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JACK SANDERS REMARKS STRUCTURAL PACKAGING SUMMIT

FEBRUARY 27, 2013

TOPIC: EMERGING TRENDS AND USING CONSUMER INSIGHTS TO MEET THOSE TRENDS/SATISFY THE

CUSTOMER

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(SLIDE 1 – INTRO SLIDE) CLEARLY, THE PACKAGING INDUSTRY CONTINUES TO FACE CHALLENGES AND CHANGING CONSUMER PREFERENCES. SO TODAY I WANT TO SHARE WITH YOU HOW WE ARE USING TRENDS AND CONSUMER INSIGHTS TO GROW OUR CONSUMER PACKAGING BUSINESSES. BEFORE I BEGIN, I WOULD LIKE TO TELL YOU A LITTLE ABOUT SONOCO. (SLIDE 2 – SONOCO OVERVIEW) ACTUALLY, SONOCO IS A 113-YEAR OLD GLOBAL PACKAGING COMPANY HEADQUARTERED IN HARTSVILLE, SOUTH CAROLINA. WE JUST REPORTED OUR 2012 RESULTS AND ACHIEVED RECORD SALES OF $4.8 BILLION. WE HAVE NEARLY 20,000 EMPLOYEES, WORKING IN 347 OPERATIONS IN 34 COUNTRIES AROUND THE WORLD. WE PROVIDE PACKAGING TO MANY OF THE BEST KNOWN BRANDS IN OVER 85 DIFFERENT NATIONS.

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AS YOU CAN SEE BY THIS SLIDE ABOUT TWO-THIRDS OF OUR SALES ARE IN THE UNITED STATES. THAT SAID, WE HAVE A GROWING PRESENCE IN THE EMERGING MARKETS OF EASTERN EUROPE, SOUTHEAST ASIA AND LATIN AMERICA.

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SONOCO HAS FOUR OPERATING SEGMENTS: (1) OUR LEGACY BUSINESS IS OUR INDUSTRIAL

PACKAGING SEGMENT WHERE WE ARE THE WORLD’S LARGEST PRODUCER OF PAPER-BASED TUBES AND CORES THAT SERVE THE TEXTILE, PAPER, PLASTIC FILM AND TAPE INDUSTRIES.

(2) OUR NEWEST SEGMENT IS PROTECTIVE SOLUTIONS, WHERE WE PRODUCE CUSTOM-ENGINEERED PROTECTIVE PACKAGING FOR CONSUMER PRODUCTS, MOLDED FOAM COMPONENTS FOR THE AUTOMOTIVE MARKET; TEMPERATURE-ASSURED PACKAGING FOR THE LIFE SCIENCE INDUSTRY AND FINALLY, HIGH VISIBILITY SECURITY PACKAGING FOR THE RETAIL INDUSTRY.

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(3) CONSUMER PACKAGING, WHICH INCLUDES PAPER-

BASED COMPOSITE CANS (THINK OF PRINGLES), FLEXIBLE PACKAGING (THINK OF OUR PATENTED SMARTSEAL OPEN AND RECLOSE FEATURE ON OREO COOKIES), RIGID PLASTIC CONTAINERS, INCLUDING BLOW-MOLDED BOTTLES FOR FOOD AND PERSONAL CARE PRODUCTS; THERMOFORMED TRAYS FOR FROZEN FOODS; INJECTION MOLDED COMPONENTS AND EXTRUDED CARTRIDGES FOR ADHESIVES AND SEALANTS.

(4) ALSO, PART OF OUR CONSUMER PORTFOLIO IS OUR DISPLAY AND PACKAGING SEGMENT, WHERE WE PROVIDE POINT-OF-PURCHASE DISPLAYS AND PACKAGING FULFILLMENT SERVICES FOR LARGE CPGS. FOR INSTANCE, WE PACKAGE ALL GILLETTE’S RAZORS AND BLADES IN NORTH AMERICA AND EUROPE.

