a big brand playbook as the small rise up & generations ... › ... ›...

June 11, 2017

Millennial Munching

A big brand playbook as the small rise

up & generations transition Equity Research

The Conde Nast-GS Love List: Consumer insights across the food industry

The small rise up and the big fall down

Legacy packaged food companies are experiencing

sales headwinds on both weaker category growth

and share losses. While private label is in focus of

late, evidence suggests that small brands are the

main drivers of share losses as barriers to

distribution and brand building fall at the same time

big brands curtail investment.

Opportunity on the horizon for those

ready to seize it

Category growth should improve in the years ahead

as Millennials form households and ramp food at

home consumption. To better understand which

brands and companies are best positioned to

capture that growth, we executed an attitude and

usage study across 35 attributes for 172 brands in

conjunction with Conde Nast. Some of the findings

are surprising. Many big brands are far from

irrelevant – Millennials demonstrate above average

affinity for them. Big brand communication and

company portfolio strategies, however, appear

largely unaligned with the attributes that can fuel

growth vs. scale.

The growth vs. scale dilemma and call for

broader portfolio approach

Our combined analysis suggests very few brands

that attempt to achieve scale and growth will

succeed, which may run counter to the CPG

structure and culture of big brand concentration. We

look for companies with established Millennial

preference, a track record of brand investment and a

flexible portfolio approach embracing a small brand

mindset to separate the likely leaders from laggards.

MDLZ & Nestle lead; CPB & KHC lag

Leaders: MDLZ benefits from both broader snack

affinity and strength in Oreo, overlaid with consistent

investment and a big and small brand (e.g., Vea)

mindset. Nestle stands out with top brands in coffee

(#1 coffee brand), water (San Pellegrino #1 overall

Millennial favorite) and leading brands in frozen.

Laggards: Numerous CPB brands appear relatively

disadvantaged and continuous advertising cuts

disconcerting. At KHC, low brand support raises

questions and a culture of cost efficiency appears

counter to the portfolio complexity likely needed to

thrive.

Jason English

(212) 902-3293 [email protected] Goldman Sachs & Co. LLC

Mitch Collett, CFA

+44(20)7774-1060 [email protected] Goldman Sachs International

Dylann B. Katz

(212) 902-7929 [email protected] Goldman Sachs & Co. LLC

Vivek Srivastava

(212) 934-8372 [email protected] Goldman Sachs India SPL

Goldman Sachs does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as research analysts with FINRA in the U.S.

The Goldman Sachs Group, Inc. Global Investment Research

June 11, 2017 Americas: Food: Packaged & Manufacturing

Goldman Sachs Global Investment Research 2

The problem: Rise of the small but mighty

Organic sales growth for leading packaged food companies has disappointed in recent years with the aggregate of our US packaged

food coverage setting a new all-time low organic sales decline in 1Q17 (-1.6%). The source of weakness has been twofold. First,

overall category growth has slowed which has been most pronounced for center-store categories as consumer shopping behavior

migrates to the perimeter of the store. Equally problematic has been broad based market share erosion. The old adage of number

one or number two brands are most defensible in categories has broadly broken down as top brands are broadly (though not

universally) losing share.

In some instances, the share loss for leading brands has been to private label which has garnered increasing investor focus of late

given announced or suggested initiatives by retailers (e.g., Amazon’s private label assortment expansion, Walmart’s focus on

private label and the US expansion of private label oriented Lidl and Aldi). While we are not dismissive of private label threats, we

see greater cause for concern in the rise of the small brands.

Smaller brands, many of which are being led by entrepreneurs (e.g., Kind, Clif or Quest in bars, Amy’s Kitchen in frozen, Siggi’s in

yogurt), continue to make inroads and are outpacing both industry and private label growth across the food industry. The pattern is

even more evident when we focus on the top 50 packaged food categories which drive 80% of industry sales. Among the top 50

categories, we see established brands and private label losing share in general to smaller brands on both a three and one year

basis; in 2016, small brands gained share in 62% of the top 50 categories vs. only 40% for private label and 32% for the leading

brand.

We believe the rise of the small brands and fall of the big brands is driven by multiple factors:

Barriers to distribution are falling. Traditional retailers continue to broaden their assortment and are increasingly

welcoming of small and differentiated brands as they attempt to differentiate their offerings from peers and cater to

expanding consumer preferences. In Nielsen measured channels, the average number of SKUs per store has expanded at a

2.5% CAGR since 2013 with major food companies seeing a 0.7% increase, private label rising 2.7% and all-other branded

manufacturers leading the growth at 3.8%. On-line, while still in its infancy in Food, will likely perpetuate this given broader

assortment in the channel and easier access/lower cost for smaller companies.

Barriers to building brand awareness and interest have fallen. Enhanced social connectivity through digital platforms

has facilitated both rapid spread of word-of-mouth awareness building and peer endorsement for brands. Both small and

large brands alike can benefit from this, but the point is that it has leveled the playing field. Compounding this has been the

digitization of media; multi-million dollar mass media campaigns are no longer requisite to build awareness – another

leveling effect.

Intense focus on margins has likely increased the vulnerability of big brands. The industry at large has prioritized

margin expansion in recent years, often at the expense of brand investment. Traditional advertising spend by large brands

has materially declined in recent years. This followed an over decade long process of engineering cost out of the food by

major companies. The combination has resulted in food products that are often seen as over-engineered by consumers and

now less supported by brand investment.

An evolving consumer psyche may also play a role. Some see a connection between broader anti-establishment

movements among the Millennial generation and a distrust of big brands. While we intuitively understand the argument,

Further Reading

This report is part of our

ongoing series on the

business implications of

a maturing Millennial

generation. For more,

see:

The fashion Love List

A report on global

snacking & the

munching mismatch

Our Consumer Currents

webpage

https://360.gs.com/gs/portal/home/fdk/?st=1&n=/portal/announcement/research/millennials

https://360.gs.com/gs/portal/?st=1&action=action.binary&d=23661074&fn=/document.pdf

https://360.gs.com/gs/portal/?st=1&action=action.binary&d=23853429&fn=/document.pdf

https://360.gs.com/gs/portal/home/fdk/?st=1&n=/portal/announcement/research/consumertrends



we note that anti-establishment movements have been commonplace in history and believe the other three explanations

are the main drivers for big brand weakness.

Exhibit 1: Sales have eroded for major food companies as both industry

growth has slowed and market share was ceded to private label and smaller

companies YoY $ sales growth, 52 wk periods ending March

Exhibit 2: Share losses have come as proliferation of assortment at food

retailers persists with smaller branded companies the primary gainers YoY Average items per store, 52 wk periods ending March

Source: The Nielsen Company, Goldman Sachs Global Investment Research. Note: Food majors include CAG, CPB, GIS, HSY, SJM, K, KHC, MDLZ, Mars, Nestle, PF

Source: The Nielsen Company, Goldman Sachs Global Investment Research. Note: Food majors include CAG, CPB, GIS, HSY, SJM, K, KHC, MDLZ, Mars, Nestle, PF

Exhibit 3: Among the top 50 packaged food categories over the past three

years, big brands have lost share at the expense of “all other’ smaller brands,

not private label 2013-2016 market share change

Exhibit 4: While not ubiquitous, small brands have gained share in 53% of the

categories analyzed vs. only 40% for the incumbent leader 2013-2016 % gaining market share

Source: The Nielsen Company, Goldman Sachs Global Investment Research


‐0.8%

1.9%2.3%

1.4%

‐3.0%

‐2.0%

‐1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

2014 2015 2016 2017 13‐17 CAGR

Food majors Private Label All Other Total Food

0.7%

2.7%

3.8%

2.5%

‐3.0%

‐2.0%

‐1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

2014 2015 2016 2017 13‐17 CAGR

Food majors Private label All Other Total Food

‐0.3%

‐0.5%

‐0.1%

0.6%

‐0.6%

‐0.4%

‐0.2%

0.0%

0.2%

0.4%

0.6%

0.8%

#1 brand Top 3 brands Private label All other

40%43%

49%53%

0%

10%

20%

30%

40%

50%

60%




Exhibit 5: This pattern continued in 2016…

2015-2016 market share change

Exhibit 6: …with small brand share gains now spanning 62% of major food

categories last year 2015-2016 % gaining market share



Exhibit 7: Brands outside of the top three are gaining share in key categories ranging from cereal to infant formula with yogurt seeing the most erosion and

more commoditized categories such as frozen seafood, milk, eggs and butter the least All other brands (excluding top three and private label) market share change for 2015-2016 and 2013-2016


‐0.1%

‐0.3%

‐0.1%

0.4%

‐0.4%

‐0.3%

‐0.2%

‐0.1%

0.0%

0.1%

0.2%

0.3%

0.4%


34% 34%

40%

62%

0%

10%

20%

30%

40%

50%

60%

70%


‐7%

‐5%

‐3%

‐1%

1%

3%

5%

Frzn. seafood

Snack cake

Frzn. Sandwiches

Milk

Nuts

Eggs

Butter

Ice cream

Gum

Frnz. entrees

Novelty

Fresh desserts

Ref. juice drinks

Nutritional

Frnz. pizza

New

age bev.

Fresh sausage

Lunchmeat

Crackers

Isotonic bev.

Cookies

Frzn. veg.

Boxed prep. din.

Salty snacks

Shelf stable veg.

Wholesom

e snacks

Cream

Breakfast meat

Fresh meat

RTE cereal

Cheese

Water

SS liquid soup

SS fruit

Coffee

Baked bread

Spice seasoning

SS juices & drinks

Candy

Soft drinks

Shortening & oil

Infant formula

Ref. meals

Veg. & herbs

Yogurt

1 yr 3 yr



The opportunity: Rise of Millennials’ food at home consumption

While packaged food industry growth has disappointed in the US of late, there is reason for optimism: the rise of the Millennials.

