wine Hard Liquor Energy / High Alcohol Super-Light Traditional Beer Tilt Sparks Natty Up etc. Amstel Light Aspen Edge Michelob Ultra etc. Premium/ Above Premium Value Malt Traditional Value Premium Light Colt 45 King Cobra Mickey’s etc. High Alcohol Imports Premium Regular Natural Ice Bud Ice Other Ice etc. FAB Light Regular SABMiller Lite Bud Light Coors Light etc. Craft/ Micro Mexican European Australian Canadian Bacardi Silver Mike’s Hard Lemon Smirnoff Ice Tequiza Zima etc. Budweiser Coors Ice House MGD etc. Busch Light Keystone Light etc. Busch Keystone Miller High Life Mil Best/ Old Mil PBR Schlitz etc. Red Hook Sam Adams Shiner Bock Sierra Nevada Fat Tire Local Micro etc. Domestic Specialty Mich Family Rolling Rock etc. Source: A-B In-Store Decision Tree Study, 2005

Shopper Decision Tree - Demographic Skews (Who’s Buying Each Segment)
B E E R Wine Hard Liquor All Adults 21+ $51K Avg. Income 62% Male / 38% Female 66% Anglo, 11% Black, 23% Latino Female, Older Higher Income Older and Younger (21-27) Energy / High Alcohol Super-Light Traditional Beer Female, Older Higher Income Younger (21-27) Premium/ Above Premium Value Malt Traditional Value Premium Light Male African -American Lower Income High Alcohol Imports Premium Regular Younger (21-27) Lower Income Male FAB Light Regular Same as Total Beer Craft/ Micro Mexican: Younger (21-27), Latino, Higher Income European, Australian, & Canadian: Male, Higher Income Younger (21-27) Female Same as Total Beer Older Anglo Older Male Lower Income Male Anglo Higher Income Domestic Specialty Anglo Higher Income Source: A-B In-Store Decision Tree Study, 2005

Shopper Decision Tree - Purchase Motivations (What Shoppers Desire When They Buy Each Segment)
B E E R Wine Hard Liquor Most Popular Alcohol Beverage Unpretentious Casual Aspirational Intimate Socializing Sophistication Fashion & Style “Take Things Up A Notch” New flavors, recipes Energy / High Alcohol Super-Light Traditional Beer Very Light Taste Very Low Calorie Non-”Beer-y” Low Carb Faster paced consumption experience Premium/ Above Premium Value Malt Traditional Value Premium Light Brand Loyalty Higher Alc Content Smaller Pack Size High Alcohol Imports Premium Regular Faster paced consumption experience FAB Light Regular Light Taste Fewer Calories Craft/ Micro Mexican: Brand Loyalty, Bottles, Lighter Style, Imported European, Australian, & Canadian: Style, Imported, Less Brand Loyal For Particular Occasion More Impulse Unique Style & Flavor Low Concern for Calories Brand Loyalty Full Taste Traditional Alcohol Content Brand Loyalty Don’t seek “new or different” Household Replenishment Brand Loyalty Household Replenishment Style Not “Mass Produced” Something Different No Calorie or Carb Concern Domestic Specialty Want Recognized Brand Name but Less Brand Loyal Domestic but Special / Different Little Calorie Concern Source: A-B In-Store Decision Tree Study, 2005

Shopper Decision Tree - Channel Skews (Where Segment’s Shoppers Skew)
B E E R Wine Hard Liquor Grocery, Clubs, Wine Stores Grocery, Liquor Stores Energy / High Alcohol Super-Light Traditional Beer TBD Grocery and Clubs Premium/ Above Premium Value Malt Traditional Value Premium Light C-Stores High Alcohol Imports Premium Regular C-Stores FAB Light Regular All Channels Craft/ Micro Mexican: Grocery European, Australian, & Canadian: Grocery Grocery C-Stores Grocery Mass Merch C-Stores Grocery Clubs Domestic Specialty Grocery Source: A-B In-Store Decision Tree Study, 2005

