Copyright © IRI, 2005. Confidential and proprietary.

“So you want to be a Rocket Scientist?” How to understand success in multinational launches

Re-inventing CPG & Retail Summit 2005

Janey Pearson - VP J&J Consumer Services EAME Ltd.Tim Eales - Industry Insights, IRI International Services

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Lack of category growth Drive for greater volumes

and higher profits Greater competition:

Crowded shelves Bigger ‘value-added’

claims Higher costs of NPD

Key Challenges facing J&J European business today

Leading to…

Strategies for big multinational launches

How to make your big bangs bigger!

How do we know when we have a Rocket?

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Huge differences across different countries…

Sale

sSe

ason

ality

Item

s pe

r sto

reD

istr

ibut

ion

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Sale

s

Seas

onal

ityIte

ms

per s

tore

Dis

trib

utio

n

€ 138.9m€ 105.1m € 101.5m

€ 265.1m

GERMANY (Sep 03) GB (Feb 04) SPAIN (Oct 03) ITALY (Jan 04)

39 weeks from launch, the German market is 2.5X bigger than Italy

Body Cream Category Value Sales

Huge differences across different countries…

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Sale

s

Seas

onal

ity

Item

s pe

r sto

reD

istr

ibut

ion

Body Cream Seasonality Index

Huge differences across different countries…

40

80

120

160

sep oct nov

dec jan feb mar apr

may jun julau

gse

p oct

Germany GBSpain Italy

xmassummer

Based on average weekly value sales per month

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Sale

sSe

ason

ality

Item

s pe

r sto

re

Dis

trib

utio

n

Body Cream No of Items per Store

127.2

23.8

78.8

110.4

GERMANY GB SPAIN ITALY

Huge differences across different countries…

Expected share given average sales & distribution0.9% 0.8% 4.2% 1.3%

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0

20

40

60

80

100

4 8 12 16 20 24 28 32 36 40 44 48 52 56 60 64 68 72 76

ITALY

UK

GERMANY

SPAIN

Sale

sSe

ason

ality

Item

s pe

r sto

re

Dis

trib

utio

n

Body Cream Distribution Build

Retailer concentration and practices largely govern the achievement of

distribution in each country

Huge differences across different countries…

Product availability - By Country - Best

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What is No Deal Sales Rate Index?

Sales rate of new product vs. Sales rate of average item in category

And therefore accounts for ‘noise’ from…

Shows effect of…

Item level analysis Adjusted for distribution Non-promoted volume only

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A purely hypothetical example…Where is this brand going?

0

50000

100000

150000

200000

250000

0 4 8 12 16 20 24 28 32 36 40 44 48 52 56 60 640

0.5

1

1.5

2

2.5

3Value ShareValue Sales

Weeks from launch

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0

50000

100000

150000

200000

250000

0 4 8 12 16 20 24 28 32 36 40 44 48 52 56 60 640

0.5

1

1.5

2

2.5

3Value ShareValue Sales

A purely hypothetical example…Sales to date would suggest a continued rise

Weeks from launch

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A purely hypothetical example…But underlying the value trend, SRI is going down

0

20

40

60

80

100

120

140

160

0 4 8 12 16 20 24 28 32 36 40 44 48 52 56 60 64

Value shareof category

Distribution

Volume priceindex

No dealvolume SRI

Media TVRs

Weeks from launch

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A purely hypothetical example…And would usually continue to fall

0

20

40

60

80

100

120

140

160

0 4 8 12 16 20 24 28 32 36 40 44 48 52 56 60 64

Value shareof category

Distribution

Volume priceindex

No dealvolume SRI

Media TVRs

Weeks from launch

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A purely hypothetical example…In fact, sales will fall when distribution stabilises

0

50000

100000

150000

200000

250000

0 4 8 12 16 20 24 28 32 36 40 44 48 52 56 60 640

0.5

1

1.5

2

2.5

3Value ShareValue Sales

Weeks from launch

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A purely hypothetical example…Sales will be 24% lower than projected

