1. 1 Copyright ©2014 The Nielsen Company. Confidential and proprietary. UPCOMING WEBINARS March 18 SUPER CONSUMERS, CHAPTER 2: MASS AND PRECISION MARKETING ACTIVATION March 25 MILLENNIALS: BREAKING THE MYTHS - "NO STRINGS ATTACHED" GENERATION

2. SECRETS OF SUCCESS Todd Hale SVP, Consumer & Shopper Insights March 4, 2014 HOW TO CAPITALIZE ON PRIVATE LABELS' UNTAPPED POTENTIAL

3. Copyright ©2014 The Nielsen Company. Confidential and proprietary. 3 TODAY’S PRESENTER TODD HALE SVP, CONSUMER & SHOPPER INSIGHTS, NIELSEN

4. SECRETS OF SUCCESS Todd Hale SVP, Consumer & Shopper Insights March 4, 2014 HOW TO CAPITALIZE ON PRIVATE LABELS' UNTAPPED POTENTIAL

5. 5 Copyright ©2014 The Nielsen Company. Confidential and proprietary. TABLE OF CONTENTS Store Brands Landscape & Performance Update Top 10 Store Brand Retailers:  Store Brand Share & Department Footprints  Drivers of Behavior  Demographic Connection Points  Use of Single versus Multiple Store Brands  Supply Sourcing  Merchandising & Marketing  Analytic Expertise How should branded manufacturers respond? Key Takeaways

6. STORE BRANDS LANDSCAPE

7. Copyright ©2014 The Nielsen Company. Confidential and proprietary. 7 VALUE & CONVENIENCE WINNING Source: Nielsen Scantrack, Total U.S., 52 weeks ending 12/21/2013 (vs. year ago), UPC-coded; *Club Stores, Dollar Stores, Mass-Merchandisers, Supercenters, & Military Growth has slowed since end of ’12 – particularly in value & convenience channels All Departments: Dollar Sales & Trend

8. 8 Copyright ©2014 The Nielsen Company. Confidential and proprietary. FASTER STORE BRANDS GROWTH (VERSUS TOTAL STORE) IN ALL BUT VALUE Store Brands: All Departments – Dollar Sales & Trend Source: Nielsen Scantrack, Total U.S., 52 weeks ending 12/21/2013 (vs. year ago), UPC-coded; *Club Stores, Dollar Stores, Mass-Merchandisers, Supercenters, & Military Supermarkets drive a larger share of store brands sales than total store

9. Copyright ©2014 The Nielsen Company. Confidential and proprietary. 9 GROWTH CHANNELS LESS DEVELOPED, BUT GAINING Source: Nielsen Scantrack, Total U.S., UPC-coded;*Club Stores, Dollar Stores, Mass-Merchandisers, Supercenters, & Military 20092010201120122013

10. Copyright ©2014 The Nielsen Company. Confidential and proprietary. 10 JUST OUTPACING BRAND GROWTH IN ’12 & ‘13 Source: Nielsen Scantrack, Total U.S. – All Outlets Combined (xAOC), UPC-coded

11. Copyright ©2014 The Nielsen Company. Confidential and proprietary. 11 BUT OPPORTUNITY REMAINS Dollar Share Source: Nielsen Scantrack, Total U.S. – All Outlets Combined (xAOC), 52 weeks ending 12/26/2009 & 52 weeks ending 12/21/2013, UPC-coded

12. Copyright ©2014 The Nielsen Company. Confidential and proprietary. 12 HIGH CONSUMER INTEREST % Saying they agree / strongly agree that store brands… Source: Nielsen Homescan Survey (January 2014 n=19428) But needle hasn’t moved much since interest peaked in 2009

13. Copyright ©2014 The Nielsen Company. Confidential and proprietary. 13 GREATER DEVELOPMENT IN EDIBLE CATEGORIES Source: Nielsen Scantrack, Total U.S. – All Outlets Combined (xAOC), 52 weeks ending 12/21/2013 (vs. year ago), UPC-coded, 116 major category groupings More than twice as many edible categories with 25+ Store Brand share Store Brands: Dollar Share

