global beauty, home and personal care

For required non-U.S. analyst and conflicts disclosures, please see page 31.

EQUITY RESEARCH | 3 SEPTEMBER 2020

Global beauty, home and personal care

A review of purposeful branding and digital efficacy

Disseminated: September 3, 2020 00:15ET; Produced: September 2, 2020 21:34ET

Global Consumer Staples: a review of purposeful branding and digital efficacy

3 September 2020 2

RBC Europe Limited Emma Letheren (Equity Analyst) +44 20 7002 2100 [email protected]

James Edwardes Jones (Equity Analyst) +44 20 7002 2101 [email protected]

RBC Capital Markets, LLC Nik Modi (Equity Analyst) (212) 905-5993 [email protected]

Steven Shemesh (Equity Associate) (212) 428-2390 [email protected]

Mehra Romezi (Equity Associate) (212) 266-4099 [email protected]

Sara Mahaffy (US Equity Strategist) (212) 618-7507 [email protected] Priced as of market close on 1 September 2020 (unless otherwise stated). All values in EUR unless otherwise noted.

Global Consumer Staples: a review of purposeful branding and digital efficacy Beauty, home and personal care Our view: We consider the ESG credentials and digital efficacy of 66 beauty and HPC brands in this follow up to our report Global Consumer Staples: a review of digital efficacy which reviewed the digital capabilities of 58 food brands. We have looked at the use of purposeful marketing at the brand level and used Refinitiv for company-level judgements. Our conclusions: 1) a brand’s online ‘buzz’ seems minimally correlated to its purposefulness, at least for now; 2) with the exception of Unilever, high corporate ESG scores are not reflected in positioning at the brand level. We believe that it will take time for purposeful marketing to influence brand equity and expect to see brand purpose become increasingly relevant to consumers as we carry out further iterations of this analysis. We think our coverage companies’ failure to extend corporate-level ESG efforts to positioning and marketing of individual brands presents a potential opportunity for those so inclined.

The online consumer isn’t recognising ongoing ESG efforts. - Unilever has found evidence that purposeful communication leads to better growth. However, we have found little evidence that brand purposefulness boosts online consumer sentiment and only some to say it results in ‘buzz’ (a high volume of social media posts about the brand). This link may become more evident over time as purposefulness drives brand equity and consumers increasingly appreciate ESG.

With the exception of Unilever, corporates scoring well in terms of ESG are not using purposeful marketing consistently at brand level. – There is a disconnect between investor and consumer communication. This could be an opportunity: we have not found evidence that consumers are recognising brands’ purposefulness but expect this to change over time given the importance of ESG considerations to many consumers.

Disruptors are showing the way. As we found in our food edition, the smaller, more agile disruptors are significantly more digitally competent than their incumbent peers. These include Dermalogica, Seventh Generation and Kylie Cosmetics.

Acquiring the winners: expensive and not necessarily replicable. - Many of the digitally impressive disruptors have been acquired by the larger companies we cover. We see little evidence that the incumbents have managed to extend these capabilities to the rest of their business with the exception of L’Oréal and Estée Lauder.

Lockdown woes. Buzz and sentiment fell during lockdown. We haven’t found any correlation between brand performance in lockdown and digital capabilities pre-lockdown. We infer that consumers were too distracted for existing digital marketing and e-commerce efforts to pay off.

Cosmetics brands enjoy the best digital capabilities.

Digital Laggards Air Wick Ariel Banana Boat Cascade Cillit Bang Domestos Downy/Lenor Mr Muscle Oral-B Rexona/Degree

Digital Leaders Avon Dermalogica Estée Lauder Fenty Beauty Kylie Cosmetics MAC NYX Olay Seventh Generation Tarte Urban Decay

Little correlation between purposeful branding and online strength

Sources: Crimson Hexagon, RBC Elements, Euromonitor, RBC Capital Markets

Purpose rankings 1 – low purpose

2 – moderate 3 – strong purpose

https://www.rbcinsightresearch.com/ui/main/report/9d334ec4-2897-483c-ae6d-5d8fccdf140b



3 September 2020 3

Table of contents Acceleration in the shift to digital ......................................................................................................................................................................................... 4

ESG factors rising in importance ........................................................................................................................................................................................... 5

Methodology ......................................................................................................................................................................................................................... 6

Does purposeful marketing matter? ..................................................................................................................................................................................... 7

Category summary ................................................................................................................................................................................................................ 8

Cosmetics .............................................................................................................................................................................................................................. 9

Skincare ............................................................................................................................................................................................................................... 10

Hair Care .............................................................................................................................................................................................................................. 11

Personal Care ...................................................................................................................................................................................................................... 12

Oral Care ............................................................................................................................................................................................................................. 13

Home Care (1) ..................................................................................................................................................................................................................... 14

Home Care (2) ..................................................................................................................................................................................................................... 15

Company analysis ................................................................................................................................................................................................................ 16

Beiersdorf (Sector Perform, price target EUR 98) ............................................................................................................................................................... 17

Edgewell Personal Care (Outperform, price target USD 36) ............................................................................................................................................... 18

Estée Lauder (Outperform, price target USD 240) .............................................................................................................................................................. 19

L’Oréal (Sector Perform, price target EUR 203) .................................................................................................................................................................. 20

Procter & Gamble (Sector Perform, price target USD 128) ................................................................................................................................................. 21

Reckitt Benckiser (Underperform, price target GBP 64) ..................................................................................................................................................... 22

Unilever (Underperform, price target EUR 42/GBP 37) ...................................................................................................................................................... 23

Henkel, Church & Dwight, Clorox and Colgate-Palmolive ................................................................................................................................................... 24

Valuation summary ............................................................................................................................................................................................................. 25

Appendix: Methodology ...................................................................................................................................................................................................... 26

Appendix: Purpose rankings I .............................................................................................................................................................................................. 27

Appendix: Purpose rankings II ............................................................................................................................................................................................. 28

Elements .............................................................................................................................................................................................................................. 29

Required disclosures ........................................................................................................................................................................................................... 30


3 September 2020 4

Acceleration in the shift to digital It is no secret that technology has dramatically changed the way we select, purchase and consume goods. According to eMarketer, digital advertising now represents 50% of total media spending and is projected to reach 61% by 2023. E-commerce is also becoming increasingly prevalent and represented 16% of US retail sales in 2019.

The COVID-19 pandemic has accelerated this shift to digital. Not only were many traditional methods of advertising limited in lockdown (billboards aren’t too effective if no one walks past them) but many traditional points-of-sale were closed. In the UK, online sales rose 18% in April according to ONS, sending the proportion spent online to its highest on record. In the US the e-commerce channel experienced the same amount of growth over 10 weeks of lockdown that it had enjoyed over the previous 10 years (L’Oréal CEO, Deutsche Bank Consumer Conference, 9 June 2020).

Although this shift should partially reverse as retailers re-open and safety concerns are alleviated, we think it is unlikely that this recent shift will ever completely unwind. Consumers new to e-commerce have been exposed to its convenience and choice. Those trying new brands due to strong online advertising during lockdown may never revert back to their old choices.

Our first edition in this series endeavoured to gain insight into 58 food brands’ digital capabilities. The conclusion was clear - the smaller, more agile disruptors were significantly more digitally advanced than their incumbent peers. In this edition, we have focused on 66 beauty, home and personal care brands. These categories have been particularly affected by the ongoing pandemic due to: 1) accelerated focus on hygiene, and 2) temporary closure of the physical retail channel. In this report, we not only draw a similar conclusion to our food edition, namely that many of our covered companies have lots of catching up to do, but also that the store closures and marketing cuts during lockdown materially affected sentiment and buzz online, even when a brand had strong digital capabilities pre-lockdown. Lastly, relative positioning stayed pretty much constant – digital winners pre-lockdown also had strong sentiment and buzz during lockdown.

Exhibit 1: Worldwide marketing spend is shifting to digital from traditional

Source: eMarketer June 2020 report, RBC Capital Markets

Exhibit 2: E-commerce penetration of the retail channel has accelerated due to lockdown

Source: L’Oréal Group, RBC Capital Markets

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3 September 2020 5

ESG factors rising in importance It is well documented that ESG has become increasingly important to investors in recent years. Our ESG Strategist, Sara Mahaffy, notes that inflows into her universe of dedicated ESG funds (Morningstar tracked global, US, and sector-focused equity funds with >20% of their holdings invested in US stocks, that have a clear & heavy emphasis on sustainable investing practices) have been picking up over the last few years. Inflows have been strong for both actively and passively managed ESG funds.

In 2Q20 inflows reached new highs. Performance has been an important driver of this - actively managed ESG funds have posted better relative fund performance than traditional actively managed equity funds in 2019 and 2020 YTD. This has repercussions for our consumer staples coverage – US consumer staples with higher ESG scores have been outperforming since 2014.

“Talking is not enough, it is critical that brands take action and demonstrate their commitment to making a difference.” – Alan Jope, Unilever CEO, Deutsche Bank Global Consumer Conference, 11 June 2019.

We think ESG factors are also increasingly relevant to the consumer. Unilever claims to have collected “extremely strong data on the link between both purposeful communication and short- and long-term growth” (Unilever CEO Alan Jope, FY19 results call). Indeed in 2018 its Sustainable Living brands (‘those taking action to support positive change for people and the planet’) grew 70% faster than the rest of Unilever’s business. Others are also waking up to the opportunity – according to Colgate’s CEO, “consumers continue to be extremely interested in purpose-driven brands, particularly brands with a strong sustainability profile” (2Q20 call, 31 Jul ‘20).

To gain some insight into each brand’s ESG capabilities we have ranked each brand on how “purposeful” their marketing is (see Appendix). We stress that this was based on our assessment of the brands’ positioning; as financial analysts we don’t claim to be experts in purposeful marketing. We were surprised to find that those of our coverage companies which score highly on ESG (according to Refinitiv) do not also have consistent purposeful marketing across their brands (except for Unilever). In addition, we found limited correlation between purpose and popularity with the online audience. We expect this link to grow over time.

