March 19, 2014
Wall Street’s View on Private Label
Tissue World 2014
Ali Dibadj
SVP, Senior Analyst
Sanford C. Bernstein
+1-212-756-4137
ali.dibadj@bernstein.com
See Disclosure Appendix of this report for important Disclosures and Analyst Certifications
Speaker
Intro
Ali Dibadj
(+1-212-756-4137; ali.dibadj@bernstein.com)
Ali Dibadj is the Senior Analyst at Bernstein covering U.S.
Household & Personal Products (HPP) and U.S. Beverages &
Snacks. He has been regularly recognized for both sectors in the
Institutional Investor and Greenwich sell-side surveys, including
being repeatedly ranked the #1 analyst in U.S. HPP, and part of
the #1 team in U.S. Beverages & Snacks. Previously, he was a
leader of McKinsey’s Consumer Goods and Retail Practices,
where he advised senior management of consumer packaged
goods and retail clients internationally on topics such as private
label, corporate strategy, mergers and acquisitions, marketing,
pricing, and organizational structure. Prior to McKinsey, Ali had
experience in the sector at Mercer Management Consulting and
Skadden, Arps. He holds an S.B. from Harvard College
(Electrical Engineering) and a J.D. from Harvard Law School.
Source: Bernstein
Ali Dibadj 212-756-4137 ali.dibadj@bernstein.com
2
U.S. Household & Personal Products / U.S. Beverages & Snacks
Investors are still uncertain about private label companies and
private label in general—I see a secular trend
100%
Intro
3-Year Cumulative Relative Return (vs. SP500)
80%
60%
40%
20%
0%
-20%
-40%
-60%
PG
PRGO
THS
KMB
02/15/14
01/15/14
11/15/13
12/15/13
10/15/13
09/15/13
08/15/13
07/15/13
06/15/13
05/15/13
04/15/13
02/15/13
03/15/13
01/15/13
12/15/12
11/15/12
09/15/12
10/15/12
08/15/12
06/15/12
07/15/12
04/15/12
05/15/12
02/15/12
03/15/12
01/15/12
11/15/11
12/15/11
10/15/11
09/15/11
08/15/11
07/15/11
06/15/11
05/15/11
04/15/11
03/15/11
-80%
MCB
Source: CapitalIQ, Bernstein
Ali Dibadj 212-756-4137 ali.dibadj@bernstein.com
3
U.S. Household & Personal Products / U.S. Beverages & Snacks
CONTENTS
U.S. private label has been gaining share overall and in consumer tissue
specifically
Retailers will likely continue to look to private label in the U.S. given
margins, negotiation ability with brands, and consumer preference
E-commerce and the emerging markets will be large, new drivers for
private label
Source: Bernstein
Ali Dibadj 212-756-4137 ali.dibadj@bernstein.com
4
U.S. Household & Personal Products / U.S. Beverages & Snacks
CONTENTS
U.S. private label has been gaining share overall and in consumer tissue
specifically
Retailers will likely continue to look to private label in the U.S. given
margins, negotiation ability with brands, and consumer preference
E-commerce and the emerging markets will be large, new drivers for
private label
Source: Bernstein
Ali Dibadj 212-756-4137 ali.dibadj@bernstein.com
5
U.S. Household & Personal Products / U.S. Beverages & Snacks
Private label market share has increased significantly for overall
U.S. Household & Personal Products, although there are signs of it
slowing down recently
U.S.
U.S. Household & Personal Products Private Label Market Share
16.5%
16.0%
15.5%
15.0%
14.5%
01/18/14
11/23/13
09/28/13
08/03/13
06/08/13
04/13/13
02/16/13
12/22/12
10/27/12
09/01/12
07/07/12
05/12/12
03/17/12
01/21/12
11/26/11
10/01/11
08/06/11
06/11/11
04/16/11
02/19/11
12/25/10
10/30/10
09/04/10
07/10/10
05/15/10
03/20/10
01/23/10
11/28/09
10/03/09
08/08/09
06/13/09
04/18/09
01/26/08
14.0%
Source: Nielsen, Bernstein
Ali Dibadj 212-756-4137 ali.dibadj@bernstein.com
6
U.S. Household & Personal Products / U.S. Beverages & Snacks
Ali Dibadj 212-756-4137 ali.dibadj@bernstein.com
7
01/18/14
11/23/13
09/28/13
08/03/13
06/08/13
04/13/13
02/16/13
12/22/12
10/27/12
09/01/12
07/07/12
05/12/12
03/17/12
01/21/12
11/26/11
10/01/11
08/06/11
06/11/11
04/16/11
02/19/11
12/25/10
10/30/10
09/04/10
07/10/10
05/15/10
03/20/10
01/23/10
11/28/09
10/03/09
08/08/09
06/13/09
04/18/09
02/21/09
We see the same trend in U.S. Tissue…
U.S.
Total Tissue U.S. Private Label Market Share
25%
24%
23%
22%
21%
20%
19%
18%
Source: Nielsen, Bernstein
U.S. Household & Personal Products / U.S. Beverages & Snacks
…as well as in each of the Tissue segments—although Toilet Tissue
has gained more than Kitchen and Facial
U.S.
