Taking Trade Spending Management to the Next Level

1. Taking Trade Spending Management to the Next Level LEAD Marketing Conference Rosemont, IL • October 2, 2012

2. TPM Used to Be ‘Simple’ • Slotting • Off-Invoice • One Size Fits All Displays • Cookie-Cutter Approach with Retailers

3. TPM Has Increased in Complexity • Changes in Shopping Behavior • More Retailers and Distributors • Private Label Quality Approaching Brand Quality • Increase in Promotion Activities/Custom Activity • Exponential Deductions/Charge-Back Volumes • Pricing Pressure at All-Time High • Focus Shifting to Trade Spend ROI • Need to Demonstrate Joint Valuewith Retailers

4. Adding to the Complexity: The Trade ‘Team’ Finance Brokers CEOs Sales Marketing Operations

5. Implications of Complexity • Align to STRATEGY • Measure at EVERY LEVEL • Determine TRUE ROI • Review and ADJUST Frequently • INTEGRATE Information into Key Systems

6. Trade Spend is No Longer Simply the Cost of Doing Business.

7. It is a Strategic & Controllable ExpenseAllocated by the Manufacturer according to their Business Strategy.

8. Going to Next Level Takes More Than Tools PEOPLE Culture&Governance PROCESS TOOLS

9. People + Processes + Tools PEOPLE • Creating the Right Culture • Managing Change & End State • Performance Goals • KPIs & Team Incentives • Process-Related Training • Impacts Every Role and Responsibility

10. People + Processes + Tools • Governance: Redo/Create Policies • Sales Planning and Forecasting - Combining HQ & Account Planning • Deduction Management • Accruing Spend • Collaborative Trade Planning with Customers PROCESSES

11. People + Processes + Tools TOOLS • Historically TPM Systems were: • Expensive • A Heavy Burden on IT • Required Many Company Resources • Accompanied by Maintenance Fees • Took Months /Years to Implement

12. Let’s Meet One Company Who Took Action • Popping up Gourmet, Whole Grain Snacks That Our Consumers LOVE! • Company Began 5 Short Years Ago, With Retail Stores in Malls, Selling as Dale and Thomas Brand • Popcorn, Indiana is Now Available at Retailers Nationwide (Food, Drug, Mass, Natural, Specialty) • Competing In Trade-Oriented Category: 40%+ of Volume Sold on Promotion • Went “Live” on TradeInsight TPM System in September 2011

13. Popcorn, Indiana… The Little Snack Food Company That No One Ever Remembers… Until They See Our Bag! 52wk Dollars +24% (Category +7%) 13.7 share, +2pts from YAG #2 Brand Behind Smartfood

14. KPI Trends Driving Popcorn, Indiana’s Success Nielsen FY Periods and Latest 52wks ending 09/01/12

15. We Invented The Popinator, And It Became A Viral Hit!

17. Popcorn, Indiana Realized They Needed a Trade Tool As Distribution Expanded Across Channels • More Complexity as New Customers Demanded Trade Dollars… We Needed to Spend, and we wanted it to be Effective! • Snack Category is Highly Promoted, and we wanted to Maximize Display Exposure during Events, since Most Snack Purchases are Impulsive • Consumers may be Loyal to a Snack Brand within a Given Segment, but Switch between Segments Based on what they “Trip Over” in the Store

18. At First, Trade Spend was Tracked in EXCEL • EXCEL is a Temporary Solution…at Best! • Fine for Building Budgets and Initial Sales Forecasting, but with Far too Many Limitations • Updating Field Forecasts is Tedious, with Various Versions of Documents Circulating • Changes in Customer’s Promotional Activity and Timing Shifts Hard to Capture • No Feed to Order Management System, Requiring Planned Events to be Set up Independently to insure Proper Allowances are Applied • Deductions Difficult to Clear, and Paid on Customer Documentation, Rather than Planned Promotions • No Post-Promotion Analysis Capabilities

19. To Get To Next Level, Popcorn, Indiana Looked At … PEOPLE Culture&Governance PROCESS TOOLS Hey, We Need Someone Who Can Help Us Build a Trade System!

