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Hispanic Allocation on Revenue Growth, 3/7/2012

Background
Since 1998, AHAA has been helping its members serve its corporate clients through breakthrough independent studies that
increase understanding of what it takes to win the market, share new concepts and identify best practices of marketing to Latinos.

Most recently, in October 2011, Part 1 of AHAAs study series on drivers to growth found a strong positive correlation between allocation of ad resources and topline growth.
Hispanic marketing Best-In-Class companies have a sustainable competitive growth advantage over the Laggards.

Hispanic Allocation on Revenue Growth, 3/7/2012 Growth

Hispanic Market Highlights


MARKET SIZE
2010 Population 50.7M1

2011 Hispanic Share of US

17%2, 1 in 6

GROWTH
Hispanic Population 2000-2010 CAGR v Non-Hispanic Share of Total US 2000-2010 Growth Share of Labor Force Growth 2010-2020 3.6% v. 0.5%3 56%4 74%7

ECONOMIC
2012 Estimated Buying Power Hispanic Buying Power 2000-2010 CAGR v. Non-Hispanic
1, 3, 4 2010

$1.2 Trillion5 7.8% v. 3.4%6

Census ACS, 2 SSG Analysis of Census,

5,6

Selig Center at the University of Georgia, 7 Bureau of Labor Statistics

Hispanic Allocation on Revenue Growth, 3/7/2012 Growth

Challenge
Companies challenged by anemic growth more than ever
Consumers have changed; more fickle today Economic downturn will make consumers more frugal and valueoriented over the long run Technology and new media create both opportunities to reach audiences and complexity as well Possible Reset of economy could structurally impact certain sectors and jobs Changing demographics (age) and multicultural trends create new potential sources for growth

Hispanic Allocation on Revenue Growth, 3/7/2012 Growth

Challenge
All companies have growing challenge of balancing competing needs
1. Holding on to General Market 2. Finding new growth 3. Capturing fair share of growth markets

Hispanic Allocation on Revenue Growth, 3/7/2012 Growth

About the Author & Sources


The study was commissioned by AHAAs Research Committee and developed and executed by Santiago Solutions Group (SSG), a growth strategy consultancy. Independent methodological review performed by Dr. Cristina Garcia, professor of mathematics & statistics at USC. Financial revenue growth data extracted from companies 10Ks. Parent company ad spend data for 2006-2010 Hispanic media and non-Hispanic media collected from The Nielsen Company. Consumer habits, attitudes and values by GfK Roper & GfK MRI syndicated studies with sample of 53K (sampling details in Appendix E)

Hispanic Allocation on Revenue Growth, 3/7/2012 Growth

Study Objectives
Presented by Carlos Santiago, President & Chief Strategist, Santiago Solutions Group

Carlos@SantiagoSolutionsGroup.com (818) 736 5661 7

Hispanic Allocation on Revenue Growth, 3/7/2012 Growth

Study Objectives
Is there a significant difference in the revenue growth rate attained by
CPG companies which designate higher focus and resources to the Hispanic market and those that focus less? What factors distinguish companies that capture Hispanic growth successfully from those that underperform with this segment?

What do they do differently?

Hispanic Allocation on Revenue Growth, 3/7/2012 Growth

Study Variables
Aggregate Hispanic Allocation 20062010: Independent variable
1. The input being changed possibly impacting Revenue CAGR. 2. The % of total advertisement dollars spent in TV, Radio, and Print (per Nielsen tracking) assigned to Hispanic-centric media channels throughout 2006 to 2010.

2006-2010 Revenue CAGR: Dependent variable


1. Revenue CAGR is our dependent variable which was tested against different levels of Hispanic Allocation. 2. Revenue as reflected from topline, organic US-only consumer demand per 10Ks.
may have been adjusted to exclude extraordinary transactions and normalize revenue from acquisitions, if enough clear data has been stated in corporate financials.

Hispanic Allocation on Revenue Growth, 3/7/2012 Growth

Methodology
A main CPG regression with 39 companies was validated by three other test regression models with larger sample sizes. Four total regression tests

Aggregate 06-10 Hispanic Allocation N=211


Aggregate Hispanic 06-10 Allocation AND Year by Year Revenue Growth N=211
Aggregate Hispanic 0610 Allocation, Year by Year Revenue Growth, AND Super Categories
N=211

All confirmed the same findings at statistical significance


Details of statistical analysis will follow after Q&A section.

CPGs N=39

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CPGs & Retailers in Study

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Study Significance

All findings discussed in the presentation are statistically significant at a


95% confidence level or better.

Hispanic Allocation on Revenue Growth, 3/7/2012 Growth

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Study Findings

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Are CPGs Growth Rates Related to Hispanic Focus?