Total Tissue U.S. Private Label Market Share by Subsegment
29%
27%
25%
23%
21%
19%
17%
15%
FACIAL TISSUE
TOILET TISSUE
PAPER TOWELS
Source: Nielsen, Bernstein
Ali Dibadj 212-756-4137 ali.dibadj@bernstein.com
8
U.S. Household & Personal Products / U.S. Beverages & Snacks
As we look and see what brands have lost this share, it seems like
Georgia Pacific has been the biggest share donor, followed by
Kimberly-Clark…
All Tissue Branded Share by Company
100%
90%
Private label: +3.8%
80%
70%
60%
Other: +0.4%
Georgia Pacific: -4.2%
50%
40%
Kimberly-Clark: -1.1%
30%
20%
Procter & Gamble: +1.2%
10%
0%
PG
KMB
Georgia Pacif ic
Other
Private Label
Source: Nielsen, Bernstein
Ali Dibadj 212-756-4137 ali.dibadj@bernstein.com
9
U.S. Household & Personal Products / U.S. Beverages & Snacks
U.S.
…and that is true across paper/kitchen towels…
U.S.
Paper Towels Branded Share by Company
100%
90%
Other: +0.2%
Private label: +3.4%
80%
70%
Georgia Pacific: -3.2%
60%
Kimberly-Clark: -1.1%
50%
40%
30%
20%
Procter & Gamble: +0.8%
10%
0%
PG
Georgia Pacif ic
KMB
Other
Private Label
Source: Nielsen, Bernstein
Ali Dibadj 212-756-4137 ali.dibadj@bernstein.com
10
U.S. Household & Personal Products / U.S. Beverages & Snacks
…and especially toilet tissue…
U.S.
Toilet Tissue Branded Share by Company
100%
90%
Private label: +4.2%
80%
70%
50%
40%
Kimberly-Clark: -0.8%
Other: +0.5%
60%
Other: +4.2%
Georgia Pacific: -5.9%
30%
20%
Procter & Gamble: +2.0%
10%
0%
PG
Georgia Pacif ic
KMB
Other
Private Label
Source: Nielsen, Bernstein
Ali Dibadj 212-756-4137 ali.dibadj@bernstein.com
11
U.S. Household & Personal Products / U.S. Beverages & Snacks
…but not facial tissue, where P&G was the biggest loser
FacialTissue Branded Share by Company
100%
90%
Private label: +3.7%
80%
70%
60%
Other: -1.5%
Georgia Pacific: +1.1%
50%
Procter & Gamble: -2.1%
40%
30%
20%
Kimberly-Clark: -1.1%
10%
0%
KMB
PG
Georgia Pacif ic
Other
Private Label
Source: Nielsen, Bernstein
Ali Dibadj 212-756-4137 ali.dibadj@bernstein.com
12
U.S. Household & Personal Products / U.S. Beverages & Snacks
U.S.
-10%
Greece
Czech Republic
Poland
Spain
Hungary
Portugal
Israel
Turkey
Netherlands
Philippines
Slovakia
Australia
France
Italy
Ireland
Germany
Ukraine
Austria
Belgium
USA
Denmark
Argentina
Finland
Taiwan
Colombia
Switzerland
Indonesia
Morocco
South Af rica
Singapore
Thailand
Russia
Malaysia
Mexico
South Korea
India
Bulgaria
Japan
United Arab Emirates
Vietnam
Saudi Arabia
Canada
Brazil
Sweden
Norway
China
Chile
Egypt
Peru
Venezuela
Hong Kong, China
United Kingdom
New Zealand
We will touch on this more later, but we see private label growth as a
global phenomenon—the power of brands is waning around the world
Source: Euromonitor, Bernstein
Ali Dibadj 212-756-4137 ali.dibadj@bernstein.com
13
U.S. Household & Personal Products / U.S. Beverages & Snacks
U.S.
Total Tissue Private Label Share Change (2004-2013)
35%
30%
25%
20%
15%
10%
5%
0%
-5%
CONTENTS
U.S. private label has been gaining share overall and in consumer tissue
specifically
Retailers will likely continue to look to private label in the U.S. given
margins, negotiation ability with brands, and consumer preference
E-commerce and the emerging markets will be large, new drivers for
private label
Source: Bernstein
Ali Dibadj 212-756-4137 ali.dibadj@bernstein.com
14
U.S. Household & Personal Products / U.S. Beverages & Snacks
Retailers will likely continue to look to private label in the U.S. given
margins, negotiation ability with brands, and consumer preference
Margins
Retailers make better margins/profit dollars
Retailers can negotiate better versus branded companies
Consumers like it/loyalty is created
Source: Bernstein
Ali Dibadj 212-756-4137 ali.dibadj@bernstein.com
15
U.S. Household & Personal Products / U.S. Beverages & Snacks
Our analysis suggests retailers can make higher penny and
percentage profits from private label, and it’s even close after trade
Margins
spend
Branded
Difference bw PL and Branded
Private Label
Sale to consumer
150
12%
132
Cost of product (i.e., manuf sales)
122
18%
100
Margin $
28
32
Margin %
19%
24%
Branded
Difference bw PL and Branded
Private Label
Sale to consumer less promo
141
7%
132
Cost of product less promo
110
7%
102
Margin $
32
30
Margin %
22%
23%
Source: Industry discussions; Bernstein estimates and analysis
Ali Dibadj 212-756-4137 ali.dibadj@bernstein.com
16
U.S. Household & Personal Products / U.S. Beverages & Snacks
Private label OTC company Perrigo, laid out the math…
Margins
Source: PRGO
Ali Dibadj 212-756-4137 ali.dibadj@bernstein.com
17
U.S. Household & Personal Products / U.S. Beverages & Snacks
…in a very compelling manner at a recent investor day
Margins
Source: PRGO
Ali Dibadj 212-756-4137 ali.dibadj@bernstein.com
18
U.S. Household & Personal Products / U.S. Beverages & Snacks
Meanwhile consumers continue to look for ways to save money…
Consumer
What was the primary reason you bought the less expensive brand rather than
the brand that you used to buy?
