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Innovation in Consumer Goods

Accenture Consumer Pulse survey shows consumers in emerging markets see innovation, and are ready to connect with CPG companies through digital channels.

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Innovation in Consumer Goods

  1. 1. Accenture Research Intelligence. Insight. Impact. CPG Innovation Consumer Pulse Survey: Global October 2014
  2. 2. Copyright © 2014 Accenture All rights reserved. 2 Contents Executive Summary Detailed Findings
  3. 3. Copyright © 2014 Accenture All rights reserved. 3 Industry trends drive both company innovation and consumer perception Food & Non- alcoholic Beverages Home & Personal Care Consumer Health Fashion & Luxury Alcoholic Beverages •Commoditizing categories and tight margins •High fragmentation and local tastes/ flavors •Desire for health & wellness •Small, frequent purchases Imperative to catch consumer at point of desire •Functional, “pro-quality” benefits •Innovation to keep brands fresh •Prominent “green” and all-natural brands •Small, frequent purchases Imperative to catch consumer at point of desire Consumers scored Food & Non-alcobev and Home & Personal Care companies highest on all elements, reflecting a higher degree of continuous, incremental innovation •Increase in consumers treating at home •Consumers seeking “trusted brands” •Regulatory constraints •Schizophrenic consumer mixing fast fashion and luxury brands •Increasing non-traditional competition •Complex supply chain and channels •Achieving identity status and top-of-mind destination critical •Drink choice is part of personal brand, and extremely occasion-based •Desire for old-fashioned brands and quality •Complicated route to market (e.g., distributors, on and off-trade) •Heavy regulation Lowest perceived innovation, with companies likely hampered by consumer desire for “heritage” brands, as well as regulatory constraints Traditionally longer development – and purchase – cycle drives lower levels of perceived innovation Despite strong HPC link, CH behaves more like highly branded Fashion & Luxury – perhaps because companies focus on brand quality and trust vs. excitement Survey Insights Industry Trends
  4. 4. Copyright © 2014 Accenture All rights reserved. 4 Consumers across the globe are typically in sync when ranking performance of various CG&S industries •Across most markets, Home & Personal Care and Food & Beverages are seen as delivering the most radically new products that meet consumer needs. •The Alcoholic Beverage industry lags behind other industries across the globe on most innovation metrics, with Japan as a bright spot. •Fashion & Luxury and Consumer Healthcare take the middle slots in innovation performance, although Fashion & Luxury leads in Sweden.
  5. 5. Copyright © 2014 Accenture All rights reserved. 5 Regional consumer trends and economic conditions also impact innovation •Rapid middle class growth and youthful population •Increased marketing for World Cup and Olympics •Sound macroeconomic fundamentals •Expanding incomes and large population drive massive growth •Recent crackdown on conspicuous consumption •Bifurcated population (kings and paupers) •Slow recovery from the recession, with only pockets of recovery •Cautious consumer •Significant private label business •Declining CPG market values •Sophisticated tastes •Negative population growth •Stagnant to declining CPG markets •Strong local players, seeking growth outside home market •Return to moderate growth; consumer confidence growing •Permanent reset to value and desire for trusted quality •Sophisticated and profitable market Emerging markets see the highest innovation levels. Are they reacting to a flood of new offerings as companies enter and grow – and invest to develop products for local tastes? Are Japanese consumers more demanding? Only in alcobev – where competition is fierce – do they see innovation higher than others W. European consumers are wary – and also comfortable advocates of sophisticated private label offerings in this concentrated retail market. As companies struggle to preserve margin, are they cutting back on innovation? Is innovation higher in the large, diverse – and competitive – US market? Retail trade is more fragmented than in W. Europe – and unusual new products frequently launch in smaller store formats (e.g., C-store). UNITED STATES BRAZIL EUROPEAN UNION JAPAN CHINA
  6. 6. Copyright © 2014 Accenture All rights reserved. 6 •Brazil & China lead the way in perception of innovation •Emerging markets prefer to engage with social media, with developed markets have a relatively heavier focus on traditional channels (mail, phone, company websites) •Emerging markets perceive more digital engagement options •Brazil and China, joined by the US and Japan, are most likely to identify new innovations in the “green” space Mobile interactions much more important in emerging markets than in mature ones; however, digital interaction imperative in even in developed markets. Accenture’s Global Consumer Pulse Research finds 25% of consumers report they are more likely to do business with a company that they can interact with in a social media environment. Are CPG companies providing more/better digital options in emerging markets? Or are expectations and digital engagement causing the divide? Are CPG companies launching more green/eco/social products in these countries? Or are consumers in these markets more likely to seek out these types of innovations? Emerging markets, Brazil and China, often surpassed developed markets in innovation perception and digital engagement Is this new product innovation or new category introduction (porting from developed markets)? Or are company marketing/ education efforts driving awareness?
