Revised April 19, 2012 (Nestle)

Hispanic Allocation on Revenue Growth, 3/7/2012

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

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

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

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

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

CPGs & Retailers in Study

Hispanic Allocation on Revenue Growth, 3/7/2012

Study Findings

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

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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.
2006-2010 Revenue Growth Rate
10%

Hispanic Allocation-Revenue Growth

5%

0%

0%

2%

4%

6%

8%

10%

12%

2006-2010 Hispanic Allocation

-5%

-10%
Please see Appendix D (Graph 1) for Detailed Graph and Graphical Analysis.

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

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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%

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

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Top 30 Percentile Hispanic Marketers By Allocation And Overall Revenue Growth

Hispanic Allocation-Revenue Growth

2006-2010 Revenue Growth Rate

10%

Top 30 Percentile

5%

0%

0%

2%

4%

6%

8%

10%

12%

2006-2010 Hispanic Allocation

-5%

-10%
Please see Appendix D (Graph 1) for Detailed Graphical Analysis.

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

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Key Findings
All tests validated the same findings
at 95% or higher statistical confidence level. 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

Hispanic Allocation has a direct & significant impact on companies overall revenue growth.

CPGs N=39

Hispanic Allocation on Revenue Growth, 3/7/2012

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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)

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

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Why Hispanic Consumers Are So Important Today?

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

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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

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

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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

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

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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

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

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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.

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

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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)

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

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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)

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

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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)

Hispanic Allocation on Revenue Growth, 3/7/2012

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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)

Hispanic Allocation on Revenue Growth, 3/7/2012

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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

Hispanic Allocation on Revenue Growth, 3/7/2012

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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.

Hispanic Allocation on Revenue Growth, 3/7/2012

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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
Accurately sizing the prize - determining on what, where and how much to invest for optimal growth and reasonable ROI Responding to the most appropriate cultural insights Using all elements of marketing above & below-the-line Focusing efforts across the portfolio not just a few mega-brands Developing strategies from communications to customer experience
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Hispanic Allocation on Revenue Growth, 3/7/2012 Growth

Presented by

Carlos Santiago
Chief Strategist Santiago Solutions Group

Full report, previous studies and key insights at:

www.Ahaa.org
www.SantiagoSolutionsGroup.com

Further questions?

Email/call us at:

Carlos@SantiagoSolutionsGroup.com (818) 736-5661

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