About Evolution Insights

1. About Evolution Insights Evolution Insightsoffer a range of products & services for clients in the field of shopper research:- Off-the-shelf research Evolution’s off the shelf research publications deliver affordable insight into shopper motivation and behaviours in UK food, drink and grocery Insight Plus Insight Plus offers your business the opportunity to engage in any of our regular shopper research projects in advance of publication, tailoring the scope to suit your needs Bespoke Consulting As publishers of research, we are able to draw upon a wealth of existing proprietary data for consulting projects – helping to better inform and shape any further research requirements. • Evolution Insights is a leading research consultancy specialising in shopper motivation and behaviour. We deliver off-the-shelf, tailored and bespoke research for manufacturers, retailers and agencies. • Further information is available at our website http://www.evolution-insights.com • Visit and sign up for Reflections, our free quarterly newsletter offering analysis and commentary on topical issues Our research and analysis helps clients develop targeted shopper marketing initiatives designed to influence shoppers at the point of purchase. We use a range of research methodologies to discover genuine insights. Our research incorporates a broad spectrum of robust qualitative and quantitative research techniques. As a leading publisher of shopper research, we are ideally placed to offer your business actionable shopper insight. www.evolution-insights.com

2. Contents Page 32 33 34 35 36 37 39 40 41 42 43 44 45 46 47 48 49 50 52 54 55 56 Page 6 10 11 12 13 14 15 16 17 18 19 20 21 23 25 26 27 29 30 31 Key findings and summary Summary of strength and weaknesses for own label Retailer overview – Own label offering Tesco Asda Sainsbury’s Morrisons The Co-operative Waitrose Marks and Spencer Overview of Retailer own label offering What is own label What is own label: the shopper’s perspective? What would make shoppers buy more brands? What do shoppers perceive to be the strengths and weakness of own label? The private label shopper: current adoption and changing behaviour Who buys own label? Awareness and purchasing behaviour, category examples own label awareness How are shoppers adapting their own label purchasing behaviour? What is the impact of recession and economic uncertainty of own label? What would you do if the economic climate improved? Why do shoppers buy either brands or own label Perceptions of private labels versus national brands How do shoppers perceive the quality of own label? Why do/don’t shoppers perceive parity of quality? Do shoppers perceive that own label quality is changing? How do shoppers perceive the healthiness of own label? How do shoppers perceive the price of own label Why do/don’t shoppers perceive parity of price? How do shoppers perceive the image of own label? How do shoppers perceive the image of own label? How does image differ among categories? Why do/don’t shoppers perceive parity of image? Why do/don’t shoppers perceive parity of image? Do shoppers perceive that own label image is changing? Price architecture What is the role of price architecture in own label? Methodology Quantitative research - survey Qualitative research – focus groups Glossary www.evolution-insights.com

3. Figures & Graphs Page Type Title 10 FigureSummary of strength and weaknesses for own label 19 Table Strengths and weaknesses of Retailers in their own label offering 27 Graph What proportion of shoppers are likely to buy a private label over a branded product for a typical supermarket food and grocery item? (by demographic) 27 Graph What proportion of shoppers are likely to buy a private label over a branded product for a typical supermarket food and grocery item? (by retailer) 28 Graph Which tier of private label do shoppers buy most regularly? (by demographic) 28 Graph Which tier of private label do shoppers buy most regularly? (by retailer) 29 FigureSample Category - Analysis of awareness and purchasing behaviour 30 Graph What proportion of shoppers are not aware of own brands? (by category) 36 Graph What proportion of shoppers view private label as of better quality than brands? (by demographic ) 36 Graph What proportion of shoppers view private label as of better/worse quality than brands? (by retailer) 41 Graph What proportion of shoppers view private label as cheaper than brands? (by demographic) 41 Graph What proportion of shoppers view private label as cheaper than brands? (by retailer) 43 Graph What proportion of shoppers agree with the statement: ‘it matters to me what other people might think of me when I consider whether to buy brands or supermarket own?’ (by demographic) 43 Graph What proportion of shoppers agree with the statement: ‘it matters to me what other people might think of me when I consider whether to buy brands or supermarket own?’ (by retailer) 44 Graph What proportion of shoppers agree with the statement: ‘it matters to me what other people might think of me when I consider whether to buy brands or supermarket own?’ (by example categories) www.evolution-insights.com

4. Retailer overview - Tesco • Traditionally Tesco operated a three-tier good, better, best price architecture, encompassing Value (good), Tesco (better) and Finest (best). However more recently it introduced a new tier, positioned between good and better called Discount Brands and Tesco. The Discount Brands is not a label in itself, but is a range of products which carry a number of labels such as Daisy (Washing up liquid). The range aims to offer shoppers additional choice and better quality at the lower end of the price scale, without compromising on quality. • In additional to its main tiers, Tesco also has a number of lifestyle ranges. These include Organic, Free From, Healthy Living, Wholefoodsand the Restaurant Collection. • Tesco’s premium ‘Finest’ range performs very well and commands great respect from shoppers. In our focus groups Finest was highlighted numerous times by shoppers of various demographic profiles as excellent quality, usually perceived to be superior to brands. • Tesco is the leading food and grocery retailer in the UK and is also the largest retailer of own brand goods in the country. Tesco’s own brand range spans categories across the board, including non-food. The Tesco name is used across the majority of the retailer’s mid-tier own label ranges. Tesco’s Finest range is the retailer’s premium tier sub-brand and spans almost every food and grocery category. Light Choices is a Tesco lifestyle sub-brands for shoppers that ‘are looking to loose a few pounds but don't want to compromise on choice or taste’. Tesco has launched a number of private label products which do not use the Tesco name. This gives shoppers a feeling of greater choice and allows the retailer to communicate different value messages and points of difference to customers. Tesco’s Finest at the Fixture: We are impressed with Tesco’s execution at the fixture for Finest. Good use of block merchandising creates impact, on-shelf marketing material communicates reasons to trade up and mechanics like dinner for £10 offer good value without compromising brand equity (which could be caused by discounting). www.evolution-insights.com