  7. 7. Copyright © 2014 Accenture All rights reserved. 7 Young consumers see most CPG innovation and are more engaged in social media •Younger consumers worldwide see more innovation, are more likely to engage using social media and are more satisfied with digital options •Female consumers in Europe and Brazil often see more innovation •Higher income and employed consumers tend to see more CPG innovation, except in France •In most countries, highest income consumers are least likely to feel ignored by CPGs, while in some countries, such as Sweden, it is the middle class who fares best •Consumers disagree on whether “green” products are new or improved •Married consumers and families see more innovation – except for Sweden Are there any cultural differences in interpretations of ‘new’ vs. ‘improved’? Is there a notable difference in % of males vs. females who are the primary household shoppers across countries? At the same time, CPG companies must figure out how to engage older generations, with 65+ consumers outnumbering under-15 by 2030 (PEW Research) Have companies focused innovation on premium products? Is this awareness or companies targeting married/ families with new product innovation?
  8. 8. Copyright © 2014 Accenture All rights reserved. 8 HPC has the highest R&D spend– and innovation – but, Alcobev still leads in organic revenue growth, despite low innovation. *See notes for companies included in average Food & Non- Alcobev 4.9% 1.3% Organic Revenue Growth R&D Expense % of Revenue Home & Personal Care 4.7% 2.3% Organic Revenue Growth R&D Expense % of Revenue Alcoholic Beverages 5.2% 0.3% Organic Revenue Growth R&D Expense % of Revenue Fashion & Luxury n/a 0.3% Organic Revenue Growth R&D Expense % of Revenue Sample of Global Companies: 3 Year Average Growth and R&D Investment Higher R&D spend seems to drive highest perceived innovation in Home & Personal Care, as well as Food & Non- alcobev Higher innovation has not driven higher organic revenue growth Premiumization, vs. new products, may be driving alcobev growth R&D spend is relatively low in Alcobev and Fashion & Luxury, likely due to business model and consumers valuing heritage brand over the “excitement” of continual new products Switching to private label during the recession may depress organic revenues in Food and HPC
  9. 9. Copyright © 2014 Accenture All rights reserved. 9 •While consumers perceive significant pockets of “real” innovation, this is not translating to significant revenue growth ‒In developed markets, innovation may simply be driving complexity, cost and a jaded and overwhelmed consumer ‒Vibrant emerging markets are seeing the most innovation •Consumers feel online channels are best for feedback; however, a number still do not feel companies are listening anywhere •Digital engagement correlates with higher sales – but options lag the opportunity •Whether considered new or improved, “green” is important – especially in countries where consumers value sustainability, even to the point of paying more for these products •Strong regional variations drive the need for different innovation strategies Conclusions
  10. 10. Copyright © 2014 Accenture All rights reserved. 10 •In our sample, Food & Non-Alcobev and Home & Personal Care companies invest the most R&D as a % of revenue (1.3 and 2.3%, respectively – compared to 0.3% in Alcobev) •This seems to be boosting innovation perception, as Food and HPC also have the highest perceived “true” innovation of all segments; ~50% of consumers are always/often seeing “radically new products” (compared to 31% in Alcobev) •However, organic revenue growth remains sluggish – and Food and HPC are outpaced by Alcobev (4.9% and 4.7% vs. 5.2% on average, last 3 years) Conclusions: Heavy investment in innovation ≠ heavy pay-off in revenue growth
  11. 11. Copyright © 2014 Accenture All rights reserved. 11 CPG manufacturers are answering the call for innovation but most products don´t capture $10mn or more in year-one sales In the US, Innovation is increasing mainly with brands extensions… …But a majority of new products fail to capture $10mn or more in year-one sales New Product Pacesetters are the Top 100 new banners (food and beverage and non-food) based on year-one sales across multi-outlet geography 86% of new products are brand extensions, 14% are new brands (cross industry) * Source: IRI 2013 New Product Pacesetters
  12. 12. Copyright © 2014 Accenture All rights reserved. 12 The number of new products that surpass $100 million in their first year is low but increasing due to a broader coverage of channels MULO: ( Multi-Outlet) grocery, drug, mass, dollar, club and convenience channels, plus Walmart, including Sam‟s & BJ's Club Stores, and military commissaries FDM: Food, drugs and mass channels Bud Light, Allegra & Dannon Oikos presented the highest sales in the US Source: IRI 2013 New Product Pacesetters
  13. 13. Copyright © 2014 Accenture All rights reserved. 13 In Western Europe, most innovations fail in scale and longevity According to Nielsen, only 24% of all innovations achieve 52 weeks of sales… …Of 12000 new introductions in 2011-13, only 7 sold more than €10mn in the first year Distinctiviness: Deliver a new value proposition to market Relevance: Generate a minimum of £/€10 mn in year one sales Endurance: Achieve at least 85% of year one sales in year 2* Source: Nielsen Breakthrough Innovation Report – European Edition 2014