Millennials remain the largest population by size with the peak age cohort of this generation rapidly approaching household

formation years. As household formation begins, growth in household size should follow. With larger households come larger food

expenditures. The current peak household size is in the 35-44 year band (which the oldest Millennials consumer has recently

entered). Nielsen measured food sales increase 70% on a per capita basis as consumers graduate from the 20-34 year old grouping

to the 35-44 year old grouping. Assuming this relationship holds, the math suggests that Millennial consumers should drive the

entirety of the industry’s growth over the next decade.

This presents both opportunity and risk for the industry at large. Given current trends, it speaks to a rich opportunity for

entrepreneurs to continue to rise in the industry while also offering reason to believe that overall category growth can improve.

Recent results, however, suggest that not all incumbent industry leaders are either prepared or well positioned to benefit.

Exhibit 8: Millennials (roughly 18-34) remain the largest generation in the US

and approach household formation years

Size of cohorts by generation 2015 population (in millions)

Exhibit 9: As Millennials age, their household size should grow Household size by age cohort

Source: Euromonitor, Goldman Sachs Global Investment Research

Source: BLS, Goldman Sachs Global Investment Research

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 72 75 78

Millennials88.7 mn

Gen X66.0 mn

Baby Boomers72.6 mn

2.0

2.8

3.4

2.7

2.1

1.8

1.0

1.5

2.0

2.5

3.0

3.5

4.0

<25 25‐34 35‐44 45‐54 55‐64 65+



Exhibit 10: Nielsen data shows age distribution for packaged food and

demonstrates a 70% increase in food expenditures from the 20-34 cohort to

the 35-44 grouping. If this holds… Per capita food expenditures by age cohort

Exhibit 11: …Millennials could constitute nearly all of the industry’s growth

through 2027 Age cohort contribution to growth in food spend between 2016-2027

Source: Euromonitor, The Nielsen Company, Goldman Sachs Global Investment Research

Source: Euromonitor, The Nielsen Company, Goldman Sachs Global Investment Research

The solution: Investment, portfolio strategy and brand role in focus

Introducing the Conde Nast-Goldman Sachs Love List

In conjunction with Conde Nast’s Food Innovation Group, we have conducted an attitude and usage study (A&U) among 7,555 US

consumers. The respondents included 1,076 millennial consumers between the ages of 18-34, 564 of which we refer to as

“Millennial Foodie Influencers” (a group of Millennial responders who agreed with the statement: “I have a passionate interest in

food, cooking, restaurants and/or food experiences.”) and focus on for our Love List. We polled these consumers on usage habits

and brand association across 35 attributes for 172 brands. We then integrated Nielsen scanner and panel data to merge self-

reported data with measured real behavioral data to glean richer insight. The result is both the output of our Love List – an affinity

ranking for brands with both Millennial and broader consumer sets – and attribute correlation with growth, scale and loyalty metrics.

Key observations, conclusions and recommendations follow.

‐

200

400

600

800

1,000

1,200

1,400

1,600

20‐34 35‐44 45‐54 55‐65 Over 65+

Millennials

223.4

246.424.1

8.4

(9.6)

8.4

(8.2)

200

210

220

230

240

250

260

270

2016 25‐34 35‐44 45‐54 55‐64 <25 & <65 2027

$ bn

spen

d change to

202

7

Today's Millennial will spend $24.1 bn more on packaged food when they are in the 35‐44 bracket in 2027 if current age‐related spending behavior holds



The Love List – Big brands are far from irrelevant

Not surprisingly, large established brands such as Coca Cola, Heinz Ketchup and Doritos top the list of most commonly purchased

brands – they would not be large established brands were they not commonly purchased. Of more interest is the question of affinity.

Some surprising observations are made when consumers are asked to rank their favorite brands and interesting divergences

between the national sample set and the Millennial Foodie Influencer cohort are revealed:

Millennials still like big brands. Despite conjecture of brand indifference, when asked to rank their favorites, Millennials

demonstrated both a higher level and broader based affinity for big brands.

Premiumization appetite creates opportunity for the smaller. Millennials also ranked small and mid-sized brands that

compete in the premium tier of their respective categories among their favorites (11 of the top 20 favorite brands for both

the national sample and millennial cohorts). Among these premium brands, the majority either laddered to health-oriented

benefits (e.g., Angie’s, Noosa, and Justin’s Nut Butters) or indulgent attributes (e.g., Ferrero Roche and Starbucks).

They like to snack. Eight of the top 20 favorite Millennial Foodie Influencer brands are traditional snack brands including

Angie’s and Haribo which ranked 2nd and 3rd, respectively, among Millennial Foodie Influencers.

Premium over mainstream preference in chocolate. Mainstream-oriented Hershey didn’t make the top 20 list for

Millennial Foodie Influencers but premium brands such as Ferrero Rocher and Mars’ Dove made the cut with 60% and 56%,

respectively, of Millennial Foodie Influencers rating them favorites.

Premium coffee over tea but water trumps all. Nespresso and Starbucks had strong followings among both sample sets,

but San Pellegrino ranked #1 as a favorite for Millennial Foodie Influencers. Poland Spring was not far behind for the

Millennial cohort, tying both Starbucks and Nespresso for the 5th most favorite brand. Traditional mainstream coffee brands

fall far behind (out of the 172 brands, neither SJM’s Folgers nor KHC’s Maxwell House placed in the top 50 favorite brands

for Millennial Foodie Influencers; interestingly, Folgers held the 8th favorite spot for the national sample set).

Ice cream melts. The national sample set ranks both Haagen-Dazs and Ben & Jerry’s among their top favorites, but ice

cream brands are noticeably absent among favorite Millennial Foodie Influencer brands.

Can baking still be relevant? Surprisingly (to us at least) PF’s Duncan Hines baking brand was ranked among the top 20

(#4) by Millennial Foodie Influencers; 13 spots above SJM’s Pillsbury brand and 100 spots above GIS’s Betty Crocker.

Bertolli’s frozen thaw? Despite the brand’s sales challenges in recent years, CAG’s Bertolli is the 5th highest ranking

favorite brand among Millennial Foodie Influencers versus a 76th ranking for Healthy Choice and 83rd for Lean Cuisine.

Yogurt is still a go-to. Noosa, founded in 2010, marks the youngest brand to make the top 20 favorite list with both

Millennial Foodie Influencers and the national sample set ranking it in the top 10. Competitor brands Fage and Yoplait also

made the top 20 list for both cohorts but Chobani was noticeably missing (ranking 36th for millennials and 29th for the

national sample set).

Cookies and crackers crumble. MDLZ’s largest (and still favored) brand Oreo failed to make the cut on either favorite list

but it wasn’t alone. No other cookie brand was ranked in the top 20 for Millennial Foodie Influencers while Cheez-It was the

only cracker brand to hold a spot (#19).

Common attributes—it’s the basics. Delving behind the brand names, there is a consistent pattern of attributes that tie

the favorite brands together. Good tasting. Easy to find. Consistent. Convenient. Good value. What constitutes each will



vary among consumers, but these are all arguably attributes that large established food companies should be able to

deliver on.

Exhibit 12: Which brands are people purchasing? % surveyed; “which of the following brands have you purchased in the last 6

months”

Exhibit 13: Favorite brands by age bracket % surveyed; “which of the following brands do you consider to be your favorites”

Source: Conde Nast-Goldman Sachs Love List


Heinz Ketchup 46% Starbucks 64%Starbucks 45% Coca‐Cola 52%Coca‐Cola 44% Doritos 48%

Land O'Lakes 42% Chobani 47%Campbell's 37% Cheerios 45%Chobani 37% Nature Valley 40%

Boar's Head 36% Oreo 39%Cheerios 36% Heinz Ketchup 39%Doritos 34% Quaker 37%

Hellmann's/Best Foods 34% Land O'Lakes 37%Lay's 34% M&M's 36%

Hershey Chocolate 33% Naked 35%Bush's Beans 33% Hidden Valley 34%

M&M's 31% Cheez‐It 33%Quaker 29% Lay's 33%

Philadelphia 28% Campbell's 33%Ritz 28% Pillsbury 32%Oreo 28% Hershey Chocolate 32%

Tostitos 28% Pepperidge Farm 32%Ghirardelli 27% Ben & Jerry's 32%

All Millennial Foodie Influencers

Top 20 purchased

brands in the last 6 months

Nespresso 68% San Pellegrino 81%San Pellegrino 59% Angie's 77%Starbucks 57% Haribo 71%

Ben & Jerry's 55% Duncan Hines 70%Coca‐Cola 55% Bertolli Frozen 67%Noosa 55% Nespresso 67%Angie's 54% Poland Spring 67%Folgers 53% Starbucks 67%Fage 51% Yoplait 67%

Peet's Coffee 51% Noosa 64%Boar's Head 51% Ferrero Rocher 60%Stouffer's 51% Justin's Nut Butters 59%

Simply Orange 51% Coca‐Cola 59%Ghirardelli 50% International Delight 57%

Cracker Barrel Cheese 50% Kashi 57%Hershey Chocolate 50% Dove Chocolate 56%

Special K 50% Pillsbury 55%Tates 50% Clif 55%Yoplait 49% Cheez‐It 53%

Haagen‐Dazs 48% Fage 52%


Top 20 brands which people consider to be their favorites



Exhibit 14: Broadly speaking, Millennials demonstrate greater affinity for nearly all top brands % surveyed; “which brands would you consider to be your favorites?”


