2012 – a year in review

1. 2012 – a year in review Plma members meeting Lance Dobson 5th March 2013

2. agenda • Customer and Manufacturer Mindset • The NZ Grocery Market • Private Label Performance • Opportunities – Where next?

3. Executive Summary |Private Label Overall, private label in New Zealand has high product awareness with shoppers and it is in 53% of all baskets. Yet, it only accounts for 13% of CPG sales compared to 25% in AUS and well in the 30s in many parts of Western Europe. High awareness but low share Optimisation Opportunities In many categories there is a gulf between the major banners in terms of PL Penetration and Share. Opportunities for White Space analysis and Optimisation by Category & Banner. The Big Picture PL is providing value for money and shoppers are content with the offer. However, it is not driving store choice. Internationally, retailers are increasingly using PL to build shopper loyalty and differentiate through innovation. These options should be carefully explored in the local context. 3

4. CUSTOMER AND MANUFACTURER MIND SET

5. Consumer Confidence is flat, with a bleak outlook for the coming year • Manufacturer Outlookis divided, but pessimistic about current trends and activities • Retailer Relationshipsare being damaged by perceived power and cost imbalances • Trade Spend is reaching saturation point and no longer delivering on its promise

6. Consumer Sentiment Stabilising Source: Nielsen Global Omnibus Consumer Survey, Q4-2012 Field Dates: November 10th – November 27th2012 Consumer Confidence Survey Q4, 2012

7. How are Kiwi’s feeling? Essentialitems Loyalty Schemes Promotionally sensitive Switching stores based on promotions Discountsand Coupons Price sensitive Shoppers seeing prices on the increase Actively looking for promotions Cutting backon luxuries Keeping spend down Large discount stores Online Claimed spending declining Source: Nielsen New Zealand Consumer Confidence Survey

8. Where do Kiwis spend their money? Recreation and Culture 9% Household Utilities 26% HH Contents and Services 5% Alcohol and Tobacco 3% Average New Zealand Household expenditure per week is $1,173 . Transport 16% Food 17% Other Expenditure 7% Health 2% Communication 2% Misc. goods and services 10% Clothing and Footwear 3% Source: Nielsen’s Consumer Media Insights Q1 12– Q4 12

9. Key Concerns for consumers are financial Increasing food prices is the second biggest concern for consumers overall. Base: All respondents (New Zealand) Source: Nielsen Global Omnibus Consumer Survey, Q4-2012 Field Dates: November 10th – November 27th2012 Consumer Confidence Survey Q4, 2012

10. Supplier concerns So what do manufacturers think? Source : Nielsen Retail Barometer Q2 2012

11. The market

12. Asia pacific remains buoyant Fast Moving Consumer Goods market dynamics (Weighted average) Note: Regional Summary for APAC is based on Australia, China, Hong Kong SAR, India, Indonesia, Korea, Malaysia, New Zealand, Philippines, Singapore, Taiwan, Thailand, and Vietnam. Indonesia has changed the retail census in 2010. Hong Kong SAR has changed the retail census in 2011. Vietnam has recalculated its growth rates based on new universe.

13. In line with most developed markets, The New Zealand grocery market is stagnant Fast Moving Consumer Goods market dynamics

14. In context Australia fairs marginally better than nz Fast Moving Consumer Goods market dynamics

15. NZ Top 20 Category Growth quadrant MAT to 27/01/2013 Source: NZ Homescan

16. SUPERMARKET Growth for 2012 stands at just 0.3% Top % performance largely driven by April’s ‘Milk Price Reset’ wiping $25m off the value of Milk in TSM -$45m +$43m Source: ScanTrack Supermarkets MAT to 30th December 2012 vs Yr Ago

17. Increasing distribution • Entering new categories • NPD • Promotional frequency up Why are smaller suppliers out performing?

18. Biggest concern for suppliers • 7 out of 10 say ROI decreasing • Implications: • Cut back on ATL • Erosion brand equity • PL share declining! 59%spend on promotion

19. PRIVATE LABEL

20. All households buy private label goods There is opportunity to drive basket penetration and frequency amongst shoppers of baskets have Private Label** of shoppers are aware of Private label* of household buy Private label** 100% 100% 53% Source: *Shopper Trends 2012 **Consumer Panel

21. Private label consumer measures In NZ, all households have bought a PL product over the last year whilst this number is closer to 75% in Western Europe. %age of Households buying PL 2011 - 2012 Avg expenditure per buyer (AWOP) 2011 - 2012 NW Shoppers spend roughly the same each time they buy PL compared to CD Shoppers, however, they buy far less frequently. PNS Shoppers buy PL more often than NW Shoppers but less often than PEL shoppers, however, they spend the most each time.