  14. 14. Copyright © 2014 Accenture All rights reserved. 14 In innovation, quality (not quantity) drives revenue There are big differences in innovation activity levels across categories and the evidence shows that quantity alone can not drive category growth % of total category sales from new introductions (2013) Value % growth of category 2013 vs. prior year Focus need to shift toward “bigger” (quality) as a means to improve success rates and category growth Different innovation level across categories Index of revenue of BEST SKU vs. category average revenue per SKU (UK 2013) Source: Nielsen Breakthrough Innovation Report – European Edition 2014
  15. 15. Copyright © 2014 Accenture All rights reserved. 15 Too many choices: •Almost 80% of the 2,818 subscribers said they’d found an especially wide range of choices and 36% of those said they were overwhelmed by the information they had to process to make a buying decision. On the other side, considering at a local Stop & Shop: If one consumer eyeballed 53 varieties of a product, he missed 21 others. Choice is attractive to consumers, but does not yield sales More and More: •Between 1975 and 2008, the number of products in the average supermarket swelled from an average of 8,948 to almost 47,000, according to the Food Marketing Institute, a trade group. (In the past few years, that number has fallen slightly, in part because of a growth spurt among smaller stores.) Less variety may be less attractive for consumers but may generate higher sales: •An experiment was conducted at an up-scale grocery store's jam/jelly selection. They had 348 different kinds of jam. A tasting booth was setup at different times, one with 6 different flavors of jam, and another with 24 different flavors. •More people stopped and sampled with 24 samples of jam, however, only 3% of the users actually purchased a jar of jam. •With the 6 flavor option, less people stopped by, but 30% of those people purchased a jar of jam New launches are not noticed, not a good return for investment •There were 1,330 new fragrances launched onto the market last year. When Edwards first began monitoring launches in 1984, there were just 38. •According to Datamonitor, only 1 in 10 consumers notice products launches in-store According to Michael Edwards’ compendium, Fragrances of the World 2013, Source: Factiva International 2014
  16. 16. Copyright © 2014 Accenture All rights reserved. 16 Companies are shifting to different types of innovation such as technology, new business models and collaboration More and more consumers goods companies are increasing focus on technology by creating dedicated innovation labs in startup hubs such as Silicon Valley, New York, and London and investing in startup accelerator programs to establish direct access to innovation from entrepreneurs… Other companies such as P&G, combines a novel business model with a tried-and-true brand to promote the creation of fresh and profitable services and solutions… •P&G’s incubator, FutureWorks, launched Multi-functional team leading the scaling of Tide Dry Cleaners and Mr Clean Carwashes •This team works with franchisees to find sites, build and open stores, and drive a best in class retail stores Open innovation— collaboration by internal company members with external partners… •In February, Coca-Cola purchased a 10% stake in Green Mountain for $1.25B •In May, announced it would increase stake to 16% •Partnership is to co-invest in cold-drink dispensing
  17. 17. Copyright © 2014 Accenture All rights reserved. 17 Unilever puts greater focus on innovation to drive up prices •In developed markets, most consumers are not seeing a pick-up in the economy and they are increasingly value conscious while competition is increasingly high. •Unilever is taking balanced decisions on pricing, always with a watchful eye on consumer affordability •Unilever is putting a greater emphasis on innovation to drive up prices in European markets as sales for the 2nd quarter has declined by 0.8%. •Unilever is not increasing marketing spend in Europe to boost sales, however, pouring more marketing money into emerging markets. Unilever says innovations such as its compressed deodorant cans are helping boost sales
  18. 18. Copyright © 2014 Accenture All rights reserved. 18 Innovation is also not driving gross margin; HPC and Food have the highest innovation rates and stagnant/ declining margin 45 50 55 60 2008 2009 2010 2011 2012 2013 Alcobev Fashion HPC Food & Non-Alcobev % Gross Margin Evolution by Industry: Sample Companies • Fashion presents the highest % of gross margin across the 4 industries • Alcobev showed resilience in recession, but with recent dip • Home & Personal care margin has been stagnant • Recession hit Food & Non- Alcobev hard – with only minor recovery
  19. 19. Copyright © 2014 Accenture All rights reserved. 19 •The large and important Western European market sees relatively low innovation, with average industry scores ranging from 25 to 44% (and Sweden much lower) •By contrast, a significant number of Brazilians see radically new products, ranging as high as 71% in HPC •Chinese consumers perceive the second highest truly new innovation (vs. product improvements) Conclusions: Vibrant emerging markets are seeing the most innovation