Shopper Decision Tree - Importance of Price/Deal
The “Price Importance Index” represents the relative importance of price/deal to each segment’s buyers. It was calculated by averaging the importance ratings of “on sale” and “less expensive than other beers” among each segment’s buyers and indexing these versus the average importance of these attributes among the total sample. Color Key: Low Average High B E E R Wine Hard Liquor Energy / High Alcohol Super-Light Traditional Beer Price Importance Index: 69 Price Importance Index: n/a Premium/ Above Premium Value Malt Price Importance Index: 202 Traditional Value Premium Light High Alcohol Imports Premium Regular Price Importance Index: n/a FAB Price Importance Index: 104 Light Regular Price Importance Index: Craft/ Micro Price Importance Index: 87 Price Importance Index: 65 Price Importance Index: 163 Price Importance Index: 135 Mexican: 73 Price Importance Index: 60 Euro/Aus/Can 74 Domestic Specialty Price Importance Index: 69 Source: A-B In-Store Decision Tree Study, 2005

Decision Tree Applications
Feature Ad Strategy Implications Assortment Strategy Implications Space and Flow Implications

Assortment and Feature Strategy Guide
Price Sensitivity High Segment Loyalty High Price Sensitivity Feature often to: Grow/maintain shopper loyalty Create/maintain status as “beer destination” Carry wide assortment Low Segment Loyalty High Price Sensitivity EDLP Narrow Assortment MALT LIQUOR VALUE LIGHT VALUE REGULAR PREMIUM LIGHT Loyalty To Segment PREMIUM REGULAR IMPORTS DOMESTIC SPECIALTY SUPER LIGHT MICROS FABs High Segment Loyalty Low Price Sensitivity Don’t need to feature as often Carry wider assortment for higher share segments Carry narrower assortment for lower share segments Low Segment Loyalty Low Price Sensitivity Feature occasionally to: Generate incremental volume Promote trade-up Create variety perception 12%+ $ share 6-10% $ share 2-5% $ share <2% $ share

Shopper Decision Tree Implications Feature Ad Strategies
To drive traffic and increase or maintain shopper loyalty, feature activity should focus on higher share, more loyal, and more price sensitive branches of the decision tree.* In most channels, Premium Lights and Value brands should receive the most regular feature ad activity. Rotate promotions of brands within “branches” of tree, according to their relative fair share, to appeal to particular brand buyers within each branch. To drive incremental volume and encourage trade-up, feature lower share, less loyal and less price sensitive branches less frequently. In most channels, Imports, Micros, Domestic Specialties, and FABs should receive proportionally less feature activity. Use these segments tactically, considering your account’s beer category strategy and shopper base. * see appendix for shares by branch

Shopper Decision Tree Implications Assortment / Distribution Opportunities
Consider a “Super Lights” section... If chain or cluster of stores is frequented by female, older, higher income shoppers. At Club stores (where this segment skews highest due to female/high income shopper base). Consider a separate Energy/High Alcohol section… At C-Stores (where this segment is likely to skew high due to male shoppers), or if chain or cluster of stores is frequented by males. If these new products are introduced and gain momentum at your chain. Use appropriate signage or section marker to draw attention to it. When new items are introduced, items in lowest share branches of tree should be scrutinized for de-listing to create space for new item(s). CDT should be used only as a starting point in these decisions. Work with RSM group to make fact-based add / retain / delete decisions.

Shopper Decision Tree Implications Space and Merchandising Flow Strategies
Don’t rely exclusively on CDT for shelf set / flow decisions. Use your knowledge of the category and your customer’s business to make the right fact-based recommendations. Enlist the help of your Category Manager, Category Space Managers, and Shopper Insights teams to help make decisions. In general, place highest share branches of the decision tree near the center of the section. Draw shoppers into section and expose them to maximum “real estate” in the aisle. Size of tree “branches” in terms of share should be considered in determining relative number of facings for each branch. Consider using permanent signage or fixtures to designate sections according to major branches of the CDT.

