SHRINK TO GROW USE ANALYTICS AND TECHNOLOGY TO OPTIMISE YOUR LINE-UP

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1 SHRINK TO GROW USE ANALYTICS AND TECHNOLOGY TO OPTIMISE YOUR LINE-UP Brenda Koornneef Business Executive, Group Marketing & Corporate Strategy, Tiger Brands José Carlos González-Hurtado President of IRI International 15th-17th June 2016, Consumer Goods Forum Global Summit 2016

2 AGENDA CONTENTS HOT TOPIC ON YOUR AGENDA THE TIGER BRANDS SUCCESS STORY HOW TO WIN

3 HOT TOPIC ON YOUR AGENDA

4 CHOICE IS A KEY DRIVER TO WIN CLIENTS "WHY HAVE YOU SELECTED THIS SHOP TODAY FOR YOUR GROCERY SHOPPING?" 30% 25% 20% 15% 10% 5% 0% Price Source: IRI Shopper Survey France 2015 Selection of products * Except proximity from your home or work Point of sales comfort and clarity of the offer Promotions Private labels New products 4

5 BUT CURRENT OVERABUNDANCE OF PRODUCT OFFERING MARKET SITUATION In suppliers price list In a large hypermarket In a supermarket Bought in a year by household In an average basket SM/HM SKU s (US = ) to SKU s to SKU s 300 SKU S (US 600) 10 to 50 SKU s Number of FMCG items available average per store (supermarkets) Europe and US 5

6 AND THE MULTI-CHANNEL REVOLUTION Emergence of pure players in FMCG Convenience is growing in importance Online/Click & Collect (Drive) growth Demand for fresh products and short time delivery is increasing M-commerce for a rebirth of loyalty programs and instore personalization On-the-go shopping with QR code - Shopping walls is growing Different trip missions with different banners at different times of the week 6

7 AND THE MULTI-CHANNEL REVOLUTION Emergence of pure players in FMCG Convenience is growing in importance Online/Click & Collect (Drive) growth Demand for fresh products and short time delivery is increasing M-commerce for a rebirth of loyalty programs and instore personalization On-the-go shopping with QR code - Shopping walls is growing Different trip missions with different banners at different times of the week 7

PRODUCTS FROM 90,000, SUPERMARKET WILL BE ABLE TO CUT

8 FORCES RETAILERS TO RETHINK ASSORTMENT TESCO CUTS RANGE BY 30% TO SIMPLIFY SHOPPING BY REDUCING NUMBER OF PRODUCTS FROM 90,000, SUPERMARKET WILL BE ABLE TO CUT PRICES AND IMPROVE AVAILABILITY ON ITS SHELVES Friday 30 January

9 AND MANUFACTURERS TO FACE NEW CHALLENGES LIMITED SHELF SPACE RETAILERS REJECT "ME TOO" PRODUCTS SHOPPER IS MORE DEMANDING THE PRIVATE LABEL PRESSURE MORE DIFFICULT TO STAND OUT OF THE SHELF 9

10 THE TIGER BRANDS SUCCESS STORY

Founded in 1921 Leading FMCG Manufacturer in SA: Baby Care

Care Snacks & Treats A top 40 JSE (JHB Stock Exchange)

11 Founded in 1921 Leading FMCG Manufacturer in SA: Baby Care Beverages Grains Groceries Perishables Personal Care Home Care Snacks & Treats A top 40 JSE (JHB Stock Exchange) listed company 16,800 employees across Africa KOO won favourite brand in SA in 2015 Present in > 22 African countries LEADING MANUFACTURER IN ALMOST EVERY CATEGORY IN WHICH WE PLAY 11

12 GROWTH THROUGH FOCUS Portfolio complexity is often the root cause of symptoms faced by consumer goods companies in developed markets Poor in Store Execution High Overheads Low Marketing ROI Low Supply Costs BRANDS SKUs SPECS CHANGES Low Speed (decisions, launches) High Capex Low Purchasing Scale 12

13 GROWTH THROUGH FOCUS Perfect in Store execution Optimum overheads High marketing ROI GROWTH THROUGH FOCUSED PORTFOLIO High speed implementation Competitive supply chain costs Capex for Growth High purchasing scale 13

14 HALF THE JAMS SOLD IN THE MARKET* WILL BE A TIGER BRANDS JAM Most valuable jam brand in SA Within top 5 jam brands in SA Discontinued in 2015 Tastes real good, like good food should *Defined Market i.e. formal trade & wholesalers 14

