1 The Evolution of "Brand": How U. SThe Evolution of "Brand": How U.S. Shoppers Have Helped Create the New Wave of Private Label Diana Sheehan April 6, 2016

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3 Private Label on the Ground What to Do Back at HomeAgenda Growth and Trends Private Label on the Ground What to Do Back at Home

4 Why Do Retailers Invest in Private Brands?Finance Brand Operations Source: Kantar Retail analysis

5 Private Label Growth and Trends at a GlanceUS: 18% Source: PLMA‘s 2016 Private Label Yearbook, 2016 Sales are Kantar Retail Projection

6 Significant Regional Variations Exist within the USDollar* and Unit Share of Private Label by Region The Coasts lag the rest of the US *Dollar Share is top line in graphic and Unit Share is bottom line, Data for 2015 Source: PLMA‘s 2016 Private Label Yearbook

7 Private Label Already Captured Staple CategoriesThe next opportunity is smart center-store expansion and HBC Last Purchase: National vs. Private Brand (among shoppers who ever purchase category) Source: Kantar Retail ShopperScape®, February 2017

8 The Foundations Behind Your Private BrandsReasons for Purchasing Private Label Food/Beverage Products Instead of National/Name Brand (among shoppers purchased private label last time they purchased category; weighted average across 15 food/beverage categories) Gen Y Boomers 48% 53% 25% 39% 22% 32% 20% 27% 19% 26% 12% 13% 9% 4% 8% 5% 3% Note: Arrows indicate significant difference vs. all private label purchasers (95% confidence level) Source: Kantar Retail ShopperScape®, February 2017

9 How Do Shoppers Trust Brands?All Shoppers Gen Y Gen X Baby Boomers Seniors I trust that retailers are taking the necessary steps to ensure the quality of the products they offer 57% 56% I trust that brands are taking the necessary steps to ensure the quality of the products they offer 59% I trust that retailers will remove a product from their shelves if they feel it's unsafe 61% 60% 63% I am willing to spend more for a product that makes a specific safety guarantee 42% 47% 43% 38% I prefer to shop at retailers that are transparent about product quality 64% I am willing to spend more on a brand I trust 69% 62% Source: Kantar Retail ShopperScape®, March 2016 Shading indicate significant difference from all shoppers

10 A Useful Tool For Understanding Private LabelIncandescent Gross Margin OPP competition Sourcing flexibility Merch ladder Emphasize trust and garner brand loyalty; seen as equals or superiors to major, respected national brands Leverages the value proposition inherent in Private Label Image  $ Banner image Innovation Differentiation Loyalty Source of PL Power Retailer’s Motivation Relies on national brand’s equity Similar graphics, ingredients Invites price/value comparison Budget brands offering low-priced alternatives to commoditized products These brands leverage A brand’s image, co-opting the strength of that brand Brand Finance Makes its own “light” Unique ingredients, packaging Limits comparability Often cross-category umbrella Trade Down Reflective Source: Kantar Retail research and analysis

11 How Can We Think About Well Known Private Labels Today?Incandescent Source of PL Power Retailer’s Motivation Brand Finance Reflective Source: Kantar Retail research and analysis

12 Carrefour Supports Differentiated Go-To-Market Strategies by MarketA Staged Approach to Consolidate Brand Equity and Leverage Margins Asia Latin America Eastern Europe Western Europe Substitute Localize Diversify Differentiate Emerging markets balance a high A Brand shopper affinity on one hand and a high value orientation on the other. Carrefour employs private label to tackle the value extreme while it’s building its brand equity in the market. Carrefour pursues its strategy to consolidate its brand equity by leveraging established local sourcing to elevate its ranges. As its quality and value proposition shape up Carrefour employs private label to manage margins in key categories. Private label tiering becomes more complex as new products come to broaden the shopper’s choice. As markets become increasingly competitive and shoppers have more choice Carrefour elevates its private label offer to higher margin categories. Source: Kantar Retail research and analysis

13 Tailored Pricing and Promotions Support Carrefour’s Private LabelsDeveloped markets rely more on programs, while hybrid and emerging markets reinforce quality and price 10% credit on Carrefour Baby products – Carrefour France 30% credit on second product purchased – Carrefour Italy Highlighted PL products on shelves – Carrefour Poland Eye level placement on shelves – Carrefour Express Turkey Source: Kantar Retail store visits and analysis

14 Carrefour’s PL Granted High Visibility in Online AssortmentConsolidating Quality Proposition Reinforcing Growth Categories RDF is featured in the “International” products category in China, further elevating its brand position. Carrefour Spain sustains impulse and elevates private label brands in niche key growth categories. Promoting as Standalone Offer The private label offer has dedicated sections facilitating access to the ranges. Source: Kantar Retail store visits and analysis 14

15 Price Positioning, Promotions, and Organic Critical to Walmart Grocery PLPL level varies by category; prevalent in spices/milk with non/organic option “Fresh guarantee” More premium option but sill reflective, quality and organic even extend to most generic portions of PL Ready-to-eat options, same as national brands Adjacent positioning and lower pricing with national brands PL as lower priced “gap-filler” Sam’s Choice differentiates against other PLs and national brands with better packaging and quality but higher pricing PL more emphasized than national brands on rollbacks and promotions Source: Kantar Retail research, analysis and store visits