APPENDIX DECISION TREES BY CHANNEL Grocery Convenience Mass Merch Club
Drug SHARES BY CHANNEL Case Volume Shares Dollar Shares SEGMENT SWITCHING Share of Requirements by Segment “Second Choice” Segments BACKGROUND AND METHODOLOGY

Decision Trees by Channel
Grocery C-Stores Mass Merch Clubs Drug Stores

Beer Shopper Decision Tree: Grocery
100% Based on Shoppers, not Volume! Energy / High Alcohol <1% Super-Light 6% Traditional Beer 94% Premium/ Above Premium 77% Value 17% Malt 1% Traditional Value 16% Premium Light 32% High Alcohol <1% Imports 16% Premium Regular 14% Light 6% Regular 9% Craft/ Micro 7% FAB 3% Domestic Specialty 5% = dominant path(s) = secondary path(s) Source: A-B In-Store Decision Tree Study, 2005

Beer Shopper Decision Tree: C-Stores
100% Based on Shoppers, not Volume! Energy / High Alcohol <1% Super-Light 2% Traditional Beer 98% Premium/ Above Premium 69% Value 29% Malt 12% Traditional Value 16% Premium Light 25% High Alcohol 2% Imports 12% Premium Regular 27% Light 3% Regular 13% Craft/ Micro <1% FAB 4% Domestic Specialty 2% = dominant path(s) = secondary path(s) Source: A-B In-Store Decision Tree Study, 2005

Beer Shopper Decision Tree: Mass Merch
100% Based on Shoppers, not Volume! Energy / High Alcohol <1% Super-Light 6% Traditional Beer 94% Premium/ Above Premium 70% Value 24% Malt <1% Traditional Value 24% Premium Light 35% High Alcohol <1% Imports 12% Premium Regular 14% Light 13% Regular 11% Craft/ Micro 2% FAB 4% Domestic Specialty 3% = dominant path(s) = secondary path(s) Source: A-B In-Store Decision Tree Study, 2005

Beer Shopper Decision Tree: Club Stores
100% Based on Shoppers, not Volume! Note: Skews higher in Clubs than in any other channel (due to high in come female shopper base) Energy / High Alcohol <1% Super-Light 11% Traditional Beer 89% Premium/ Above Premium 84% Value 5% Malt <1% Traditional Value 4% Premium Light 46% High Alcohol 1% Imports 15% Premium Regular 17% Light 4% Regular <1% Craft/ Micro 4% FAB 1% Domestic Specialty 1% = dominant path(s) = secondary path(s) Source: A-B In-Store Decision Tree Study, 2005

Beer Shopper Decision Tree: Drug Stores
100% Based on Shoppers, not Volume! Energy / High Alcohol <1% Super-Light 2% Traditional Beer 98% Premium/ Above Premium 69% Value 29% Malt <1% Traditional Value 26% Premium Light 25% High Alcohol 2% Imports 15% Premium Regular 25% Light 8% Regular 18% Craft/ Micro <1% FAB 2% Domestic Specialty 2% = dominant path(s) = secondary path(s) Source: A-B In-Store Decision Tree Study, 2005

Shares by Channel Case and Dollar Shares Grocery C-Stores Drug Stores

Energy / High Alcohol <1%
Case Shares: Grocery B E E R 100% Energy / High Alcohol <1% Super-Light 4% Traditional Beer 95% Premium/ Above Premium 69% Value 26% Malt 1% Traditional Value 22% Premium Light 33% High Alcohol 3% Imports 13% Premium Regular 14% Light 12% Regular 10% Craft/ Micro 3% FAB 2% Domestic Specialty 4% To drive traffic and maintain shopper loyalty, feature activity should focus on higher share branches of the decision tree. So Premium Lights, Premium Regulars, and Imports should receive the majority of Grocery feature ad activity. To drive traffic and maintain loyalty, rotate promotions of brands within “branches” according to fair share; but only need to feature one at a time per “branch”. To drive incremental volume and profit, feature lower share branches, but less frequently. Micros, Domestic Specialties, FABs, Value brands, and “Super Lights” should receive proportionally less feature activity than Premiums and Imports. Use these segments tactically, considering your account’s beer category strategy and shopper base. Source: InfoScan 12 mos ending 10/05

