LEADING THE WAY IN LATIN AMERICA

Alfredo CostaClient Services Director, Nielsen BrazilSeptember 30, 2014

BRAZIL

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AGENDA

INTRODUCTION

BRAZIL MACROECONOMIC HIGHLIGHTS

FMCG’S PERFORMANCE

CONSUMER NEW SHOPPING DYNAMIC

OPPORTUNITIES TO GROWTH

REFLECTIONS AND OPPORTUNITIES

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3GDP and GDP per person, comparison between Brazilian states and world countriesSource: The economist, IBGE (Brazilian Institute for statistics and Geography) and IMF

A COUNTRY WITH CONTINENTAL DIMENSIONSFrom The Economist: Comparing Brazilian States With Nations (GDP and Population)

BRAZILIAN EQUIVALENTS – COMPARE-CABANA

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DESPITE CHALLENGES, BRAZIL’S ECONOMY IS STRONGER

Sources: ABEP and IBGE

HOUSEHOLD CONSUMPTION

INCOME/CREDITINVESTMENTS

SOCIAL POLICIES

% of population by socioeconomic level

2008 2012

20%15%

24%23%

25%26%

18%22%

9% 10%

4% 4%0.60% 0.50%

DE C2 C1 B2 B1 A2 A1

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FMCG CONSUMERS “TRADE UP”Categories that drive growth are developing in higher value segments

ACCESS

11

WO MOVE + TRADEDOWN

9

TRADE UP

53

20

2009

166

30

117

20

2013

39

170

239

ACCESS WO MOVE + TRADE DOWN TRADE UP

2009

166

2013

239

W. O. MOVEMENT

TRADE DOWN

TRADE UP

ACCESS MATURE

CATEGORIES LIFECYCLE

Source: Nielsen Retail Index and Homescan

FMCG SALES: R$

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TRADING UP: FOUR KEY DRIVERS

Source: Nielsen Retail Index and Homescan

DEODORANTS YOGURT

CLEANSERSCONVENIENT BEERS

HEALTHY

INDULGING

TRADE UPSOFISTICATED

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GLOBAL BRANDS FOLLOWING “TRADE UP” TREND

Source: Nielsen Retail Index - YTD 14 Avg Price vs T. Category – Based on 16 global brands

OPPORTUNITIES TO DRIVE SUSTAINABLE GROWTH

Global brands’ prices are an

average of 37% above category

The average relative distribution is around 17% (compared to category level)

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8

2014 IS A CHALLENGING YEAR FOR BRAZIL

Sources: IBGE, FGV and Nielsen Homescan

INCOMEUSD

14.868EXPENSES

USD 15.844

MID-SOCIOECONOMIC LEVEL spends 15% more than it earns

Income vs Expenses

SOCIAL PROTECTION NETWORK EMPLOYMENT AND INCOME CREDIT

Average % of income committed to credit

MARCH'10 MARCH'11 MARCH'12 MARCH'13 MARCH'14

36.5 40.1 42.4 44 45.7

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INFLATION COULD AFFECT CONSUMPTION

Sources: IBGE, FGV, Nielsen Analytics and Nielsen Homescan

Food & Beverages

1.5% Government-managed prices

8.5%6.5% HPC5.9%

IPCS2013

How much BR is sensitive to price?

129

100LatAm Average

Brazil

40% 31% 22%

SHARE OF POCKET OF FMCG EXPENSES(By Socioeconomic Level)

LOWSEL

MIDDLE SEL

HIGHSEL

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-0.4

-2.6

0.3

2

-0.3

-3.6

2.6

9.3

WHOLESALERS PLAY AN IMPORTANT ROLE

Volume Change - 2013 vs. 2012 – Total Brazil - Source: Nielsen| Retail Index| Cash & Carry Scantrack

CASH & CARRY VOLUME CHANGE (2012-2013)

WHOLESALERDRUGBARTRADITIONALMINIMARKETS

SUPERMARKETS

HYPERMARKETS

TOTAL PRODUCT AREA

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AND THERE STILL IS ROOM TO GROW

