1
Hispanic Allocation on Revenue Growth, 3/7/2012
Revised April 5, 2012 (Nestle & Appendix)
2
Hispanic Allocation on Revenue Growth, 3/7/2012
Background
Hispanic Allocation on Revenue Growth
Since 1998, AHAA has be...
3
Hispanic Allocation on Revenue Growth, 3/7/2012
Hispanic Market Highlights
Hispanic Allocation on Revenue Growth
MARKET ...
4
Hispanic Allocation on Revenue Growth, 3/7/2012
Challenge
• Companies challenged by anemic growth more than ever
– Consu...
5
Hispanic Allocation on Revenue Growth, 3/7/2012
Challenge
All companies have growing challenge of balancing
competing ne...
6
Hispanic Allocation on Revenue Growth, 3/7/2012
About the Author & Sources
Hispanic Allocation on Revenue Growth
• The s...
7
Hispanic Allocation on Revenue Growth, 3/7/2012Hispanic Allocation on Revenue Growth
Study Objectives
Presented by Carlo...
8
Hispanic Allocation on Revenue Growth, 3/7/2012
Is there a significant difference in the revenue growth rate attained by...
9
Hispanic Allocation on Revenue Growth, 3/7/2012
Study Variables
Hispanic Allocation on Revenue Growth
Aggregate Hispanic...
10
Hispanic Allocation on Revenue Growth, 3/7/2012
Methodology
Hispanic Allocation on Revenue Growth
A main CPG regression...
11
Hispanic Allocation on Revenue Growth, 3/7/2012
CPGs & Retailers in Study
12
Hispanic Allocation on Revenue Growth, 3/7/2012
Study Significance
Hispanic Allocation on Revenue Growth
All findings d...
13
Hispanic Allocation on Revenue Growth, 3/7/2012Hispanic Allocation on Revenue Growth
Study Findings
14
Hispanic Allocation on Revenue Growth, 3/7/2012
Are CPGs Growth Rates Related to
Hispanic Focus?
Hispanic Allocation on...
15
Hispanic Allocation on Revenue Growth, 3/7/2012
Key Findings
Hispanic Allocation on Revenue Growth
• Hispanic Allocatio...
16
Hispanic Allocation on Revenue Growth, 3/7/2012
Key Findings
Hispanic Allocation on Revenue Growth
Organic revenue
grow...
17
Hispanic Allocation on Revenue Growth, 3/7/2012
Top 30 Percentile Hispanic Marketers
By Allocation And Overall Revenue ...
18
Hispanic Allocation on Revenue Growth, 3/7/2012
Key Findings
All tests validated the
same findings.
Hispanic Allocation...
19
Hispanic Allocation on Revenue Growth, 3/7/2012Hispanic Allocation on Revenue Growth
Why Hispanic Consumers Are So Impo...
20
Hispanic Allocation on Revenue Growth, 3/7/2012Hispanic Allocation on Revenue Growth
Much faster household formation ha...
21
Hispanic Allocation on Revenue Growth, 3/7/2012Hispanic Allocation on Revenue Growth
Much larger Households means heavi...
22
Hispanic Allocation on Revenue Growth, 3/7/2012Hispanic Allocation on Revenue Growth
Hispanic households food at home e...
23
Hispanic Allocation on Revenue Growth, 3/7/2012Hispanic Allocation on Revenue Growth
The younger age and larger Hispani...
24
Hispanic Allocation on Revenue Growth, 3/7/2012Hispanic Allocation on Revenue Growth
More influenced by strong brands
H...
25
Hispanic Allocation on Revenue Growth, 3/7/2012Hispanic Allocation on Revenue Growth
Less price sensitive
Hispanics are...
26
Hispanic Allocation on Revenue Growth, 3/7/2012
Status & Image Conscious
Hispanics are CPG valuable customers
Top Box: ...
27
Hispanic Allocation on Revenue Growth, 3/7/2012
See Shopping as Fun
Hispanics are CPG valuable customers
Top Box: Agree...
28
Hispanic Allocation on Revenue Growth, 3/7/2012
Key Category Influentials
Hispanics are CPG valuable customers
My famil...
29
Hispanic Allocation on Revenue Growth, 3/7/2012
Conclusions
& Implications
30
Hispanic Allocation on Revenue Growth, 3/7/2012
Key Takeaways
For Consumer Packaged Goods
Statistical evidence demonstr...
31
Hispanic Allocation on Revenue Growth, 3/7/2012Hispanic Allocation on Revenue Growth
Implications for Companies
• Real ...
32
Hispanic Allocation on Revenue Growth, 3/7/2012
The U.S. Hispanic Consumer
Opportunity
Robert Moskow,
Research Analyst
...
33
Hispanic Allocation on Revenue Growth, 3/7/2012
Top Five Observations
• Wall Street should be paying more attention to ...
34
Hispanic Allocation on Revenue Growth, 3/7/2012
Why Does Wall Street Tend To Overlook
Hispanic Marketing Expertise?
Sou...
35
Hispanic Allocation on Revenue Growth, 3/7/2012
In reality, “Leaders” have outpaced
“Laggards” in North America by 3.1%...
36
Hispanic Allocation on Revenue Growth, 3/7/2012
Good Hispanic Marketing Organizations
Attract Best-In-Class Managers
• ...
37
Hispanic Allocation on Revenue Growth, 3/7/2012
The trend is to push more of the
responsibility into the brand teams
St...
38
Hispanic Allocation on Revenue Growth, 3/7/2012
2.1% 2.4%
4.4%
13.1%
0%
2%
4%
6%
8%
10%
12%
14%
2008 2009 2010 2011 (E)...
39
Hispanic Allocation on Revenue Growth, 3/7/2012
Mexican
65.7%
Other
5.1%Central
American
8.3%
Cuban
3.4%
Puerto Rican
9...
40
Hispanic Allocation on Revenue Growth, 3/7/2012
Companies Mentioned (Price as of 06 Mar 12)
Campbell Soup Company (CPB,...
41
Hispanic Allocation on Revenue Growth, 3/7/2012
Credit Suisse provided non-investment banking services, which may inclu...