  20. 20. Copyright © 2014 Accenture All rights reserved. 20 Companies are investing heavily in emerging market innovation •PepsiCo opens food and beverage innovation center in DuBiotech to drive growth across the Middle East •The new facility is equipped with an advanced culinary center and test laboratories focused on developing and tailoring PepsiCo brands for distinct, locally relevant taste preferences throughout the region. •P&G opens $250 million Innovation Centre in Singapore to generate new product formulations, advanced packaging and prototypes – uniquely designed to deliver value for consumers in Asia and the rest of the world •General Mills opened the company's first innovation, technology and quality center in China, which is $15 million facility •It will focus on developing high-quality products for Chinese consumers including snacks, convenient meals, yogurt and super-premium ice cream. •Unilever’s global Enterprise Support and IT Innovation centre in Bengaluru inaugurated •Largest operating centre for Unilever will support HUL as well as the global Unilever business •The centre currently houses 1400 people including Unilever employees & co- located IT vendor partners
  21. 21. Copyright © 2014 Accenture All rights reserved. 21 Unilever takes HUL strategies like small packs, cheaper variants to developed markets. “If we had that in the US, there is no reason why we would be hit in a recession. We have seen that we tend to do well in markets that have a wide portfolio of brands in a category. So, we are trying to do the same in other markets," Polman had said Successful innovations are flowing from emerging markets to a global audience •Grameen Danone produces a yogurt known as Shokti, which is fortified to meet 30% of children’s daily requirements of vitamin A, iron, zinc and iodine. The goal was to increase consumption of these yogurts by children in poor, rural areas of Bangladesh •When fresh milk prices doubled in Bangladesh in 2008, Grameen Danone was forced to raise the price of Shokti, and sales plummeted. Danone experimented with selling nutritious foods to very poor people but struggled both to earn a profit and to deliver nutrition. It responded to low sales by beginning to sell yogurts to wealthier urban consumers, alongside in rural areas •Urban sales grew quickly and they made up 80% of Grameen Danone sales. While re-orienting sales had kept the company afloat, it had diverted it from its original purpose of providing nutrition to the rural poor •In Brazil, babies often sleep with their parents, and many families were poor. What consumers really care about is keeping the baby dry all night. •P&G launched an affordable, ultra water-tight nappy, without fussy details. It developed a lower-priced diaper line to make it attractive for parents who couldn't afford its more expensive diapers. •The basic tier of products now exists around the world under different brand names, such as Simply Dry in Western Europe.
  22. 22. Copyright © 2014 Accenture All rights reserved. 22 •Depending on segment, 25 to 32% of consumers don’t feel like companies are incorporating their feedback in product development ‒Emerging markets are the exception, especially Brazil, where an overwhelming majority feel listened to, and most channels are rated positively ‒Japanese consumers feel most ignored, with ~60% feeling companies are not incorporating feedback •There is no consensus on the most effective channel; only 20 to 30% of consumers picked each channel •~Half of consumers feel company websites and/or social media are the most effective channel(s); this is especially true in emerging markets •However, CG&S lags other industries in extent of investment in social media, despite open innovation being the 2nd rated reason for social media initiatives; CG&S also ranks last in using social media to monitor trends for product development* Conclusions: Consumers feel online channels are best for feedback; however, a number still do not feel companies are listening anywhere Sources: Accenture Consumer Innovation Pulse Survey, 2014; Accenture Business Agility Study
  23. 23. Copyright © 2014 Accenture All rights reserved. 23 •50%+ of consumer feel company websites and social media are the most effective channels for providing feedback •Only between 30 and 40% of consumers feel companies perform well at providing digital options ‒This is especially low in Western Europe ‒Even in emerging markets, ratings barely exceed 50% at most Conclusions: Digital engagement options seem to lag the opportunity
  24. 24. Copyright © 2014 Accenture All rights reserved. 24 European countries present the highest Digital TV and internet penetration rates Digital TV household penetration in selected countries worldwide in 2012 Top 50 countries with the highest internet penetration rate
