M6- POI St Louis Nielsen Presentation - poinstitute.com

1 STRATEGIC PLANNING DRIVING SUPERIOR EXECUTIONLori MillsSeptember 20162 Copyright 2016 The Nielsen Company. Confidential and EXECUTION GUIDELINESI nputs come from everywhere - it can be hard to make sense of it all to deliver optimum plans3 Copyright 2016 The Nielsen Company. Confidential and CHANGE IN ONE LEADS TO A CHANGE IN ALLM ovements in these elements are inextricably connected, and so must be their planningKPIsAssortmentPricingPromotionSp aceSALESIn- store Execution4 Copyright 2016 The Nielsen Company. Confidential and IS THE SHELF SUCH A STRUGGLE TODAY?Source: 1) Nielsen Innovation Database 52 weeks ending 11/28/15, Food channel, 2014; 2) Nielsen Breakthrough Innovation Report, 3) A study conducted by IHL revealed that out- of- stocks cost retailers a whopping $ billion in sales worldwide, which is 39% higher than three years ago.

2 4) Nielsen Scantrack: xAOC YTD 2015 through 9/26/15 VS. 2012, 5) Nielsen Homescan Total All Outlets, All Buyers, All Brands (UPC), c alendar years 2010- 2014 and 52 weeks ending 10/24/2015, trips per shopper, 6) Nielsen TDLinx & Nielsen Analytics; CAGRs (compounded annual growth rates dollar basis)OUT OF STOCKSSKU GROWTH OUTPACING SALES GROWTHCROWDED SHELVESHEATED NEW ITEM RACE20,000+New product launches 2008 - 20 13but 85% failand stole space from existing itemsTRIP FREQUENCY DOWNCOMPETITION FOR SHELF SPACEEXECUTIONAL FLAWSSHOPPER AND INDUSTRY SHIFTSMORE PLACES TO SPENDin typical grocery store30,831 items9%14%9%3%6%- 7%- 8%- 6%- 1%- 1%GROCERYDAIRYHOUSEHOLD CAREFROZEN FOODSPERSONAL CARETop 5 D epartments - YTD 2015attribute to lost sales39% higher than three years agogrowth by 2020ecommercetrips/year 2015132trips/year 2011151+11%TDP$ VELOCITY70% OF PURCHASE DECISIONS ARE MADE IN FRONT OF THE SHELF5 Copyright 2016 The Nielsen Company.

3 Confidential and products, In the right stores,At the right price,With the right PromotionsTO WIN, YOU MUST GET BOTH PREDICTIVE PLANNING ANDACCOUNT EXECUTION RIGHTACCOUNT PLANNINGHQ STRATEGIC PLANNINGSTRATEGY ACTIVATION AT RETAIL6 Copyright 2016 The Nielsen Company. Confidential and INTERNAL PRIORITIESM isleading measures of success and market pressures lead to misalignment and accuracy issuesSTRATEGICTACTICALC ompeting PrioritiesSmartMerchandising promotes collaboration across the organization creating a hassle- free process that allows stakeholders to solve key business issues quickly7 Copyright 2016 The Nielsen Company. Confidential and S SMART MERCHANDISING CREATES INTEGRATED EFFICIENCIES & OUTCOMESD etermine item incrementality & optimal distribution(Assortment & Space Optimization)Refine distribution strategy by market or cluster(Assortment & Space Optimization)Allocate facings to maximize on shelf availability(Assortment & Space Optimization)Evaluate consumer- driven market structure + Shop Along(Consumer & Shopper Insights)Develop optimal shelving principles(Audit + Regression)Scale POG across stores while applying optimal shelving principles(POG automation)Tra ck ex ecu ti o n & co mp l i a n ce to optimal POG(Audit)8 Copyright 2016 The Nielsen Company.

4 Confidential and S SMART MERCHANDISING CREATES INTEGRATED EFFICIENCIES & OUTCOMESS mart MerchandisingDetermine item incrementality & optimal distribution(Assortment & Space Optimization)Refine distribution strategy by market or cluster(Assortment & Space Optimization)Allocate facings to maximize on shelf availability(Assortment & Space Optimization)Evaluate consumer- driven market structure + Shop Along(Consumer & Shopper Insights)Develop optimal shelving principles(Audit + Regression)Scale POG across stores while applying optimal shelving principles(POG automation)Tra ck ex ecu ti o n & co mp l i a n ce to optimal POG(Audit)9 Copyright 2016 The Nielsen Company. Confidential and THE SHOPPER: Nielsen QUALITATIVE CASE STUDYEASTCENTRALWESTSOUTHMINI GROUPS3 FOCUS GROUPS IN SELECT REGIONS2 X 2 XRETAILERS3 X 2 XRETAILERS3 X 1 XRETAILERS3 X 1 XRETAILERSSHOP- ALONGSC ategorySegmentBrandUPCS egmentFormBrandUPCFormBrandUPCS egmentBrandSub BrandUPCC onsumer & Shopper Insights10 Copyright 2016 The Nielsen Company.

5 Confidential and S SMART MERCHANDISING CREATES INTEGRATED EFFICIENCIES & OUTCOMESS mart MerchandisingDetermine item incrementality & optimal distribution(Assortment & Space Optimization)Refine distribution strategy by market or cluster(Assortment & Space Optimization)Allocate facings to maximize on shelf availability(Assortment & Space Optimization)Develop optimal shelving principles(Audit + Regression)Scale POG across stores while applying optimal shelving principles(POG automation)Tra ck ex ecu ti o n & co mp l i a n ce to optimal POG(Audit)Evaluate consumer- driven market structure + Shop Along(Consumer & Shopper Insights)11 Copyright 2016 The Nielsen Company. Confidential and DO THESE PRODUCTS ALL HAVE IN COMMON?12 Copyright 2016 The Nielsen Company. Confidential and RANKINGS DON T TELL THE WHOLE STORYItem/sales rank doesn t factor in true incrementality and leaves money on the table 2% MilkNon- Fat Milk1% MilkChocolate MilkStrawberry Milk 1% Milk turns fast but is highly cannibalistic with 2% Milk Chocolate Milk has lower turns but provides more incremental category contribution Strawberry Milk is almost entirely incremental, but its turns are so low that 1% Milk offers better incremental category contributionASSORTMENT13 Copyright 2016 The Nielsen Company.