42
Hispanic Allocation on Revenue Growth, 3/7/2012
Q & A Discussion
43
Hispanic Allocation on Revenue Growth, 3/7/2012
Statistical Detail
& Model Validation
Presented by Dr. Cristina Garcia
...
44
Hispanic Allocation on Revenue Growth, 3/7/2012
Methodology Highlights
• Started by looking at the Top 500
overall Adve...
45
Hispanic Allocation on Revenue Growth, 3/7/2012
Test Validations
All models validated the
same findings.
Hispanic Alloc...
46
Hispanic Allocation on Revenue Growth, 3/7/2012
Consumer Packaged Goods Regression
Model
• Hispanic Allocation alone ex...
47
Hispanic Allocation on Revenue Growth, 3/7/2012
CPG Model Findings
– For every additional percentage point
increase in ...
48
Hispanic Allocation on Revenue Growth, 3/7/2012
Test 1: Is Aggregate Hispanic Allocation Important?
YES! Hispanic Alloc...
49
Hispanic Allocation on Revenue Growth, 3/7/2012
TEST 2: Individual Years Growth and Aggregate Hispanic Allocation
Reval...
50
Hispanic Allocation on Revenue Growth, 3/7/2012
Test 3: Hispanic Allocation, Super Categories and Revenue CAGR
Revalida...
51
Hispanic Allocation on Revenue Growth, 3/7/2012
1
Hispanic Allocation on Revenue Growth
Conclusions of Tests
• In all t...
52
Hispanic Allocation on Revenue Growth, 3/7/2012
Appendix
53
Hispanic Allocation on Revenue Growth, 3/7/2012
Sectors/Super Categories
Breakdown
Top 500
Advertisers
Super-
Categorie...
54
Hispanic Allocation on Revenue Growth, 3/7/2012
Appendix A
Ranking By Hispanic Allocation
Company
2006-2010 Hispanic
Al...
55
Hispanic Allocation on Revenue Growth, 3/7/2012
Ranking By Hispanic Allocation Cont.
Company
2006-2010 Hispanic
Allocat...
56
Hispanic Allocation on Revenue Growth, 3/7/2012
Appendix B
Ranking By Growth Rate
Company
2006-2010 Revenue
Growth Rate...
57
Hispanic Allocation on Revenue Growth, 3/7/2012Hispanic Allocation on Revenue Growth
Ranking By Growth Rate Cont.
Compa...
58
Hispanic Allocation on Revenue Growth, 3/7/2012
Appendix C
Regression Analysis Results
Test 1 Test 2 Test 3 CPG Model
V...
59
Hispanic Allocation on Revenue Growth, 3/7/2012
Appendix D
Graphical Analysis
Graph 1
60
Hispanic Allocation on Revenue Growth, 3/7/2012
Appendix D
Graphical Analysis
Chart 1
61
Hispanic Allocation on Revenue Growth, 3/7/2012
Appendix D
Graphical Analysis
Chart 2
62
Hispanic Allocation on Revenue Growth, 3/7/2012
Appendix E
GfK MRI Hispanic Data Notes
• GfK MRI has measured Hispanics...
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AHAA Study: 2012 Hispanic Allocation Impact on Revenue Growth Study Series: Part II - CPG Sector

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AHAA presented new research on how Consumer Packaged Goods (CPG) and CPG-driven retail companies are increasing their investment and honing their strategies to better target Hispanic consumers. The outcome of this increased focus is impacting companies overall growth rate and is being noticed by Wall Street analysts.

Some of the companies featured in this new study include:
Coca-Cola, Ralcorp, Groupe Danone, Nestle, Walgreens, Church & Dwight, General Mills, Hormel Foods, Walmart, CVS/Caremark, McCormick, Dean Foods, LVMH Moet Hennessy, Louis Vuitton, Tyson Foods, JM Smucker, Kellogg, Clorox, Target, Pernod Ricard, Campbell Soup, Kimberly-Clark, Diageo, Procter & Gamble, Hershey, Brown-Forman, Unilever, Big Lots, Conagra Foods, Kraft Foods, Pepsico, Henkel Kgaa, Nutrisystem, Newell Rubbermaid, Fortune Brands, and Sara Lee.

The data will show the strong correlation (with a 95% confidence level) between corporate revenue growth and Hispanic marketing -- indicating that the Hispanic market can be a big determinant in corporate success.

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AHAA Study: 2012 Hispanic Allocation Impact on Revenue Growth Study Series: Part II - CPG Sector

  1. 1. 1 Hispanic Allocation on Revenue Growth, 3/7/2012 Revised April 5, 2012 (Nestle & Appendix)
  2. 2. 2 Hispanic Allocation on Revenue Growth, 3/7/2012 Background Hispanic Allocation on Revenue Growth Since 1998, AHAA has been helping its members serve its corporate clients through breakthrough independent studies that • increase understanding of what it takes to win the market, • share new concepts • and identify best practices of marketing to Latinos. Most recently, in October 2011, Part 1 of AHAA’s study series on drivers to growth found a strong positive correlation between allocation of ad resources and topline growth. • Hispanic marketing ‘Best-In-Class’ companies have a sustainable competitive growth advantage over the ‘Laggards’.
