The Power of Private Brands 1 Kit Vale Global Director March 19, 2014
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Europe Outpaces the US in PB Share (all Categories) Private Brand Value Share by Country - CY 2013 Global Growth of Private Brands was +24% between 2007-2012 to reach an estimated $352B. In Europe, 89% consumer s have increased their purchasing by 15% vs. YAG mainly due to the belief that Private Brands have equal or greater quality on National Brands. 4 Source: Nielsen/PLMA, PLMA International Private Label Yearbook 2013
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24 Year Progression of Private Brands in the US Private Brand $ Share and U.S. GDP (Gross Domestic Product in Total U.S. Supermarkets) 6 Source: US Bureau of Labor Statistics; A.C. Nielsen; GDP: The total market value of all final goods and services produced in a country in a given year, equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports.
Total Private Brands Outperform National Brands PB vs. NB Dollar Growth (2010 2013) 7.5% 4.9% 3.0% 2.7% 2.7% 2.5% 1.2% 1.5% 2010 2011 2012 2013 NATIONAL BRAND PRIVATE BRAND Private Brands outpaced National Brands significantly during the recession in 2010-11 In 2012-13, National brands developed defensive strategies to combat the erosion due to Private Brand 7 Source: Nielsen/PLMA, PLMA International Private Label Yearbook 2013 and prior years
Evolution of Private Brands in US RECESSION PERIODS = SPRINGBOARD FOR PB GROWTH 1981-82 1990-91 2001-02 2007-09 Low cost and questionable quality GENERICS Stores take ownership of program with banner name on the product PRIVATE LABELS Multiple tiers of brands become widespread STORE BRANDS With more focus on Health & Wellness, Lifestyle brands are established OWN BRANDS 2011-14 Sophisticated Consumers; more Differentiated Retailers and more innovative PB CONSUMER BRANDS 8 Source: Daymon Proprietary Research
Key Factors for Switching from NB to PB Trust (Retailer/Products) Familiarity (Category) Benefit (Risk of Switching) Similarity (Between NB & PB) S w i t c h i n g a n d S t i c k i n g S W I T C H I N G T O P B In the US, 88% of consumers find PB to be as good as NB: At the beginning of the 2008 recession, consumers were buying PB to cut costs. By 2013, 72% of consumers were buying PB out of preference rather than a necessity. On average, Private Brand Solutions offer consumers savings of 22% versus national brands. 9 IRI: Private Label & National Brands: Paving the Path to Growth Together, Dec 2013
Thresholds for Private Brand Selection Private Brand Adoption Pathway Categories are segmented by the degree of difficulty of trying or switching to Private Brands 10 Source: Hartman Group
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Why is Paper a Significant Category? Basket Grows when Paper is Purchased Average Dollars Per Shopping Trip, Item in Basket vs. Item Not in Basket The average dollars a US household spends per shopping trip Is roughly double when Paper items are purchased. 12 Source: Nielsen Consumer Panel on a Total US All Outlets market definition for calendar year 2013
Total Paper: PB Grew 5%, NB Declined -1% $ Share of Category: Total $15.7B, +0.3% Unit Share of Category: Total 3.5B, -1.8% Private Brand 23.6% (+1.1 pts) Private Brand 36.6% (+0.6 pts) National Brand 76.4% (-1.1 pts) National Brand 63.4% (-0.6 pts) DOLLARS $ % CYA National Brand $11,984,964,941-1.2% Private Brand $3,703,349,226 5.2% UNITS U % CYA National Brand 2,234,752,518-2.7% Private Brand 1,291,836,297 0.0% 13 Source: Nielsen Scanning xaoc market; 52 Weeks Ending 1/18/2014 xaoc = Food, Drug, Mass, Club ex. Costco, Dollar, & Military Channels
