BLAST 27 September 2019

27 September 2019

Weekend Consumer Blast: Will celebrity beauty brands be able to

outlast the trend of the moment?
Ali Dibadj +1-212-756-4137 ali.dibadj@bernstein.com

Richard J Clarke, FCA +44-207-170-0536 richard.clarke@bernstein.com

Callum Elliott, CFA, ACA +44-207-170-0502 callum.elliott@bernstein.com

Brandon Fletcher, CFA +1-212-969-1498 brandon.fletcher@bernstein.com

Alexia Howard +1-212-407-5941 alexia.howard@bernstein.com

Euan McLeish +852-2918-5780 Euan.McLeish@bernstein.com

Jamie Merriman +1-212-823-3978 jamie.merriman@bernstein.com

Bruno Monteyne +44-207-170-5086 bruno.monteyne@bernstein.com

Sara H. Senatore +1-212-756-4289 sara.senatore@bernstein.com

Trevor Stirling +44-207-170-5087 trevor.stirling@bernstein.com

Vitaly Umansky +852-2918-5706 vitaly.umansky@bernstein.com

By Ali Dibadj & Consumer Team which included makeup in its domain) have launched or
announced that they will soon be launching a makeup company
As an increasing number of celebrity beauty brands are launched,
(Exhibit 1).
investors have looked to better understand their capabilities for
growth and competition within the cosmetics sector. A helpful
EXHIBIT 1: A glance at the increasing number of celebrity
analogy to inform our viewpoint is looking at what happened with
makeup brands
celebrity fragrances. Of most significance to analyze is, whether
celebrity makeup brands suffer the same fate as celebrity 2015 2018
Kylie Cosmetics
fragrances? Circa Beauty
(Eva Mendes) (Kylie Jenner)
Honest Beauty
(Jennifer Alba)
Thorne by
Bella (Thorne)
Kora Organics
(Miranda Kerr)
P8NT
(Gwen Stefani)

Celebrities have long been used as the face of many beauty

products or brands. Employed as a spokesperson or the center 2011 2017 2019
Nuance by Salma Hayek
Fenty Beauty KKW Beauty Florence by
of an advertising campaign, celebrities represent a wide Flower
(Drew Barrymore) (Rihanna) (Kim Kardashian) Millie Bobby
Victoria Beckham
Beauty
2017 2017 Brown
spectrum of beauty products, from fragrances to eye shadow to Trademark filed,
Announced but not launched: but not yet launched:
hair conditioner. Instead of just sponsoring a product, over the Haus Laboratories (Lady Gaga)
Lindsay Lohan
Thank U, Next (Ariana Grande)
Aneres (Serena Williams)
last few years, an increasing number of celebrities have launched INDUSTRY | 1

their own makeup lines. Celebrities having their own beauty
products is not novel. In fact, beginning in the mid-2000s there
was a broad movement of celebrities introducing their own
fragrance brands. As the celebrity fragrance trend has wafted
away (sorry!), celebrity cosmetic brands are coming to populate
shelves and consumers' minds. While maybe at first glance a side
job for Grammy and Oscar winning stars, these celebrity
cosmetic brands are not immaterial. Some of the most well-
known celebrity cosmetic brands are Kylie Cosmetics, by Kylie
Jenner, Rihanna's Fenty Beauty, and Jessica Alba's Honest
Beauty (under the larger Honest Company name), but the list truly
goes on and on. Kylie Jenner was named the youngest self-made
billionaire ever by Forbes in 2019, in large part due to her
cosmetic brand. Celebrities ranging from YouTube sensations to
reality TV stars to athletes (Serena Williams filed a patent in 2018
Note: Honest Beauty originally launched in 2015, and relaunched with a smaller
selection of products in 2018; Circa Beauty (Eva Mendes) is reportedly discontinued
today
Source: Bernstein Analysis
With celebrities as more than just the spokesperson, but truly the
essence of the brand, this trend aligns itself with today's
increased obsession around personal image, propelled by social
media, as well as celebrity connection. These makeup brands
target different audiences, largely a function of the celebrity icon
they are attached to. For example, Millie Bobby Brown (the 15-
year-old star of Netflix hit show Stranger Things) has launched a
line targeted specifically at Gen Z and sponsored by PETA, while
Victoria Beckham's product may draw a different consumer