  3. 3. 3 Hispanic Allocation on Revenue Growth, 3/7/2012 Hispanic Market Highlights Hispanic Allocation on Revenue Growth MARKET SIZE – 2010 Population 50.7M1 – 2011 Hispanic Share of US 17%2, 1 in 6 GROWTH – Hispanic Population 2000-2010 CAGR v Non-Hispanic 3.6% v. 0.5%3 – Share of Total US 2000-2010 Growth 56%4 – Share of Labor Force Growth 2010-2020 74%7 ECONOMIC – 2012 Estimated Buying Power $1.2 Trillion5 – Hispanic Buying Power 2000-2010 CAGR v. Non-Hispanic 7.8% v. 3.4%6
  4. 4. 4 Hispanic Allocation on Revenue Growth, 3/7/2012 Challenge • Companies challenged by anemic growth more than ever – Consumers have changed; more fickle today – Economic downturn will make consumers more frugal and value- oriented over the long run – Technology and new media create both opportunities to reach audiences and complexity as well – Possible “Reset” of economy could structurally impact certain sectors and jobs – Changing demographics (age) and multicultural trends create new potential sources for growth Hispanic Allocation on Revenue Growth
  5. 5. 5 Hispanic Allocation on Revenue Growth, 3/7/2012 Challenge All companies have growing challenge of balancing competing needs 1. Holding on to ‘General Market’ 2. Finding new growth 3. Capturing fair share of growth markets Hispanic Allocation on Revenue Growth
  6. 6. 6 Hispanic Allocation on Revenue Growth, 3/7/2012 About the Author & Sources Hispanic Allocation on Revenue Growth • The study was commissioned by AHAA’s Research Committee and developed and executed by Santiago Solutions Group (SSG), a growth strategy consultancy. • Independent methodological review performed by Dr. Cristina Garcia, professor of mathematics & statistics at USC. • Financial revenue growth data extracted from companies 10Ks. • Parent company ad spend data for 2006-2010 Hispanic media and non-Hispanic media collected from The Nielsen Company. • Consumer habits, attitudes and values by GfK Roper & GfK MRI syndicated studies with sample of 53K (sampling details in Appendix E)
  7. 7. 7 Hispanic Allocation on Revenue Growth, 3/7/2012Hispanic Allocation on Revenue Growth Study Objectives Presented by Carlos Santiago, President & Chief Strategist, Santiago Solutions Group Carlos@SantiagoSolutionsGroup.com (818) 736 5661
  8. 8. 8 Hispanic Allocation on Revenue Growth, 3/7/2012 Is there a significant difference in the revenue growth rate attained by CPG companies which designate higher focus and resources to the Hispanic market and those that focus less? What do they do differently? What factors distinguish companies that capture Hispanic growth successfully from those that underperform with this segment? Study Objectives Hispanic Allocation on Revenue Growth
  9. 9. 9 Hispanic Allocation on Revenue Growth, 3/7/2012 Study Variables Hispanic Allocation on Revenue Growth Aggregate Hispanic Allocation 2006- 2010: Independent variable 1. The input being changed possibly impacting Revenue CAGR. 2. The % of total advertisement dollars spent in TV, Radio, and Print (per Nielsen tracking) assigned to Hispanic-centric media channels throughout 2006 to 2010. 2006-2010 Revenue CAGR: Dependent variable 1. Revenue CAGR is our dependent variable which was tested against different levels of Hispanic Allocation. 2. Revenue as reflected from topline, organic US-only consumer demand per 10Ks. − may have been adjusted to exclude extraordinary transactions and normalize revenue from acquisitions, if enough clear data has been stated in corporate financials.
  10. 10. 10 Hispanic Allocation on Revenue Growth, 3/7/2012 Methodology Hispanic Allocation on Revenue Growth A main CPG regression with 39 companies was validated by three other test regression models with larger sample sizes. Four total regression tests • All confirmed the same findings at statistical significance • Details of statistical analysis will follow after Q&A section. Aggregate 06-10 Hispanic Allocation N=211 Aggregate Hispanic 06-10 Allocation AND Year by Year Revenue Growth N=211 Aggregate Hispanic 06- 10 Allocation, Year by Year Revenue Growth, AND Super Categories N=211 CPGs N=39
  11. 11. 11 Hispanic Allocation on Revenue Growth, 3/7/2012 CPGs & Retailers in Study
  12. 12. 12 Hispanic Allocation on Revenue Growth, 3/7/2012 Study Significance Hispanic Allocation on Revenue Growth All findings discussed in the presentation are statistically significant at a 95% confidence level or better.
  13. 13. 13 Hispanic Allocation on Revenue Growth, 3/7/2012Hispanic Allocation on Revenue Growth Study Findings
  14. 14. 14 Hispanic Allocation on Revenue Growth, 3/7/2012 Are CPGs Growth Rates Related to Hispanic Focus? Hispanic Allocation on Revenue Growth There is a direct & positive relationship between CPG’s Hispanic ad allocation and their topline revenue growth. Please see Appendix D (Graph 1) for Detailed Graph and Graphical Analysis.
  15. 15. 15 Hispanic Allocation on Revenue Growth, 3/7/2012 Key Findings Hispanic Allocation on Revenue Growth • Hispanic Allocation alone explains about 35% of CPGs change in topline revenue growth – The other 65% may include other critical factors such as brand awareness/equity, new product development, management focus, measurement tools, distribution, sales force, past performance, community position, organization structure, talent, overall segmentation expertise, etc. – Further analysis is needed to determine what exactly the other drivers of revenue growth are. Hispanic Marketing 35% Other Drivers of Growth 65% CPGs & Retailers Revenue Growth Drivers For Consumer Packaged Goods and their retailers
  16. 16. 16 Hispanic Allocation on Revenue Growth, 3/7/2012 Key Findings Hispanic Allocation on Revenue Growth Organic revenue growth rates decline sharply as Hispanic share of budgets decrease and vice versa. 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% Top Allocation (≥70th Percentile) Middle Allocation (40th - 70th Percentile) Low Allocation (<40th Percentile) 7.7% 4.7% 0.9% 6.8% 2.2% 0.6% Allocation Tiers Average 06-10 Hispanic Allocation Average 06-10 Revenue CAGR
  17. 17. 17 Hispanic Allocation on Revenue Growth, 3/7/2012 Top 30 Percentile Hispanic Marketers By Allocation And Overall Revenue Growth Hispanic Allocation on Revenue Growth Top 30 Percentile Please see Appendix D (Graph 1) for Detailed Graphical Analysis.
  18. 18. 18 Hispanic Allocation on Revenue Growth, 3/7/2012 Key Findings All tests validated the same findings. Hispanic Allocation has a direct & significant impact on companies overall revenue growth. Aggregate 06-10 Hispanic Allocation N=211 Aggregate Hispanic 06-10 Allocation AND Year by Year Revenue Growth N=211 Aggregate Hispanic 06- 10 Allocation, Year by Year Revenue Growth, AND Super Categories N=211 CPGs N=39
  19. 19. 19 Hispanic Allocation on Revenue Growth, 3/7/2012Hispanic Allocation on Revenue Growth Why Hispanic Consumers Are So Important Today?