Exhibit 3: Sustainable investing has increased significantly over the last 12 months

Source: RBC US Equity Strategy, Morningstar

Exhibit 4: Sustainable funds have outperformed traditional funds

Source: RBC US Equity Strategy, Morningstar

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https://www.rbcinsightresearch.com/ui/main/analyst/243137


3 September 2020 6

Methodology We set out to assess the digital marketing efficacy, online presence and purposeful branding power of key beauty, home care and personal care brands. Doubtless our data is less comprehensive than that which the brand owners themselves have access to. However, we do think that it has enabled us to draw some interesting conclusions. If the brand owners disagree, we hope they will let us know.

We have selected 66 brands, a mixture of incumbent leaders and disruptive/emerging brands. We avoided selecting brands with names that have multiple meanings in order to ensure an accurate analysis. For example, we did not include P&G’s Tide brand as the results would have included many irrelevant posts relating to the sea.

In partnership with our data science team, RBC Elements, we have considered online consumer sentiment and brand buzz using social media data vendor Crimson Hexagon. To get an understanding of purely consumer interest we only included social media posts made by individuals in this analysis and removed company channels. We were also restricted to English-language posts so that we could check our findings. E1

Crimson Hexagon labelled each social media post as positive, neutral or negative sentiment. To understand online brand popularity, we calculated net consumer sentiment: % of positive posts – % of negative posts.

We measured ‘brand buzz’ by the overall volume of social media posts. To make the data comparable we weighted our volume data by brand size which we obtained from Euromonitor.

For a normalised result, we looked at sentiment and post volume over the 12 months pre-lockdown: 1 April 2019 - 31 March 2020. We also looked at lockdown sentiment, which we assume is the period 1 April – 30 June 2020.

In addition, we considered year-on-year momentum. Lockdown momentum is the change in sentiment/ buzz from Apr-June 2019 to Apr-June 2020.

Our Digital Leaders (and Laggards) as presented on the front page have to screen well (or badly) on both consumer sentiment and brand buzz. Sentiment must be above 15 (below 5) and weighted volume of posts over 120 (below 50).

The data generated by Crimson Hexagon was mainly from Twitter, Tumblr and News sites, as demonstrated in Exhibit 5.

Exhibit 5: The data sources used by Crimson Hexagon

Source: Crimson Hexagon, RBC Elements, RBC Capital Markets

In an effort to sense check our results, we have compared them with Gartner’s Digital IQ 2019 US Indices (and 2020 where possible). Gartner is a business intelligence firm which ranks brands based on their digital competence in e-commerce, social media marketing and mobile platforms.

In order to gain some understanding of how each brand’s engagement is influenced by consumers’ increasing ESG focus, we have also given each brand a ‘purpose’ score: 1, 2 or 3 (3 being the highest purpose ranking). We determined this simply by reviewing their websites and looking for emphasis of environmental or social/charitable purpose (our analysis doesn’t reach the “G” in ESG). This may seem simplistic, but replicates the way a consumer would get an impression of a brand’s ‘purpose’ in our view (assuming any purpose highlighted on the website is mirrored in its other social media channels). From page 16 on we look at our results by company and compare our purpose scores to Refinitiv’s overall corporate ESG scores. We have organised the 16 public companies in our analysis into quartiles by their ESG score to get an idea of their relative positioning (see Exhibit 7). Please see the Appendix for further detail on our methodology or reach out if you have any queries.

E Learn more about RBC Elements on page 29.

Twitter58%

News11%

Tumblr11%

Forums10%

Reddit5%

Reviews4%

Youtube1%


3 September 2020 7

Does purposeful marketing matter? Given the growing importance of ESG factors to investors, we thought it would be interesting to see whether this was reflected at the consumer level. We introduce the purpose rankings: we’ve ranked each brand between 1 and 3 depending on how purposeful a brand’s marketing is. For example, we rank Colgate with the highest purpose score of 3 due to involvement in charitable campaigns such as ‘Bright Smiles, Bright Futures’ which has given over 850 million children free dental screening and education.

Of course, this does not encompass everything – we haven’t looked at the “G” in ESG or the top sustainability issues for consumer goods according to SASB (product quality, design and supply chain management). This is merely our first tentative step towards understanding our coverage companies’ ESG capabilities. Our conclusions are as follows:

Brands with strong to moderate purpose had a slightly better buzz on average: 174 vs 158 (average weighted volume of posts for our analysis excluding Lysol and Fenty Beauty whose >1000 scores distort the average).

Most brands which had really strong buzz are also purposeful. Eight brands were off the chart (Exhibit 6) and five of these ranked moderate or strong.

We didn’t find a link between brand purposefulness and online sentiment.

We didn’t find correlation between lockdown momentum and purpose score.

Either consumers don’t significantly favour brands with a strong purpose or the existing purposeful positioning is yet to register with them. We think the latter is more likely given some purposeful brands did rank very strongly in sentiment and buzz – we can assume these brands have made a big enough deal of their efforts to the consumer. For example, Tarte cosmetics (one of our Digital Leaders) has a well-publicised reputation for using sustainable, vegan-friendly ingredients and processes. On the other hand, is Colgate viewed as an ethical toothpaste brand? We think it takes time and effort for purposefulness to be widely appreciated by consumers and inform part of a brand’s equity.

We also conclude that purposeful marketing does not directly result in strong online sentiment and buzz - there are other factors at play. For example, Dollar Shave Club lies off the chart in Exhibit 6 with a weighted volume of posts of 609. We found little purposeful marketing however its strong digital capabilities are well-documented.

Exhibit 6: Consumer sentiment and buzz by purpose ranking (April 2019 – March 2020)

Source: Crimson Hexagon, RBC Elements, Euromonitor, RBC Capital Markets

Exhibit 7: Corporate ESG scores

Source: Refinitiv

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L'Oreal SAProcter & Gamble CoJohnson & Johnson

Henkel AG & Co KGaA

LVMH The Clorox Company

Church & Dwight Co IncShiseido Co Ltd

Beiersdorf AG Edgewell Personal Care Co

Kosé Corp Estee Lauder Companies Inc

Colgate-Palmolive CoGlaxoSmithKline PLC

Reckitt Benckiser Group PLCUnilever NV

BottomQuartile

3rd Quartile

2ndQuartile

Top Quartile

Given this is our first look at the ESG capabilities of our coverage, we have taken Refinitiv’s corporate-level ESG scores for comparison. We have access to ESG scores for the 16 public companies in our analysis and organised these into quartiles.

Out of our coverage, Colgate-Palmolive, Unilever and Reckitt Benckiser came out top. Yet at the brand level, we only found consistent purposeful marketing for Unilever –although we maintain our Underperform rating, this definitely gives us food for thought. Colgate scored well but we only looked at one brand. We think there is an opportunity here for our coverage to better reflect their ESG efforts at the brand level as we do think it matters to consumers, and increasingly so.



Click on the relevant data points to go to an overview

of that category


3 September 2020 8

Category summary Cosmetics was the clear overall category winner. In the 12 months preceding

lockdown it had the strongest average buzz and sentiment around its brands. We think this makes sense – companies like L’Oréal and Estée Lauder are amongst the biggest spenders in marketing in our global coverage and have invested heavily behind their digital capabilities. It is also an exciting, colourful, varied category, so creating a buzz amongst consumers is easier in our opinion. The more staple-like categories of Oral Care, Home Care and Personal Care screened relatively poorly.

During lockdown, all categories saw a reduction in consumer sentiment relative to the same period 12 months before. For the 66 brands covered, consumer sentiment declined 6 percentage points yoy on average. Is this due to mentions of COVID-19 skewing sentiment? With the exception of Home Care, we don’t think so - we scanned through some of the negative posts and rarely found a COVID-19 mention. We wonder if lockdown had a general negative impact on people’s mood and this had repercussions for brand sentiment.

Home Care is very different. The huge uptick in post volume and deterioration in sentiment found was very much linked to COVID-19. For example, jokes about President Trump’s comments on injecting disinfectant and fears over stockpiling. We suspect that Crimson Hexagon has overstated negativity here and that the overall momentum for Home Care was positive given elevated attention on cleaning products during lockdown to prevent contagion of the virus. That said, we’re unsure this momentum is sustainable long term.

For most categories, brand buzz declined yoy during lockdown. This makes sense as, although consumers had more time to use social media whilst stuck at home, brand owners were making significant cuts in marketing, many points of sale were closed and consumers had other things on their mind.

As well as Home Care, Hair Care brands saw much more positive momentum in post volume. Scanning through posts, it seems the closure of hair salons revived interest in, or at least conversation relating to, the consumer hair care category.

So, what does our analysis tell us about the demand outlook for the HPC industry? We found 16m posts about 66 HPC brands in the 12 months preceding lockdown. During the 3-month lockdown period we found 7m. The posting rate almost doubled. We think we can infer that interest in HPC brands held up.

Exhibit 8: Consumer sentiment and brand buzz (April 2019 – March 2020)


Exhibit 9: Lockdown momentum (April - June 2019 to April - June 2020)


Hair Care

Skincare

Oral Care

Cosmetics

Home CarePersonal Care

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Personal Care

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Absolute change in net consumer

sentiment (P-N), %

Change in weighted volume of posts

Lockdown

Home CareNet consumer sentiment: -5Weighted volume of posts: 537%

Click on the relevant data points to go to an overview of that category


3 September 2020 9

Cosmetics

As already mentioned, Cosmetics was the category winner by far in terms of relative digital capabilities in the 12 months pre lockdown. In fact, 8 out of 11 of our overall “Digital Leaders” are in this category. Cosmetics continued to lead throughout lockdown as well with the category enjoying the best consumer sentiment and second best buzz out of all the categories.

In terms of overall digital prowess pre-lockdown (Exhibit 8) Kylie Cosmetics, Fenty Beauty and NYX looked particularly impressive, however Tarte, Urban Decay, Avon and Maybelline as well all had above average brand buzz. In addition, every Cosmetics brand we looked at enjoyed above average consumer sentiment.

