Finding the Win/Win in Promotional Spend

1. Finding the Win/Winin Promotional Spend May 21, 2013

2. TODAY’S PRESENTERS Dennis Moore - Global President Advanced Analytic Consulting, Nielsen Dennis is global lead for Advanced Analytic Consulting, a function dedicated to solving client business issues through the application of analysis and consulting. He brings 20+ years of experience delivering analytic solutions to some of the largest marketing organizations in the world. Michelle Christensen - Senior Analytics Lead, Wrigley Gum Michelle advises the business on price and pack strategy, investment decisions and business performance. Prior to this role, Michelle held positions across Consumer Insights, Category Management and Analytics for companies including Quaker, PepsiCo and Wrigley.

3. What we’ll cover How to better understand the impact of your Trade Promotions 1 High level insights on trade promotions 2 Wrigley Case Study 3

4. Everyday and promoted price - two levers controlling over $701B in sales & profitability 2012 North American Dollar Sales Across All Categories Promoted prices control 31%of total dollar sales Everyday prices control 69%of total dollar sales Source: Nielsen North American AOC 2012 w/e 12/29/12

5. Significant investments are made … COGS Trade Promo Dist Adv R&D Trade Promotion is essential for shelf placement, feature & display presence and pricing tactics

6. The current environment is placing increasing pressure on retailers and manufacturers Frugal Consumers Cost of Goods Competitive Retail Landscape squeezing profits and impeding growth

7. Consumers exhibit several behaviors when exposed to trade promotions in-store • Purchasethe same brand as they otherwise would have during that shopping trip • Switchto the promoted brand for that purchase during that trip • Pick-upthe promoted brand in place of a purchase at another store • Addthe promoted brand as a truly incremental purchase

8. PSOV Methodology When increased promotions no longer drive category sales growth, our analytical approach must change Market Expansion Incremental Volume Brand Switch New Paradigm Store Switch Time Switch Subsidized Volume Subsidized Volume Non – Promoted Volume Non – Promoted Volume Current Paradigm Purchase Behaviors

9. Brand A Brand B Nielsen assets allow us to model to micro trade area for competitive effects Stores in Connecticut

10. Who actually benefits from the different sources of promoted volume? Promotional Impact Framework High Retailer Growth Same brand switching across stores Mutual Growth Market expansion & mutual share gains Retailer Benefit Subsidization Volume that would have been sold Manufacturer Growth Competitive brand switching within store Low Manufacturer Benefit Low High Source: Nielsen PnP and Retailer Switching Models

11. POLL #1 In general, how much of promotional spending actually drives mutual growth? Less than 10% 10% to 20% 20+% I have no idea

12. Are the $215.9M promoted sales truly incremental? Promotional Impact Framework High Retailer Growth Mutual Growth 17% 32% Retailer Benefit Subsidization Manufacturer Growth 27% 25% Low Manufacturer Benefit Low High Note: 30 category average 2013 Source: Nielsen Promotional Source of Volume Models

13. Poll #2 Which Country is more likely to see mutual growth….Canada or United States? Canada United States They are the same

14. Overall, Canada and US have very similar offering for promotional Win/Win Promotional Impact Framework High Retailer Growth Mutual Growth 28% 33% 19% 16% Retailer Benefit Subsidization Manufacturer Growth 29% 24% 23% 28% Low Manufacturer Benefit Low High Note: 30 category average 2013 Source: Nielsen Promotional Source of Volume Models

15. Poll #3 Which category provides the most mutual growth? Beer Cereal Coffee Frozen Entrees Laundry Detergent

16. Stockable and Expandable Categories Find the Promotion win/Win Mutual Growth share of total Promotions 16% Note: 30 category average 2013 Source: Nielsen Promotional Source of Volume Models

17. Categories with Large competitive landscapes and lower brand loyalty increase possibility for manufacturer Growth Manufacturer Growth share of total Promotions 40% Note: 30 category average 2013 Source: Nielsen Promotional Source of Volume Models

18. Storable and planned categories are most likely to draw purchases from other stores Retailer Growth share of total Promotions 48% Note: 30 category average 2013 Source: Nielsen Promotional Source of Volume Models

19. Using promotions Strategically are key for categories with high subsidization Subsidization share of total Promotions 27% Note: 30 category average 2013 Source: Nielsen Promotional Source of Volume Models

20. Strategize opportunities in promotional execution to find that promotion win/win

21. In summary of initial insights… More insights to come!

22. Wrigley GumPSOV Case Study Confidential

23. Wrigley Gum Situation • Declining Gum Category • 60% category share with vast brand portfolio • YoY losses in promotion effectiveness • New questions from Sr. Management: Is there a role for promotion in an impulse category?

24. Analysis of the “database view” could not answer our complex, but real issues in promotion strategy • Does promotion benefit the category? • To what degree do we create value for the Retailer and Wrigley? • How much subsidization happens on a brand after pack-type switching and pantry loading? Database View -% Chg vs YA Incremental 10% Base90% -% Chg vs YA

25. PSOV helped Wrigley uncover the true impact of promotion Database View PSOV View Incremental 10% Mutual BenefitNew volume to category or would have bought competitive in another channel Wrigley ONLY BenefitWould have purchased Competition Base90% Retailer ONLY BenefitWould have purchased Wrigley in another channel Subsidized Retailer and WrigleyWould have purchased Wrigley today or in the next two weeks

26. Wrigley uncovered differences across brands & how they laddered to portfolio and category value • % Promotion Incrementality to Manufacturer/Retailer Brand B+lift

27. Wrigley could also address some long-held stakeholder hypotheses with facts • Retailer A’s “Mega Discount” createspantry loading. • Feature activity in Retailer X creates above average switching with Retailer Y and hurts category profitability. • Promotion activity on Packtype A (low margin) sources from Packtype B (high margin) and is dilutive for Wrigley and our Retailers.

28. Finally, PSOV led to a simple framework to guide our promotion investment decisions • Wrigley promotion Comparison HIGH LOW LOW HIGH

29. magnitude & importance of insights led to a 3-year glide path to full in-market implementation

30. Path to more effective trade promotions • More than half of all promotions are not working for you. In fact, only 17% of all trade promotions are truly incremental to both retailer and manufacturer • Promotional Source of Volume can provide a new lens to view your trade promotions • Determine the true return on your trade promotions • Answer a lot of long held hypotheses • Identify where to allocate promotional dollars for greatest impact (Brands, Channels, Portfolio) • Develop win/win solutions for my brands and retailers 1 2

31. THANK YOU! • Q&A • 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.com OR, if you have any questions regarding the content of this webinar, you can also contact: Dennis Moore, email: Dennis.Moore@nielsen.com • Other Nielsen Contacts: Doug.Bennett@nielsen.com