  20. 20. 20 Hispanic Allocation on Revenue Growth, 3/7/2012Hispanic Allocation on Revenue Growth Much faster household formation has exponential impact on continued growth opportunity Non-Hispanic Hispanic 2.5%/yr.0.4%/yr.Households CAGR 6x NH CAGR
  21. 21. 21 Hispanic Allocation on Revenue Growth, 3/7/2012Hispanic Allocation on Revenue Growth Much larger Households means heavier usage Non-Hispanic Hispanic Persons Per HH1 3.82.5 52% larger HH
  22. 22. 22 Hispanic Allocation on Revenue Growth, 3/7/2012Hispanic Allocation on Revenue Growth Hispanic households food at home expenditures will grow at 5.7% annually, more than twice the rate for Non-Hispanic households of 2.5%. Which Consumer Is Worth More? $- $20 $40 $60 $80 $100 1995 2000 2005 2010 2015 2020 $27 $33 $42 $59 $78 $94 $Billion Hispanics Food at HH Expenditures Historic CAGR: 5.4% Forecast CAGR: 5.7%
  23. 23. 23 Hispanic Allocation on Revenue Growth, 3/7/2012Hispanic Allocation on Revenue Growth The younger age and larger Hispanic household size contributes to Hispanic households having the highest consumer spending potential for necessary spending on Food at Home and Personal Care. Which Consumer Is Worth More? Hispanic Personal Care cumulative lifetime spending is about 33% higher than that of Non- Hispanic White. Hispanic Food at Home cumulative lifetime spending is over 50% higher than that of Non- Hispanic White.
  24. 24. 24 Hispanic Allocation on Revenue Growth, 3/7/2012Hispanic Allocation on Revenue Growth More influenced by strong brands Hispanics are CPG valuable customers Source: 2011 Doublebase GfK MRI - Base: All (n= 6.6K Hispanics & 46.5K Non-Hispanics) Top Box: Agree Completely or Agree Mostly or Very Important Hispanic Index I am more influenced by what seems hot and what’s not 139 Brand name is the best indication of quality 152 I only buy food items that are name brands, not generic brands 150
  25. 25. 25 Hispanic Allocation on Revenue Growth, 3/7/2012Hispanic Allocation on Revenue Growth Less price sensitive Hispanics are CPG valuable customers Top Box: Agree Completely or Agree Mostly or Very Important Hispanic Index I’d pay extra for products that are consistent with the image I want to convey 125 I tend to make impulse purchases 117 I know the price I pay for most of the foods & packaged goods I buy 83
  26. 26. 26 Hispanic Allocation on Revenue Growth, 3/7/2012 Status & Image Conscious Hispanics are CPG valuable customers Top Box: Agree Completely or Agree Mostly or Very Important Hispanic Index I like to live a lifestyle that impresses others 149 I prefer to buy things that my friends/neighbors would approve of 167 Seeking the utmost attractive appearance 122
  27. 27. 27 Hispanic Allocation on Revenue Growth, 3/7/2012 See Shopping as Fun Hispanics are CPG valuable customers Top Box: Agree Completely or Agree Mostly or Very Important Hispanic Index I enjoy wandering the store looking for new products 131 I’m always first of friends to try new products/services 145 Shopping is a great way to relax 147
  28. 28. 28 Hispanic Allocation on Revenue Growth, 3/7/2012 Key Category Influentials Hispanics are CPG valuable customers My family/friends often ask for and trust my advice on this topic Hispanic Index Babies/Children 130 Beer 121 Alcoholic Beverages 135 Beauty 138 Cleaning Products 112 New Food Items 126 Food 112 Snacks 123 Dieting 115 Healthy Lifestyle 112
  29. 29. 29 Hispanic Allocation on Revenue Growth, 3/7/2012 Conclusions & Implications
  30. 30. 30 Hispanic Allocation on Revenue Growth, 3/7/2012 Key Takeaways For Consumer Packaged Goods Statistical evidence demonstrates that: • Consistent/significant Hispanic marketers drive superior revenue growth. • Hispanic as a priority drive sustainable growth into future.
  31. 31. 31 Hispanic Allocation on Revenue Growth, 3/7/2012Hispanic Allocation on Revenue Growth Implications for Companies • Real bottom-line benefits come from consistent approaches. • Marketing is only the beginning, corporate-wide integration and investment is key – Responding to the most appropriate cultural insights – Broad use of all elements of marketing – Developing strategies from communications to customer experience
  32. 32. 32 Hispanic Allocation on Revenue Growth, 3/7/2012 The U.S. Hispanic Consumer Opportunity Robert Moskow, Research Analyst Marcela Giraldo, Research Associate robert.moskow@credit-suisse.com (212) 538 3095 marcela.giraldo@credit-suisse.com (212) 325 6764 DISCLOSURE APPENDIX CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, INFORMATION ON TRADE ALERTS, ANALYST MODEL PORTFOLIOS AND THE STATUS OF NON-U.S ANALYSTS. U.S. Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. The materials may not be used or relied upon in any way.
  33. 33. 33 Hispanic Allocation on Revenue Growth, 3/7/2012 Top Five Observations • Wall Street should be paying more attention to the companies that “get this right” • Good Hispanic marketing companies attract and retain “best-in-class” managers • Commitment from the top and accountability at the bottom are key • Kraft has engineered a turnaround • Goya is the premier asset in Hispanic CPG CREDIT SUISSE (USA), INC.