60%
50%
2014
2013
2012
48%
45%45%
40%
30%
20%
23%
19%
17%
10%
16%
12%
9%
12%12%14%
6% 6%
4%
4% 2% 3%
1% 1% 0%
1% 1% 0%
0%
To save money Not worth paying Worried about More expensive Less expensive Less expensive More expensive More expensive
where possible
more in this
economy/job brand price rose brand price fell brand innovation
brand
brand quality
category
unavailable
problem
Source: Bernstein Consumer Survey 2014, 2013, 2012
Ali Dibadj 212-756-4137 ali.dibadj@bernstein.com
19
U.S. Household & Personal Products / U.S. Beverages & Snacks
…and trading down on CPG seems to be one of the clear ways to do so
Consumer
Traded Down In Past 12 Months In At
Least One Category?
Traded Down In Past 12 Months?
(Average Response Across All
Individual Categories)
80%
70%
66%
68%
63%
60%
30%
64%
26%
25%
54%
22%
22%
20%
50%
20%
16%
40%
15%
30%
10%
20%
5%
10%
0%
0%
2010
2011
2012
2013
2010
2014
2011
2012
2013
2014
Source: Bernstein U.S. Consumer Survey 2014
Ali Dibadj 212-756-4137 ali.dibadj@bernstein.com
20
U.S. Household & Personal Products / U.S. Beverages & Snacks
0%
Bleach
Paper Towels/Kitchen Towels
Bottled water
Trash bags
Laundry detergent
Household cleaners
Sandwich bags
Cough and cold medications
Liquid soap
Batteries
Toilet paper
Dishwashing detergent
Cheese
Air fresheners
Cigarettes
Facial tissue
Diapers
Cereal
Cola/Pop/Soft Drinks
Cookies/Crackers
Cat litter
Catsup
Sanitary napkins/tampons
Household/Personal wipes
Bar soap
Shampoo/Conditioners
Canned soup
Ground coffee
Breakfast cereals/Snack bars
Salad dressings
Spaghetti sauce
Potato chips
Pretzels
Pasta/Rice/Noodles
Juices
Popcorn
Mouthwash
Fresh milk
Chewing Tobacco
Tortilla chips
Toothbrushes
Dips/Salsa
Color cosmetics/Make-up
Razors/Blades
Nuts
Shaving cream/gel
Yogurt
Iced teas
Energy drinks
Confectionary/Candy/Chocolate
Frozen entrees
Sun cream
Refrigerated dough products
Wine
Pet food
Spirits/Hard alcohol
Beer
Skin creams
Toothpaste
Frankfurters/Sausages
Fragrance/Cologne/Perfume
Deodorants
Sports drinks
Baby food
Not all categories are created equally regarding consumer trade
down…
40%
Ali Dibadj 212-756-4137 ali.dibadj@bernstein.com
21
Consumer
Traded Down In The Past 12 Months? (% Yes)
35%
30%
25%
20%
15%
10%
5%
Source: Bernstein U.S. Consumer Survey 2014
U.S. Household & Personal Products / U.S. Beverages & Snacks
0%
Bleach
Paper Towels/Kitchen Towels
Bottled water
Trash bags
Laundry detergent
Household cleaners
Sandwich bags
Cough and cold medications
Liquid soap
Batteries
Toilet paper
Dishwashing detergent
Cheese
Air fresheners
Cigarettes
Facial tissue
Diapers
Cereal
Cola/Pop/Soft Drinks
Cookies/Crackers
Cat litter
Catsup
Sanitary napkins/tampons
Household/Personal wipes
Bar soap
Shampoo/Conditioners
Canned soup
Ground coffee
Breakfast cereals/Snack bars
Salad dressings
Spaghetti sauce
Potato chips
Pretzels
Pasta/Rice/Noodles
Juices
Popcorn
Mouthwash
Fresh milk
Chewing Tobacco
Tortilla chips
Toothbrushes
Dips/Salsa
Color cosmetics/Make-up
Razors/Blades
Nuts
Shaving cream/gel
Yogurt
Iced teas
Energy drinks
Confectionary/Candy/Chocolate
Frozen entrees
Sun cream
Refrigerated dough products
Wine
Pet food
Spirits/Hard alcohol
Beer
Skin creams
Toothpaste
Frankfurters/Sausages
Fragrance/Cologne/Perfume
Deodorants
Sports drinks
Baby food
…with consumer tissue as among the most traded down categories
Consumer
40%
