UNCOMFORTABLE PLACES

BRYAN GILDENBERG MAY 2018

RIGHTING THE WRONGS OF THE NEW WORLD

Source: Oxford Living English Dictionary

Let’s Get Uncomfortable: Key Words: Unease, Physical Discomfort, Pain, Awkwardness

Unease: “I Can’t See It”

Physical Discomfort: “I Can’t Reach It”

Pain: “I Can’t Afford It”

Awkwardness: “I Can’t Do It”

(W)ide Angle Lens

• See opportunities beyond your brand, category definitions and siloes

UNEASE: “I CAN’T SEE IT”

Channel CAGR '12-'17E

CAGR '17E-'22E

1.5% 1.7%

2.9% 4.0%

2.7% 2.9%

4.7% 3.6%

-4.3% -4.7%

6.2% 7.5%

3.7% 4.5%

2.2% 1.2%

-4.2% -0.1%

16.3% 14.6%

2.3% 2.6%

KR Channel Totals 3.2% 4.2%

$391 $439 $499

$112 $239

$472 $109

$88

$87

$272 $303

$321

$180

$215

$268

$70

$95

$136

$97

$78

$61

$56

$70

$84

$381

$435

$502

$138

$159

$194

$115

$124

$135

$1,921

$2,245

$2,759

$-

$500

$1,000

$1,500

$2,000

$2,500

$3,000

2012 2017E 2022E

Sale

s in

Bill

ions

($) Apparel

Clubs

Category Specialist

Convenience

Department

Discounter

Drug

Supercenter

Mass

Online

Supermarket

KR Channel Sales, US$ Billions

KR Chain Sales: The Map Of The Uncomfortable World

Source: Kantar Consulting Analysis

Bar Trivia: Growth Increasingly Coming From Places That Are Hard To See Or Measure

45% of all U.S. growth coming from non-store retail

45% of all U.S. store-based retail growth is real (rest is inflation)

45% of all U.S. store-based retail growth is coming from four places

Rx Club Discount C-store

Real growth in food, drug (non-Rx), and mass ‒ Almost, oddly, -0.45% (it’s really about -0.4%)

A category today where assessing the easily measured world leaves you missing virtually anything interesting in the category

Not just Amazon here, but unmeasured brick and mortar and new commercial models

Winners here? Triangulate and trust

The Unmeasured World: Beauty

Source: Kantar Retail research and analysis

Digitazation Mobilization:

½ of US digital time on a mobile app

Income Polarization: US GINI coefficient =

Turkey

Ethnic Diversity: 78% over 50 US Caucasian, 52%

under 30

Age Polarization: From now-2025

Americans over 65 will be over 100% of

population growth

Urbanization: $4.5T GDP of

densely populated US cities – 4th

largest economy in the world

Key Places The Wide Angle Lens Should See…

5 Key FragmentNation Retail Components: The Growth Cactus

Source: Dun & Bradstreet's Global Economic Outlook — 2013 to 2018. Kantar Worldpanel, 2015. Projected forecast based on trended Value Sales; Source: Kantar Worldpanel – TAM June 2015 – France, UK, Spain, Portugal, Ireland, Venezuela, Argentina, Brazil, Bolivia, Colombia, Mexico, Ecuador, Chile, CAM, Peru, Ghana, Nigeria, India, China, South Korea, Malaysia, Philippines, Taiwan, Thailand, Vietnam

2.3 2.6 2.7 2.9 3.0

3.1 3.1

6.0

4.0

3.0

2.0 1.6 1.3 1.2

2012 2013 2014 2015 2016 2017 2018

Global Economy Global FMCG

% Change Year Over Year In Global Sales

The Growth Challenge: Long-range deceleration is underway in global FMCG

Source: Kantar Retail, supplier websites

Challenger brands’ appeal to shoppers may increase further

Unique, niche, often pricier brands more in reach

Too Small? Round Up The “Usual Suspects”

Exploring Unexplored Niches – Why Do Big Companies Leave These Ideas In Binders On Shelves?