15 THE BURNING QUESTIONS How do we drive growth in a mature segment? What is the optimum assortment for each of our brands within the different retailers? Can we launch new products without one brand cannibalizing the other? Which product attributes (flavour, size, format etc.) do our products need and which do shoppers want? 15

16 THERE IS A CLEAR DISTINCTION IN THE TYPES OF JAMS THAT DIFFERENT RETAILERS SELL Quality Grade Attribute Importance by Retailer: Latest Year 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 6% 9% 8% 48% 64% 75% 66% 77% 79% 51% 28% 17% 22% 29% 12% Retailer Spar 1 Retailer PnP 2 Retailer Checkers 3 Retailer Shoprite 4 Retailer Makro5 Total Total Market Mkt Economy Everyday Premium Price + Size Dependant Balanced Brand + Flavour Source: IRI 16

17 METHODOLOGY: HOW DO WE DO IT? TRADITIONAL APPROACH Sales Figures + Distribution Figures COMPETITIVE EDGE Product Attributes + Store Level + Dynamic Product Mix New Performing Approach Importance per Attribute + Incremental Sales Incremental Volume 25% 75% Transferable volume 17

18 ASSORTMENT OPTIMIZATION 2.0 TO SPOT INCREMENTAL AND TRANSFERABLE SALES 25% Gains from the added item (uniqueness) Incremental Sales Non transferable (Drives market size) Total new item s sales 75% Transferable (Drives market share) Sales substitutable with other products 18

19 ATTRIBUTE IMPORTANCE DIFFER BY RETAILER Retailer 1 Retailer 2 Retailer 3 Retailer 4 Retailer 5 Lifestyle 32.2 Brand 25.5 Brand 28.6 Size 19.1 Packtype 22.0 Flavour 23.8 Size 21.8 Lifestyle 19.9 Brand 18.7 Flavour 16.9 Brand 16.3 Flavour 19.3 Flavour 18.2 Flavour 16.9 Brand 15.5 Size 9.8 PriceBin 15.2 PriceBin 15.7 Lifestyle 14.1 PriceBin 14.4 PriceBin 8.9 Lifestyle 12.2 Size 9.6 Packty 13.3 Size 14.1 Consist 6.3 Consisten 3.2 Packtype 4.9 Consist 11.6 SKU Count 9.7 Packtype 2.7 Packtype 2.9 Consist 3.1 PriceBin 6.3 Consiste

20 PLANETARY SYSTEM INDICATES UNIQUENESS AND INTERCHANGEABILITY OF BRANDS Uniqueness: Brand map Product Mapping by Brand Mainstream brands are quite unique Hugo_S Premium brands in this retailer are highly interchangeable All_Gold Hazeldene Weigh_pm_Less Thistlewood Spar_Brand Rhodes KOO All_Gold Spar_Brand 2 Rhodes Brand 5 Hugo_S KOO Hazeldene Brand 11 Goldcrest Brand 1 St_Dalfour Brand 3 Weigh_pm_Less Brand 6 Hillcrest Brand 8 Hilton Brand 10 Thistlewood Brand 12 Other_Brands Melissa_S Brand 4 Naturelite Brand 7 Dursots Brand 9 Product mapping is a visual representation of attribute interaction, where proximity of attribute values implies strong interaction. Bubble sized by value share. 20

21 BRANDS INTERACT DIFFERENTLY IN DIFFERENT RETAILERS Uniqueness: Brand map Premium brands do not play a major role in this retailer Product Mapping by Brand Hugo_S All_Gold KOO Rite_Brand 1 All_Gold Hugo_S Rhodes Brand 7 Sunshine Brand 10 Hazeldene Brand 13 Pot O_Gold Brand 2 KOO Danish_Choice Brand 5 Naturelite Brand 8 Other_Brands 11 Dursots Brand 14 Goldcrest Brand 3 Thistlewood Brand 4 Weigh_pm_Less Brand 6 Housebrand Brand 9 St_Dalfour Brand 12 Hillcrest Brand 15 Product Mapping is a visual representation of attribute interaction, where proximity of attribute values implies strong interaction. Bubble sized by value share. 21

THE BURNING QUESTIONS How do we drive growth in a mature segment? What is the optimum assortment for each of our brands within the different retailers?

