Demand Realization

Insights Driven Performance (IDP)NCA PresentationDan VucovichVP Global Chief Customer OfficerHershey North America3/15/2010 2:19 PMCAGNY - 2010 1

Key MessagesHistorical retailer and manufacturer category managementwill not be enough to realize full demand potentialShopper needs, preferences and choices are becomingmore fragmented and sophisticatedOur go to market strategy is a company wide effort“Insight Driven Performance” is a business model toachieve demand realization3/15/2010 2:19 PMCAGNY - 2010 2

Manufacturers and Retailers have evolvedtheir understanding of demand…ManufacturersConsumer BasedIdentifying ConsumerInsightsCreating ConsumerSegmentationRetailersShopper BasedIdentifying ShopperInsightsCreating ShopperSegmentationDeveloping Sales ToolsCreating Unique FormatsBrand Marketing ProgramsStore Marketing Programs3/15/2010 2:19 PMCAGNY - 2010 3

An integrated approach is critical tomaximize demand realizationConsumerPropositionHersheyShopperPropositionCollaborativeApproachDemandRealizationRetailerPropositionRetailer3/15/2010 2:19 PMCAGNY - 2010 44

An integrated approach is critical tomaximize demand realizationConsumerPropositionHersheyShopperPropositionCollaborativeApproachDemandRealizationRetailerPropositionRetailer3/15/2010 2:19 PMCAGNY - 2010 55

We understand behaviors and preferencesacross the consumer landscapeWho They AreDemographicsWhy They BuyWhat They BuyWhere/How They BuyWhen They ConsumeNeed StatesBrands, Packs, Tastes,TexturesShoppers and ChannelDynamicsUsage Occasions3/15/2010 2:19 PMCAGNY - 2010 6

And where the unmet demand residesConsumer SegmentsNeedStates3/15/2010 2:19 PMCAGNY - 2010 7

Insights guide our brand strategies Optimizes Portfolio Roles Identifies Biggest Opportunities Builds Incremental Growth Creates Focus3/15/2010 2:19 PMCAGNY - 2010 8

Insights direct focused messaging of key brandsYounger MaleInstant ConsumableProduct Focused,Late Night/Sports,Slightly IrreverentEmotional Connection to theChocolate/Peanut ButterIt’s s All About the Cup3/15/2010 2:19 PMCAGNY - 2010 9

An integrated approach is critical tomaximize demand realizationConsumerPropositionHersheyShopperPropositionCollaborativeApproachDemandRealizationRetailerPropositionRetailer3/15/2010 2:19 PMCAGNY - 2010 1111

We’re leveraging consumer and shopperinsights to create a fifth season…S’Mores3/15/2010 2:19 PMCAGNY - 2010 12

There appeared to be an opportunity forchocolate in the summerChocolate Category Seasonality Index240190140Unmet Demand90JanMayOctDec40Calendar YearSource: IRI/Nielsen3/15/2010 2:19 PMCAGNY - 2010 13

Insights identified S’mores Sas an ownablefamily usage occasionMay Jun JulAug3/15/2010 2:19 PMCAGNY - 2010 14

An integrated marketing program wascreated to ensure summer-long salesPrint & MediaPartnershipsMerchandisingRetail Activation3/15/2010 2:19 PMCAGNY - 2010 15

S’mores Commercial3/15/2010 2:19 PMCAGNY - 2010 16

There appeared to be an opportunity forchocolate in the summer240190Chocolate Category Seasonality Index3 yr CAGR+15%DollarsHershey 6-Pack140Hsy Six-Pack IndexUnmet Demand90JanMayOctDec40Calendar YearSource: IRI/Nielsen3/15/2010 2:19 PMCAGNY - 2010 17

An integrated approach is critical tomaximize demand realizationConsumerPropositionHersheyShopperPropositionCollaborativeApproachDemandRealizationRetailerPropositionRetailer3/15/2010 2:19 PMCAGNY - 2010 1818

Retailers have a deep understanding oftheir shoppersRetailer Shopper SegmentationWho They AreDemographicsWhy They BuyWhat They BuyWhere/How They BuyWhen They ConsumeTrip MissionsBrands, Packs, Tastes,TexturesShoppers and ChannelDynamicsUsage Occasions3/15/2010 2:19 PMCAGNY - 2010 19

LeverageImpulsivityMerchandising location is critical toconverting C-Store CshoppersInsightsIn C-stores, Cover 20% of confection ispurchased from secondary locationsOpportunityImprove buyer conversion by offeringconfection at the check out counter3/15/2010 2:19 PMCAGNY - 2010 20

Counter merchandising drives impulsive purchasesC-Store - Traffic Map+10%Increase inCategory $Sales3/15/2010 2:19 PMCAGNY - 2010 21

BundledPromotionCross category programs drive salesin C-storesCInsightsKit Kat and a beverage are part of ashopper’s ‘Take a Break’ ritualOpportunityPartnership on bundled program including:– TV/Print– Radio– In-Store merchandising3/15/2010 2:19 PMCAGNY - 2010 22

Cross category merchandising drivesimpulsive purchasesKitKat Velocity ChangeMarket vs. Participating Stores+360 ptsParticipating+25 ptsMarketChg YOY3/15/2010 2:19 PMCAGNY - 2010 23

IDP leverages tools and capabilities to drive demandrealizationWhere the Right SupplyMeets the High ProfitDemandHow the Right MessageGets to the RightDemand TargetStoreDisplaysMerchandisingPromotionPriceIn-Store ActivationShelf SetPrintInternet SitesTV FlightsTV ChannelsOut of Store CommunicationSponsorshipRadioAssortmentContentDemand RealizationCapturing a Higher PercentageConversion; Increasing Buying Rate3/15/2010 2:19 PMCAGNY - 2010 24

Creating IDP enables a Comprehensive a collaborative Operating approachSystemCustomersConsumersProductsProductRetail LeversAssortmentModelingShopperInsightsMarketing LeversSupplyMarketing ROI LeversChainHershey’s Demand LandscapeShopper SegmentationRetailer Trip MissionsEfficientAssortment Planogram DistributionGapsOperating SystemPlacement Demand Shopper Profit DemandPricing PromotionProfilingMerchandisingFinanceP&LMarketingPreferencesRetailInsightsPoolingBrandMarketingMerchDriversMarketResearchMediaCustomerMarketingInsightsDrivenPerformanceAdvancedAnalyticsConsumerPromotionsPartnersFront EndExpertiseHershey’s Insights Driven Performance3/15/2010 2:19 PMCAGNY - 2010 25

…with IDP will all enable stores activation having a demand at a granular profilelevel100%DetachedGuilty ControllersBroad ApproachConfection LovingModeratorsCluster ApproachLoyal IndulgersEngaged ExploringMunchersNational RetailerPractical ValueSeekingSegment3/15/2010 2:19 PMCAGNY - 2010 26

The linear, functionally oriented process andorganization approach must evolve…InsightsMarketingInsightsRetailerPlanningMarketing Cat MgtCustomer ShopperEngagementMktg& DemandRealizationSalesRetailerCat InputMgtDemandRealizationRetailerInputSalesCustomerMarketing3/15/2010 2:19 PMCAGNY - 2010 27

Key MessagesHistorical retailer and manufacturer category managementwill not be enough to realize full demand potentialShopper needs, preferences and choices are becomingmore fragmented and sophisticatedOur go to market strategy is a company wide effort“Insight Driven Performance” is a business model toachieve demand realization3/15/2010 2:19 PMCAGNY - 2010 28