2010 Outlook Private Label and Branded Consumer Products

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2010 Outlook Private Label and Branded Consumer Products

  1. 1. GLG Vital Signs Powered by GLG Q&A and GLG CouncilsSM February 23, 2010 GLG Vital Signs 2010 Outlook for Private Label Food and Consumer Packaged Goods Reactions from 13 Leading Food and Consumer Packaged Goods Experts As the economy starts to show some signs of renewal, what does this signal for the private label food and consumer packaged goods manufacturers who made inroads against branded products throughout 2009? Which private label manufacturers are best positioned to continue their growth in 2010? Which branded manufacturers are poised to make their way back to the top of the heap? This GLG Vital Signs features reactions from thirteen leading food and consumer packaged goods experts and is powered by the GLG Consumer Goods & Services CouncilsSM. Council Members featured in this report include David LaPlante, CEO of Federated Group, Inc., one of the largest private label grocery and foodservice product manufacturers; James Wisner, the President at Wisner Marketing Group (WMG), a research, consulting, and marketing organization serving the retail and consumer packaged goods industries; and Daniel Durick, President of Emerging Food Technologies, a strategy, sales, development, and operations consultant. Vital Signs Questions: 1. With regard to food/consumer packaged goods, which private label companies are poised for outsized growth in the upcoming year and why? 2. With regard to food/CPG, which private label companies do you think are potential acquisition targets and why? 3. Which branded food/CPG company has done the best job of withstanding the private label onslaught during the current downturn? Why? 4. With regard to food/CPG, which product categories do you think are most likely to return to brand-label dominance when the economy recovers? Why? 5. Which branded food/CPG companies are most likely to return to a dominant position when the economy recovers? Why? 6. As the economy recovers, do you believe that private label products will continue to gain share from branded products? Why? 7. Will branded food/CPG manufacturers continue to experience downward pricing pressure as the economy recovers? About GLG Vital Signs: GLG Vital Signs are quick-turnaround Q&A reports, powered by the GLG Q&A tool and the GLG CouncilsSM, about publicly available news and issues. GLG Vital Signs are meant to offer rapidly-delivered insights from key thought and opinion leaders from the GLG Councils. GLG Vital Signs are available for purchase. GLG clients can commission custom Q&A reports by providing GLG with unique questions for GLG Council Member populations. If you have any questions about GLG Vital Signs or you want to commission a Custom Report, please contact qaglg@glgroup.com. This GLG Vital Signs report was powered by Gerson Lehrman Group. Vital Signs are for your own use and may not be redistributed, disseminated, published or displayed without the prior written consent of Gerson Lehrman Group. 1
  2. 2. GLG Vital Signs Powered by GLG Q&A and GLG CouncilsSM February 23, 2010 Vital Signs Population Description This GLG Vital Signs features reactions from thirteen leading food and consumer packaged goods experts and is powered by the GLG Consumer Goods & Services CouncilsSM. Council Members featured in this report include Rick Shea, President of Shea Marketing Consulting, a firm that specializes in providing marketing expertise to CPG/Food companies; Harold Falber, former Senior Vice President of Sturm Foods, a manufacturer of private label hot cereals, powdered soft drinks, and niche branded products; Roger Davidson, an independent retail food and drug consultant; Bob Anderson, an Independent Consultant within the Grocery Retail and Food and Beverage industries; David LaPlante, CEO of Federated Group, Inc., one of the largest private label grocery and foodservice product manufacturer, distributer, and marketer in the United States; James Wisner, at Wisner Marketing Group (WMG), a research, consulting, and marketing organization serving the retail and consumer packaged goods industries; Adam Labar, President of AR LABAR LLC, a sales and manufacturing brokerage company; Katherine Steirly, Founder and Chief Executive Officer of Kathy Steirly & Associates, is a retail consultant with manufacturers and investors to the beauty and CPG industry; Daniel Durick, President of Emerging Food Technologies, a strategy, sales, development, and operations consultant; James Lee, Chief Operating Officer at Triple A Products, a bottling distributor; Mark Tralongo, President of MMT Alliances, a marketing and licensing agency specializing in the food industry; Dawn Hudson, Vice- Chairman of Parthenon, a boutique strategic consulting firm; and Joel Abramson, Principal Partner of JJ Sales and Marketing, a private sales and marketing firm. Vital Signs Methodology Vital Signs reports are quick-turnaround Q&A of select GLG Council Members. To improve turnaround time and our ability to deliver urgent insights, Vital Signs are not edited for content or style. Our goal with Vital Signs is to deliver aggregated insights to clients with as much speed as possible, presenting a real-time glimpse into important issues and topics of interest. IMPORTANT DISCLAIMER-.This Vital Signs report is for informational purposes only and does not constitute investment advice or a recommendation. The Vital Signs report is based upon survey responses from GLG Council Members. Council Members are not employees or agents of GLG, and GLG does not guarantee that any information in this Vital Signs report is accurate, timely or complete. All GLG Council Members have signed Gerson Lehrman Group’s Terms and Conditions which state, among other things, that the Council Member will not reveal confidential information and is permitted to participate in GLG projects. In using this Vital Signs report, you agree to hold Gerson Lehrman Group harmless and free of all liability that may result from your use of this Vital Signs report. This GLG Vital Signs report was powered by Gerson Lehrman Group. Vital Signs are for your own use and may not be redistributed, disseminated, published or displayed without the prior written consent of Gerson Lehrman Group. 2
  3. 3. GLG Vital Signs Powered by GLG Q&A and GLG CouncilsSM February 23, 2010 Table of Contents Click Document to Jump to Corresponding Section Vital Signs Results by Question……………………………………………………………………….........page 4-15 1. With regard to food/consumer packaged goods, which private label companies are poised for outsized growth in the upcoming year and why? 2. With regard to food/CPG, which private label companies do you think are potential acquisition targets and why? 3. Which branded food/CPG company has done the best job of withstanding the private label onslaught during the current downturn? Why? 4. With regard to food/CPG, which product categories do you think are most likely to return to brand-label dominance when the economy recovers? Why? 5. Which branded food/CPG companies are most likely to return to a dominant position when the economy recovers? Why? 6. As the economy recovers, do you believe that private label products will continue to gain share from branded products? Why? 7. Will branded food/CPG manufacturers continue to experience downward pricing pressure as the economy recovers? Vital Signs Results by Respondent……………………………………...…...........................................page 16 1. Mr. Rick Shea……..………….….……….…...…………….............……………..…...…...........................page 16 2. Mr. Harold Falber……..………….…....…….…...……………….............……………………...….............page 17 3. Mr. Roger Davidson…….……………....……………………...……………...…………….…….................page 18 4. Mr. Bob Anderson…………………………………………………………....…………………..……......…..page 19 5. Mr. David LaPlante…………………………………………………………...……………….……...........….page 20 6. Mr. James Wisner…………………………………………………………………...……........….….............page 21 7. Mr. Adam Labar…………………………………………………………………..…………....……....….......page 22 8. Mrs. Katherine Steirly……………………………………..........……………………..………..……….…….page 23 9. Mr. Daniel Durick……………………………....…………………………….…….........………….........…...page 24 10. Mr. James Lee……………………………………………………....………….………….....….…...…….....page 25 11. Mr. Mark Tralongo………………....………………....…….…………………………………..…............….page 26 12. Ms. Dawn Hudson………....……………....…………………………….……………..…..…..……….........page 27 13. Mr. Joel Abramson………………………....………....…………....…….……………..…..…..………........page 28 Vital Signs Population………………………………………………………………………....…....…...…......page 29-31 Powered by the GLG Consumer Goods & Services CouncilsSM This GLG Vital Signs report was powered by Gerson Lehrman Group. Vital Signs are for your own use and may not be redistributed, disseminated, published or displayed without the prior written consent of Gerson Lehrman Group. 3