22 THE BURNING QUESTIONS How do we drive growth in a mature segment? What is the optimum assortment for each of our brands within the different retailers? Can we launch new products without one brand cannibalizing the other? Which product attributes (flavour, size, format etc.) do our products need and which do shoppers want? 22

23 RESULTS ROI x 12 Reducing the products by 37% will drive 1.1% ($270k) value growth for the retailers and 3.4% ($440k) value growth for Tiger Brands NEW New launch has the potential to drive additional revenue of approx. $600K across markets Additional benefits: De-cluttered range Less complicated merchandising More efficient distribution & supply chain 23

24 HOW TO WIN

25 FOCUS ON WHAT MATTERS Traditional view: Focus on the shelf Assortment optimisation 2.0: Starts with the shopper Sales rotation only Product isolation view Look at the at the category as a dynamic product mix Use the incrementality Use the incrementality from attributes attractiveness 25

26 ASSORTMENT OPTIMIZATION 2.0 FOCUSES THE DRIVERS OF THE PURCHASE DECISION Pack Type Marketing Mix Product Form Price Value Packaging Ingredient Flavor Brand Category SHOPPER CHOICE 26

27 ASSORTMENT OPTIMIZATION 2.0 IDENTIFIES ATTRIBUTE IMPORTANCE AND ATTRACTIVENESS Each product has a set of attributes (features): Brand: Sub-category: Pack type: Pack size: Sugar: Red Classic Metal Can 330ml 12% 27

28 ASSORTMENT OPTIMIZATION 2.0 SIZE OF THE PRIZE Category revenue gain with the optimized scenario versus actual revenue Netherlands - Hot Sauces France - Frozen Fish Spain - Margarines Non Optimized Store Group 1 - Optimized Store Group 2 - Optimized Category revenue % change between optimized scenario and actual revenue across different regions/stores within each country 28

29 IN OUR INCREASINGLY COMPLEX WORLD, COMPANIES NEED SIMPLICITY AND SCALABILITY TO TURN OCEANS OF DATA INTO ACTION AND GROWTH The Market Is Changing Every Day Data Is Now Disparate No 2 Countries Are The Same Win Local, Track Global 29

30 THE TRADITIONAL MARKET READING MODEL IS NOT ADAPTED TO THE BIG DATA ERA Hierarchy 1 Hierarchy 2 Hierarchy 3 Hair Shampoos Hair Conditioners Hair Colorants THE TRADITIONAL MODEL TRANSLATES PRODUCT CATEGORIES INTO RIGID HIERARCHIES 30

31 SO, MR. RETAILER MRS. MANUFACTURER IN THE FUTURE WHAT WILL YOU NEED TO GROW? 31

32 1. BREAK SKUS INTO ATTRIBUTES = THE END OF RIGID HIERACHIES Move from rigid hierarchies to multidimensional analysis of all consumer product data 32

33 1. BREAK SKUS INTO ATTRIBUTES = THE END OF RIGID HIERACHIES Move from rigid hierarchies to multidimensional analysis of all consumer product data 33

34 1. BREAK SKUS INTO ATTRIBUTES = THE END OF RIGID HIERACHIES Move from rigid hierarchies to multidimensional analysis of all consumer product data 34

35 2. HAVE A 360 O VIEW OF CONSUMERS / SHOPPERS AND YOURSELF Liquid Data TM Technology Platform Data integrated and aligned across multiple dimensions of brand, customer, segment, geography, channel, store and time. You need to have a super powerful IT platform 35

36 3. MAKE IT EASY, MAKE IT FAST 36 SIMPLE VISUALISATION

37 3. MAKE IT EASY, MAKE IT FAST USERS GLOBALLY 1MILLION 95% QUERY A MONTH EXECUTED OF WHICH ANSWERED IN LESS THAN 10 SECONDS ON THE FLY 37 SIMPLE VISUALISATION

38 THE FUTURE IS NOW 38

39 WHAT YOU WILL NEED TO GROW AND WIN 1 Observe & Understand Reality Analytics on Oceans of Data Analytics on Attributes 2 Make Sense of It Super Powerful Integration Platform 3 Be Able to Act Fast On the Fly 39

40 Thank you! Find out more at iriworldwide.com

LATAM. This is a format that will become of increasing significance to brands.

LATAM. This is a format that will become of increasing significance to brands. Once a channel purely for trade customers, Cash & Carry (C&C) stores are now selling directly to 46 million households across Latin America. End consumers are increasingly choosing to shop there, with