Kraft Foodsat Walmart

Partnering with Walmart to Build

Kraft Brands

March, 2009

2

Customer Marketing Best Practices

1. Collaboration and retailer understanding

Strong collaboration between manufacturer and retailer ensures that the needs of both are met and results in mutually beneficial and actionable programs

2. Meeting retailers goals and initiatives

The most successful programs leverage manufacturer and retailer equities and assets, address the retailer’s key initiatives, and deliver on the retailer’s marketing priorities.

3. Retailer differentiation and added value

Retailer-specific solutions strengthen shopper loyalty by creating value for the retailer and shoppers. Manufacturers can help the retailer better understand shoppers’ needs by sharing and applying research and insights from their respective categories.

4. Retailer specific solutions based on shopper insights

The most relevant solutions come from understanding how demographic and lifestyle trends and the changing needs and attitudes of consumers effect shopping behavior.

5. Effective in-store execution and measurement

Developing a cross-functional team and working closely with marketing and operations helps ensure flawless execution. Formalizing objectives and setting evaluation metrics for

measuring program performance is essential for evaluation and evolution.

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Walmart’s Marketing Programs are Based on 3 Beliefs:

1. Save Money, Live Better is a key principle from Sam Walton that is relevant today

2. “Brand Aspirationals” are the core growth consumer

Looking for good brands at great prices

3. Food & Beverage is a key growth opportunity

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Understanding the Grocery Opportunity

• Food and beverage is a key conversion opportunity for Walmart, as it brings in more shoppers with greater frequency, and attracts a greater share of their spending than other merchandise categories

• Walmart is experiencing success in the current economic downturn, as consumers spend more of their food dollars at Walmart Supercenter

• The key to sustaining this success is to develop solutions-based programs to meet shopper needs

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Leading with Food & Beverage

• Food is a frequent destination category that can be leveraged to drive cross-box shopping

• Compared to other merchandise categories offered at WMSC, Food & Beverage brings in more shoppers, with greater frequency and attracts a greater share of Walmart spending

• Food is a frequent destination category that can be leveraged to drive cross-box shopping

• Compared to other merchandise categories offered at WMSC, Food & Beverage brings in more shoppers, with greater frequency and attracts a greater share of Walmart spending

Food & Beverage 94% 80% 62% 22%

General Merchandise 87% 35% 13% 10%

Health & Beauty 86% 40% 13% 12%

Non-food 87% 44% 13% 13%

Share of Shoppers

Share ofTrips

Share ofDollars Trips / HH

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Following Grocery Division Principles

• Price Image– Value– Prominent displays with clear pricing signage

• Provide solutions delivering consistent platforms that meet shoppers’ needs

– Meal Solutions– Health & Wellness– Seasonal

• Align with In-Store Presentation• Advertising focused on affordability and “saving people money in the shopping basket”• Clarity of Offering

– “Good, Better, Best” in ranges• SKU rationalization helps shoppers navigate through the store (average shopper spends

21 minutes in WMSC)– Aligned with solution

• Seasonal Opportunity– Consistency in packaging (i.e. Halloween)– Blocks of products with common price points

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Developing Successful Marketing Programs

Foundational Insights

Platform Development

In-depth ResearchProgram Concept Ideation

ConceptTestingAmong

WM Shoppers

Refined Program Elements

Execution

Walmart Touch Points Integrated Throughout The Process

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Focusing on Shopper Segments with the Greatest Growth Potential

• Common thread among key shopper segments at Walmart is that they are all value driven – best opportunity for mutual growth is with Brand Aspirationals

• Common thread among key shopper segments at Walmart is that they are all value driven – best opportunity for mutual growth is with Brand Aspirationals

Price Value Shoppers • Younger, family households• Many unemployed and/or

homemakers

Brand Aspirationals• Mature households, only 1/3

have kids at home• Less affluent and educated

• Mature, empty-nester HHs• Educated, affluent, employed

Price Sensitive Affluents

• Traditional values, family a top priority

• Live paycheck to paycheck, many have experienced financial crises

• First to cut back when times are tough

• Brand-conscious, they seek brand name products

– Trust brands for quality– Simplifies shopping

• Not loyal to any retailer • Shop wherever they need to,

to get desired brands within budget

• Time-constrained, never have enough time

• Pride themselves on being ‘smart shoppers’, getting the best deal whatever it takes

• Social and community-involved• Focused on financial security

Lifestyle & AttitudesLifestyle & AttitudesLifestyle & Attitudes

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Meeting Walmart Shoppers’ Needs

• Walmart Shoppers are concerned about the economy and are changing their behaviors accordingly

– Preparing more food at home - cooking and eating at home, eating leftovers, brown-bagging 

– Staying home more - entertaining at home more now vs. going out

• Walmart Shoppers have some key needs that have been around for a while, and there is new news on each:

– Convenience: Needs expanding as consumers adapt to economic hardship, but time pressures still present

– Quality: Staying at home more, entertaining at home demands quality brands and experiences

– Health & Wellness: Shoppers seek to achieve health & wellness goals within constrained budgets

• Walmart Shopper Segments are all value-driven, for different reasons– Shopper Marketing programs must meet the unique needs of each segment

by offering value to help build loyalty

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Shoppers Say Walmart is Ideally Suited to Provide Solutions

“Because you depend on Walmart for convenience and you need their help … I need these ideas.”