  4. 4. GLG Vital Signs Powered by GLG Q&A and GLG CouncilsSM February 23, 2010 -------------------------------------------------------------------------------------------------------------------------------------------------------------- GLG VITAL SIGNS RESULTS --------------------------------------------------------------------------------------------------------------------------------------------------------------- 1. With regard to food/consumer packaged goods, which private label companies are poised for outsized growth in the upcoming year and why? Respondent Name Answer Treehouse Foods continues to build the largest and most diversified 100% private label food company.They continue to add companies and are well positioned in a Mr. Rick Shea number of growing categories (soup,sauces,dry mixes).AIPC is a leader in the private label pasta category.Gross margins have improved dramatically in the last 6 months due to declining prices for durum wheat. Ralcorp, Treehouse, S.T. Specialty, Presto Products, Ralcorp & Treehouse play where there are few brands in each platform, Treehouse is on an acquisition path - Mr. Harold Falber bought Sturm to extend from wet to dry shelf. Presto will take share from Glad/Ziploc - consumers see less value in a bag brand. ST Specialty is leader in - mac&cheese). They are generally low cost provider with high quality. AIPC because consumer trends in dining at home are once again favoring the pasta category. RAH - I believe that they will put their Post integration problems behind them Mr. Roger Davidson and continue to grow their cereal, condiment and snack categories. Perrigo - they dominate the PL OTC and personal care categories and we see the consumer becoming more receptive to these products as non branded ones. Ralcorp in the cookie and cracker category. They have pulled both together and Nabisco has left alot on the table. As we went from brands and assortments to value Mr. Bob Anderson and sku reductions companies and categories will be effected. Ones that have strong trend lines (not fads)in areas that have ties to health, fresh, lite, smaller portions, less sugar,fructose,salt,fat and fried will all be winners Overall Private Brands sales will outpace national brand sales this like they have in the past. Companies like Tree House Foods, with their purchase of Sturm, will see Mr. David LaPlante good growth. other small companies like Mixes of the Heartland will grow organicly due to the categories they produce (Gluten Free). Winnona Food is a good growth candidate with their Vitamin Water and energy shot business. Several are exceptionally well-positioned, especially the major players. Easiest way to Mr. James Wisner develop an A-List is to check the "Category Colonels" awards in PL Buyer magazine. Perrigo, Vijon, and First Quality. Retailers in the Drug Class of trade will continue to differentiate themselves by looking for opportunities to expand private label at the Mr. Adam Labar expense of the 3rd and 4th tier brands. All three of these companies manufacture private label items in categories that are private label growth areas like analgesics, skin care and women/baby/senior pads and diapers. Garcoa, Woodridge, and Product Quest are all strong private label manufacturers in the personal care categories. They have proven infrastructures and have funded Mrs. Katherine Steirly expansion in R&D, facilities and marketing efforts. They stand totally behind their quality standards to produce "as good as, if not better" than their name brand equivalents. The focus of these companies is skin, hair and sun care. This GLG Vital Signs report was powered by Gerson Lehrman Group. Vital Signs are for your own use and may not be redistributed, disseminated, published or displayed without the prior written consent of Gerson Lehrman Group. 4
  5. 5. GLG Vital Signs Powered by GLG Q&A and GLG CouncilsSM February 17, 2010 Respondent Name Answer Mr. James Lee I believe that Cott, Cliffstar, and clement Pappas are positioned for growth because they are the premier players in their categories Ral-Corp understands differentiation and how targeted marketing designed for retailers reaps huge rewards. Palermo Pizza,attention to quality, a new production Mr. Mark Tralongo facility, and focusing on details could take them to the next level. Pretzel Inc.,has integrity, an outstanding reputation, relatively new production facility,central location, and quality products which match-up well with trends. Those that invest in quality and brand building initiatives. Consumers want value, and Ms. Dawn Hudson that means good prices for quality products....not just cheap products. I think Costco does a good job of providing quality for a good price in their private label products. The three private label companies that are best suites to benefit from the huge grwoth of private label products in traditional retail outlets are Vijohn, Apollo and Garcoa. they Mr. Joel Abramson are all manufacture a diverse product mix that have creative teams that can develop products and bring them to market quickly. 2. With regard to food/CPG, which private label companies do you think are potential acquisition targets and why? Respondent Name Answer Potential acquisition targets include AIPC with either Ralcorp or Treehouse as the acquirer.Most of the takeover activity will be Ralcorp and Treehouse adding Mr. Rick Shea complimentary product lines to their private label stable.Potential non public acquisition targets include Gilster,Karlin and Faribault Foods to name a few. Reynolds Packaging (foil), Presto Products, ST Specialty, Country Pure Foods. Reynolds/Presto are owned by Rank NZ, Presto sold to raise cash. ST Specialty, Mr. Harold Falber would be excellent for Treehouse, Country Pure Foods - they have the infrastructure to be less contract dependent focus on PL. Cliffstar - they have reached their growth potential and new more capital and new ideas to move ahead. North American Baking - well run company with premium Mr. Roger Davidson products that needs capital to grow. Current investors ready to turn the company. Jel- sert - a private held company producing niche products like drink mixes and freezer pops. Growing and very profitable. AIPC, Cliffstar. Many are as they have done well and have good balance sheets and feel now is the time to sell. One needs to look at how inflation has effected their Mr. Bob Anderson business. Their current inventory position as well as cost and retails in the categories they sell. How well WalMarts Project Impact does and what other retails follow will be key here as well. Winnona Foods, family owned and invloved in fast growing categories that will need investment; Mixes of the Heartland invloved in Gluten Free and needs solid Mr. David LaPlante management structure: Republic Plastics manufacturer of Foam plates and associated products needs some management depth. Most likely will be the mid-size second-tier companies with a strong customer base in Mr. James Wisner their categories (Sturm was a perfect fit for the profile). Also, family controlled companies without a clear line of succession. This GLG Vital Signs report was powered by Gerson Lehrman Group. Vital Signs are for your own use and may not be redistributed, disseminated, published or displayed without the prior written consent of Gerson Lehrman Group. 5
  6. 6. GLG Vital Signs Powered by GLG Q&A and GLG CouncilsSM February 17, 2010 Respondent Name Answer Two strategies could take place. One strategy would be for an established branded manufacturer to buy a Vijon or First Quality and run it as a separate division. This Mr. Adam Labar enables them to grow their branded business by taking out 3rd and 4th tier brands with the private label divsion. Second strategy would be for the larger private label companies to buy smaller competitors. Mrs. Katherine Steirly Not able to answer. Lancaster Colony-poor brand management/sales/profit; Chef Pierre Foods-weak recovery from bankruptcy; Sanderson Farms-unprofitable poultry lines; Wayne Farms- Mr. Daniel Durick likewise sales and profit downturns; Pilgrim's Pride/Gold Kist-struggling after bankruptcy; Advance Foods-needs new product lines to stay competitive; Mr. James Lee Cliff Star, Cott, Clement Pappas Palermo Pizza Diary State Foods Joseph Campione Inc. Pretzels Inc. Four have good products, reputations, facilities, significant upside potential, what is lacking Mr. Mark Tralongo management/financial where-with-all to reach full potential. Hanover Brands a company thats been stifled with very poor management. Despite this debilitating condition, they meet sales goals, and appear to have a loyal following. I think the companies and categories are less relevant...what is important is..is the Ms. Dawn Hudson quality of what they manufacture excellent, and does the acquisition price allow for investment in packaging and innovation. I think that Garcoa is the company that is best suited for an acquisition. They are privately owned with a new senior sales managemtn team and a very strong network Mr. Joel Abramson of field brokers. they have double their sales in the last 12 months and should continue that growth for at least anothe 18 months. They also have a very solid and broad retail customer base making them a very attractive acquisition. This GLG Vital Signs report was powered by Gerson Lehrman Group. Vital Signs are for your own use and may not be redistributed, disseminated, published or displayed without the prior written consent of Gerson Lehrman Group. 6
  7. 7. GLG Vital Signs Powered by GLG Q&A and GLG CouncilsSM February 17, 2010 3. Which branded food/CPG company has done the best job of withstanding the private label onslaught during the current downturn? Why? Answer Value Answer Value Mr. Rick Shea Other: General Mills Unilever 0 Mr. Harold Falber Pepsico Procter & Gamble 5 Mr. Roger Davidson Nestle Mr. Bob Anderson Nestle Colgate-Palmolive 0 Mr. David LaPlante Procter & Gamble Kimberly-Clark 0 Mr. James Wisner Pepsico Mr. Adam Labar Procter & Gamble Georgia-Pacific 0 Mrs. Katherine Steirly Procter & Gamble Clorox 1 Other: Frito Lay Mr. Daniel Durick Kraft 0 Mr. James Lee Coca-Cola Mr. Mark Tralongo Procter & Gamble Pepsico 2 Ms. Dawn Hudson Clorox Coca-Cola 1 Mr. Joel Abramson Procter & Gamble Sara Lee 0 Nestle 2 Other 2 Respondent Name Answer Best combination of share and volume growth.They have maintained Mr. Rick Shea pricing,increased marketing and done a nice job of differentiating their products and brands from private label. Pepsico is battle seasoned, they do not give an inch and will not let their brands be Mr. Harold Falber eroded for ex: Quaker. They will do what it takes to gain back share, and considers it a war. Nestle has tremendous R&D capability, a top notch marketing organization and is Mr. Roger Davidson focused on categories that are difficult to replicate by private label suppliers. This GLG Vital Signs report was powered by Gerson Lehrman Group. Vital Signs are for your own use and may not be redistributed, disseminated, published or displayed without the prior written consent of Gerson Lehrman Group. 7
