1. Presented by: THE GLOBAL HAVE & HAVE NOT CHALLENGE Frank Badillo Chief Economist July 2013

2. © Copyright 2013 Kantar Retail Copyright © 2013 Kantar Retail. All Rights Reserved. 501 Boylston Street, Suite 6101, Boston, MA 02116 (617) 912- 2828 howard.zimmerman@kantarretail.com No part of this material may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photography, recording, or any information storage and retrieval system now known or to be invented, without the express written permission of Kantar Retail. The printing of any copies for back up is also strictly prohibited. Disclaimers The analyses and conclusions presented in this seminar represent the opinions of Kantar Retail. The views expressed do not necessarily reflect the views of the management of the retailer(s) under discussion. This seminar is not endorsed or otherwise supported by the management of any of the companies covered during the course of the workshop or within the following slides.

3. © Copyright 2013 Kantar Retail Have Nots: Losing share of income Income Inequality Growing Across Countries  The Haves. Are keeping or growing their share of all income earned  The Have Nots. Are losing share of income earned by all households Producing Haves and Have Nots Source: Kantar Retail analysis 3 Haves: Gaining share of income Income level that divides Haves from Have Nots can differ by country

4. © Copyright 2013 Kantar Retail A Broader Definition of Haves and Have Nots Defined over long term by key attributes beyond income.  The Definers: –Gen cohort –Wealth –Education –Household type –Urbanization –Retirement age Shifts focus to attributes that cause income to lag or lead Source: Kantar Retail analysis 4 Part of large younger, working-age cohort Some wealth A college degree Married/couple An urban resident Plan to retire late Part of large younger, working-age cohort Some wealth A college degree Married/couple An urban resident Plan to retire late Part of large older cohort nearing retirement Little wealth No college degree Unmarried/divorced A non-urban resident Plan to retire early Part of large older cohort nearing retirement Little wealth No college degree Unmarried/divorced A non-urban resident Plan to retire early Attributes found at polar ends Have Nots: Losing share of income Haves: Gaining share of income

5. © Copyright 2013 Kantar Retail Shaped by What Defines and Divides Them  The Definers. Mostly demographic attributes that can differ by country  The Dividers. Mostly external forces: –Inflation –Government austerity External forces further divide Haves and Have Nots 5 Haves … Part of large younger, working-age cohort Some wealth A college degree Married/couple An urban resident Plan to retire late Have Nots … Part of large older cohort nearing retirement Little wealth No college degree Unmarried/divorced A non-urban resident Plan to retire early Have Nots: Losing share of income Haves: Gaining share of income Inflation Government Austerity Haves… Part of large younger, working-age cohort Some wealth A college degree Married/couple An urban resident Plan to retire late Have Nots… Part of large older cohort nearing retirement Little wealth No college degree Unmarried/divorced A non-urban resident Plan to retire early Source: Kantar Retail analysis

6. © Copyright 2013 Kantar Retail Opportunities, Threats Among Haves/Have Nots Working-age population: Markets skewed toward older cohorts nearing retirement will yield more Have-Not behavior Early retirement expectations: Adds to pressure on Have Nots, primarily in developed countries Urbanization: Drives Have household gains in markets such as China, India College-educated and married: Bull's-eye of Have household formation Wealth effects: Skew to Haves, but can be negative or positive Given focus on factors that define and divide them 6 Inflation pressures: Threat looms largest in emerging markets Government austerity: Threat is greatest in developed markets, but Europe most of all The Definers The Dividers The Dividers Source: Kantar Retail analysis

7. © Copyright 2013 Kantar Retail Source: Kantar Retail analysis 7 Promotes Have Behavior Promotes Have-Not Behavior “Definers” Generational Mix India, MexicoCanada, France, Germany, Italy, Japan, Spain, United Kingdom Wealth Canada, France, Germany, Italy, Japan, Spain, United Kingdom, United States Brazil, China, India, Russia Education* Japan, United Kingdom, United States Brazil, China, Italy, India, Mexico, Spain Household Composition # Italy, SpainJapan, United States Urbanization China, IndiaFrance, Germany, Italy, Japan, Russia, United Kingdom Retirement Expectations* Brazil, China, India, Japan, Mexico France, Italy “Dividers” Inflation PressureCanada, France, Germany, Italy, Japan, Spain Brazil, India, Russia Government Austerity China, India, MexicoFrance, Germany, Italy, Spain, United Kingdom *Education and retirement data for India is estimated; #Household composition not available for Brazil, China, India, and Russia  These are the countries that rank at polar ends of measures for the given factor  Suggests the factor is most likely to promote Have or Have-Not behavior in that country Mapping Factors to Countries Where most likely to affect Have/Have Not behavior

