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The 2011 Mid-Year Performance Review The Top 100 Brands EXECUTIVE

Summary

How are leading CPG brands performing in today’s difficult economy? The answer is mixed. Our data shows that, as a group, the Top 100 Brands within the Catalina Network grew only slightly during a 52-week period ending mid-year 2011. Our findings also show that revenues could have increased far more significantly had brands held onto their loyal consumers. For the average brand, the lost opportunity due to loyalty declines and defections was nearly four times greater than its growth in sales.

TOP 100 RESULTS Total revenues for the Top 100 Brands grew less than one percent. Forty-three brands declined in revenues by an average of $23.6 million, while 57 brands increased sales revenues by an average of $23.3 million (see figure 2, page 3). By category, top grocery brands within the beverage, shelf stable, produce and dairy segments achieved average growth rates that were two to three times greater than the Top 100. Meanwhile, on average, the top brands in frozen foods and bakery had declining revenues (see figure 7, page 5).

Lost loyalty digs a deep financial hole out of which brands must fight to climb every year. While the average Top 100 Brand managed to increase revenues by 2.2 percent during the 52-week period ending at the start of July 2011, that growth rate could have been much greater had they held onto their highly loyal consumers from the previous period. In fact, the lost opportunity due to reduced loyalty and defection was equal to 8.5 percent of total revenues for the average brand, or nearly four times greater than the average revenue increase.

FIG. 1

WHAT STUNTED GROWTH? Lost opportunity from loyalty erosion was nearly 4X greater than the revenue increase realized by the average Top 100 Brand.

8.5%

SURPRISING EFFECTS OF LOYALTY The 2011 Mid-Year Performance Review also demonstrates the tremendous impact of consumer loyalty on brands. Loyalty is one of the most powerful, yet least understood forces in building CPG brands. Every year, brands experience a dramatic exodus of previously loyal consumers, resulting in significant reductions in potential volume and share.

Š 2011 Catalina Marketing Corporation

2.2%

Revenue Gain for Average Brand

Lost Opportunity for Average Brand

Source: Sample of the Catalina Network, spanning about 21,000 Food, Drug, and Mass stores.

Although this does not include all Retailers and Stores, conclusions are generally in line with national network results.

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OTHER KEY FINDINGS Catalina encourages you to look at the provocative charts and graphs on pages 3, 4, and 5 of this review which show key measures of the Top 100 Brands, Categories, Top Revenue Gaining Brands, and Top Revenue Declining Brands. In addition, these graphs show some surprising metrics that highlight the dramatic effects of loyalty on most brands.

Below are key findings from these charts that all brand managers and executives should pay close attention to if they want to maximize success: • The Top 100 Brands had an average opportunity loss equal to 8.5 percent of revenues, or $25.8 million, due to defections and reduced loyalty among consumers who were highly loyal in the previous 52-week period (see figure 1, page 1).

• Some 46 percent of highly loyal consumers in the first 52-week period of this study either reduced loyalty (26 percent) or completely defected from the brand (20 percent) in the next year (see figure 3, page 3).

• Even the top five revenue gainers experienced significant churn by loyal consumers, representing an average opportunity loss of six percent. And winning brands like these tended to hold on to more of their loyals than the average Top 100 Brand, whose lost opportunity was even more significant (see figure 4, page 4).

• The top five revenue decliners averaged a lost opportunity of some 11.1 percent, far higher than the average brand (see figure 5, page 4).

• Brand defection happens quickly. In fact, one out of three fully loyal shoppers will completely abandon a brand for the next year after just one competitive purchase (see figure 6, page 5).

PROTECTING HIGH-VALUE LOYALS Catalina's experience working with leading brands has demonstrated that brand managers who make loyalty an important part of their marketing strategy by concentrating on their highest-value consumers deliver significant financial efficiencies and brand building gains. Past Catalina research shows that just 1 out of 40 shoppers makes up 80 percent of volume for the average CPG brand, further highlighting the importance of keeping these customers. Only Catalina can find, understand and reach these important brand buyers to dramatically reduce churn rates and maximize overall brand

© 2011 Catalina Marketing Corporation

share and volume. For example, based on analysis of three years of purchase behavior by your consumers, Catalina can predict which of your high-value consumers are most likely to reduce loyalty or defect, and then reach those buyers with relevant messaging and offers that will keep them returning to your brand. Catalina can even successfully drive your best consumers to join online loyalty and social programs. By turning around potential defection through customized campaigns that reach your most important loyal consumers, brands can actually increase purchase frequency and size.