Traded Down In The Past 12 Months? (% Yes)
35%
30%
25%
20%
15%
10%
5%
Source: Bernstein U.S. Consumer Survey 2014
Ali Dibadj 212-756-4137 ali.dibadj@bernstein.com
22
U.S. Household & Personal Products / U.S. Beverages & Snacks
73% of consumers who traded down thought what they traded down
to was “as good” or “better” than the more expensive brands
Consumer
Respondents' Average Experience
with Less Expensive Brands
Worse,
bad value
4%
Better
5%
Worse, but
still a good
value
23%
As Good
68%
Source: Bernstein U.S. Consumer Survey 2014
Ali Dibadj 212-756-4137 ali.dibadj@bernstein.com
23
U.S. Household & Personal Products / U.S. Beverages & Snacks
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Fresh milk
Bottled water
Pasta/Rice/Noodles
Bleach
Baby f ood
Shaving cream/gel
Pretzels
Tortilla chips
Cough and cold …
Household/Personal wipes
Cheese
Spaghetti sauce
Nuts
Liquid soap
Catsup
Juices
Bar soap
Air f resheners
Dips/Salsa
Popcorn
Sun cream
Iced teas
Household cleaners
Cereal
Toothpaste
Sports drinks
Mouthwash
Cookies/Crackers
Toothbrushes
Breakfast cereals/Snack …
Salad dressings
Frankf urters/Sausages
Potato chips
Canned soup
Deodorants
Frozen entrees
Sandwich bags
Yogurt
Ref rigerated dough …
Confectionary/Candy/Ch…
Sanitary napkins/tampons
Skin creams
Cola/Pop/Soft Drinks
Ground coff ee
Chewing Tobacco
Paper Towels/Kitchen …
Shampoo/Conditioners
Toilet paper
Trash bags
Dishwashing detergent
Cigarettes
Laundry detergent
Pet f ood
Spirits/Hard alcohol
Facial tissue
Energy drinks
Cat litter
Razors/Blades
Wine
Color cosmetics/Make-up
Batteries
Diapers
Fragrance/Cologne/Perf …
Beer
By category across HPP, U.S. consumers seem to be generally
satisfied with less expensive CPG products
Ali Dibadj 212-756-4137 ali.dibadj@bernstein.com
24
Consumer
Exprience with Less Expensive Brands "As good" or "Better"
Source: Bernstein U.S. Consumer Survey 2014
U.S. Household & Personal Products / U.S. Beverages & Snacks
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Fresh milk
Bottled water
Pasta/Rice/Noodles
Bleach
Baby f ood
Shaving cream/gel
Pretzels
Tortilla chips
Cough and cold …
Household/Personal wipes
Cheese
Spaghetti sauce
Nuts
Liquid soap
Catsup
Juices
Bar soap
Air f resheners
Dips/Salsa
Popcorn
Sun cream
Iced teas
Household cleaners
Cereal
Toothpaste
Sports drinks
Mouthwash
Cookies/Crackers
Toothbrushes
Breakfast cereals/Snack …
Salad dressings
Frankf urters/Sausages
Potato chips
Canned soup
Deodorants
Frozen entrees
Sandwich bags
Yogurt
Ref rigerated dough …
Conf ectionary/Candy/Ch…
Sanitary napkins/tampons
Skin creams
Cola/Pop/Sof t Drinks
Ground cof f ee
Chewing Tobacco
Paper Towels/Kitchen …
Shampoo/Conditioners
Toilet paper
Trash bags
Dishwashing detergent
Cigarettes
Laundry detergent
Pet f ood
Spirits/Hard alcohol
Facial tissue
Energy drinks
Cat litter
Razors/Blades
Wine
Color cosmetics/Make-up
Batteries
Diapers
Fragrance/Cologne/Perf …
Beer
However, consumer tissue is on the lower end of satisfaction
Ali Dibadj 212-756-4137 ali.dibadj@bernstein.com
25
Consumer
Exprience with Less Expensive Brands "As good" or "Better"
Source: Bernstein U.S. Consumer Survey 2014
U.S. Household & Personal Products / U.S. Beverages & Snacks
Private label still has a worse quality perception than low-priced
“brands”—this continues to be the challenge/opportunity
Consumer
Experience with private label...