Generally the newer, disruptive brands Tarte, Fenty Beauty and Kylie Cosmetics screened particularly favourably in this analysis relative to legacy brands owned by consumer staples incumbents (although Kosé Corp, LVMH and Coty have now grabbed a piece of the action with the acquisition of Tarte and stakes in Fenty Beauty and Kylie respectively). These brands have exceptionally strong digital marketing – Fenty Beauty and Tarte scored joint third in Garner’s Digital IQ 2019 Beauty Index and Kylie Cosmetics is marketed by Kylie Jenner, a top Instagram influencer. We also note Tarte and Fenty Beauty’s strong purpose scores – both have strong cruelty-free branding and are sponsors of various charitable causes.

We think there is some correlation between our purpose rankings and consumer sentiment in this category with top scoring purposeful brands MAC, Lancôme, Tarte and Fenty Beauty all having really strong consumer sentiment scores.

During lockdown, the relative positioning of the brands did not vary much. The buzz around L’Oréal Paris increased significantly versus the period 12 months before however this was mostly reflected in negative press comments around the time of the #Blacklivesmatter protests and disappointment with its new anti-aging products. Lancôme held up best.

Our results for Fenty Beauty have been distorted by #Blacklivesmatter posts (numerous angry posts showed up as negative) however also include some poor product reviews.



Exhibit 11: Lockdown momentum (April – June 2019 to April - June 2020)


Urban DecayAvon

Tarte

Kylie Cosmetics

Lancôme

NYX

Estée Lauder

Maybelline

L'Oréal Paris

MAC

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Fenty BeautyNet consumer sentiment: 31Weighted volume of posts: 1286

Urban Decay

Fenty Beauty

AvonTarte

Kylie Cosmetics

Lancôme

NYX Estée Lauder

MaybellineMAC

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L'Oréal ParisNet consumer sentiment: -44Weighted volume of posts: 117%

Brand ownership Avon (Avon Products) Lancôme (L’Oréal Group) NYX (L’Oréal Group)

Estée Lauder (Estée Lauder) L’Oréal Paris (L’Oréal Group) Tarte (Kosé Corp)

Fenty Beauty (Fenty Corp/LVMH) MAC (Estée Lauder) Urban Decay (L’Oréal Group)

Kylie Cosmetics (Kylie Jenner Inc/Coty) Maybelline (L’Oréal Group)




3 September 2020 10

Skincare Skincare had the next best overall category performance pre- and during

lockdown. Brands such as Dermalogica and Olay performed the best but Shiseido and Clinique also had healthy sentiment and buzz over both periods. Clinique and Olay also scored well in Garner’s Digital IQ 2019 Beauty Index. This is impressive for such big, established brands.

Estée Lauder and L’Oréal’s peer-leading investments behind digital have paid off – their brands screened relatively well. We also think they have successfully managed to extend acquired brands’ digital capabilities.

We can’t say the same for Edgewell Personal Care and Beiersdorf however. It seems that Beiersdorf is yet to revive recently acquired brand Coppertone. Edgewell’s Banana Boat looked particularly weak – the only skincare brand to have negative sentiment over the period. During lockdown, things continued to decline for both these brands. Both brands also scored poorly in Garner’s Digital IQ 2019 Personal Care Index: Banana Boat was ranked 68th and Coppertone 66th.

We find some correlation between purposeful rankings and relative digital winners. We found strong consumer sentiment for highly ranked Dermalogica, Kiehl’s and Dermalogica. Banana Boat and La Prairie were the exceptions here.

Lockdown momentum in Skincare was more mixed than it has been for other categories (for example Cosmetics where most brands had a negative trajectory). It seems the category has been more resilient to the cuts in marketing and store closures. Given the Cosmetics occasion is usually for those leaving the house, it makes sense Skincare performed better here. We note those with relatively strong digital capabilities pre-lockdown managed to maintain this in lockdown.

Nivea managed to remain stable during lockdown in terms of momentum – a feat only 10% of brands in our analysis managed.

Prestige beauty particularly suffered due to department store, travel retail and beauty store closures. La Prairie and Kiehl’s saw strong negative momentum yoy despite okay online positions prior to lockdown.

Sun care names were particularly affected during lockdown due to travel restrictions whilst the dermocosmetics names have held up.

Exhibit 12: Pre-lockdown consumer sentiment and brand buzz (April 2019 – March 2020)




Banana Boat

Hawaiian Tropic

Kiehl's

Coppertone

La Prairie

Eucerin

La Roche-Posay

Shiseido

Clinique

Olay

Garnier

Nivea

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DermalogicaNet consumer sentiment: 16Weighted volume of posts: 776

Dermalogica

Banana BoatHawaiian Tropic

Kiehl's

CoppertoneLa Prairie

EucerinLa Roche-Posay

Shiseido

CliniqueOlay

Garnier

Nivea

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sentiment (P-N), %

Change in weightedvolume of posts

Lockdown

Brand ownership Banana Boat (Edgewell Personal Care) Eucerin (Beiersdorf) La Prairie (Beiersdorf) Shiseido (Shiseido)

Clinique (Estée Lauder) Garnier (L’Oréal Group) La Roche-Posay (L’Oréal Group)

Coppertone (Beiersdorf) Hawaiian Tropic (Edgewell Personal Care) Nivea (Beiersdorf)

Dermalogica (Unilever) Kiehl’s (L’Oréal Group) Olay (P&G)

Purpose rankings

1 – low purpose 2 – moderate 3 – strong purpose


3 September 2020 11

Hair Care Within Hair Care, digital capabilities were not as strong as in other categories.

All brands apart from Schwarzkopf exhibited below average brand buzz (and for Schwarzkopf the additional buzz was tempered by a slightly negative brand sentiment score). We think there’s room to generate more excitement around the brands with additional digital marketing given most brands have healthy sentiment scores.

Pantene was the relative digital winner with both strong sentiment and brand buzz. We also note especially strong buzz and a healthy sentiment score for TRESemmé. Both brands maintained a positive consumer sentiment trajectory during lockdown although any buzz was materially diminished. In addition, of the brands we looked at, Pantene and TRESemmé scored the highest in Gartner’s Digital IQ 2019 Hair Care & Colour Index.

As we found in Skincare, the brands which enjoyed strong digital capabilities pre-lockdown were able to maintain positive sentiment momentum during lockdown – Pantene and TRESemmé here.

Schwarzkopf comes across as the relative digital loser. Whilst we found a lot of posts about the brand, the tone behind these posts was mostly negative. Sentiment further deteriorated under lockdown. We think this brand would benefit from a portion of the increased investment set out by Henkel.

Despite being a digital laggard in the 12 months pre-lockdown, Head and Shoulders gained significant momentum during lockdown. Marketing in markets such as the Philippines and favourable product reviews seem to have driven this. Despite this momentum however, we note that its overall relative positioning in lockdown remained weak with brand buzz remaining behind the others.

We found a distinct lack of correlation between purpose rankings and digital capabilities here. Nor was there a link between each brand’s purpose rankings and lockdown momentum - highly scored Sunsilk and TRESemmé (note both Unilever brands) have opposite directions of momentum.

We note that none of the brands we looked at made the top ten for Gartner’s Digital IQ 2019 Hair Care & Colour Index. Schwarzkopf, Kérastase and Head and Shoulders screened particularly poorly in the index at 57, 41 and 36 respectively. We note Sunsilk and Elsève/Elvive were not featured.





Kérastase

Head and Shoulders

Elsève/Elvive

Schwarzkopf

TRESemmé

Sunsilk

Pantene

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sentiment (P-N), %


Lockdown

Head and ShouldersNet consumer sentiment: 31Weighted volume of posts: 655%

Brand ownership Elsève/Elvive (L’Oréal Group) Schwarzkopf (Henkel)

Head and Shoulders (P&G) Sunsilk (Unilever)

Kérastase (L’Oréal Groupe) TREsemmé (Unilever)

Pantene (P&G)




3 September 2020 12

Personal Care

We found strong buzz within the Personal Care category – we had to extend the axis further given multiple brands were ‘off the chart’ (>300 weighted volume). We only had to do this for 3 categories. 20% of all ‘off the chart’ brands were in personal care.

That said, net consumer sentiment was relatively low for the category - only 1% on average (vs 11% for the total analysis). It seems that interest is easily generated, but enthusiasm is harder to come by.

Relative digital winners pre-lockdown include Harry’s, Bath and Body Works and Schick which had both strong buzz and relatively good sentiment. Unilever’s Rexona/Degree and Axe/Lynx were the category’s digital laggards.

We were surprised not to find better sentiment around Dollar Shave Club however it is positive to see the brand continue to generate a strong buzz (although we do note that compared to the previous 12 months, post volume has deteriorated by 40%).

With the exception of Old Spice, the most interest and noise was for the male grooming brands: Gillette, Dollar Shave Club, Schick and Harry’s. This was maintained throughout lockdown as well with the male grooming brands exhibiting double or triple the weighted post volume of the other brands. In regards to Gartner’s Digital IQ 2019 Personal Care Index, Gillette was the highest ranked brand we looked at coming in 2nd (Garner does not take online sentiment into account).

We found no correlation between online strength and our purpose rankings in Personal Care. In fact, all the brands that exhibited overall negative sentiment in the 12 months pre-lockdown had really strong purpose rankings. Either, consumers don’t care (we think this is unlikely) or any purposeful marketing and charitable efforts aren’t reaching consumers attention yet.

Durex was the worst performer during lockdown in terms of buzz and sentiment. This came across in terms of sales according to Reckitt Benckiser in its HY20 results.