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(SLIDE 3 – CONSUMER TRENDS) AS MENTIONED EARLIER, THE PACKAGING INDUSTRY CONTINUES TO FACE CHALLENGES AND CHANGE. SOME OF THESE CHALLENGES ARE LISTED HERE AS CONSUMER TRENDS ARE FORCING CHANGES IN PACKAGING. HOWEVER, I DO BELIEVE WE FACE ONE OF THE MOST UNIQUE AND OPPORTUNISTIC TIMES OUR WORLD HAS EVER EXPERIENCED. I WANT TO SPEAK WITH YOU TODAY ABOUT MANY OF THE POSITIVE TRENDS WE SEE WHEN WE LOOK INTO THE FUTURE AND HOW WE ARE WORKING TO TAKE ADVANTAGE OF THESE OPPORTUNITIES.

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(SLIDE 4 – WHAT IS THE ECONOMY TELLING US?) BUT, BEFORE I GET INTO THE HEART OF MY PRESENTATION, IT IS IMPORTANT TO UNDERSTAND WHERE WE ARE IN THE CURRENT ECONOMIC CYCLE AND THE IMPACT IT HAS ON PACKAGING. ALTHOUGH WE HAVE HAD SOME RESOLUTION TO THE “FISCAL CLIFF,” THERE ARE MANY OPEN ISSUES AND I BELIEVE WE ARE STILL IN FOR ANOTHER YEAR OF SLOW GROWTH. OVERALL, WE BELIEVE U.S. GDP WILL GROW AT LESS THAN 2% IN 2013 AS CONSUMER CONFIDENCE IS SHAKY, AND THE DATA IS A BIT CONTRADICTORY. FOR INSTANCE, ON THE NEGATIVE SIDE, U.S. GDP DECLINED IN THE FOURTH QUARTER OF 2012 AND MOST OF EUROPE REMAINS IN RECESSION.

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ON THE POSITIVE SIDE, U.S. HOUSING STARTS HAVE GROWN SIGNIFICANTLY AND ARE AVERAGING ABOUT 950,000 UNITS ANNUALLY. THIS IS ABOUT ONE-THIRD OF THE PEAK VOLUME IN 2005, BUT, UP SIGNIFICANTLY FROM THE DEPTHS OF THE GREAT RECESSION. ANOTHER POSITIVE ECONOMIC INDICATOR IS U.S. AUTO PRODUCTION, WHICH HAS SHOWN CONSISTENT GROWTH SINCE THE GREAT RECESSION TO ABOUT 15 MILLION UNITS ANNUALLY. CLEARLY, FURTHER IMPROVEMENT IN HOME CONSTRUCTION AND AUTO PRODUCTION WILL INCREASE JOBS, IMPROVE CONSUMER SPENDING AND INCREASE DEMAND FOR CONSUMER PRODUCTS AND THEIR PACKAGING.

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(SLIDE 5 – MEGA TRENDS IMPACTING FUTURE GROWTH) BUT THAT’S 2013. LET’S TALK ABOUT 2020. RECENTLY, WE ASKED BAIN CONSULTING TO CONDUCT A DETAILED ASSESSMENT OF THE GLOBAL ECONOMY AND WHAT IMPACT CERTAIN TRENDS WOULD HAVE ON OUR BUSINESS THROUGH THE CURRENT DECADE. AS PART OF THIS WORK, THEY UNCOVERED EIGHT “MEGATRENDS” THEY BELIEVE WILL ADD $27 TRILLION DOLLARS TO GLOBAL GDP BY 2020. FOUR OF THESE MEGATRENDS DIRECTLY AFFECT SONOCO AND WE HAVE WORKED VERY HARD TO ALIGN OUR LONG-TERM STRATEGY TO TAKE ADVANTAGE OF THESE TRENDS.