  25. 25. Copyright © 2014 Accenture All rights reserved. 25 But China and India are the next frontiers for digital and social media marketing of consumer goods and services •Over the next decade, China is expected to reach 70-80% penetration and the penetration rate in India is also expected to increase. •The opportunities are endless for companies that are willing to embrace the next wave of marketing and embrace digital and social media marketing Large base of internet users (618 mn users in China & 164.81mn users in India with low penetration rates 45.8% & 11.4% respectively) Due to the relatively low rates of PC usage, both countries have a strong mobile penetration, (number of Internet subscribers in India is 164.81, with 7 out of 8 accessing the Internet from their mobile phones. In China, over 618 mn Internet users, 80% of which access the Web via their smartphones) Many users in both China and India are active social media users (India has c91mn social media users or 55% market penetration. The penetration rate in China is 91%) Both economies have large and growing middle classes whose increasing consumption of everything from smartphones to degrees from overseas universities will play a large role in driving domestic and international aggregate demand. China and India have many similarities and differences within the digital and social media landscape
  26. 26. Copyright © 2014 Accenture All rights reserved. 26 Accenture research showed direct correlation between CPG brand website usage and in-store purchase behavior Online brand presence matters – as does fresh and engaging content Brand visitors spend more •CPG brand website visitors buy 37% more in store and spend 53% more on the entire category •Consumers on the best evaluated websites spent over 200% more on the brand than non-visitors •Price paid per unit in brand at the best of the ten CPG brand websites was 2% higher than for non-visitors in brand Successful brand sites… •Provide compelling reason to buy (not just coupons) •Update content at least weekly, e.g., pulse surveys, user generated reviews, status on weight loss plans •Engage visitors, e.g., demos, live chat, apps and games Sources: Accenture/ dunnhumbyUSA, comScore research, 2011
  27. 27. Copyright © 2014 Accenture All rights reserved. 27 •May differentiate in a crowded market (Japan, alcobev) •Significant number of consumers still perceive no green products •55% of global respondents say they are willing to pay extra for products and services from companies committed to CSR (an increase of 1000 basis points in the past two years) * •“Green” is particularly important in emerging markets, with about two-thirds of consumers in APAC, LATAM and MEA saying they would pay more – and this figure is increasing •Willingness to pay extra is lower in North America and Europe (42% and 40%, respectively), but this number is also increasing •Products with sustainability claims or otherwise linked to sustainability programs grew sales between 2 and 5% from last year (vs. 1% for products without claims) Conclusions: While “green”/ sustainable products are more seen as improved vs. new, this is becoming a required investment Sources: Accenture Consumer Innovation Pulse Survey, 2014; “Doing Well By Doing Good’ – Nielsen, June 2014
  28. 28. Copyright © 2014 Accenture All rights reserved. 28 Contents Executive Summary Detailed Findings
  29. 29. Copyright © 2014 Accenture All rights reserved. 29 Consumers feel fast-moving Food & Beverages and Home & Personal Care lead in innovation, while Alcoholic Beverages lags Q1. How often does each of the following types of companies address your needs by developing radically ‘new’ products versus making product improvements? ? Top 2 : Always / Often Base: All respondents (n=11360) Alcoholic Beverages Fashion and Luxury Consumer Healthcare Home & Personal Care Food and Beverages 31% 40% 40% 51% 48% Global • Highly competitive and commoditizing Food & Beverages and Home & Personal Care experience highest innovation • Brand dependent industries are less likely to develop radically new products • Alcoholic beverages’ focus on heritage brands results in few truly “new” products
  30. 30. Copyright © 2014 Accenture All rights reserved. 30 Base: All respondents (n=11360) 39% 26% 20% 31% 24% 28% 26% Fashion and Luxury 39% 46% 36% 56% 32% 41% 36% Consumer Healthcare 44% 32% 28% 55% 36% 39% 32% Home and Personal Care 59% 47% 33% 71% 52% 49% 39% Food and Beverages 53% 38% Alcoholic Beverages 58% 42% 51% 41% 35% 40% 33% 36% 27% 36% UK US France Brazil Sweden Germany China Japan Q1. How often does each of the following types of companies address your needs by developing radically ‘new’ products versus making product improvements? ? Emerging markets perceive higher innovation than developed – though US consumers also see more “new” products • Emerging markets Brazil and China see more “new” products • Of developed markets, US consumers see the most “new” products • Brazilians perceive the highest innovation, while Swedes feel there are few truly “new” products
  31. 31. Copyright © 2014 Accenture All rights reserved. 31 Base: All respondents (n=11360) Fashion and Luxury Consumer Healthcare Home and Personal Care Food and Beverages Alcoholic Beverages Q1. How often does each of the following types of companies address your needs by developing radically ‘new’ products versus making product improvements? ? There seem to be clear regional biases in how consumers perceive existing innovation Top 2 : Always / Often 39% 44% 32% 36% 25% 51% 49% 41% 39% 28% 58% 71% 55% 56% 31% 50% 53% 42% 41% 38% W Europe US Brazil APAC 43% 44% 35% 35% 27% 55% 62% 47% 48% 37% Developed Emerging