The Growth vs. Scale dichotomy

Basic measures such as purchase behavior and affinity demonstrate that large established brands have continued relevance to

Millennial consumers. While encouraging in terms of an outlook on brand durability, it does not shed light on growth prospects, or

lack thereof. In an effort to assess this, we delved deeper and merged Nielsen data to align brand attributes across realized growth,

scale (sales level) and loyalty (repeat) using both retail scanner data and panel data among both Nielsen’s national and Millennial

aged sample sets.

For both the overall pool and the Millennial Foodie Influencer cohort, affordability and consistency were correlated with scale,

suggesting that those attributes are non-negotiable when it comes to establishing a big, scalable brand. It’s also imperative to check

“basic” boxes including “easy to find”, “convenient”, and “good variety”. In order to drive growth, however, a different set of

boxes need to be checked. For the national sample set, Nielsen sales growth was strongly correlated with “unique”, “trendy”,

“innovative” and “a brand not many people know of”. The perception of the ingredient profile (e.g., “made with clean ingredients”

and “less processed”) also correlated strongly with sales growth.

As is evident in Exhibits 15 and 16, almost all of the attributes that correlate with growth are negatively correlated with size. There

are, however, a few exceptions and both the broader pattern of conflict and rare exceptions have implications in terms of both

optimal brand messaging and portfolio strategy, in our opinion.

0%10%20%30%40%50%60%70%80%90%

Angie's

Ben & Jerry's

Bertolli Frozen

Boar's Head

Cheez‐It

Clif

Coca‐Cola

Cracker Barrel Cheese

Dove Chocolate

Duncan Hines

Fage

Ferrero Rocher

Folgers

Ghirardelli

Haagen‐Dazs

Haribo

Hershey Chocolate

International Delight

Justin's Nut Butters

Kashi

Nespresso

Noosa

Peet's Coffee

Pillsbury

Poland Spring

San Pellegrino

Simply O

range

Special K

Starbucks

Stouffer's

Tate's

Yoplait

Which brand

s wou

ld you

con

sider to

be your

favorites?




There are no attributes at the intersection of positive growth and scale when looking at the national sample set. Amongst the

Millennial Foodie Influencer cohort, there are three attributes that lie at the intersection of both positive growth and scale: “good

variety”, “convenient” and “consistent”. These seem like basic and obvious attributes, but they are nonetheless strengths of legacy

brands that are largely being neglected in modern consumer communication. The industry instead has focused on messages

around transparency, authenticity and natural/clean ingredients. While the evolution of product formulation toward these attributes

is likely warranted (effectively unwinding the over-engineering trend from the 1990’s into the early 2000’s), the data suggest that

brand messaging and communication may be more effective when focused on inherent taste, variety and convenience attributes –

all attributes where incumbent brands arguably have a right to win.

Exhibit 15: National sample set: which attributes correlate with scale and growth National sample set population growth and scale correlation scatter plot

Source: Conde Nast-Goldman Sachs Love List, The Nielsen Company



Exhibit 16: Millennial Foodie Influencer population: which attributes correlate with scale and growth

Millennial Foodie Influencer population growth and scale correlation scatter plot

Source: Conde Nast-Goldman Sachs Love List, The Nielsen Company



Exhibit 17: Among the national sample set, a lack of overlap between growth and scale attributes suggests brands can’t “have it

all”

Brand attributes split into 3 GS-defined buckets based on strong positive correlation for national sample set

Source: Conde Nast-Goldman Sachs Love List, The Nielsen Company, Goldman Sachs Global Investment Research

‐Affordable‐Consistent‐Convenient‐Easy to find‐Good value‐Good variety‐Made by a manufacturer I trust‐One that reminds me of my childhood‐Trusted

‐A brand not many people know of‐Expensive‐Innovative‐Less processed‐Made with clean ingredients‐Natural‐One I recommend to friends/family‐Organic‐Transparent about how it is produced‐Trendy‐Unique GROWTH

LOYALTY

SCALE‐One of my favorites



Exhibit 18: When we zoom into the Millennial cohort, overlap between growth and scale attributes emerge in “convenient” and

“good variety”

Brand attributes split into 3 GS-defined buckets based on strong positive correlation for Millennial Foodie Influencers


A Portfolio Approach: Challenging the big brand first paradigm

The findings of the analysis have aforementioned implications on brand communication – a ‘fix your food/ingredient issues’ but

‘trumpet your inherent virtues (taste, variety, convenience)’ conclusion. They also have potential implications on portfolio

management strategy that may run counter to the big-brand silo cultures that are inherent in many established CPG companies.

‐Affordable‐Consistent‐Easy to find‐One that reminds me of my childhood

‐A brand not many people know of‐Expensive‐For me/my lifestyle‐Fresh‐Good tasting‐Less processed‐Made by a manufacturer I trust‐Natural‐One I recommend to friends/family‐One of my favorites‐Organic‐Safe for me/my family‐Trendy‐Unique

GROWTHLOYALTY

SCALE

‐Convenient‐Good variety

‐Good value



The modern day brand management structure of the CPG industry emerged as early as 1931 with implementation at P&G. It took

nearly three decades to spread throughout the industry but is now commonplace. Most established CPG companies have now

organized their marketing functions around and allocated resources against their stable of priority brands. The best talent and most

resources generally gravitate to or are assigned to the priority brands, which most often correlate with the largest brands. The focus

of both the people and resources is generally to drive growth. The aforementioned analysis, however, suggests that these brands

may inherently lack the attributes requisite to achieve the growth and that these resources may be more effective if directed toward

small or newer brands that can carve out a growth “niche”. The implicit portfolio strategy of managing large incumbent brands for

stability and cash and nurturing small or new brands for growth may seem obvious, but it is both uncommon and conflicting with

common food company culture. The evidence of this can be found at retail. Major food companies arguably have an advantage in

developing and commercializing the next rising brand in Food, but too few have found success on this front and instead have turned

to M&A to fill their portfolio holes (often with mixed results). It is time for big brands to embrace a small brand mindset, in our view.

The leaders and the laggards: MDLZ & Nestle set examples; KHC & CPB lag

Based on the realities of recent trends and analysis of underlying drivers, we believe that category fragmentation, the shrinking of

big brands and the growth of small brands is likely to continue. The evidence, however, suggests that this does not need to be a

universal trend or translate into big companies lagging even if their big brands are no longer driving the growth. In short, we see

some better positioned than others based on both their existing stable of brands and actions on both brand investment and

portfolio management. We screen our coverage universe for the following in effort to gauge the likelihood of future success as the

Millennial generation graduates to its core food at home consumption life-stage:

Brands with an already demonstrable affinity among Millennials.

A consistent track record and pattern of brand investment.

A flexible portfolio approach that demonstrates willingness and ability to invest and execute behind large and small brands

alike, often with an effort of driving premiumization within their categories.

Based on these attributes, we highlight the following leaders and laggards we believe are better or worse positioned to capture the

Millennial growth opportunity.

The leaders who appear better positioned:

MDLZ:

Broadly aligned with snack food preferences. Broadly speaking, snack food category growth has consistently outpaced

traditional packaged food growth over the past decade. With eight of the top 20 favorite Millennial Foodie Influencer brands

being snack brands, we generally expect this trend to continue.



MDLZ’s big brands resonate with Millennials. This is evidenced by the measured consumer affinity for its brands. Oreo,

for example, was the top ranking cookie brand among Millennial Foodie Influencer favorites in our survey (ranking 83 spots

above K’s Keebler brand and 37 spots above CPB’s Pepperidge Farm).

MDLZ demonstrates an embracement of a small brand mindset. Two brands in particular showcase this mindset:

Belvita and Vea. Belvita, which was launched in North America in 2012 and ranks among some of the youngest US brands

in our survey, is considered a favorite among 30% of millennials and ranked higher than traditional breakfast/snack bars

such as Nature Valley or Nutri-Grain. It has resonated with millennial consumers in particular for being “convenient”,

“consistent”, “good tasting” and “for me/my lifestyle”. MDLZ has supported this brand with various TV and media

campaigns. It is now seeking to replicate this success with the launch of another new brand – Vea. Vea is launching in the

US this July with a line of premium priced crackers featuring on-trend health attributes (e.g., Non-GMO Project Verified, no

artificial ingredients, colors or flavors) with a variety of ethnic rooted flavors (e.g., Thai Coconut, Tuscan Herbs, Greek

Hummus). Its efforts demonstrate a balance of both nurturing its core brands while investing in new growth equities.

A consistent brand investment pattern that stands out among peers. Advertising and promotion curtailment in the

Food industry has been commonplace over the past five years – since 2011, the percent of sales reinvested in A&P has

fallen from 5.7% to 5% in 2016. This compares to a modest increase from 5.2% of sales at MDLZ to 5.4% in 2016 (we expect

that measure to rise to 5.8% by FY18).