Strong Growth for PB Paper across the Segments Total Category: $15.7B NB: $12B & PB is $3.7B 10.2% 4.3% 0.5% 1.3% -1.0% -1.9% -1.6% -2.8% BATH TISSUE PAPER TOWELS FACIAL TISSUE PAPER NAPKINS NATIONAL BRAND PRIVATE BRAND PB sales have been growing year over year for Bath Tissue, Towel and Facial Tissue Paper Napkins were soft over the last year for both NB and PB 14 Source: Nielsen Scanning xaoc market; 52 Weeks Ending 1/18/2014 xaoc = Food, Drug, Mass, Club ex. Costco, Dollar, & Military Channels
Who is Shopping the Paper Category 98% of US households purchase Bath Tissue 41% purchase Private Brand Bath Tissue 80% of US households purchase Paper Towels 46% purchase Private Brand Paper Towels 67% of US households purchase Facial Tissue 31% purchase Private Brand Facial Tissue 45% of US households purchase Napkins 27% purchase Private Brand Napkins 15 Source: Nielsen Homescan Store Brand Insights; Total US All Outlet; Calendar Year Ending 2013
How they Shop the Category Key Consumer Purchase Drivers at the Shelf Is a good value Price Absorbency Strength level Temp low price/on sale/on discount Roll size/number of sheets per roll Softness level Ply Package size Septic safe Premium (superior quality at a higher price) Brand name Environmentally friendly product National brand vs. store brand Fragrance Package design 11% 15% 36% 32% 29% 24% 45% 55% 74% 74% 68% 66% 64% 63% 85% 82% 16 Source: Daymon Worldwide Proprietary Research February 2014
Where is her Loyalty? NB vs. PB Brand Purchasing Behavior O P P O R T U N I T Y K N O C K S AT T H E B AT H R O O M D O O R National Brand Exclusivity Bath Tissue: Paper Towel: Facial Tissue: Paper Napkin: 55% 45% 55% 40% Dual-Brand Shoppers Bath Tissue: Paper Towel: Facial Tissue: Paper Napkin: 35% 35% 33% 30% Private Brand Exclusivity Bath Tissue: Paper Towel: Facial Tissue: Paper Napkin: 10% 20% 12% 30% 17 Source: Mintel Report; Household Paper Products February 2012 ; Homescan Store Brand Insights 2012
PB Paper Outpacing Category in most Channels Private Brand Dollar Share by Channel Paper vs Non-Food Grocery Department 8.9% 5.2% 0.3% 0.8% 1.3% -1.0% -1.8% -2.7% TOTAL US xaoc GROCERY DRUG MASS/CLUB/DOLLAR/MILITARY TOTAL PAPER PB PAPER Private Brand Paper dollars is up +5% while the Paper category overall was flat (+0.3%) Growth is driven by Mass, Club, Dollar, Military (+9%) New channels are emerging: DIY: Home Depot, Lowes, Menards; On-Line: Fresh Direct 18 Source: Nielsen Scanning xaoc market; 52 Weeks Ending 1/18/2014 xaoc = Food, Drug, Mass, Club ex. Costco, Dollar, & Military Channels
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US Trends: Changing the Landscape SUSTAINABILITY HEALTHY & WELLNESS CONVENIENCE VALUE EQUATION New Pulp Certifications New Technology Sensory Experience Germ-Free Additives On-the-Go Multi-Purpose On-the-Go Multi-Purpose Larger Packs Custom Sizes Technology 20
US Trends: Sustainability PULP CERTIFICATION ATMOS (Advanced Tissue Molding System) Sugar Cane, Bamboo, Cotton Tree-Free alternatives and readily renewable Recycled 100% Paper, Unbleached "Environmental Strategy of the Year" & "Innovative Product of the Year PPI Awards 2013 Tell me You re Green 1 in 5 consumers say they prefer to buy paper products with eco-friendly logos Eco-Friendly Manufacturing Less environmental impact, Premium Product 35% less energy Sustainability is getting more traction in the US with Retailers and Consumers. 21 Source: Mintel; Daymon Proprietary Information