“They are really geared towards families and making things easy … you come here and everythingyou need is in one spot.”

“They stand for convenience and low price and this is just the next logical evolutionary step in their growth.”

“People are coming to shop in bulk … meal ideas would give more people a reason to come to Walmart …”

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Walmart Shoppers Need Convenient Meal Solutions

“You don’t think about making a kabob because it seems such a fancy, big presentation, but they look so easy to put together …”

Lack Cooking Skills

“I’m tired of eating the same old boring thing … my kids say, Mom, can we eat something different?”

Need Creative Ideas

My Challenges …

“People get home, and don’t want to spend 3 hours cooking. I need ideas requiring just a few ingredients.”

Limited Time to Shop, Prep and Cook

My Ideal Meal Solution Has …

I'd like great-tasting, low effort,"homemade" meals

Always looking for easy meal ideas

I like it when stores offer quick,easy meal ideas

If I see an idea, I am likely to buythe ingredients and try it

Q: How strongly do you agree or disagree …? (Top 3 box %- 1-10 scale)

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Walmart Shoppers are Concerned About the Economy

• Walmart Shoppers are adjusting their behaviors in tough economic times

• Compared to other consumers, WMSC shoppers are more likely to…– Say their financial situation has “gotten worse” in the last year– Be “extremely concerned” about the economy

“Within the past 3 months how has your spending changed?”

•Overall90% have cut back on non-essentials49% stick to a budget

•Dining86% eat at home more42% eat at less expensive restaurants

•Leisure38% entertain at home more vs. go out32% have stopped taking vacations25% rent movies vs. go to the theatre

Spending More orNo Change

Cutting Back On Spending

•At Home59% use AC/heat less4% have moved to a less expensive home

•Driving9% have sold their car/bought more fuel-efficient car5% are carpooling

28%

72%

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Walmart Shoppers Are Finding Ways to Make Meals More Affordable

• Making meals more affordable by sourcing food at home is a key strategy for stretching budgets

• Making meals more affordable by sourcing food at home is a key strategy for stretching budgets

” I tend to make foods that are good as leftovers, spaghetti, things like that... in larger quantities.”

Among WMSC Shoppers…

74% say they have avoided going out to eat and ordering in carry out food over the past three months*

65% look for recipes that fill up the family for less

81% say they are making meals that provide leftovers

68% are brown-bagging lunch

76% limit the purchase of non-meal food items (e.g., vending, c-store, movie theatre, etc.)

”We're eating out less so we can afford to buy groceries.”

” Packing lunches for school and work has saved us a lot of money. Also, making meals from scratch enables us to save more.”

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Walmart Shoppers Seek Ideas While In- and Out-of-Store

• In keeping with their value-consciousness, Walmart Shoppers are significantly more likely to review sale items in a store circular or ad

90% of WMSC Shoppers look at store circulars received by mail or in newspapers*

74% are spending time thinking through meals/ menus before shopping

63% look for recipes on-line*

53% look at store circular deals on-line

58% look on-line for manufacturer coupons or other deals*

67% are planning meals around what’s on sale

71% look at store circulars in-store to plan shopping trip

63% look in the store for affordable solutions to meal planning

In-Store Out-of-Store Both In & Out-of-Store

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Meal Solutions Opportunity at Walmart

• Help Shoppers “Save Money, Live Better” by providing AFFORDABLE solutions focused on convenience, quality and health & wellness from Kraft and Walmart

• Identify shopper centric marketing platforms that enable Kraft to most effectively leverage portfolio depth and breadth, creating volume growth for both Kraft and Walmart

• Build a program to fully meet consumers’ needs by analyzing category interactions across the store and bringing different categories together for one stop shopping

• Enhance Walmart’s positioning as a solutions resource with a complete meal solutions destination that delivers relevant food ideas and ingredients in a convenient format

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Kraft’s Meal Solution Equities Bring Important Advantages

• Vast portfolio of popular American brands, breadth of product portfolio enables full meal solutions (beverages, sides, desserts, etc.)

• Vast portfolio of popular American brands, breadth of product portfolio enables full meal solutions (beverages, sides, desserts, etc.)