14. Copyright ©2014 The Nielsen Company. Confidential and proprietary. 14 WHERE ARE THE GROWTH OPPORTUNITIES? Source: Nielsen Scantrack, Total U.S. – All Outlets Combined (xAOC), 52 weeks ending 12/21/2013 (vs. year ago), UPC-coded, 116 major category groupings Are they bigger in low or high share categories? What other considerations? Store Brands: Dollar Share Bottom 10 1.Computer/Electronic Prods 2.Beer 3.Deodorant 4.Gum 5.Tobacco & Accessories 6.Canning/Freezing Supplies 7.Wine 8.Liquor 9.Hair Care 10.Insecticides Repellants Top 10 1.Milk 2.Eggs-Fresh 3.Sugar/Sugar Substitutes 4.Wrapping Materials Bags 5.Pain Remedies 6.Dessert/Fruit/Tops-Frozen 7.Unprep Meat/Seafood-Frozen 8.Fruit-Canned 9.Cheese 10.Shortening/Oil

15. Copyright ©2014 The Nielsen Company. Confidential and proprietary. 15 BASIC EDIBLES DRIVE TOP SELLING CATEGORIES Source: Nielsen Scantrack, Total U.S. – All Outlets Combined (xAOC), 52 weeks ending 12/21/2013 (vs. year ago), 120 major categories, UPC-coded Top ten highest selling store brand categories

16. Copyright ©2014 The Nielsen Company. Confidential and proprietary. 16 BASIC EDIBLES DELIVER TOP SHARES TOO Source: Nielsen Scantrack, Total U.S. – All Outlets Combined (xAOC), 52 weeks ending 12/21/2013 (vs. year ago), UPC-coded, 120 major category groupings Six of top ten store brands share categories losing share Top ten highest store brands $ share

17. Copyright ©2014 The Nielsen Company. Confidential and proprietary. 17 SOME BIG EDIBLE CATEGORIES STRUGGLING Source: Nielsen Scantrack, Total U.S. – All Outlets Combined (xAOC), 52 weeks ending 12/21/2013 (vs. year ago), 120 major categories, UPC-coded Top ten largest declining (change in $ sales) store brands categories

18. Copyright ©2014 The Nielsen Company. Confidential and proprietary. 18 TRIAL & ERROR AND FALLING DEMAND Source: Nielsen Scantrack, Total U.S. – All Outlets Combined (xAOC), 52 weeks ending 12/21/2013 (vs. year ago), 120 major categories, UPC-coded Top ten fastest declining ($ % change vs. year ago) store brands categories For new categories, was there sufficient research to ensure sound launches?

19. Copyright ©2014 The Nielsen Company. Confidential and proprietary. 19 MOST FAST GROWING ARE ALREADY TOP SELLERS Source: Nielsen Scantrack, Total U.S. – All Outlets Combined (xAOC), 52 weeks ending 12/21/2013 (vs. year ago), 120 major categories, UPC-coded Top ten fastest growing (change in $ sales) store brands categories Only two non-edible categories part of the mix

20. Copyright ©2014 The Nielsen Company. Confidential and proprietary. 20 NON-EDIBLES DRIVING FAST GROWING Source: Nielsen Scantrack, Total U.S. – All Outlets Combined (xAOC), 52 weeks ending 12/21/2013 (vs. year ago), 120 major categories, UPC-coded Top ten fastest growing ($ % change vs. year ago) store brands categories

21. INNOVATION OR EMULATION? Is our store brands industry better at true innovation? Or is our industry better at emulating brand successes?

22. TOP TEN STORE BRAND RETAILERS

23. Copyright ©2014 The Nielsen Company. Confidential and proprietary. 23 SUPERMARKETS DOMINATE TOP TEN Source: Nielsen Homescan, 52 weeks ending 9/28/2013, UPC-coded items Limited assortment/extreme discount formats lead the way Store Brands $ Share of Total Store

24. Copyright ©2014 The Nielsen Company. Confidential and proprietary. 24 SHOUT OUT TO SOME NOT ON OUR TOP TEN LIST Source: Company websites Marketside – a big secretSuperiority in packaging visuals for their Culinary Circle line Simply Balanced product launch Brand-like building engagements for their store brands

25. Copyright ©2014 The Nielsen Company. Confidential and proprietary. 25 GAPS IN DEPARTMENT ASSORTMENT Source: Nielsen Homescan, 52 weeks ending 9/28/2013, UPC-coded items Store Brand $ Share Index versus Channel Share Index versus channel is:120 or greater between 80–12080 or less Most under-developed in health & beauty, general merchandise and alcoholic bevs Aldi Save-A-Lot Wegmans Dollar General Costco H-E-B Kroger Grocer Corp Hannaford Safeway-Corp Stater Bros DairyDeliFrozenMeatFresh Produce Dry Grocery Non-FoodHealth & Beauty General Merch Alcoholic Bevs