(% Responding Store Brand "As Good" or "Better")
43%
45%
40%
As Good
Better
39%
36%
35%
30%
25%
2012
2013
2014
Source: Bernstein U.S. Consumer Survey 2014
Ali Dibadj 212-756-4137 ali.dibadj@bernstein.com
26
U.S. Household & Personal Products / U.S. Beverages & Snacks
The biggest hurdle to purchasing less expensive HPP products
across the board does tend to be a perceived quality difference
70%
Consumer
I have not purchased the less expensive household and personal product
brands in certain categories because... (% of all Buyers)
63%
60%
50%
40%
33%
29%
30%
20%
7%
10%
7%
5%
Lack of Less
Expensive Brand
Availability
No Need to Save
Money
0%
Perceived Quality Price Dif f erence Too General "Trust" in Already Always Buy
Diff erence
Small
Brands
the Less Expensive
Brand
Note: A handful of respondents also cited medical or environmental rationales for sticking with their brands (e.g., a preference for eco-friendly products,
Source: Bernstein U.S. Consumer Survey 2014
Ali Dibadj 212-756-4137 ali.dibadj@bernstein.com
27
U.S. Household & Personal Products / U.S. Beverages & Snacks
CONTENTS
U.S. private label has been gaining share overall and in consumer tissue
specifically
Retailers will likely continue to look to private label in the U.S. given
margins, negotiation ability with brands, and consumer preference
E-commerce and the emerging markets will be large, new drivers for
private label
Source: Bernstein
Ali Dibadj 212-756-4137 ali.dibadj@bernstein.com
28
U.S. Household & Personal Products / U.S. Beverages & Snacks
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
Toilet paper
Plastic bags/Wraps
Laundry detergent
Bar soap
Liquid soap
Dishcleaning…
Household cleaners
Pet food
Toothbrushes
Toothpaste
Bleach
Shampoo/Conditioners
Salty Snacks (e.g.,…
Paper Towels/Kitchen…
Facial tissue
Rice/Noodles/Pasta
Hot cereals
Sanitary napkins/Tampons
Batteries
Household/Personal…
Nappies/Diapers
Dry fruits/Nuts
Frozen meals
Bottled water
Shaving cream/Gel
Cold cereals/Snack bars
Iced tea/Iced coffee
Razors/Blades
Cigarettes
Air fresheners
Biscuits/Cookies/Crackers
Canned/Packaged soup
Fresh milk
Tomato…
Confectionary/Candy/C…
Cheese
Soft drinks/Colas
Energy drinks
Beer
Instant coffee/Ground…
Skin creams/Skin care
Juices/Juice Drinks
Cough and cold…
Hot tea
Curd/Yogurt
Processed meat
Mouthwash
Deodorants
Baby food
Sports drinks
Wine
Spirits/Hard alcohol
Colour cosmetics/Make-up
Fragrance/Cologne/Perf…
Trading down is increasingly a global phenomenon as consumers
see many CPG products as more-and-more basic…
Emerging
China trade down in past 12 months
Source: Bernstein China Consumer Survey 2014
Ali Dibadj 212-756-4137 ali.dibadj@bernstein.com
29
U.S. Household & Personal Products / U.S. Beverages & Snacks
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
Toilet paper
Plastic bags/Wraps
Laundry detergent
Bar soap
Liquid soap
Dishcleaning…
Household cleaners
Pet food
Toothbrushes
Toothpaste
Bleach
Shampoo/Conditioners
Salty Snacks (e.g.,…
Paper Towels/Kitchen…
Facial tissue
Rice/Noodles/Pasta
Hot cereals
Sanitary napkins/Tampons
Batteries
Household/Personal wipes
Nappies/Diapers
Dry fruits/Nuts
Frozen meals
Bottled water
Shaving cream/Gel
Cold cereals/Snack bars
Iced tea/Iced coffee
Razors/Blades
Cigarettes
Air fresheners
Biscuits/Cookies/Crackers
Canned/Packaged soup
Fresh milk
Tomato…
Confectionary/Candy/Ch…
Cheese
Soft drinks/Colas
Energy drinks
Beer
Instant coffee/Ground…
Skin creams/Skin care
Juices/Juice Drinks
Cough and cold…
Hot tea
Curd/Yogurt
Processed meat
Mouthwash
Deodorants
Baby food
Sports drinks
Wine
Spirits/Hard alcohol
Colour cosmetics/Make-up
Fragrance/Cologne/Perf…
…and consistent with the U.S. (Europe, etc.) consumer tissue is high
on the “trade down” spectrum
Emerging
China trade down in past 12 months
Source: Bernstein China Consumer Survey 2014
Ali Dibadj 212-756-4137 ali.dibadj@bernstein.com
30
U.S. Household & Personal Products / U.S. Beverages & Snacks
Although still generally low, we see the emerging markets quickly
accepting private label—an enormous opportunity for growth,
Emerging
although margins must be watched
Emerging Markets Total Tissue Private Label Share Change (2004-2013)
30%
25%
20%
15%
10%
5%
0%
-5%
Source: Euromonitor, Bernstein
Ali Dibadj 212-756-4137 ali.dibadj@bernstein.com
31
U.S. Household & Personal Products / U.S. Beverages & Snacks
Physical retailers will likely continue to lose share, at an
accelerating pace as more categories migrate online in CPG too E-commerce
Physical Retail Share Loss Due To e-commerce Growth (bps)
(39)
(38)
(46)
(35)
(54)
(63)
(35)
(67)
(69)
(67)
(81)
(81)
(90)
(101)
(113)
(126)
(141)
(157)
(176)
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E
Source: US Census, Company Reports, Bernstein analysis
Ali Dibadj 212-756-4137 ali.dibadj@bernstein.com
32
U.S. Household & Personal Products / U.S. Beverages & Snacks
Looking at what an Amazon buyer does versus a Walmart buyer