  8. 8. GLG Vital Signs Powered by GLG Q&A and GLG CouncilsSM February 17, 2010 Respondent Name Answer Mr. Bob Anderson Due to the categories their in and who they supply as well as being multi national Mr. David LaPlante Strong brands in low private lebel share categories. Pepsi impresses me with their vision and understanding of mainstream health and wellness. They are mostly in categories that are more problematic for private label growth. Consisten well-executed marketing, merchandising, and product Mr. James Wisner development. The P&G "Basic" initiative is really dumb; the economics do not work for anyone, especially the retailer. They don't get it. In the past, I might have selected them. They blinked. P&G continues to be aggressive on the legal front against private label manufacturers Mr. Adam Labar that infringe on any of their patents or trade dress. Their brands continue to dominate share in their respective categories which enables them to keep valuable shelf space. P&G is the master at studying and understanding the consumer. They connect to the Mrs. Katherine Steirly customer via mnay varied marketing programs. Constant couponing, new product introductions, upgraded packaging, and price-point Mr. Daniel Durick holds has protected Frito Lay thus far through the recession. Coke has been able to get Wal-Mart running big with their product. This has Mr. James Lee somewhat nuetralized Wal_marts PL performance P&G, through it's extensive/aggressive marketing approach has created a wide "mote" between them and their competition. They had been successful in creating, virtually an aspirational brand for most, if not all of their products. For the CPG industry, this Mr. Mark Tralongo would be the equivalent of Louis Vuitton selling groceries! Pepsico's Frito-Lay would fall within these same parameters. Their quality, R&D, management, distribution system, and product assortment is second to none! While Clorox's categories are prime for private label competition, I think they have done an excellent job of differentiating their products and doing promotions that offer value. One could have picked Pepsico or coke, but those categories in general are Ms. Dawn Hudson more insulated to private label as consumers pick beverages based on image as well as taste and private labels brands so far have not delivered any image....rather a negative image. P and G has done the best job withstanding private label due to their very close personal and professional relationship with the senior managers of most major Mr. Joel Abramson retailers. They provide tremendous marketing support and new product innovation to discourage the move to PL. This GLG Vital Signs report was powered by Gerson Lehrman Group. Vital Signs are for your own use and may not be redistributed, disseminated, published or displayed without the prior written consent of Gerson Lehrman Group. 8
  9. 9. GLG Vital Signs Powered by GLG Q&A and GLG CouncilsSM February 17, 2010 4. With regard to food/CPG, which product categories do you think are most likely to return to brand-label dominance when the economy recovers? Why? Answer Value Answer Value Mr. Rick Shea Beverages, Cereals, Snack Personal care 7 foods, Frozen foods Personal Care, Beverages, Household Mr. Harold Falber Cereals, Snack foods, Frozen 1 products foods, Pet Food Mr. Roger Davidson Personal care, Pet Food Beverages 6 Mr. Bob Anderson Beverages, Frozen foods, Condiments Cereals 3 Mr. David LaPlante Personal Care, Household products Snack foods 4 Mr. James Wisner Other: see below Frozen foods 4 Mr. Adam Labar Personal Care Mrs. Katherine Steirly Personal Care Canned foods 1 Mr. Daniel Durick Condiments Condiments 3 Mr. James Lee Condiments Pet food 4 Mr. Mark Tralongo Personal care, Beverages, Snack foods Other 1 Ms. Dawn Hudson Personal care, Beverages, Pet food Beverages, Cereals, Snack Mr. Joel Abramson foods, Frozen foods, Canned foods, Pet Food Respondent Name Answer These categories have a stronger consumer "image" related component to the Mr. Rick Shea category dynamics.They also our led by strong brands with large share positions. private label to brand price deltas are not all that great. As econ improves, for a few cents more, a consumer will be more comfortable giving family, friends, pets the perceived better value/quality of a well known brand. ANY PL company and Mr. Harold Falber grocery/club chain that underestimates this is heading for severe trouble UNLESS they build and treat house brands as brands of high quality imagery and an extension of store in the consumers' home. This GLG Vital Signs report was powered by Gerson Lehrman Group. Vital Signs are for your own use and may not be redistributed, disseminated, published or displayed without the prior written consent of Gerson Lehrman Group. 9
  10. 10. GLG Vital Signs Powered by GLG Q&A and GLG CouncilsSM February 17, 2010 Respondent Name Answer Personal care products are somewhat discretionary in nature. As the economy Mr. Roger Davidson improves people will spend more on their appearance. People often treat their pets better than their children. They will trade up when they can afford to in this category. Because of their postion in the category and abilty to spend money to protect it. Any Mr. Bob Anderson category that the customer today has bought and now has adopted the attitude of why pay more will remain in the private label camp. Mr. David LaPlante Low Private brands share and not as frequently purchased. The problem is that most branded cpg companies and investment analysts still don't fully comprehend what is driving priving label. The assumption that private label growth is dependent on the economy really misses what is taking place. Yes, it gives a little "blip," but the underlying trends (SKU rationalization, Improved retailer Mr. James Wisner marketing, premium and differentiated private label, superior quality in many categories, retailer economics, category management systems, activity share programs, media fragmentation, etc., etc., etc., are equally powerful in driving private label growth. Some categories are more private label resistant--several personal care products and snacks, are some examples. Mr. Adam Labar Only the high end/specialty products will see brand growth like anti-aging items. Consumers tend to stay more brand loyal to persoanl care products. Promoting a Mrs. Katherine Steirly private label item involves a large amount of funding - usually coming from the retailer rather than the manufacturer. Condiments have extreme brand loyalty. Consumers in reality dislike Ketchup and Salsa knock-offs. When economic recovery noticeably begins, the Condiment Industry Mr. Daniel Durick will be one of the first to revive. I believe this is an area that people like their brands but have been force to PL Mr. James Lee because of the economy The three categories chosen share a common thread, they have a "mote" separating Mr. Mark Tralongo them from the competition, and they have an "I'm worth it", indulgence felling attached to them, providing these products with an added value advantage. Because image matters and consumers want to associate with postive images that say they are secure and don't need to compromise. Regarding pet food, this is one of Ms. Dawn Hudson the areas consumers love to indulge and think they are doing better for their pets. Areas like household cleaning adn frozen foods are less image based because friends and family do not see what they purchase. Food and beverage products always maintain a high degree of customer loyalty as opposed to personal cae, household goods and condiments. There are many brands Mr. Joel Abramson that are national brand equivalent that may be equal or better than the national brands and the consumers who try them normally will not go back to the higher priced brand. This GLG Vital Signs report was powered by Gerson Lehrman Group. Vital Signs are for your own use and may not be redistributed, disseminated, published or displayed without the prior written consent of Gerson Lehrman Group. 10