  32. 32. Copyright © 2014 Accenture All rights reserved. 32 Consumers find online feedback most effective; a significant number do not feel companies are listening Q2. Which method(s) do you feel is the most effective way that companies incorporate your suggestions and feedback when they develop and/or enhance products? ? None, companies are not incorporating my suggestions Phone Mail In person Social media Company website 23% 24% 25% 11% 29% 26% 22% 25% 24% 11% 25% 30% 23% 23% 21% 11% 28% 28% 22% 23% 24% 10% 29% 29% 20% 32% 27% 10% 20% 22% Food and Beverages Home and Personal Care Consumer Healthcare Alcoholic Beverages Fashion and Luxury Global Base: All respondents (n=11360) • Company websites are still the top target for feedback • Social media is a strong second choice • Consumers feel phone is the least useful • Over a quarter of consumers don’t feel like companies are listening; this is strongest in Alcobev – where innovation is also lowest
  33. 33. Copyright © 2014 Accenture All rights reserved. 33 Brazilians feel company websites are most effective, by a wide margin Q2. Which method(s) do you feel is the most effective way that companies incorporate your suggestions and feedback when they develop and/or enhance products? ? Base: All respondents (n=11360) 25% 23% 24% Fashion and Luxury 26% 33% 24% 42% 26% 26% Consumer Healthcare 29% 28% 42% 25% 28% 25% Home and Personal Care 28% 34% 27% 42% 29% 27% Food and Beverages 30% 28% 40% 27% 27% 27% 25% Alcoholic Beverages 31% 23% 29% 29% 25% 32% 20% 22% 22% 30% 38% 30% Company Website UK US France Brazil Sweden Germany China Japan • Brazilians are significantly more likely to find Company Websites an effective feedback venue • Germans and Chinese also support this channel • Japanese are least supportive – though they feel Company Websites are significantly more effective than other channels
  34. 34. Copyright © 2014 Accenture All rights reserved. 34 In Social Media, there appears to be an emerging market bias, with Brazil and China both peaking Q2. Which method(s) do you feel is the most effective way that companies incorporate your suggestions and feedback when they develop and/or enhance products? ? Base: All respondents (n=11360) 27% 28% 25% 29% 30% Alcoholic Beverages 19% 17% 35% 15% 21% 21% Fashion and Luxury 20% 20% 42% 17% 23% 22% Consumer Healthcare 17% 16% 16% 36% 21% 18% Home and Personal Care 19% 20% 18% 39% 22% 21% Food and Beverages 20% 21% 40% 18% 25% 22% 10% 11% 9% 9% 11% Social Media UK US France Brazil Sweden Germany China Japan • Brazilians lead again in finding Social Media effective • The UK and US have the next highest levels of support • Japanese consumers are significantly less like to find Social Media a good feedback tool
  35. 35. Copyright © 2014 Accenture All rights reserved. 35 Again, Brazil leads in believing In Person feedback most effective; in most categories, the US and France also agree Q2. Which method(s) do you feel is the most effective way that companies incorporate your suggestions and feedback when they develop and/or enhance products? ? Base: All respondents (n=11360) 10% 8% 22% 7% 22% 8% 24% 8% 21% 22% 27% 20% 28% 18% 24% 18% Food and Beverages 36% 22% Alcoholic Beverages 18% 18% 32% 22% 21% 18% Fashion and Luxury 19% 16% 34% 24% 24% 18% Consumer Healthcare 21% 19% 37% 26% 25% 20% Home and Personal Care 19% 16% 37% 28% In person UK US France Brazil Sweden Germany China Japan • In Person remains a relatively strong channel for feedback • Once again, Brazilians lead in finding this channel effective • The US and France also support this channel • Similarly, Japanese do not feel In Person feedback works
  36. 36. Copyright © 2014 Accenture All rights reserved. 36 French consumers find Mail to be an effective feedback channel, with Brazilians and Chinese also supporting Q2. Which method(s) do you feel is the most effective way that companies incorporate your suggestions and feedback when they develop and/or enhance products? ? Base: All respondents (n=11360) Alcoholic Beverages 22% 10% 27% 14% 32% 15% Fashion and Luxury 24% 15% 33% 35% 18% 17% Consumer Healthcare 23% 15% 33% 36% 19% 17% Home and Personal Care 25% 15% 33% 40% 21% 17% Food and Beverages 23% 17% 33% 37% 20% 19% 9% 28% 7% 29% 27% 8% 7% 26% 27% 8% Mail UK US France Brazil Sweden Germany China Japan • Mail is the channel French consumers find to be most effective for feedback • This is seconded by Brazilians, Chinese and to a lesser degree, Germans • The UK, US and Sweden all do not support Mail • Again, Japanese consumers are unlikely to think Mail is effective
  37. 37. Copyright © 2014 Accenture All rights reserved. 37 Phone is not widely favored as a feedback tool, with the Chinese standing out in their moderate support Q2. Which method(s) do you feel is the most effective way that companies incorporate your suggestions and feedback when they develop and/or enhance products? ? Base: All respondents (n=11360) 20% 3% 3% 3% 3% 2% 21% 20% 18% 19% 7% 2% 4% Alcoholic Beverages 10% 7% 6% Fashion and Luxury 5% 3% 12% 7% 8% 5% Consumer Healthcare 6% 4% 15% 9% 10% 7% Home and Personal Care 5% 3% 11% 8% 10% 7% Food and Beverages 5% 3% 12% 8% 8% 5% Phone UK US France Brazil Sweden Germany China Japan • Almost all countries find Phone the least effective feedback channel • China supports Phone almost as strongly as In Person feedback • Brazil’s support is relatively low, though higher than almost all