Nestle:

Advantaged positions in majority of categories. Starting in coffee, Nespresso ranked as the #1 coffee brand for our

survey for both the national sample set and Millennial Foodie Influencers. The brand also ranked as #1 overall (out of 172

brands) for the national sample set (with 68% of those surveyed ranking it as a favorite). Compared to Starbucks, which

placed #2 in coffee, Nespresso was ranked higher by the national survey sample for key growth beverage attributes such as

“good tasting”, “innovative” and “unique”. Starbucks, however, was rated higher for “easy to find” (38% of the national

set and 46% of Millennial Foodie Influencers said Starbucks was “easy to find” vs. 6%/7% for Nespresso) which reflects

Nespresso remaining exclusive to DTC online sales and Nespresso stores but suggests the brand could benefit from

broader distribution without diluting the premium attributes of the brand. In water, Nestle held the top 3 spots for the

national sample set and the #1 and #2 spots for Millennial Foodie Influencers. San Pellegrino impressively ranked #1 in the

survey overall for Millennial Foodie Influencers and #2 for the national sample set while Poland Spring tied as the #5

favorite brand for Millennial Foodie Influencers. Nestle also held superior positions in frozen meals, with Stouffer’s ranking

as the favorite brand for the national sample set and DiGiorno ranking as the 2nd favorite among Millennial Foodie

Influencers. For the national survey pool, Lean Cuisine ranked as the superior “better-for-you” frozen entrée brand (and 30th

favorite overall) above KHC’s Weight Watchers (86th) and CAG’s Healthy Choice (118th). This positioning in Frozen is notable

given the category returned to growth for Nestle in 2016 having been in decline in 2015.

Opportunity awaits for these big brands. In beverage enhancers, Nestle’s Coffee-Mate ranked #2, behind WhiteWave’s

International Delight. Despite its relative ranking to a direct competitor, the brand ranked 21st overall for Millennial Foodie

Influencers’ favorite brands, just shy of our top 20 list (International Delight ranked 14th). In ice cream, Nestle’s brands

ranked inferior to Ben & Jerry’s (Ben & Jerry’s was the 27th overall favorite brand for Millennial Foodie Influencers

compared to Haagen-Dazs 46th and Dreyer’s/Edy’s 119th). Nestle’s brands, however, outranked Ben & Jerry’s for “one that

reminds me of my childhood” which suggests Nestle could have some success by embracing the nostalgic attributes of its



brands. 81% of Millennial Foodie Influencers said Haagen-Dazs was “good tasting” (compared to 64% for Ben & Jerry’s)

and 31% would recommend the brand to friends and family (compared to 12% for Ben & Jerry’s).

The laggards who appear less well positioned:

KHC:

Relative disadvantage with value-focused brands. KHC’s portfolio has a relative disadvantage in our survey affinity

ranking for both the national sample met and Millennial Foodie Influencers: Starbucks/premium coffee > Maxwell House;

Planters lags in snacking; Hillshire Farm & Ball Park > Oscar Mayer; Crystal Light and Country Time lag in beverages;

Cracker Barrel Cheese was the only KHC brand to show up in either top 20 favorite lists (out of the 16 KHC brands that were

included in the survey). Out of the 5 coffee brands we surveyed, Maxwell House came in last place in coffee for the overall

sample with only 38% of the national sample set ranking it as a favorite (vs. Starbucks 57%). KHC’s brands comprised our

entire sample set for cheese brands (including Cracker Barrel Cheese, Kraft Singles and Velveeta). Although the relative

rankings for Kraft Singles and Velveeta were uninspiring (neither breaking the top 50 favorite brands for either sample set),

Cracker Barrel Cheese ranked as the 15th most favorite brand for the national sample set with 50% of those surveyed

considering it to be a favorite. In frozen meals, KHC’s Weight Watchers brand ranked below Nestle’s Lean Cuisine and

received low overall attribute ratings.

Cost discipline a likely impediment to brand building. KHC’s focus on price discipline, cost cuts and synergy realization

resulted in low brand investment (in fact, the lowest out of food peers). A&P as a % of sales averaged 2.5% from 2014-2016.

We believe management’s intense focus on scale and cost efficiency is a likely impediment to the natural inefficiencies that

can result from a more fragmented portfolio of smaller brands. In order to add complexity to the portfolio, which usually

results in increased costs, KHC may need to reevaluate its low brand investment.

CPB:

Inferior positioning in its categories. CPB’s flagship Campbell’s soup brand ranked below GIS’s Progresso for Millennial

Foodie Influencers. Core sauce brand Prego ranked 97th among Millennial Foodie Influencers’ favorite brands while it ranked

145th for the national sample set. Bolthouse Farms, which was once slated to be the growth engine for the Campbell Fresh

division, ranked below the struggling V8 brand. V8’s relative ranking (3rd for Millennial Foodie Influencers in the juice

category) was surprising to us as 46% of Millennial Foodie Influencers ranked the brand a favorite (compared to 42% for

Bolthouse Farms). The attribute data, however, was less encouraging with both brands receiving low overall rankings for

key beverage attributes. “Good tasting” was identified as a leading indicator to achieve both growth and scale in the

beverage category. CPB’s beverage brands ranked significantly below its key competitors for Millennial Foodie Influencers

(25%/33% selected “good tasting” as an attribute for V8/Bolthouse Farms vs. Simply Orange 76%, Bai 70%, Tropicana 52%).

Cutting ad spend. Advertising and promotion spend as a % of sales for CPB has declined from 6.4% in 2011 to 5% in 2016

while overall marketing and selling expenses as a % of sales went from 13% in 2011 to 10.6% in 2016. While we

acknowledge that not all marketing and promotion spend is effective and profitable, we also recognize the need for

manufacturers to nurture businesses and recent levels show CPB pulling back.



HSY:

HSY’s investment behind its brands has been at the top of its peer group (average 7.6% A&P as a % of sales from 2014-

2016). However, both measured results and survey results suggest the company’s portfolio is not resonating with current

trends, namely, the shift to premiumization in the chocolate category. Only 48% of millennials ranked Reese’s as one of

their favorites compared to Ferrero Rocher and Mars’ Dove which 60%/56% of Millennial Foodie Influencers ranked as their

favorites. The lack of premium products in HSY’s portfolio signals potential growth challenges in the future.

HSY’s acquired brand, Krave, for example, also did not rank well in our survey among Millennial Foodie Influencers

(ranking among the bottom 20 for the most purchased brands in the past 6 months and in the bottom 20 for brands which

people consider to be their favorites).

Exhibit 19: Ratings, price targets, methodologies, and risks

Source: FactSet, Goldman Sachs Global Investment Research

Why this trend is here to stay: Venture propels small brands

Venture/private equity in food & non-alcoholic beverage

In addition to lower barriers to entry, one could also argue that the recent rise of small brands has been facilitated by improved

access to capital. Since 2014, more than $12.7 bn of new funds have been injected into small, up-and-coming food and beverage

Ticker Rating Methodology Price: 6/9/2017

Target Price (12mo)

Upside / Downside

KHC Buy FNTM 24x P/E & 16x EV/EBITDA* 90.83 94 2.4%

MDLZ Buy** Equal weighted FNTM 22x P/E & 15.5x EV/EBITDA (85%); 17X M&A EV/EBITDA (15%) 45.62 53 15.3%

NESN.S

Buy

50% by applying a P/E of 16.7x to our 2020 forecasts and50% by applying a P/E of 20.7x to our 2020 ‘change’ case (both

discountedback to December 2018)

SFr 80.95 SFr 81 0.1%

CPBNeutral FNTM 18x P/E & 12x EV/EBITDA* 56.54 59 4.0%

HSY Neutral FNTM 21x P/E & 13x EV/EBITDA* 114.02 109 -4.4%Notes:

*Denotes 50%/50% weighting to price target**On the Americas Conviction List

Risks

Integration challenges; executional missteps; greater-than-expected sales shortfalls at legacy Kraft; FX & commodity price volatility.

Worse core category growth, innovation success, cost & FX volatility, strategic actions

(1) Weaker-than-expected cost savings; (2) higher than-expected cost saving reinvestment; (3) weaker-than-expected organic sales growth; (4) lower-thanexpected or value-destructive cash use; and (5) adverse FX moves.

Better/worse productivity realization, input cost relief, innovation success, strategic activity

More/less favorable input costs, demand growth, strategic actions



brands across the globe (both private equity and venture rounds and including e-commerce). Funding since 2014 makes up 83% of

all funding rounds since 2009 (which total close to $15.5 bn). 29% of the funding since 2014 supported companies based in the

United States (with the vast majority of those based in California, followed by New York and Texas).

Funding levels during 2014-2016 increased 455% compared to 2011-2013 levels. Given the lack of organic growth in the space and

the success of new, smaller brands, we are not surprised to see a recent uptick in funding. The spike in 2014 and 2015, however,

came from large private equity inflows for a few deals (ex. Weetabix receiving funding of $764 mn in 2015 and Agropur receiving

funding of $470 mn in 2014). In 2016 funding levels fell back closer to pre-2014 levels. On the forward, we expect funding to

accelerate, as 2017 funding year-to-date is outpacing prior years (funding YTD of $1.4 bn vs. the same period for 2016 of $1.1 bn).

Newer start-ups (those founded in 2010 or later) received 52% of new funds from 2014-2017. E-commerce companies obtained 50%

of new funding since 2014 (48% of new funding since 2009) while mobile commerce received 14% of new funding since 2014 (12%

of new funding since 2009). A lot of the new funding over the past few years has been flowing into a few key “buckets”, including

non-alcoholic beverages, e-commerce, mobile commerce, protein-based food and free-from products. We have highlighted a

number of deals in these categories in Exhibit 26.