There is a direct & positive relationship between CPGs Hispanic ad allocation and their topline revenue growth.
Please see Appendix D (Graph 1) for Detailed Graph and Graphical Analysis.

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Key Findings
For Consumer Packaged Goods and their retailers
Hispanic Allocation alone explains about 35% of CPGs change in topline revenue growth
The other 65% may include other critical factors such as brand awareness/equity, new product development, management focus, measurement tools, distribution, sales force, past performance, community position, organization structure, talent, overall segmentation expertise, etc.
Further analysis is needed to determine what exactly the other drivers of revenue growth are.

CPGs & Retailers Revenue Growth Drivers

Hispanic Marketing 35%

Other Drivers of Growth 65%

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Key Findings
Organic revenue growth rates decline sharply as Hispanic share of budgets decrease and vice versa.
Allocation Tiers
Average 06-10 Hispanic Allocation Average 06-10 Revenue CAGR

7.7%

8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%

6.8%

4.7%

2.2%

0.9%

0.6%

Top Allocation (70th Percentile)

Middle Allocation (40th 70th Percentile)

Low Allocation (<40th Percentile)

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Top 30 Percentile Hispanic Marketers By Allocation And Overall Revenue Growth

Top 30 Percentile

Please see Appendix D (Graph 1) for Detailed Graphical Analysis.

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Key Findings
All tests validated the same findings. Hispanic Allocation has a direct & significant impact on companies overall revenue growth.
Aggregate 06-10 Hispanic Allocation

N=211
Aggregate Hispanic 06-10 Allocation AND Year by Year Revenue Growth N=211
Aggregate Hispanic 0610 Allocation, Year by Year Revenue Growth, AND Super Categories N=211

CPGs N=39

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Why Hispanic Consumers Are So Important Today?

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Much faster household formation has exponential impact on continued growth opportunity
Non-Hispanic Hispanic

6x NH CAGR

Households CAGR

0.4%/yr.

2.5%/yr.

1SSG

Analysis of US Census, Data Set: 2008-2010 American Community Survey 1-Year Estimates

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Much larger Households means heavier usage


Non-Hispanic Hispanic

52% larger HH

Persons Per HH1

2.5

3.8

1SSG

Analysis of US Census, Data Set: 2008-2010 American Community Survey 1-Year Estimates

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Which Consumer Is Worth More?


Hispanic households food at home expenditures will grow at 5.7% annually, more than twice the rate for Non-Hispanic households of 2.5%.

Hispanics Food at HH Expenditures


$100 $80
$ Billion
Historic CAGR: 5.4% Forecast CAGR: 5.7%

$94 $78

$59 $42

$60 $40 $20 $1995 $27

$33

2000

2005

2010

2015

2020

Source: Bureau of Labor Statistics, Credit Suisse estimates 2011

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Which Consumer Is Worth More?


The younger age and larger Hispanic household size contributes to Hispanic households having the highest consumer spending potential for necessary spending on Food at Home and Personal Care.
Hispanic Food at Home cumulative lifetime spending is over 50% higher than that of NonHispanic White. Hispanic Personal Care cumulative lifetime spending is about 33% higher than that of NonHispanic White.

Source: 2010 Geoscape Consumer Spending Dynamix.

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Hispanics are CPG valuable customers


More influenced by strong brands
Top Box: Agree Completely or Agree Mostly or Very Important I am more influenced by what seems hot and whats not Hispanic Index 139

Brand name is the best indication of quality I only buy food items that are name brands, not generic brands

152 150

Source: 2011 Doublebase GfK MRI - Base: All (n= 6.6K Hispanics & 46.5K Non-Hispanics)

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Hispanics are CPG valuable customers


Less price sensitive
Top Box: Agree Completely or Agree Mostly or Very Important
Id pay extra for products that are consistent with the image I want to convey I tend to make impulse purchases I know the price I pay for most of the foods & packaged goods I buy

Hispanic Index
125 117 83

Source: 2011 Doublebase GfK MRI - Base: All (n= 6.6K Hispanics & 46.5K Non-Hispanics

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Hispanics are CPG valuable customers


Status & Image Conscious
Top Box: Agree Completely or Agree Mostly or Very Important I like to live a lifestyle that impresses others I prefer to buy things that my friends/neighbors would approve of Seeking the utmost attractive appearance Hispanic Index 149 167 122

Source: 2011 Doublebase GfK MRI - Base: All (n= 6.6K Hispanics & 46.5K Non-Hispanics

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Hispanics are CPG valuable customers


See Shopping as Fun
Top Box: Agree Completely or Agree Mostly or Very Important Hispanic Index

I enjoy wandering the store looking for new products


Im always first of friends to try new products/services Shopping is a great way to relax