  11. 11. GLG Vital Signs Powered by GLG Q&A and GLG CouncilsSM February 17, 2010 5. Which branded food/CPG companies are most likely to return to a dominant position when the economy recovers? Why? Answer Value Answer Value Unilever 4 Mr. Rick Shea Nestle, Other: General Mills Procter & Gamble, Colgate- Procter & Gamble 9 Mr. Harold Falber Palmolive, Clorox, Kraft, Pepsico, Coca-Cola Colgate-Palmolive 3 Mr. Roger Davidson Procter & Gamble, Kraft Mr. Bob Anderson Unilever, Procter & Gamble, Kimberly-Clark 0 Pepsico, Coca-Cola, Nestle Mr. David LaPlante Kraft Georgia-Pacific 0 Mr. James Wisner Unilever, Procter & Gamble, Pepsico Clorox 2 Mr. Adam Labar Unilever, Procter & Gamble Kraft 4 Mrs. Katherine Steirly Procter & Gamble Procter & Gamble, Colgate- Pepsico 5 Mr. Daniel Durick Palmolive Mr. James Lee Kraft Coca-Cola 4 Procter & Gamble, Colgate- Mr. Mark Tralongo Palmolive, Clorox, Pepsico, Sara Lee 0 Coca-Cola Ms. Dawn Hudson Unilever, Procter & Gamble, Nestle 3 Clorox Mr. Joel Abramson Pepsico, Coca-Cola, Nestle Other 1 Respondent Name Answer Nestle's purchase of Kraft frozen pizza will drive synergies and frozen category Mr. Rick Shea dominance.General Mills well positioned in cereal,snacks and yogurt. The above are the strongest marketeers with the stomach to fight, the discipline, and the pockets to narrow the price delta. They are good at innovation and consumer Mr. Harold Falber relations. They have important brands that are consumed or used and that represent care and concern for what is ingested into the body or worn on the skin and hair This GLG Vital Signs report was powered by Gerson Lehrman Group. Vital Signs are for your own use and may not be redistributed, disseminated, published or displayed without the prior written consent of Gerson Lehrman Group. 11
  12. 12. GLG Vital Signs Powered by GLG Q&A and GLG CouncilsSM February 17, 2010 Respondent Name Answer P&G in their detergent and paper categories. Their move to Bounty, Charmin and Tide Basic will hold brand conscious customers during the downturn. These same consumers will be more prone to trade back up when things improve. Many of Kraft's more commoditized brands have been hit hard by PL during the downturn - including Mr. Roger Davidson mac/cheese, ref. cheese and meats and salad dressings. Should recover some with the economy. But the big change will be the growth in international sales as they link U.S. products to the Cadbury distribution network. Also chocolate is very insulated against PL. Again do to their line up of products, relationship with retailer and international Mr. Bob Anderson business. Plus they are the ones that have the funds need by retailer to "run" their business. Strong brands that are #1 in category even though many compete in high PL share Mr. David LaPlante areas. Unilever is doing the best job of branding right now and has the best understanding of the Hispanic marketplace. P&G will continue to take a technological lead in product Mr. James Wisner development, and Pepsi is well-positioned now, except in carbonated beverages which has very weak growth prospects. Both companies manufacture leading brands with formulations that are a challenge to Mr. Adam Labar manufacture from the private label side and hold strong brand equity with the consumers. Mrs. Katherine Steirly Intense focus on the consumer andhow to communicate with her. HBC products are very brand loyal in good times. With most other categories, the consumer has found that many Private Label Products are as good as branded products at much reduced pricing. There will have to be a very good reason to sift back to branded products, especially those that held their price points, but made the mistake of reducing package weights or quantities. ie: Hellman's/Best Foods Mr. Daniel Durick Mayonnaise reducing to 30-ounce jars. They screwed up half of America's Holiday recipes. The consumer is really ticked-off with companies that take advantage of consumer economics with cheesy gimmics like weight changes. STUPID ! ! Is a 2- ounce reduction really going to dramatically improve Unilever's bottom line that dramatically. I believe craft condiments will maintain their brand dominince when people have Mr. James Lee money Mr. Mark Tralongo For exactly the same reason stated previously They participate in more image oriented categories and will benefit from consumers Ms. Dawn Hudson feeling more secure. the same reasons apply as above. These dominant brands have developed strong pervasive brand loyalty that will be much easier to win back when the economy Mr. Joel Abramson improves. A customer who finds a consumer product that has a similar or better formula than the brand will stay with the alternative. This GLG Vital Signs report was powered by Gerson Lehrman Group. Vital Signs are for your own use and may not be redistributed, disseminated, published or displayed without the prior written consent of Gerson Lehrman Group. 12
  13. 13. GLG Vital Signs Powered by GLG Q&A and GLG CouncilsSM February 17, 2010 6. As the economy recovers, do you believe that private label products will continue to gain share from branded products? Why? Answer Value Private labels will gain significant share 2 Private labels will gain some share 8 No change 0 Branded labels will regain some share 2 Branded labels will regain significant share 1 Respondent Name Answer Private labels will gain some share; Growth is tapering off in Q4 2009 and 2010 but private label is still outpacing category and branded growth in most categories.During past recessions in 2000 and 1991 private label growth slowed in the post recession Mr. Rick Shea years.This time may be different with the increase in number of mid tier and premium private label products.Quality and retailer committment is stronger than ever for private label. Branded labels will regain significant share; A narrowing price delta lets consumer feel she/he is giving her/his family a better product for not much money as economy improves. What's more, stores must advertise the quality of products vs. just savings. Mr. Harold Falber Also, grocery/club show savings on branded products as matter of course - its a steep slope for PL UNLESS private label is positioned as a quality brand representing store (Trader Joe's) Private labels will gain some share; PL products will continue to gain share for several reasons: 1. Consumers have tried them during the downturn and found the Mr. Roger Davidson quality to be equivalent to national brands. 2. Retailers will continue to support their development as they have higher margins, enable them to leverage the brands and differentiate them from other retailers. Private labels will gain some share; During the last 3 recessions private label grew and kept market share. Only in the 80's did it not,as retailers then did not understand private label as they do today,nor was the quality there. Since this was the first time Mr. Bob Anderson private label was in a recession retailers mis read the need for value and create generics which were of even lessor quality and just gave up internal margin in many cases. Private labels will gain significant share; PL quality has consistently increased and Mr. David LaPlante any customer that has traded to PL and been satisfied with quality will stay. This GLG Vital Signs report was powered by Gerson Lehrman Group. Vital Signs are for your own use and may not be redistributed, disseminated, published or displayed without the prior written consent of Gerson Lehrman Group. 13
  14. 14. GLG Vital Signs Powered by GLG Q&A and GLG CouncilsSM February 17, 2010 Respondent Name Answer Private labels will gain significant share; The ecomomy is only a small piece of the growth. Most importantly, every major retailer except Publix has announced significant Mr. James Wisner private label initiatives and SKU rationalization efforts. Many have built large private brand marketing departments. The WalMart Hefty/Glad announcement is just the beginning. Private labels will gain some share; The quality of private label has greatly improved and as more consumers traded down to private label last year because of Mr. Adam Labar the current economic environment they will notice the improvement and be more apt for repeat private label purchases vs some of the brands that they purchased in the past. Private labels will gain some share; Retailers today are publicly stating that privalte label growth is a major strategy to help enhance their bottom lines. They also hope to Mrs. Katherine Steirly create stronger loyalties with their consumers through products only available in their stores. Private labels will gain some share; The consumer found out Private Label and House Brand Products are better quality than perceived. They now ask themselves Mr. Daniel Durick why did I pay more for a 'name' all of these years? Private labels will gain some share; There has to be some conversion factor from Mr. James Lee people that have tried PL. PL benefits from sampling Branded labels will regain some share; The current studies (Nielson & PLMA) on PL customer retention reveal percentages ranging from 45 to 90%, once the current Mr. Mark Tralongo economic conditions improve. Based on these studies, it is clear that some Private Label erosion will occur. Branded labels will regain some share; i think consumers will defintiely return to branded products, particularly those that promise significant benefits. However, Ms. Dawn Hudson consumers will be smarter, and those private labels products that offer excellent quality and let consumers know can also gain share. Consumers will not blindly move to higher priced products. Private labels will gain some share; The economy has developed a "new" and loyal customer base that has purchased anw ill stay with private label or proprietary brands. Mr. Joel Abramson The formulas for this products have been enhanced to be national brand equivalent and they are now packaged, merchandised and promoted like the brand. This GLG Vital Signs report was powered by Gerson Lehrman Group. Vital Signs are for your own use and may not be redistributed, disseminated, published or displayed without the prior written consent of Gerson Lehrman Group. 14
