© IGD 2010 IGD RESEARCH 2010

© IGD 2010 About IGD IGD is an International research and training organisation which has been providing insight on the food and grocery industry for over 100 years Quality, detailed research based on primary research – Board level links with retailers – Regular face to face meetings and local store visits – Team of 30 in-house analysts with industry experience Providing practical and actionable insight – Retailing – Supply Chain Optimisation – Shopper Trends and Category Management

© IGD 2010 Track over 180 retailers…

© IGD 2010 and over 60 markets… Argentina Australia Austria Belgium Bosnia & Herzegovina Brazil BulgariaCanada Chile China Croatia Czech RepublicDenmarkEstonia Finland FranceGermany Greece Hungary India IrelandItaly JapanLatvia Lithuania Luxembourg Malaysia Mexico NetherlandsNew Zealand NorwayPoland Portugal Romania Russia Saudi Arabia SerbiaSlovakia Slovenia South AfricaSouth Korea Spain Sweden Switzerland Thailand Turkey Ukraine UAE UKUSA Vietnam

© IGD 2010 Insight on key issues…

© IGD 2010 THE LATEST INTERNATIONAL PRIVATE LABEL TRENDS

© IGD 2010 Grocery proven to be a relatively ‘Safe Harbour’ Source: IGD Research

© IGD 2010 But growth will remain subdued in 2010 Grocery market growth* Source: IGD Research *Excluding the impact of food price inflation

© IGD 2010 What’s in the pipeline? Economic recovery but fitful, inconsistent growth A more restrictive regulatory environment Fresh waves of unemployment Inflation and greater volatility in commodity prices Possible further price falls in housing markets Potentially brittle consumer confidence

© IGD 2010 PL growth when the economy is challenging 1988 – 1993 PL share increased from 15% to 20% PL share from 20% to 21% 2007 – 2009 (Q1) PL share from 21% to 24% Source: US Department of Commerce, Nielsen

© IGD 2010 Price is at the forefront of product choice Drivers of product choice 1.Price 2.Know all ingredients 3.Fat content 4.Brand name Source: IGD Research 1.Brand name 2.Know all ingredients 3.Fat content 4.Price

© IGD 2010 Two opposing views of the impact of recession Swinging PendulumTotal Shift “Once the recession is over, I think consumers will continue to up-trade again…consumers will go back to their historic purchasing behaviour” Chief Executive A “I think once people discover value for money they will stay with it, and why shouldn’t they?” Chief Executive B

© IGD 2010 This is what shoppers have just told us Source: IGD Shopper Trends Arrows denote changes since March 2009 Changed for good - made changes and will stick with them Changed for now - expect to go back to normal Expect to cut back if it gets worse As normal and don’t expect to change 77% of those who have made changes expect to stick with them +8% -5%

© IGD 2010 A consistent situation across Europe Source: IGD Research Base: All main shoppers (excluding don’t know) in Great Britain, France, Germany and Spain Least change Most change

© IGD 2010 A growing challenge for manufacturer brands Source: IGD Shopper Trends 2010 Price Brand nameWell know brands

© IGD 2010 Change in brand and private label purchasing by 2012 Lowest price supermarket own brands Premium supermarket own brands Well known brands Source: Shoppers in 2012: Is your business Ready for Them?

© IGD 2010 Change in ethical shopping by 2012 Local or regional foods Foods with high animal welfare claims Fairtrade foods Organic foods Source: Shoppers in 2012: Is your business Ready for Them?