131
145 147

Source: 2011 Doublebase GfK MRI - Base: All (n= 6.6K Hispanics & 46.5K Non-Hispanics

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Hispanics are CPG valuable customers


Key Category Influentials
My family/friends often ask for and trust my advice on this topic Babies/Children Beer Alcoholic Beverages Beauty Cleaning Products New Food Items Food Snacks Dieting Healthy Lifestyle
Source: 2011 Doublebase GfK MRI - Base: All (n= 6.6K Hispanics & 46.5K Non-Hispanics

Hispanic Index
130 121 135 138 112 126 112 123 115 112

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Conclusions & Implications

Hispanic Allocation on Revenue Growth, 3/7/2012

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Key Takeaways For Consumer Packaged Goods


Statistical evidence demonstrates that: Consistent/significant Hispanic marketers drive superior revenue growth. Hispanic as a priority drive sustainable growth into future.

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Implications for Companies


Real bottom-line benefits come from consistent approaches. Marketing is only the beginning, corporate-wide integration and investment is key
Responding to the most appropriate cultural insights Broad use of all elements of marketing Developing strategies from communications to customer experience

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The U.S. Hispanic Consumer Opportunity


Robert Moskow, Research Analyst Marcela Giraldo, Research Associate

robert.moskow@credit-suisse.com (212) 538 3095 marcela.giraldo@credit-suisse.com (212) 325 6764


DISCLOSURE APPENDIX CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, INFORMATION ON TRADE ALERTS, ANALYST MODEL PORTFOLIOS AND THE STATUS OF NON-U.S ANALYSTS. U.S. Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
The materials may not be used or relied upon in any way.

CREDIT SUISSE (USA), INC.

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Top Five Observations


Wall Street should be paying more attention to the companies that get this right
Good Hispanic marketing companies attract and retain best-in-class managers Commitment from the top and accountability at the bottom are key

Kraft has engineered a turnaround


Goya is the premier asset in Hispanic CPG

CREDIT SUISSE (USA), INC.

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Why Does Wall Street Tend To Overlook Hispanic Marketing Expertise?


Difficult to isolate the impact of Hispanic marketing on growth rates Even when you do isolate it, it doesnt look that meaningful to valuation Investors attention has shifted to emerging markets
U.S. Approx. % of Growth Rate Growth Rate Division Sales To With With NonGrowth Hispanics Hispanics Hispanic Rate Tier Leaders 18% 7.0% 2.5% 3.3% Followers 13% 5.5% 2.5% 2.9% Laggards 8% 4.0% 2.5% 2.6% High/Low Difference 0.7%

Companies KO, GIS, NESN.VX, MKC KFT, K, UN HNZ, CPB, HSY, PEP, CAG

+ Most of these companies have 60% of their sales in North America + Therefore, an incremental 0.7% to North America growth rate translates to only 0.4% for total company sales + In terms of valuation, 0.4% of incremental growth translates to a valuation differential of only 8%

Source: Company information. CS estimates

CREDIT SUISSE (USA), INC.

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In reality, Leaders have outpaced Laggards in North America by 3.1% on average


6.0%

Historic organic revenue growth NA (3 yrs)

5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% -4.0%

4.4%

4.6% 3.3%

Leaders: Average 2.6%

Followers: Average 2.2%


2.9% 2.3%

Laggards: Average -0.5%

1.4% 0.7%

1.0%

1.3% 0.5%

1.4%

-0.1%

McCormick

General Mills

- Translates into a much more meaningful 20%+ valuation differential!


Source: Company information. CS estimates

CREDIT SUISSE (USA), INC.

Pepsi (beverages)

Unilever

Nestle

Coke

Heinz

Kraft

Cambpell

Colgate

P&G

Kellogg

ConAgra

-3.7%

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Good Hispanic Marketing Organizations Attract Best-In-Class Managers


Good managers want to be on the cutting edge of marketing They create shareholder value

Examples
Coke shifting their mindset to the Latin American point-of-sale merchandising approach General Mills leveraging the Que Rica Vida platform and partnering with Univision

CREDIT SUISSE (USA), INC.

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The trend is to push more of the responsibility into the brand teams
Stage 1 Low level of top management commitment Stage 2 Creation of a high profile management role to oversee the Hispanic efforts Creation of a Center of Excellence dedicated to sharing best practices Support function with no P&L responsibility Stage 3 Accountability at the brand level for Hispanic sales. Hispanic advertising budget is integrated within the brands. ROI goals for Hispanic marketing investment within the brand teams

Young brand managers get assigned to monitor the Hispanic efforts

- Coke, Wal-Mart, P&G, Unilever are all doing this - The risk is that upper management lose will some of their control and visibility - Maintaining accountability will be the key to success
CREDIT SUISSE (USA), INC.

