Network of Executive Women Annual Leadership Conference “NALS”

1. Network of Executive Women Annual Leadership Conference “NALS” Is Anybody Listening? September 29, 2004 www.hoytnet.com Don TestaWilton, CT203.762.7092dontesta@hoytnet.com Luci SheehanSt. Petersburg, FL727.360.4466lucisheehan@hoytnet.com Nancy SwiftScottsdale, AZ480.513.0547nancyswift@hoytnet.com

2. Today • The Consumer Landscape • How In Touch Are We? • Q&A

3. To understand current consumer purchasing behavior, a good starting point is to look at U.S. population income trends over the past 35 years: • Mean Income Trends By Population Fifths, 1967 – 2003(2003 CPI Adjusted Dollars – Per Household) Source: US Census, Bureau of Labor Statistics, 2003. All data adjusted for inflation.

4. Today, the U.S. population appears to be segmenting into “haves” and “have-nots” as the upper two quintiles continue to gain faster than the others Source: US Census Bureau. 2003; Dept. of Commerce. Figures do not add to 100 due to rounding.

5. The fact is, however, that since 1970 general prosperity has risen significantly, thereby opening-up opportunities to market higher priced “Mass Affluence” products such as White Strips, Swiffer, MP3s and DVD Players Mass Affluence – Marketing’s New Opportunity, 1970 - 2000 Source: Selling To The Monied Masses, HBS Review, July - Aug 2004, Page 97

6. Nonetheless, the result of continuing economic pressure for the majority of consumers is that Value Shopping has become a national obsession, leading to escalating disloyalty as consumers switch back and forth among different channels for low prices and best values % of Category Dollars Total US. – 52 w/e 12/28/02 – upc-coded products; Grocery w/SC, Mass, Drug, Club & Dollar Store channels only Source: ACNielsen, Total U.S.

7. One Result: Massive migration from Traditional to Value Discount channels • One Point = 109.3MM Trips • Shopper Trips By Channel (1996 – 2004)(Avg. # Trips/Household/Channel/Year) • Traditional • Value Discount Total Trips • Down 2.7 Billion Trips in Eight Years 167 156 *Includes Target, Wal-Mart and Kmart Supercenters Source: AC Nielsen Homescan, 2003

8. Another Result: Expert predictions that the defections will not only continue but accelerate over the next five years: Source: Willard Bishop Consulting – Channel Blurring Redefines the Grocery Market, June 2004

9. In addition to income considerations, it is clear that the days of “Ozzie & Harriet”, “Leave It To Beaver” and “Father Knows Best” are histoire: • In 2002, only 23.6% of U.S. households could be considered “traditional families” – that is, consisting of a married (male and female) couple with at least one child under 18 – versus 44.3% in 1960 – a decline of 39%. • 60% of women 16 years and older are now in the workforce and unavailable for cooking leisurely meals at home – a 39% increase since 1970. • Singles in total now comprise 86MM souls or 41% of the adult population – and are the biggest eat-away-from-home consumers. • The percentage of women at age 44 with four children or more plummeted from 36.0% in 1970 to 11.0% in 2000. • 10% of the adult population says it will never marry. • Unmarried adults now head nearly 50% of total American households and will soon constitute a new “unmarried majority” Source: U.S. Census Bureau, August, 2004

10. How traditional households have changed: 1960 – 2002 % of Total U.S. Households(2002 vs. 1960) Traditional Non-Traditional TV advertiser’s traditional target Note that the # of 1 person HHs now actually outnumbers the # of married couples with children under 18 Source: U.S. Census Bureau, June 12, 2003

11. While the traditional family continues to fragment, growing ethnic segments each require specialized marketing and merchandising approaches (1) American Indian, Native Hawaiian, Alaskan Native and other Pacific Islanders Source: U.S. Census 3/18/2004

12. It is estimated that Hispanic buying power will exceed $1 trillion by 2010 and $2 trillion by 2020: Hispanic Buying Power (1997 - 2020)(in billions) Source: The Hispanic Consumer Market in 1999 and Forecasts to 2020, Standard & Poor’s DRI, 1999