26. DRIVERS OF BEHAVIOR

27. 27 Copyright ©2014 The Nielsen Company. Confidential and proprietary. SUPERMARKETS LEAD CONVERSION RATES IN ALL BUT THREE DEPARTMENTS Store Brands Department Buyer Conversion Source: Nielsen Homescan, 52 weeks ending 9/28/2013, UPC-coded items, % of store brand shoppers who buy store brands Cross-Channel Ranking: 1 st 2 nd 3 rd 4 th 5 th Total Store Dry Grocery Dairy Frozen Fresh Produce Meat Non-Food Deli Health & Beauty Alcoholic Bevs General Merch Supermarkets Mass with Supercenters Warehouse Clubs Drug Stores Dollar Stores

28. Copyright ©2014 The Nielsen Company. Confidential and proprietary. 28 ALDI, H-E-B & KROGER BEST AT CONVERSION Source: Nielsen Homescan, 52 weeks ending 9/28/2013, UPC-coded items, % of store brand shoppers who buy store brands Only Dollar General, Safeway & Stater Bros converting less than 90% Store Brands Buyer Conversion

29. Copyright ©2014 The Nielsen Company. Confidential and proprietary. 29 H-E-B # 1 DEPARTMENT CONVERTER; KROGER NO. 2 Source: Nielsen Homescan, 52 weeks ending 9/28/2013, UPC-coded items, % of store brand shoppers who buy store brands Store Brands Buyer Conversion Retailer Ranking by Department Dry Grocery No. 1 in Dairy Deli FrozenMeat Non-Food Health & Beauty General Merch No. 1 in Fresh Produce No. 1 in Alcoholic Bevs No. 1 in

30. 30 Copyright ©2014 The Nielsen Company. Confidential and proprietary. H-E-B, KROGER & COSTCO DRIVE LARGER ANNUAL STORE BRANDS BUYING RATE Store Brands $ Buying Rate Source: Nielsen Homescan, 52 weeks ending 9/28/2013, UPC-coded items, Item $ Per Item Buyer But interesting to see Aldi holding No. 4 position

31. Copyright ©2014 The Nielsen Company. Confidential and proprietary. 31 SUPERMARKETS CAPTURE MORE FREQUENT TRIPS Source: Nielsen Homescan, 52 weeks ending 9/28/2013, UPC-coded items, Item Trips Per Item Buyer Fewer trips from Aldi, Costco, Save-A-Lot & Dollar General Store Brands Buying Frequency

32. Copyright ©2014 The Nielsen Company. Confidential and proprietary. 32 COSTCO WINS PER TRIP SPEND Source: Nielsen Homescan, 52 weeks ending 9/28/2013, UPC-coded items, Item $ Per Item Trip Aldi No. 2 Store Brands $ Per Trip

33. 33 Copyright ©2014 The Nielsen Company. Confidential and proprietary. NATIONAL GROCERS LEVERAGE DEALS TO WIN % Store Brands $ On Deal Source: Nielsen Homescan, 52 weeks ending 9/28/2013, UPC-coded items, % Item $ On Deal Are those levels really necessary or do we need more effective promotions?

34. DEMOGRAPHIC CONNECTION POINTS

35. Copyright ©2014 The Nielsen Company. Confidential and proprietary. 35 ARE YOU FOCUSED ON NEW OR EXISTING BUYERS? Drive 43% of sales: Do you understand what drives these buyers to spend so much? Source: Nielsen Homescan, Total U.S., 52 weeks ending 09/14/2013, UPC-coded 1/5 of Store Brands Buyers

36. Copyright ©2014 The Nielsen Company. Confidential and proprietary. 36 TOP STORE BRANDS BUYERS SPEND 3X MORE Source: Nielsen Homescan, Total U.S., 52 weeks ending 09/14/2013, UPC-coded They make more trips, spend more per trip & are less deal prone Store Brand Buying Behavior

37. Copyright ©2014 The Nielsen Company. Confidential and proprietary. 37 A 10 PT. SHARE SWING FOR TOP SPENDERS Source: Nielsen Homescan, Total U.S., 52-weeks ending 09/14/2013, UPC-coded All Category Dollar Shares Over 1/4 th of dollar sales for Top Buyers is devoted to Store Brands