© IGD 2010 United States 31% Shoppers are buying more private label… 33% 26% 37% Total 31% Source: IGD Research, 2009

© IGD 2010 Focus on private label is being maintained in US Retailers are emphasising not only the price advantage of their private labels but are also focusing on the quality aspect Source: IGD Research, 2009

© IGD % of shoppers are buying more store brand products 57% of shoppers frequently purchase store brand products 90% agree that store brands are as good as national brands 91% do not plan to stop buying PL when the recession is over 94% of first time purchasers find their purchase favourable Source: PLMA / GfK 2009 Attitudes of US shoppers

© IGD 2010 Is it all because of the downturn? Source: IGD Research, 2009 Private Label Discounters 28% 31% 28% Buying more Begun to make changes to save money in recession

© IGD 2010 Is it all because of the downturn? Buying more Begun to make changes to save money in recession Both 14% 13% 15% 16% 12% Private Label Discounters Source: IGD Research, 2009

© IGD 2010 Recession is accelerating existing shopper trends Private Label Discounters “Slowly, over time you gradually try different [private label] products and find the ones you like. But with the economic climate and everything, you find you’re doing it more.” “We’ve been gradually drifting away from the big superstores.” Source: IGD Research, 2009

© IGD 2010 …and are buying more at discount stores Source: IGD Research % 29% 28% 31% Total 28%

© IGD 2010 What are the triggers for buying more PL? Buying a bit more to save money “I am probably buying just a little more own brands as I am starting to count the pennies a bit.” Trial and error “I‘ve bought a private label product and not liked it at all but when I bought another one it was absolutely fine.” Recession has accelerated an ongoing process “Slowly, over time you gradually try different [private label] products and find the ones you like. But with the economic climate and everything, you find you’re doing it more.” Recommendation “We do shopping for an elderly gentleman who lives near us. He started having the basic products and said they were better than he thought. So there was one item we tried and it was fine.” Satisfied with the quality “I used to tease my sister for buying private label then I bought one once and it was alright.”

© IGD 2010 Strengths of private label Cheaper than brands for equivalent quality Regularly on promotion Consistent level of quality Can trust the supermarket Used in recipes provided by supermarket Best quality available At the forefront of new ideas, tastes and flavours Source: IGD Research 2009

© IGD 2010 Just as good as the alternative brands Has improved over the last few years Some stores are better than others 52%66%52% 61%57%54% 69%73%36% 67%57%52% Private label quality perceptions by market Source: IGD Research 2009

© IGD 2010 Reliable Quality Specialist Wide distribution Trust companies Heritage Best Available Special offers Innovation International Image All mentions (%) Shoppers’ views on the key strengths of brands Source: IGD Research 2009

© IGD 2010 Strength of private label and brands compared Reliable taste/quality 1 Specialist 2 Wide distribution 3 Heritage 4 Trust famous companies 5 Best quality available 6 Special offers 7 International 8 Forefront of innovation 9 Image 10 Arrows connect comparable factors between private label and brands Source: IGD Research, Cheaper/same quality 2 Special offers 3 Consistent quality by category 4 Trust supermarket involvement 5 Used in supermarket recipes 6 Best quality available 7 Forefront of innovation Private label Brands

© IGD 2010 Do shopper attitudes differ by category? % of British shoppers who would reject private label 37%21%10% Open to buying private label across whole store Rejects only 1 category Rejects 2-3 categories Rejects 4-5 categories 23%9% Rejects 6+ categories 81% of shoppers would buy private label in all but three or less categories Source: IGD Research, 2009

© IGD 2010 Shoppers private label preferences by category % of British shoppers who would not choose to buy private labels by category Categories private label is most likely to be rejected for Alcohol Breakfast cereal Laundry & household cleaning Hot drinks Frozen ready meals & meat Bread Canned & packet Household paper Biscuits & cakes Desserts & ice cream Confectionery Dairy products Jams, preserves & sauces Categories private label is least likely to be rejected for Source: IGD Research, 2009

© IGD 2010 The balance is already about right Rather there be more supermarket private label products Rather there be more branded products 70% 10% 15% 5% don’t know Most shoppers see the balance about right Source: IGD 2009

© IGD 2010 Do shoppers have enough private label choice? The choice of different types of supermarket private label products is more than I need I like having a wide choice of different types of supermarket private label products Source: IGD Research, 2009

