REDEFINING RETAIL FACTORS INFLUENCING CPG GROWTH WITHIN HEALTH & BEAUTY Q2 2014

REDEFINING RETAIL FACTORS INFLUENCING CPG GROWTH WITHIN HEALTH & BEAUTY Q2 2014

THE CHALLENGE FOR GROWTH 2 Copyright 2013 The Nielsen Company. Confidential and proprietary.

CPG STILL SPUTTERING FOR GROWTH IN NORTH AMERICA United States Canada +1.0 0.3 +1.4 +0.0 Dollars Units Nielsen: ScanTrack Total Tracked Sale 52 wks ending July 5, 2014 Dollars Units Nielsen: MarketTrack Total Tracked Sale 52 wks ending June 28, 2014 3

2014 IS SHAPING UP TO BE MORE OF THE SAME Slow growth, driven only by inflation $ % Chg Unit % Chg 5 2 2 2 2 2 2 0 0 0 0 0 2009 2010 2011 2012 2013 YTD 2014 Inflation +5 +0 +2 +2 +2 +2 Source: Nielsen MarketTrack, National All Channels YTD 28 weeks to June 28, 2014 Total Tracked Sales excluding Fresh Random Weight 4

THE PRAIRIES LEAD REGIONAL PERFORMANCE The Prairies lead regional growth twice the National average 52 week Regional CPG Performance $ % Chg Unit % Chg 3 1 1 2 1 1 0 0 0 0 1 0 National Maritimes Quebec Ontario Prairies B.C. Source: Nielsen MarketTrack, National All Channels 52 weeks Ending June 28 2014 Total Tracked Sales excluding Fresh Random Weight 5

WESTERN CANADA HAS NOW SURPASSED THE EAST AS YOUNGER CANADIANS MIGRATE FOR JOBS East Ontario West 30.6% 38.4% 30.7% Older Deal sensitive Less Store Brands Immigration Discount Urbanization Source: Statistics Canada The Canadian Population in 2011 Analytical document East: Atlantic + Quebec West: Prairies + BC Jobs Migration Fertility Immigration 6

CONVENIENCE & GAS OUTPACING THE MARKET Convenience & Gas (+3%)* Drug (+2%) 6% 12% All Other (+2%) Total Market: $73.3 Billion (+2%) 11% 71% Copyright 2013 The Nielsen Company. Confidential and proprietary. Source: Nielsen MarketTrack, National, Dollars, 52 weeks ending June 28, 2014 Excludes Fresh Random Weight and Food Service; * Includes Tobacco Grocery & Mass (+1%) 7

HEALTH & BEAUTY SALES ARE OUTPERFORMING TOTAL CPG $ Share and Growth +1 +1 +2 Non Grocery HABA 15.3 +1 13.0 +1 9.6 18.1 +2 10.5 +4 +4 Grocery Categories 66.6 +1 76.4 All Channels Source: Nielsen MarketTrack, 52 Weeks to June 28, 2014 Excludes Random Weight Fresh Grocery + Mass +1 71.2 19.6 Drug Stores +0 +6 8

HABA CATEGORIES ARE LEADING RETAIL SALES GROWTH WITHIN GROCERY + MASS MERCHANDISERS $ Share and Growth +1 +1 +2 Non Grocery HABA 15.3 +1 13.0 +1 9.6 18.1 +2 10.5 +4 +4 Grocery Categories 66.6 +1 76.4 All Channels Source: Nielsen MarketTrack, 52 Weeks to June 28, 2014 Excludes Random Weight Fresh Grocery + Mass +1 71.2 19.6 Drug Stores +0 +6 9