6 Confidential and JOIN DEMAND AND SUPPLY, ASSORTMENT AND SPACEAs shelf inventory requirements change, so does the possible assortmentAs sales change due to assortment changes, so do shelf inventory requirementsInventory ModelsOptimize space to meet the new demand requirements IncrementalityModelsOptimize assortment to reduce redundancy and maximize potential ASSORTMENTThe right assortment will capture full consumer demand: The better the assortment, the higher the salesDemandSupplyCopyright 2016 The Nielsen Company. Confidential and CONTRIBUTION TO THE CATEGORY/BRAND/SEGMENT(TRUE INCREMENTALITY)DON T TURN A BLIND EYE TO CANNIBALIZATIONS ales Rates are important, but how does it contribute to the category/brand/segment?CANNIBALIZATION EFFECTHIGH CANNIBALIZATIONT otal Sales: $110 LOW CANNIBALIZATIONT otal Sales: $150 Item AItem BSize of bubble: $ Volume Overlap: Level of CannibalizationItem CHIGH PERFORMING ITEMSS ales Rate ($ Sales per Point of Distribution)Item AItem BItem CItem DItem EItem FItem G$100$90$70 Sales numbers for illustration purposes onlyASSORTMENT15 Copyright 2016 The Nielsen Company.

7 Confidential and ANALYTIC FRAMEWORKC ombines rate of sales, consumer decisions and a true view of incrementalityASSORTMENTS aturated; restrictingcategory growth Make sure you have thebest items in distributionKey category driver Increase ItemsDetrimental to category performance De- list worst performersHelps maximize category sales Review slow movers for de- listmentRATIONALIZEDEVELOPNURTURESQUEEZE Avg Sales RateslowfastConsumer Response to Assortment (Incrementality)positivenegativeDistribu tion (# Items)16 Copyright 2016 The Nielsen Company. Confidential and CONCEPT IN ACTIONHow do sales vary based on delivered variety?DESSERTSCAKESICE CREAMPIESFRUITCREAMBERRYUPC 1 UPC 2A SIMPLE, TOP- DOWN APPROACHDo stores that carry a disproportionate share of Pies sell more or less Desserts?

8 ASSORTMENTW ithin Pies, is it better to carry more or fewer Berry Pies?Which Berry UPCs are best?17 Copyright 2016 The Nielsen Company. Confidential and DISTRIBUTION STRATEGY AT THE STORE LEVELA ggregate models assume all stores and banners behave the same ASSORTMENTEven under the same banner, a store in one area can behave very differently than another. Urban High- income, Asian 24 foot set 120 active items Big Box Avg $/week = $5,200 Rural Middle- income, white/non- Hispanic 12 foot set 98 active items Small Format Avg $/week = $1,402 STORE 2 Banner ASTORE 1 Banner AVa ri a ti o n s i n s to re s i z e, reg i o n a l i ty a n d co n s u mer d ema n d a re n o t v i s i b l e i n a g g reg a te mo d el s ! 18 Copyright 2016 The Nielsen Company.

9 Confidential and STORE LEVEL ASSORTMENT WITHIN THE AVAILABLE SPACEI terative optimization algorithm will allocate facings to power SKUs while maximizing assortment varietyWrong mix and stock by product40 itemsPotential Sales: $5,990 Out of Stock Loss: $440 Under- stockedOptimal stockOver- stockedASSORTMENTR eplenishment ScheduleCase Pack OutDays of SupplySafety StockApply Inventory Model19 Copyright 2016 The Nielsen Company. Confidential and STORE LEVEL ASSORTMENT WITHIN THE AVAILABLE SPACEI terative optimization algorithm will allocate facings to power SKUs while maximizing assortment varietyWrong mix and stock by product40 itemsPotential Sales: $5,990 Out of Stock Loss: $440 Right mix and stock by product39 itemsPotential Sales: $6,100 Out of Stock Loss: $0 Under- stockedOptimal stockOver- stockedASSORTMENT20 Copyright 2016 The Nielsen Company.

10 Confidential and ASO KEY BENEFITSH elping you overcome key pain points for better assortment and space planningSPEED AND INTELLIGENCE Optimize retail supply and demand simultaneously Just- in- time performance analytics Evaluate plan impact before you execute PROCESS MANAGEMENT Accurate and accessible data Integrated and streamlined processes Access anywhere toolsMaximize category demand while minimizing out- of- stockUse analytics and software to bring simplicity and integrity to a complex systemIntegrate assortment- based demand and supplyASSORTMENT21 Copyright 2016 The Nielsen Company. Confidential and S SMART MERCHANDISING CREATES INTEGRATED EFFICIENCIES & OUTCOMESD etermine item incrementality & optimal distribution(Assortment & Space Optimization)Refine distribution strategy by market or cluster(Assortment & Space Optimization)Allocate facings to maximize on shelf availability(Assortment & Space Optimization)Evaluate consumer- driven market structure(Consumer & Shopper Insights)Develop optimal shelving principles(Audit + Regression)Scale POG across stores while applying optimal shelving principles(POG automation)Tra ck ex ecu ti o n & co mp l i a n ce to optimal POG(Audit)Smart MerchandisingCopyright 2016 The Nielsen Company.