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Kraft has engineered a turnaround

Strong support from top management


The strategy is to increase Hispanic spending on top 10 brands including Oreo, KoolAid and Kraft Singles. Re-established their Latino Center of Excellence in 2008

Hispanic Advertising Investment as % of Total


14% 12% 10% 8% 6% 4% 2% 0% 2.1% 2.4% 3X increase in 2011 13.1%

4.4%

2008

2009 Kraft Foods Inc

2010 Average group

2011 (E)

Source: Kantar media. KFTs management comments

Risks
Its hard to regain momentum after several years away

Kool-Aid, in a first for any Kraft brand, has allocated the majority of its 2011 marketing budget to reach Hispanics

Spin off of companies may dilute Hispanic efforts and impact scale advantage
Source: NY Times

CREDIT SUISSE (USA), INC.

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Goya is the premier asset in the Hispanic food space

US Hispanic Population by Country of Origin

75-year-old family-owned and family-managed company Approximately $1B in annual revenues Best at understanding food preferences by country of origin Tailor product portfolio by region in the US Relationships with bodegas are important asset

Central American 8.3% Dominican 2.8%

South American Other 5.1% 5.8%

Cuban 3.4% Mexican 65.7%

Puerto Rican 9.0%


Source: U.S. Census 2008

Mexican Caribbean

Central And South American

Source: www.goya.com

CREDIT SUISSE (USA), INC.

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Companies Mentioned (Price as of 06 Mar 12) Campbell Soup Company (CPB, $33.04, NEUTRAL, TP $33.00) Clorox Co. (CLX, $67.92, NEUTRAL, TP $72.00) Colgate-Palmolive (CL, $93.35, NEUTRAL, TP $90.00) ConAgra Foods, Inc. (CAG, $26.36, NEUTRAL, TP $27.00) Danone (DANO.PA, Eu50.58, UNDERPERFORM, TP Eu44.00) General Mills (GIS, $38.60, NEUTRAL, TP $41.00) H.J. Heinz Company (HNZ, $53.09, NEUTRAL, TP $54.00) Hormel Foods (HRL, $28.50, NEUTRAL, TP $32.00) Kellogg Company (K, $52.09, NEUTRAL, TP $56.00) Kimberly-Clark Corporation (KMB, $72.66) Kraft Foods, Inc. (KFT, $38.35, OUTPERFORM, TP $45.00) McCormick & Company (MKC, $50.82, NEUTRAL, TP $50.00) Nestle (NESN.VX, SFr55.30, NEUTRAL, TP SFr58.00) PepsiCo, Inc. (PEP, $62.79) Procter & Gamble Co. (PG, $66.95, OUTPERFORM, TP $70.00) Ralcorp (RAH, $74.41, NEUTRAL, TP $75.00) Reckitt Benckiser (RB.L, 3469 p, OUTPERFORM, TP 3,800.00 p) Sara Lee Corporation (SLE, $21.24, NEUTRAL, TP $20.00) The Coca-Cola Company (KO, $69.23) The Hershey Company (HSY, $60.93, OUTPERFORM, TP $68.00)

Analysts stock ratings are defined as follows: Outperform (O): The stocks total return is expected to outperform the relevant benchmark* by at least 10-15% (or more, depending on perceived risk) over the next 12 months. Neutral (N): The stocks total return is expected to be in line with the relevant benchmark* (range of 10-15%) over the next 12 months. Underperform (U): The stocks total return is expected to underperform the relevant benchmark* by 10-15% or more over the next 12 months. *Relevant benchmark by region: As of 29th May 2009, Australia, New Zealand, U.S. and Canadian ratings are based on (1) a stocks absolute total return potential to its current share price and (2) the relative attractiveness of a stocks total return potential within an analysts coverage universe**, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. Some U.S. and Canadian ratings may fall outside the absolute total return ranges defined above, depending on market conditions and industry factors. For Latin American, Japanese, and non-Japan Asia stocks, ratings are based on a stocks total return relative to the average total return of the relevant country or regional benchmark; for European stocks, ratings are based on a stocks total return relative to the analyst's coverage universe**. For Australian and New Zealand stocks, 12-month rolling yield is incorporated in the absolute total return calculation and a 15% and a 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds replace the +10-15% and -10-15% levels in the Neutral stock rating definition, respectively. **An analyst's coverage universe consists of all companies covered by the analyst within the relevant sector. Restricted (R): In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances. Volatility Indicator [V]: A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward. Analysts coverage universe weightings are distinct from analysts stock ratings and are based on the expected performance of an analysts coverage universe* versus the relevant broad market benchmark**: Overweight: Industry expected to outperform the relevant broad market benchmark over the next 12 months. Market Weight: Industry expected to perform in-line with the relevant broad market benchmark over the next 12 months. Underweight: Industry expected to underperform the relevant broad market benchmark over the next 12 months. *An analysts coverage universe consists of all companies covered by the analyst within the relevant sector. **The broad market benchmark is based on the expected return of the local market index (e.g., the S&P 500 in the U.S.) over the next 12 months. Credit Suisses distribution of stock ratings (and banking clients) is: Global Ratings Distribution Outperform/Buy* 46% (60% banking clients) Neutral/Hold* 42% (57% banking clients) Underperform/Sell* 10% (48% banking clients) Restricted 2%