“I Can’t See It” – NO CATEGORY IN THE STORE CAN HELP A RETAILER ESTABLISH CREDIBILITY IN NICHES WITH PASSIONATE FOLLOWERS THAN PUBLICATIONS

SEE THE WHOLE MARKET: Must Look Beyond Conventional Category/Channel Definitions

SEE THE RIGHT SCALE: Ironically, With A Broader View, Small Opportunities Don’t Look So Small

SEE THE COST OF INACTION: There Is No Comfortable, Easy Answer

PHYSICAL DISCOMFORT: “I CAN’T REACH IT”

(H)uman-Centric Understanding • Consumer/shopper insights need to broaden into human insight

36%

41%

42%

43%

Specific items I want to buy are in-stock

Being able to get everything on my list

Quick/hassle-free checkout

Being able to easily locate items I need

How Shoppers Describe Stress-Free Shopping (Share of all shoppers who rank factor among top four most important to a stress-free shopping experience)

13

Source: Kantar Retail ShopperScape®, July 2015

Ove

rall

Expe

rien

ce

Tim

e-sa

ving

&

C

onve

nien

ce

Ass

ortm

ent

First Value? Reduce Stress

‘Health’ and ‘Wellness’ Are Two Separate Trip Missions

Terms That Shoppers Associate With Being “Healthy” or Being “Well”

Healthy Well

14

Avoiding

Stress

Minimizing Stress

‒ Laughing (61%) ‒ Having hobbies/interests (59%) ‒ Being spiritually centered (59%) ‒ Feeling happy with how I look (58%) ‒ Keeping my mind sharp (58%) ‒ Having healthy relationships

with others (57%) ‒ Looking a certain way (45%)

Mental/Aspirational

‒ Eating healthy (76%) ‒ Avoiding overly processed foods (72%) ‒ Being active (69%) ‒ Exercising regularly (69%) ‒ Getting enough sleep (67%) ‒ Having a certain weight (66%) ‒ Not being sick (61%) ‒ Completing routine medical visits (60%) ‒ Managing chronic conditions (59%) ‒ Confidence my body is taking care of me

and vice versa (56%)

Physical/Functional

More likely to associate terms with being healthy

More likely to associate terms with being well

Note: Terms within the intersection are almost equally likely to be attributed to being healthy or being well.

Source: Kantar Retail ShopperScape®, February 2017

Obviously, the digital world is enabling personal connection and healthy living to happen anywhere

15

Source: CDC

How Is Mom Changing? Well, She’s a Heck of a Lot Older Than She Used to Be

(Note: Do NOT write this in a Mother’s Day card)

10% of all first-time mothers are over the age of 35

Older Moms Are More Affluent, Better Educated, and F@#4*ng Tired

This brings me to my next point. My birthday is tomorrow. I will be 41. I never thought I would be this damn old with a 2-year-old. I love my daughter beyond life itself. I love being a mom. I have so much fun with her. However, I wish I was 10 years younger. A toddler’s energy level is through the roof. Unlike my daughter, I don’t know exactly how or why I lost my energy, I just really need it back. She wants me to run and play with her. And I do it because she likes to stay busy. Unfortunately, I am so sore by the end of the weekend it isn’t even remotely funny.

SARA R. Chi-Town Mommy Mayhem

“

Source: Kantar Retail ShopperScape®, Kantar Retail estimates and research 1 Kantar Retail ShopperScape®, December 2016 | 2Statistisches Bundesamt

Chi-Town Mommy Mayhem, Meet Amazon Prime…

Amazon Prime’s purchasing power in aggregate now 2nd largest economy in the world (behind China)

Percent of Households Who Are Prime Members (among all primary HH shoppers)

In Perspective: Prime’s penetration in the U.S. exceeds:

The percent of households that shop Target (29%)1

The total number of households in Germany (40.8m)2

55% of US Product Searches now START on Amazon (vs 26% Google and 19% EVERYTHING ELSE)

10% 14%

19% 23%

31% 37%

45%

2011 2012 2013 2014 2015 2016 2017

American Grandparents Would Be a G20 Nation

19 Source: AARP

There are more grandparents in the U.S. than there are people in France or Thailand (69.5 million — 25% of whom spend more than $1,000/year on their grandkids)

=

OLD MARKETING NEW MARKETING

The Upside — I don’t have to guess anymore, The Downside - the prize isn’t as big for every success

21

If “Marketing Is Like A Pick-A-Mix” – what’s different?

