ESPAÑA-BRASIL-VENEZUELA-REPÚBLICA DOMINICANA

TO CREATE COMPETITIVE ADVANTAGES

Getting Prepared for a more Regulated Business Environment

Alcohol Restriction has a Global AgendaThe Global Strategy to Reduce Harmful Use of Alcohol was endorsed by the Sixty-third World Health Assembly in 2010, and since then more countries have implemented further restrictions

National

Regional

Source: WHO – Status Report on Alcohol and Health

The Global Strategy to Reduce Harmful Use of Alcohol includes ten target areas for nation support:

1. Leadership Awareness and Commitment

2. Health Service response

3. Community Actions

4. Drink-Driving policies and countermeasures

5. Availabilty of Alcohol

6. Marketing of Alcoholic beverages

7. Pricing Policies

8. Reducing the negative effects of intoxication

9. Reducing the Public Health impact of unrecorded alcohol

10. Monitoring and Surveillance

Alcohol Restriction Strategy is not too different from Tobacco

Product and Packaging

RestrictionsPlace Restrictions Promotion

Restrictions Price Restrictions

Ban on ingredients and flavours

GHW over 30% of pack area

Generic B&W packaging Packaging brand design

restrictions (white packaging)

Ban on consumption in-doors

Ban on consumption in public out-door places (parks / beaches, etc)

Ban on consumption in private transport

Restrictions on trade events and communication

Sales and Visibility restrictions within a given radius (i.e., of school)

Ban on consumer events, free give aways, sampling

In-store and permanent merchandising ban (RDB)

Ban on branded price signs

Ban on all consumer communication

Heavy excise charges Minimum pricing

requirements Price on pack required

Illustrative example of the most regulated tobacco markets today (Canada and Australia)

We can help you to understand IMPACTS and size the RISK

...Based on Real Cases from other Markets and the Tobacco Industry

Consumer Impacts - Summary

• Drinking becomes less socially acceptable, fewer consumers start to drink and they tend to reduce average consumption.

• Drinking becomes more difficult in certain environments with consumers forced to adapt their routines in order to have a drink

• Consumers become frustrated by increasing Liquor and Beer prices and start to down trade, or even chose illicit products.

• It takes much longer to build awareness, typically consumers are more aware of VfM than premium brands

• Brand equity is reduced as consumers no longer perceive significant differentiation across brands

• Retailers are anxious about remaining compliant with new regulations —retailers have to adapt to changes in alcohol legislation to“keep business as usual”

• Retailer-manufacturer relationships are threatened, as common marketing tactics to promote brands in store are no longer possible

• Managing the assortment becomes critical as they tend to focus on higher rotation SKU´s

• Pricing is a constant challenge, retailers look to manufacturers to off-set decline in category value

• Higher capabilities are required from retailers / staff to navigate brands and engage with consumers to sell premium brands

Customer Impacts - Summary

Industry Impacts - Summary

Reduced Volume and Profit

• Restrictions unbalance the Price/Benefits equation

• Increasing Prices will drive downtrade to cheaper brands and reduce average consumption

• Growth of Illicit Trade

• Higher cost of doing business with retailers

• Higher investment in Internet and Direct Marketing

• Higher challenges to the Distribution model

• Different set of skills and capabilities required among Brand,Trade and Agency teams

• More markets are adopting Advertising restrictions for Alcohol.

• In Russia and Turkey alcohol consumption has dropped…

• Year 2012 saw on-going slow reduction of beer market. However, producers significantly increased their revenues by higher selling prices.

• By the year end one can expect further beer market reduction by about 5% resulting from prohibition to sell beer in kiosks. Advertisement ban can drive market share growth of regional producers at the expense of large federal companies. At the same time the introduction of the limitations will promote price competition and fiercer “shelf fights” in network retail.

EXAMPLE: effect in RUSSIA - BEER

As of 2013, beer cannot be sold in Russian airports, bus stops, railway stations and certain other public places.

• Prohibition came into force in July 1, 2012 for alcohol beverages higher than 5% of strength

• From January 1, 2013 these outlets also stopped selling beer.

• The majority of street kiosks were not able to receive a license for alcohol sale.

• Restrictions on minimum area of 50 m2

• Tight control of license issuing by the Federal Service for Alcohol Market Regulation

• High cost of license.

EXAMPLE: effect in RUSSIA - BEER

• Retail prices for beer produced in Russia have grown consistently in the last years and the biggest constituent of the price growth was the excise tax, which increased by 20% from January 1, 2012. To smooth over this effect, brewers increased average selling price gradually*, in November 2011 and in March 2012 after this event.

Tax increase

EXAMPLE: effect in RUSSIA - BEER

We can help you to avoid get trapped in the Commoditization Cycle

”“To overcome the challenges of a Restricted Market we need

To be able to communicate with consumers and differentiate our

brands in spite of evolving regulation and its cumulative effects

on Consumers, Customers and Industry

You have the opportunity to learn from other experiences on regulations in the Alcohol and Tobacco industries to turn the situation into a Growth Opportunity

Learnings were consolidated in Six Major Chapters

Tobacco Learnings — “What they would do differently having a second chance”

ACTIVATION PLANNING PROCESS

SEGMENTATION OF RETAIL UNIVERSE

CUSTOMER ACTIVATION

SKILLS & CAPABILITIES

PORTFOLIO

Reinforce Horeca (On Trade) as an opportunity to drive consumer interactions and Branded experiences.

Identify key influencers to facilitate positive peer-to-peer communication

Leverage packaging as a form of communication Develop simple, clear brand messages Work to break purchase inertia to drive adoption Reduce opportunities for loyal consumers to switch by managing

availability, quality and price

CONSUMER-SHOPPER ACTIVATION

EXAMPLE

Methodology and Action PlanProject will be fully implemented in 5 phases which will enable the Company to prepare for the impact of regulation and align the organization behind the strategies and solutions required to create competitive advantage

Identify & Prioritise Local

Issues and Identify Required Business Drivers

Define Solution Requirements

Develop / Implement Solutions

Incorporate Solutions into Company Plan

Kick Off / Context Setting Workshop

A B C D E

Why TMC Consultores Comerciales?

• TMC Consultores Comerciales is an International Marketing and Sales Consultancy Group

• Rather than selling generic concepts, all TMC products and services are tailored to the specific needs of each client and situation.

• TMC has broad experience dealing with marketing restrictions in different industries such as Tobacco, Beer, Liquor, OTC and Pharma, offering a unique set of best practices.

• Since 1996 TMC has collated knowledge and experience working with most of major fast moving consumer goods companies in almost all markets in Latin America.

• The team is formed by a selected group of experienced senior executives and consultants who goes beyond theoretical models to guarantee the delivery of business results. TMC success is measured through the achievement of the client’s commercial objectives.