Exhibit 20: The Global Venture Landscape: Food and Non-alcoholic Beverage, including e-commerce $ mn (lt. axis), # of deals (rt. axis)

Source: CB Insights, Goldman Sachs Global Investment Research

0

20

40

60

80

100

120

140

0

1000

2000

3000

4000

5000

6000

2009 2010 2011 2012 2013 2014 2015 2016 YTD2017

Funding amount $ (LHS) Number of deals (RHS)



Exhibit 21: More than 57% of venture funding is coming from early stage

(Angel, Seed, Series A, Series B and Series C funding) Food & bev (including e-comm) venture funding amount in $ mn by stage

Exhibit 22: Average deal size has been on the rise in recent years

Average and median deal size in $ mn for food and beverage companies



Exhibit 23: US and China lead new funding since 2009

% of new funding since 2009 by country for food and non-alcoholic beverage

Exhibit 24: By subsector, e-commerce has received the majority of share of

funding % of funding by subsector



‐

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2009 2010 2011 2012 2013 2014 2015 2016 YTD2017

Angel Seed Series A Series B Series C Series D+ Growth equity

0

2

4

6

8

10

12

14

16

18

05

101520253035404550

2009 2010 2011 2012 2013 2014 2015 2016 YTD2017

Average deal size (LHS) Median deal size (RHS)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

2009 2010 2011 2012 2013 2014 2015 2016 YTD2017

% of total fu

nding

E‐commerce Mobile commerce



Exhibit 25: Highlighting emerging companies; start-up funding for companies founded after 2010 with more than $75 mn Year founded (LHS) and total funding amount $ mn (RHS); total funding above $75 mn


2009

2010

2011

2012

2013

2014

2015

2016

‐ 100 200 300 400 500 600 700

Flagstone FoodsMasan Nutri‐SciencePicnic

MissFreshSwiggyThrive Market

DeliverooDoorDashJuicero

Benlai Life

Blue Apron foodpanda InstacartPlated

Suja Life

BigBasket

Hampton Creek

HelloFresh

iFood Munchery

Woowa Brothers

Valeo Foods



Exhibit 26: Key PE/VC investments in food and beverage categories Total funding/amount by round in $ mn; includes deals with total known funding of over $10 mn


Company Company description RoundDate of funding

Year founded

AmountTotal Funding

Country City

Soylent Maker of nutritional meal‐replacement drinks and reduces environmental impact. Series B 5/4/2017 2013 $50 $72 United States Los Angeles

Juicero The first home cold‐pressed juicing system. Series B 3/31/2016 2013 $70 $100 United States Lafayette

Blue Bottle Coffee Small network of cafes, wholesale partners, an espresso cart, a coffee kiosk, and vintage German coffee roasters. Series C 6/5/2015 2002 $70 $116 United States Oakland

Suja Life Handcrafted lines of cold‐pressured juices Series C 12/1/2014 2012 $20 $196 United States San Diego

All Market All Market is the manufacturter of Vita Coco Coconut Water. Series D 5/24/2012 2012 $11 $208 United States New York

Joint Juice Ready‐to‐drink glucosamine supplement that builds stronger bone cartilage and lubricates joints. Series E 10/25/2011 1999 $73 $124 United States San Francisco

HelloFresh Global provider of fresh food at home via its soft subscription model business. Series G 12/20/2016 2011 $89 $367 Germany Berlin

Yiguo Ego is a Chinese online fresh‐food eCommerce platform. Series C ‐ II 11/9/2016 2005 $200 $200 China Shanghai

Deliveroo End‐to‐end food delivery service that brings high‐quality local restaurant food to homes and offices. Series E 8/5/2016 2013 $275 $475 United Kingdom London

BigBasket Online grocery store. Series D 3/22/2016 2011 $150 $253 India Bengaluru

DoorDash On‐demand delivery service that connects customers with local businesses. Series C 3/22/2016 2013 $127 $187 United States San Francisco

Womai Sells imported products from overseas markets directly to Chinese consumers. Series C 10/12/2015 2008 $220 $320 China Beijing

Ele.me China‐based online food ordering site. Website and apps enable users to search for restaurants nearby. Series F 8/27/2015 2008 $630 $2,335 China Shanghai

Blue Apron Once‐a‐week subscription service, delivering all the fresh ingredients needed to make 3 meals. Series D 6/9/2015 2012 $135 $193 United States Brooklyn

NatureBox Allows consumers to discover new & healthy foods through a monthly subscription service. Series C 5/5/2015 2012 $30 $59 United States San Carlos

Delivery Hero Online food ordering and delivery sites. More than 150,000 restaurants are connected to its service. Series H 6/8/2015 2011 $110 $1,753 Germany Berlin

Picnic App to place orders, and suppliers then deliver the goods to a central distribution center run by Picnic. Series B 3/28/2017 2015 $109 $109 Netherlands

Instacart Mobile app that allows users to shop for groceries directly from a phone. Series D 3/8/2017 2012 $400 $675 United States San Francisco

MissFresh Fresh produce e‐commerce mobile application which enables users to order fresh produce and get it delivered. Series C 1/23/2017 2014 $100 $177 China Beijing

Meicai Mobile e‐vendor of agricultural products, which serves tens of thousands of restaurants in China. Series D 6/22/2016 2014 $200 $200 China Beijing

Masan Nutri‐Science Fully‐integrated branded meat platform, focused on driving productivity in Vietnam's animal protein industry. Private Equity 4/3/2017 2015 $150 $150 Vietnam Ho Chi Minh City

Icelandic Provisions Brand of Traditional Icelandic Skyr which is packed with more protein than yogurt. Series B 1/24/2017 2015 $9 $20 United States New York

Beyond Meat Offers a plant protein that looks, feels, tastes, and acts like meat. Series F 10/10/2016 2009 $23 $40 United States El Segundo

Hampton Creek 100% vegan, cholesterol and gluten free, egg substitute. Series D 7/29/2015 2011 $120 $240 United States San Francisco

The Chia Company Producer of Chia, a plant based source of omega 3, fiber and protein with a fully traceable global supply chain. Series B 5/27/2015 2003 $6 $28 Australia Port Melbourne

COFCO Meat Engaged in feedstuff processing, livestock and poultry breeding, slaughtering, processing, and more. Private Equity 6/6/2014 2002 $270 $270 China Beijing

Justin's Manufacturer of almond butter snacks including nut butters and candy bars. Private Equity 10/17/2013 2004 $47 $48 United States Boulder

Rhythm Superfoods Develops nutrient‐rich, delicious, raw, vegan, gluten‐free, no cholesterol and non‐GMO foods. Series D 1/18/2017 2009 $6 $17 United States Austin

Kite Hill Maker of non‐dairy cheese. Series A 5/20/2016 2013 $18 $25 United States Hayward

Non‐alcoholic beverages

Mobile commerce

Protein‐based

Free‐from

E‐commerce



Appendix

Love List Rankings

Exhibit 27: Beverage occasion relative ranking of brands within categories **brands with no data or ranking are brands where less than 10 people answered survey

Source: Conde Nast-Goldman Sachs Love List, Goldman Sachs Global Investment Research

Category OccasionRank within sub‐

category for national sample set

Rank within sub‐category for Millennial Foodie

Influencers

Overall favorite rank for national sample

set

Overall favorite rank for Millennial Foodie

InfluencersBeverage OccasionInternational Delight Beverage enhancer Beverage 1 1 32 14Coffee‐Mate Beverage enhancer Beverage 2 2 42 21Crystal Light Beverage enhancer Beverage 3 133Minute Maid Beverage enhancer Beverage 4 3 141 107Country Time Beverage enhancer Beverage 5 4 153 113Nespresso Coffee/hot chocolate Beverage 1 1 1 5Starbucks Coffee/hot chocolate Beverage 2 1 3 5Folgers Coffee/hot chocolate Beverage 3 3 8 83Peet's Coffee Coffee/hot chocolate Beverage 4 10Maxwell House Coffee/hot chocolate Beverage 5 89Swiss Miss Coffee/hot chocolate Beverage 6 4 159 123Simply Orange Juice Beverage 1 1 13 23Tropicana Juice Beverage 2 7 37 63V8 Juice Beverage 3 3 39 37Bolthouse Farms Juice Beverage 4 5 67 51Odwalla Juice Beverage 5 91Bai Juice Beverage 6 6 96 58Naked Juice Beverage 7 4 123 40Gatorade Juice Beverage 8 2 148 28Powerade Juice Beverage 9 8 154 105Horizon Organic Milk Beverage 1 2 24 48So Delicious Milk Beverage 2 38Silk Milk Beverage 3 1 53 43Coca‐Cola Soda Beverage 1 1 5 13Pepsi Soda Beverage 2 2 43 57Lipton Tea Beverage 1 1 52 55Honest Tea Tea Beverage 2 2 136 69Nestea Tea Beverage 3 3 164 129San Pellegrino Water/enhanced water Beverage 1 1 2 1Perrier Water/enhanced water Beverage 2 6 31 119Poland Spring Water/enhanced water Beverage 3 2 34 5Smart Water Water/enhanced water Beverage 4 3 63 29Vitamin Water Water/enhanced water Beverage 5 5 71 63Dasani Water/enhanced water Beverage 6 4 151 48Aquafina Water/enhanced water Beverage 7 7 155 125



Exhibit 28: Breakfast occasion relative ranking of brands within categories **brands with no data or ranking are brands where less than 10 people answered survey


Exhibit 29: Condiment/dressing occasion relative ranking of brands within categories **brands with no data or ranking are brands where less than 10 people answered survey





Influencers


set


InfluencersBreakfast OccasionSpecial K Cereal/granola Breakfast 1 2 17 29Kashi Cereal/granola Breakfast 2 1 25 14Cheerios Cereal/granola Breakfast 3 3 45 33Quaker Cereal/granola Breakfast 4 4 62 51Bear Naked Cereal/granola Breakfast 5 5 115 69Cascadian Farm Cereal/granola Breakfast 6 132Chex Cereal/granola Breakfast 7 6 135 81Noosa Yogurt Breakfast 1 2 6 10Fage Yogurt Breakfast 2 3 9 20Yoplait Yogurt Breakfast 3 1 19 5Siggi's Yogurt Breakfast 4 21Chobani Yogurt Breakfast 5 4 29 36Dannon Yogurt Breakfast 6 5 130 83Oikos Yogurt Breakfast 7 6 138 96