FOOD CATEGORIES ACCOUNT FOR ALMOST 1 IN 5 DOLLARS SALES IN DRUG STORES FUELING GROWTH $ Share and Growth +1 +1 +2 Non Grocery HABA 15.3 +1 13.0 +1 9.6 18.1 +2 10.5 +4 +4 Grocery Categories 66.6 +1 76.4 All Channels Source: Nielsen MarketTrack, 52 Weeks to June 28, 2014 Excludes Random Weight Fresh Grocery + Mass +1 71.2 19.6 Drug Stores +0 +6 10

SDM TESTING FRESH FORMAT Source: Nielsen photos 11

HOW ARE THE HEALTH & BEAUTY DIVISIONS PERFORMING? OTC +1 36.6 $12.4 Billion 18% of CPG Body Care Baby Care Cosmetics +1 +2 +1 14.1 10.5 20.1 +2% Source: Nielsen MarketTrack, National All Channels 52 weeks Ending June 28 2014 Hair Care Oral Hygiene Shaving +1 +1 4 8.5 6.4 3.8 12

MAKING THE CUT IN HABA Top 5 Face Care +2% Headache Rem 3% Shampoo+Cond. +0% Health Suppl. +5% Diapers +0% Men s Antifungals +17% Sleeping Aids +13% Topical Analgesics +13% Energy Nutrition +11% Athletic Supports +10% Source: Nielsen MarketTrack, National All Channels 52 weeks Ending June 28 2014 > $5 million Enemas 13% Tooth Polish 12% Acne Products 8% Menstrual Relief 8% Wart Removers 6% 13

DRUG STORES REMAIN THE TOP DESTINATION FOR HABA SALES BUT LOSING SHARE $ Share 2009 2014 Pt Chg Drug Stores 39.6% 36.3% 3.4 Grocery 23.4% 22.9% 0.5 Mass Merch. 21.4% 21.4% +0.0 Warehouse 7.0% 9.6% +2.6 Source: Nielsen Homescan Channel Facts 52 Weeks Ending June 28, 2014 Health Food 1.9% 2.1% +0.2 Remaining 6.7% 7.7% +1.0 14

WHERE IS THE CONSUMER TODAY? Do you think economics conditions are better today than a year ago? YES NO 15

WHERE IS THE CONSUMER TODAY? As a result, will you change your spending behaviours? YES NO 16

WHERE DO WE FIND GROWTH IN A CHALLENGING ENVIRONMENT? 17

TRENDS IMPACTING GROWTH Cyclical Changes Economy still fragile Cautious Consumer Structural Changes Value Motivators Emerging Retail Formats Connected Consumer Evolving Consumer 18

CONSUMER SENTIMENT IN A HOLDING PATTERN 19 Copyright 2013 The Nielsen Company. Confidential and proprietary.

CANADIAN CONSUMER CONFIDENCE IS IN A HOLDING PATTERN SINCE THE RECESSION 110 114 111 112 113 104 96 90 98 102 101 96 94 100 98 100 99 102 84 3Q05 3Q06 3Q07 3Q08 2Q09 2Q10 4Q11 4Q12 4Q13 2Q14 Pre Recession Recession Post recession Source: Nielsen Global Online Consumer Confidence Surveys Q2 2014 20

TOP CONCERNS 2014 is presenting may new consumer pressure points 1) Economy 2) Debt 3) Jobs 1) Health 2) Debt 3) Food Prices 4) Health 5) Food Prices 2011 4) Utility Bills 5) Fuel Prices Source: Nielsen Global Omnibus Consumer Confidence Survey Q2 2014 Canada Top 2 Combined 2014 21

CONSUMERS ARE STILL FOCUSED ON SPENDING RESTRAINT 54% are trying to reduce household expenses $$$ 73% are trying to spend less on their grocery bill* 3% decline in household expenditures Source: Nielsen Homescan, Total Expenditures 52 Weeks Ending June 28, 2014 Q2 2014 Global Omnibus Survey Canada * Nielsen Panel Views Survey June 2014 Canada 22