  38. 38. Copyright © 2014 Accenture All rights reserved. 38 On average, over a quarter of consumers don’t feel companies incorporate feedback, with the Japanese significantly more negative Q2. Which method(s) do you feel is the most effective way that companies incorporate your suggestions and feedback when they develop and/or enhance products? ? Base: All respondents (n=11360) 20% 61% 27% 21% 17% 59% 61% 18% 60% 63% Alcoholic Beverages 34% 42% 15% 30% 37% 40% Fashion and Luxury 31% 39% 7% 27% 29% 37% Consumer Healthcare 32% 36% 7% 24% 27% 37% Home and Personal Care 28% 35% 5% 20% 25% 35% Food and Beverages 30% 34% 6% 23% 24% 33% UK US France Brazil Sweden Germany China Japan None, companies are not incorporating my suggestions • Japanese consumers do not feel companies are listening to feedback in new product development • Emerging markets are the most positive, with most consumers feeling that companies incorporate feedback • Consumers feel alcobev companies listen least to their feedback
  39. 39. Copyright © 2014 Accenture All rights reserved. 39 Overall, digital options are surprisingly rare – given the ubiquity of digitization and the growth of mobility Q3. How well do each of the following types of companies develop products that provide you a “digital option” when using the product? ? Alcoholic Beverages 29% Fashion and Luxury 37% Consumer Healthcare 33% Home and Personal Care 39% Food and Beverages 38% Top 2 : Very well / Well Global Base: All respondents (n=11360) • Consumers feel there are the fewest options to engage digitally with alcobev products, perhaps due to regulatory constraints • Consumer health also lags, somewhat – again, this may be regulation-driven; however, it seems a missed opportunity given consumer focus on health & wellness – and the desire for product information
  40. 40. Copyright © 2014 Accenture All rights reserved. 40 Base: All respondents (n=11360) Fashion and Luxury Consumer Healthcare Home and Personal Care Food and Beverages Alcoholic Beverages Q3. How well do each of the following types of companies develop products that provide you a “digital option” when using the product? ? Once again, consumers see digital options varying by region – with emerging market consumers perceiving significantly more 31% 30% 27% 28% 24% 41% 37% 35% 34% 27% 51% 53% 50% 52% 36% 40% 43% 34% 40% 34% W Europe US Brazil APAC 32% 31% 28% 28% 24% 47% 51% 42% 49% 37% Developed Emerging Top 2 : Very well / Well
  41. 41. Copyright © 2014 Accenture All rights reserved. 41 Base: All respondents (n=11360) Alcoholic Beverages 29% 13% 25% 36% 27% 22% Fashion and Luxury 33% 15% 30% 52% 34% 27% Consumer Healthcare 35% 14% 50% 35% 24% Home and Personal Care 37% 29% 16% 21% 22% 17% 22% 15% 35% 53% 37% 26% Food and Beverages 36% 17% 51% 32% 41% 31% 45% 39% 37% 48% 50% Q3. How well do each of the following types of companies develop products that provide you a “digital option” when using the product? ? Brazil leads, with China also more satisfied with digital options Top 2 : Very well / Well UK US France Brazil Sweden Germany China Japan • Brazilian consumers lead in finding “digital options”, closely followed by China • US and German consumers also perceive a relatively high number of “digital options” • In Sweden, consumers see a significant lack of “digital options”; Japanese perception also lags
  42. 42. Copyright © 2014 Accenture All rights reserved. 42 Alcoholic Beverages 19% Fashion and Luxury 25% Consumer Healthcare 24% Home and Personal Care 26% Food and Beverages 25% Q4. When each of the following types of companies develop green/eco-friendly/socially conscious products do you feel these are new products or product improvements? ? Consumers more likely think “green” products are improved vs. new; “green” products seem less common in highly “branded” categories New Products Products Improvement 47% 44% 50% 54% 53% Global Base: All respondents (n=11360) Companies Not Developing Green Products 33% 30% 26% 20% 23% Most perceived “green” products in Food & HPC; high incidence in HPC may be driven by the many “green” home care products Alcobev lags in perceived “green” development, with fewer category opportunities and a stronger emphasis on heritage brands
  43. 43. Copyright © 2014 Accenture All rights reserved. 43 Base: All respondents (n=11360) Fashion and Luxury Consumer Healthcare Home and Personal Care Food and Beverages Alcoholic Beverages Q4. When each of the following types of companies develop green/eco-friendly/socially conscious products do you feel these are new products or product improvements? ? Consumers in Western Europe see the least “green” innovation, in sharp contrast to those in APAC 18% 20% 19% 19% 15% 28% 31% 27% 25% 18% 26% 31% 29% 30% 19% 28% 29% 26% 30% 24% W Europe US Brazil APAC 53% 55% 49% 44% 46% 50% 51% 46% 39% 38% 51% 51% 49% 45% 42% 54% 55% 54% 47% 54% W Europe US Brazil APAC 29% 25% 32% 37% 40% 21% 18% 27% 35% 44% 23% 18% 22% 26% 39% 18% 16% 20% 24% 22% W Europe US Brazil APAC New Products Products Improvement Companies Not Developing Green Products
  44. 44. Copyright © 2014 Accenture All rights reserved. 44 Base: All respondents (n=11360) Fashion and Luxury Consumer Healthcare Home and Personal Care Food and Beverages Alcoholic Beverages Q4. When each of the following types of companies develop green/eco-friendly/socially conscious products do you feel these are new products or product improvements? ? Both emerging and developed markets are more likely to see “green” products as “improvements” vs. “new”; emerging markets perceive that more companies are developing green products 50% 52% 47% 42% 43% 56% 57% 55% 48% 54% Developed Emerging New Products Products Improvement 26% 23% 30% 36% 39% 17% 14% 18% 21% 24% Developed Emerging Companies Not Developing Green Products 23% 24% 23% 22% 18% 27% 30% 27% 30% 21% Developed Emerging
