1. 21 st March 2007 How to sell to Promiscuous Shoppers Presented by Moxie Market Concepts

2. 21 st March 2007 Today’s Presentation What is shopper promiscuity worth? Why are suppliers starting to consider shopper promiscuity in their category and channel strategies? Why are shoppers promiscuous? What is promiscuous shopper behaviour? How do we leverage it for profit? Goal: to increase your share of the pie…

3. 21 st March 2007 What is shopper promiscuity worth? Some key category departments… Departments2006% of total2005% growth grocery % of total sales Total market sales $ mill Total non grocerys ales $ mill Shelf Staple food7651.420.7%7271.45.2%73%10,4172,766 Dairy Case food6152.016.6%5789.16.3%62%9,8513,699 Snacks4168.311.3%4013.83.8%66%6,3532,185 Drink - cold shelf stable2941.87.9%2730.87.7%54%5,4802,538 Frozen Food2361.26.4%2233.35.7%72%3,280918 Drink - hot shelf stable1053.02.8%967.68.8%81%1,297244 Total food24327.765.7%23006.05.7%66%36,67712,349 Cigarettes3800.010.3%3626.04.8%60%6,3332,533 Household Care3183.88.6%3036.24.9%78%4,096912 Personal Care2804.67.6%2718.53.2%39%7,1624,358 Pet Care1148.73.1%1072.17.2%75%1,532383 Baby811.72.2%776.94.5%57%1,415603 Health Care704.31.9%670.15.1%28%2,5521,848 Magazines232.00.6%223.14.0%30%773541 Total non food12685.034.3%12122.84.6%53%23,86411,179 Provisional total37012.7100.0%35128.85.4%61.1%6054123528 Pick up percentage85% Total centre store 43,54469.2%35,12971,22527,680

4. 21 st March 2007 Suppliers are increasingly looking to shopper promiscuity to help ‘ease the squeeze’…

5. 21 st March 2007

6. Need Increase top line sales whilst reducing channel trade spend, including alternative profit generating initiatives. Understanding how to proactively manage range strategy – new lines, deletions and PL Understanding how shoppers shop, trends and possible implications for their business Reduce the dependence on one channel/two customers Reducing CODB including supply chain efficiencies Understand how non-grocery channels operate, the competitive environment and what the need sets are Problem Growth of sales and profit in the majority of categories in Grocery is flat. Most available levers (price, promotion, space) have already been pulled Retailers believe their point of difference is price, despite evidence to the contrary. Grocery retailing is a duopoly and they are squeezing suppliers harder on margin, supply chain, trade spend and ranging including PL FMCG suppliers playing in non- grocery channels are there by default, and not really having a strategy to optimize performance Key needs of suppliers in the grocery channel

7. 21 st March 2007 But what about the shopper? Need Solutions for all touch points around the store. More interactivity and entertainment - shopper communication and education Addressing key issues of health Want to get in and out quickly - convenience focus True convenience stores with broader convenience offers Willing to shop in different channels for solutions Occasion based solutions Problem No differentiation between retail stores. Grocery shopping is a mundane experience Health and convenience trends not adequately addressed Shopper visits are increasing yet basket sizes are decreasing Now shop across more channels Retailer price focus means they are ignoring other shopper decision criteria All points to the need to change channel mix and extend beyond grocery.

8. 21 st March 2007 Shoppers are starting to look outside grocery: no longer fulfils their primary shopping needs. Despite the fact that grocery looks like it has grown in recent reports, it has been driven by inflation and lateral growth through opening new stores, NOT because people are shopping in grocery more. Overall they are shopping in grocery less. WHY? Shoppers are becoming promiscuous – grocery can no longer meet their needs, because the market is no longer comprised of homogenous shoppers. ‘Traditional families’ are now no longer the majority. Single-person households are now 1 in 5 in Australia. There is now a vast diversity of ethnic and socioeconomic groups comprising the Australian population. The rich are getting richer and the poor are getting poorer, so the ‘middle’ has dropped out of the market. Traditional FMCGs are grounded in the mainstream. But the market is shifting in to premium, niche, gourmet offers (coffee, coffee, dips). People are trading down in commodity categories to fund them trading up in the categories they care about. And what that means is shoppers are now increasingly about destination because they want specific products for specific occasions. Hence the growth of grocery quick trip instead of main shop. If the grocery offering continues to be mainstream it will lose share of shopping occasions to niche / destination category retailers. Growth of other channels (e.g. Specialty Stores, P&C, DDS, $ Stores) shows that shoppers have more options and are starting to use them.