  34. 34. 34 Hispanic Allocation on Revenue Growth, 3/7/2012 Why Does Wall Street Tend To Overlook Hispanic Marketing Expertise? Source: Company information. CS estimates Tier Approx. % of Sales To Hispanics Growth Rate With Hispanics Growth Rate With Non- Hispanic U.S. Division Growth Rate Companies Leaders 18% 7.0% 2.5% 3.3% KO, GIS, NESN.VX, MKC Followers 13% 5.5% 2.5% 2.9% KFT, K, UN Laggards 8% 4.0% 2.5% 2.6% HNZ, CPB, HSY, PEP, CAG High/Low Difference 0.7% + Most of these companies have 60% of their sales in North America + Therefore, an incremental 0.7% to North America growth rate translates to only 0.4% for total company sales + In terms of valuation, 0.4% of incremental growth translates to a valuation differential of only 8%  Difficult to isolate the impact of Hispanic marketing on growth rates  Even when you do isolate it, it doesn’t look that meaningful to valuation  Investors attention has shifted to emerging markets
  35. 35. 35 Hispanic Allocation on Revenue Growth, 3/7/2012 In reality, “Leaders” have outpaced “Laggards” in North America by 3.1% on average Source: Company information. CS estimates 4.4% 4.6% 3.3% 1.4% 0.7% 1.0% 2.3% 2.9% 1.3% 0.5% 1.4% -0.1% -3.7%-4.0% -3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% Nestle McCormick GeneralMills Colgate P&G Coke Kellogg Kraft Unilever Heinz ConAgra Cambpell Pepsi (beverages) HistoricorganicrevenuegrowthNA(3yrs) Leaders: Average 2.6% Followers: Average 2.2% Laggards: Average -0.5% - Translates into a much more meaningful 20%+ valuation differential!
  36. 36. 36 Hispanic Allocation on Revenue Growth, 3/7/2012 Good Hispanic Marketing Organizations Attract Best-In-Class Managers • Good managers want to be on the cutting edge of marketing • They create shareholder value Examples • Coke shifting their mindset to the Latin American point-of-sale merchandising approach • General Mills’ leveraging the “Que Rica Vida” platform and partnering with Univision CREDIT SUISSE (USA), INC.
  37. 37. 37 Hispanic Allocation on Revenue Growth, 3/7/2012 The trend is to push more of the responsibility into the brand teams Stage 1 • Low level of top management commitment • Young brand managers get assigned to monitor the Hispanic efforts Stage 2 • Creation of a high profile management role to oversee the Hispanic efforts • Creation of a Center of Excellence dedicated to sharing best practices • Support function with no P&L responsibility Stage 3 • Accountability at the brand level for Hispanic sales. • Hispanic advertising budget is integrated within the brands. • ROI goals for Hispanic marketing investment within the brand teams - Coke, Wal-Mart, P&G, Unilever are all doing this - The risk is that upper management lose will some of their control and visibility - Maintaining accountability will be the key to success CREDIT SUISSE (USA), INC.
  38. 38. 38 Hispanic Allocation on Revenue Growth, 3/7/2012 2.1% 2.4% 4.4% 13.1% 0% 2% 4% 6% 8% 10% 12% 14% 2008 2009 2010 2011 (E) Kraft Foods Inc Average group 3X increase in 2011 Kraft has engineered a turnaround • Strong support from top management • The strategy is to increase Hispanic spending on top 10 brands including Oreo, Kool- Aid and Kraft Singles. • Re-established their Latino Center of Excellence in 2008 Risks • It’s hard to regain momentum after several years away • Spin off of companies may dilute Hispanic efforts and impact scale advantage Kool-Aid, in a first for any Kraft brand, has allocated the majority of its 2011 marketing budget to reach Hispanics Source: NY Times Source: Kantar media. KFT’s management comments Hispanic Advertising Investment as % of Total CREDIT SUISSE (USA), INC.
  39. 39. 39 Hispanic Allocation on Revenue Growth, 3/7/2012 Mexican 65.7% Other 5.1%Central American 8.3% Cuban 3.4% Puerto Rican 9.0% Dominican 2.8% South American 5.8% Goya is the premier asset in the Hispanic food space • 75-year-old family-owned and family-managed company • Approximately $1B in annual revenues • Best at understanding food preferences by country of origin • Tailor product portfolio by region in the US • Relationships with bodegas are important asset US Hispanic Population by Country of Origin Source: www.goya.com Source: U.S. Census 2008 Caribbean Mexican Central And South American CREDIT SUISSE (USA), INC.
  40. 40. 40 Hispanic Allocation on Revenue Growth, 3/7/2012 Companies Mentioned (Price as of 06 Mar 12) Campbell Soup Company (CPB, $33.04, NEUTRAL, TP $33.00) Clorox Co. (CLX, $67.92, NEUTRAL, TP $72.00) Colgate-Palmolive (CL, $93.35, NEUTRAL, TP $90.00) ConAgra Foods, Inc. (CAG, $26.36, NEUTRAL, TP $27.00) Danone (DANO.PA, Eu50.58, UNDERPERFORM, TP Eu44.00) General Mills (GIS, $38.60, NEUTRAL, TP $41.00) H.J. Heinz Company (HNZ, $53.09, NEUTRAL, TP $54.00) Hormel Foods (HRL, $28.50, NEUTRAL, TP $32.00) Kellogg Company (K, $52.09, NEUTRAL, TP $56.00) Kimberly-Clark Corporation (KMB, $72.66) Kraft Foods, Inc. (KFT, $38.35, OUTPERFORM, TP $45.00) McCormick & Company (MKC, $50.82, NEUTRAL, TP $50.00) Nestle (NESN.VX, SFr55.30, NEUTRAL, TP SFr58.00) PepsiCo, Inc. (PEP, $62.79) Procter & Gamble Co. (PG, $66.95, OUTPERFORM, TP $70.00) Ralcorp (RAH, $74.41, NEUTRAL, TP $75.00) Reckitt Benckiser (RB.L, 3469 p, OUTPERFORM, TP 3,800.00 p) Sara Lee Corporation (SLE, $21.24, NEUTRAL, TP $20.00) The Coca-Cola Company (KO, $69.23) The Hershey Company (HSY, $60.93, OUTPERFORM, TP $68.00) Disclosure Appendix Important Global Disclosures I, Robert Moskow, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report. See the Companies Mentioned section for full company names. 