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(SLIDE 6 – MEGA TRENDS IMPACTING FUTURE GROWTH – FOCUSED FOUR) THE FOUR RELEVANT MEGATRENDS ARE EXPECTED TO IMPACT GLOBAL GDP BY AN ESTIMATED $22 TRILLION BY 2020. THEY INCLUDE:

• THE NEXT BILLION CONSUMERS – THIS IS A $10 TRILLION MEGATREND THAT SHOWS HOW THE RISING WEALTH OF EMERGING ECONOMIES WILL LIKELY INCREASE THE DEMAND FOR CONSUMER PRODUCTS (AND THUS PACKAGING).

• GROWING OUTPUT OF PRIMARY INPUTS – CLEARLY, AN INCREASE IN GLOBAL CONSUMER DEMAND WILL FUEL AN INCREASE IN DEMAND FOR COMMODITIES, RANGING FROM ENERGY TO BASIC RAW MATERIALS. AS A RESULT, THE COMMODITY COST VOLATILITY WE’VE SEEN IN RECENT YEARS IS LIKELY TO CONTINUE.

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• KEEPING THE WEALTHY HEALTHY – THIS IS A $4 TRILLION-DOLLAR MEGATREND PRIMARILY IMPACTING DEVELOPED ECONOMIES AS THEY ADJUST TO THE DEMANDS OF AN AGING POPULATION.

• FINALLY, EVERYTHING THE SAME BUT NICER – THIS $5 TRILLION-DOLLAR MEGATREND IS ALSO FOCUSED ON DEVELOPED ECONOMIES AS MORE AFFLUENT CONSUMERS DRIVE PREMIUM PRODUCTS AND SERVICES.

IN THE NEXT PART OF OUR ASSESSMENT, WE SOUGHT TO UNDERSTAND WHAT LEVEL OF IMPACT (EITHER POSITIVE OR NEGATIVE) THESE FOUR MEGATRENDS WOULD HAVE ON OUR BUSINESSES. WE BELIEVE THAT EMERGING ECONOMIES CAN DRIVE POSITIVE GROWTH FOR MANY OF OUR BUSINESSES, INCLUDING OUR MORE MATURE INDUSTRIAL-FOCUSED BUSINESSES.

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HOWEVER, EACH OF OUR BUSINESSES COULD BE NEGATIVELY IMPACTED BY COMMODITY COST VOLATILITY DUE TO INCREASED GLOBAL CONSUMER DEMAND. IN ADDITION, OUR ASSESSMENT INDICATES WE SHOULD HAVE GROWTH OPPORTUNITIES IN DEVELOPED COUNTRIES CATERING TO THE NEEDS OF AN AGING, MORE AFFLUENT CONSUMER. OVERALL, WE ARE BULLISH. THE NEXT BILLION CONSUMERS REPRESENT ONE OF “THE BIGGEST GROWTH OPPORTUNITIES IN THE HISTORY OF CAPITALISM.” AND HEALTH AND LIFESTYLE TRENDS PROVIDE A $9 TRILLION OPPORTUNITY IN ADVANCED ECONOMIES. THAT IS A LOT OF GROWTH POTENTIAL.

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(SLIDE 7 – TRANSFORMING ECONOMY REQUIRES A DIFFERENT APPROACH) ONE CLEAR TREND IS A MOVE FROM A SUPPLY-BASED ECONOMY TO A DEMAND-BASED ECONOMY. CUSTOMERS ARE TENDING TO ORDER BASED SOLEY ON KNOWN DEMAND AND WE BELIEVE THIS TREND WILL CONTINUE. THIS DEMAND DRIVEN ECONOMY REQUIRES THAT WE TAKE A DIFFERENT APPROACH. WE CAN NO LONGER WAIT FOR OUR CUSTOMERS TO PLACE THE NEXT ORDER. WE MUST PROACTIVELY DEVELOP SOLUTIONS AND TARGETED INNOVATIONS THAT ANTICIPATE CUSTOMER NEEDS. SAID ANOTHER WAY, IF YOU HAVE TO ASK YOUR CUSTOMER WHAT THEY WANT, IT IS PROBABLY TOO LATE AS THEY HAVE ALREADY TOLD YOUR COMPETITORS AS WELL.