8. © Copyright 2013 Kantar Retail Opportunities, Threats Among Haves/Have Nots Brazil, Russia: Where inflation threat to Have Nots is greatest because unlikely to be offset by other factors France, Germany, Italy, Spain, United Kingdom: Where austerity and older workforce will drive more inequality India, China, Mexico: Where factors favor gains among Have households Canada, Japan, United States: Where outlook is mixed for Haves and Have Nots With focus on net impact among largest markets 8 Source: Kantar Retail analysis

9. © Copyright 2013 Kantar Retail Have Gains BroadeningMixed EffectsHave Nots Falling Back Further China − Low levels of education and wealth per capita + No austerity pressures, urbanization trend, late retirement plans Canada − Workforce skewed older + Low inflation, high per-capita wealth Brazil − Inflation pressures, low levels of education and wealth per capita + Late retirement plans Russia − Inflation pressures, low per- capita wealth, little urbanization India − Inflation pressures, low levels of education and wealth + No austerity pressures, workforce skewed younger, urbanization trend, late retirement plans Japan − Workforce skewed older, high percentage of single-person households, no urbanization + Low inflation, high levels of education and per-capita wealth, late retirement plans France − Austerity, workforce skewed older, early retirement expectations, little urbanization + Low inflation, high per-capita wealth Spain − Austerity, workforce skewed older, low education levels + Low inflation, high per-capita wealth, high percentage of family households Mexico − Low levels of education + No austerity pressures, workforce skewed younger, late retirement plans United States − High percentage of single- person households + High levels of education and per-capita wealth Germany − Austerity, workforce skewed older, little urbanization + Low inflation, high per capita wealth United Kingdom − Austerity, workforce skewed older, little urbanization + High levels of education and per-capita wealth Italy − Austerity, workforce skewed older, low education levels, little urbanization, early retirement expectations + Low inflation, high per-capita wealth, high percentage of family households Source: Kantar Retail analysis 9 Countries by Impact of Defining/Dividing Factors Likely net impact on Haves and Have Nots

10. © Copyright 2013 Kantar Retail Opportunities, Threats Among Haves/Have Nots Developed vs. Emerging: Expect a Have/Have Not challenge in developed and emerging markets alike Value proposition: Adapt a dual Have/Have Not value proposition to each country based on its mix of key attributes Food/fuel inflation: Use as local indicator of stress on Have Nots Discretionary spending: Expect Have household effects to be most evident in discretionary categories and channels Consumables spending: Expect Have Not effects to be focused in consumable/nondiscretionary categories, channels A value focus: Expect value-focused brands and retailers—in-store and online—to continue to thrive/expand General conclusions and implications 10 Source: Kantar Retail analysis

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12. © Copyright 2013 Kantar Retail Income Inequality: Greatest in Key Markets  Split into Haves and Have Nots relevant in all markets  Notable that: –United States looks as much like China and emerging markets as developed markets –European markets have the least income inequality—but austerity will likely change that And affects developed and emerging markets alike Source: OECD, International Monetary Fund, and Kantar Retail analysis 12 Income Inequality Measured by Gini Index* 100 = inequality; 0 = equality * Based on after-tax income; Highlighted in red bold are the largest markets # Brazil and China are estimated based on IMF data, all other countries are OECD data

13. © Copyright 2013 Kantar Retail Generational Mix: Key in Developed Markets  Tilt toward aging workforce likely to yield more Have-Not behavior  Japan, Germany, and Italy are most vulnerable  Relevance in emerging markets likely depends on other factors as well Source: United Nations Population Division, and Kantar Retail Analysis 13 Working-Age Population by Country* Share of Population Age 15 to 34 Relative to Age 55-plus * Highlighted in red bold are the largest markets

14. © Copyright 2013 Kantar Retail Retirement Expectations: An Added Dimension  Most susceptible are countries such as Italy and France that have early retirement expectations and workforce skewed older  An older workforce is less of a Have-Not driver where workers delay retirement Early retirement plans will magnify Have-Not threat Source: OECD and Kantar Retail analysis 14 Average Retirement Age of Men by Country * In 2011 * Highlighted in red bold are the largest markets; Does not include India among largest markets considered

15. © Copyright 2013 Kantar Retail Urbanization: A Creator of Have Households  As countries grow, movement into urban areas drives gain in Have households  China and India are likeliest candidates  Developed markets hurt by slow-growing urban areas Source: GeoHive and Kantar Retail analysis 15 Population of Cities of 2 million or more * Among 60 largest countries by GDP * Highlighted in red bold are the largest markets: CAGR is 2010-2020