0

50000

100000

150000

200000

250000

0 4 8 12 16 20 24 28 32 36 40 44 48 52 56 60 640

0.5

1

1.5

2

2.5

3Value ShareValue Sales

Weeks from launch

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Case Study

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250ml Body Lotion pricing & distribution

8555 50

84

GERMANY GB SPAIN ITALY

Average price (€) per litre

39 weeks from launch Prices varied by 20%

21.520.725.5

19.0

GERMANY GB SPAIN ITALY

159 162 154 115Index

Category weighted distribution

39 weeks from launch Distribution achievement was much higher in GB and Germany

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250ml Body Lotion promotional activity

57.9 59.9 46.912.2

GERMANY GB SPAIN ITALY

32 3325

7GERMANY GB SPAIN ITALY

516 550

89

559

GERMANY GB SPAIN ITALY

% Volume sales with any trade promotion 39 weeks from launch Nearly 6 times more promotional activity in Spain as in Germany

Incremental share Incremental share varied by 4 times

Media TV support varied significantly . by country

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€ 1.4m€ 0.9m € 0.9m

€ 1.7m

GERMANY GB SPAIN ITALY

250ml Body Lotion sales performance

1.0 0.8 0.90.6

GERMANY GB SPAIN ITALY

Value sales 39 weeks from launch Value sales are highest in the largest country

Value share of category 39 weeks from launch Despite high sales in Germany, this equates to the lowest share

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Brand A 250ml Body Lotion - GB

2.5 2.7

1.30.7

0.30.4 0.30.60

50

100

150

200

250

300

350

Pre 4 9 13 17 22 26 30 35 39 43 48

Value share oftotal category

Volume priceindex

No dealvolume SRI

Media TVRs

% volume ondeal

Weeks from launch

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Brand A 250ml Body Lotion - Spain

1.7

0.30.40.3 0.40.61.42.0

1.01.7

0

20

40

60

80

100

120

140

160

180

200

Pre 4 8 13 17 21 26 30 34 39 43 47 52 56 61 65

Value share oftotal category

Volume priceindex

No dealvolume SRI

Media TVRs

% volume ondeal

Weeks from launch

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Brand A 250ml Body Lotion - Germany

0.2

1.6

1.31.2

0.8

0.40.30.20.20.2 0.3

1.5

1.0

0.2 0.20

50

100

150

200

250

300

Pre 5 9 13 18 22 26 31 35 39 44 48 52 57 61 65 70

Value share oftotal category

Volume priceindex

No dealvolume SRI

Media TVRs

% volume ondeal

Weeks from launch

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Brand A 250ml Body Lotion - Italy

1.2

0.50.7

0.4

1.8

0.6

0.2 0.2

1.8

0.40

50

100

150

200

250

300

350

Pre 4 8 13 17 21 26 30 34 39 43 47 52

Value share oftotal category

Volume priceindex

No dealvolume SRI

Media TVRs

% volume ondeal

Weeks from launch

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Sales rate index by country – 250ml Body Lotion

0255075

100125150175200225250275300

4 8 13 17 21 26 30 34 39 43 48 52 56 61 65 69

GB

Spain

Germany

Italy

Weeks from launch

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Brand A – pre/during/post advertisingNDSRI Volume

0

20

40

60

80

100

120

140

160

Phase 1 - PRE Phase 2 - DURING Phase 3 - POST

Germany

GB

Spain

Italy

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Critical learnings & actions from our case study

Sales Rate Index is predictable

Critical variations in price sensitivity by market Action: Pricing Strategy

Advertising driving peaks Action: Advertising deployment

This launch has performed exactly the same in each of the four markets

Brand proposition not selling off the shelf Action: Communicating the message at shelf

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Summary

SRI is a way of normalising these differences to allow a direct comparison

SRI identifies total launch achievements and the underlying consumer trends

Using this knowledge from all major launches in the category, J&J can now interpret the early signs to spot their rockets

Traditional measures do not allow consistent comparison of launches between different categories, markets and seasons