22. Global private label share comparison New Zealand's Private label penetration trails behind the global average in 2011 Weighted Global Average: 16.0% (+0.5%) NZ Units PL penetration is 19.3% (2012) • Key highlights: • Private label is 30%+ of value in seven European countries • Gains were seen in most of the countries, including both mature and emerging markets 2011 for most countries (some of the smaller markets is 2010 data) Source : Nielsen ScanTrack & Homescan – All shoptypes covered by Nielsen

23. Private label Share in AUS Both major retailers have grown their share of Private Label sales since 2004 with Coles maintaining its lead over Woolworths over time. Value share Private Labels by retailer P2Y

24. ... In NZ on the other hand Unlike Australia, private label sales form a stable foundation of the market, rather than growth segment. 2010 2012 2011

25. Private label performance NWW show the sharpest decline as well as lowest penetration of PL sales whilst PNS declined only modestly due to growth in in PSA. Both Progs and New World Private Label declined at similar rates during 2012. Prepared for: Source: Databank

26. PL Penetration by top 30 categories What are the white space opportunities?

27. AUS vs NZ high PL Share Comparison With few exceptions, AUS PL shares are significantly higher for comparable categories with Bread and Cheese & Dips being prime examples. Top 20 - PL Categories(in Value Share)

28. Super category positioning Key PL categories like Chilled Foods and Grocery are in decline and losing share against Branded whilst Frozen and Pet have gained slightly against Branded. NZ Private Label Super Categories Growth vs CHG in Category PenetrationMAT to 30nd December 2012 vs YA.

29. Chilled | Category positioning Chilled PL is in sharp decline for Butter, Cheese & Convenience Foods. Whilst the Total Categories are in decline, the PL declines are magnitudes higher than the overall categories. NZ Private Label Super Categories Growth vs CHG in Category PenetrationMAT to 30nd December 2012 vs YA.

30. Grocery | Category positioning Grocery overall is pulled down by bread which is in sharp decline for Private Label whilst Branded is flat (Promotions). NZ Private Label Super Categories Growth vs CHG in Category PenetrationMAT to 30nd December 2012 vs YA. Oils

31. Category performance by banner Overall PL value sales are declining across all banners. Whilst the lion’s share can be attributed to chilled, most super categories are in decline. However, there are a few notable exceptions: PEL Snackfood growth driven by Packaged Nuts & Cereal Snacks Grocery: Tuna, Cooking Oils, Cereals, Eggs Frozen: Poultry & Potato Pet Supplies Opportunities There are some notable differences in PL penetration both, between Foodstuffs and Progressive and Australia and New Zealand. Bread, Snackfoods, Smallgoods & Cheese come to mind.

32. Shoppers claim to be buying more PL Main reasons to purchase are for price and value Reasons for buying store brands Store brand product purchasing Whether buying more Store Brand Products Base: All store brand buyers (n = 1659) Ref: Q114/Q115

33. Despite what customers say, they are spending marginally less on private label. 2010, 2011, 2012 Scan value share vs. Households buying and $ Spent

34. Private label basket size vs. frequency PNS stayed largely un changed, maintaining its lead in terms of PL basket size. However, PEL has made a large leap in basket size whilst maintaining frequency. From Shopper trends we know that it has been most preferred store and has the most loyal buyers. NW on the other hand has decreases in salience and loyalty and should focus on behavioral loyalty, just like PNS. Source: Nielsen Homescan

35. Countdown shoppers attributing more importance to PL Range than PAK’nSave or New World shoppers PAK’nSAVE shoppers shopping for value across the entire basket.

36. WHERE NEXT?

37. No private label brand owns the premium space. Is there opportunity to develop a strategy that talks to ‘good, better, best’? No brands seen as high quality. Opportunity for NPD? Pam’s, Signature Range and Select perceived as look-alike brands Budget and Homebrand perceived as lower quality store brands

38. Global private label trends Internationally, Private Label is increasingly used as a strategic differentiator and tool to build shopper loyalty… Private Label Innovation Retailers are increasingly taking the role of brand creators and expand in new areas such as Healthy Foods & Beauty… “Tesco Venture Brands” Capturing often more brand oriented categories… i.e. Chokablok for Tesco Value Range benefits beyond price High quality ingredients, in smart packaging, open labelling and often locally sourced, i.e. Coles’ “Australia First” sourcing strategy Revamping PL ranges, targeted to specific missions & shopper involvement. Source: Nielsen & IDG Research

39. New Zealand’s Projected Population is set to grow significantly in the coming years 2006 Census: 4,184,600 1996 = 3.7m 2006 = 4.2m 2016 = 4.5m 2026 = 4.8m SOURCE: Stats NZ

40. ……AND is set to continue to becoming more ethnically diverse… * Includes ‘New Zealanders’ and other ethnicities SOURCE: Stats NZ | National Ethnic Population Projections (April 2010)

41. ....AND EVEN MORE DIVERSE IN AUCKLAND!

42. Closing thoughts

43. 1 Private Label penetration in New Zealand sits around 13% and is slowly declining. Overall, PL is more dominant in “staple” categories and NZ’s PL brands can be generally categorised in the good & better segments but not Best (premium). 43

44. 2 There are categories like Bread, Snackfoods, Smallgoods or Cheese that could provide further growth through premiumisation for the market without fundamentally changing the nature of PL in New Zealand. 44

45. 3 Looking at global trends, retailers are increasingly choosing PL as a means for gain Shopper loyalty and differentiation by developing new concepts and premium brands that provide a new value equation to the consumer. 45

46. The NZ market is relatively small and agile, thus well positioned to captilise on some of the trends around convenience shopping missions, sustainability and locally sourced products as well as a changing ethnic mix 4 46

48. Appendix

49. Scan value share vs. Penetration and awop 2010, 2011, 2012

50. Scan value share vs. Penetration and awop 2010, 2011, 2012