  15. 15. GLG Vital Signs Powered by GLG Q&A and GLG CouncilsSM February 17, 2010 7. Will branded food/CPG manufacturers continue to experience downward pricing pressure as the economy recovers? Answer Value Branded food/CPG manufacturers will experience SIGNIFICANT downward pricing pressure 3 Branded food/CPG manufacturers will experience SOME downward pricing pressure 8 No change 0 Branded food/CPG manufacturers will regain SOME pricing power 2 Branded food/CPG manufacturers will regain SIGNIFICANT pricing power 0 Respondent Name Answer Mr. Rick Shea Branded food/CPG manufacturers will experience SOME downward pricing pressure Mr. Harold Falber Branded food/CPG manufacturers will regain SOME pricing power Mr. Roger Davidson Branded food/CPG manufacturers will experience SOME downward pricing pressure Mr. Bob Anderson Branded food/CPG manufacturers will regain SOME pricing power Branded food/CPG manufacturers will experience SIGNIFICANT downward pricing Mr. David LaPlante pressure Mr. James Wisner Branded food/CPG manufacturers will experience SOME downward pricing pressure Mr. Adam Labar Branded food/CPG manufacturers will experience SOME downward pricing pressure Mrs. Katherine Steirly Branded food/CPG manufacturers will experience SOME downward pricing pressure Branded food/CPG manufacturers will experience SIGNIFICANT downward pricing Mr. Daniel Durick pressure Branded food/CPG manufacturers will experience SIGNIFICANT downward pricing Mr. James Lee pressure Mr. Mark Tralongo Branded food/CPG manufacturers will experience SOME downward pricing pressure Ms. Dawn Hudson Branded food/CPG manufacturers will experience SOME downward pricing pressure Mr. Joel Abramson Branded food/CPG manufacturers will experience SOME downward pricing pressure This GLG Vital Signs report was powered by Gerson Lehrman Group. Vital Signs are for your own use and may not be redistributed, disseminated, published or displayed without the prior written consent of Gerson Lehrman Group. 15
  16. 16. GLG Vital Signs Powered by GLG Q&A and GLG CouncilsSM February 17, 2010 GLG VITAL SIGNS INDIVIDUAL RESULTS --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Rick Shea is the President of Shea Marketing Consulting, a firm that specializes in providing marketing expertise to CPG/Food companies. He has 20+ years of marketing experience as VP of Marketing for Kraft, Unilever, George Weston Bakeries, Malt-O-Meal cereals, and Pepperidge Farm. Mr. Shea was the CMO/VP of Malt-O-Meal, from 2004 to 2007, where his leadership led to being named as the Walmart Supplier of the Year. He was also VP of Marketing at Unilever, where he was responsible for the marketing efforts for Entenmanns, Thomas, and Brownberry brands. He was a Director of Marketing at Kraft Foods, where he has held several positions in the Convenient Meals & Pizza Divisions and won several top Kraft awards. Mr. Shea works with his Dad, former President of Campbell Soup Int. & CEO of Pepperidge Farm, at Shea Marketing and they both provide their expertise on all aspects of the supermarket industry. They follow all major consumer food companies, consumer trends, and are experts on all key grocery retailers. --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 1. With regard to food/consumer packaged goods, which private label companies are poised for outsized growth in the upcoming year and why? Treehouse Foods continues to build the largest and most diversified 100% private label food company.They continue to add companies and are well positioned in a number of growing categories (soup,sauces,dry mixes).AIPC is a leader in the private label pasta category.Gross margins have improved dramatically in the last 6 months due to declining prices for durum wheat. 2. With regard to food/CPG, which private label companies do you think are potential acquisition targets and why? Potential acquisition targets include AIPC with either Ralcorp or Treehouse as the acquirer.Most of the takeover activity will be Ralcorp and Treehouse adding complimentary product lines to their private label stable.Potential non public acquisition targets include Gilster,Karlin and Faribault Foods to name a few. 3. Which branded food/CPG company has done the best job of withstanding the private label onslaught during the current downturn? Why? Other: General Mills; Best combination of share and volume growth.They have maintained pricing,increased marketing and done a nice job of differentiating their products and brands from private label. 4. With regard to food/CPG, which product categories do you think are most likely to return to brand-label dominance when the economy recovers? Why? Beverages, Cereals, Snack foods, Frozen foods; These categories have a stronger consumer "image" related component to the category dynamics.They also our led by strong brands with large share positions. 5. Which branded food/CPG companies are most likely to return to a dominant position when the economy recovers? Why? Nestle, Other: General Mills; Nestle's purchase of Kraft frozen pizza will drive synergies and frozen category dominance.General Mills well positioned in cereal,snacks and yogurt. 6. As the economy recovers, do you believe that private label products will continue to gain share from branded products? Why? Private labels will gain some share; Growth is tapering off in Q4 2009 and 2010 but private label is still outpacing category and branded growth in most categories.During past recessions in 2000 and 1991 private label growth slowed in the post recession years.This time may be different with the increase in number of mid tier and premium private label products.Quality and retailer committment is stronger than ever for private label. 7. Will branded food/CPG manufacturers continue to experience downward pricing pressure as the economy recovers? Branded food/CPG manufacturers will experience SOME downward pricing pressure This GLG Vital Signs report was powered by Gerson Lehrman Group. Vital Signs are for your own use and may not be redistributed, disseminated, published or displayed without the prior written consent of Gerson Lehrman Group. 16
  17. 17. GLG Vital Signs Powered by GLG Q&A and GLG CouncilsSM February 17, 2010 --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Harold Falber was through October of 09, Senior Vice President of Sturm Foods(manufacturer of private label hot cereals, powdered soft drinks, niche branded products),& President of Trade Area Marketing Group, a management consulting group, since March 2006. Mr. Falber was also the Chief Strategy Consultant to President and General Manager of Presto Products, a private label food and disposer bags to packaging closures to soil stabilization materials to specialty stretch films. He was Chief Strategy Consultant to Reynolds Consumer Products until January 09. He consulted to the President at CP Kelco-Asia Pacific in strategy and sales management, a manufacturer of a broad spectrum of texturizing and stabilizing ingredients to food processors such as hydrocolloids for food, beverages, skin care, dental, Pharma and OTC, wet-end paper and oilfields. Previously, he was the President and General Manager of Hallmark Flowers and Gifts, a subsidiary of Hallmark cards, from 2005 through 2006. --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 1.With regard to food/consumer packaged goods, which private label companies are poised for outsized growth in the upcoming year and why? Ralcorp, Treehouse, S.T. Specialty, Presto Products, Ralcorp & Treehouse play where there are few brands in each platform, Treehouse is on an acquisition path - bought Sturm to extend from wet to dry shelf. Presto will take share from Glad/Ziploc - consumers see less value in a bag brand. ST Specialty is leader in - mac&cheese). They are generally low cost provider with high quality. 2. With regard to food/CPG, which private label companies do you think are potential acquisition targets and why? Reynolds Packaging (foil), Presto Products, ST Specialty, Country Pure Foods. Reynolds/Presto are owned by Rank NZ, Presto sold to raise cash. ST Specialty, would be excellent for Treehouse, Country Pure Foods - they have the infrastructure to be less contract dependent focus on PL. 3.Which branded food/CPG company has done the best job of withstanding the private label onslaught during the current downturn? Why? Pepsico; Pepsico is battle seasoned, they do not give an inch and will not let their brands be eroded for ex: Quaker. They will do what it takes to gain back share, and considers it a war. 4. With regard to food/CPG, which product categories do you think are most likely to return to brand-label dominance when the economy recovers? Why? Personal care, Beverages, Cereals, Snack foods, Frozen foods, Pet food; private label to brand price deltas are not all that great. As econ improves, for a few cents more, a consumer will be more comfortable giving family, friends, pets the perceived better value/quality of a well known brand. ANY PL company and grocery/club chain that underestimates this is heading for severe trouble UNLESS they build and treat house brands as brands of high quality imagery and an extension of store in the consumers' home. 5. Which branded food/CPG companies are most likely to return to a dominant position when the economy recovers? Why? Procter & Gamble, Colgate-Palmolive, Clorox, Kraft, Pepsico, Coca-Cola; The above are the strongest marketeers with the stomach to fight, the discipline, and the pockets to narrow the price delta. They are good at innovation and consumer relations. They have important brands that are consumed or used and that represent care and concern for what is ingested into the body or worn on the skin and hair 6. As the economy recovers, do you believe that private label products will continue to gain share from branded products? Why? Branded labels will regain significant share; A narrowing price delta lets consumer feel she/he is giving her/his family a better product for not much money as economy improves. What's more, stores must advertise the quality of products vs. just savings. Also, grocery/club show savings on branded products as matter of course - its a steep slope for PL UNLESS private label is positioned as a quality brand representing store (Trader Joe's) 7. Will branded food/CPG manufacturers continue to experience downward pricing pressure as the economy recovers? Branded food/CPG manufacturers will regain SOME pricing power This GLG Vital Signs report was powered by Gerson Lehrman Group. Vital Signs are for your own use and may not be redistributed, disseminated, published or displayed without the prior written consent of Gerson Lehrman Group. 17