Influencers


set


InfluencersCondiment/dressing OccasionHellmann's or Best Foods Dairy/spread Condiment/dressing 1 4 36 101Land O'Lakes Dairy/spread Condiment/dressing 2 3 40 94Miracle Whip Dairy/spread Condiment/dressing 3 1 69 23Philadelphia Dairy/spread Condiment/dressing 4 6 84 112Breakstone's Dairy/spread Condiment/dressing 5 121I Can't Believe It's Not Butter Dairy/spread Condiment/dressing 6 5 125 110Country Crock Dairy/spread Condiment/dressing 7 2 127 37Reddi‐Wip Dairy/spread Condiment/dressing 8 146PAM Dairy/spread Condiment/dressing 9 7 156 117Hidden Valley Salad dressing Condiment/dressing 1 1 117 108Wish‐Bone Salad dressing Condiment/dressing 2 137Sabra Sauce/salsa Condiment/dressing 1 1 64 46Pace Sauce/salsa Condiment/dressing 2 65Prego Sauce/salsa Condiment/dressing 3 2 145 97Knorr Meal enhancer Condiment/dressing 1 1 90 45Old El Paso Meal enhancer Condiment/dressing 2 2 143 122



Exhibit 30: Lunch/dinner occasion relative ranking of brands within categories **brands with no data or ranking are brands where less than 10 people answered survey





Influencers


set


InfluencersLunch/dinner OccasionBush's Beans Canned and frozen vegetables Lunch/dinner 1 1 26 63Green Giant Canned and frozen vegetables Lunch/dinner 2 2 66 90Ore‐Ida Canned and frozen vegetables Lunch/dinner 3 3 79 98Hunt's Canned and frozen vegetables Lunch/dinner 4 4 168 119Cracker Barrel Cheese Cheese Lunch/dinner 1 1 15 72Kraft Singles Cheese Lunch/dinner 2 2 103 83Velveeta Cheese Lunch/dinner 3 2 113 83Annie's Homegrown Dry meals Lunch/dinner 1 1 32 23Kraft Mac and Cheese Dry meals Lunch/dinner 2 2 49 72Back to Nature Meals Dry meals Lunch/dinner 3 170Stouffer's Frozen meals Lunch/dinner 1 6 12 63Amy's Frozen meals Lunch/dinner 2 5 23 56Lean Cuisine Frozen meals Lunch/dinner 3 8 30 83MorningStar Farms Frozen meals Lunch/dinner 4 3 48 33Birds Eye Frozen meals Lunch/dinner 5 10 70 135DiGiorno Frozen meals Lunch/dinner 6 2 81 32Weight Watchers Frozen meals Lunch/dinner 7 86P.F. Chang's Frozen meals Lunch/dinner 8 91Bertolli Frozen Frozen meals Lunch/dinner 9 1 98 5Marie Callender's Frozen meals Lunch/dinner 10 9 107 116Healthy Choice Frozen meals Lunch/dinner 11 7 118 76Hot Pockets Frozen meals Lunch/dinner 12 4 142 44Banquet Frozen meals Lunch/dinner 13 149Udi's Gluten Free Lunch/dinner 1 51Glutino Gluten Free Lunch/dinner 2 100Boar's Head Meat Lunch/dinner 1 1 11 75Nathan's Famous Meat Lunch/dinner 2 56Hebrew National Meat Lunch/dinner 3 2 59 76Tyson Meat Lunch/dinner 4 4 102 114Jimmy Dean Meat Lunch/dinner 5 2 105 76Hillshire Farm Meat Lunch/dinner 6 6 111 127Jennie‐O Meat Lunch/dinner 7 116Ball Park Meat Lunch/dinner 8 147Oscar Mayer Meat Lunch/dinner 9 5 152 115Hormel Meat Lunch/dinner 10 162Skippy Nut butter/jam/jelly Lunch/dinner 1 4 46 105Smucker's Nut butter/jam/jelly Lunch/dinner 2 2 68 91Welch's Nut butter/jam/jelly Lunch/dinner 3 3 72 98Justin's Nut Butters Nut butter/jam/jelly Lunch/dinner 4 1 73 12Campbell's Soup Lunch/dinner 1 2 101 110Progresso Soup Lunch/dinner 2 1 104 69Swanson Soup Lunch/dinner 3 166



Exhibit 31: Snack occasion relative ranking of brands within categories **brands with no data or ranking are brands where less than 10 people answered survey





Influencers


set


InfluencersSnack OccasionTate's Biscuit/cookie Snack 1 17Oreo Biscuit/cookie Snack 2 1 47 51Pepperidge Farm Biscuit/cookie Snack 3 2 55 88Snackwell's Biscuit/cookie Snack 4 58Keebler Biscuit/cookie Snack 5 5 88 134Belvita Biscuit/cookie Snack 6 3 95 98Famous Amos Biscuit/cookie Snack 7 157Newtons Biscuit/cookie Snack 8 4 160 123Duncan Hines Baking Snack 1 1 60 4Pillsbury Baking Snack 2 2 82 17Betty Crocker Baking Snack 3 3 110 104Hostess Baking Snack 4 4 161 133Haribo Candy Snack 1 1 114 3Sour Patch Candy Snack 2 2 122 76Swedish Fish Candy Snack 3 3 144 132Cape Cod Chips Snack 1 2 27 42Food Should Taste Good Chips Snack 2 34Stacy's Chips Snack 3 1 61 37Lay's Chips Snack 4 5 76 60Doritos Chips Snack 5 4 87 54Ruffles Chips Snack 6 6 109 63Tostitos Chips Snack 7 3 120 48Pringles Chips Snack 8 7 163 127Ghirardelli Chocolate Snack 1 8 14 89Hershey Chocolate Chocolate Snack 2 3 16 22Dove Chocolate Chocolate Snack 3 2 22 16M&M's Chocolate Snack 4 5 54 41Reese's Chocolate Snack 5 4 77 29Snickers Chocolate Snack 6 7 78 82Ferrero Rocher Chocolate Snack 7 1 97 11Brookside Chocolate Snack 8 6 119 76Cheez‐It Cracker Snack 1 1 41 19Triscuit Cracker Snack 2 3 50 129Ritz Cracker Snack 3 2 80 58Ben & Jerry's Ice cream Snack 1 1 4 27Haagen‐Dazs Ice cream Snack 2 2 20 46Dreyer's or Edy's Ice cream Snack 3 3 93 119Krave Meat Snack 1 129Slim Jim Meat Snack 2 150Sahale Snacks Nuts Snack 1 57Planters Nuts Snack 2 1 139 95Angie's Popcorn Snack 1 1 7 2Popcorn Indiana Popcorn Snack 2 73Smartfood Popcorn Snack 3 3 83 62Skinny Pop Popcorn Snack 4 2 85 61Orville Redenbacher's Popcorn Snack 5 4 131 102Kind Snack bar Snack 1 2 44 63Larabar Snack bar Snack 2 106Clif Snack bar Snack 3 1 124 18Pop Tarts Snack bar Snack 4 3 128 91Nature Valley Snack bar Snack 5 6 140 108Fiber One Snack bar Snack 6 3 158 91Nutri‐Grain Snack bar Snack 7 5 165 102



Day part roadmap: What it takes to win in breakfast, lunch/dinner, snacks, beverage etc.

We examined the similarities and differences of what drives growth, scale and loyalty for different eating occasions for the national

sample set. We grouped brands based on day part: breakfast, lunch/dinner, snacks, condiments/dressings and beverages.

Exhibit 32: What it takes to succeed in breakfast Brand attributes with positive correlation to GS-defined buckets of scale, growth

and loyalty for breakfast

Exhibit 33: Which brands straddle these buckets Top 5 ranked brands for aggregate of attributes by % for each GS-defined bucket

(ex. Fage appeared the most in the top 5 for the various growth attributes; it

“checks the most boxes” for the growth attributes); more than 5 listed for ties



‐Affordable‐Consistent‐Convenient‐Easy to find‐Good value‐Good variety

‐Made by a manufacturer I trust‐One that remainds me of my childhood‐Trusted

‐Expensive‐Fresh‐Good variety‐Innovative‐Less processed‐Made by a manufacturer I trust‐Made with clean ingredients‐One that reminds me of my childhood

‐Natural‐Organic‐Trendy ‐Unique‐Transparent about how it is produced‐A brand not many people know of‐One I recommend to friends/family

GROWTH

LOYALTY

SCALE

‐Cheerios‐Chex‐Dannon‐Quaker‐Special K

‐Chobani‐Bear Naked‐Fage‐Noosa‐Siggi's

GROWTH LOYALTY

SCALE



Exhibit 34: What it takes to succeed in lunch/dinner Brand attributes with positive correlation to GS-defined buckets of scale, growth

and loyalty for lunch/dinner


(ex. Udi’s appeared the most in the top 5 for the various growth attributes; it




‐Affordable‐Consistent‐Easy to find‐Good value‐Good variety‐Made by a manufacturer I trust‐One that reminds me of my childhood

GROWTH

LOYALTY

SCALE

‐Good tasting‐Trusted

‐A brand not many people know of‐Expensive‐Fresh‐Innovative‐Less processed‐Made with clean ingredients‐Natural ‐One I recommend to friends/family