Wholesaler household penetration

% quarterly penetration in Wholesaler channelSource: Nielsen | Homescan

Channel still reaching only 20% of households across the country

Series1

18.8 19.417.9 18.7 18.9

20.221.9

20.6

Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13

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CHANNEL STRATEGY SHOULD BE REINFORCED

Volume Change - 2013 vs. 2012 – Total Brazil - Source: Nielsen| Retail Index| Cash & Carry Scantrack

Changes in trip frequency vs. average expenditure, 2013-2012

HYPER MARKET

SUPER MARKET

NEIGHBORHOOD WHOLESALER BAR/TRADITIONAL

GROCERY STORE

TOTAL CHANNELS

DRUG

-4

-17

1

7

1

-2

-11

3

6

-2

10

14

35

FREQUENCY AVERAGE TICKET $

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PACK STRATEGY ALSO OFFERS AFFORDABILITY

60%of the top 20 categories

Family-sized packages have gained importance for

40%of the top 20 categories.

Smaller packages have gained importance for

+ =

Source: Nielsen Retail Index

DIVERSIFIED CHANNELS

Increasing importanceof larger packages

9.88.9

COOKIESup to 100g

3.7 4.8

BEERup to 349ml

LOWERFREQUENCY

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CONSUMERS WANT TO MAINTAIN NEW LIFESTYLESThey are making choices to keep the level of comfort they have acquired

Diversify channelsLOOK FOR VALUE

Reduce trips to the point of purchaseMONTHLY GROCERY SHOPPING

Package sizesSPEND ALTERNATIVES

Switch to cheaper brandsTRADE-DOWN

Reduce volume RATIONALIZE PURCHASES

REDUCE OUT-OF-HOME CONSUMPTION and discretionary services

WHERE TO LOOK FORGROWTH IN THE NEXT YEARS?

STREAMLINEEFFORTS

BROADENHORIZONS

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THE INTERIOR IS KEY TO FMCG’S FUTURE

ACTUAL GDP2013* vs. 2009

NIELSEN PRODUCT AREAS

2013 vs. 2009

+1.6% +3.0%

+4.0% +4.9%

Leading brands’average share

7.5%inferior

Key accounts’Average share

39%interior

Source: Nielsen Retail Index and IBGE

CAPITAL

INTERIOR

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INTERIOR: STILL ROOM FOR FMCG DEVELOPMENTHigher access and trade-up are still great leverages to be used in BR interior

68

69

88

PENETRATION INDEX (INTERIOR/CAPITAL)

Source: Nielsen Homescan | Penetration of the interior divided by penetration of the capital

CONSUMERS IN THE INTERIOR ARE AT AN EARLIER STAGE OF CONSUMPTION

Soy-based beverage

Packaged Toasted Bread

Mouthwash

ACCESS CATEGORIES

118

READY-TO-DRINK JUICE

POWDERED JUICE

READY-TO-USE SAUCE

TOMATO PASTE

105

87

86

TRADE-UP IS CAPABLE OF REACHING MORE

HOUSEHOLDSTRADE-UP CATEGORIES

REFLECTIONS AND

OPPORTUNITIES

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INFLATION SHOULD HOLD UP AND

CONTINUE THREATENING

CONSUMERS’ POCKET

THE INTERIOR SHOULD CONTINUE

TO PLAY AN IMPORTANT ROLE IN

GROWTH, AND LEADERS’ BRANDS

STILL HAVE ROOM TO GROW ACROSS SMALL CITIES

REFLECTIONSB R A Z I L

CONSUMERS ARE MAKING CHOICES TO

MAINTAIN THEIR LIFESTYLE LEVEL, SO AFFORDABILITY IS A KEY DRIVER TO BE

CONSIDERED

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OPPORTUNITIESB R A Z I L

FOCUS ON PRICE AND PORTFOLIO

STRATEGIES TO DELIVER THE

AFFORDABILITY NEEDED BY THE

CONSUMER

SHORT TERM

DEVELOP BRAZIL’S “WHITE SPACES”

FOCUSING ON THE POCKETS OF

OPPORTUNITY IN ORDER TO SUSTAIN FUTURE MARKET

LEADERSHIP

LONG TERM

DELIVER QUALITY BRANDS, PUTTING

TOGETHER AS MANY GROWTH DRIVERS AS

POSSIBLE

MID TERM