5. Overview of Own Label Offering • Shoppers in general are aware of the tiered offering of most retailers, and have a good understanding of how they believe the retailers differ in terms of quality. Marks & Spencer’s present a clear single tier offering in most categories, which their shoppers find easy to understand, the introduction of a limited range of ‘Brand Captain’ brands has had a mixed response from M&S’s stalwart shoppers. Waitrose’s standard tier offering is felt to offer a good alternative to the main branded products, with their premium range felt to be at least on a par, if not better than brands.                        Source: Evolution Insights www.evolution-insights.com

6. What do shoppers perceive to be the strengths and weakness of own label? “I am pretty sure all the own brand products are made in the same places as the branded stuff.” [Female, 30-39, C1] "For example the Sainsbury’s own is exactly the same taste as Nescafe (in my opinion)." [Female, 50-60, D] "Its lower quality, so it can’t be made by the same brands." [Male, 30-39, E] • A major barrier to buying brands which was highlighted in the focus groups was that many shoppers believe own labels and brands are made in the same factories. Some respondents suggested own labels and brands are the same products and therefore there is no point in buying brands. “I think the brands could make the stuff cheaper because they don’t have to spend loads of money on advertising.” [Female, 30-39, C1] "I would hate to think that the main brands made the cheaper stuff, otherwise I would feel ripped off buying the brands." [Female, 25-29, D] “I think it comes off the same production lines, then put in different packaging, if not the same line, from the same factory.” [Male, 30-39, C1] "I think they are made as a loss leader to get you into the supermarkets, then buy the more expensive stuff." [Female, 50-60, D] "I think the same people make the same stuff, and they are cheaper because there all less advertising costs." [Female, 50-60, D] “I am sure that they come from the same factory.” [Female, 25-29, C1] www.evolution-insights.com

7. Awareness and purchasing behaviour, category examples • Here we analyse some example categories. Specifically we look at how aware shoppers are of own brands for each category, whether they regularly purchase and whether they normally buy. • If you take bread as an example, awareness is nearly 100%. All the major supermarket operators stock a wide variety of own brand breads, which have high visibility on the fixture. We can then see that two-third of shoppers regularly buy own label bread, suggesting widespread acceptance. However when we look at the proportion that normally buy own label bread the penetration rate falls significantly suggesting a lack of loyally towards own label bread among many shoppers. • Now let’s contrast bread with lager. It is immediately noticeable that awareness of own brand lager is very much lower than for bread. In part this is explained because there are fewer own brand SKUs and also because coverage at the fixture is typically weak. Only one-third of shoppers regularly buy own brand. We find in our qualitative research that shoppers have negative image perceptions of own brand lager. Indeed only 5% of shoppers say they normally buy own brand lager. • Analysis of awareness and purchasing behaviour across some example categories highlights some interesting differences. Awareness Purchase Normally purchase 19.9% Bread 97.2% 66.7% 17.6% Laundry detergent 96.9% 54.6% 16.6% Coffee 94.4% 45.2% 9.7% Shampoo 93.3% 41.4% 5.1% Lager 85.2% 33.0% Appeal/ relevance Loyalty Source: Evolution Insights www.evolution-insights.com

8. Methodology www.evolution-insights.com 8

9. Methodology Evolution’s methodology • Evolution carried out a preliminary survey of 100 shoppers , to test questions for the main survey. • Detailed secondary and desk research was conducted to define the private label landscape, macro drivers and trends, scope and examples of initiatives to date. • Initial insights gained were used to help further design the main survey. • The main survey was completed by 1546 UK adults who said they regularly shop for food & grocery. • Two focus groups were carried out to further enhance the secondary research and main quantitative survey, one involving 9 and the other involving 8. • Comprehensive and detailed assessment of all the data received was then used to discover insights. • Throughout this process, primary research was supported by secondary research drawing on Evolution’s proprietary databases, national statistics, news and industry resources. • Evolution’s consultants also maintain close relationships with industry figures across retailers and manufacturers. Source: Evolution Insights www.evolution-insights.com

10. Methodology: quantitative survey Topics of questions in quantitative survey • Detailed shopper insights were gained from a survey of 1,000 UK adults who say they regularly shop for food and grocery. The samples were fully representative of the UK population. • The survey contained 15 questions relating to the perceptions of Supermarket own labels – in addition to standard demographic profiling questions. • The survey was undertaken by a third party MRS partner and is therefore bound by the MRS code of conduct. • The survey was carried out online during the week commencing 9th January 2011. Source: Evolution Insights www.evolution-insights.com

11. Methodology: qualitative research – focus groups • The Focus Groups were carried out w/c 16th January 2011 Source: Evolution Insights www.evolution-insights.com