(instead of a box of chocolates)

You should know what

you’re going to get

Transparency

You can get more than just

chocolate

Variable targeting criteria

You can choose the size of bag

you want

Discrete investment levels

Small hands help

Delivery platforms need to be just as targeted as your selection criteria

“I CAN’T REACH IT”….

Did ya try bending over a bit?

More analytics from more places more integrated into more activities

Blurring of the line between shopper, digital and media spending makes an integrated platform essential

The customer plan will look more like a consumer plan, and consumer plans will be more activation centric

Scalable solutions can often be found through a combination of value and openness for “closed” trends

“I Can’t Reach It” – What Changes?

NO CATEGORY IN THE STORE KNOWS MORE ABOUT WHAT PEOPLE GENUINELY CARE ABOUT THAN PUBLICATIONS

“I CAN’T AFFORD IT” = PAIN

(O)ptimize Everything, But Do It Right! • Reroute unprofitable spending into fuel for real growth

The World Of Disruptive Pricing….A Simpler “MAP”

STABLE

DISRUPTIVE

EFFECTIVE INEFFECTIVE

The World Of Disruptive Pricing….A Simpler “MAP”

Over a period of multiple years, take all these programs and gradually kill them off

STABLE

DISRUPTIVE

EFFECTIVE INEFFECTIVE

The World Of Disruptive Pricing….A Simpler “MAP”

…and “Swipe Left” on the ineffective stuff in general – knowing this is the first step!

Over a period of multiple years, take all these programs and gradually kill them off

STABLE

DISRUPTIVE

EFFECTIVE INEFFECTIVE

Optimization Often Confuses Measurability And Significance

VS

• Optimize the whole, not just the parts

• Don’t try and optimize discrete activities if those discrete activities are part of a campaign

• Realize that everything is part of a campaign these days

• Weed out terrible ideas permanently not temporarily

• Realize where ROI is really ROC (Return On Choices)

“I CAN’T AFFORD IT” - Conclusions

• More specific understanding of profitable baskets – NO CATEGORY IN THE STORE CAN ADD IMPULSIVE PILES OF PROFIT TO A SHOPPER BASKET THAN PUBLICATIONS

• Less reliance on high intensity promotions that disrupt the market – NO CATEGORY LENDS ITSELF BETTER TO BEING SOLD IN A LESS PROMOTIONAL MARKETPLACE THAN PUBLICATIONS

• More integrated view of the relationship between marketing and selling – NO CATEGORY CROSSES THE CONTENT/COMMERCE DIVIDE BETTER THAN PUBLICATIONS

Optimization: What Changes?

GROWTH POINTS OF EMPHASIS

(L)earning Obsessed Organization • Both your people and your company must constantly learn

Tomorrow’s Skillset

The ability to tie analytics to activity, requires both a higher fluency in analytics but also real understanding of their operational implications

Storytelling – turning data into a compelling narrative

The ability to manage people when you don’t understand what they do

The ability to act uncertainly – comfortable with knowing that forward progress will be accompanied by constant recalibration

Turning plans into roadmaps – focus on the outcome, not on the tactics

GROWTH POINTS OF EMPHASIS

(E)xperience-Centric Category/Brand Strategy • Reaching the brand into people’s lives, and bringing it to life

Moving to MeCommerce: 5 Platforms To Integrate Marketing And Sales

1 2 4 3 SCROLL SUBSCRIPTION SHARE SAY 5 SEARCH

1. Scroll: Shoppers Have Moved to the Small Screen: NO CATEGORY IN THE STORE HAS A STRONGER PRESENCE IN MOBILE THAN PUBLICATIONS

Source: Kantar Retail ShopperScape® March 2017, ComScotre (2017)

94%

84%

69%

45%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Gen Y(1982 to 2002)

Gen X(1965 to 1981)

