SIMON FOSTER

Marketing & Sales Director

RACHAEL EDMONDSON-CLARKE

Marketing Strategy Manager

Why are we here and what’s in it for you?

Share real business challenges

Gain practical, marketing experience

Build your knowledge, skills and confidence

Help you prepare for your Brand Strategy Exams

Practice principles and skills that you will need to use in your Brand Strategy & Advertising Strategy Coursework AND get feedback from people at the coalface!

Have fun!

Get rewarded for great work!

Here’s what we’ll cover today

Thorntons – a potted history

Thorntons strategy

Brand Plans for 2015/2016

Brief

Practical advice

Q&A

And we will be back on the 25th March

Our History

104 Years Of Making Customers Smile

1911 Founded in Sheffield by Joseph Thornton

1922 Famous Easter Eggs began

1931 First chocolate enrober in Sheffield factory

104 Years Of Making Customers Smile

1948 Moved production to Belper

1954 Thorntons first Master Chocolatier

By 1967 Thorntons had nearly 90 shops making a profit of £250k on a turnover of £1.7m

104 Years Of Making Customers Smile

1985 Production moved to Alfreton

1987 Full listing on London Stock Exchange

1997 Turnover exceeds £100m

2008 Turnover exceeds £200m

2011 Guinness World Record holders

Our Strategy

10

Where We’ve Come From

Where We Are NowOur Strategy

Rebalance Ensuring our products are available where our shoppers want to buy them

Revitalise Clarifying our brand position, improving the in-store experience, coordinating product ranges across channels with renewed visual identity

RestoreImproving profitability towards industry competitive returns

Our Shoppers Our Shoppers

Overview – Significant progress in the first three years

Next stage – An emerging international FMCG business

Where We’ve Come From Where We Are Now

Where We’re Going

Our Shoppers

Our Shoppers Our Shoppers

Use strength of our brands to:- retain the No.1 premium

brand position in the UK- attain leadership in the

premium sector in the grocery market

NPD focused on fewer, stronger product launches

Continue to invest in:- brand communications- driving loyalty and frequency

through inspirational shopper experience

Create stronger year-round relevance while retaining strength at key seasons

Continue to grow higher contribution margin FMCG division whilst reducing lower contribution margin Retail divisionStrengthen our margins through clearly established brand position and disciplined pricing strategySupply chain strategy designed to support margin growthStrong and disciplined culture of cost controlInvest in our brand, people and business infrastructureFunding in place to support future growth

UK Commercial targeting further continued growth

International to become an important contributor to the long term growth of the business

Retail will be FMCG Co.’s largest customer and a profitable showcase for the brand

Investment in manufacturing capacity and capability to support growth

Rebalance & Grow……FMCG as our core business & retail its

largest customer by 2017

Revitalise our Brand……by putting the shopper at the heart of our business

Restore……our profitability to industry competitive

levels

The next 3 years – Sticking to our strategy

Where we play – The gifting opportunity

Leadership through clear market positioning

Understanding our consumers drives effective product development

The Boxed Chocolate Category has grown £38m over the last 5 years with Inlaid Boxed a key driver with £27m growth

Boxed Chocolate – Our core market remains resilient

713.0 722.7698.7

718.2751.9

193.7 198.9 198.9209.8

220.5

£m

Value Sales £m Boxed Chocolate Category and Inlaid Boxed Sub Category 52w – Total Coverage

Source: Nielsen Scantrack to WE 13th September 2014

Market share – Strength and opportunity

9.5%

Thorntons % Value Market Share by Category and Category Size £M – Total Coverage

Source: Nielsen Scantrack to WE 13th September 2014

11.6% 11.9% 12.0% 11.4%

30.0%

34.9%

33.1%

34.3%34.7%

1.5% 1.8%

3.5%

4.4%

6.3%

1.9%

2.9%

4.0%

4.9% 4.9%

CHRISTMAS SPECIALITIES £155M EASTER SPECIALITIES £356M

TOTAL BOXED £752M INLAID BOXED SUB CATEGORY £221M

Thorntons continue to hold a leading share in Inlaid Boxed and have significantly grown share across Easter and Christmas in the last 5 years

Thorntons brand - Strong and further improving

Leading in brand awareness

Highest advocacy in the sector

Broadening distribution has increased brand advocacy

Market leading brand values

Highest consideration for gifting

Brand Revitalisation – Spontaneous awareness remains strong

Source: HPI Brand Tracker 2014

• Thorntons spontaneous awareness is more than double that of other premium brands, and is matched only by Cadbury

1 2 3 4 5 6 7 8 9 10

Brand Health: Thorntons leads on key values & gifting fit

Source: HPI Brand Tracker 2014

Excellence

Creativity

Togetherness

Consideration for gifting

1 2 3 4 5 6 7 8 9 10

1 2 3 4 5 6 7 8 9 10

1= 1= 3 4 5 6 7 8 9 10

Creating a platform for international growth – Targeted international opportunities