To learn more about how Catalina can help you acquire, maximize and retain loyal, high-value consumers, call 1-877-210-1917.

METHODOLOGY The 2011 Mid-Year Performance Review looks at the sales and loyalty performance of the Top 100 Brands from a sample of the Catalina Network that spans across 21,000 food, drug, and mass stores.

Although this does not include all retail stores, the conclusions in this report are generally in line with national network results. Catalina's total U.S. network includes more than 26,000 retail grocery, drug and mass merchant stores, with access to the purchasing behaviors of approximately 90 million American households.

The study examines revenue and loyalty changes between two 52-week periods. The first period ends July 4, 2010, and the second ends July 3, 2011.

Highly loyal consumers were defined as those who made 70 percent or more of all category purchases with a single brand during the first 52-week period.

Loyalty reductions and total brand defections were tracked among these consumers during the second 52-week period. Shoppers must have purchased within the category in both 52-week periods to be included in loyalty calculations.

HOW DOES LOYALTY IMPACT YOUR BRAND? Catalina can help you efficiently motivate consumers to try your products, increase consumption, and stay loyal. Give us a call for a customized plan for your brands at 1-877-210-1917.

To view a one-minute video about Catalina, click here.

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FIG. 2

REVENUES GREW SLIGHTLY The Top 100 Brands grew revenues within in the Catalina Network by less than one percent. 43 brands declined in revenues by an average of $23.6 million. 57 brands increased revenues by an average of $23.3 million dollars.

Increase of

0.7%

$43.7

$44.0

July '09 - June '10

July '10 - June '11

Source: Sample of the Catalina Network, spanning about 21,000 Food, Drug, and Mass stores. Although this does not include all Retailers and Stores, conclusions are generally in line with national network results.

FIG. 13

LOYALS ARE NOT GUARANTEED TO STAY 46% of highly loyal consumers either reduced loyalty or completely left the average Top 100 Brand.*

Remaining High Loyals

High Loyals

54%

100%

Defectors 20% June '09 - June '10

Reduced Loyalty 26% June '10 - June '11

*Shoppers must have purchased with the category in both 52-week periods to be included in loyalty calculations.

Highly loyal is defined as shoppers who make 70% or more of all category purchases with a single brand.

Source: Sample of the Catalina Network, spanning about 21,000 Food, Drug, and Mass stores. Although this does not include all Retailers and Stores, conclusions are generally in line with national network results.

Š 2011 Catalina Marketing Corporation

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FIG. 4

TOP GAINERS KEPT LOYALS BETTER Lost Loyalty Opportunity Averaged 6% of Sales vs. 8.5% for the Average Brand % Revenue Gain

Total Lost Opportunity Due to Loyalty (millions)

Loyalty Opportunity as % of Total Revenue

52.9%

$11.3

6.0%

34.7%

$8.1

3.9%

31.2%

$15.9

5.9%

19.7%

$19.7

5.2%

16.8%

$68.6

9.0%

TOP FIVE REVENUE GAINERS, July '10 - June '11

Mayonnaise Brand

Frozen Waffles Brand

1.0M Shoppers -$3.98 Spend*

3.2M Shoppers

61%

19%

6.4M Shoppers

78%

13%

5.3M Shoppers

Yogurt Brand

20% 1.0M Shoppers 0.7M Shoppers -$3.33 Spend -$6.33 Spend

Enhanced Water Brand

Packaged Salads Brand

1.1M Shoppers -$6.83 Spend*

9%

1.0M Shoppers -$8.35 Spend

0.8M Shoppers -$8.98 Spend

14%

11%

74%

1.4M Shoppers -$10.62 Spend

5.8M Shoppers

76%

18% 3.9M Shoppers -$13.24 Spend Change

6.0M Shoppers

53% Reduced Loyalty

6%

1.4M Shoppers -$11.94 Spend Change

34%

Remained Loyal

0.5M Shoppers -$10.65 Spend

13%

Fully Defected

*Average opportunity loss per shopper due to loyalty decline or defection.