Disclosure Appendix
Important Global Disclosures I, Robert Moskow, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report. See the Companies Mentioned section for full company names.
3-Year Price, Target Price and Rating Change History Chart for NESN.VX
NESN.VX Date 16-Nov-09 11-Feb-10 30-Nov-10 9-Jun-11 11-Jul-11 16-Dec-11 Closing Price (SFr) 47.88 49.69 54.55 53.15 52.6 51.2 Target Price Initiation/ (SFr) Rating Assumption 55 60 N 55 R 58 N
60 55 50 45 40 SFr 35 55 60 58 N 55 R N

*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.

Closing Price

Target Price

Initiation/Assumption

Rating

O=Outperform; N=Neutral; U=Underperform; R=Restricted; NR=Not Rated; NC=Not Covered

3-Year Price, Target Price and Rating Change History Chart for HSY
HSY Date 3/24/09 7/8/09 7/24/09 12/31/09 2/1/10 4/22/10 7/23/10 2/2/11 2/28/11 3/18/11 4/26/11 10/21/11 10/27/11 Closing Price (US$) 35.41 37.01 40.97 35.79 36.81 48.08 47.21 48.61 52.32 53.87 57.27 60.26 57.46 Target Price Initiation/ (US$) Rating Assumption 30 U 33 43 N R 40 N 50 52 55 O 56 58 64 70 68
70 65 60 55 50 45 40 35 US$ 3030
09 3/7 /

Credit Suisses policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated herein. Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research-and-analytics/disclaimer/managing_conflicts_disclaimer.html Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties. See the Companies Mentioned section for full company names. Price Target: (12 months) for (NESN.VX) Method: Our price target is based on our APV (adjusted present value), a hybrid DCF that splits the operating cash flows (discounted at the cost of equity), and the tax shield (discounted at the cost of debt). A terminal growth rate of 2.5% is assumed Risks: Significant movements in raw material costs or currency can impact the business, as can irrational behaviour by either competitors or retailers. Food scares, shortages, or contamination can also impact the business. Price Target: (12 months) for (HSY) Method: Our 12-month target price of $68/share implies a 19x P/E multiple against our 2013 estimate. This assumes that stock maintains the 1920x P/E multiple which is the range where it is trading today Risks: The risks that HSY and our $68 target price could face include: 1) execution risk in the growing premium/dark chocolate category; 2) volatile cocoa, nuts and dairy commodity input costs; and 3) the risk of competitive incursion in chocolate from Mars. Please refer to the firm's disclosure website at www.credit-suisse.com/researchdisclosures for the definitions of abbreviations typically used in the target price method and risk sections. See the Companies Mentioned section for full company names. The subject company (NESN.VX) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse. Credit Suisse provided investment banking services to the subject company (NESN.VX) within the past 12 months.

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O=Outperform; N=Neutral; U=Underperform; R=Restricted; NR=Not Rated; NC=Not Covered

The analyst(s) responsible for preparing this research report received compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities.

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7Ma r -0 9 7Ma y-0 9 7Ju l-0 9 7Se p09 7No v09 7Ja n10 7Ma r -1 0 7Ma y-1 0 7Ju l-1 0 7Se p10 7No v10 7Ja n11 7Ma r -1 1 7Ma y-1 1 7Ju l-1 1 7Se p11 7No v11 7Ja n12

70 68 64 58 55 56 50 43 U 52 O

40 R N

33

Rating

CREDIT SUISSE (USA), INC. Hispanic Allocation on Revenue Growth, 3/7/2012

40

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Hispanic Allocation on Revenue Growth, 3/7/2012

41

Q & A Discussion

Hispanic Allocation on Revenue Growth, 3/7/2012

42

Statistical Detail & Model Validation


Presented by Dr. Cristina Garcia Math & Statistics Professor at USC SSG Methodology Advisor

Hispanic Allocation on Revenue Growth, 3/7/2012

43

Methodology Highlights
Started by looking at the Top 500 overall Advertisers (TV, Radio, Print) by year and in aggregate between. Matched each parent company to available published financial revenue data, and calculated 2006-2010 compounded annual growth rates. Companies which did not have consistent published financials such as companies which grew on M&As that werent adjustable rather than organic consumer driven growth were eliminated from the final regression set.
Top 500 U.S. Overall Advertisers 2006-2010
(500)