Exhibit 16: Pre-lockdown consumer sentiment and brand buzz (April 2019 – March 2020)




Bath & Body Works

Axe/Lynx

Schick

Johnson's

Durex

Old Spice

Harry's

Veet Dollar Shave Club

Gillette

Rexona/Degree

-30

-20

-10

0

10

20

30

0 100 200 300 400 500 600 700 800 900

Ne

t co

nsu

me

r se

nti

me

nt

(P-N

), %



Bath &Body Works

Axe/Lynx Schick

Johnson'sDurex

Old Spice

Harry's

Veet

Dollar Shave ClubGillette

Rexona/Degree

-20

-10

0

10

20

30

-100% -75% -50% -25% 0% 25% 50%


sentiment (P-N), %


Lockdown

Brand ownership Axe/Lynx (Unilever) Gillette (P&G) Rexona/Degree (Unilever)

Bath & Body Works (L Brands) Harry’s (Edgewell Personal Care) Schick (Edgewell Personal Care)

Dollar Shave Club (Unilever) Johnson’s (Johnson & Johnson) Veet (Reckitt Benckiser)

Durex (Reckitt Benckiser) Old Spice (P&G)




3 September 2020 13

Oral Care

We didn’t find much buzz around Oral Care, as we might have expected from such a staple-like category. Consumer sentiment was also below average (Oral Care scored 8% on average vs 11% for all 66 brands). This is in stark contrast to Gartner’s Digital IQ 2020 Personal Care Index which ranked most of the brands in its top 10. We think the brands have developed strong capabilities in terms of e-commerce and digital marketing, but getting consumers sufficiently excited about toothpaste to write on social media is a challenge.

No Oral Care brands made it onto our front page Digital Leaders list. However in relative terms, we think Colgate screened okay. Gartner’s Digital IQ 2020 Personal Care Index also ranked it highly, in 6th place (up from 9th in 2019).

We note that Colgate was also the only brand within Oral Care to which we attributed a purposeful branding score. It is involved in charitable campaigns such as ‘Bright Smiles, Bright Futures’ which has helped over 850 million children with free dental screening and education. We gave Colgate the highest purpose ranking of 3. Colgate was able to maintain relatively strong sentiment throughout lockdown.

As with most of the HPC brands we surveyed, brand buzz declined during lockdown in Oral Care. On average, weighted volume was 25% below what it was a year earlier. Crest had particularly poor momentum and declined strongly in terms of sentiment and buzz. The other P&G brand that we surveyed, Oral-B, also saw a large decline in brand buzz. Given a positive share performance in the period (as P&G reported on 30th July) this relative positioning surprised us.

At first glance, Sensodyne managed to maintain the most stability under lockdown. However, it started from a weak position and had the second lowest sentiment and buzz during lockdown of its oral care peers. Gartner’s Digital IQ 2020 Personal Care Index also ranked it the lowest out of all the oral care brands we looked at.

Listerine was the only oral care brand surveyed to see positive momentum in brand buzz during lockdown. However, importantly, posts were largely negative. Net consumer sentiment over lockdown period was -12%, significantly below average lockdown sentiment of all the brands surveyed of 6%.





Crest

Oral-B

Listerine

SensodyneColgate

-5

0

5

10

15

20

0 10 20 30 40 50Ne

t co

nsu

me

r se

nti

me

nt

(P-N

), %



Crest

Oral-B

Listerine

Sensodyne

Colgate

-10

-5

0

5

-80% -70% -60% -50% -40% -30% -20% -10% 0% 10% 20%


sentiment (P-N), %


Lockdown

Brand ownership Colgate (Colgate-Palmolive) Listerine (Johnson & Johnson) Sensodyne (GlaxoSmithKline)

Crest (P&G) Oral-B (P&G)




3 September 2020 14

Home Care (1)

Overall, the category’s consumer sentiment was weaker than we found elsewhere. The Home Care brands (including those on the next page) held an average net sentiment of 3% for the 12 months before lockdown and -2% during (vs 11% and 6% on average for all brands surveyed). We reviewed many of the posts labelled ‘negative’ by Crimson Hexagon and suggest treating these results with caution. We found several posts with exclamations about stains or spills, expressions of fear about COVID-19 or concerns about stockpiling that, although of negative sentiment, were not talking negatively about the brand. We think overall sentiment was actually more positive given greater focus on hygiene.

Buzz around Home Care was poor: 8 out of 10 of our overall Digital Laggards are in this category. If we pushed up sentiment a bit, this would still be the case.

There was one stand-out digital capability. In the 12 months pre-lockdown Unilever’s Seventh Generation, one of the overall Digital Leaders in our analysis, had impressive sentiment as well as brand buzz. Out of all the home care brands that also scored positively in terms of sentiment, it had the strongest buzz. It also scored a high purpose ranking. The other high scorers in terms of purpose, Cascade, Omo and Domestos (the latter two also owned by Unilever) didn’t fare as well as Seventh Generation.

Buzz around Home Care increased significantly under lockdown thanks to increased attention on cleanliness in the home to reduce the spread of COVID-19. In fact, only 13 brands saw a > 50% rise in weighted volume of posts and 9 of these were in Home Care. Dettol, Domestos, Clorox, Lysol and Mr Muscle saw particularly strong momentum, exacerbated by President Trump’s comments about injecting disinfectant to cure COVID-19. We expect the buzz around these brands to moderate from such high levels although we expect elevated attention around Home Care to continue in the near term. We note this momentum was not due to any improvement in brand digital capabilities.

Domestos’ positive trajectory in consumer sentiment under lockdown was particularly impressive given (as explained earlier) the category’s sentiment has been dragged down by non-brand specific factors.

Ariel scored particularly badly pre-lockdown and we note particularly dramatic moves under lockdown. We found very few posts for Ariel.





Cascade

Downy/Lenor

Charmin Bounty

Persil

OmoAriel

Mr Muscle

Domestos

-20

-10

0

10

20

30

0 10 20 30 40 50 60 70 80 90 100

Ne

t co

nsu

me

r se

nti

me

nt

(P-N

), %



Seventh GenerationNet consumer sentiment: 37Weighted volume of posts: 186

CascadeSeventh Generation

Downy/Lenor

Charmin

Bounty

Persil

OmoMr Muscle

-60

-50

-40

-30

-20

-10

0

10

20

30

40

50

-100% 0% 100% 200%


sentiment (P-N), %


Lockdown

ArielNet consumer sentiment: -41Weighted volume of posts: 1380%

DomestosNet consumer sentiment: 42Weighted volume of posts: 518%

Brand ownership Ariel (P&G) Domestos (Unilever) Persil (Unilever/Henkel)

Bounty (P&G) Downy/ Lenor (P&G) Seventh Generation (Unilever)

Cascade (P&G) Mr Muscle (SC Johnson & Son)

Charmin (P&G) Omo (Unilever)




3 September 2020 15

Home Care (2)

Only a few Home Care brands showed any sort of buzz in the 12 months before lockdown. We’ve already mentioned Seventh Generation, but Lysol and Clorox also looked impressive. Given our pre-lockdown period does include March (so some COVID-19 noise), we had a look at each brand’s buzz in the period February 2019 – January 2020 to try to exclude the impact of President Trump’s comments and COVID-19. We still found very strong brand buzz for Clorox, Lysol and Seventh Generation. We don’t think it’s irrelevant that these three brands also scored highly in terms of purposeful branding. Clorox also scored the top spot in Gartner’s Digital IQ 2019 Home Care Index.

As well as Ariel, the relative laggards in terms of digital capabilities pre-lockdown seem to be Cillit Bang, Air Wick, Arm & Hammer.

We also found hardly any buzz around Bref. This is partly a geographical problem – Bref’s top markets do not include the US or UK (markets that our analysis of English-language posts is skewed to). This is also the case with Omo. That said, we think Henkel has been underinvesting in its brands for a long time so would have been surprised to find anything but poor results in our analysis.

Momentum under lockdown was much more positive in Home Care than in other categories. As well as the factors already mentioned, we think lockdown store closures were a relative advantage for the category given most Home Care brands can be purchased in supermarkets, which were kept open.

Cillit Bang and Lysol’s lockdown momentum were the highest out of all 66 brands. Dettol and Clorox also screened very highly. All have benefited from increased attention to cleanliness in the period and this has been confirmed by the respective brand owners in terms of sales performance. Given all would have been affected by the exaggerated negative skew to posts as a result of COVID-19 noise, we think the relative positioning in terms of sentiment is interesting. Reckitt Benckiser’s Lysol and Cillit Bang came out the most favoured brands.





Dettol

Arm & Hammer

Bref

Cillit Bang

Air Wick

Cif/Jif

FebrezeClorox

-40

-30

-20

-10

0

10

20

30

40

50

0 100 200 300 400 500 600 700

Ne

t co

nsu

me

r se

nti

me

nt

(P-N

), %



LysolNet consumer sentiment: -16Weighted volume of posts: 1386

DettolArm & Hammer

Bref

Air Wick

Cif/Jif

Febreze

Clorox

Lysol

-20

-10

0

10

20

30

-200% 200% 600% 1000% 1400% 1800% 2200% 2600% 3000%


sentiment (P-N), %


Lockdown

Cillit BangNet consumer sentiment: 4Weighted volume of posts: 3836%

Brand ownership Air Wick (Reckitt Benckiser) Cif/Jif (Unilever) Dettol (Reckitt Benckiser)

Arm & Hammer (Church & Dwight) Cillit Bang (Reckitt Benckiser) Febreze (P&G)

Bref (Henkel) Clorox (Clorox) Lysol (Reckitt Benckiser)




3 September 2020 16

Company analysis Exhibit 24: Consumer sentiment and brand buzz by company (April 2019 – March 2020)

Notes: Fenty Beauty, Kylie Cosmetics, NYX (L’Oréal) and Lysol (Reckitt Benckiser) are off the chart as all enjoy weighted volume of posts of over 800. Source: Crimson Hexagon, RBC Elements, Euromonitor, RBC Capital Markets

-40

-30

-20

-10

0

10

20

30

40

50

0 100 200 300 400 500 600 700 800

Net

co

nsu

mer

sen

tim

ent

(P-N

), %



Unilever Edgewell Personal Care Colgate-Palmolive

Reckitts Estée Lauder Church and Dwight

P&G Beiersdorf Clorox

L'Oréal Henkel Other

Click on the relevant data points to go to an overview of that company


3 September 2020 17

Beiersdorf (Sector Perform, price target EUR 98) Beiersdorf spends about 25% of its trade and advertising spend on digital, significantly less than the likes of Unilever and L’Oréal. We do think this percentage is higher however when just looking at its Consumer division (and excluding its adhesives business Tesa) given marketing spend is skewed towards the beauty business.