13. But there is not much time to think about this: Hispanic shoppers already make more trips to Target, SAM’s and Costco than non-Hispanics and just as many trips to Wal-Mart Trips Per Shopper Per Year: Hispanics vs. All Shoppers, Leading Accounts, Summer, 2003(Average # Trips/HH/Year: All Shoppers) Source: IRI InfoScan

14. America’s Aging Population and the Rapidity With Which This Is Growing Also Require Different Marketing and Merchandising Approaches: • Between now and 2010, a baby boomer will turn 50 every 7 seconds. • Between 1990 and 2010, the number of Americans 55 years and older will jump from 52.4MM to 81.1MM – an increase of approximately 29MM souls or 55%. • This is over twice the rate of the growth of the total population in general during this period which will increase only 21% or about 1% per year • By 2025, the 55+ group will comprise the largest single segment of the U.S. population at 32.7% and those 65+ will comprise 20.8% (vs. 13.9% in 2000 and 9.8% in 1960) • Life expectancy in this country is now 76.4 years for those born in 1998 vs 68.2 years for those born in 1950 and 70.8 years for those born in 1970 • By 2010, 45 - 64 year olds will outnumber 25-44 year olds and comprise the largest single segment of the U.S. population

15. Ask yourselves: How does the following profile change your marketing or merchandising approaches, if at all? 30.2 26.2 25.5 24.8 22.0 26.5 23.2 22.1 Source: U.S. Census, Department of Commerce, From the 2004 World Almanac, Pg. 379

16. Underpinning These Trends Is a Feeling That There Isn’t Enough Time In The Day To Get Everything Done, Especially Cooking Family-centered Home-style Meals: • The number of families with both parents working has grown from 50-77% of the population since 1970. • The average family spends less than 20 minutes per day in meal preparation: • More than 33% of shoppers bring home ready-to-eat dinners at least twice a week • 35% of shoppers say they “use a microwave almost all the time” • 47% of shoppers say they “only cook because they have to” • By 2005, many Americans will never have cooked a meal from scratch. • 65% of Americans say that they are time pressured and that this feeling is growing stronger while another 45% say they have less leisure time than they did two years ago. Source: GMA, Opinion ‘98; U.S.B.L.S. 2000; Beverage Marketing, 1999

17. In addition to feeling constantly time-pressured, consumers are reeling from Information Overload, causing most to “blank-out” on all but the most personal or relevant messages: Media Proliferation 2004 vs. 1960 1960 – Mass Media Matures 2004 – Mass Media, RIP Magazine titles: 8,400 4.4 billion pages indexed by Google Magazine titles: 17,300 TV channels per home: 5.7 TV channels per home: 82.4 Internet broadcast stations: 25,000+ Radio stations: 13,500 Radio stations: 4,400 % of Email Identified as Spam June, 2003 July, 2004 49% 65% Source: Brightmail.com Aug. 2004

18. Even when consumers do focus on media, more than 70% use different types of media simultaneously Source: October 2003 BIGresearch SIMM survey

19. While the foregoing presents numerous and often bewildering challenges to both CPG marketers and retailers, these challenges are now doubly difficult because food has deteriorated to such a relatively low involvement purchase • Food as a % of Personal Consumption $: 1960-2003 Source: USDA, ERS, August, 2004

20. Exacerbating all of these issues is media fragmentation which has forced both marketers and retailers to replace traditional advertising approaches with “touchpoints” and seek-out 360º strategies to envelope consumer targets • Media Fragmentation Update – 2004 • In the 1960’s, an advertiser could reach 80% of U.S. women with a spot aired simultaneously on the three national TV networks but to duplicate this today would require 100 TV channels. • Prime time ratings of TV broadcast networks fell from approximately 51MM viewers in 1977 to 30MM today – a drop of 41.5%. • The average U.S. household now receives 100 TV channels compared with 27 in 1994. • Cable TV channels now command a 52% audience share in prime time or 8 share points greater than broadcast TV at 44%. • Digital video recorders will be in 20% of U.S. households by 2008 and in nearly 50% by 2009. Between 65 and 75% of current DVR households now fast forward through commercials. • Daily newspaper readership has fallen from 81% of households in 1964 to 55% in 2002. • And so on – you get the point. Source: http://www.backchannelmedia.com/newsletter/20040728/04=print.html