16 Target Pursues a Highly Differentiated Private Label StrategyGrocery Home Apparel Best Better Good Source: Company reports; Kantar Retail research and analysis

17 Amazon Private Label History in a NutshellStrathwood Outdoor patio, lawn, & garden Denali Amazon Elements DIY tools & accessories Premium-positioned baby wipes sold exclusively to Prime members Happy Belly, Mama Bear and more… Opened multiple consumable brands for detergent, coffee, nuts and more all available exclusively to Prime members 2005 2004 2006 2009 2014 2016 Amazon Fashion Pinzon 7 private label apparel lines: Franklin & Freeman, Franklin Tailored, James & Erin, Lark & Ro, North Eleven, Scout + Ro, and Society New York Bedding, bath, home furnishings Pike Street products (also launched 2005) re-branded under Pinzon Amazon Basics Started in consumer electronics accessories and home and office supplies Expanded to general merchandise, including fitness, home & pet supplies Source: Kantar Retail analysis; Company Website Source: Kantar Retail research and analysis; Amazon.com

18 Amazon Has Had Both Successes and Missteps“From work dresses to weekend wear, our polished wardrobe essentials serve up effortless style” Sustainable Scannable packaging for more Info Transparent Sets precedent for future brands Source: Kantar Retail research and analysis; media reports; Amazon.com

19 Amazon’s Foray Into Consumables Takes an Experimental ApproachDifferentiation New brands could means opportunity for co-branding for suppliers New brands this year and beyond… Summer Fall Organic Baby Food Coffee Nuts Trail Mix Sustainable Laundry Detergent Amazon currently only stocks about 10 Happy Belly and 3 Mama Bear SKUs. Consolidation These brands could transition to Amazon Elements or remain brands in their own right All of these newer brands are exclusive to Prime members and can be seen as additional feeders for membership renewals. At this point, they represent a shift away from “Amazon” branding but maintain the same focus on quality, sustainability, sourcing, and transparency that has marked other PLs. These brands are a long-term threat as Amazon further test private label waters in more categories to discover the best method of building equity. Source: Kantar Retail research and analysis; company reports; Amazon.com

20 Kirkland Signature Is Always Evolving To Maximize Value and QualityCostco sold $3.5 million on its first Single’s Day in China through Alibaba, helped by the wide brand recognition KS had among Chinese shoppers in advance of the site’s 2014 launch Items are continuously being improved in regards to price, formulation, and packaging KS Bath Tissue is the best selling item at Costco KS expands into any category where there is an opportunity and embodies the Costco brand. Members trust KS products to be high-quality, well-priced, and relevant to their lives. KS is well-known both for the occasional uber-premium products like a $600 bottle of Glenlivet and high quality products in bulk such a men’s shirts. Source: mypbrand.com; Costco publications

21 Sam’s Club: Revamping Private Label – An Opportunity and Threat20 different brands Start Phase 1 Phase 2 Chandra Holt announces changes Double PL team from 30 to 60 Have added 300 Member’s Mark items Total of 770 Member’s Mark items, no other private labels 573 items 12 brands 166 Member’s Mark Have added 300 Member’s Mark items Feb. 2016 Aug. 2016 Dec. 2016 Dec. 2017 Source: Kantar Retail research and analysis, company reports

22 ALDI and Lidl Are the Ultimate Private Label ManifestationIf the financial model extends beyond a product brand to include the entire store, then the model changes Branded Alignment Discount Prices No Sacrifice in Quality Conclusion: These stores are well positioned for growth Global Sales Sales Growth CAGR Stores 2016E 2018E 2021E 2020E Aldi $ $ $ 7.7% 6.7% 11,170 11,757 12,340 Lidl $ $ $ 8.1% 7.5% 10,888 11,491 12,194 USA $ $ $ 11.2% 9.4% 1,557 1,767 1,982 Trader Joe's $ $ $ 8.4% 8.3% 486 535 568 - $ $ 140.5% 120 330 Lidl’s US headquarters and DCs Source: Kantar Retail store visits; KRiQ Report Builder

23 Simple Truth: The Transcendent Brand of the FutureThe power of $1.7B to a retailer struggling to grow Source: Kantar Retail analysis

24 Things to Remember: Shoppers Are Changing!Shoppers are Embracing Private Label Retailers are Adding Premium Appeals to their Labels Private Labels Can Be as Trusted as National Brands Private Brands Can Be a Bellwether for a Retailer’s Strategy Don’t Forget: New Challenges Can Mean Fresh Opportunities The Opportunity Has Never Been Better Source: Kantar Retail research and analysis

25 Planning Conference Register today! Essential Insights to Drive Growth(previously Mid Year Forum) Essential Insights to Drive Growth May Chicago, IL Join Kantar Retail cross-channel thought leaders for a two-day event designed provide you with planning frameworks to customize your retailer plans. Assortment, promotions, pricing, and retailer segmentation are all under intense scrutiny. This Conference will feature Kantar Retail’s latest synthesis of macroeconomic, shopper, and retailer insights to guide plans. To register visit https://KRevents.cvent.com/PlanningConference or

26 For further information please refer to www.kantarretailiq.comContact: Diana Sheehan T: +1 (708) @KR_DianaS @kantarretail