Public (418)

Private (-82)

Consistent Advertisers (220)

Inconsistent Advertisers (-198)

Publicly Traded w/ clear Organic US Revenue (211)

Unadjustable M&As Inconsistent Data (-9)

CPGs (39)
44

Hispanic Allocation on Revenue Growth, 3/7/2012

Test Validations
Aggregate 06-10 Hispanic Allocation N=211

All models validated the same findings. Hispanic Allocation has a direct & significant impact on companies overall revenue growth.

Aggregate Hispanic 06-10 Allocation AND Year by Year Revenue Growth

N=211
Aggregate Hispanic 0610 Allocation, Year by Year Revenue Growth, AND Super Categories N=211

CPGs

N=39

Hispanic Allocation on Revenue Growth, 3/7/2012

45

Consumer Packaged Goods Regression Model


Aggregate Hispanic Allocation 2006-2010

Hispanic Allocation alone explains about 35% of changes in revenue growth over a 5 year period for Consumer Packaged Goods (R2=0.35)
An R squared of .35, tells us that roughly 35% of a companys revenue growth is driven by changes in Hispanic Allocation. The expected range for a 1 percent increase in Hispanic allocation is an increase of .48% to 1.28% in overall corporate revenue growth rate.

Revenue Growth over 5 year period (CAGR 06-10)


CPG (N=39)
Hispanic Allocation on Revenue Growth, 3/7/2012

46

CPG Model Findings


For every additional percentage point increase in Hispanic allocation, we would expect revenue growth of 0.883% over the 5 years for Consumer Packaged Goods

Revenue Growth Drivers for CPGs & Retailers

In other words, on average, a 10% allocation of a CPG companys ad spend to Hispanic media over 5 years would generate revenue growth of 8.83% over the 5 year period.

Hispanic Marketing 35% All Other Drivers of Growth 65%

Hispanic Allocation on Revenue Growth, 3/7/2012

47

Test 1: Is Aggregate Hispanic Allocation Important? YES! Hispanic Allocation directly impacts topline revenue growth for Top 500 Advertisers
Aggregate Hispanic Allocation 06-10

On average, for every additional percentage point increase in Hispanic allocation, we would expect revenue growth of .40% over the 5 years.
In other words, allocating 10% of the companys ad spend to Hispanic media over 5 years would generate revenue growth of 4.00% over the 5 year period

Aggregate Growth CAGR 06-10


TOP ADVERTISERS (N=211)
Hispanic Allocation on Revenue Growth, 3/7/2012

48

TEST 2: Individual Years Growth and Aggregate Hispanic Allocation Revalidated! Both directly impact topline revenue growth
Of course, each years CAGR most significantly affects the companys revenue growth over 5 years R-square 0.608 In other words, 60.8% of the variation in growth over the 5 years (CAGR 0610) is explained by the ad spend in Hispanic media over the 5 years and each years annual growth. On average, for every additional percentage point increase in Hispanic allocation, we would expect revenue growth of .34% over the 5 years. In other words, allocating 10% of the companys ad spend to Hispanic media over 5 years would generate revenue growth of 3.44% over the 5 year period.
49

CAGR 06-07, 07-08, 08-09, 09-10

Aggregate Hispanic Allocation 06-10

Revenue Growth over 5 year period


TOP ADVERTISERS (N=211)

Hispanic Allocation on Revenue Growth, 3/7/2012

Test 3: Hispanic Allocation, Super Categories and Revenue CAGR Revalidated Again! Hispanic Allocation Is Relevant to Revenue Growth!
CAGR: 06-07, 07-08, 0809, 09-10 Categories: Auto, Tech & Entertainme nt, Retail, CPG, Finance/Insu rance Hispanic Allocation: 06-10

R-square .64, in other words, 64% of the variation in growth over the 5 years (CAGR 06-10) is explained by the ad spend in Hispanic media over the 5 years and each annual years growth. On average, for every additional percentage point increase in Hispanic allocation, we would expect revenue growth of 0.29% over the 5 years. In other words, allocating 10% of the companys ad spend to Hispanic media over 5 years would generate revenue growth of 2.89% over the 5 year period

Revenue Growth over 5 year period


TOP ADVERTISERS (N=211)
Hispanic Allocation on Revenue Growth, 3/7/2012

50

Conclusions of Tests
In all tests, Hispanic Allocation consistently comes up as a statistically significant variable positively affecting revenue growth rates.
Along with showing the importance of investing in the Hispanic market, our model also shows that performance during the turn into the recession 2007 to 2008 and recovery from the recession 2009 to 2010 time periods serve as good indicators for relative long term performance (06-10).

