DRIVING GROWTH HOW TO WIN THE BATTLE IN THE STORE

DRIVING GROWTH HOW TO WIN THE BATTLE IN THE STORE Alexandru Zudor 06.10.2016

Copyright 2013 The Nielsen Company. Confidential and proprietary. CONFIDENTIALITY CLAUSE The Client is not authorised to publish and/or adapt this research report, whether in whole or in part(s), in the press, on the radio, on television, in leaflets, data search systems, litigations etc. without prior written consent of Nielsen. Consent for publication should be sought from Nielsen each time. 2

AGENDA INTRODUCTION MARKET CONTEXT SALES FUNDAMENTALS HOW TO ENSURE IN-STORE PERFORMANCE CASE STUDY 3

AGENDA Get to know each other WHY ARE WE HERE TODAY? Present ways to ensure the optimal instore execution Answer your questions 4

MARKET CONTEXT

EVOLUTION OF RETAIL ASSORTMENT 1900 1950 1990 2000 2016 6

Copyright 2013 The Nielsen Company. Confidential and proprietary. AVERAGE NUMBER OF VISITED RETAILERS RETAILERS USED IN THE PAST 4 WEEKS In average, Shoppers visit 5different stores/retailers in 2015. 40% of shoppers are visiting 6 and more than 6 retailers in one month. 4 1 7 6 Retailers 13% % 10 31 12 25 19 21 15 14 19 23 29 20 40 41 18 17 7 Retailers 12% 8 Retailers 7% > 8 Retailers 9% 38 28 24 25 23 16 16 6 + retailers 5 retailers 4 retailers 15 22 18 13 12 16 14 7 8 7 7 9 4 1 5 6 3 retailers 2 retailers 1 retailer 2006 2008 2010 2012 2014 2015 2016 Average/ Retailers 2,5 3,4 3,9 4,1 4,7 5,0 5,1 *Nielsen Shopper Trends Slovenia, 2016 7

THREAT OF OUT OF STOCKS AFFECTS EVERYONE 50% of shoppers will buy an alternative brand if their desired brand is out-of-stock LOYALTY 7% 5% 4% 5% 4% 8% 13% 13% 14% 4% 5% 12% 10% 10% 11% 14% 3% 10% 7% 12% Doesn't buy category THREAT TO MANUFACTURER 55% 43% 60% 60% 57% 44% 51% 52% Wait until it was available Look for the same brand but change sub-brand, size stc. THREAT TO RETAILER 21% 31% 20% 22% 28% 35% 21% 29% Buy an alternative brand Buy the same brand at another store *Nielsen Shopper Trends Romania, 2016 8

Although 80% of shoppers prepare a shopping list, they usually end up buying additional grocery items, but it is decreasing compared to 2015 *Nielsen Shopper Trends Serbia, 2016 9

PRICE AWARENESS 40% of shoppers are very price conscious 11% 5% 6% I don't know about or notice the prices of grocery items 51% 53% 55% I don't necessarily know all the prices but I generally notice when the price changes I know the prices of most of the items and always notice when the price changes 38% 27% 43% 32% 28% 40% I know all the prices of the grocery items I buy regularly 11% 11% 12% 2014 (Feb) 2015 (Feb) 2016 (Mar) *Nielsen Shopper Trends Slovenia, 2016 10

SALES FUNDAMENTALS

STORE EXECUTION FUNDAMENTALS Distribution & Assortment Promotions Visibility Investment Price 12

DISTRIBUTION & ASSORTMENT ASSORTMENT OUT-OF-STOCK COMPETITION S ASSORTMENT COMPARATIVE OUT-OF- STOCK» Do I have defined the right assortment?» For each store type?» Considering region specifics?» Considering the season?» Are all my target products available on the shelf?» Are my minimum stock requirements met?» How high is the OOS incidence?» How high is the near-oos incidence?» What is the competitions assortment?» How does it compare to my target assortment?» How is my OOS incidence compared to competition?» Are the direct competitor SKUs present in the stores where my SKUs were OOS? 13

VISIBILITY MERCHANDISING STANDARDS SECONDARY PLACEMENT EXECUTION SHARE OF SHELF SHARE OF SECONDARY» Are my shelf merchandising standards implemented?» Where are the gaps?» Are all products presented according to standard?» Are all prices communicated according to standard?» Are my secondary placements present according to agreements?» Are they executed according to standards?» Where are the gaps?» How is my overall shelf space compared to competition?» How is my shelf space brand by brand compared to direct competitor brands?» How many competitor secondary placements are present?» What is my share of secondary placements compared to competition? 14

PRICE SHELF PRICE PRICE ANALYSIS RECOMMENDED SELLING PRICE COMPLIANCE COMPARATIVE PRICE» Are my prices according to standard?» Are my prices communicated according to standard?» Are my price promotions implemented?» Which is the average shelf price?» Most frequent shelf price?» Minimum shelf price?» Maximum shelf price?» Do the retailers comply with my recommended selling price?» Where are the gaps?» Which are the shelf prices of my competitors?» How are the prices compared to my prices?» Are there price related promotions? 15