3-Year Price, Target Price and Rating Change History Chart for NESN.VX NESN.VX Closing Price Target Price Initiation/ Date (SFr) (SFr) Rating Assumption 16-Nov-09 47.88 55 11-Feb-10 49.69 60 30-Nov-10 54.55 N 9-Jun-11 53.15 55 11-Jul-11 52.6 R 16-Dec-11 51.2 58 N 55 60 55 58 N R N 35 40 45 50 55 60 7-Mar-097-May-09 7-Jul-097-Sep-09 7-Nov-09 7-Jan-107-Mar-107-May-10 7-Jul-10 7-Sep-10 7-Nov-10 7-Jan-117-Mar-117-May-11 7-Jul-117-Sep-11 7-Nov-11 7-Jan-12 Closing Price Target Price Initiation/Assumption Rating SFr O=Outperform; N=Neutral; U=Underperform; R=Restricted; NR=Not Rated; NC=Not Covered 3-Year Price, Target Price and Rating Change History Chart for HSY HSY Closing Price Target Price Initiation/ Date (US$) (US$) Rating Assumption 3/24/09 35.41 30 U 7/8/09 37.01 33 7/24/09 40.97 43 N 12/31/09 35.79 R 2/1/10 36.81 40 N 4/22/10 48.08 50 7/23/10 47.21 52 2/2/11 48.61 55 O 2/28/11 52.32 56 3/18/11 53.87 58 4/26/11 57.27 64 10/21/11 60.26 70 10/27/11 57.46 68 30 33 43 40 50 52 55 56 58 64 70 68 O NR N U 30 35 40 45 50 55 60 65 70 3/7/09 5/7/09 7/7/09 9/7/09 11/7/09 1/7/10 3/7/10 5/7/10 7/7/10 9/7/10 11/7/10 1/7/11 3/7/11 5/7/11 7/7/11 9/7/11 11/7/11 1/7/12 Closing Price Target Price Initiation/Assumption Rating US$ O=Outperform; N=Neutral; U=Underperform; R=Restricted; NR=Not Rated; NC=Not Covered The analyst(s) responsible for preparing this research report received compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities. 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Price Target: (12 months) for (NESN.VX) Method: Our price target is based on our APV (adjusted present value), a hybrid DCF that splits the operating cash flows (discounted at the cost of equity), and the tax shield (discounted at the cost of debt). A terminal growth rate of 2.5% is assumed Risks: Significant movements in raw material costs or currency can impact the business, as can irrational behaviour by either competitors or retailers. Food scares, shortages, or contamination can also impact the business. Price Target: (12 months) for (HSY) Method: Our 12-month target price of $68/share implies a 19x P/E multiple against our 2013 estimate. This assumes that stock maintains the 19- 20x P/E multiple which is the range where it is trading today Risks: The risks that HSY and our $68 target price could face include: 1) execution risk in the growing premium/dark chocolate category; 2) volatile cocoa, nuts and dairy commodity input costs; and 3) the risk of competitive incursion in chocolate from Mars. Please refer to the firm's disclosure website at www.credit-suisse.com/researchdisclosures for the definitions of abbreviations typically used in the target price method and risk sections. See the Companies Mentioned section for full company names. The subject company (NESN.VX) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse. Credit Suisse provided investment banking services to the subject company (NESN.VX) within the past 12 months.
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  42. 42. 42 Hispanic Allocation on Revenue Growth, 3/7/2012 Q & A Discussion
  43. 43. 43 Hispanic Allocation on Revenue Growth, 3/7/2012 Statistical Detail & Model Validation Presented by Dr. Cristina Garcia Math & Statistics Professor at USC SSG Methodology Advisor
  44. 44. 44 Hispanic Allocation on Revenue Growth, 3/7/2012 Methodology Highlights • Started by looking at the Top 500 overall Advertisers (TV, Radio, Print) by year and in aggregate between. • Matched each parent company to available published financial revenue data, and calculated 2006-2010 compounded annual growth rates. • Companies which did not have consistent published financials such as companies which grew on M&As that weren’t adjustable rather than organic consumer driven growth were eliminated from the final regression set. Top 500 U.S. Overall Advertisers 2006-2010 (500) Public (418) Consistent Advertisers (220) Publicly Traded w/ clear Organic US Revenue (211) CPGs (39) Unadjustable M&As Inconsistent Data (-9) Inconsistent Advertisers (-198) Private (-82)
  45. 45. 45 Hispanic Allocation on Revenue Growth, 3/7/2012 Test Validations All models validated the same findings. Hispanic Allocation has a direct & significant impact on companies overall revenue growth. Aggregate 06-10 Hispanic Allocation N=211 Aggregate Hispanic 06-10 Allocation AND Year by Year Revenue Growth N=211 Aggregate Hispanic 06- 10 Allocation, Year by Year Revenue Growth, AND Super Categories N=211 CPGs N=39