  18. 18. GLG Vital Signs Powered by GLG Q&A and GLG CouncilsSM February 17, 2010 --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Roger Davidson is currently an independent retail food and drug consultant residing in Oakton, Virginia. On April 11, 2009 he completed a six month assignment as Senior Vice President of Global Food Procurement for Walmart. Throughout 2007, he worked as a part of the senior management team that facilitated the merger between Wild Oats and Whole Foods. Mr. Davidson has over 38 years of experience in a variety of senior management positions at some of the top food and drug retailers in the US. These include key roles in operations, marketing, merchandising, supply chain, and finance at companies as varied as Whole Foods, Wild Oats, Supervalu, Ahold USA, Walmart, and H.E.B. Food/Drug. He has experience in product development, store brands, private label, store design, store layout, procurement, and supply chain. Mr. Davidson has worked in all regions of the US and in many international locations including the Netherlands, Czech Republic, Scandanavia, Costa Rica, Mexico, and Chile. --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 1. With regard to food/consumer packaged goods, which private label companies are poised for outsized growth in the upcoming year and why? AIPC because consumer trends in dining at home are once again favoring the pasta category. RAH - I believe that they will put their Post integration problems behind them and continue to grow their cereal, condiment and snack categories. Perrigo - they dominate the PL OTC and personal care categories and we see the consumer becoming more receptive to these products as non branded ones. 2. With regard to food/CPG, which private label companies do you think are potential acquisition targets and why? Cliffstar - they have reached their growth potential and new more capital and new ideas to move ahead. North American Baking - well run company with premium products that needs capital to grow. Current investors ready to turn the company. Jel-sert - a private held company producing niche products like drink mixes and freezer pops. Growing and very profitable. 3. Which branded food/CPG company has done the best job of withstanding the private label onslaught during the current downturn? Why? Nestle; Nestle has tremendous R&D capability, a top notch marketing organization and is focused on categories that are difficult to replicate by private label suppliers. 4. With regard to food/CPG, which product categories do you think are most likely to return to brand-label dominance when the economy recovers? Why? Personal care, Pet food; Personal care products are somewhat discretionary in nature. As the economy improves people will spend more on their appearance. People often treat their pets better than their children. They will trade up when they can afford to in this category. 5. Which branded food/CPG companies are most likely to return to a dominant position when the economy recovers? Why? Procter & Gamble, Kraft; P&G in their detergent and paper categories. Their move to Bounty, Charmin and Tide Basic will hold brand conscious customers during the downturn. These same consumers will be more prone to trade back up when things improve. Many of Kraft's more commoditized brands have been hit hard by PL during the downturn - including mac/cheese, ref. cheese and meats and salad dressings. Should recover some with the economy. But the big change will be the growth in international sales as they link U.S. products to the Cadbury distribution network. Also chocolate is very insulated against PL. 6. As the economy recovers, do you believe that private label products will continue to gain share from branded products? Why? Private labels will gain some share; PL products will continue to gain share for several reasons: 1. Consumers have tried them during the downturn and found the quality to be equivalent to national brands. 2. Retailers will continue to support their development as they have higher margins, enable them to leverage the brands and differentiate them from other retailers. 7. Will branded food/CPG manufacturers continue to experience downward pricing pressure as the economy recovers? Branded food/CPG manufacturers will experience SOME downward pricing pressure This GLG Vital Signs report was powered by Gerson Lehrman Group. Vital Signs are for your own use and may not be redistributed, disseminated, published or displayed without the prior written consent of Gerson Lehrman Group. 18
  19. 19. GLG Vital Signs Powered by GLG Q&A and GLG CouncilsSM February 17, 2010 --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Bob Anderson has spent over 40 years in the grocery industry. He started his career with Vons Grocery Company in Southern California and worked there for 20 years in a variety of positions. Leaving Vons, Mr. Anderson went to Pace Membership Warehouse and was a buyer in their Southern California Division, working there for 5 years. He finished out his career with Wal-Mart Store Inc, where he worked from 1991 through February 2007. During his time with Wal- Mart he was the VP of Dry Grocery which included dairy, frozen, dry, DSD, snacks and beverages and liquor. Mr. Anderson was asked to start up Wal-Mart’s store brand private label division, Great Value, and over saw the Sam's Choice program as well. He was responsible for sourcing, procurement, label design and testing for both labels while at Wal-Mart. Mr. Anderson and his team were successful in building Great Value into the leading store brand program in the United States. In addition, he and his team were honored with the Retailer of the Year award twice for their work. In 2007, he was inducted into the Private Label Manufactures Hall of Fame. Mr. Anderson retired from Walmart in February of 2007 and now works as an Independent Consultant within the Grocery Retail and Food and Beverage Industries. --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 1. With regard to food/consumer packaged goods, which private label companies are poised for outsized growth in the upcoming year and why? Ralcorp in the cookie and cracker category. They have pulled both together and Nabisco has left alot on the table. As we went from brands and assortments to value and sku reductions companies and categories will be effected. Ones that have strong trend lines (not fads)in areas that have ties to health, fresh, lite, smaller portions, less sugar,fructose,salt,fat and fried will all be winners 2. With regard to food/CPG, which private label companies do you think are potential acquisition targets and why? AIPC, Cliffstar. Many are as they have done well and have good balance sheets and feel now is the time to sell. One needs to look at how inflation has effected their business. Their current inventory position as well as cost and retails in the categories they sell. How well WalMarts Project Impact does and what other retails follow will be key here as well. 3. Which branded food/CPG company has done the best job of withstanding the private label onslaught during the current downturn? Why? Nestle; Due to the categories their in and who they supply as well as being multi national 4. With regard to food/CPG, which product categories do you think are most likely to return to brand-label dominance when the economy recovers? Why? Beverages, Frozen foods, Condiments; Because of their postion in the category and abilty to spend money to protect it. Any category that the customer today has bought and now has adopted the attitude of why pay more will remain in the private label camp. 5. Which branded food/CPG companies are most likely to return to a dominant position when the economy recovers? Why? Unilever, Procter & Gamble, Pepsico, Coca-Cola, Nestle; Again do to their line up of products, relationship with retailer and international business. Plus they are the ones that have the funds need by retailer to "run" their business. 6. As the economy recovers, do you believe that private label products will continue to gain share from branded products? Why? Private labels will gain some share; During the last 3 recessions private label grew and kept market share. Only in the 80's did it not,as retailers then did not understand private label as they do today,nor was the quality there. Since this was the first time private label was in a recession retailers mis read the need for value and create generics which were of even lessor quality and just gave up internal margin in many cases. 7. Will branded food/CPG manufacturers continue to experience downward pricing pressure as the economy recovers? Branded food/CPG manufacturers will regain SOME pricing power This GLG Vital Signs report was powered by Gerson Lehrman Group. Vital Signs are for your own use and may not be redistributed, disseminated, published or displayed without the prior written consent of Gerson Lehrman Group. 19