WHAT ARE CONSUMERS DOING TO SAVE? Top saving activities: Stock up when on promotion 85% New #1 Only buy items when on sale 75% Use Coupons 65% Seek out stores with lower prices 59% Buy larger sizes 52% Buy lower priced store brands 48% Buy lower priced name brands 38% Shop at Discount Retailers 36% Source: Nielsen PanelViews Survey Canada June 2014 $$$ 23

SINCE BEFORE THE RECESSION, % OF RETAIL SALES SOLD WITH A PRICE CUT HAS INCREASE 10 POINTS % Dollars Sold on TPR 27% 27% 31% 33% 34% 35% 37% 37% HABA 27% +4 +4 2007 2008 2009 2010 2011 2012 2013 2014 Source: Nielsen MarketTrack, National GB+MM+DG 12 week periods ending June 28, 2014 Quarterly Periods 24

HABA DEPARTMENTS ARE LESS DEPENDENT ON PRICE CUTS BUT IS GAINING MOMENTUM TPR* % of Total Dollar Sales $ % Chg TPR* Total ORAL HYGIENE 36 +7 +2 BABY CARE BODY CARE HAIR CARE 28 30 32 +3 +2 +3 +1 1 +1 SHAVING OTC COSMETICS 26 23 21 * TPR Temporary Price Reduction Source: Nielsen MarketTrack, National Grocery + Drug + Mass 52 weeks to June 28, 2014 versus Year Ago +3 4 +5 +1 +4 +1 25

ALMOST 6 BILLION IN GROCERY SALES HAVE SHIFTED TO DISCOUNT RETAILERS SINCE 2007 Yr 2007 Yr 2014 34.3% 43.7% HABA 36% MORE TO COME Discount Share Projections: Discount $ Share +9 share points Source: Nielsen MarketTrack National GB+DG+MM 52 weeks to June 28, 2014 2014: 44.7% 2017: 50.9% 26

DISCOUNT RETAILERS GAINING SHARE OF WALLET FOR THE MAJORITY OF HABA DEPARTMENTS Discount Dollar Share $ % Chg Disc Conv BABY CARE 69.5 +14 3 SHAVING 45.7 2 5 HAIR CARE 40.3 +2 +0 ORAL HYGIENE 39.7 +3 +1 BODY CARE OTC COSMETICS 32.7 26.8 24.9 Source: Nielsen MarketTrack, National All Channels 52 weeks to June 28, 2014 * Excludes Random Weight Fresh +1 +5 +4 +1 +0 +0 27

TRADITIONAL RETAIL UNDER ATTACK TRADITIONAL 28 Copyright 2013 The Nielsen Company. Confidential and proprietary.

THE LOYAL, DISLOYAL SHOPPER Average Loyalty to Store 14% Source: Nielsen Homescan: Top 10 Banners in Ontario Avg $ Share of Requirements 52 weeks to Sept 19/13 The Opportunity Need to understand what and where your shoppers are spending the other 86% 29

TRADITIONAL CPG CHANNELS RELATIVELY STATIC Grocery 1% Drug +2% Conv & Gas +3% Warehouse +3% Mass Merch 5% less Zellers +5% Source: Nielsen Homescan Channel Watch Canada 52 weeks to June 28, 2014 *Convenience Track 52 weeks to June 28, 2014 Drug MarketTrack 30

MANY RETAIL CHANNELS SUFFERING DUE TO THE SHIFT TO ONLINE AND INCREASED COMPETITION Grocery 1% Drug +2% Conv & Gas +3% Warehouse +3% Mass Merch 5% less Zellers +5% Source: Nielsen Homescan Channel Watch Canada 52 weeks to June 28, 2014 *Convenience Track 52 weeks to June 28, 2014 Drug MarketTrack Office Supply 23% Electronic 17% US Cross Border 16% Department 9% General Merch 4% 31