shows e-commerce is clearly not just another channel
E-commerce
Walmart buyer:
Amazon buyer:
1. Selects vendors
1. Takes anyone
2. Picks assortment
2. Accepts anything
3. Sets plan-o-gram/
shelf-space
3. Lets consumers
choose democratically
4. Determines retail price
4. Automates pricing
5. Does not think about
distribution much
5. Does think about
distribution a lot
Source: Bernstein
Ali Dibadj 212-756-4137 ali.dibadj@bernstein.com
33
U.S. Household & Personal Products / U.S. Beverages & Snacks
We see this channel as very conducive to refragmentation as offline
market share does not automatically translate online
E-commerce
100%
Overall Retail Dominance
Online Dominance
Overall - Online Dominance Gap
-40%
Source: Euromonitor, OneClickRetail, Bernstein estimates and analysis
Ali Dibadj 212-756-4137 ali.dibadj@bernstein.com
34
U.S. Household & Personal Products / U.S. Beverages & Snacks
Private label CPG may come to Amazon before too long
E-commerce
Senior Manager, Amazon-branded Consumables
Job Description
The Amazon Consumables team is looking for an entrepreneurial, analytical and highly motivated Senior Manager to lead
Marketing for our Amazon-branded Consumables program. The Senior Manager, Consumables Marketing will lead a team
focused on driving innovation in the customer shopping experience and developing/executing our various marketing
strategies including brand marketing, new product marketing, social marketing, affiliate marketing, partnerships, and
promotions.
The Senior Manager’s primary responsibilities will include:
- Recruiting, hiring, and developing a team of strong performers
- Maintaining an effective and efficient organizational design that allows our program to scale in both number of countries
and number of products
- Developing a strong culture of rapid experimentation, measurement, and iteration
- Driving innovation in how customers shop for consumables online – including search experience, browse, detail pages,
and marketing widgets – across PC and mobile
- Using quantitative and qualitative data to understand customer behavior and apply those insights to our marketing levers.
- Contributing to category goals including sales, operating profit, cost per new customer, customer trial of products,
subscription rate and customer re-purchase rate.
- Optimizing our involvement in various company-wide programs including Subscribe & Save, Vendor-powered coupons,
Amazon Mom, Amazon Student, baby registry, and Amazon Prime
- Leading strategic new initiatives for the business as required
- Partnering closely with cross functional teams including the retail category teams, various software platform owners,
central marketing teams and finance to deliver on brand equity, operating profit, and customer satisfaction.
- Collaborating with other members of the Consumables Private Label team including Brand Management, Product
Management, Packaging Management and Sourcing on new products and new marketing strategies
Source: Amazon job postings
Ali Dibadj 212-756-4137 ali.dibadj@bernstein.com
35
U.S. Household & Personal Products / U.S. Beverages & Snacks
DISCLOSURE APPENDIX
Ali Dibadj 212-756-4137 ali.dibadj@bernstein.com
36
U.S. Household & Personal Products / U.S. Beverages & Snacks
Disclosure Appendix
SRO REQUIRED DISCLOSURES
References to "Bernstein" relate to Sanford C. Bernstein & Co., LLC, Sanford C. Bernstein Limited, Sanford C. Bernstein (Hong Kong) Limited, and Sanford C. Bernstein (business registration
number 53193989L), a unit of AllianceBernstein (Singapore) Ltd. which is a licensed entity under the Securities and Futures Act and registered with Company Registration No.
199703364C, collectively.
Bernstein analysts are compensated based on aggregate contributions to the research franchise as measured by account penetration, productivity and proactivity of investment ideas. No
analysts are compensated based on performance in, or contributions to, generating investment banking revenues.
Bernstein rates stocks based on forecasts of relative performance for the next 6-12 months versus the S&P 500 for stocks listed on the U.S. and Canadian exchanges, versus the MSCI Pan
Europe Index for stocks listed on the European exchanges (except for Russian companies), versus the MSCI Emerging Markets Index for Russian companies and stocks listed on
emerging markets exchanges outside of the Asia Pacific region, and versus the MSCI Asia Pacific ex-Japan Index for stocks listed on the Asian (ex-Japan) exchanges - unless otherwise
specified. We have three categories of ratings:
Outperform: Stock will outpace the market index by more than 15 pp in the year ahead.
Market-Perform: Stock will perform in line with the market index to within +/-15 pp in the year ahead.
Underperform: Stock will trail the performance of the market index by more than 15 pp in the year ahead.
Not Rated: The stock Rating, Target Price and estimates (if any) have been suspended temporarily.