That said, Beiersdorf screened poorly relative to many of L’Oréal, Estée Lauder and P&G’s beauty brands. None of its brands screened well on both consumer sentiment and brand buzz in the 12 months pre lockdown or saw overall positive momentum during lockdown. Post a margin reset in early 2019 where Beiersdorf committed to €70-80m additional investment per annum into “new markets, innovation, digitalization and up-skilling” (FY18 press release) we expected Beiersdorf to perform a bit better in our analysis. It also set up a Venture Capital fund of €50m to invest in skin care technology, new business models and digital platforms.

We note that Nivea held up relatively well during lockdown – one of only a few brands in our analysis to avoid a decline in its buzz and sentiment during the period. We think its availability during lockdown helped here. La Prairie was particularly affected due to its exposure to travel retail, department store and beauty store closures.

Beiersdorf’s recent acquisition of Coppertone hasn’t revived the brand. Its pre-lockdown scores were below average. It deteriorated significantly over lockdown, however global travel restrictions hit all the sun care brands in our analysis.

In terms of purposeful marketing, we gave both Nivea and La Prairie high purpose scores. Given Nivea is 50-60% of the business, we think this reflects positively on Beiersdorf. This is in contrast to the company’s overall ESG score calculated by Refinitiv. Beiersdorf was placed in the bottom quartile of the companies for which we have looked at ranked ESG scores (we note we didn’t have any access to ESG scores for private companies therefore this just includes the 16 companies presented on page 7). Beiersdorf’s Environmental score compared reasonably but it was dragged down by its Governance score which is not reflected in our consideration of its brands’ purpose.

Exhibit 25: Beiersdorf consumer sentiment and brand buzz (April 2019 – March 2020)




Coppertone

La PrairieEucerin

Nivea

0

5

10

15

20

25

30

0 50 100 150 200 250 300

Ne

t co

nsu

me

r se

nti

me

nt

(P-N

), %



Coppertone

La Prairie

Eucerin

Nivea

-20

-10

0

10

-60% -40% -20% 0% 20% 40% 60% 80% 100%


sentiment (P-N), %


Lockdown




3 September 2020 18

Edgewell Personal Care (Outperform, price target USD 36) In 2018, Edgewell Personal Care began the implementation of Project Fuel – a 3-year cost savings initiative intended to deliver $225-$240M of gross annual savings through FY21. While part of these savings are meant to overcome rising inflation and other commodity costs, a good portion will be reinvested behind brands to drive top-line growth – more specifically the management has called out recent investments in e-commerce, R&D, and optimization of media mix to prioritize investments with the highest potential for return. It’s also worth noting that Edgewell Personal Care recently announced the hire of Eric O’Toole as the new President of North America. Mr. O’Toole has extensive experience in digital, so we would expect continued progress going forward.

While Edgewell Personal Care’s digital efforts span all brands across their portfolio, it seems there is a particular focus on wet shave (mainly Schick). Management has recently suggested that they are moving to a new direct-to-consumer platform that has more functionality and is easier to use from a consumer standpoint. They also mentioned they are building out a new omni channel marketing structure and are making significant talent upgrades within that structure. Therefore we are unsurprised to see Schick and Harry’s came out very well in our analysis with strong consumer sentiment and brand buzz for both brands over the 12 months prior to lockdown.

From an ESG perspective, Banana Boat had purposeful branding on its website (notably a partnership with the Skin Cancer Foundation) so we gave it a high purpose ranking of 3. The rest of Edgewell’s brands had made limited effort however. We are therefore unsurprised that Edgewell‘s Refinitiv ESG score is in the bottom quartile. Edgewell and Estée Lauder scored the worst in terms of ESG out of our US coverage.

Exhibit 27: Consumer sentiment and brand buzz (Apr 2019 – Mar 2020)




Schick

Harry's

Banana Boat

Hawaiian Tropic

-10

-5

0

5

10

15

20

0 100 200 300

Ne

t co

nsu

me

r se

nti

me

nt

(P-N

), %



Schick

Harry's

Banana BoatHawaiian Tropic

-20

-15

-10

-5

0

-50% -30% -10% 10% 30% 50%


sentiment (P-N), %


Lockdown




3 September 2020 19

Estée Lauder (Outperform, price target USD 240) We think Estée Lauder’s Leading Beauty Forward cost-savings initiative is ramping up nicely and the company is reinvesting a significant portion of these savings into brand spend, including ad/promotional investment, data analytics capabilities, digital marketing, talent acquisition and IT support for consumer-facing activities. These investments help bring brands that are traditionally not advertised on social media up to speed with where the consumer is.

We are therefore unsurprised that Estée Lauder’s brands screened so well in this analysis - all enjoyed healthy sentiment and brand buzz. Even during lockdown, when overall consumer sentiment fell dramatically in our analysis (consumer sentiment almost halved on average) Estée Lauder stood out with an average lockdown sentiment for its brands of 19%, triple the average. We think this is a testament to the company’s culture of reinvestment/brand-building. MAC looked particularly impressive and we think it’s no coincidence that this is also the brand to score the best in terms of purposeful marketing. Post-lockdown consumer interaction fell quite dramatically, but we view that as a function of the overall environment – more a category issue than brand specific issues.

COVID-19 has accelerated several trends that were already taking place, the most important being the migration to online. In 2014, we estimated that e-commerce would represent 13% of Estée Lauder’s sales by 2025; in FY20, this has already reached 22%. Key to this has been older consumers participating in the online channel for the first time and/or more frequently. The shift to online includes several benefits that should be sustainable for the long term at Estée Lauder: higher margins and data. Online sales are markedly higher margin than department store sales as they don’t require the cost of the beauty counter worker (Estée Lauder has significantly higher SG&A margins (~60%) vs HPC (~22%) and luxury peers (~36%)). Online sales also provide more valuable insights for the company and should help the company more effectively engage its consumers.

Specifically as it relates to ESG, Estée Lauder has made contributions to support the well-being of communities, including monetary and in-kind donations, hand sanitizer produced at the Company’s facilities and the establishment of the ELC Cares Employee Relief Fund. That said, relative to its peers this is not yet enough – it was put into the bottom quartile of Refinitiv’s ESG data for our coverage.

Exhibit 29: Estée Lauder consumer sentiment and brand buzz (April 2019 – March 2020)




CliniqueEstée Lauder

MAC

0

10

20

30

40

50

0 50 100 150 200

Ne

t co

nsu

me

r se

nti

me

nt

(P-N

), %



Clinique

Estée Lauder

MAC

-30

-25

-20

-15

-10

-5

0

5

10

-60% -50% -40% -30% -20% -10% 0% 10% 20%


sentiment (P-N), %


Lockdown




3 September 2020 20

L’Oréal (Sector Perform, price target EUR 203) In our opinion, L’Oréal is at the forefront of digital marketing, social media and influencer use and technological investment within beauty. It spends 40% of its media spend on digital and has racked up some impressive statistics: it reaches an audience of 1 billion on its websites, has 250m social media followers on its various pages and received over 170m reviews on e-commerce platforms (according to Marketing Week).

We are therefore not surprised to see its brands came out favourably in our analysis. On average, its brands’ online consumer sentiment was double that of the other brands. Kérastase, Urban Decay, Lancôme and Kiehl’s all screened particularly well.

Many of its brands also had very strong online buzz with both NYX and Urban Decay making it into the overall Digital Leaders in our analysis. These brands are both sizeable and material to the group.

During lockdown, buzz was mixed. Considering weighted volume declined in lockdown for over half of the brands in our analysis, negative volume momentum for only 4 out of 10 brands for L’Oréal doesn’t look so bad. And this is despite aggressive cost cutting and most points of sale being closed during lockdown (we think L’Oréal was more exposed to store closures than those in oral care, personal care and home care).

We highlight Lancôme which screened well in all areas - the only brand to achieve positive momentum in both buzz and sentiment during lockdown with also strong digital capabilities in the 12 months pre-lockdown and a good purpose ranking to boot.

We do think we see a correlation between L’Oréal’s strongest performing brands in Exhibit 31 and its purpose rankings – NYX, Lancôme and Kiehl’s were all ranked highly and had good online sentiment and engagement. However, these make up only 30% of the L’Oréal brands we surveyed. For the other brands, we were unable to find any significant ethical purpose or charitable efforts. Refinitiv’s ESG score for L’Oréal resulted in the company placed in the 2nd quartile – this is a good score, but we think there is scope for L’Oréal to cascade down its corporate ESG efforts to the brand level.





Urban DecayKérastase

Kiehl's

Elsève/Elvive

La Roche-Posay

Garnier

Lancôme

Maybelline

L'Oréal Paris

0

10

20

30

40

0 100 200 300 400

Ne

t co

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me

r se

nti

me

nt

(P-N

), %



NYXNet consumer sentiment: 26Weighted volume of posts: 850

Urban Decay

KérastaseKiehl's

Elsève/Elvive

La Roche-Posay

Garnier

Lancôme

NYX

Maybelline

-50

-40

-30

-20

-10

0

10

-60% -40% -20% 0% 20% 40% 60%


sentiment (P-N), %


Lockdown

L'Oréal ParisNet consumer sentiment: -44Weighted volume of posts: 117%




3 September 2020 21

Procter & Gamble (Sector Perform, price target USD 128) Procter & Gamble is amongst the leaders in CPG when it comes to digital. It has been reinventing brand building from wasteful mass marketing to mass one-to-one brand building fueled by data and technology with a propensity focus. This effort is driving growth for the company while delivering savings and efficiencies to reinvest for more growth and profit. To be more specific, P&G’s consumer database enables advanced programmatic media buying that finds people with the highest propensity to buy and reaches them without the unwelcomed ad frequency. China is P&G’s most sophisticated market in this regard, with 80% of digital media bought this way (for context, last fiscal year, they reduced media digital waste by 30% and increased the number of people that they reached by 50%).

P&G’s individual brand performance from a consumer engagement perspective was weak during the lockdown period, but this does not coincide with the company’s growth and/or share status. We anticipate overall interaction was weaker than the period pre-lockdown because consumer demand for P&G’s categories was so strong that P&G did not have to spend as much on marketing/advertising to drive top-line. We point out that nearly all of P&G’s categories have experienced a sharp increase in consumption since lockdown began.