  46. 46. 46 Hispanic Allocation on Revenue Growth, 3/7/2012 Consumer Packaged Goods Regression Model • Hispanic Allocation alone explains about 35% of changes in revenue growth over a 5 year period for Consumer Packaged Goods (R2=0.35) – An R squared of .35, tells us that roughly 35% of a company’s revenue growth is driven by changes in Hispanic Allocation. – The expected range for a 1 percent increase in Hispanic allocation is an increase of .48% to 1.28% in overall corporate revenue growth rate. Revenue Growth over 5 year period (CAGR 06-10) Aggregate Hispanic Allocation 2006-2010 CPG (N=39)
  47. 47. 47 Hispanic Allocation on Revenue Growth, 3/7/2012 CPG Model Findings – For every additional percentage point increase in Hispanic allocation, we would expect revenue growth of 0.883% over the 5 years for Consumer Packaged Goods – In other words, on average, a 10% allocation of a CPG company’s ad spend to Hispanic media over 5 years would generate revenue growth of 8.83% over the 5 year period. Hispanic Marketing 35% All Other Drivers of Growth 65% Revenue Growth Drivers for CPGs & Retailers
  48. 48. 48 Hispanic Allocation on Revenue Growth, 3/7/2012 Test 1: Is Aggregate Hispanic Allocation Important? YES! Hispanic Allocation directly impacts topline revenue growth for Top 500 Advertisers • On average, for every additional percentage point increase in Hispanic allocation, we would expect revenue growth of .40% over the 5 years. • In other words, allocating 10% of the company’s ad spend to Hispanic media over 5 years would generate revenue growth of 4.00% over the 5 year period Aggregate Growth CAGR 06-10 Aggregate Hispanic Allocation 06-10 TOP ADVERTISERS (N=211)
  49. 49. 49 Hispanic Allocation on Revenue Growth, 3/7/2012 TEST 2: Individual Years Growth and Aggregate Hispanic Allocation Revalidated! Both directly impact topline revenue growth Revenue Growth over 5 year period Aggregate Hispanic Allocation 06-10 CAGR 06-07, 07-08, 08-09, 09-10 • Of course, each year’s CAGR most significantly affects the company’s revenue growth over 5 years • R-square 0.608 In other words, 60.8% of the variation in growth over the 5 years (CAGR 06- 10) is explained by the ad spend in Hispanic media over the 5 years and each year’s annual growth. • On average, for every additional percentage point increase in Hispanic allocation, we would expect revenue growth of .34% over the 5 years. • In other words, allocating 10% of the company’s ad spend to Hispanic media over 5 years would generate revenue growth of 3.44% over the 5 year period.TOP ADVERTISERS (N=211)
  50. 50. 50 Hispanic Allocation on Revenue Growth, 3/7/2012 Test 3: Hispanic Allocation, Super Categories and Revenue CAGR Revalidated Again! Hispanic Allocation Is Relevant to Revenue Growth! Revenue Growth over 5 year period Categories: Auto, Tech & Entertainme nt, Retail, CPG, Finance/Insu rance CAGR: 06-07, 07-08, 08- 09, 09-10 Hispanic Allocation: 06-10 • R-square .64, in other words, 64% of the variation in growth over the 5 years (CAGR 06-10) is explained by the ad spend in Hispanic media over the 5 years and each annual year’s growth. • On average, for every additional percentage point increase in Hispanic allocation, we would expect revenue growth of 0.29% over the 5 years. • In other words, allocating 10% of the company’s ad spend to Hispanic media over 5 years would generate revenue growth of 2.89% over the 5 year period TOP ADVERTISERS (N=211)
  51. 51. 51 Hispanic Allocation on Revenue Growth, 3/7/2012 1 Hispanic Allocation on Revenue Growth Conclusions of Tests • In all tests, Hispanic Allocation consistently comes up as a statistically significant variable positively affecting revenue growth rates. – Along with showing the importance of investing in the Hispanic market, our model also shows that performance during the turn into the recession 2007 to 2008 and recovery from the recession 2009 to 2010 time periods serve as good indicators for relative long term performance (06-10).
  52. 52. 52 Hispanic Allocation on Revenue Growth, 3/7/2012 Appendix
  53. 53. 53 Hispanic Allocation on Revenue Growth, 3/7/2012 Sectors/Super Categories Breakdown Top 500 Advertisers Super- Categories Included Auto Packaged Goods Omitted Advertisers (Reasons) Private Gov’t Non- Profits
  54. 54. 54 Hispanic Allocation on Revenue Growth, 3/7/2012 Appendix A Ranking By Hispanic Allocation Company 2006-2010 Hispanic Allocation Percentage Rank Percentile 2006-2010 Revenue Growth Rate WALGREEN CO 10.05% 1 100.00% 9.20% WAL-MART STORES INC 9.70% 2 97.30% 5.12% COCA-COLA CO 8.79% 3 94.70% 12.39% CLOROX CO 8.09% 4 92.10% 3.30% RALCORP HOLDINGS 8.08% 5 89.40% 11.82% GROUPE DANONE 7.81% 6 86.80% 11.82% KIMBERLY-CLARK CORP 7.09% 7 84.20% 2.74% UNILEVER 6.92% 8 81.50% 1.39% TARGET CORP 6.68% 9 78.90% 3.25% GENERAL MILLS INC 6.27% 10 76.30% 6.50% NESTLE SA 6.25% 11 73.60% 7.45% LOREAL SA 6.20% 12 71.00% 3.86% PROCTER & GAMBLE CO 6.13% 13 68.40% 2.30% HERSHEY CO 5.72% 14 65.70% 2.22% TYSON FOODS INC 5.71% 15 63.10% 3.70% BROWN-FORMAN CORP 5.09% 16 60.50% 1.62% CVS/CAREMARK CORP 5.01% 17 57.80% 5.03% JM SMUCKER CO 4.90% 18 55.20% 3.44% BEIERSDORF AG 4.11% 19 52.60% -1.34%