Source: Sample of the Catalina Network, spanning about 21,000 Food, Drug, and Mass stores. Although this does not include all Retailers and Stores, conclusions are generally in line with national network results.

FIG. 5

TOP DECLINERS LET MORE LOYALS LEAVE Lost Loyalty Opportunity Averaged 11.1% of Sales vs. 8.5% for the Average Brand % Revenue (Loss)

Total Lost Opportunity Due to Loyalty (millions)

Loyalty Opportunity as % of Total Sales

(16.8)%

$15.8

9.7%

(10.0)%

$54.0

11.7%

(9.5)%

$25.5

12.5%

(7.9)%

$50.4

9.3%

(7.4)%

$42.3

12.3%

TOP FIVE REVENUE DECLINERS, July '10 - June '11 0.7M Shoppers -$10.94 Spend

0.6M Shoppers

Ice Cream Brand

28%

0.9M Shoppers -$10.12 Spend

31%

41% 3..1M Shoppers -$12.74 Spend

7.9M Shoppers

Packaged Salads Brand

65%

26%

9%

2.4M Shoppers 1.7M Shoppers -$5.62 Spend Change -$7.28 Spend

9.6M Shoppers

Desserts Brand

71%

17% 1.5M Shoppers -$21.32 Spend

4.2M Shoppers

Frozen Dinner Brand

63%

23% 3.2M Shoppers -$8.00 Spend

5.1M Shoppers

Snacks Brand

1.1M Shoppers -$13.07 Spend

50% Remained Loyal

32% Reduced Loyalty

12% 0.9M Shoppers -$20.07 Spend

13% 1.9M Shoppers -$8.94 Spend

18%

Fully Defected

*Average opportunity loss per shopper due to loyalty decline or defection.

Source: Sample of the Catalina Network, spanning about 21,000 Food, Drug, and Mass stores. Although this does not include all Retailers and Stores, conclusions are generally in line with national network results.

Š 2011 Catalina Marketing Corporation

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FIG. 6

EARLY INTERVENTION IS ESSENTIAL Defection often occurs quickly.

One out of three shoppers who were 100 percent loyal to a brand for 52 weeks completely abandoned that brand the next year after making just one purchase with a competitive brand.

32%

40%

44%

46%

1

2

3

4

Competitive Purchases

Source: Sample of the Catalina Network, spanning about 21,000 Food, Drug, and Mass stores. Although this does not include all Retailers and Stores, conclusions are generally in line with national network results.

FIG. 7

AVERAGE BRAND PERFORMANCE

BY CATEGORY* How did your category do?

Category Group

Number of Brands

Average Sales % Change

Average Lost Opportunity in Dollars

Loyalty Opportunity as % of Total Sales

Average % of Highly Loyal Consumers Who Reduced Loyalty or Left the Brand

Beverage

14

6% $27,954,552 7%

37%

Shelf Stable

11

5%

43%

Produce

2

5% $36,851,522 8%

30%

Dairy

7

5% $32,229,592 8%

43%

Candy

3

4% $18,853,134 6%

79%

Refrigerated 10

2% $21,699,088 8%

49%

Snacks

9

2% $23,868,100 8%

53%

Alcohol

4

0% $26,066,874 6%

50%

Frozen

8

-1% $29,399,331 9%

46%

$23,775,608

8%

Bakery 5 -3% $13,555,883 5% 57% *Looks at key metrics among the Top 100 Brands by category.

Source: Sample of the Catalina Network, spanning about 21,000 Food, Drug, and Mass stores. Although this does not include all Retailers and Stores, conclusions are generally in line with national network results.

Š 2011 Catalina Marketing Corporation