As of 03/13/2014, Bernstein's ratings were distributed as follows: Outperform - 43.6% (0.4% banking clients) ; Market-Perform - 45.2% (0.4% banking clients); Underperform - 11.2% (0.0%
banking clients); Not Rated - 0.0% (0.0% banking clients). The numbers in parentheses represent the percentage of companies in each category to whom Bernstein provided investment
banking services within the last twelve (12) months.
Accounts over which Bernstein and/or their affiliates exercise investment discretion own more than 1% of the outstanding common stock of the following companies EL / Estee Lauder Cos Inc.
This research publication covers six or more companies. For price chart disclosures, please visit www.bernsteinresearch.com, you can also write to either: Sanford C. Bernstein & Co. LLC,
Director of Compliance, 1345 Avenue of the Americas, New York, N.Y. 10105 or Sanford C. Bernstein Limited, Director of Compliance, 50 Berkeley Street, London W1J 8SB, United
Kingdom; or Sanford C. Bernstein (Hong Kong) Limited, Director of Compliance, Suites 3206-11, 32/F, One International Finance Centre, 1 Harbour View Street, Central, Hong Kong, or
Sanford C. Bernstein (business registration number 53193989L) , a unit of AllianceBernstein (Singapore) Ltd. which is a licensed entity under the Securities and Futures Act and
registered with Company Registration No. 199703364C, Director of Compliance, 30 Cecil Street, #28-08 Prudential Tower, Singapore 049712.
Ali Dibadj 212-756-4137 ali.dibadj@bernstein.com
37
U.S. Household & Personal Products / U.S. Beverages & Snacks
12-Month Rating History as of 03/15/2014
Ticker Rating Changes
AVP
CCE
CL
CLX
DPS
EL
ENR
KMB
KO
PEP
PG
M (RC) 07/03/07
M (IC) 11/16/10
M (IC) 05/07/07
M (RC) 07/18/11
M (RC) 01/11/13
M (IC) 05/07/07
M (RC) 11/06/12
M (IC) 05/07/07
O (IC) 11/16/10
O (IC) 11/16/10
O (RC) 08/08/11
Rating Guide: O - Outperform, M - Market-Perform, U - Underperform, N - Not Rated
Rating Actions: IC - Initiated Coverage, DC - Dropped Coverage, RC - Rating Change
OTHER DISCLOSURES
A price movement of a security which may be temporary will not necessarily trigger a recommendation change. Bernstein will advise as and when coverage of securities commences and
ceases. Bernstein has no policy or standard as to the frequency of any updates or changes to its coverage policies. Although the definition and application of these methods are based on
generally accepted industry practices and models, please note that there is a range of reasonable variations within these models. The application of models typically depends on forecasts of a
range of economic variables, which may include, but not limited to, interest rates, exchange rates, earnings, cash flows and risk factors that are subject to uncertainty and also may change
over time. Any valuation is dependent upon the subjective opinion of the analysts carrying out this valuation.
This document may not be passed on to any person in the United Kingdom (i) who is a retail client (ii) unless that person or entity qualifies as an authorised person or exempt person within the
meaning of section 19 of the UK Financial Services and Markets Act 2000 (the "Act"), or qualifies as a person to whom the financial promotion restriction imposed by the Act does not apply by
virtue of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, or is a person classified as an "professional client" for the purposes of the Conduct of Business Rules
of the Financial Conduct Authority.
To our readers in the United States: Sanford C. Bernstein & Co., LLC is distributing this publication in the United States and accepts responsibility for its contents. Any U.S. person receiving
this publication and wishing to effect securities transactions in any security discussed herein should do so only through Sanford C. Bernstein & Co., LLC.
To our readers in the United Kingdom: This publication has been issued or approved for issue in the United Kingdom by Sanford C. Bernstein Limited, authorised and regulated by the
Financial Conduct Authority and located at 50 Berkeley Street, London W1J 8SB, +44 (0)20-7170-5000.
To our readers in member states of the EEA: This publication is being distributed in the EEA by Sanford C. Bernstein Limited, which is authorised and regulated in the United Kingdom by
the Financial Conduct Authority and holds a passport under the Markets in Financial Instruments Directive.
To our readers in Hong Kong: This publication is being distributed in Hong Kong by Sanford C. Bernstein (Hong Kong) Limited which is licensed and regulated by the Hong Kong Securities
and Futures Commission (Central Entity No. AXC846). This publication is solely for professional investors only, as defined in the Securities and Futures Ordinance (Cap. 571).
To our readers in Singapore: This publication is being distributed in Singapore by Sanford C. Bernstein, a unit of AllianceBernstein (Singapore) Ltd., only to accredited investors or
institutional investors, as defined in the Securities and Futures Act (Chapter 289). Recipients in Singapore should contact AllianceBernstein (Singapore) Ltd. in respect of matters arising from,
Ali Dibadj 212-756-4137 ali.dibadj@bernstein.com
38
U.S. Household & Personal Products / U.S. Beverages & Snacks
or in connection with, this publication. AllianceBernstein (Singapore) Ltd. is a licensed entity under the Securities and Futures Act and registered with Company Registration No. 199703364C.
It is regulated by the Monetary Authority of Singapore and located at 30 Cecil Street, #28-08 Prudential Tower, Singapore 049712, +65-62304600. The business name "Sanford C. Bernstein"
is registered under business registration number 53193989L.