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(SLIDE 8 – TRANSFORMING PACKAGING REALITY) THE GLOBAL PACKAGING MARKET IS EXPECTED TO GROW AT A COMPOUND RATE OF JUST OVER 3 PERCENT. HOWEVER, AS THIS CHART SHOWS, FLEXIBLE PACKAGING IS EXPECTED TO GROW AT 3.5 PERCENT AND RIGID PLASTIC PACKAGING WILL GROW AT 5.6 PERCENT ANNUALLY. BASED ON THESE TRENDS, SONOCO HAS BEEN FOLLOWING A STRATEGY OF PROVIDING OUR CONSUMER CUSTOMERS WITH MULTI-STRUCTURAL PACKAGING CHOICES BASED ON THEIR NEEDS – WHETHER IT IS A COMPOSITE CAN, A FLEXIBLE PACKAGE OR A RIGID PLASTIC CONTAINER.

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(SLIDE 9 – GROWTH IN PACKAGING DRIVEN BY EMERGING MARKETS) ONE OF THE LARGEST DRIVERS OF NEW CONSUMER PRODUCTS WILL COME FROM THE ESTIMATED ONE BILLION NEW CONSUMERS THAT WILL ARRIVE OVER THE NEXT DECADE, ESPECIALLY IN EMERGING MARKETS SUCH AS ASIA AND SOUTH AMERICA.

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(SLIDE 10 – A NEW MIDDLE CLASS VISUAL) THE NEW MIDDLE CLASS GROWING IN EMERGING MARKETS WILL CONTRIBUTE $10 TRILLION IN GROWTH BY 2020. (SLIDE 11 – MAP) THEY LIVE IN A DOZEN EMERGING MARKET COUNTRIES; NOT JUST IN THE SO CALLED BRIC NATIONS. (SLIDE 12 – PACKED STREET SLIDE) AND WESTERN MULTINATIONALS EXPECT 70% OF FUTURE GROWTH TO COME FROM THESE EMERGING ECONOMIES.

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(SLIDE 13 – CHANGING OUR MARKETING FOCUS) SO WHAT DOES ALL OF THIS MEAN? HOW DO THESE MEGA TRENDS IMPACT US? ONE OF THE BIGGEST CHANGES WE HAVE MADE IS IN THE AREA OF MARKETING “INSIGHTS”. AS I MENTIONED EARLIER, IF WE HAVE TO ASK OUR CUSTOMERS WHAT THEY WANT, IT IS PROBABLY TOO LATE. OVER THE PAST FEW YEARS, WE HAVE DEVELOPED A PROPRIETARY SUITE OF CONSUMER RESEARCH CAPABILITIES TO DRIVE NEW PRODUCT DEVELOPMENT. FOR INSTANCE, BY USING RAPID CONSUMER FEEDBACK WE CAN TELL OUR CUSTOMERS WHAT CONSUMERS ARE SAYING ABOUT THEIR PRODUCT PACKAGING AND SPECIFICALLY ABOUT THEIR PREFERENCES.

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(SLIDE 14 – PEPPERIDGE FARM CASE STUDY INTRO SLIDE) A KEY SUCCESS OF THIS STRATEGY CAN BE SEEN IN OUR INSIGHTS-DRIVEN APPROACH TO PEPPERIDGE FARM’S NATURALS-BAKED CHIPS. (SLIDE 15 – IN THE BEGINNING) MOST OF US ARE FAMILIAR WITH THIS TYPE OF PACKAGE. THIS IS A TYPICAL QUAD-SEAL BAG THAT MOST PEOPLE SEE ON THEIR GROCERY SHELF.

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YOU WOULD PURCHASE THESE, GO HOME, OPEN THEM, AND THEN, IF YOU ARE LIKE MOST FAMILIES, YOU WOULD USE A DEVICE OR METHOD TO RECLOSE THEM, LIKE THESE. (SLIDE 20 – INTO BAG) OR -- EVERY CPG’S NIGHTMARE. A COMPLETE LOSS OF ON-SHELF IDENTITY

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(SLIDE 21 – BAG EVOLUTION/SEALTAB)

• THIS STORY DID NOT START WITH DEVELOPING A PRODUCT FOR PEPPERIDGE FARM.