Hispanic Allocation on Revenue Growth, 3/7/2012 Growth

51 1

Appendix

Hispanic Allocation on Revenue Growth, 3/7/2012

52

Sectors/Super Categories Breakdown


Top 500
Advertisers SuperCategories
Included

Omitted Advertisers
(Reasons)

Auto

Packaged Goods

Private

NonProfits

Govt

Hispanic Allocation on Revenue Growth, 3/7/2012

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Appendix A Ranking By Hispanic Allocation


Company
WALGREEN CO WAL-MART STORES INC COCA-COLA CO CLOROX CO RALCORP HOLDINGS GROUPE DANONE KIMBERLY-CLARK CORP UNILEVER TARGET CORP GENERAL MILLS INC NESTLE SA LOREAL SA PROCTER & GAMBLE CO HERSHEY CO TYSON FOODS INC BROWN-FORMAN CORP CVS/CAREMARK CORP JM SMUCKER CO BEIERSDORF AG

2006-2010 Hispanic Allocation Percentage


10.05% 9.70% 8.79% 8.09% 8.08% 7.81% 7.09% 6.92% 6.68% 6.27% 6.25% 6.20% 6.13% 5.72% 5.71% 5.09% 5.01% 4.90% 4.11%

Rank
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

Percentile
100.00% 97.30% 94.70% 92.10% 89.40% 86.80% 84.20% 81.50% 78.90% 76.30% 73.60% 71.00% 68.40% 65.70% 63.10% 60.50% 57.80% 55.20% 52.60%

2006-2010 Growth Rate


9.20% 5.12% 12.39% 3.30% 11.82% 11.82% 2.74% 1.39% 3.25% 6.50% 10.59% 3.86% 2.30% 2.22% 3.70% 1.62% 5.03% 3.44% -1.34%

Hispanic Allocation on Revenue Growth, 3/7/2012

54

Ranking By Hispanic Allocation Cont.


Company
PEPSICO INC KRAFT FOODS INC DIAGEO PLC KELLOGG CO ESTEE LAUDER COS BIG LOTS INC CONAGRA FOODS INC HORMEL FOODS CORP PERNOD RICARD SA LVMH MOET HENNESSY LOUIS VUITTON SA MCCORMICK & CO INC SARA LEE CORP

2006-2010 Hispanic Allocation Percentage


3.80% 3.77% 3.53% 3.42% 2.80% 2.33% 2.24% 1.97% 1.57%

Rank
20 21 22 23 24 25 26 27 28

Percentile
50.00% 47.30% 44.70% 42.10% 39.40% 36.80% 34.20% 31.50% 28.90%

2006-2010 Growth Rate


-0.21% 0.90% 2.73% 3.40% -0.03% 1.08% 1.06% 5.60% 3.06%

0.64%
0.55% 0.53%

29
30 31

26.30%
23.60% 21.00%

3.91%
5.01% -9.25%

FORTUNE BRANDS INC


HENKEL KGAA CHURCH & DWIGHT CO

0.53%
0.48% 0.26%

32
33 34

18.40%
15.70% 13.10%

-4.32%
-0.78% 7.40%

DEAN FOODS CO
CAMPBELL SOUP CO KAO CORP NEWELL RUBBERMAID NUTRI/SYSTEM INC

0.20%
0.15% 0.13% 0.04% 0.01%

35
36 37 38 39

10.50%
7.80% 5.20% 2.60% 0.00%

4.67%
2.98% -4.50% -3.76% -2.59%

Hispanic Allocation on Revenue Growth, 3/7/2012

55

Appendix B Ranking By Growth Rate


Company
COCA-COLA CO RALCORP HOLDINGS GROUPE DANONE NESTLE SA WALGREEN CO CHURCH & DWIGHT CO GENERAL MILLS INC HORMEL FOODS CORP WAL-MART STORES INC CVS/CAREMARK CORP MCCORMICK & CO INC DEAN FOODS CO LVMH MOET HENNESSY LOUIS VUITTON SA LOREAL SA

2006-2010 Growth Rate


12.39% 11.82% 11.82% 10.59% 9.20% 7.40% 6.50% 5.60% 5.12% 5.03% 5.01% 4.67% 3.91% 3.86%

Rank
1 2 3 4 5 6 7 8 9 10 11 12 13 14

Percentile
100.00% 97.30% 94.70% 92.10% 89.40% 86.80% 84.20% 81.50% 78.90% 76.30% 73.60% 71.00% 68.40% 65.70%

2006-2010 Hispanic Allocation


8.00% 8.77% 10.53% 5.24% 9.32% 0.41% 9.21% 0.30% 7.33% 2.84% 0.22% 0.10% 0.62% 51.57%

TYSON FOODS INC


JM SMUCKER CO KELLOGG CO CLOROX CO TARGET CORP

3.70%
3.44% 3.40% 3.30% 3.25%

15
16 17 18 19

63.10%
60.50% 57.80% 55.20% 52.60%

0.04%
5.52% 3.77% 10.04% 7.16%

Hispanic Allocation on Revenue Growth, 3/7/2012

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Ranking By Growth Rate Cont.