© IGD 2010 Predicting future investment trends Premium Co Brands Standard Discount Lines Entry Level Ethical Entry Level IGD predicts that investment will be channelled at both ends of the private label spectrum; value and premium, driven by a broadening of the offer, product reformulations and the introduction of new own label tiers Quality Good Better Best Roll-out of restaurant quality premium ranges e.g. Tesco Finest Collection Reformulation of value ranges to incorporate ethical credentials e.g. Sainsbury’s Basics Launch of new discounter brands e.g. Tesco Co-branded products e.g. Kettle and Kirkland at Costco

© IGD 2010 Shoppers are looking for value and values Value Values Heritage Provenance Pack size Ethics Sustainability Performance Promotions Price

© IGD 2010 Value with Values

© IGD 2010 Aldi Hofer – Austria The next frontier: carbon footprint labelling Tesco – UK

© IGD 2010 Up to $10 in vouchers at Food Lion (US) Heightened promotional activity 2 for 3 deal for brands and Pl at Carrefour (France) 10 for $10 Mix and Match at Safeway (US)

© IGD 2010 “Good” is getting “better” Source: IGD Delivering both ‘Value’ and ‘Values’, Sainsbury’s sales from its Basics range are up 50% on 2008 Having previously lacked a specific entry-level price label range, Waitrose is currently repositioning a significant part of its core private label offer to a single, unified value-focused brand By September 2009, 1,400 SKU’s are included under the essential Waitrose brand which also delivers on ‘values’

© IGD 2010 Carrefour Discount – launched in 2009 Source: IGD Carrefour Discount replaces the No.1 range in Carrefour’s French hypermarkets except on a few specific lines

© IGD 2010 Bold communication in-store Source: IGD Rewe, Germany, Aug 09 Carrefour, France, June 09Target, USA, June 09

© IGD 2010 Tesco has added a fourth tier Source: IGD Value Standard Finest “Discount” (Launched September 2008) The Discount Brands range is c. 20% cheaper than Tesco standard PL and approximately twice the cost of Tesco Value 30% of Tesco shoppers are now regularly buying into the Discount Brands range

© IGD 2010 Discounter brands at Tesco Source: IGD

© IGD 2010 Loblaws – Canada Publix - USA Sainsbury’s – UK

© IGD 2010 Concepts emerging which cater for growing list of consumer trends Convenience Scratch cooking Health Value Cook Asian at Marks & Spencer (UK) Mein Frischemenu at Real (Germany) Kies & Wok at Albert Heijn (Netherlands)

© IGD 2010

Bundle deals now more important in private label Price and convenience with a focus on chilled ready-meals Source: IGD Kies & Kok at Albert Heijn Shoppers pick 4 different meal components: i) Meat ii) Side iii) Vegetables iv) Sauce Appeals to those looking for a quick meal solution, but still wanting to cook Flexed by store type Sainsbury’sMetro Group - Real

© IGD 2010 In-store execution and merchandising Shelf barkers to sign post shoppers to own label products at Auchan (France) Pound shop concept at Tesco (UK) ‘Wall of Value’ at Walmart (US) Bold in-store displays at Carrefour (France) Floor advertising at Target (US)

© IGD 2010 Shoppers also helping to refine ranges

© IGD 2010 …and communicating via social media

© IGD 2010 Key takeaways A ‘bumpy’ economic climate could be reality for some years It’s not just the economy that is driving change, broader trends are emerging in private label which need capitalising on Pay greater attention to shifting shopper behaviour Ensure the price advantage of private label is maintained – it is the most significant strength identified by shoppers Recognise the different levels of shopper expectations in the countries you operate in – one size does not fit all The perceived strengths of brands vary by market – tailor communication accordingly Long-term retailer relationships should be more important than ever; and shopper insights can provide an excellent platform New shopper communication and promotional mechanics are available, ensure you understand them and utilise where appropriate

© IGD 2010 Enter new markets and distribution channels Engage your existing customers and prospective new clients Train and develop your people Improve your supply chain Brief colleagues, senior management and investors Track wider industry trends and developments Engage with our people and industry network How can they provide this? Access to online services: Retail Analysis and Supply Chain Analysis Specific projects just for you

© IGD 2010 FOR MORE DETAILS Ian Weide, Senior Business Analyst