9. 21 st March 2007 Evidence this is happening… Sydney Morning Herald, Danielle Teutsch, 24.6.07 AUSTRALIANS are shunning the supermarket aisles and heading to old-fashioned fruit and vegetable shops to buy fresh produce. Greengrocers are attracting half of all shoppers compared with 43 per cent in 2005, the 2006 Nielsen ShopperTrends Report found. Bakers, butchers and fishmongers are also becoming more popular, eating away at supermarket patronage. Nielsen market research client services director Anton van den Berg said supermarkets had lost patronage for fresh food over the past five years. "Speciality food retailers have picked up most of that," he said. "It's a desire for quality and range of choice. There's a growing emphasis on 'back to the community' type of shopping.“ Mr van den Berg said people also liked going to their local greengrocer or baker for the convenience."By the time you get to the shopping centre, park your car and take the escalator up, you've taken half an hour," he said.

10. 21 st March 2007 What does promiscuous shopper behaviour look like? People looking for destinations (e.g. Macro) People trading down (on low emotion items) to trade up (on things they care about) People going premium / niche People going big box People supporting my local / community and relationship focus. Tribalism as a macro trend. Online shopping (not yet a major trend) Examples: I buy my meat and vegies from local butcher and fruit & veg store because they know me, their food is fresher and I support my local community I buy my personal care products at the pharmacy – they always have the brands I buy and I don’t have to negotiate the queue

11. 21 st March 2007 Promiscuous behaviour differs by social segment Specific groups behave differently: Higher end punters (e.g. SINKS & DINKS) that have specific needs, its not about price OR they’ll trade off on commodities to fund premium. Lower socio-economic households that are promiscuous because they are driven by low budgets & price. Neutral Bay/ Cremorne vs. Liverpool. They go to discounters. BUT the REMAINING middle class people are shopping at Aldi – trading down on low care categories to trade up on high. Polarizing trend: Big Box vs. Premium Specialty Stores

12. 21 st March 2007 How do you leverage it? The BIG question: What are the shopper & consumption occasions for your category and can they be found outside grocery? Example occasions: meal treat instant gratification destination (e.g. Bunnings) emergency (e.g. personal care, pharmaceuticals)

13. 21 st March 2007 What are the possible alternative channels for your product? Example non-grocery channels: Petroleum and Convenience Route (independent retailers e.g. butchers, fruit & veg shops, ‘Ma & Pa’ corner stores, newsagents) Entertainment & Leisure (cinema, theme parks, video stores) Foodservice (restaurants, cafes, takeaway outlets, quick service restaurants e.g. McDonald’s, hospitals, institutions etc.) Education (schools, universities) Liquor Specialty channels (e.g. Pet Specialty, Hardware) Mass discounters (Go Lo, Reject Shop etc.)

14. 21 st March 2007 Workshop What are the tell tale signs of a category (or company) that needs to leverage alternative channel potential? What Shopper signs are there? Where do you get the data from? What else do I need to know?

15. 21 st March 2007 Things you need to know when assessing alternative channels Size of prize: number of outlets, current market value and what % of that you can realistically get RTM: economies of scale, ease of execution versus size of prize Key purchase drivers in the channel – both shopper and trade … and assess brand fit and impact of channel choice on brand positioning

16. 21 st March 2007 How to sell to promiscuous shoppers??? Match your product to both shopper missions and the channels shoppers are going to fulfill them Be where they would expect to find you Be relevant to how the shopper shops the channel Thank you