• WE CONDUCTED ETHNOGRAPHY AND INSIGHT GROUP STUDIES ON EXISTING COFFEE FLEXIBLE TIN-TIE PACKAGING VS. A NEW PACKAGE WITH A RECLOSABLE FEATURE.

• OUR RESEARCH FOUND THAT ONLY ONE-THIRD OF STUDY PARTICIPANTS KEPT COFFEE IN THE ORIGINAL TIN-TIE PACKAGE, WHILE 50 PERCENT EMPTIED THE PACKAGE AND STORED THE COFFEE IN AIR-TIGHT RIGID CONTAINERS. (LIKE A COMPOSITE CAN)

• AS A RESULT, CONSUMERS SAID THE RECLOSE FEATURE WAS NOT THAT IMPORTANT TO THEM.

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• WE TOOK THE RECLOSE FEATURE TO PEPPERIDGE FARM AND CONDUCTED MORE CONSUMER RESEARCH. THE RESEARCH SHOWED THAT CONSUMERS “VALUED” THE PACKAGE WITH THE RECLOSE FEATURE.

• WORKING WITH PEPPERIDGE FARM, WE CAME UP WITH THIS RECLOSABLE BAG, THE FIRST EVER USING OUR PATENTED SEALTAB TECHNOLOGY FOR THEIR NATURAL’S CRACKER CHIPS.

• WITH THE SEALTAB FEATURE, CONSUMERS CAN OPEN THE BAG AS NORMAL, BUT RECLOSE IT WHEN THEY FINISH SNACKING THROUGH MULTIPLE USES.

• NO MORE DUCK TAPE OR DUMPING THE PRODUCT INTO AN UNBRANDED PLASTIC BAG AS SHOWN EARLIER.

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THIS INNOVATION SOLVED THREE ISSUES:

• 1) IT PROVIDED CONSUMERS WITH WHAT THEY WANTED – A RECLOSABLE PACKAGE THAT WOULD KEEP CHIPS FRESH.

• 2) IT SUPPORTED PEPPERIDGE FARM’S DESIRE TO KEEP THEIR BRAND IN FRONT OF THE CONSUMER LONGER,

• AND IT 3) REQUIRED NO ADDITIONAL CAPITAL INVESTMENT FOR THE CUSTOMER.

THE PRODUCT WAS LAUNCHED IN SEPTEMBER OF 2012 AND WAS A TOP INNOVATION AT PACK EXPO INTERNATIONAL.

THE SEALTAB RECLOSE FEATURE WILL BE USED IN OTHER SNACK PRODUCTS VERY SOON AND WE’VE RECEIVED ADDITIONAL SKUS FROM PEPPERIDGE FARM.

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(SLIDE 22 – WIN/WIN SOLUTION) THIS SUCCESS STORY MARRIES CONSUMER NEEDS WITH PACKAGING KNOWLEDGE AND MANUFACTURING CAPABILITIES. WE WERE ABLE TO DELIVER PACKAGING BENEFITS THAT CONSUMERS VALUE WITHOUT OUR CUSTOMER HAVING TO INVEST SIGNIFICANT CAPITAL. THIS PACKAGE IS INNOVATIVE AND FORWARD-THINKING. IT DIFFERENTIATED OUR CUSTOMERS’ PRODUCTS AND SATISFIED THEIR CONSUMERS.

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(SLIDE 23 – LEGO SOLUTION) LET ME GIVE YOU ONE LAST EXAMPLE OF USING INSIGHTS -- AND OUR MULTI-STRUCTURAL CAPABILITY -- TO MEET THE CUSTOMER’S NEEDS BY DELIVERING A TOTAL SOLUTION. THIS EXAMPLE INVOLVES LEGO. SONOCO WAS FIRST ASKED TO PROVIDE PACKAGING FULFILLMENT SERVICES FOR LEGO’S PRODUCTS IN EUROPE AND THEN IN NORTH AMERICA. BUT THE MORE WE GOT TO KNOW LEGO’S BUSINESS AND CHALLENGES, THE MORE WE INDENTIFIED OPPORTUNITIES TO IMPROVE THEIR PRODUCTS’ APPEARANCE ON STORE SHELVES. WE SUGGESTED A NEW PACKAGE IN THE FORM OF A COLORFUL, RECLOSABLE, STAND-UP POUCH VS. THE TRADITIONAL CHIPBOARD BOX.