INVESTMENT COOLERS DRAUGHT / VENDING MACHINES FURNITURE COMPETITION S INVESTMENT» Are my coolers present & functional?» Are the coolers merchandised according to standard?» Are the coolers used according to agreement?» Are my draught machines / beverages vending machines present & functional?» Are they used according to agreement?» Are my branded furniture / parasols present?» Are they used according to agreement?» Does the competition have coolers?» Does the competition shave draught / beverages machines?» Does the competition has branded furniture? 16

PROMOTIONS PRESENCE OF PROMOTIONS TYPE OF PROMOTIONS COMMUNICATION OF PROMOTIONS COMPETITION S PROMOTIONS» Are my promotions implemented in the stores according to agreement?» For which SKUs / brands?» TPR / Discount» Co-Package» Gift-pack» Buy 1 get 2» Are the promotions properly communicated?» What kind of POSMs are present?» Does the competition have promotions in the store?» For which SKUs / brands?» What type of promotions?» How are they communicated? 17

HOW TO ENSURE IN-STORE PERFORMANCE

Copyright 2013 The Nielsen Company. Confidential and proprietary. THE PROCESS Continuously Track In-Store Execution Analyze In- Store Performance Implement & Maintain Benchmarks (Re)define In- Store Benchmarks 19

ANALYZE & DEFINE IN-STORE BENCHMARKS Organic, natural and local fresh produce Actual Performance How are current standards performing? Sales Performance Store Execution Compared to competition Advanced Analytics / Modeling What will be the impact in terms of sales if we would increase / decrease: Distribution / OOS Visibility Price Investment Promotions New Benchmarks Target Stores Assortment Merchandising standards Cooler / Draught / Other assets usage Pricing policy Promotional activity 20

IN-STORE BENCHMARKS EXAMPLES ASSORTMENT MINIMUM STOCK VISIBILITY COOLER PRICING Brand A CAN 0.5l Brand A RGB 0.5l Brand A PET 2.5l Brand B CAN 0.5l Brand B RGB 0.33l Min 3 pieces for CAN 0.5l Min 6 for RBG 0.33 & 0.5l Minim 5 for PET 0.5l Share of Shelf >30% Share of Secondary >= Each Competitor Minimum 2 POSM materials Min 80% full Bottom 2 shelves only PET Top shelf only premium brands Vertical block by brand merchandising Minimum 5% lower than direct competitor for RGB Same price for CAN and PET as direct competitor Supermarket Type A 21

Copyright 2013 The Nielsen Company. Confidential and proprietary. CONTINUOUSLY TRACK EXECUTION Channel Region Distributor Store Distribution Visibility Price Investment Promo Sales Rep Catchment Area City Chain 22

Copyright 2013 The Nielsen Company. Confidential and proprietary. BACK TO PERFORMANCE ANALYSIS Implement & Maintain 6-12 Months Analyze Performance 23

CASE STUDY

BACKGROUND 1 Romania 2016 2 Beverages Manufacturer 3 Promo Activation period 4 Modern Trade channel 5 Weekly tracking of execution 25

BUSINESS OBJECTIVE Evaluate activation campaigns with focus on: In-store execution: how was POS activated? Impact on sales: how the company performed in activated stores? 26

BUSINESS QUESTIONS What is the total effect of the activation program? How much additional sales is generated by activation mechanics? Which mechanics are most impactful and which are not contributing to sales? 27

Copyright 2016 The Nielsen Company. Confidential and proprietary. NIELSEN SOLUTION HAD TWO STEPS 1. Evaluate true in-store execution information 2. Combine with store level sales and performance metrics STORE AUDITS STORE LEVEL DATA ANALYTICS END RESULT: EVALUATE IMPACT OF ACTIVATIONS & DRIVE OPTIMAL EXECUTION 28

COMBINING EXECUTION WITH PERFORMANCE Audit was used for execution level assessment & to build foundations for activation/execution impact analysis. Execution audit Execution level Activation/ execution Impact A C Modelling to separate baseline sales from promotions& activations mechanics, which influence sales B 29

HOW MUCH ADDITIONAL SALES WAS GENERATED BY THE ANALIZED ACTIVATION CAMPAIGN? This analysis shows how much additional sales was generated by the different elements considered in the model: seasonality, target activation, banded pack, TPR Total Incremental vs. Base 30

WHICH ACTIVATION ELEMENTS TRANSFER TO INCREMENTAL SALES? This analysis shows how much of the incremental sales generated by the activation was due to the different activation element: Display Gondola Palet And so on 31

RANKING OF THE ACTIVATION MATERIAL 1 2 3 4 5 Ranking Type 1 Type 2 Type 3 Type 4 Type 5 This analysis shows how the different Activations materials rank in terms of impact on sales growth: Poster Wobbler Shelf Divider And so on 32

SUMMARY & RECOMMENDATIONS

Copyright 2013 The Nielsen Company. Confidential and proprietary. SUMMARY & RECOMMENDATIONS Threat of out of stocks affects everyone, manufacturers & retailers alike The shelf is getting crowded visibility is a key issue Shoppers are shopping around, they visit 5-6 retailers a month on average The battle on the shelf is as important as always, what have changed are the tools and tactics Taking empirical based decisions it is not enough anymore A more elaborate analysis, evaluation and decision making process is needed The tools are there, the knowledge is there, use them, invest in store execution in order to win the battle in the store 34

THANK YOU! Alexandru Zudor Store Observation Leader South-East Europe Mobile: +40 755 140 016 www.nielsen.com