2. Trade relationships: it all starts with the shopper Prof. Gino Van Ossel 24th November 2010 Gino.VanOssel@Vlerick.com

3. introduction Source: GfK-FNLI Top Topics 2011 - manufacturer (n=290) “% of top managers that mentions…”

4. agenda 3 | 1.shopper trends 2.retail trends 3.trade relationships 4.conclusion

5. agenda 4 | 1.shopper trends 2.retail trends 3.trade relationships 4.conclusion

6. shopper trends: decreasing loyalty 1

7. 6 |

8. shopper trends: decreasing loyalty 7 |

9. shopper trends: decreasing loyalty – 1 st level 8 | the Berlusconi syndrom

10. shopper trends: decreasing loyalty – 1 st level 9 | the Berlusconi syndrom

11. shopper trends: decreasing loyalty – 1 st level 10 | the Berlusconi syndrom

12. shopper trends: decreasing loyalty – 1 st level 11 | the Berlusconi syndrom: from brand loyalty to brand sensitivity

13. shopper trends: decreasing loyalty – 2 nd level 12 |

14. shopper trends: decreasing loyalty – 2 nd level 13 |

15. shopper trends: decreasing loyalty – 2 nd level 14 | A brand lovers A brands represent >70% in purchased units switchers A brands represent between 40 and 69% in purchased units private label lovers A brands represent <40 % in purchased units source: GfK panel services Belgium

16. shopper trends: decreasing loyalty – 2 nd level 15 | source: GfK panel services Belgium (index 81)(index 111)(index 107)

17. shopper trends: decreasing loyalty – 2 nd level 16 | het “neusje dicht”-paradigma

18. shopper trends: decreasing loyalty – 2 nd level 17 | het “neusje dicht”-paradigma: from brand sensitivity to indifference

19. shopper trends: increasing price sensitivity 2

20. shopper trends: increasing price sensitivity growth of discount market share discount – Western Europe (source: Nielsen)

21. shopper trends: increasing price sensitivity growth of private label 20 | market share private label – Western Europe (source: Nielsen)

22. shopper trends: increasing price sensitivity increasing promotion intensity source: GfK panel services Netherlands

23. shopper trends: choice stress 3

24. 23 | how much ketchup does a store need ?

25. shopper trends: choice stress increasing price sensitivity choice stress decreasing loyalty

26. agenda 25 | 1.shopper trends 2.retail trends 3.trade relationships 4.conclusion

27. retail trends: managing price perception 1

28. source: investor relations meeting, Greece, 3rd December 2009

29. Source: Carrefour half year results, 30th August 2010

30. retail trends: cost management 2

31. source: investor relations meeting, Greece, 3rd December 2009

32. Source: Carrefour half year results, 30th August 2010

33. 32 | source: Tesco Preliminary Results, 24 th April 2010

34. retail trends: rethinking product ranges 3

35. less is more

36. source: investor relations meeting, Greece, 3rd December 2009 SKU’s - 7.5%

37. Source: Carrefour half year results, 30th August 2010

38. retail trends: rethinking product ranges less is more private label proliferation

39. retail trends: rethinking product ranges: private label proliferation Nielsen, MAT week 37 change 2009 vs. 2007, Belgium sales value growth SKU growth correlation between changes in # PL SKU’s and PL market share

40. 7300 SKUs (38% of total)

41. Source: Carrefour half year results, 30th August 2010

42. retail trends: rethinking product ranges less is more private label proliferation more space for non-food & services

43. 42 |

44. retail trends: in short… efficiency rethinking product ranges managing price perception

45. agenda 44 | 1.shopper trends 2.retail trends 3.trade relationships 4.conclusion

46. © Vlerick Leuven Gent Management School

47. trade relationships: price cuts, promotions & delistings

48. De Standaard 11 Feb 09

49. trade relationships Source: GfK-FNLI Top Topics 2011 Retail (N=72) vs. manufacturer (n=290) “% of top managers that mentions…”

50. Source: Unilever Q3 results, 4th November 2010

51. Source: Unilever half year results, 4th August 2010

52. Source: Unilever Q3 results, 4th November 2010

53. trade relationships: retailer vs. manufacturer margin 52 | Operating Margin 2008/2007 * Concerns 2008 fiscal year results (year end March 2009)

55. agenda 54 | 1.shopper trends 2.retail trends 3.trade relationships 4.conclusion

56. conclusion pressure on trade relationships: starts with the needs of the shopper (consumer) makes all retailers respond in similar ways is accelerated by ‘human nature’: retailers envy margins (vs. ROCE !!) makes in turn all manufacturers respond in similar ways

57. conclusion 56 |

58. conclusion if this were a weather forecast… … rain with major risk of thunderstorms

59. 58 |

60. conclusion “The tough market conditions in the mature world are not expected to become easier in the near future, while for the FMCG companies the comparison base is becoming tougher. In addition, commodity costs are rising while consumer sentiment does not allow for price increases. source: Petercam: Unilever (EUR 22.12, Reduce): Acquiring Alberto Culver for USD 3.7bn in cash, 27 th Sept 2010

61. conclusion “The tough market conditions in the mature world are not expected to become easier in the near future, while for the FMCG companies the comparison base is becoming tougher. In addition, commodity costs are rising while consumer sentiment does not allow for price increases. This environment forces the industry to further step up A&P spending etc. and likely to accept some margin pressure or to accept lower growth. Hence we expect tough times for the sector, with Unilever performing in line with the sector. “ source: Petercam: Unilever (EUR 22.12, Reduce): Acquiring Alberto Culver for USD 3.7bn in cash, 27 th Sept 2010

62. conclusion “The tough market conditions in the mature world are not expected to become easier in the near future, while for the FMCG companies the comparison base is becoming tougher. In addition, commodity costs are rising while consumer sentiment does not allow for price increases. This environment forces the industry to further step up A&P spending etc. and likely to accept some margin pressure or to accept lower growth. Hence we expect tough times for the sector, with Unilever performing in line with the sector. “ source: Petercam: Unilever (EUR 22.12, Reduce): Acquiring Alberto Culver for USD 3.7bn in cash, 27 th Sept 2010

63. conclusion don’t let competition outpace you !

64. Retail & Trade Marketing Research Centre: training workshops entertrainment (contract)research Gino.VanOssel@Vlerick.be #ginovanossel