Company
PERNOD RICARD SA CAMPBELL SOUP CO KIMBERLY-CLARK CORP DIAGEO PLC PROCTER & GAMBLE CO HERSHEY CO BROWN-FORMAN CORP

2006-2010 Growth Rate


3.06% 2.98% 2.74% 2.73% 2.30% 2.22% 1.62%

Rank
20 21 22 23 24 25 26

Percentile
50.00% 47.30% 44.70% 42.10% 39.40% 36.80% 34.20%

2006-2010 Hispanic Allocation


0.39% 0.02% 7.07% 1.53% 6.91% 4.74% 6.01%

UNILEVER
BIG LOTS INC CONAGRA FOODS INC KRAFT FOODS INC ESTEE LAUDER COS INC PEPSICO INC HENKEL KGAA BEIERSDORF AG NUTRI/SYSTEM INC NEWELL RUBBERMAID INC FORTUNE BRANDS INC KAO CORP SARA LEE CORP

1.39%
1.08% 1.06% 0.90% -0.03% -0.21% -0.78% -1.34% -2.59% -3.76% -4.32% -4.50% -9.25%

27
28 29 30 31 32 33 34 35 36 37 38 39

31.50%
28.90% 26.30% 23.60% 21.00% 18.40% 15.70% 13.10% 10.50% 7.80% 5.20% 2.60% 0.00%

8.27%
48.70% 2.95% 4.46% 47.88% 51.62% 0.04% 1.66% 0.01% 0.01% 0.01% 0.09% 0.74%

Hispanic Allocation on Revenue Growth, 3/7/2012 Growth

57

Appendix C Regression Analysis Results


Test 1 Variable in Model Unstandarized Beta Standardized Beta (Significance) NA Test 2 Unstandarized Beta Standardized Beta (Significance) .038 .189 (.000) .291 .511 (.000) .019 .202 (.000) .435 .581 (.000) .344 .125 (.005) NA Test 3 Unstandarized Beta Standardized Beta (Significance) .039 .195 (.000) .269 .472 (.000) .016 .176 (.000) .448 .598 (.000) .288 .104 (.018) -5.458 -.128 (.007) 2.229 .042 (.385) 4.095 .112 (.026) 1.226 .037 (.459) 2.399 .068 (.168) .644 211 CPG Model Unstandarized Beta Standardized Beta (Significance) NA

CAGR 06-07

CAGR 07-08

NA

NA

CAGR 08-09

NA

NA

CAGR 09-10

NA

NA

Hispanic Allocation 06-10 Auto

.396 .143 (.037) NA

.883 .592 (.000) NA

Insurance/Finance

NA

NA

NA

Technology

NA

NA

NA

Retail

NA

NA

NA

CPG

NA

NA

NA

R-Square N= Dependent Variable

.021 211 CAGR 06-10

.608 211

.350 39

Hispanic Allocation on Revenue Growth, 3/7/2012

58

Appendix D Graphical Analysis

Graph 1

Hispanic Allocation on Revenue Growth, 3/7/2012

59

Appendix D Graphical Analysis

Chart 1

Hispanic Allocation on Revenue Growth, 3/7/2012

60

Appendix D Graphical Analysis

Chart 2

Hispanic Allocation on Revenue Growth, 3/7/2012

61

Appendix E

GfK MRI Hispanic Data Notes


GfK MRI has measured Hispanics within its National Study (Survey of the American Consumer). Since 2003, GfK MRI began translating all survey materials into Spanish and hiring bilingual interviewers to capture the Spanish dominant Hispanic. Other enhancements to data sampling since then include:
Hispanic language capability sample balanced against Nielsen Language estimates Additional Hispanic specific demographics (language capability outside the home, language capability inside the home, country of origin, foreign born, length of time in the U.S., additional Hispanic adults in the home, how well do you speak English) Hispanic specific media (3 Magazines, 135+ Television Programs, 2 Cable stations, 3 Radio formats, 3 websites)

Hispanic specific segmentations (Geoscape Hispanicity, Hispanic Cohorts, Hispanic PersonicX)


Hispanic Networks/Programs available in NPM Fusion database

Hispanic Allocation on Revenue Growth, 3/7/2012

62