  55. 55. 55 Hispanic Allocation on Revenue Growth, 3/7/2012 Ranking By Hispanic Allocation Cont. Company 2006-2010 Hispanic Allocation Percentage Rank Percentile 2006-2010 Revenue Growth Rate PEPSICO INC 3.80% 20 50.00% -0.21% KRAFT FOODS INC 3.77% 21 47.30% 0.90% DIAGEO PLC 3.53% 22 44.70% 2.73% KELLOGG CO 3.42% 23 42.10% 3.40% ESTEE LAUDER COS 2.80% 24 39.40% -0.03% BIG LOTS INC 2.33% 25 36.80% 1.08% CONAGRA FOODS INC 2.24% 26 34.20% 1.06% HORMEL FOODS CORP 1.97% 27 31.50% 5.60% PERNOD RICARD SA 1.57% 28 28.90% 3.06% LVMH MOET HENNESSY LOUIS VUITTON SA 0.64% 29 26.30% 3.91% MCCORMICK & CO INC 0.55% 30 23.60% 5.01% SARA LEE CORP 0.53% 31 21.00% -9.25% FORTUNE BRANDS INC 0.53% 32 18.40% -4.32% HENKEL KGAA 0.48% 33 15.70% -0.78% CHURCH & DWIGHT CO 0.26% 34 13.10% 7.40% DEAN FOODS CO 0.20% 35 10.50% 4.67% CAMPBELL SOUP CO 0.15% 36 7.80% 2.98% KAO CORP 0.13% 37 5.20% -4.50% NEWELL RUBBERMAID 0.04% 38 2.60% -3.76% NUTRI/SYSTEM INC 0.01% 39 0.00% -2.59%
  56. 56. 56 Hispanic Allocation on Revenue Growth, 3/7/2012 Appendix B Ranking By Growth Rate Company 2006-2010 Revenue Growth Rate Rank Percentile 2006-2010 Hispanic Allocation COCA-COLA CO 12.39% 1 100.00% 8.79% RALCORP HOLDINGS 11.82% 2 97.30% 8.08% GROUPE DANONE 11.82% 3 94.70% 7.81% WALGREEN CO 9.20% 4 92.10% 10.05% NESTLE SA 7.45% 5 89.40% 6.25% CHURCH & DWIGHT CO INC 7.40% 6 86.80% 0.26% GENERAL MILLS INC 6.50% 7 84.20% 6.27% HORMEL FOODS CORP 5.60% 8 81.50% 1.97% WAL-MART STORES INC 5.12% 9 78.90% 9.70% CVS/CAREMARK CORP 5.03% 10 76.30% 5.01% MCCORMICK & CO INC 5.01% 11 73.60% 0.55% DEAN FOODS CO 4.67% 12 71.00% 0.20% LVMH MOET HENNESSY LOUIS VUITTON SA 3.91% 13 68.40% 0.64% LOREAL SA 3.86% 14 65.70% 6.20% TYSON FOODS INC 3.70% 15 63.10% 5.71% JM SMUCKER CO 3.44% 16 60.50% 4.90% KELLOGG CO 3.40% 17 57.80% 3.42% CLOROX CO 3.30% 18 55.20% 8.09% TARGET CORP 3.25% 19 52.60% 6.68%
  57. 57. 57 Hispanic Allocation on Revenue Growth, 3/7/2012Hispanic Allocation on Revenue Growth Ranking By Growth Rate Cont. Company 2006-2010 Revenue Growth Rate Rank Percentile 2006-2010 Hispanic Allocation PERNOD RICARD SA 3.06% 20 50.00% 1.57% CAMPBELL SOUP CO 2.98% 21 47.30% 0.15% KIMBERLY-CLARK CORP 2.74% 22 44.70% 7.09% DIAGEO PLC 2.73% 23 42.10% 3.53% PROCTER & GAMBLE CO 2.30% 24 39.40% 6.13% HERSHEY CO 2.22% 25 36.80% 5.72% BROWN-FORMAN CORP 1.62% 26 34.20% 5.09% UNILEVER 1.39% 27 31.50% 6.92% BIG LOTS INC 1.08% 28 28.90% 2.33% CONAGRA FOODS INC 1.06% 29 26.30% 2.24% KRAFT FOODS INC 0.90% 30 23.60% 3.77% ESTEE LAUDER COS INC -0.03% 31 21.00% 2.80% PEPSICO INC -0.21% 32 18.40% 3.80% HENKEL KGAA -0.78% 33 15.70% 0.48% BEIERSDORF AG -1.34% 34 13.10% 4.11% NUTRI/SYSTEM INC -2.59% 35 10.50% 0.01% NEWELL RUBBERMAID INC -3.76% 36 7.80% 0.04% FORTUNE BRANDS INC -4.32% 37 5.20% 0.53% KAO CORP -4.50% 38 2.60% 0.13% SARA LEE CORP -9.25% 39 0.00% 0.53%
  58. 58. 58 Hispanic Allocation on Revenue Growth, 3/7/2012 Appendix C Regression Analysis Results Test 1 Test 2 Test 3 CPG Model Variable in Model Unstandarized Beta Standardized Beta (Significance) Unstandarized Beta Standardized Beta (Significance) Unstandarized Beta Standardized Beta (Significance) Unstandarized Beta Standardized Beta (Significance) CAGR 06-07 NA .038 .189 (.000) .039 .195 (.000) NA CAGR 07-08 NA .291 .511 (.000) .269 .472 (.000) NA CAGR 08-09 NA .019 .202 (.000) .016 .176 (.000) NA CAGR 09-10 NA .435 .581 (.000) .448 .598 (.000) NA Hispanic Allocation 06-10 .396 .143 (.037) .344 .125 (.005) .288 .104 (.018) .883 .592 (.000) Auto NA NA -5.458 -.128 (.007) NA Insurance/Finance NA NA 2.229 .042 (.385) NA Technology NA NA 4.095 .112 (.026) NA Retail NA NA 1.226 .037 (.459) NA CPG NA NA 2.399 .068 (.168) NA R-Square .021 .608 .644 .350 N = 211 211 211 39 Dependent Variable CAGR 06-10
  59. 59. 59 Hispanic Allocation on Revenue Growth, 3/7/2012 Appendix D Graphical Analysis Graph 1
  60. 60. 60 Hispanic Allocation on Revenue Growth, 3/7/2012 Appendix D Graphical Analysis Chart 1
  61. 61. 61 Hispanic Allocation on Revenue Growth, 3/7/2012 Appendix D Graphical Analysis Chart 2
  62. 62. 62 Hispanic Allocation on Revenue Growth, 3/7/2012 Appendix E GfK MRI Hispanic Data Notes • GfK MRI has measured Hispanics within its National Study (Survey of the American Consumer). • Since 2003, GfK MRI began translating all survey materials into Spanish and hiring bilingual interviewers to capture the Spanish dominant Hispanic. • Other enhancements to data sampling since then include: – Hispanic language capability sample balanced against Nielsen Language estimates – Additional Hispanic specific demographics (language capability outside the home, language capability inside the home, country of origin, foreign born, length of time in the U.S., additional Hispanic adults in the home, how well do you speak English) – Hispanic specific media (3 Magazines, 135+ Television Programs, 2 Cable stations, 3 Radio formats, 3 websites) – Hispanic specific segmentations (Geoscape Hispanicity, Hispanic Cohorts, Hispanic PersonicX) – Hispanic Networks/Programs available in NPM Fusion database

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