38. Copyright ©2014 The Nielsen Company. Confidential and proprietary. 38 TOP SPENDERS DRIVEN BY NEED FOR VALUE? Source: Nielsen Homescan, 52-weeks ending 9/14/2013; *Index = demographic group / total U.S. * 100 Top Store Brands Buyers Index* – Over to Under Developed Segments 80 or < > 80, < 120 120 or > 1 Member HH 2 3 to 4 5+ Kids < 6 6 to 12 13 to 17 No kids < 18 Income < $20k $20k - $29.9k $30k - $39.9k $40k - $49.9k $50k - $69.9k $70k - $99.9k $100k + White African-American Asian Hispanic Female Head < 35 35 to 44 45 to 54 55 to 64 65+ No Female Head Not a HS Grad HS Grad Some College College Grad Total All Departments

39. 39 Copyright ©2014 The Nielsen Company. Confidential and proprietary. DIVERSE CONNECTION POINTS AT THE EXTREMES OF INCOME % of Account Dollar Sales Source: Nielsen Homescan, 52 weeks ending 9/28/2013, UPC-coded items Save-A-Lot & Dollar General have greater opportunity to build sales from economically challenged; Costco, Wegmans & Safeway from affluent

40. 40 Copyright ©2014 The Nielsen Company. Confidential and proprietary. DIVERSE CONNECTION POINTS AT THE EXTREMES OF HOUSEHOLD TYPES % of Account Dollar Sales Source: Nielsen Homescan, 52 weeks ending 9/28/2013, UPC-coded items Save-A-Lot & Dollar General have greater opportunity to build sales from small households; Stater Bros & H-E-B from large households

41. Copyright ©2014 The Nielsen Company. Confidential and proprietary. 41 WINNING THESE AGE GROUPS IS CRITICAL Source: Nielsen Homescan, 52 weeks ending 9/28/2013, UPC-coded items % of Account Dollar Sales Most best-of-breed retailers are well positioned to win among the two age groups most important to top spend store brands buyers

42. 42 Copyright ©2014 The Nielsen Company. Confidential and proprietary. DIVERSE CONNECTION POINTS AT THE EXTREMES OF AGE % of Account Dollar Sales Source: Nielsen Homescan, 52 weeks ending 9/28/2013, UPC-coded items H-E-B & Wegmans have greater opportunity to build sales among younger; Stater Bros, Save-A-Lot & Dollar General from older

43. 43 Copyright ©2014 The Nielsen Company. Confidential and proprietary. SIMILAR CONNECTION POINTS IN TERMS OF KID VERSUS NO KID HOUSEHOLDS % of Account Dollar Sales Source: Nielsen Homescan, 52 weeks ending 9/28/2013, UPC-coded items Makes for tough assortment decisions as kid households drive sales

44. 44 Copyright ©2014 The Nielsen Company. Confidential and proprietary. H-E-B & STATER BROS HAVE STRONG DRAW FROM HISPANICS % of Account Dollar Sales Source: Nielsen Homescan, 52 weeks ending 9/28/2013, UPC-coded items Opportunity for all as Hispanics have strong attitudinal connection with store brands

45. USE OF SINGLE OR MULTIPLE STORE BRAND LABELS

46. 46 Copyright ©2014 The Nielsen Company. Confidential and proprietary. BEST OF BREED WIN WITH SINGLE & MULTIPLE STORE BRANDS Number of Store Brands: Source: Company websites Is there room for rationalization for those with multiple store brands? 12 - 1011 - 3570 +

47. SUPPLY SOURCING

48. Copyright ©2014 The Nielsen Company. Confidential and proprietary. 48 MOST TOP TEN OUTSOURCE PRODUCTION Supply Sourcing Source: Company websites 1.Aldi 2.Costco 3.Dollar General 4.Hannaford 5.H-E-B 6.Save-A-Lot 7.Stater Bros 8.Wegmans NOT IN RANK ORDER 1.Kroger Grocery-Corp 2.Safeway-Corp OutsourcedCombination of Outsourced & Manufacture Their Own