  20. 20. GLG Vital Signs Powered by GLG Q&A and GLG CouncilsSM February 17, 2010 --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- David LaPlante is CEO of Federated Group, Inc., one of the largest private label grocery and foodservice product manufacturer, distributer, and marketer in the United States, where he has worked since 2000. At Federated, Mr. LaPlante works directly with retailers to help solve their private label demands and contract manufacturers to help manufacture their own Federated Brands product line. He also works with product manufacturers to help them with entry into new retail markets. Mr. LaPlante has over 30 years of private label development and brand marketing experience. Prior to his time at Federated Group, Mr. LaPlante served as a Vice President of Sales and Marketing at Shurfine International. --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 1. With regard to food/consumer packaged goods, which private label companies are poised for outsized growth in the upcoming year and why? Overall Private Brands sales will outpace national brand sales this like they have in the past. Companies like Tree House Foods, with their purchase of Sturm, will see good growth. other small companies like Mixes of the Heartland will grow organicly due to the categories they produce (Gluten Free). Winnona Food is a good growth candidate with their Vitamin Water and energy shot business. 2. With regard to food/CPG, which private label companies do you think are potential acquisition targets and why? Winnona Foods, family owned and invloved in fast growing categories that will need investment; Mixes of the Heartland invloved in Gluten Free and needs solid management structure: Republic Plastics manufacturer of Foam plates and associated products needs some management depth. 3. Which branded food/CPG company has done the best job of withstanding the private label onslaught during the current downturn? Why? Procter & Gamble; Strong brands in low private lebel share categories. 4. With regard to food/CPG, which product categories do you think are most likely to return to brand-label dominance when the economy recovers? Why? Personal care, Household products; Low Private brands share and not as frequently purchased. 5. Which branded food/CPG companies are most likely to return to a dominant position when the economy recovers? Why? Kraft; Strong brands that are #1 in category even though many compete in high PL share areas. 6. As the economy recovers, do you believe that private label products will continue to gain share from branded products? Why? Private labels will gain significant share; PL quality has consistently increased and any customer that has traded to PL and been satisfied with quality will stay. 7. Will branded food/CPG manufacturers continue to experience downward pricing pressure as the economy recovers? Branded food/CPG manufacturers will experience SIGNIFICANT downward pricing pressure This GLG Vital Signs report was powered by Gerson Lehrman Group. Vital Signs are for your own use and may not be redistributed, disseminated, published or displayed without the prior written consent of Gerson Lehrman Group. 20
  21. 21. GLG Vital Signs Powered by GLG Q&A and GLG CouncilsSM February 17, 2010 --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- James Wisner is currently the President at Wisner Marketing Group (WMG), a research, consulting, and marketing organization serving the retail and consumer packaged goods industries. WMG works with a wide variety of clients and has produced several landmark industry commissioned studies over the past several years. WMG is the retail marketing agency for the American Egg Board. Mr. Wisner has over thirty years of experience in the food and drug industry, serving as Vice-President responsible for marketing, merchandising, procurement, and store operations in various positions at Jewel-Osco, Shaws Supermarkets, and Topco Associates (a $4 billion marketing and procurement organization). He is experienced in all aspects of retail and trade marketing, including supply chain management. Mr. Wisner is a popular and frequent speaker at many industry association conferences, including the Food Marketing Institute, General Merchandise Distributor's Council, and Private Label Manufacturers Association. --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 1.With regard to food/consumer packaged goods, which private label companies are poised for outsized growth in the upcoming year and why? Several are exceptionally well-positioned, especially the major players. Easiest way to develop an A-List is to check the "Category Colonels" awards in PL Buyer magazine. 2. With regard to food/CPG, which private label companies do you think are potential acquisition targets and why? Most likely will be the mid-size second-tier companies with a strong customer base in their categories (Sturm was a perfect fit for the profile). Also, family controlled companies without a clear line of succession. 3. Which branded food/CPG company has done the best job of withstanding the private label onslaught during the current downturn? Why? Pepsico; Pepsi impresses me with their vision and understanding of mainstream health and wellness. They are mostly in categories that are more problematic for private label growth. Consisten well-executed marketing, merchandising, and product development. The P&G "Basic" initiative is really dumb; the economics do not work for anyone, especially the retailer. They don't get it. In the past, I might have selected them. They blinked. 4. With regard to food/CPG, which product categories do you think are most likely to return to brand-label dominance when the economy recovers? Why? Other: see below; The problem is that most branded cpg companies and investment analysts still don't fully comprehend what is driving priving label. The assumption that private label growth is dependent on the economy really misses what is taking place. Yes, it gives a little "blip," but the underlying trends (SKU rationalization, Improved retailer marketing, premium and differentiated private label, superior quality in many categories, retailer economics, category management systems, activity share programs, media fragmentation, etc., etc., etc., are equally powerful in driving private label growth. Some categories are more private label resistant--several personal care products and snacks, are some examples. 5.Which branded food/CPG companies are most likely to return to a dominant position when the economy recovers? Why? Unilever, Procter & Gamble, Pepsico; Unilever is doing the best job of branding right now and has the best understanding of the Hispanic marketplace. P&G will continue to take a technological lead in product development, and Pepsi is well-positioned now, except in carbonated beverages which has very weak growth prospects. 6. As the economy recovers, do you believe that private label products will continue to gain share from branded products? Why? Private labels will gain significant share; The ecomomy is only a small piece of the growth. Most importantly, every major retailer except Publix has announced significant private label initiatives and SKU rationalization efforts. Many have built large private brand marketing departments. The WalMart Hefty/Glad announcement is just the beginning. 7. Will branded food/CPG manufacturers continue to experience downward pricing pressure as the economy recovers? Branded food/CPG manufacturers will experience SOME downward pricing pressure This GLG Vital Signs report was powered by Gerson Lehrman Group. Vital Signs are for your own use and may not be redistributed, disseminated, published or displayed without the prior written consent of Gerson Lehrman Group. 21
  22. 22. GLG Vital Signs Powered by GLG Q&A and GLG CouncilsSM February 17, 2010 --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Adam Labar is President of AR LABAR LLC, a sales and manufacturing brokerage company, where he has worked since 2003. Mr. Labar has more than 19 years of experience in the consumer packaged goods industry. Previously, Mr. Labar worked for Sterling Health, Carter Wallace, and Twinlab. He is knowledgeable about the sales, marketing, and manufacturing of private label and branded consumer products in retail categories such as; analgesics, skin care, first aid, suncare, nutrition, family planning, oral care, men's grooming, etc... Mr. Labar has headquarter retail selling experience to accounts as large as Wal-Mart, Walgreens, CVS, Rite Aid, Family Dollar, Albertsons, Kroger and as small as Duane Reade, HEB, Harris Teeter, Meijer, and Kerr Drug. He received his Master of Business Administration degree from Queens College and has a Bachelor of Arts degree in Economics from Hampden-Sydney College. --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 1. With regard to food/consumer packaged goods, which private label companies are poised for outsized growth in the upcoming year and why? Perrigo, Vijon, and First Quality. Retailers in the Drug Class of trade will continue to differentiate themselves by looking for opportunities to expand private label at the expense of the 3rd and 4th tier brands. All three of these companies manufacture private label items in categories that are private label growth areas like analgesics, skin care and women/baby/senior pads and diapers. 2. With regard to food/CPG, which private label companies do you think are potential acquisition targets and why? Two strategies could take place. One strategy would be for an established branded manufacturer to buy a Vijon or First Quality and run it as a separate division. This enables them to grow their branded business by taking out 3rd and 4th tier brands with the private label divsion. Second strategy would be for the larger private label companies to buy smaller competitors. 