20. Popcorn, Indiana: PEOPLE • Strong Executive Support, Involved Throughout the Entire Implementation Process • Provided Clear Goals to TPM Providers • Keep it Simple, so the Sales Team will Use it • We’re Willing to Invest in Technology, but Need Year One ROI • We Need a Planning System which will Work Around our Processes and Various Distribution Channels (Direct, DSD, Food Service, etc.) • We Need a System which will Allow Cross Functional Teams to View a “Single Version of the Truth” We Weren’t Trying to Cut Spending, Just Understand It, and Have It Be More Productive!

21. Popcorn, Indiana: PROCESSES • Improve Processes Where Possible. No “Legacy Process” was Immune from Review • Adopt “Best Practices” From Other Companies • (Listen to the Guy with the Grey Hair) • Start with Clean Information in System • Sales History was Accurate, but Spending wasn’t, so Importing it into New System wouldn’t be Advantageous • Critical that Customer and Product Masters are Accurate, and a Great Time to Review Naming Conventions on Products • Develop Reliable Metrics to Allow Measuring Results • Believe the Numbers and Run Business Accordingly

22. Critical Areas of Interest Requiring Improvement Visibility Analysis Sales Forecasting Deductions

23. Visibility • AFTER • Visibility without Aggregating Spreadsheets • Plan, Execute & Pay for all Trade Programs within one TPM System • Easier to Communicate Programs/Customer Activities • Track Sales and Spend at Program & Customer Level • Improved S&OP Process and Aligned Team with One Plan BEFORE • Lacked Visibility into Spending • Took Too Long to Determine Total Spending of Event (usually not until the deduction came in) • Difficult to Make Adjustments to Customer Plans • S&OP Process was also a Challenge

24. Analysis • AFTER • Measure Lift of Promotions • Have Begun to Optimize Promotions • Which Tactics Work Best in Each Channel • Which Price Points Drive the Most Lift while still Profitable • Validate Retailer Execution • Input for Customer P&Ls BEFORE • Data Timeliness and Accuracy Not Consistent • Needed to Integrate Distributor, Retailer and Syndicated Data • Needed to Streamline Methodology for Monitoring of Retailer Compliance

25. Sales Forecasting BEFORE • Unable to View Entire Year’s Plan in Single Location • Took Too Long to Gather Needed Information • Multiple Spreadsheets and Formats to Consolidate • Sales Didn’t Derive Benefit from Sales Forecasting Process • AFTER • Integrated Key Systems and Automated Data Feeds • Provide Sales with Better Forecasting “Start Point” by Pre-Populating Base Forecast from Channel Consumption Trends • Better Information for Production Means Orders Ship on Time and Compete!

26. Deductions and Chargebacks • AFTER • Huge Productivity Gains • Matching and Clearing Deductions (Sales Ops) • Establishing Accruals to Fund Future Deductions (Finance) • Fewer “Spending Surprises” • Decline in Deduction Balance • More $ to Re-Deploy to Future Programs to Drive Revenue BEFORE • Took Too Long to Clear Deductions • Limited Visibility into Spending Due to Allow Accurate Accrual • Took Too Long to Understand Total Spend of an Event • No Real Method for Disputing Post-Audit Deductions

27. We Have Measurable Results • Completed Implementation in 5 Months with a Fully Functioning Planning System in Only 3 Months • Deduction Balance Dropped from 3-1/2% of Sales to Less than 1% in 60 Days • Reduce Forecasting Error KPI (MAPE) by Half Through Improved Processes and Visibility Enabled by TPM System • Sales +24% and Share +2pts without Additional Trade Spend

28. Increase Promotion Effectiveness Improve Sales Forecasting Provide Visibility into Spend & Deductions Accurately Identify Spend Liability Make Better Use of Demand Data Reconcile Deductions More Efficiently Must Enable One Plan, One Place Today’s TPM Systems Must… 1 2 3 4 5 6 7

29. Questions