‐One of my favorites‐Organic‐Safe for me/my family‐Transparent about how it is produced‐Trendy‐Unique

‐Banquet‐Campbell's‐Hunt's‐Lean Cuisine‐Smucker's‐Stouffer's

‐Amy's‐Annie's Homegrown‐Back to Nature Meals‐Justin's Nut Butters‐Udi's

GROWTH LOYALTY

SCALE

‐Progresso

‐Cracker Barrel Cheese



Exhibit 36: What it takes to succeed in snacks Brand attributes with positive correlation to GS-defined buckets of scale, growth

and loyalty for snacks


(ex. Clif appeared the most in the top 5 for the various growth attributes; it “checks

the most boxes” for the growth attributes); more than 5 listed for ties



‐One of my favorites

GROWTHLOYALTY

SCALE

‐Affordable‐Consistent‐Convenient‐Easy to find‐Good value‐Good variety

‐Made by a manufacturer I trust‐One that reminds me of my childhood‐Trusted

‐A brand not many people know of‐For me/my lifestyle‐Fresh‐Innovative‐Less processed‐Made with clean ingredients‐Natural

‐One I recommend to friends/family‐Organic‐Safe for me/my family‐Transparent about how it is produced‐Trendy‐Unique

‐Betty Crocker‐Duncan Hines‐Hershey Chocolate‐Keebler‐Pillsbury

‐Angie's‐Clif‐Food Should Taste Good‐Krave‐Larabar‐Sahale Snacks‐Skinny Pop

GROWTHLOYALTY

SCALE



Exhibit 38: What it takes to succeed in beverages Brand attributes with positive correlation to GS-defined buckets of scale, growth

and loyalty for beverages


(ex. Silk appeared the most in the top 5 for the various growth attributes; it




GROWTH

LOYALTY

SCALE‐Affordable‐Consistent‐Convenient‐Easy to find‐Good value‐Made by a manufacturer I trust

‐One of my favorites‐One that reminds me of my childhood

‐A brand not many people know of‐Expensive‐For me/my lifestyle‐Good variety‐Innovative‐Less processed‐Made with clean ingredients‐Natural

‐One I recommend to friends/family‐Organic‐Safe for me/my family‐Transparent about how it is produced‐Trendy‐Unique

‐Goodtasting

‐Folgers‐Lipton‐Maxwell House‐Minute Maid‐Poland Spring‐Swiss Miss

‐Bolthouse Farms‐Naked‐Nespresso‐Odwalla‐Silk‐So Delicious

GROWTHLOYALTY

SCALE‐Starbucks



Exhibit 40: What it takes to succeed in condiments/dressings/sauces Brand attributes with positive correlation to GS-defined buckets of scale, growth

and loyalty for condiments/dressings/sauces


(ex. Sabra appeared the most in the top 5 for the various growth attributes; it




GROWTH

LOYALTY

SCALE

‐Convenient‐Easy to find‐Good variety‐Organic

‐Transparent about how it is produced‐Trendy

‐A brand not many people know of‐Less processed

‐Affordable‐Good value

‐Consistent‐Good tasting‐MAde by a manufacturer I trust‐One of my

favorites‐One that reminds me of my childhood‐Trusted

‐Expensive‐Fresh‐Made with clean ingredients‐Natural

‐Breakstone's‐Heinz Ketchup‐Pace

‐Prego‐Reddi Wip‐Sabra

GROWTH

LOYALTY

SCALE

‐Knorr

‐Land O'Lakes‐Philadelphia

‐Old El Paso

‐Hellmann's/Best Foods



Disclosure Appendix

Reg AC

We, Jason English, Mitch Collett, CFA, Dylann B. Katz and Vivek Srivastava, hereby certify that all of the views expressed in this report accurately reflect our personal views about the subject company

or companies and its or their securities. We also certify that no part of our compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this

report.

Unless otherwise stated, the individuals listed on the cover page of this report are analysts in Goldman Sachs' Global Investment Research division.

GS Factor Profile

The Goldman Sachs Factor Profile provides investment context for a security by comparing key attributes of that security to its conviction sector and the market. The four key attributes depicted are:

growth, returns, multiple and an integrated IP score. Growth returns and multiple are indexed based on composites of several methodologies to determine the stocks percentile ranking within the

region's coverage universe. The precise calculation of each metric may vary depending on the fiscal year, industry and region but the standard approach is as follows:

Growth is a composite of next year's estimate over current year's estimate, e.g. EPS, EBITDA, Revenue. Return is a year one prospective aggregate of various return on capital measures, e.g. CROCI,

ROACE, and ROE. Multiple Multiple is a composite of one-year forward valuation ratios, e.g. P/E, dividend yield, EV/FCF, EV/EBITDA, EV/DACF, Price/Book. Integrated IP score is a composite of

Growth, Return and Multiple scores.

Quantum

Quantum is Goldman Sachs' proprietary database providing access to detailed financial statement histories, forecasts and ratios. It can be used for in-depth analysis of a single company, or to make

comparisons between companies in different sectors and markets.

GS SUSTAIN

GS SUSTAIN is a global investment strategy aimed at long-term, long-only performance with a low turnover of ideas. The GS SUSTAIN focus list includes leaders our analysis shows to be well

positioned to deliver long term outperformance through sustained competitive advantage and superior returns on capital relative to their global industry peers. Leaders are identified based on

quantifiable analysis of three aspects of corporate performance: cash return on cash invested, industry positioning and management quality (the effectiveness of companies' management of the

environmental, social and governance issues facing their industry).

Disclosures

Coverage group(s) of stocks by primary analyst(s)

Jason English: America-Food: Packaged & Manufacturing, America-Household Products/Personal Care. Mitch Collett, CFA: Europe-Beverages, Europe-Food.

America-Food: Packaged & Manufacturing: Amplify Snack Brands Inc., Campbell Soup Co., Conagra Brands Inc., General Mills Inc., Hershey Co., J. M. Smucker Co., Kellogg Co., Kraft Heinz Co., Mead

Johnson Nutrition Co., Mondelez International Inc., Pinnacle Foods Inc., Post Holdings.

America-Household Products/Personal Care: Church & Dwight Co., Clorox Co., Colgate-Palmolive Co., Edgewell Personal Care, Energizer Holdings, Estee Lauder Co., Freshpet Inc., Kimberly-Clark Corp.,

Procter & Gamble Co., Valvoline Inc..

Europe-Beverages: Anheuser-Busch InBev, Britvic Plc, Carlsberg, Coca-Cola HBC AG, Davide Campari, Diageo, Heineken, Pernod Ricard, Remy Cointreau.

Europe-Food: Agrana, Aryzta, Barry Callebaut, Chr Hansen, Danone, Kerry, Lindt & Sprungli, Nestle, Novozymes, Orkla ASA, Suedzucker AG, Tate & Lyle, Unilever, Unilever Plc.

Company-specific regulatory disclosures

The following disclosures relate to relationships between The Goldman Sachs Group, Inc. (with its affiliates, "Goldman Sachs") and companies covered by the Global Investment Research Division of

Goldman Sachs and referred to in this research.

Goldman Sachs has received compensation for investment banking services in the past 12 months: Campbell Soup Co. ($56.54), Kraft Heinz Co. ($90.83), Mondelez International Inc. ($45.62) and Nestle

(SFr80.95)

Goldman Sachs expects to receive or intends to seek compensation for investment banking services in the next 3 months: Campbell Soup Co. ($56.54), Hershey Co. ($114.02), Kraft Heinz Co. ($90.83),

Mondelez International Inc. ($45.62) and Nestle (SFr80.95)

Goldman Sachs had an investment banking services client relationship during the past 12 months with: Campbell Soup Co. ($56.54), Kraft Heinz Co. ($90.83), Mondelez International Inc. ($45.62) and

Nestle (SFr80.95)

Goldman Sachs had a non-investment banking securities-related services client relationship during the past 12 months with: Campbell Soup Co. ($56.54), Kraft Heinz Co. ($90.83) and Nestle (SFr80.95)

Goldman Sachs had a non-securities services client relationship during the past 12 months with: Campbell Soup Co. ($56.54), Hershey Co. ($114.02), Kraft Heinz Co. ($90.83), Mondelez International Inc.

($45.62) and Nestle (SFr80.95)

Goldman Sachs makes a market in the securities or derivatives thereof: Campbell Soup Co. ($56.54), Hershey Co. ($114.02), Kraft Heinz Co. ($90.83) and Mondelez International Inc. ($45.62)



Distribution of ratings/investment banking relationships

Goldman Sachs Investment Research global Equity coverage universe

Rating Distribution Investment Banking Relationships

Buy Hold Sell Buy Hold Sell

Global 33% 53% 14% 63% 57% 50%

As of April 1, 2017, Goldman Sachs Global Investment Research had investment ratings on 2,857 equity securities. Goldman Sachs assigns stocks as Buys and Sells on various regional Investment

Lists; stocks not so assigned are deemed Neutral. Such assignments equate to Buy, Hold and Sell for the purposes of the above disclosure required by the FINRA Rules. See 'Ratings, Coverage groups

and views and related definitions' below. The Investment Banking Relationships chart reflects the percentage of subject companies within each rating category for whom Goldman Sachs has provided

investment banking services within the previous twelve months.

Price target and rating history chart(s)

70 7170

6564

5960

59

61.5

6763

6160

66

6465

90 82 81

350370390410430450470490510530550

505560657075808590

Nestle (NESN.S)

Goldman Sachs rating and stock price target history

Stock Price Currency : Sw iss Franc

Source: Goldman Sachs Investment Research for ratings and price targets; FactSet closing prices as of 3/31/2017.