  45. 45. Copyright © 2014 Accenture All rights reserved. 45 Base: All respondents (n=11360) 14% 18% 16% Fashion and Luxury 18% 20% 30% 18% 25% 19% Consumer Healthcare 16% 17% 29% 20% 27% 22% Home and Personal Care 16% 17% 31% 23% 31% 23% Food and Beverages 14% 19% 26% 18% 28% 20% Alcoholic Beverages 13% 17% 19% 27% 29% 26% 31% 27% 26% 31% 22% 26% 30% Q4. When each of the following types of companies develop green/eco-friendly/socially conscious products do you feel these are new products or product improvements? ? European countries are least likely to feel “green” products are “new” New Products UK US France Brazil Sweden Germany China Japan • Japan, the US, Brazil and China all are more likely to believe green/eco-friendly/social conscious products are “new” vs. product improvements • Japan especially stands out in seeing “green” alcobev products as “new” • As a whole, the UK, France, Sweden and Germany don’t perceive “green” products as “new”
  46. 46. Copyright © 2014 Accenture All rights reserved. 46 Base: All respondents (n=11360) 43% 56% 42% 48% 38% 36% Fashion and Luxury 41% 53% 45% 39% 43% 38% Consumer Healthcare 48% 59% 49% 49% 46% 40% Home and Personal Care 53% 61% 51% 57% 47% 51% Food and Beverages 52% 61% 51% 52% 50% 47% Alcoholic Beverages 58% 43% 57% 49% 46% 57% 58% 38% 41% 44% Q4. When each of the following types of companies develop green/eco-friendly/socially conscious products do you feel these are new products or product improvements? ? Across the board, consumers are more likely to see “green” products as “improved” vs. “new” Products Improvements UK US France Brazil Sweden Germany China Japan • Germany and China are significantly more likely to perceive “green” products as “improved” • The UK and Japan are the least likely to view “green” products as “improved”
  47. 47. Copyright © 2014 Accenture All rights reserved. 47 Base: All respondents (n=11360) 27% 17% 27% 18% 31% 40% 39% 39% 44% 48% Fashion and Luxury 30% 39% 26% 39% 35% 42% Consumer Healthcare 25% 35% 22% 31% 27% 37% Home and Personal Care 23% 30% 18% 20% 18% 30% Food and Beverages 25% 29% 23% 30% 21% 33% 21% 21% 29% 20% 30% 36% Alcoholic Beverages Q4. When each of the following types of companies develop green/eco-friendly/socially conscious products do you feel these are new products or product improvements? ? Given the importance of CSR, there is still a relatively strong perception that companies are not supporting this desire I do not feel companies are developing green/eco-friendly/socially conscious products UK US France Brazil Sweden Germany China Japan • The UK leads in feeling that companies are not developing “green” products • The Chinese and sometimes Brazilians and US consumers are least likely to feel companies are not developing “green” products • Countries generally see Alcobev companies as developing the fewest “green” products
  48. 48. Copyright © 2014 Accenture All rights reserved. 48 Appendix
  49. 49. Copyright © 2014 Accenture All rights reserved. 49 Conclusions - IRI
  50. 50. Copyright © 2014 Accenture All rights reserved. 51 •Unilever’s Magnum brand generated year-one sales of $95mn & 2nd year, $136mn •Kraft Foods' MiO generated cumulative #1 & #2 year sales of $268mn. New 30% of buyers to the category •Milo’s Kitchen Year-one sales exceeded $75 million and year-two sales grew past $100mn •Hershey’s Reese’s Minis generated over $100mn in year one sales
  51. 51. Copyright © 2014 Accenture All rights reserved. 52 •Winning in the Digital Channel: The E-Commerce Opportunity in Consumer Goods: http://www.accenture.com/us-en/Pages/insight-winning-digital-channel- consumer-goods-ecommerce.aspx •Redrawing the Frontiers: http://consumergoods.edgl.com/column/Redrawing-the-Frontiers92925 •Data Transformation: Winning and Retaining the Digital Consumer: http://www.accenture.com/us-en/Pages/insight-winning-digital-channel-consumer- goods-ecommerce.aspx •The Future Of Consumer Goods: Moving From Analog To Digital: http://www.slideshare.net/xavianaya/accenture- cpgdigitalrevolutionmovingfromanalogtodigitaloperatingmodel •Innovation in Consumer Products How to achieve high performance through new product innovation: http://www.accenture.com/sitecollectiondocuments/pdf/consumerproductsgrouppov_103008_fnl.pdf •Research Shows Digital IT Transformation Boosts CPG Profits: http://www.accenture.com/us-en/Pages/insight-digital-it-transformation-for-consumer- packaged-goods.aspx •Lacoste partners with Accenture to establish online presence in China: http://www.retailinasia.com/article/sectors/fashion/2013/08/lacoste-partners- accenture-establish-online-presence-china •Company will invest $200 million in its plan to upgrade fulfillment, mobile, and analytics capabilities: http://www.retailsolutionsonline.com/doc/belk-chooses- accenture-to-aid-in-omni-channel-transformation-0001 •Digital Delivery: How CPG Companies Can Entice E-Consumers: http://consumergoods.edgl.com/column/Digital-Delivery--How-CPG-Companies-Can- Entice-E-Consumers94784 Accenture PoV for reference

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