Its most impressive brands in terms of our analysis were Pantene and Olay. Both secured strong sentiment and buzz with the online consumer before and during lockdown (not withstanding some decline in buzz from Pantene). Ariel, Oral-B & Downy/Lenor all looked rather lacklustre. We found little purposeful marketing.

P&G deserves more than a few points in the corporate responsibility domain for repurposing manufacturing/packaging equipment to produce and donate hand sanitizer and 'hundreds of thousands' of face shields. It’s also making strides in making production more eco-friendly (until now, the low quality and high cost of recycled polypropylene has created barriers to its use). It recently invented a breakthrough technology that removes the color, odor and contaminants from used polypropylene to restore it to virgin-like resin quality. This process fully closes the loop in the reuse of recycled plastics while making it more affordable and accessible. This is a material benefit to P&G, but also a potentially even bigger benefit to society. We think there’s significant scope for P&G to highlight these ESG efforts at brand level. It lies in the second quartile of Refinitiv’s ESG scores.





Crest

Cascade Old SpiceDowny/Lenor

Oral-BCharmin Bounty

Ariel

Head andShoulders

Febreze

PanteneOlay

-20

-10

0

10

20

30

0 50 100 150 200 250 300

Ne

t co

nsu

me

r se

nti

me

nt

(P-N

), %



GilletteNet consumer sentiment: -10Weighted volume of posts: 635

CrestCascade

Old Spice

Downy/Lenor

Oral-B

CharminBounty

FebrezePanteneOlay

Gillette

-30

-20

-10

0

10

20

30

40

-120% -100% -80% -60% -40% -20% 0% 20% 40% 60%


sentiment (P-N), %


Lockdown

ArielNet consumer sentiment: -41Weighted volume of posts: 1380%

Head and ShouldersNet consumer sentiment: 31Weighted volume of posts: 655%




3 September 2020 22

Reckitt Benckiser (Underperform, price target GBP 64) Over the last decade, Reckitt Benckiser has cut costs too far in our opinion in terms of marketing, R&D and infrastructure. Its digitalisation efforts prove no exception - about 30% of its FY19 marketing spend related to digital media, well below the likes of L’Oréal and Unilever.

Prior to lockdown, Reckitt Benckiser’s brands looked lacklustre in our analysis, particularly in terms of consumer sentiment with only Durex enjoying strong positive sentiment. The brands held an average sentiment of 3% well below the overall average of our analysis: 11%. We note that numerous posts about the Home Care brands in our analysis were mislabelled as negative due to exclamations about stains or spills, expressions of fear about COVID-19 or concerns about stockpiling. We think Lysol, Cillit Bang and Dettol actually screened more positively than it first seems due to elevated attention on hygiene. However there is no excuse for Air Wick and Veet.

During lockdown, several of Reckitt’s brands gained significant momentum. Cillit Bang and Lysol’s buzz accelerated the most out of all 66 brands in our analysis. Buzz around Dettol also increased by nearly 1000%. This increased attention on hygiene is supportive for Reckitt and we have already seen this reflected in a strong HY20 sales performance. That said, this is not down to anything Reckitt Benckiser has done itself and we are unsure about the sustainability of this momentum. Lockdown momentum was nothing special for Reckitt Benckiser’s other brands and actually very poor for Durex. Given continued social restrictions, we expect the Durex brand to recover only slowly.

Reckitt Benckiser sits in the top quartile of Refinitiv’s ESG scores – something we are relatively surprised about given its reputation for aggressive cost cutting, links to Indivior’s false marketing scandal and its 2011 incident in Korea involving poisonous humidifiers. Indeed, whilst it has a healthy Environmental and Social score, it holds one of the lower Governance scores. That said, half of its brands screen favourably in terms of purposeful branding at the moment– Durex, Lysol and Dettol. The two latter have been particularly prominent recently, sponsoring various COVID-19 efforts. Durex, Dettol and Lysol all have a relatively higher buzz about them online than the other Reckitt Benckiser brands – potentially thanks to this purposeful marketing. As with L’Oréal, we think there’s scope for Reckitt Benckiser to make more of its ESG credentials at brand level.

Exhibit 35: Reckitt Benckiser consumer sentiment and brand buzz (April 2019 – March 2020)




Durex

DettolCillit BangAir Wick Veet

-20

-10

0

10

20

30

0 50 100 150

Ne

t co

nsu

me

r se

nti

me

nt

(P-N

), %



LysolNet consumer sentiment: -16Weighted volume of posts: 1386

DurexDettol

Cillit Bang

Air Wick

Veet

Lysol

-20

-15

-10

-5

0

5

10

-500% 0% 500% 1000% 1500% 2000% 2500% 3000% 3500% 4000%


sentiment (P-N), %


Lockdown




3 September 2020 23

Unilever (Underperform, price target EUR 42/GBP 37) According to Unilever, 40% of its media spend goes on digital, 85% of its marketers are digitally trained and its largest digital agency is its in-house content creator U-Studios. It is also launching more brands than ever before and has acquired on-trend brands with strong digital capabilities. In HPC, this has included Dermalogica and Seventh Generation, for which we have found strong consumer engagement and digital presence. We found similar results for its acquisitions such as Graze in our Food, Bottled Water and Hot Drinks edition.

In the 12 months pre-lockdown, the results were very mixed – acquired brands had a strong online presence however Unilever’s legacy brands looked relatively lacklustre. It doesn’t seem like Unilever has manage to extend the acquired digital capabilities of brands such as Dermalogica and Seventh Generation to the rest of its business (we note these two are only a small portion of Unilever’s sales). Legacy brands such as Persil, Rexona, Omo, Domestos, Axe/Lynx and Cif/Jif had low sentiment and/or brand buzz. Dollar Shave Club had weak sentiment and brand buzz deteriorated 60% from April 2018 - March 2019 to April 2019 – March 2020.

Lockdown momentum was mixed for Unilever. Given the categories all seem to have behaved this way on average, we don’t think this is a Unilever problem. One thing we do think is a Unilever problem however, is why Seventh Generation was unable to benefit from the same momentum boost from COVID-19 that the rest of the home care category enjoyed. On the other hand, it is clear Domestos benefited and also Cif/Jif to some extent.

We can’t ignore Unilever’s strong purposeful marketing here – we gave high purpose scores to all but one of its brands. This is unlike anything we have seen in the rest of our analysis and tempers our Underperform rating. We think this helped brand sentiment and indeed over 70% of Unilever’s brands had positive online sentiment pre-lockdown. This is in line with Refinitiv’s ESG scoring: it placed Unilever in the highest quartile when compared against its peers.

In conjunction with our Food edition, we have now surveyed the online sentiment and buzz around 18 Unilever brands. We think we can draw the conclusions that:

1) Unilever has failed to extend the digital capabilities of its acquired brands to its legacy brands;

2) Unilever has made a lot of effort around ESG and is well ahead of peers in this respect.





Axe/Lynx

Dermalogica

Seventh Generation

Persil

Omo

DomestosDollar Shave Club

TRESemmé

Cif/Jif

Sunsilk

Rexona/Degree

-30

-20

-10

0

10

20

30

40

0 100 200 300 400 500 600 700 800

Ne

t co

nsu

me

r se

nti

me

nt

(P-N

), %



Axe/Lynx

Dermalogica

Seventh Generation

Persil

Omo

Dollar Shave Club

TRESemmé

Cif/JifSunsilk

Rexona/Degree

-30

-20

-10

0

10

20

30

-100% -50% 0% 50% 100%

Absolute change in net consumer sentiment

(P-N), %


Lockdown

DomestosNet consumer sentiment: 42Weighted volume of posts: 518%





3 September 2020 24

Henkel, Church & Dwight, Clorox and Colgate-Palmolive Henkel: We only surveyed two of Henkel’s brands but found weak digital capabilities for both. Schwarzkopf’s buzz slightly improved in lockdown however we think this was a response to the closure of salons rather than anything Henkel-specific. Its digital investments have been lacklustre so far with digital comprising only 20% of marketing spend. That said, we think that is subject to change with the digital investments proposed as part of last year’s margin reset. We didn’t find any purposeful marketing for Bref or Schwarzkopf despite Henkel sitting in the second quartile of Refinitiv’s ESG scores – there is an opportunity for Henkel to highlight its existing ESG efforts at brand level here and potentially generate some excitement around its brands.

Church & Dwight: We view Church & Dwight as one of the best managed companies in the consumer packaged goods industry, and as such it’s no surprise that the name has generated a strong buzz around Arm & Hammer online. Last quarter, online sales increased by 75% and now account for 13% of total sales. Importantly, management intends to step up investments in 2H20 and shared that they are conducting research on purchasing habits to maximize efficiency. We find some evidence for purposeful marketing and hopefully as this embeds, Church & Dwight can generate some better consumer sentiment around this brand.

Clorox: We would characterize Clorox as the poster child for lockdown beneficiaries. Even so, management continues to reinvest behind e-commerce and digital advertising. This is consistent with the consumer sentiment analysis, which suggests a material increase in engagement since lockdown. We anticipate consumption across Clorox’s categories will remain robust for the foreseeable future but looking more long term, we are not so sure. We found some purposeful branding around Clorox however the company lies in the third quartile according to Refinitiv’s ESG scores.

Colgate-Palmolive: One of its key priorities for 2020 was to launch more premium innovation to drive growth, accelerate market share, and become more digital/data driven across all efforts at the organization. We think management has made solid progress against this initiative as exemplified by the recent acceleration in organic sales growth. We also point out Colgate-Palmolive was the only company in our US HPC coverage to make it into the top quartile of Refinitiv’s ESG scores. We are not surprised it’s among the most popular S&P 500 names in both passive and active sustainable equity funds.