16. © Copyright 2013 Kantar Retail Education: Single Biggest Driver of Haves  No surprise that developed markets are most educated  Offsetting factors may be at work in places like Spain and Italy— markets that are developed even though skewed toward less education But may be offset by other factors in some countries Source: OECD and Kantar Retail analysis 16 Educational Attainment by Country 1 Share of population 25-64 years old 1 Data is for 2010 except where noted. Highlighted in red bold are the largest markets; Does not include India among largest markets considered 2 Basic Education is roughly equivalent to less than a U.S. high school education 3 College Educated is roughly equivalent to a four-year college degree or higher 4 Data is from 2000 for China, 2003 for Argentina, 2004 for Saudi Arabia, 2007 for Indonesia and South Africa, and 2009 for Brazil

17. © Copyright 2013 Kantar Retail Household Composition: Key Ingredient  A high percentage of married/couple households helps offset less education in places like Spain, Italy  Fewer married/ couple households in developed countries likely pushing more toward Have-Not behavior Married/couple + college educated = Have bull's-eye 17 Household Type by Country* Latest Year Available # * Highlighted in red bold are the largest markets; Does not include Brazil, China, India, and Russia among largest markets considered; NA=Not Available # Data are from 2000 for Estonia, Finland, Korea, Latvia, and the United States; 2001 for Bulgaria, Denmark, Greece, Italy, Lithuania, the Netherlands, Norway, Portugal, Slovakia, and Spain; 2002 for Romania, and Sweden; 2005 for Iceland, and Japan; 2006 for New Zealand. Source: Kantar Retail analysis

18. © Copyright 2013 Kantar Retail Wealth Effects: Most Affect Have Households  Negative post-recession wealth effects persist in markets where workforce is skewed older  Is especially the case among Baby Boomers in the United States  Emerging markets such as Brazil, Russia, China, and India will see positive wealth effects— if gains can be sustained But impact can be negative as well as positive Source: National Bureau of Economic Research, and Kantar Retail analysis 18 Relative Wealth Per Adult by Market* In 2000, among 60 largest markets by GDP By most wealth Hong Kong United States Ireland Switzerland United Kingdom Netherlands Singapore Belgium Japan Italy Taiwan Australia France Norway Canada Spain Germany Israel Greece * Highlighted in red bold are the largest markets By least wealth Nigeria Bangladesh India Pakistan Algeria Indonesia Vietnam Romania Peru Ukraine China Egypt Russia Kazakhstan Iran Brazil Turkey Saudi Arabia Philippines

19. © Copyright 2013 Kantar Retail Inflation Threats: Weigh on Emerging Markets  Toll may prove greatest on Russia and Brazil, where may be fewer offsetting effects  In developed markets, inflation may prove a bigger threat than expected if shift to pro- growth policies not managed well Source: International Monetary Fund and Kantar Retail analysis 19 Consumer Price Inflation by Market CAGRs among 60 largest markets by GDP

20. © Copyright 2013 Kantar Retail Government Austerity: Threat to Mature Markets  Threat is greatest mostly in Europe, where challenged to sustain big role in the economy  China and other emerging markets in much better position to restimulate and sustain growth Source: International Monetary Fund and Kantar Retail analysis 20 Government Spending by Market* In 2012 as share of GDP among 60 largest markets * General Government Total Expenditure includes net acquisition of nonfinancial assets, which includes land, buildings, roads, and other infrastructure; Highlighted in red bold are the largest markets

21. © Copyright 2013 Kantar Retail Related Content on Haves and Have Nots  June 2012 Mid-Year Forum presentation, Strategic Outlook Workshop, The Macro-Retail Outlook to 2020: A Landscape Shaped by Have and Have NotsStrategic Outlook Workshop, The Macro-Retail Outlook to 2020: A Landscape Shaped by Have and Have Nots  April 2012 article, The Macroeconomic Outlook for Retail: The Have Not Swing VotesThe Macroeconomic Outlook for Retail: The Have Not Swing Votes  April 2012 Shopper Forum presentation, The Haves and Have NotsThe Haves and Have Nots  February 2012 article, The Macroeconomic Outlook for U.S. Retail: The Have Not ChallengeThe Macroeconomic Outlook for U.S. Retail: The Have Not Challenge  December 2011 Year-End Forum presentation, The Way Forward: Illuminating The Uncertain Economic LandscapeThe Way Forward: Illuminating The Uncertain Economic Landscape 21

22. © Copyright 2013 Kantar Retail 245 First Street Floor 10 Cambridge, MA 02142 F +1 617 499 2723 www.KantarRetailiq.com T: +614.355.4019 KRIQ website: Macroeconomics InsightsKRIQ website: Macroeconomics Insights Topics & Trends > Macroeconomics F: +614.355.4059 Frank Badillo Chief Economist Frank.Badillo@KantarRetail.com www.KantarRetailiq.com T: +614.355.4044 F: +614.355.4059 Doug Hermanson Economist Doug.Hermanson@KantarRetail.com