Dollar Shares: Grocery
B E E R 100% Energy / High Alcohol 1% Super-Light 5% Traditional Beer 94% Premium/ Above Premium 76% Value 18% Malt 1% Traditional Value 15% Premium Light 31% High Alcohol 2% Imports 19% Premium Regular 13% Light 8% Regular 7% Craft/ Micro 5% FAB 4% Domestic Specialty 4% To drive traffic and maintain shopper loyalty, feature activity should focus on higher share branches of the decision tree. So Premium Lights, Premium Regulars, and Imports should receive the majority of Grocery feature ad activity. To drive traffic and maintain loyalty, rotate promotions of brands within “branches” according to fair share; but only need to feature one at a time per “branch”. To drive incremental volume and profit, feature lower share branches, but less frequently. Micros, Domestic Specialties, FABs, Value brands, and “Super Lights” should receive proportionally less feature activity than Premiums and Imports. Use these segments tactically, considering your account’s beer category strategy and shopper base. Source: InfoScan 12 mos ending 10/05

Case Shares: C-Stores B E E R 100% Energy / High Alcohol <1% Super-Light 2% Traditional Beer 97% Premium/ Above Premium 65% Value 32% Malt 4% Traditional Value 24% Premium Light 36% High Alcohol 4% Imports 7% Premium Regular 18% Light 13% Regular 11% Craft/ Micro 1% FAB 2% Domestic Specialty 2% To drive incremental volume and profit, feature lower share branches, but less frequently. Micros, Imports, Domestic Specialties, FABs, and “Super Lights” should receive proportionally less C-Store promotional activity than Premiums. Use these segments tactically, considering your account’s beer category strategy and shopper base. To drive traffic and maintain shopper loyalty, promotional activity should focus on higher share branches of the decision tree. So Premium Lights, Premium Regulars, and traditional Value brands should receive the majority of C-Store promotional activity. To drive traffic and maintain loyalty, rotate promotions of brands within “branches” according to fair share; but only need to feature one at a time per “branch”. Source: InfoScan 12 mos ending 10/05

Dollar Shares: C-Stores
B E E R 100% Energy / High Alcohol <1% Super-Light 3% Traditional Beer 97% Premium/ Above Premium 73% Value 24% Malt 3% Traditional Value 18% Premium Light 38% High Alcohol 3% Imports 10% Premium Regular 18% Light 10% Regular 8% Craft/ Micro 1% FAB 3% Domestic Specialty 1% To drive traffic and maintain shopper loyalty, promotional activity should focus on higher share branches of the decision tree. So Premium Lights, Premium Regulars, and traditional Value brands should receive the majority of C-Store promotional activity. To drive traffic and maintain loyalty, rotate promotions of brands within “branches” according to fair share; but only need to feature one at a time per “branch”. To drive incremental volume and profit, feature lower share branches, but less frequently. Micros, Imports, Domestic Specialties, FABs, and “Super Lights” should receive proportionally less C-Store promotional activity than Premiums. Use these segments tactically, considering your account’s beer category strategy and shopper base. Source: InfoScan 12 mos ending 10/05

Case Shares: Drug B E E R 100% Energy / High Alcohol <1% Super-Light 3% Traditional Beer 97% Premium/ Above Premium 65% Value 32% Malt 1% Traditional Value 27% Premium Light 31% High Alcohol 4% Imports 15% Premium Regular 16% Light 15% Regular 12% Craft/ Micro 1% FAB 1% Domestic Specialty 2% To drive traffic and maintain shopper loyalty, feature activity should focus on higher share branches of the decision tree. So Premium Lights, Premium Regulars, and Value Lights should receive the majority of feature ad activity in most Drug stores. To drive traffic and maintain loyalty, rotate promotions of brands within “branches” according to fair share; but only need to feature one at a time per “branch”. To drive incremental volume and profit, feature lower share branches, but less frequently. Imports, “Super Lights”, Domestic Specialties, FABs, Value brands, and Value Regulars should receive proportionally less feature activity than Premium Regulars and Value Lights. Use these segments tactically, considering your account’s beer category strategy and shopper base. Source: InfoScan 12 mos ending 10/05