Retail - Building the brand profitably – Continued ‘right sizing’ of the estate

‘World-class’ manufacturing – Evolving a flexible and efficient operation

Building brand equity – Broadening brand investment

Becoming an FMCG Company – Transforming the organisation

Continued growth of UK Commercial – Building on strengths and exploiting market opportunities

The next 3 years – Key strategic drivers

Creating a platform for international growth – Targeted international opportunities

Retail - Building the brand profitably – Continued ‘right sizing’ of the estate

‘World-class’ manufacturing – Evolving a flexible and efficient operation

Building brand equity – Broadening brand investment

Becoming an FMCG Company – Transforming the organisation

The next 3 years – Key strategic drivers

Continued growth of UK Commercial – Building on strengths and exploiting market opportunities

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UK Commercial – Developing our FMCG capabilities

39.5%22.7%

35.4%

27.3%7.9%

11.2%9.7% CAGR 5-10%

Sales

Differentiated Products

In-house Warehousing and Distribution

Account Management

Common Platforms

Out-sourced Warehousing and Distribution

Trade Marketing

Category Management

FMCG NPD

Unified Warehousing

FMCG Systems Investment

2011 2014 2017 (Est)

Broadening of distribution set to continue

% of sales

Response to changing shopper behaviour

Reducing dependency on Top 6 UK Grocers

26

UK Commercial – Building on strengths & exploiting opportunities

InlaidBoxed Chocs

(Market £215m)

Current Share 35%

Each 1% = £2m RSV

Single Flavour(Market £205m)

Current Share 1%

Each 1% = £2m RSV

Twist-Wrap

(Market £250m)

Current Share 2%

Each 1% = £2.5m RSV

Chocolate Blocks(Market £580m)

Current Share 0%

Each 1% = £6m RSV

Christmas(Market £155m)

Current Share 6.3%

Target 10%

£6m RSV opportunity

Easter(Market £355m)

Current Share 4.9%

Target 9%

£14m RSV opportunity

Key Seasons

We are the leading premium chocolate brand in the UK, with shopper spend exceeding £300m

Our ambition is to become the leading premium chocolate brand in UK Commercial

We will succeed by growing in 5 key areas:

Creating a platform for international growth – Targeted international opportunities

‘World-class’ manufacturing – Evolving a flexible and efficient operation

Building brand equity – Broadening brand investment

Becoming an FMCG Company – Transforming the organisation

Continued growth of UK Commercial – Building on strengths and exploiting market opportunities

27

The next 3 years – Key strategic drivers

Retail - Building the brand profitably – Continued ‘right sizing’ of the estate

Continued growth of UK Commercial – Building on strengths and exploiting market opportunities

Building brand equity – Broadening brand investment

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Building our brand equity

Investing in our brand to deliver a clear and consistent premium market position through products sought after by our shoppers and consumers

Optimising our marketing mix and investment levels by channel to maximise ROI, differentiate, and build shopper affinity to our brand

Retail investment

Progressive investment in store refurbishment

and merchandising

Product development

Leverage our competitive advantage to deliver a pipeline of product development

Brand positioning

Optimise our brand positioning to drive

relevance and credibility as the gifting

chocolate experts

Channel focused investment

Drive incremental purchase around peak

seasons and new product launches

Brand footprintDeepen penetration

through channel diversification

Broaden brand through licensing

partnerships

We will achieve this through 5 key areas

Creating a platform for international growth – Targeted international opportunities

‘World-class’ manufacturing – Evolving a flexible and efficient operation

Building brand equity – Broadening brand investment

Becoming an FMCG Company – Transforming the organisation

Continued growth of UK Commercial – Building on strengths and exploiting market opportunities

29

The next 3 years – Key strategic drivers

Retail - Building the brand profitably – Continued ‘right sizing’ of the estate

Continued growth of UK Commercial – Building on strengths and exploiting market opportunities

Becoming an FMCG Company – Transforming the organisation

One Customer(Retail)

Many SKUs

Seasonal Refresh & NPD

Over 100 Customers(including Retail)

Fewer SKUs

Focused FMCG Development & Support

30

Transforming the organisation

FROM

BUSINESS PEOPLE

TO

People ORG Design

Process CapabilitySystems Communication

Becoming an FMCG Company (with Retail as its biggest customer)

Through a business change programme that encompasses

Our Brand Plans for 2016

Inlaid (Thorntons), perceived as the most ‘special’

According to shoppers,Inlaid Chocolate is the most ‘special’ offering within Boxed Chocolate category*

Thorntons lead this category with a 31.9% market share**

Its the core of what Thorntons offer, and crucial that we add value to the category

Inlaid are losing shoppersto Single Flavour

We need to ensure products are perceived as worth paying more for

Anchored in Sharing Anchored in Formal Gifting

Anchored Self Treat & Special

Sharing

Twistwrap ££

Inlaid££££

Single Flavour£££

We need to address some key challenges

Source: SBXL December 2014

Do Shoppers Notice our Brand

Do Shoppers understand our Offering

?