3. Which branded food/CPG company has done the best job of withstanding the private label onslaught during the current downturn? Why? Procter & Gamble; P&G continues to be aggressive on the legal front against private label manufacturers that infringe on any of their patents or trade dress. Their brands continue to dominate share in their respective categories which enables them to keep valuable shelf space. 4. With regard to food/CPG, which product categories do you think are most likely to return to brand-label dominance when the economy recovers? Why? Personal care; Only the high end/specialty products will see brand growth like anti-aging items. 5. Which branded food/CPG companies are most likely to return to a dominant position when the economy recovers? Why? Unilever, Procter & Gamble; Both companies manufacture leading brands with formulations that are a challenge to manufacture from the private label side and hold strong brand equity with the consumers. 6. As the economy recovers, do you believe that private label products will continue to gain share from branded products? Why? Private labels will gain some share; The quality of private label has greatly improved and as more consumers traded down to private label last year because of the current economic environment they will notice the improvement and be more apt for repeat private label purchases vs some of the brands that they purchased in the past. 7. Will branded food/CPG manufacturers continue to experience downward pricing pressure as the economy recovers? Branded food/CPG manufacturers will experience SOME downward pricing pressure This GLG Vital Signs report was powered by Gerson Lehrman Group. Vital Signs are for your own use and may not be redistributed, disseminated, published or displayed without the prior written consent of Gerson Lehrman Group. 22
  23. 23. GLG Vital Signs Powered by GLG Q&A and GLG CouncilsSM February 17, 2010 --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Katherine Steirly is the Founder and Chief Executive Officer of Kathy Steirly & Associates, is currently working as a retail consultant with manufacturers and investors to the beauty and CPG industry. She brings a unique point of view to businesses studying the dramatic changes taking place in retail today. She last served as Vice President, General Merchandise Manager, for the Health, Beauty, and Personal Care category at Walgreens, where she worked from 2005 until 2009. In this role, she managed one of four purchasing divisions controlling financial planning, buying, replenishment, marketing, analysis and career development for 6700 stores. Additionally, she negotiated with executives at all major CPG and beauty companies, including P&G, J&J, L'Oreal, Unilever, Revlon, Colgate, and Schering Plough, and was responsible for over $4 billion in sales. Previously, she served as Vice President, Merchandising for Eckerd Corporation's 2700 stores, where she worked from 1999 until 2005. --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 1. With regard to food/consumer packaged goods, which private label companies are poised for outsized growth in the upcoming year and why? Garcoa, Woodridge, and Product Quest are all strong private label manufacturers in the personal care categories. They have proven infrastructures and have funded expansion in R&D, facilities and marketing efforts. They stand totally behind their quality standards to produce "as good as, if not better" than their name brand equivalents. The focus of these companies is skin, hair and sun care. 2. With regard to food/CPG, which private label companies do you think are potential acquisition targets and why? Not able to answer. 3. Which branded food/CPG company has done the best job of withstanding the private label onslaught during the current downturn? Why? Procter & Gamble; P&G is the master at studying and understanding the consumer. They connect to the customer via mnay varied marketing programs. 4. With regard to food/CPG, which product categories do you think are most likely to return to brand-label dominance when the economy recovers? Why? Personal care; Consumers tend to stay more brand loyal to persoanl care products. Promoting a private label item involves a large amount of funding - usually coming from the retailer rather than the manufacturer. 5. Which branded food/CPG companies are most likely to return to a dominant position when the economy recovers? Why? Procter & Gamble; Intense focus on the consumer andhow to communicate with her. 6. As the economy recovers, do you believe that private label products will continue to gain share from branded products? Why? Private labels will gain some share; Retailers today are publicly stating that privalte label growth is a major strategy to help enhance their bottom lines. They also hope to create stronger loyalties with their consumers through products only available in their stores. 7. Will branded food/CPG manufacturers continue to experience downward pricing pressure as the economy recovers? Branded food/CPG manufacturers will experience SOME downward pricing pressure This GLG Vital Signs report was powered by Gerson Lehrman Group. Vital Signs are for your own use and may not be redistributed, disseminated, published or displayed without the prior written consent of Gerson Lehrman Group. 23
  24. 24. GLG Vital Signs Powered by GLG Q&A and GLG CouncilsSM February 17, 2010 --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Daniel Durick is the President of Emerging Food Technologies, a strategy, sales, development, and operations consultant where he has worked since 1983. Mr. Durick has over 28 years of quality food, beverage, processing and operations experience in a wide variety of multi-unit restaurant and supermarket operations. He is an enterprising corporate officer, and private business owner with full P&L experience. Mr. Durick specializes in client "Turn-Arounds" and provides broad domestic and international expertise in concept, menu, food product, food processing development, and operations evaluations. He specializes in commodity Beef, Pork, Chicken; Meat Replacement Products; and Chain QSR, Steak, Seafood, Italian, Bakery, Mexican and Asian restaurant operations. --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 1. With regard to food/consumer packaged goods, which private label companies are poised for outsized growth in the upcoming year and why? ConAgra Foods; Pinnacle Foods; Gilcrest/Mary Lee Foods; Lancaster Colony (especially their T. Marzetti division); Chef Pierre Foods; Dean Foods; Sanderson Farms; Wayne Farms; Pilgrim's Pride/Gold Kist; J.B.Swift; United Natural Foods Inc.; Hain-Celestial; Advance Foods; Holten Beef; Van's Natural Products; Great Lakes Cheese; Bay Valley Foods; Foxtail Foods (Perkins Restaurants); IPP/Heinz. 2. With regard to food/CPG, which private label companies do you think are potential acquisition targets and why? Lancaster Colony-poor brand management/sales/profit; Chef Pierre Foods-weak recovery from bankruptcy; Sanderson Farms-unprofitable poultry lines; Wayne Farms-likewise sales and profit downturns; Pilgrim's Pride/Gold Kist-struggling after bankruptcy; Advance Foods-needs new product lines to stay competitive; 3. Which branded food/CPG company has done the best job of withstanding the private label onslaught during the current downturn? Why? Other: Frito Lay; Constant couponing, new product introductions, upgraded packaging, and price-point holds has protected Frito Lay thus far through the recession. 4. With regard to food/CPG, which product categories do you think are most likely to return to brand-label dominance when the economy recovers? Why? Condiments; Condiments have extreme brand loyalty. Consumers in reality dislike Ketchup and Salsa knock-offs. When economic recovery noticeably begins, the Condiment Industry will be one of the first to revive. 5. Which branded food/CPG companies are most likely to return to a dominant position when the economy recovers? Why? Procter & Gamble, Colgate-Palmolive; HBC products are very brand loyal in good times. With most other categories, the consumer has found that many Private Label Products are as good as branded products at much reduced pricing. There will have to be a very good reason to sift back to branded products, especially those that held their price points, but made the mistake of reducing package weights or quantities. ie: Hellman's/Best Foods Mayonnaise reducing to 30- ounce jars. They screwed up half of America's Holiday recipes. The consumer is really ticked-off with companies that take advantage of consumer economics with cheesy gimmics like weight changes. STUPID ! ! Is a 2-ounce reduction really going to dramatically improve Unilever's bottom line that dramatically. 6. As the economy recovers, do you believe that private label products will continue to gain share from branded products? Why? Private labels will gain some share; The consumer found out Private Label and House Brand Products are better quality than perceived. They now ask themselves why did I pay more for a 'name' all of these years? 7. Will branded food/CPG manufacturers continue to experience downward pricing pressure as the economy recovers? Branded food/CPG manufacturers will experience SIGNIFICANT downward pricing pressure This GLG Vital Signs report was powered by Gerson Lehrman Group. Vital Signs are for your own use and may not be redistributed, disseminated, published or displayed without the prior written consent of Gerson Lehrman Group. 24

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