49. MERCHANDISING & MARKETING

50. 50 Copyright ©2014 The Nielsen Company. Confidential and proprietary. ONLINE ENGAGEMENTS & PROMOTION SUPPORT GETTING BETTER, BUT HOW MUCH IS NEEDED? Merchandising & Marketing Source: Nielsen observations 1.H-E-B 2.Aldi 3.Kroger Grocery-Corp 4.Safeway-Corp 5.Save-A-Lot 6.Dollar General 7.Wegmans 8.Hannaford 9.Stater Bros 10.Costco Online Engagement 1.H-E-B 2.Kroger Grocery-Corp 3.Safeway-Corp 4.Wegmans 5.Save-A-Lot 6.Aldi 7.Dollar General 8.Hannaford 9.Costco 10.Stater Bros Quality of Promotions Some really good online engagements, but those on the bottom make you search for their store brands Temporary price reductions still most prominent deal; use of digital coupons & recipe ideas for some

51. Copyright ©2014 The Nielsen Company. Confidential and proprietary. 51 EYE-CATCHING IN-STORE MERCHANDISING; ITS OWN WEBSITE & ARRAY OF SOCIAL MEDIA Source: Todd Hale (in-store photo); Kroger, http://www.simpletruth.com/; The Cincinnati Enquirer

52. 52 Copyright ©2014 The Nielsen Company. Confidential and proprietary. PROMOTION “BEST PRACTICES” FROM ONLY TWO ON OUR TOP TEN LIST Top Ten Store Brands Promotions (alpha order) Source: Supermarket News & Wegmans 1. Brookshire brands hit the road 2. CVS quizzes Beauty buyers 3. Food Lion requests before-and-after photos 4. H-E-B GIVES TLC TO BABY BRAND 5. Loblaw links brands to better health 6. Target makes a scene at Grand Central 7. Walgreens ice cream stars in reality show 8. WEGMANS PUTS CHEFS TO THE TEST 9. Whole Foods gives away free product 10. Winn-Dixie beefs up Facebook game STORE BRANDS 2014: THE CONNECTED CONSUMER

53. ANALYTIC EXPERTISE

54. 54 Copyright ©2014 The Nielsen Company. Confidential and proprietary. LOW INVESTMENTS IN ANALYTICS COMPARED TO NATIONAL BRAND INVESTMENTS Analytic Expertise Source: Nielsen observations 1.Aldi 2.Costco 3.Dollar General 4.Hannaford 5.H-E-B 6.Save-A-Lot 7.Stater Bros 8.Wegmans NOT IN RANK ORDER 1.Kroger Grocery-Corp 2.Safeway-Corp Use basic POS or panel data metrics to drive assortment & pricing decisions; competitive store visits Few using more complex analytics to test new product concepts; simulate product launches; conduct ad copy and/or weight testing; or understand white space opportunities from a consumer demand perspective Simple Complex

55. HOW SHOULD BRANDED MANUFACTURERS RESPOND?

56. Copyright ©2014 The Nielsen Company. Confidential and proprietary. 56 COLLABORATE WITH YOUR RETAIL PARTNERS Be current in branded vs. store brand pricing analytics Show why your brand assortment aligns well w/store brand assortment Identify promotional partners Take a collaborative approach to how you assess branded versus store brand risks & opportunities Use excess capacity for store brand production The Basics Create account-specific integrated shelf set plans Help retailers migrate to digital communication Provide recipes or “how to” solution content Identify white space opportunities in & outside of your categories Show retail partners how to connect w/consumer segments The Next Level

57. KEY TAKEAWAYS

58. 58 Copyright ©2014 The Nielsen Company. Confidential and proprietary. KEY TAKEAWAYS – NO BLUEPRINT FOR SUCCESS Don’t get caught up in the competition, get caught up in what your shoppers want! Best of breed store brands retailers show diversity in: What departments they choose to engageThe behaviors in which they drive salesThe types of shoppers they can connect with And in how they nurture their store brands via: Use of Single vs. Multiple Store Brands Supply Sourcing Merchandising & Marketing Analytic Expertise

59. 59 Copyright ©2014 The Nielsen Company. Confidential and proprietary. KEY TAKEAWAYS – TOP TEN WIN WITH: Organizational Focus Operational Excellence Shopper Understanding

60. THANK YOU

61. Copyright ©2014 The Nielsen Company. Confidential and proprietary. 61 Q & A THANK YOU FOR JOINING US If you have follow-up questions or want more information, please contact your Nielsen Professional Services rep If you are not a current Nielsen client, please contact us Phone:800.553.3727 Email:CPGSolutions@nielsen.comCPGSolutions@nielsen.com If you have any questions regarding the content of this webinar, you can also contact Todd Hale: Todd.Hale@nielsen.com http://www.linkedin.com/pub /todd-hale/a/353/613 @ToddHaleNielsen