A Strong Brand that people want to buy

There is too much considered behaviour not enough grab and go behaviour

of peoplewalk away 50%

We need to maximise our strength in Inlaid

We need the very best

execution to work in each

of these segments

Entry Level Premium

Premium PremiumPlus

We need to improve our offering with aclear positioning in each segment

We need to ensure we have offerings for the key ‘token gift’ and ‘sharing’ price points

Anchored in Sharing

Anchored in Formal Gifting

Anchored Self Treat & Special Sharing

Twistwrap ££

Inlaid££££

Single Flavour£££

Moments Re-energise, focus and

grow

2015

July2015

Aug2015

Sept2015

Oct2015

Nov2015

Dec2016

Jan2016

Feb2016

Mar2016

April2016

May2016

June

Inlaid

Twistwrap

Timings

Moments Re-energise

Moments is worth

£7.7mtotal market

with 2%

market share

Source: Neilson MAT to 27th Dec 2014

To the busy mum who loves spending Saturday nights in with her family, Moments are the premium sharing chocolates that makes that time even more special. Because Moments are the nation’s favourite flavours, made with all of Thorntons know-how.

Moments Brand Position

INSPIRING PURCHASE

ENGAGE OUR SHOPPERS

DELIGHTING SHOPPERS

Moments FY15 Brand Plan

Drive brand engagement

through added value on-pack

licensed partnership for Christmas 15

Increase sales and margin at Christmas with a

large format pack

Delighting shoppers through X Factor

partnership

Partnership objectives for Thorntons

Key Objective

To drive increased distribution and volumes of Moments across Commercial accounts at Christmas 15

Secondary Objectives

To drive brand engagement

Reposition the Moments brand with ‘Moments Mums’

Why X Factor?

167m series views, 3.29m subscribers

Live Final was watched by

13m viewers in 2014

9m Facebook likes5.4m followers on twitter

6m tweets across the series

Factor is the biggest show on

81% above ITV’s prime time average

Moments will partner with the X Factor Live Tour for Christmas 15

Prizes for shoppers – Live Tour tickets plus Live Tour ‘ backstage meet and greets’

2.9 million Thorntons X Factor packs out in the trade

X Factor finalist meet and greetappearances at retailer of Thorntons’choice

X Factor goodies as additional prizes

Use of X Factor assets for POS and on-pack

A partnership offering the following:

Moments Role

Chance to win X Factor Experience with Thorntons

Driving sales back into the category through engaging shopper activity.

Improved margin in the category versus competitors.

Net sales and margin from a category with limited transferable sales

SHOPPERCATEGORY THORNTONS

Moments summary

Moments is in growth! +46% sales at Christmas 14

Moments Pouch at Christmas 15 will drive

incremental sales for Thorntons

X Factor partnership at Christmas 15 is

shopper led activity designed to

drive early season sales

Source: Neilson MAT to 27th Dec 2014

Moments is worth

£7.7m total market

with 2% market share

Summary

46

47

Summary

British company with over 100 years of heritage & expertise in premium chocolate

A transforming business from Retail to FMCG

We’ve got some challenges - 50% of shoppers walking away empty handed from the

boxed chocolate fixture.

X Factor partnership planned with Moments for winter 2015

Let’s play!

48

49

THE PROBLEM:

Thorntons has a small share of the chocolate twistwrap (sharing) market (with Moments) and struggles to get presence in store especially during the early winter season (Sept – Oct). The Brand has less affinity in the South East and with 18-24 year olds.

THE OPPORTUNITY:

Thorntons has an X Factor partnership for 2015 which includes media rights to the X Factor Brand assets for use on pack, on-line and in store.

YOUR CHALLENGE:

Put together a proposal (the maths and the magic) to Simon & Rachael on how you can leverage the X Factor partnership to drive a positive Brand relationship and profitable sales with 18-24 year olds in the South East.

The Game

50

Your target audience

51

Your tools

ASSETS

X Factor logos & imagesX Factor finalist meet &

greet25 X Factor VIP experiencesTickets to X Factor Live Tour

X Factor goodies

MEDIA CHANNELS

Consider all media channels except TV

BUDGET

Flexible dependant on ROINo more than £250k

Return must be >£250k

52

Moments Financials (numbers are fictional for the game)

52 WK VOLUME 2m units

RRP £4.29

PROMOTION Price down to £2.50

VOLUME ON DEAL 50%

AVERAGE UNIT PRICE £3.40

MARGIN 50%

Some practical tips

53

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Worked example

Who can we reach?

UK population 64m

UK population living in the South East 25.6m

UK population living in the SE agued 18-24 2.6m

Assume 20% of population buy a Moments pack 520k units

Assume 5% enter our on-pack competition 26k entries

Viral campaign assume 50% participate, spreads to 16 new leads 208k people

Send new leads a voucher, assume 5% redemption 10k redemptions

Each redemption worth £1.70 gross margin £17k

Assume investment £10k, ROI +70%

Questions and Answers

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