US Trends: Health & Wellness GERM-FREE Anti-Viral Tissues ADDITIVES Cooling, Medicated, Vicks & Aloe 58% of consumers interested in products with additives Antibacterial 61% of consumers interested in these products Hand Towels Hands are only as clean as the towel used to dry them. Aloe & Vitamin E Moist Wipes growing faster than dry; remains small: 4% of combined sales. Products with value-added benefits are adding a new dimension to the category 22 Source: Mintel; Daymon Proprietary Information
US Trends: Convenience ON-THE-GO On-the-Go MULTI-PURPOSE In the Car Tissues and hand towels created in travel packs Multi-Purpose Portable Facial Tissue Pop-up Napkins Dispenser makes iteasy to use New Heights for Strength Multi-purpose uses for Paper Towels, replacing napkins, sponges, dish cloths, are driving innovation for a super-strong towel Consumer lifestyle is driving innovation in the category. 23 Source: Mintel; Daymon Proprietary Information
US Trends: Value Equation LARGE PACKS CUSTOM SIZES TAD Multipacks & Club Packs Larger Sizes Larger sizes growing +28%* across all segments Select-A-Size Premium paper means less is needed; $1.7B Paper Towel segment and is growing +10% TAD Equivalent TAD proliferation makes Premium PB available The concept of Value has been redefined. Size and Quality matter to Consumers. 24 Source: Mintel; Daymon Proprietary Information; * average of sub-categories sizes
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BRANDS: Private Brands Win 60% of Top 5 Spots Consumer Reports: 2013 Bath Tissue Ratings RANK PRODUCT OVERALL SCORE 1 White Cloud, 3-ply Ultra Soft & Thick (Walmart) 88 2 Charmin Ultra Strong 71 3 Quilted Northern Ultra Plush 70 4 Up & Up (Target) 68 5 Great Value Ultra Strong (Walmart) 68 6 Charmin Ultra Soft 65 7 Nice Premium Ultra (Walgreens) 65 8 Cottonelle Ultra Comfort Care 64 9 Scott Naturals 54 10 Scott Extra Soft 53 11 Charmin Basic 52 12 White Cloud, 2-ply Comfort (Walmart) 51 13 Kirkland Signature (Costco) 51 14 Quilted Northern, Ultra Soft & Strong with Clean Stretch 49 15 Ology Soft & strong (Walgreens) 49 Private Brand won 7 of top 15 spots Attributes Measured: Softness, Strength, Plies, Tearing Ease, Disintegration, Sheets/Roll 26 Source: Consumer Report 2013
BRANDING: Winning Portfolios No. 1 selling SKU Target s Up & Up 1 Billion rolls are sold per year; $440M/yr Portfolio Strategy, Dominates Shelf Fresh Direct Cloud 9 Dollar General Premium, Unique, New NBE: Easy for shoppers to equate Tissue 27
PROMOTION: Shopper Solutions Cleaning Summer Picnic 28
MERCHANDISING: In & Beyond the Aisle Pallet Displays in Secondary Locations Club Defense Strategies Promotions drive 28% of total PB Paper Sales 29 Source: Nielsen Scanning xaoc market; 52 Weeks Ending 1/18/2014
PROMOTION: Head to Head with National Brands Target Compare and Save Dollar General: Calculating the Savings 30
POINT OF SALE: Retailers Support PB Product Features lead 44% of social media conversations 31 Source: March 2013 Daymon; Mintel
FEELING IS BELIEVING: In-Store Events Head to Head Comparison Consumer education to engage consumers Highlight the Value Proposition Feel + Quality + Price = Perfect Value Proposition 32 Source: March 2013 Daymon
33 What s next for PB Paper
What s next for PB Paper Seen the effect on Bath Tissue More Retailers getting into the Ultra Tier 34
What s next for PB Paper Integral to their Overall Strategic Plan Part of their DNA as a Differentiator 35
What s next for PB Paper Consumers are Switching and Sticking First traded for cost, now for Preference 36
What s next for PB Paper PB Paper continues to grow in existing channels We will see growth in newer channels: DIY, On-line, Specialty 37
Kit Vale Global Director Thank You! 38