ECR Europe Forum '08. Jointly Agreed Growth – driving the JAG

Jointly Agreed Growth (JAG) The essence of JAG JAG Break-out session May 28th from 11.45 AM to 1 PM 0

Agenda Agenda Timing Speakers Looking back (from 2016) 11:50 - 12:05 • Phil Humphreys (Diageo) to the Genesis of JAG • Sarah Bradbury (Tesco) The essence of JAG 12:05 - 12:40 • Jens Weng (McKinsey&Company) • Jean-Albert Nyssens (McKinsey&Company) • Company testimonials So what's next? 12:40 - 12:45 • Phil Humphreys • Sarah Bradbury Q&A 12:45 - 13:00 • Facilitated by McKinsey&Company 1

Current negotiation model not focused on shopper How focused is the current negotiation model on the consumer and shopper, on driving demand and generating growth? Percent of respondents Not at all 22 Not really 55 A bit 10 Moderately 8 Heavily 4 Source: ECR Europe Conference 2

What’s ‘new’ about JAG? JAG is … • … a shopper and consumer-centric approach aimed at improving category offer • … a business plan to drive consumer demand and generate sales growth for both retailer and supplier • … a three-year rolling business plan with annual reviews • … a fact-based approach changing buyers’ and sellers’ mindsets , behaviours and approach to negotiation 3

Partners need to overcome some barriers to growth Trade barriers Jointly Agreed Growth (JAG) Lack of strategic alignment A Jointly Agreed Growth strategy Lack of long-term visibility / focus A 3-year framework plan Fear of private label match impeding An agreed category strategy and set of product introduction principles Slow distribution of new products / Long-term integrated process avoiding general availability issues supply chain disruption A set of agreed pre-defined growth Lack of KPIs to measure effective criteria, balancing financial, marketing return and operational KPIs 4

JAG actions drive win-win-win growth through genuine innovation Transaction Traffic Frequency size Example Olympic game Reduce cycle time Premium promotion for toothbrush smoothies versus traditional juices Benefits • Consumer • Opportunity to • Improved dental • Healthier win ticket to health lifestyle Shanghai • Retailer • Increased traffic • Increased sales • Increased basket size • Supplier • Increased sales • Increased sales • Increased sales 5

The JAG process Step 1 Review the economic and Step 2 shopper environment Review sales and agree on prioritized growth levers Step 5 Conditions Monitor for and adapt success Step 3 Define and agree on 3-year Step 4 JAG Execute the plan JAG plan 6

The JAG process – Step 1 Objectives Step 1 Review the economic and Step 2 • Develop common shopper environment Review sales and agree on understanding on prioritized growth levers overall context for Step 5 growth Monitor and Conditions adapt for success Step 3 Define and • Build rationales to agree on 3- justify growth targets year JAG Step 4 plan Execute the JAG plan 7

The JAG process – Step 2 Objectives • Diagnose category Step 1 Step 2 dynamics Review the economic and shopper environment Review sales and agree on • Understand where prioritized incremental growth growth levers Step 5 comes from Conditions Monitor and adapt for success Step 3 • Select, estimate Define and agree on 3- potential financial year JAG impact and prioritize Step 4 plan Execute the growth levers for the JAG plan category • Draft action plan for priority levers 8

The JAG process – Step 3 Objectives Step 1 • Finalize JAG plan by Review the economic and Step 2 agreeing on: shopper environment Review sales and agree on prioritized –Sales uplift growth levers Step 5 –Investments Conditions Monitor and adapt for success Step 3 allocation Define and agree on 3- –Activities year JAG Step 4 plan –Key performance Execute the JAG plan indicators (KPI) and JAG plan monitoring 9

The JAG process – Step 4 Objectives Step 1 • Ensure alignment on Review the economic and Step 2 JAG plan shopper environment Review sales and agree on prioritized • Develop clear growth levers implementation plan Step 5 Monitor and Conditions that ensures a fluent adapt for success Step 3 Define and progress of agree on 3- year JAG execution Step 4 plan Execute the JAG plan 10

The JAG process – Step 5 Objectives Step 1 • Ensure realization of Review the economic and Step 2 targets of JAG shopper environment Review sales and agree on collaboration: prioritized growth levers –Review project Step 5 Monitor and Conditions plans and monitor adapt for success Step 3 Define and progress agree on 3- year JAG –Evaluate overall Step 4 plan Execute the collaboration JAG plan 11

Conditions for success Jointly Agreed Growth Agreement Trust between collaboration partners Sufficient and quality resources Information sharing People performance review 12

The JAG journey continues … Next steps • Launch pilots • Refine JAG manual based on experience from pilots • Develop JAG training program with ICI • Further integrate ECR practices to address all growth levers 13