Helps me prepare meals that my family likes

Helps me make meal preparation and planning simple

Has meal ideas for people like me

Provides simple meal ideas

Gives me ideas for complete meals

Helps me lead a healthy and balanced lifestyle

Gives me creative ideas for meals

Is a leader for providing meal and recipe ideas 24%

24%

27%

31%

22%

34%

30%

43%

39%

54%

56%

58%

59%

60%

62%

63%

Kraft Walmart

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Kraft Brings Strong Meal Solutions Expertise and Assets

Kraft Kitchens• Customized, consumer-tested food ideas, including

relevant BFY ideas

• Superb culinary expertise from full-time experts:– Lever latest food trends and knowledge of food AFH

• New, consumer-endorsed food idea communication strategy

Marketing Assets• Customized content in Food & Family magazine

• Digital content on Walmart.com

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“Simple Mealtime Ideas” by Kraft

• As part of a 2008 CSI, Kraft partnered with Walmart to execute a Simple Mealtime Ideas program in Walmart Supercenters

• Walmart’s positioning as a solutions resource was enhanced with a complete meal solutions destination that delivered relevant food ideas and ingredients in a convenient format

• The promotion was executed July 15th – September 2nd, 2008 and effectively drove significant incremental volume for both Kraft and Walmart

• Simple Mealtime Ideas was featured in the Seasonal Aisle in 1,700 Walmart Supercenters

• The program included 51 Kraft brands and nearly 200 SKUs

• Products were grouped by breakfast, lunch, dinner, and snacks

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Simple Mealtime Ideas Program Overview

• Walmart’s Seasonal Aisle was transformed into a destination area for shoppers to find simple, easy, affordable, and delicious mealtime ideas using their favorite Kraft brands

• Mealtime ideas aligned with consumer needs across breakfast, lunch, dinner and snacking occasions

• Merchandising layout provided clarity of offerings across meal occasions

• In-aisle signage featured Kraft food photography to entice shoppers

• An integrated 360°communication plan included multiple touch points to provide strong consistent messaging across tactics

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The Simple Mealtime Ideas Seasonal Aisle

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Tab

Recipe Booklets

Email Blasts

PR

Simple Mealtime Ideas Aisle

Print Ads

walmart.com

#MEALS Recipes

Sampling Events

In-Store TV Spots

360° marketing programs are important as Walmart Shoppers seek ideas for meeting needs both in and out-of-store

Simple Mealtime IdeasIntegratedCommunication Plan

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Simple Mealtime Ideas Effectively Reached Walmart Shoppers

• Although they may come into WMSC with ideas and lists, Walmart Shoppers seek solutions while they are in the store

– Solutions included products and easy, compelling ideas

• Shoppers navigate using signage and products in tandem– Overhead signage helped direct shoppers when viewing from across

aisles, or from front or back of store– Looked to endcaps to get an idea of what was in the aisle

• Product selection is key to compelling solutions– Popular, high-penetration products drew shoppers in– Products best ‘fit’ with theme– Mix of complementary items rounded out assortment against theme and

could highlight lower-penetration products

• Clear communication is critical in busy store environment– Clear, consistent, compelling messages delivered across touch points– Marketing collateral used to support theme and drive key behaviors – e.g.

recipe cards to serve as shopping list

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Orchestrated Interaction of Key Elements to Achieve Success

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Simple Mealtime Ideas Summary

• This is an example of a promotion recognized by Walmart. It’s a unique collaborative effort that was carried out flawlessly, and on a scale and scope that neither company had attempted: the “Simple Mealtime Ideas” event.  Quick. Convenient. Affordable

• The inspiration for this in-store experience started with consumers’ needs 

• The display conveniently brought our products together with engaging photography and delicious recipes to get people cooking

• Easy meal ideas helped families plan breakfast, lunch, dinner or snacks

• Simple Mealtime Ideas was featured in stores across the country for seven weeks, in total, 66,000 displays each featuring 190 products

• That’s the equivalent of 176 miles of four-foot displays

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Customer Marketing Best Practices

1. Collaboration and retailer understanding

Strong collaboration between manufacturer and retailer ensures that the needs of both are met and results in mutually beneficial and actionable programs

2. Meeting retailers goals and initiatives

The most successful programs leverage manufacturer and retailer equities and assets, address the retailer’s key initiatives, and deliver on the retailer’s marketing priorities.

3. Retailer differentiation and added value

Retailer-specific solutions strengthen shopper loyalty by creating value for the retailer and shoppers. Manufacturers can help the retailer better understand shoppers’ needs by sharing and applying research and insights from their respective categories.

4. Retailer specific solutions based on shopper insights

The most relevant solutions come from understanding how demographic and lifestyle trends and the changing needs and attitudes of consumers effect shopping behavior.

5. Effective in-store execution and measurement

Developing a cross-functional team and working closely with marketing and operations helps ensure flawless execution. Formalizing objectives and setting evaluation metrics for

measuring program performance is essential for evaluation and evolution.