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YOUNG CHILDREN TODAY ARE VERY FAMILIAR WITH FLEXIBLE POUCHES AND OUR RESEARCH CONFIRMED THIS. ONLY SONOCO COULD DELIVER EVERY ASPECT OF THE NEW PACKAGE, FROM DESIGN, TO ARTWORK MANAGEMENT, TO COLOR SEPARATIONS AND CYLINDER ENGRAVING, TO PRECISION PRINTING AND FINALLY PACKAGING FULFILLMENT. AS A RESULT, OUR TOTAL SOLUTION WON THE “BEST OF THE BEST” GOLDEN CYLINDER AWARD FROM THE GRAVURE ASSOCIATION OF AMERICA. BUT MORE IMPORTANTLY, IT SATISFIED OUT CUSTOMER AND DROVE ADDITIONAL LEGO SALES.

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(SLIDE 24 – SATISFY THE CUSTOMER) THE STARBUCKS COFFEE, PEPPERIDGE FARM AND LEGO CASE STUDIES ARE JUST A FEW EXAMPLES OF OUR STRATEGY TO USE INSIGHTS AND MULTI-STRUCTURAL PACKAGING OPTIONS TO SATISFY OUR CUSTOMERS. WHAT WE HAVE LEARNED IS ENCAPSULATED IN THIS LOGO. IT SYMBOLIZES THE KEY ELEMENTS OF OUR MISSION AND STRATEGIC FOCUS. THIS LOGO TAKES OUR STRATEGIC FOCUS AREAS AND SURROUNDS THEM WITH OUR NUMBER ONE PRIORITY –“SATISFY THE CUSTOMER.” IN OUR MISSION STATEMENT WE USE THE WORDS:

• INNOVATIVE – MEANING WE LEVERAGE TECHNOLOGY TO CREATE MARKET-FOCUSED SOLUTIONS;

• VALUE-CREATING – MEANING WE WILL BE THE BEST COST PRODUCER GIVEN THE CUSTOMER BENEFIT DESIRED;

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• AND SOLUTIONS – MEANING A MULTI-PRODUCT AND SERVICE OFFERING THAT DELIVERS THE MOST COMPLETE VALUE EQUATION

OUR “SATISFY THE CUSTOMER STRATEGY” IS CUSTOMER-FOCUSED – IT IS CUSTOMER DRIVEN – AND ULTIMATELY IT WILL BE CUSTOMER JUDGED. TO TRULY PROVIDE THE LEVEL OF CUSTOMER SATISFACTION THAT WILL MAKE US BETTER THAN OUR COMPETITORS, WE MUST DO SOME THINGS DIFFERENTLY. WE MUST BECOME MORE OUTWARDLY FOCUSED TOWARD THE CUSTOMER. THIS MEANS WE MUST DO WHAT THE CUSTOMER WANTS VERSUS WHAT WE THINK THEY WANT. WE ARE FOCUSING ON BETTER UNDERSTANDING CONSUMER BEHAVIORS SO WE CAN CHANGE THE CONVERSATION WITH OUR CUSTOMERS AND DEMONSTRATE A BETTER UNDERSTANDING OF THEIR NEEDS.

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FOCUSING ON CONSUMERS, AND ON END USE MARKETS, ALLOWS US TO BETTER UNDERSTANDING MARKET GROWTH, CONSUMER PREFERENCES, CUSTOMER NEEDS AND GEOGRAPHIC TRENDS. THE WORLD IS CHANGING AND WE MUST ADAPT OR BE LEFT BEHIND.