To our readers in Australia: Sanford C. Bernstein Limited and Sanford C. Bernstein (Hong Kong) Limited are exempt from the requirement to hold an Australian financial services licence
under the Corporations Act 2001 in respect of the provision of the following financial services to wholesale clients:
providing financial product advice;
dealing in a financial product;
making a market for a financial product; and
providing a custodial or depository service.
Sanford C. Bernstein Limited and Sanford C. Bernstein (Hong Kong) Limited will distribute the requested global research to wholesale clients domiciled within Australia.
Sanford C. Bernstein Limited, Sanford C. Bernstein (Hong Kong) Limited and AllianceBernstein (Singapore) Ltd. are regulated by, respectively, the Financial Conduct Authority under U.K.
laws, by the Hong Kong Securities and Futures Commission under Hong Kong laws, and by the Monetary Authority of Singapore under Singapore laws, all of which differ from Australian laws.
One or more of the officers, directors, or employees of Sanford C. Bernstein & Co., LLC, Sanford C. Bernstein Limited, Sanford C. Bernstein (Hong Kong) Limited, Sanford C. Bernstein
(business registration number 53193989L) , a unit of AllianceBernstein (Singapore) Ltd. which is a licensed entity under the Securities and Futures Act and registered with Company
Registration No. 199703364C, and/or their affiliates may at any time hold, increase or decrease positions in securities of any company mentioned herein.
Bernstein or its affiliates may provide investment management or other services to the pension or profit sharing plans, or employees of any company mentioned herein, and may give advice to
others as to investments in such companies. These entities may effect transactions that are similar to or different from those recommended herein.
Bernstein Research Publications are disseminated to our customers through posting on the firm's password protected website, www.bernsteinresearch.com. Additionally, Bernstein Research
Publications are available through email, postal mail and commercial research portals. If you wish to alter your current distribution method, please contact your salesperson for details.
Bernstein and/or its affiliates do and seek to do business with companies covered in its research publications. As a result, investors should be aware that Bernstein and/or its affiliates may
have a conflict of interest that could affect the objectivity of this publication. Investors should consider this publication as only a single factor in making their investment decisions.
This publication has been published and distributed in accordance with Bernstein's policy for management of conflicts of interest in investment research, a copy of which is available from
Sanford C. Bernstein & Co., LLC, Director of Compliance, 1345 Avenue of the Americas, New York, N.Y. 10105, Sanford C. Bernstein Limited, Director of Compliance, 50 Berkeley Street,
London W1J 8SB, United Kingdom, or Sanford C. Bernstein (Hong Kong) Limited, Director of Compliance, Suites 3206-11, 32/F, One International Finance Centre, 1 Harbour View Street,
Central, Hong Kong, or Sanford C. Bernstein (business registration number 53193989L) , a unit of AllianceBernstein (Singapore) Ltd. which is a licensed entity under the Securities and
Futures Act and registered with Company Registration No. 199703364C, Director of Compliance, 30 Cecil Street, #28-08 Prudential Tower, Singapore 049712. Additional disclosures and
information regarding Bernstein's business are available on our website www.bernsteinresearch.com.
CERTIFICATIONS
I/(we), Ali Dibadj, Senior Analyst(s)/Analyst(s), certify that all of the views expressed in this publication accurately reflect my/(our) personal views about any and all of the subject securities or
issuers and that no part of my/(our) compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views in this publication.
Copyright 2014, Sanford C. Bernstein & Co., LLC, Sanford C. Bernstein Limited, Sanford C. Bernstein (Hong Kong) Limited, and AllianceBernstein (Singapore) Ltd., subsidiaries of
Ali Dibadj 212-756-4137 ali.dibadj@bernstein.com
39
U.S. Household & Personal Products / U.S. Beverages & Snacks
AllianceBernstein L.P. ~1345 Avenue of the Americas ~ NY, NY 10105 ~212/756-4400. All rights reserved.
This publication is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of, or located in any locality, state, country or other jurisdiction where
such distribution, publication, availability or use would be contrary to law or regulation or which would subject Bernstein or any of their subsidiaries or affiliates to any registration or licensing
requirement within such jurisdiction. This publication is based upon public sources we believe to be reliable, but no representation is made by us that the publication is accurate or complete.
We do not undertake to advise you of any change in the reported information or in the opinions herein. This publication was prepared and issued by Bernstein for distribution to eligible
counterparties or professional clients. This publication is not an offer to buy or sell any security, and it does not constitute investment, legal or tax advice. The investments referred to herein
may not be suitable for you. Investors must make their own investment decisions in consultation with their professional advisors in light of their specific circumstances. The value of
investments may fluctuate, and investments that are denominated in foreign currencies may fluctuate in value as a result of exposure to exchange rate movements. Information about past
performance of an investment is not necessarily a guide to, indicator of, or assurance of, future performance.
Ali Dibadj 212-756-4137 ali.dibadj@bernstein.com
40
U.S. Household & Personal Products / U.S. Beverages & Snacks