21. Permission-Based E-mails Radio Internet Ads Print Cable TV FSPs Mega-EventSponsorship Direct Mail In-Store Sampling FSIs Content Implants In-Store TV Customer Service Network TV Movie Theater Ads Newspapers Outdoor Signage DVD Trailers High Impact Product Placements Coupons Retailtainment Touchpoints: Communicating Is No Longer a Clean Shot

22. Women as primary shoppers America’s love of entertainment The Good News: In spite of the changes – and the new and often unfamiliar approaches required to cope with them – some things remain the same

23. To confirm a fact you all know – women are the primary shoppers in all channels but Convenience and Gas which has always been male-dominated • Share of Channel Trips By Gender, 2002 As males age, they handle increased share of trips Source: ACNielsen Channel Blurring Study, 2002

24. In addition to being primary shoppers, women consistently outspend men in all channels, including Convenience and Gas • Avg. Expenditures Per Shopping Trip By Channel & Gender, 2002 • Average $ Basket Size Total U.S. – 52 weeks ending 12/28/02

25. The difference between women shoppers today and those of the 1960’s and 1970’s is that they are significantly better educated and better informed, thereby challenging both manufacturers and retailers to connect on deeper, more relevant and respectful levels Source: http://www.infoplease.com/ipa/A0779809.html

26. Despite what Americans say about being time pressured, the fact is that Americans will make time to have fun and be entertained: • In 2002, Americans spent a total of $620 billions on “recreation” – videos, movies, amusement parks, spectator sports, rock concerts, wheel goods, boats and theater, etc.: • This $620B is almost 3 x’s more than Americans spent for education and research in 2002 ($186B) and 46% more than they spent for all clothing, accessories and jewelry combined • This $620B is 25% more than what the BLS says Americans spent on Food At Home in 2002 ($602B) • Americans spent an additional $415B on eating out in 2002 which is NOT included in the “recreation” numbers.

27. In addition, if one uses spending growth rates to judge what is really important to Americans, having fun and being entertained is America’s #1 priority while eating at home is last • U.S. Household Expenditures By Category (% Growth 1992 – 2002) Source: Bureau of Economic Analysis, U.S. Dept. of Commerce, 2004

28. Net on the consumer landscape – the key issues as we perceive them: • Capturing share in an atomized consumer market that defies traditional approaches. • Communicating effectively with this market in an age of media fragmentation, information overload, time pressures, consumer indifference, multi-tasking and ad-blocking technology. • When to shift gears and reengineer to acknowledge that “niche” is now mainstream. • Insuring that one’s organization understands that diversity is no longer a diversity issue but a market-driven necessity.

29. How In Touch Are We?

30. On Making The Connection “Everyone says they’re targeting women, yet most women don’t feel understood by marketers. According to the Yankelovich Monitor, 59% of women feel misunderstood by food marketers…” Dori Molitor, from Marketing to Women by Martha Barletta, pg. 158. Dearborn Trade Publishing, 2003 “More than two thirds (69%) of consumers say they feel retailers do not put their needs first. There is a serious disconnect between what consumers need and how they want it, and what retailers offer.” Kurt Salmon Associates Consumer Outlook, 4th Quarter, 2003

31. Q&A

32. Thank You We have enjoyed our time with you and hope that this has been both informative and fun. www.hoytnet.com Don TestaWilton, CT203.762.7092dontesta@hoytnet.com Luci SheehanSt. Petersburg, FL727.360.4466lucisheehan@hoytnet.com Nancy SwiftScottsdale, AZ480.513.0547nancyswift@hoytnet.com