Pilots are currently being finalized Who? Where? What category? • UK • Healthcare • Eastern Europe • Spirits • Poland • Coffee or confectionary (TBD) • The Netherlands • Cosmetics • UK • Skincare • France, Spain & Italy • Household items Many other pilots are still under discussion 14

Toolkit of templates available for participating companies Achieved Forecast Growth (%) n-4 n-3 n-2 n-1 n n+1 n+2 n+3 GDP Private Consumption - Food Investments/Budget (Value - - Beverages Year n+1 Year n+2… N° of Stores Weighted Distribution Responsible financial or not, e.g., GRPs) - Personal care Activities to support growth - Household Actions 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 n+1 n+2 n+3 n+1 n+2 n+3 n+1 n+2 n+3 Out of home food and beverages Assortment / Planogram Household disposable income Population Action 1 Inflation Action 2 Household savings ratio Action 3 Value growth (%) n-4 n-3 n-2 n-1 n n+1 n+2 n+3 Product innovation Hypermarkets Action 1 Supermarkets Convenience Action 2 Discount Action 3 Drugstores In-store activation/ Promotions Total Action 1 Region value share (%) Agreement on Growth Strategy and its relevant n-4 targets n-3 n-2 n-1 n n+1 n+2 n+3 Action 2 Region 1 Action 3 Region 2 Region 3 Achieved Current Plan On-shelf availability Region 4 n-2 n-1 n, YTD Year n n+1 n+2 n+3 Action 1 Region 5 Action 2 Population segmentation (No. SALES TURNOVER FOR SUPPLIER BRANDS IN CATEGORY (sell-out from retailer) n-4 n-3 n-2 n-1 n n+1 n+2 n+3 Action 3 Of households) Current Assortment (Total all growth activities to support sales) TOTAL 1 member household Linear growth (market/consumption growth rate), no specific initiativeshousehold 2 members Manufacturer In-store activities (displays, features, in store media…) 3 members household Retailer Account Manager Buyer Price/ discounts 4 or more members household Director Director Assortment Extension Grocery shopping behavior n-4 n-3 n-2 n-1 n n+1 n+2 n+3 VP VP - Existing products not previously listed at retailer (listed on market) of facia visited/year Average No. - New products (to be launched) Only shop at one retailer (%) Total (Current Assortment + Assortment Extension) Shop at 2 fascia Shop at 3 fascia GROWTH RATE (%) Shop at 4 fascia Sales of Supplier brands in Category at retailer Shop at 5+ fascia Retailer Category Sales nationwide INVESTMENTS (Marketing, Trade, etc…) in VALUE Manufacturer Retailer KPI Unit Year n-1 Year n Year n Year n+1 Year n+2 Year n+3 Do we use this KPI? Report frequency Source (Yes/No) LOGISTICS Financial KPIs YTD Target Target Target Target Inventory Turnover Category sales - Volume units Annual Turns Category sales - Value Euro Inventory Level (N° of Days) Category Growth - Volume % Service level Category Growth - Value % Financial KPIs Market share of category at retailer % Market share of supplier in category % DISTRIBUTION Sales per store Units Number of Channels Sales per sqm Euro Number of Stores Incremental supplier sales EUR Sales Weighted Distribution Consumer / Shopper KPIs SHOPPER METRICS Penetration % Penetration New category shoppers % Frequency Purchase frequency define time Loyalty Repeat Purchase % Consumer / Shopper KPIs Loyalty % Shopper Satisfation (activity) % Shopper Awareness (activity) % Manufacturer Retailer Average transaction size Euro Account Manager Buyer Director Director Operational KPIs VP VP The ECR Europe Essential Guide to Day to Day Category Management (Appendix 5) lists a set of consumer, market, financial and productivity measures with the data source origin and the recommended report frequency http://www.ecrnet.org/04-publications/blue_books/pub_2000_essential_guide_daytoday_catman.pdf Assortment / Planogram Product innovation In-store activation/ Promotions On-shelf availability 15

For further information… • Marianne Dehousse, marianne.dehousse@ecreurope.com ECR Europe • Phil Humphreys, phil.humphreys@diageo.com Diageo • Sarah Bradbury, sarah.bradbury@uk.tesco.com Tesco • Jens Weng, jens_weng@mckinsey.com McKinsey&Company • Jean-Albert Nyssens, Jean-albert_nyssens@mckinsey.com McKinsey&Company 16

Acknowledgements 17

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ECR Europe Forum '08. Jointly Agreed Growth – driving the JAG

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ECR Europe Forum ’08. Jointly Agreed Growth – driving the JAG — Presentation Transcript