E COMMERCE, ETHNIC, HEALTH AND DOLLAR STORES LEAD RETAIL GROWTH IN CANADA Online +43% Ethnic Grocery +20% Health Food +8% Dollar Stores +7% Grocery 1% Drug +2% Conv & Gas +3% Warehouse +3% Mass Merch 5% less Zellers +5% Source: Nielsen Homescan Channel Watch Canada 52 weeks to June 28, 2014 *Convenience Track 52 weeks to June 28, 2014 Drug MarketTrack Office Supply 23% Electronic 17% US Cross Border 16% Department 9% General Merch 4% 32

HEALTH FOOD SPECIALTY STORES $523 Million 15% of households HEALTH Source Nielsen Homescan 52 weeks to June 2014 67% buying HABA Spending $242 per year 5 trips per year 33

DOLLAR STORES HAVE ROOM TO GROW IN CANADA CANADA U.S DOLLAR STORES $ Share 1.2% 2.3% % Chg +7% +1% Penetration 75% 66% Source Nielsen Homescan 52 weeks to June 2014 33% of Dollar Store shoppers buy HABA in Dollar Stores 34

ETHNIC STORES CONTINUE TO CAPTURE A LARGER SHARE OF CANADIAN WALLETS Ethnic Grocery +20% Source: Nielsen Homescan Retailer Watch Ethnic Stores, 52 weeks to June 28, 2014 Estimate $4 5 Billion* 17% of households :36% in Toronto Spending $328 per year 11 trips per year * Perry Caico CIBC World Markets 35

ONLINE SHOPPING GAINING MOMENTUM Online Shopping +43% 1.9% share of Tracked Sales Grocery Composite 0.6% Drug Composite 1.0% Copyright 2013 The Nielsen Company. Confidential and proprietary. +11% YA $2.3 Billion Source: Nielsen Homescan, National Total Expenditures, 52 Weeks Ending June 28, 2014 43% of households (+22%) Spending $388 /yr (+17%) 36

WHAT ARE CONSUMERS BUYING ONLINE AND WILLING TO BUY ONLINE? Currently Buying Online Willing to Buy Online 21% Toys 16% Health & Beauty 14% Cosmetics 9% Paper Products 7% Household Products 7% Confectionery 6% Pet Products 6% Non Perishable Food 6% Baby Products 4% OTC Drugs 4% Beverages 3% Fresh Produce 3% Perishable Food Source: Canadian PanelViews Social Media Survey Oct 2013 70% Paper Products 64% Household Products 56% Heath & Beauty 55% Toys 50% Non Perishable Food 49% Pet Products 48% Confectionery 48% Cosmetics 47% OTC Drugs 45% Beverages 33% Baby Products 20% Perishable Food 18% Fresh Produce 37

THE FACE OF THE CANADIAN SHOPPER IS CHANGING Ethnicity Downsizing Generations 38

COMMON GENERATIONAL DEFINITIONS While there are many generalizations, there is no official definition Millions <19 Gen Z 16% Source: Statistics Canada Census 2011 19 37 Gen Y 27% 38 47 Gen X 14% 48 67 Boomers 28% 68+ GI 14% 5.7 9.4 4.7 9.8 5.0 39

CURRENTLY MILLENNIALS ARE UNDER REPRESENTED IN PURCHASING POWER Millennials Importance 27% 14% 12% % of Population 9.1 M Source: Source Nielsen Homescan 52 weeks to March 29, 2014 % Household Heads 2.0 M % of CPG $ s 11.7 B 40

MILLENNIALS WILL SURPASS BOOMERS BY 2020 2010 2020 2030 8.9 M 26% 10.0 M 26% 11.0 M 26% 9.7 M 28% 9.4 M 24% 8.3 M 20% Total Canada 34.2 M 38.4 M 42.1 M Source: Statistics Canada M: Millions Millennials Boomers 41

THE CPG GROWTH ENGINE WILL SWITCH GEARS By 2020 MILLENNIALS BOOMERS +$12.6 B $4.3 B +207% Source: Nielsen Homescan 52 weeks to March 29, 2014 HH <35 years Based on older generation spend 9% 42