Bref (Henkel)

Schwarzkopf (Henkel)

Colgate (Colgate-Palmolive)

Arm & Hammer (Church & Dwight) Clorox (Clorox)

-20

-10

0

10

20

30

40

50

0 50 100 150 200 250 300 350 400 450 500 550 600 650 700

Ne

t co

nsu

me

r se

nti

me

nt

(P-N

), %



Bref (Henkel)

Schwarzkopf (Henkel)

Colgate (Colgate-Palmolive)

Arm & Hammer (Church & Dwight)

-20

-15

-10

-5

0

5

-40% -30% -20% -10% 0% 10% 20% 30% 40%


sentiment (P-N), % Change in weighted volume of posts

Lockdown

Clorox (Clorox)Net consumer sentiment: -16Weighted volume of posts: 1053%



RBC ratings and price targets Church & Dwight (Sector Perform, PT USD 99) Colgate-Palmolive (Outperform, PT USD 88)

Henkel (Outperform, PT EUR 99) The Clorox Company (Sector Perform, PT USD 218)


3 September 2020 25

Valuation summary

Source: Bloomberg, RBC Capital Markets estimates Prices at 12.30 BST, 2 September 2020

European Companies Rating 2020 E 2021 E 2020 E 2021 E 2020 E 2021 E 2020 E 2021 E 2020 E 2021 E

Danone † € 55.8 Sector Perform 70 Dec 17.8 15.4 11.0 10.1 3.8 3.8 20.7 18.6 5.6 6.0

Nestlé † CHF 110 Underperform 95 Dec 26.7 26.0 16.1 16.0 2.5 2.5 25.0 24.3 5.0 3.8

Unilever NV † € 49.8 Underperform 42 Dec 22.0 21.5 15.1 14.6 3.3 3.3 24.6 23.8 4.9 4.8

Unilever plc † £ 45.1 Underperform 37 Dec 22.4 21.4 15.3 14.5 3.2 3.3 23.8 23.0 4.9 4.8

L'Oréal † € 282 Sector Perform 203 Dec 41.1 37.3 25.0 21.9 1.5 1.7 42.2 36.7 2.5 2.9

Reckitt Benckiser † £ 75.5 Underperform 64 Dec 23.6 25.0 17.7 18.8 2.3 2.3 25.1 26.9 3.6 3.6

Henkel † € 87.0 Outperform 99 Dec 24.7 20.1 14.2 12.0 2.1 2.1 24.7 20.2 3.9 5.0

Beiersdorf † € 99.0 Sector Perform 98 Dec 36.9 30.5 17.5 14.9 0.7 0.7 29.0 24.3 3.5 3.3

Food & HPC average 27.6 25.1 16.7 15.5 2.3 2.3 27.3 25.0 4.1 4.2

Anheuser-Busch InBev † € 49.9 Outperform 71 Dec 54.7 18.2 15.7 12.2 2.1 2.1 28.2 21.2 2.7 6.8

Britvic ~ £ 8.6 Outperform 10.5 Sep 22.5 15.7 12.6 10.3 2.7 3.8 26.3 17.3 3.0 5.4

Campari † € 9.0 Underperform 6.8 Dec 59.7 38.8 31.4 23.1 0.6 0.6 55.4 37.6 1.4 2.5

Carlsberg † DKK 870 Outperform 960 Dec 24.6 21.9 12.6 11.6 2.4 2.4 24.9 22.1 4.7 5.0

Diageo † £ 24.8 Sector Perform 24 June 20.0 20.0 14.5 16.2 2.8 2.8 22.4 23.6 2.8 3.3

Fever-Tree ~ £ 20.8 Outperform** 25 Dec 62.1 36.8 46.0 28.2 0.8 1.3 62.5 36.9 1.9 2.7

Heineken † € 77.6 Sector Perform 83 Dec 43.6 22.9 16.9 13.1 2.2 2.2 41.2 25.5 0.7 3.7

Pernod Ricard † € 145 Sector Perform 145 June 28.7 24.3 19.7 17.2 2.1 2.2 33.5 26.9 2.4 3.3

Beverages average 36.3 23.1 17.6 14.8 2.1 2.3 33.1 24.9 2.5 4.3

BAT † £ 25.4 Sector Perform 27 Dec 7.9 7.7 7.9 7.7 8.3 8.3 11.0 10.7 12.4 12.5

Imperial Brands † £ 12.5 Sector Perform 18 Sep 5.1 5.1 6.9 6.7 11.1 11.1 9.3 9.2 18.0 17.7

Tobacco average 6.5 6.4 7.4 7.2 9.7 9.7 10.1 9.9 15.2 15.1

US companies

General Mills § US$ 63.1 Sector Perform 64 May 17.4 17.1 14.1 13.8 3.5 3.7 20.7 20.5

Mondelez § US$ 58.2 Outperfom 66 Dec 22.4 20.8 19.1 17.8 1.0 2.3 29.8 28.0

Food average 17.8 17.1 14.9 14.3 2.9 3.3 25.2 24.3

Clorox § US$ 220.1 Sector Perform 218 June 29.8 29.6 20.8 20.6 1.9 1.9 30.0 29.9

Colgate Palmolive § US$ 78.1 Outperform 88 Dec 26.6 25.3 17.6 17.4 2.3 2.4 25.8 25.5

Estee Lauder § US$ 221.0 Outperform 240 June 40.2 31.9 25.7 21.7 0.6 0.8 40.5 33.5

P&G § US$ 138.2 Sector Perform 128 June 26.4 25.0 18.8 17.9 2.2 2.4 27.1 26.1

HPC average 29.2 28.0 19.6 19.4 1.9 1.9 29.6 28.7

Coca-Cola § US$ 49.1 Outperform 55 Dec 27.7 24.3 23.6 20.9 3.4 3.5 34.4 30.5

PepsiCo § US$ 139.2 Outperform 153 Dec 26.0 23.6 17.8 16.5 2.9 2.8

Molson Coors * US$ 37.0 Dec 9.6 9.3 7.7 7.6 5.4 5.8

Constellation Brands § US$ 185.9 Outperform 216 Feb 20.5 18.3 16.2 15.6 1.7 1.9 21.0 20.5

AmBev * BRL 12.7 Dec 18.8 16.8 9.2 8.4 4.7 5.1

Brown-Forman § US$ 72.6 Sector Perform 51 Apr 43.7 42.8 31.4 30.5 1.0 1.0 41.3 40.5

Beverages average 24.4 22.5 17.6 16.6 3.2 3.4 32.3 30.5

Altria § US$ 43.1 Outperform 68 Dec 9.9 9.4 9.1 8.8 7.9 8.3 12.3 11.8

PMI * US$ 79.0 Dec 14.1 13.0 11.0 10.3 6.1 6.3

Tobacco average 12.0 11.2 10.1 9.5 7.0 7.3 12.3 11.8

Unilever's Price Target in GBP is converted from our EUR price target at EUR/GBP 0.88

* Based on Bloomberg Consensus estimates † Covered by RBC Europe Limited analyst James Edwardes Jones (+44 207 002 2101)

**Fever-Tree is Speculative Risk ~ Covered by RBC Europe Limited analyst Emma Letheren (+44 207 002 2100)

All figures are time weighted to calendar year end § Covered by RBC Capital Markets LLC analyst Nik Modi (+1 212 905 5993)

Divi yield (%) EV/NOPAT FCF yield (%)

Share price

Price

Target

Year

end

P/E EV/EBITDA


3 September 2020 26

Appendix: Methodology Crimson Hexagon

Crimson Hexagon is a social media data vendor. We used it to analyse over 41m social media posts on 66 beauty, home and personal care brands.

It had access to various social media platforms. However due to data availability, around 60% of posts analysed came from Twitter. Please see Exhibit 5 for the data source split.

In order to limit the issue of Crimson Hexagon identifying posts that were irrelevant to the brand, we selected brands with names that did not have multiple meanings. For example, we did not include P&G’s Tide brand as the results would have included many irrelevant posts relating to the ocean in addition to posts about the detergent brand.

RBC Elements were able to exclude posts made by each brands’ own channels. Therefore we could get good insight into the consumers’ own sentiment and interest in each brand.

Crimson Hexagon labelled each post either positive, negative or neutral. We calculated net consumer sentiment for each brand by calculating the percentage of positive posts minus the percentage of negative posts.

Crimson Hexagon calculated the total number of social media posts posted on the platforms it had access to. In terms of languages, it could only access posts made in the English language therefore our analysis is skewed to developed markets such as the UK and USA. To make this number comparable across brands we weighted it by brand size in USD millions (according to Euromonitor). Where we didn’t have access to Euromonitor brand data (for example Durex, Bounty and Charmin), we estimated brand size using our conversations with Investor Relations and online reports.

We looked at a pre-lockdown period to get a cleaner impression of a brand’s digital capabilities in a ‘normal’ world: 1 April 2019 to 31 March 2020. We looked at the momentum of the brand pre-lockdown: change in sentiment or buzz from 1 April 2018 – 31 March 2019 to 1 April 2019 – 31 March 2020. We also looked at the brand during lockdown from 1 April 2020 to 30 June 2020 as well as momentum of lockdown: change in sentiment or buzz from 1 April 2019 – 30 June 2019 to 1 April 2020 – 30 June 2020.

For our category summary, we calculated the average consumer sentiment and average weighted volume for all the brands in each category.

Gartner

A business intelligence firm that benchmarks the digital competence of consumer brands. Its rankings are based on:

- Site & e-commerce: looks at every touchpoint of the customer journey from brand site load times, search & navigation efficiency, e-tailor hand off and performance on 3rd party sites

- Digital marketing: measures online visibility, email campaigns, display advertising strategies, organic and paid search effectiveness

- Social media: presence and engagement relative to peers on established and emerging social platforms

- Mobile & tablets: how brands are using them and whether they are seeing increased consumer sales conversion

We looked at Gartner’s Digital IQ US Indices for 2019 Beauty, 2019 and 2020 Personal Care and 2019 Hair Care & Color. Some of the brands we analysed have not been ranked by Gartner. We note that the higher the ranking, the better.

Purpose rankings / ESG Scores from Refinitiv

We looked at each brand’s websites for mentions of charity work, sustainability and environmental protection initiatives. We checked purposeful marketing was consistent across platforms by looking at each brand’s Instagram pages.

We compiled Refinitiv’s corporate ESG scores for the 16 public companies in our analysis into quartiles to get an idea of their relative positioning (see Exhibit 7).