The price targets show n should be considered in the context of all prior published Goldman Sachs research, which may or may not have included price targets, as w ell as developments relating to the company, its industry and financial markets.

Rating

Price target

Price target at removal

Covered by Mitch Collett, CFA

Not covered by current analyst

FTSE World Europe (GBP)

Inde

xPr

ice

Stoc

kPric

e Dec 2 Sep 13N S

MB

J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M2014 2015 2016 2017

41 3937

36

35 41 38 40 4547

50 62

6162

68

66

59

61

6063

1,800

1,900

2,000

2,100

2,200

2,300

2,400

303540455055606570

Campbell Soup Co. (CPB)


Stock Price Currency : U.S. Dollar



Rating

Price target


Covered by Jason English


S&P 500

Inde

xPr

ice

Stoc

kPric

e Jul 14 Feb 28N S

MN


909189

107

106

101

92 9392

9394

89

99

110

106

101 105107

1,800

1,900

2,000

2,100

2,200

2,300

2,400

80859095

100105110115120

Hershey Co. (HSY)





Rating

Price target




S&P 500

Index

Price

Stoc

kPric

e

Apr 1, 2014 N

Apr 8 Jan 15S

MN


605955

5473

72

7393

91

8382 83 84

89

9398

100

9894

95

1,800

1,900

2,000

2,100

2,200

2,300

2,400

40

50

60

70

80

90

100

Kraft Heinz Co. (KHC)





Rating

Price target




S&P 500

Index

Price

Stoc

kPric

e Jan 15N

MB




Regulatory disclosures

Disclosures required by United States laws and regulations

See company-specific regulatory disclosures above for any of the following disclosures required as to companies referred to in this report: manager or co-manager in a pending transaction; 1% or

other ownership; compensation for certain services; types of client relationships; managed/co-managed public offerings in prior periods; directorships; for equity securities, market making and/or

specialist role. Goldman Sachs trades or may trade as a principal in debt securities (or in related derivatives) of issuers discussed in this report.

The following are additional required disclosures: Ownership and material conflicts of interest: Goldman Sachs policy prohibits its analysts, professionals reporting to analysts and members of their

households from owning securities of any company in the analyst's area of coverage. Analyst compensation: Analysts are paid in part based on the profitability of Goldman Sachs, which includes

investment banking revenues. Analyst as officer or director: Goldman Sachs policy prohibits its analysts, persons reporting to analysts or members of their households from serving as an officer,

director, advisory board member or employee of any company in the analyst's area of coverage. Non-U.S. Analysts: Non-U.S. analysts may not be associated persons of Goldman, Sachs & Co. and

therefore may not be subject to FINRA Rule 2241 or FINRA Rule 2242 restrictions on communications with subject company, public appearances and trading securities held by the analysts.

Distribution of ratings: See the distribution of ratings disclosure above. Price chart: See the price chart, with changes of ratings and price targets in prior periods, above, or, if electronic format or if

with respect to multiple companies which are the subject of this report, on the Goldman Sachs website at http://www.gs.com/research/hedge.html.

Additional disclosures required under the laws and regulations of jurisdictions other than the United States

The following disclosures are those required by the jurisdiction indicated, except to the extent already made above pursuant to United States laws and regulations. Australia: Goldman Sachs Australia

Pty Ltd and its affiliates are not authorised deposit-taking institutions (as that term is defined in the Banking Act 1959 (Cth)) in Australia and do not provide banking services, nor carry on a banking

business, in Australia. This research, and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act, unless otherwise agreed by Goldman Sachs. In

producing research reports, members of the Global Investment Research Division of Goldman Sachs Australia may attend site visits and other meetings hosted by the issuers the subject of its research

reports. In some instances the costs of such site visits or meetings may be met in part or in whole by the issuers concerned if Goldman Sachs Australia considers it is appropriate and reasonable in the

specific circumstances relating to the site visit or meeting. Brazil: Disclosure information in relation to CVM Instruction 483 is available at http://www.gs.com/worldwide/brazil/area/gir/index.html.

Where applicable, the Brazil-registered analyst primarily responsible for the content of this research report, as defined in Article 16 of CVM Instruction 483, is the first author named at the beginning of

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disclosures relating to Goldman Sachs (as defined above). Goldman Sachs Canada Inc. has approved of, and agreed to take responsibility for, this research report in Canada if and to the extent that

Goldman Sachs Canada Inc. disseminates this research report to its clients. Hong Kong: Further information on the securities of covered companies referred to in this research may be obtained on

request from Goldman Sachs (Asia) L.L.C. India: Further information on the subject company or companies referred to in this research may be obtained from Goldman Sachs (India) Securities Private

Limited, Research Analyst - SEBI Registration Number INH000001493, 951-A, Rational House, Appasaheb Marathe Marg, Prabhadevi, Mumbai 400 025, India, Corporate Identity Number

U74140MH2006FTC160634, Phone +91 22 6616 9000, Fax +91 22 6616 9001. Goldman Sachs may beneficially own 1% or more of the securities (as such term is defined in clause 2 (h) the Indian

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companies referred to in this research may be obtained from Goldman Sachs (Asia) L.L.C., Seoul Branch. New Zealand: Goldman Sachs New Zealand Limited and its affiliates are neither "registered

banks" nor "deposit takers" (as defined in the Reserve Bank of New Zealand Act 1989) in New Zealand. This research, and any access to it, is intended for "wholesale clients" (as defined in the Financial

Advisers Act 2008) unless otherwise agreed by Goldman Sachs. Russia: Research reports distributed in the Russian Federation are not advertising as defined in the Russian legislation, but are

information and analysis not having product promotion as their main purpose and do not provide appraisal within the meaning of the Russian legislation on appraisal activity. Singapore: Further

information on the covered companies referred to in this research may be obtained from Goldman Sachs (Singapore) Pte. (Company Number: 198602165W). Taiwan: This material is for reference

only and must not be reprinted without permission. Investors should carefully consider their own investment risk. Investment results are the responsibility of the individual investor. United Kingdom: Persons who would be categorized as retail clients in the United Kingdom, as such term is defined in the rules of the Financial Conduct Authority, should read this research in conjunction

with prior Goldman Sachs research on the covered companies referred to herein and should refer to the risk warnings that have been sent to them by Goldman Sachs International. A copy of these

risks warnings, and a glossary of certain financial terms used in this report, are available from Goldman Sachs International on request.

44

4139

41 42 43

46 45

47

4543 44

46 45

46

4945

4647

49

1,800

1,900

2,000

2,100

2,200

2,300

2,400

30.0032.0034.0036.0038.0040.0042.0044.0046.0048.0050.00

Mondelez International Inc. (MDLZ)





Rating

Price target




S&P 500

Index

Price

Stoc

kPric

e Jul 30B

MN




European Union: Disclosure information in relation to Article 4 (1) (d) and Article 6 (2) of the European Commission Directive 2003/125/EC is available at

http://www.gs.com/disclosures/europeanpolicy.html which states the European Policy for Managing Conflicts of Interest in Connection with Investment Research.

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Association, Financial Futures Association of Japan and Type II Financial Instruments Firms Association. Sales and purchase of equities are subject to commission pre-determined with clients plus

consumption tax. See company-specific disclosures as to any applicable disclosures required by Japanese stock exchanges, the Japanese Securities Dealers Association or the Japanese Securities

Finance Company.

Ratings, coverage groups and views and related definitions

Buy (B), Neutral (N), Sell (S) -Analysts recommend stocks as Buys or Sells for inclusion on various regional Investment Lists. Being assigned a Buy or Sell on an Investment List is determined by a

stock's return potential relative to its coverage group as described below. Any stock not assigned as a Buy or a Sell on an Investment List is deemed Neutral. Each regional Investment Review

Committee manages various regional Investment Lists to a global guideline of 25%-35% of stocks as Buy and 10%-15% of stocks as Sell; however, the distribution of Buys and Sells in any particular

coverage group may vary as determined by the regional Investment Review Committee. Additionally, the regional Investment Review Committees each manage regional Conviction lists which

represent investment recommendations focused on either the size of the potential return or the likelihood of the realization of the return. Addition or removal of stocks from such Conviction lists do not

represent a change in the analysts’ investment rating for such stocks.

Total return potential represents the upside or downside differential between the current share price and the price target, including all paid or anticipated dividends, expected during the time horizon

associated with the price target. Price targets are required for all covered stocks. The total return potential, price target and associated time horizon are stated in each report adding or reiterating an

Investment List membership.

Coverage groups and views: A list of all stocks in each coverage group is available by primary analyst, stock and coverage group at http://www.gs.com/research/hedge.html. The analyst assigns one

of the following coverage views which represents the analyst's investment outlook on the coverage group relative to the group's historical fundamentals and/or valuation. Attractive (A). The

investment outlook over the following 12 months is favorable relative to the coverage group's historical fundamentals and/or valuation. Neutral (N). The investment outlook over the following 12

months is neutral relative to the coverage group's historical fundamentals and/or valuation. Cautious (C). The investment outlook over the following 12 months is unfavorable relative to the coverage

group's historical fundamentals and/or valuation.

Not Rated (NR). The investment rating and target price have been removed pursuant to Goldman Sachs policy when Goldman Sachs is acting in an advisory capacity in a merger or strategic

transaction involving this company and in certain other circumstances. Rating Suspended (RS). Goldman Sachs Research has suspended the investment rating and price target for this stock, because

there is not a sufficient fundamental basis for determining, or there are legal, regulatory or policy constraints around publishing, an investment rating or target. The previous investment rating and

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information is not meaningful and is therefore excluded.

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