WHICH HABA DEPARTMENTS ARE MOST COMMONLY FOUND IN A MILLENNIALS SHOPPING BASKET? Relative Dollar Index <35 years Baby Care 384 Body Care 122 Hair Care 120 Cosmetics 109 Oral Hygiene 97 OTC 67 Nielsen Homescan Dollar Consumption Index 52 wks to December 28, 2013 Consumer Facts CPG Departments Relative Index (82 for total) 43

AGING IN AND AGING OUT As consumers age, they change their consumption of key HABA departments HH Dollar Index 55 64 yrs 65+ yrs Trend OTC 118 146 Oral Hygiene 107 100 Cosmetics 101 89 + Body Care 91 81 Hair Care 103 81 Baby Care 101 90 Nielsen Homescan Dollar Consumption Index 52 wks to December 28, 2013 Consumer Facts CPG Departments 44

I want to watch what I want, when I want and for free. 45

MEDIA HABITS DIFFER BETWEEN GENERATIONS Boomers Millennial LIGHT Media Usage MEDIUM HEAVY TV Internet Magazines Newspaper Radio Source: Nielsen Spectra, PMB, January 2014 46

OVER THE PAST 3 YEARS, MILLENNIALS ARE WATCHING LESS TRADITIONAL TELEVISION 2012 2013 2014 3.0 hrs/day Millennials 22hr 48min 22hr 29min 20hr 52min Boomers 33hr 36min Source: Nielsen Borealis; TV Data Source: BBM Canada 33hr 47min 33hr 59min 4.9 hrs/day 47

TOP 10 TV SERIES AMONG MILLENNIALS IN 2013 Boomers 1. Amazing Race Canada 1 2. Big Bang Theory 3 3. Masterchef 58 4. Stanley Cup Finals 5 5. Sochi 2014 6 FEMALES: 7 of 10 are reality shows 6. La Voix 2 7. Agents of S.H.I.E.L.D 53 8. Under the Dome 4 9. Amazing Race 9 10.Grey s Anatomy 22 Source: Nielsen Borealis; TV Data Source: BBM Canada TV Series Excluding specials MALES: 2of 10 are reality shows 48

MILLENNIALS ARE CUTTING THE CORD % with no cable or TV subscription 26% 12% Millennials Boomers Source: Nielsen Spectra, 2014 Mar 49

LESS CABLE BUT MORE ONLINE MEDIA Millennials Boomers 46% News Websites 23% 34% Watch TV online 5% 26% Newspapers Online Source: December 2013 Nielsen PanelViews Social Media Survey 22% Radio Online 14% 7% 50

POWER AT THEIR FINGERTIPS % Total Ownership % Millennials Ownership 51% 79% 12% expected to buy in next year 63% potential ownership Source: Nielsen PanelViews, Social Media Survey, 2013 7% expected to buy in next year 86% potential ownership! 51

LEADING TO ONLINE SALES E commerce M commerce 70% have purchased from an online store Nielsen, PanelViews, Social Media, survey 2013 65% have purchased or are willing to purchase via virtual store 52

KEY TAKEAWAYS Economic Divide: Economy remains sluggish; opportunities across the economic spectrum with polarizing growth Premium vs. Value Cyclical Changes: With time, the economy will improve along with consumer spending fueling growth Copyright 2013 The Nielsen Company. Confidential and proprietary. Structure Changes: The face of the Canadian shopper continues to evolve changing the retail landscape. We need to align to these trends for sustainable growth. 53

THANK YOU! Stay Connected to Consumer and Media Trends For the latest insights, visit us nielsen.com Download our app: Nielsen TOPTEN Questions regarding the content of this presentation, contact: Copyright 2013 The Nielsen Company. Confidential and proprietary. Carman Allison, email carman.allison@nielsen.com @carman_allison 54