3 September 2020 27

Appendix: Purpose rankings I

Source: RBC Capital Markets

Brand Company Purpose score Evidence

Air Wick Reckitt Benckiser Group Plc (RB) 1 Small evidence of purpose beyond direct brand marketing on the website

Ariel Procter & Gamble Co, The 1 Small evidence of purpose beyond direct brand marketing on the website

Arm & Hammer Church & Dwight 3 Arbor day foundation

Avon Avon Products Inc 1 Small evidence of purpose beyond direct brand marketing on the website

Axe/Lynx Unilever Group 3 Anti-bullying … ditch the label

Banana Boat Edgewell Personal Care Brands LLC 3 Partner with Skin Cancer Foundation

Bath & Body Works L Brands Inc 3 Commitment to fighting social injustice prominent on website

Bounty Procter & Gamble Co, The 1 Plenty in the US

Bref Henkel AG & Co KGaA 1 Small evidence of purpose beyond direct brand marketing on the website

Cascade Procter & Gamble Co, The 2 A bit about water conservation

Charmin Procter & Gamble Co, The 1 Small evidence of purpose beyond direct brand marketing on the website

Cif/Jif Unilever Group 3 Projects to clean up the community:

Cillit Bang Reckitt Benckiser Group Plc (RB) 1 Small evidence of purpose beyond direct brand marketing on the website

Clinique Estée Lauder 1 Small evidence of purpose beyond direct brand marketing on the website

Clorox Clorox 2 Clorox company: Supporting Youth Education, Health and Well-Being

Colgate Colgate-Palmolive 3 Bright Smniles, Bright Future education and dental screening

Coppertone Beiersdorf AG 1 Small evidence of purpose beyond direct brand marketing on the website

Crest Procter & Gamble Co, The 1 Small evidence of purpose beyond direct brand marketing on the website

Dermalogica Unilever Group 3 Developing womens skills

Dettol Reckitt Benckiser Group Plc (RB) 3 COVID-19 and Trigger project (cleaning up the planet)

Dollar Shave Club Unilever Group 1 Small evidence of purpose beyond direct brand marketing on the website

Domestos Unilever Group 3 COVID-19 and sanitation projects partnered with Unicef

Downy/Lenor Procter & Gamble Co, The 1 Small evidence of purpose beyond direct brand marketing on the website

Durex Reckitt Benckiser Group Plc (RB) 2 Plenty around sex education

Elsève/Elvive L'Oréal Groupe 1 Sub-brand of L'Oréal Paris: website all about advertising/buying products

Estée Lauder Estée Lauder 1 Small evidence of purpose beyond direct brand marketing on the website

Eucerin Beiersdorf AG 1 Small evidence of purpose beyond direct brand marketing on the website

Febreze Procter & Gamble Co, The 1 Small evidence of purpose beyond direct brand marketing on the website

Fenty Beauty Fenty Corp/LVMH 3 CLF foundation established by Rhianna

Garnier L'Oréal Groupe 1 Small evidence of purpose beyond direct brand marketing on the website

Gillette Procter & Gamble Co, The 3 Distributing $1m to non-profit organisations to help men achieve their personal best

Harry's Edgewell Personal Care Brands LLC 1 Small evidence of purpose beyond direct brand marketing on the website

Hawaiian Tropic Edgewell Personal Care Brands LLC 1 Small evidence of purpose beyond direct brand marketing on the website

Head and Shoulders Procter & Gamble Co, The 1 Small evidence of purpose beyond direct brand marketing on the website

Johnson's Johnson & Johnson Inc 3 Prominent 'Products with a purpose'; donating to American Nurses Foundation

Kérastase L'Oréal Groupe 1 Small evidence of purpose beyond direct brand marketing on the website


3 September 2020 28

Appendix: Purpose rankings II

Source: RBC Capital Markets

Brand Company Purpose score Evidence

Kiehl's L'Oréal Groupe 3 Skin Care with a misswion. Various charitable causes

Kylie Cosmetics Kylie Jenner Inc 1 Small evidence of purpose beyond direct brand marketing on the website

La Prairie Beiersdorf AG 3 Art sponsorship

La Roche-Posay L'Oréal Groupe 1 Small evidence of purpose beyond direct brand marketing on the website

Lancôme L'Oréal Groupe 2 Educate, empower, employed

Listerine Johnson & Johnson Inc 1 Small evidence of purpose beyond direct brand marketing on the website

L'Oréal Paris L'Oréal Groupe 1 Small evidence of purpose beyond direct brand marketing on the website

Lysol Reckitt Benckiser Group Plc (RB) 3 Lots around COVID-19, healthy habits and schools

MAC Estée Lauder 2 Viva Glam fund and AIDS

Maybelline L'Oréal Groupe 1 Small evidence of purpose beyond direct brand marketing on the website

Mr Muscle SC Johnson & Son Inc 1 Small evidence of purpose beyond direct brand marketing on the website

Nivea Beiersdorf AG 3 Various COVID-19 initiatives prominent

NYX L'Oréal Groupe 1 Small evidence of purpose beyond direct brand marketing on the website

Olay Procter & Gamble Co, The 1 Small evidence of purpose beyond direct brand marketing on the website

Old Spice Procter & Gamble Co, The 1 Small evidence of purpose beyond direct brand marketing on the website

Omo Unilever Group 3 Outdoor classroom day in 50 countries

Oral-B Procter & Gamble Co, The 1 Small evidence of purpose beyond direct brand marketing on the website

Pantene Procter & Gamble Co, The 1 Small evidence of purpose beyond direct brand marketing on the website

Persil Unilever Group 2 Home is good

Rexona Unilever Group 3 Freedom of movement

Schick Edgewell Personal Care Brands LLC 1 Small evidence of purpose beyond direct brand marketing on the website

Schwarzkopf Henkel AG & Co KGaA 1 Small evidence of purpose beyond direct brand marketing on the website

Sensodyne GlaxoSmithKline Plc 1 Small evidence of purpose beyond direct brand marketing on the website

Seventh Generation Unilever Group 3 Loads of stuff

Shiseido Shiseido 1 Small evidence of purpose beyond direct brand marketing on the website

Sunsilk Unilever Group 2 Global brand site: talks about Brazilian women expanding horizons, but nothing on local country websites

Tarte KOSÉ Corp. 2 Tarte gives back

TRESemmé Unilever Group 3 Supporting women in the workplace: Levo foundation

Urban Decay L'Oréal Groupe 1 Small evidence of purpose beyond direct brand marketing on the website

Veet Reckitt Benckiser Group Plc (RB) 1 Small evidence of purpose beyond direct brand marketing on the website


3 September 2020 29

Elements Description

RBC Elements is a primary research and data science team embedded within RBC’s Global Research division. The main focus of RBC Elements is to use scientific methods, algorithms and systems to analyze vast amounts of structured and unstructured data, to obtain insights that are inputs into RBC’s Fundamental Global Research teams.

Objective

The team is involved in creating various machine learning and predictive modeling tools and processes, helping RBC Research discover the information hidden in big data, and allowing the Research division to make smarter decisions and deliver differentiated products to our clients. RBC Elements strives to augment the already available industry data with different alternative data sources, and enhance data collection procedures to include information that is relevant.

Methods

The team is implementing different machine learning and data mining algorithms using state-of-the-art methods. Examples include:

• Machine learning techniques and algorithms, such as k-NN, Naive Bayes, SVM, Decision Forests, Clustering, Artificial Neural Networks, and Natural Language Processing to find patterns in the past, and to predict the future.

• Feature selection techniques to find what matters most in the data. • Statistical modeling and analysis, and statistical tests such as distributions, and regression/GLM. • Developing hypotheses and making inferences using large amounts of data.


3 September 2020 30

Required disclosures Non-U.S. analyst disclosure Emma Letheren and James Edwardes Jones (i) are not registered/qualified as research analysts with the NYSE and/or FINRA and (ii) may not be associated persons of the RBC Capital Markets, LLC and therefore may not be subject to FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Conflicts disclosures This product constitutes a compendium report (covers six or more subject companies). As such, RBC Capital Markets chooses to provide specific disclosures for the subject companies by reference. To access conflict of interest and other disclosures for the subject c ompanies, clients should refer to https://www.rbccm.com/GLDisclosure/PublicWeb/DisclosureLookup.aspx?entityId=1. These disclosures are also available by sending a written request to RBC Capital Markets Research Publishing, P.O. Box 50, 200 Bay Street, Royal Bank Plaza, 29th Floor, South Tower, Toronto, Ontario M 5J 2W7 or an email to [email protected].

The analyst(s) responsible for preparing this research report received compensation that is based upon various factors, including total revenues of the member companies of RBC Capital Markets and its affiliates, a portion of which are or have been generated by investment banking activities of the member companies of RBC Capital Markets and its affiliates.

Distribution of ratings For the purpose of ratings distributions, regulatory rules require member firms to assign ratings to one of three rating categories - Buy, Hold/Neutral, or Sell - regardless of a firm's own rating categories. Although RBC Capital Markets' ratings of Outperform (O), Sector Perform (SP), and Underperform (U) most closely correspond to Buy, Hold/Neutral and Sell, respectively, the meanings are not the same because our ratings are determined on a relative basis.

Conflicts policy RBC Capital Markets Policy for Managing Conflicts of Interest in Relation to Investment Research is available from us on request. To access our current policy, clients should refer to https://www.rbccm.com/global/file-414164.pdf or send a request to RBC Capital Markets Research Publishing, P.O. Box 50, 200 Bay Street, Royal Bank Plaza, 29th Floor, South Tower, Toronto, Ontario M5J 2W7. We reserve the right to amend or supplement this policy at any time.

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3 September 2020 31

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3 September 2020 32

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To Japanese Residents: Unless otherwise exempted by Japanese law, this publication is distributed in Japan by or through RBC Capital Markets (Japan) Ltd. which is a Financial Instruments Firm registered with the Kanto Local Financial Bureau (Registered number 203) and a member of the Japan Securities Dealers Association (“JSDA”) and the Financial Futures Association of Japan (“FFAJ”).

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