Boomers(1946 to 1964)

Seniors( > 1946)

Smartphone Ownership by Generation

Across all Households: 77%

It’s Where Shoppers Spend Their Time: Design Requires Rethinking

Ensure that your shopper marketing team is ATM: Always Thinking Mobile

Source: Company mobile apps

2. Subscription: The Journey to Predictive-Replenishment: NO CATEGORY IN THE STORE UNDERSTANDS SUBSCRIPTIONS BETTER THAN PUBLICATIONS

Source: Kantar Retail research and analysis, Company website

Toda

y To

mor

row

Subscription management

1-touch ordering

No-touch ordering

Integrated replenishment

Predictive replenishment

5%

7%

12%

October 2016: currentlyuse voice-controlled

home assistant

January 2017: currentlyown voice-enabledassistant/speaker

July 2017: currently ownAmazon Echo or Google

Home

3. Say: Voice Device Adoption on the Rise: NO CATEGORY LENDS ITSELF BETTER TO HAVING BRANDABLE SKILLS BASED ON CONTENT EXPERTISE THAN PUBLICATIONS This will change our relationship with the internet

Source: Kantar Retail ShopperScape®, October 2016 and January & July 2017

Voice-Enabled Smarthome Assistant Ownership: October 2016 vs. January 2017 vs. July 2017

*Data for October 2016, January 2017, and July 2017 come from non-identical questions, and note differences in description of technology Note: Arrows indicate significant difference between time periods (95% confidence level)

9%

5%

12%

5%

18%

7%

Amazon Echo Device

Google Home

All Shoppers Amazon Shoppers Prime Members

Percent of Shoppers Who Own Smarthome Assistant Device (July 2017)

4. Share: Social Media is Not Just for the Kids: NO CATEGORY HAS A BROADER SOCIAL MEDIA FOOTPRINT THAN PUBLICATIONS Facebook in particular touches a broader audience

Source: Kantar Retail ShopperScape®, July 2016

Note: Dark blue highlighting indicates significantly greater vs. all shoppers; light blue highlighting indicates significantly less vs. all shoppers (95% confidence level)

Percent of Shoppers Who Use Platform, by Demographic Segment

All Shoppers

Kids in HH Have Nots Haves Gen Y Gen X Boomers Seniors

Facebook 68% 79% 66% 72% 82% 73% 60% 54%

Facebook Messenger 45% 61% 42% 48% 66% 52% 32% 22%

Pinterest 45% 62% 41% 50% 69% 50% 31% 23%

Instagram 34% 49% 32% 38% 60% 39% 20% 15%

Using search as a data point to drive innovation is the easy part

What does this mean in terms of innovation? Speed — can we innovate at the speed of data? Scale — can we evaluate innovations so that they are successful on the upswing? Strategy — what is our innovation portfolio?

Source: Google Analytics

5. Search: Google Analytics: Coconut Oil: NO CATEGORY UNDRESTANDS TREND IDENTIFICATION BETTER THAN PUBLICATIONS What If Product Innovation Had Started When Search Upticked In 2012?

Experience: Implications

• The 5Ss are the key – businesses that understand these will win

• Experience-centric brands and customer plans require integration across the streams – no big company is doing this particularly well today

• Your brands are experienced in a variety of non-controlled ecosystems – linkage and consistency critical

• The linkage between digital, shopper, customer, and media can and should be experience centered

Experience = The Integration Of Marketing And Sales Around These Key Principles

W H O L E IDE-ANGLE LENS UMAN-CENTRIC PTIMIZING VALUE EARNING OBSESSED XPERIENCE-CENTRIC

Did we look into uncomfortable places?

Did we look into the human side of the brief and delivery?

Did we deliver a measurable commercial impact?

Did we build new world capability with our clients?

Did we think about both marketing and sales?

Questions to ask ourselves about each client project to make sure we’re using WHOLE thinking

For further information please refer to www.kantarretailiq.com Contact: Bryan Gildenberg Chief Knowledge Officer T: +1 (617) 912 2862 Bryan.Gildenberg@kantarretail.com @bryang_kr @analyst www.kantarretail.com