Dollar Shares: Drug B E E R 100% Energy / High Alcohol <1% Super-Light 3% Traditional Beer 97% Premium/ Above Premium 74% Value 23% Malt 1% Traditional Value 19% Premium Light 31% High Alcohol 3% Imports 19% Premium Regular 16% Light 10% Regular 9% Craft/ Micro 2% FAB 2% Domestic Specialty 3% To drive incremental volume and profit, feature lower share branches, but less frequently. Imports, “Super Lights”, Domestic Specialties, FABs, Value brands, and Value Regulars should receive proportionally less feature activity than Premiums and Value Lights. Use these segments tactically, considering your account’s beer category strategy and shopper base. To drive traffic and maintain shopper loyalty, feature activity should focus on higher share branches of the decision tree. So Premium Lights, Premium Regulars, and Value Lights should receive the majority of feature ad activity in most Drug stores. To drive traffic and maintain loyalty, rotate promotions of brands within “branches” according to fair share; but only need to feature one at a time per “branch”. Source: InfoScan 12 mos ending 10/05

Loyalty and Switching Share of Requirements by Segment
“Second Choice” Segments

Share of Requirements and Second Choices Among “Most Often” Buyers of Segment
B E E R Wine Hard Liquor Energy / High Alcohol na Super-Light 68% Traditional Beer Premium Lights Premium/ Above Premium Value Malt 51% Traditional Value Premium Light 83% Premium Regulars High Alcohol 65% Imports 70% Premium Regular 71% Premium Regulars Premium Lights Micros Light 80% Regular 69% Premium Regular Imports Craft/ Micro 68% Premium Lights FAB 70% Domestic Specialty 69% Premium Lights Premium Regulars Imports Imports Premium Lights How to read: Few buyers are 100% loyal to any one segment, but they do have “most often” preferences. For example, those who say their “most often” brand is a Premium Light brand, on average, give 83% of their beer volume to Premium Lights. When they are not buying Premium Lights, they are next most likely to buy either Premium Regulars or Imports. Source: A-B Shopper Poll, 2005

Share of Requirements and Second Choices Among Avg
Share of Requirements and Second Choices Among Avg. Past Week Buyers of Segment B E E R 52% Wine 23% Hard Liquor 25% Energy / High Alcohol na Super-Light 63% Traditional Beer Premium Lights Premium/ Above Premium Value Malt 48% Traditional Value Premium Light 74% Premium Regulars High Alcohol 59% Imports 53% Premium Regular 63% Premium Regulars Premium Lights Premium Lights Light 65% Regular 59% Premium Regular Imports Craft/ Micro 48% Premium Lights FAB 54% Domestic Specialty 52% Premium Lights Premium Lights Premium Lights Premium Lights Premium Lights How to read: A typical past week buyer of Craft/Micro beer gives 48% of his beer volume to Craft/Micros. He is most likely to also have Premium Lights in his purchase mix. Source: A-B Shopper Poll, 2005

Decision Tree Methodology

Comparison of Common CDT Methodologies
A-B uses in-store intercepts where legal to construct the beer shopper decision tree because they reveal more accurate decision factors at the point of purchase.

Anheuser-Busch CDT Methodology
Sample Composition ~2,000 in-store interviews with beer shoppers Grocery, C-Store, Mass Merch, Club, and Drug channels represented Survey collected attitudinal, behavioral, transactional, and demographic information Time Frame and Geography Interviews took place from Fall of 2004 – Summer of 2005 Geographic dispersion throughout major US markets (FL, AZ, OH, IL, TX, IN, MI, CA) Source: A-B In-Store Decision Tree Study, 2005

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