1. Presented by: John Rand, Senior Vice President January 2014 Retail Diffusion: An Inevitable Journey

2. © Copyright 2014 Kantar Retail Copyright © 2014 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 2014 Kantar Retail Retailer Neutral Brand Position Homogenous Shopper Merchandising to Fit High/Low Promotion National Demand Standard Assortment Retailer Differentiation Model for 20th Century Retail Five core drivers of retail change today: 1.Shopper Diversity 2.Generational Change 3.Economic Polarization 4.Geographic Migration 5.Technological Evolution All five are contributing to far-reaching alterations in the U.S. shopper base Source: Kantar Retail analysis 3 The model for 20 th century retail is long gone

4. © Copyright 2014 Kantar Retail Key Differences Between Haves and Have Nots… Source: Kantar Retail ShopperScape ®, February 2013 4 * Among shoppers who receive a paycheck (i.e., not retired or unemployed) and have noticed impact on take-home pay when Social Security payroll tax cut expired Key Differences Between Haves and Have Nots in Anticipated Changes When Facing an Income Shortfall* ShopperScape ® data shows differences between shoppers at different income levels, even when they each might face a loss of income

5. © Copyright 2014 Kantar Retail Large segment of the shopping population has been constrained economically for long enough that they are moving beyond just price comparisons to other factors as ways to decide where to spend their time and money Approach to Shopping Has Changed in Past Year Source: Kantar Retail ShopperScape ®, October 2013 5 Approach to Shopping Has Changed in Past Year Percent of Shoppers Indicating Statement Describes “Quite Well” or “Somewhat”

6. © Copyright 2014 Kantar Retail Retailer Differentiation Model for 21st Century Retail Source: Kantar Retail analysis 6 Winning Retailers make clear decisions about their target shopper & communicate this clearly as an integral part of their brand. The old model of retailing has now been replaced with a model of success that is fundamentally about differentiation Shopper & Retailer Brand are at the core: Success depends on a clearly defined targeted shopper and a brand that clarifies a market proposition

7. © Copyright 2014 Kantar Retail One Thing Is Clear Retailers with a clear brand outgrow the market Source: Kantar Retail analysis 7 Natural/ Organic Natural/ Organic Value Premium Clubs ‘13E-’18E CAGR = 9.2% ‘13E-’18E CAGR = 5.4% ‘13E-’18E CAGR = 7.5% ‘13E-’18E CAGR = 6.3% #1#2 #3#4

8. © Copyright 2014 Kantar Retail Suggestions for Action Embrace the difference. The differentiated retailer needs to be understood before it can be sold to. Internalize the business model. Many of these retailers (e.g., club) have fundamentally different ways of making money and judging success. Learn their metrics and apply them accordingly. Set proper expectations. Particularly for brand managers and marketing, those not usually close to the customer, it is incumbent upon the customer team to demonstrate why it may not be in the interest of the differentiated retailer to follow the total plan for distribution or to use marketing funds to achieve the same programs. Accept that the retailer brand trumps product. This is not the easiest thing for any supplier to internalize, but probably the most important one, as item proliferation that is not aligned to the target brand or shopper always ends up as a cost to the supplier—either in overspending to gain distribution or in spoils and returns when it fails. Fit the targeted shopper. Here, at the foundation of everything, is a shopper both you and your retailer are seeking to serve. Concentrate energy on understanding the chosen cohort or segment, and build your offer on that. Look for the commonalities. Once you see the world as a series of brand-centric customers, each of whom has a set of targeted shoppers, you are also ready to be more profitable by finding and clustering retailers whose brands and shopper decisions are alike, where you can apply economies of scale by serving multiple needs. Source: Kantar Retail analysis 8

9. © Copyright 2014 Kantar Retail Contact: John Rand Senior Vice President John.Rand@KantarRetail.com D +1.617.912.2860 M +1.508.667.3321