Analyst Page Bernstein Events Industry Page

See Disclosure Appendix of this report for important disclosures and analyst certifications www.bernsteinresearch.com
Ali Dibadj +1-212-756-4137 ali.dibadj@bernstein.com
reminiscent of Posh Spice's glory days (Exhibit 2-3). Meanwhile,
some lines have built strong brand equity around specific
categories, such as Kylie with Lip Kits, or Rihanna's Fenty in
foundation (Rihanna's Fenty really established itself in the
category through its wide range of color tones, offering 50
different shades) (Exhibits 2-5).
EXHIBIT 2: Millie Bobby EXHIBIT 3: …while Victoria
Brown is launching a PETA Beckham's new line draws
sponsored, Gen Z targeted an older consumer
line…
Source: Wikimedia Commons Source: Wikimedia Commons
EXHIBIT 4: Lip Kits were EXHIBIT 5: Rihanna's Fenty
Kylie Cosmetic's first and Beauty offers 50+ color
most famous product tones in foundation
Source: Wikimedia Commons Source: Bernstein Photos
The fact that the celebrity runs the brand entitles them to a great
advantage: free advertising. Celebrities can advertise for free on
their own social media platforms instantly reaching thousands, or
for Kylie Jenner her 145 million followers.
Many celebrity makeup brands have DTC websites (which often
link directly from their social media accounts). Sometimes brands
begin with just a DTC website (such as Kylie Cosmetics), and if
successful, are able to leverage their success to expand into
brick-and-mortar (as Kylie has done with Ulta). We've also seen
some examples of retailer partnerships. For example, Fenty
worked with LVMH's incubator Kendo, and launched exclusively
in Sephora. Lady Gaga has recently launched Haus Laboratories
on its DTC website as well as Amazon (the brand's official retail
partner).
Some of these brands also work with third party manufacturers.
The Honest Company outsources its manufacturing but builds
formulas in-house, stating that this combination allows the
U.S. HOUSEHOLD & PERSONAL PRODUCTS
27 September 2019
company to scale distribution while maintaining control over
product quality. Kylie Cosmetics has publicized her partnership
with a third-party manufacturer, Seed Beauty, based in California
(Kylie Jenner was seen visiting the manufacturing facility and
"making" one of her lip kits in her family's reality TV show).
Some celebrity makeup brands are embracing health and
wellness. Many of them are cruelty free, and some are even
chemical free or at least claim to be. They brand products in their
lines with a variety of health and wellness buzzwords such as
eco-friendly and vegan. For instance, all of Kylie Cosmetics' Lip
Kits are vegan, and a range of other products have certain
shades or varieties that are as well. Another example is Miranda
Kerr (a famous supermodel, I am told) who has a makeup and
skin care line called Kora Organics. This brand's "secret
ingredient" and differentiator is the juice of a fruit only found in
the South Pacific Islands which she claims has immense health
benefits. Larger and more established brands, as well as
retailers, have caught onto this growing consumer trend too.
Sephora recently introduced a "Clean at Sephora" seal to label
products, while maintaining a list of products for shoppers to
reference. Ulta.com now has filters that can let customers search
for products by a range of health qualifiers such as paraben-free,
vegan etc.
Finally, we've seen some range in pricing across celebrity beauty
brands. Some aim for affordability such as Drew Barrymore's
Flower Beauty that is sold in Walmart, among other places.
Meanwhile, a closer examination of Fenty Beauty's prices vs. top-
selling competitors at Sephora suggest average price-points
across its best-selling categories: concealer, foundation, and
highlighter (Exhibit 6). Kylie's pricing skews higher-end vs. key
competitors on Ulta (Exhibits 7-9). We also used Euromonitor
data to examine leading brands in 2018 across eye makeup and
lip products, confirming Kylie Cosmetics' tilt premium (Exhibits
10-11). A potential risk to Kylie's pricing is that its third-party
manufacturer, Seed Beauty, also has its own makeup brand
ColourPop, competing in some of the same categories (and also
offered at Ulta). Seed Beauty claims the two lines are made in
separate facilities with different technology and ingredients, but
both claim to be cruelty-free. Meanwhile, ColourPop is noticeably
less expensive than Kylie's products, for instance selling lip gloss
at $7 vs. Kylie's at $16. One reviewer on Ulta.com only a few
days ago compared the two against each other, noting
ColourPop's lipstick, "dries fast, is cheaper than Kylie, and is also
cruelty free." A beauty blogger who reviewed the ingredients of
ColourPop and Kylie Jenner's lipsticks found that the ingredients
were the same but in slightly different proportions, actually
preferring ColourPop. We think this discovery by consumers
around Kylie's lack of proprietary technology and availability of a
cheaper almost identical substitute could pressure the price
premiums Kylie's products command today.
BERNSTEIN 2
Ali Dibadj +1-212-756-4137 ali.dibadj@bernstein.com 27 September 2019

EXHIBIT 6: Fenty had average price-points across its best- EXHIBIT 10: Compared to the EXHIBIT 11: For lip products,
selling categories largest eye makeup brands Kylie Cosmetics ranked
Fenty Beauty Prices vs Competitors ($/unit)
in 2018, Kylie Cosmetics is about average on pricing vs.
more expensive category incumbents
Highlighter
Kylie Eye Makeup Price vs. Kylie Lip Product Price vs.
Concealer
Best Selling Brands ($/unit) Best Selling Brands ($/unit)
Foundation
120 300
100 250
80 200
60 150
40 100
20 50
0 0

Source: Sephora.com, Bernstein analysis

EXHIBIT 7: Kylie Cosmetics'
eyeshadow palette had a
price per unit value of 3.1,
slightly above average of
the comparison group
Kylie Cosm etics Price vs
Com petitors ($/unit)
Eyeshadow Palette
Note: Urban Decay and Morphe each
had two different products listed as
bestsellers in the eyeshadow palette
category
Source: Ulta.com, Bernstein analysis
EXHIBIT 9: Kylie Cosmetics' lipstick is sold a little below
average amongst category best sellers
Kylie Cosm etics Price vs
Com petitors ($/unit)
EXHIBIT 8: Kylie Cosmetics'
bestselling lip gloss, one of
its most popular items,
sells at a premium
Kylie Cosm etics Price vs
Com petitors ($/unit)
Lip Gloss
Note: ColourPop is manufactured by the
same 3rd party as Kylie Cosmetics
Source: Ulta.com, Bernstein analysis
Note: Compared to five brands with Note: Compared to five brands with
greatest sales in the subcategory in greatest sales in the subcategory in
2018; Kylie Cosmetics ranked 22nd 2018; Kylie Cosmetics ranked 11th
Source: Euromonitor, Bernstein analysis Source: Euromonitor, Bernstein analysis
The previous celebrity beauty brand trend was in the fragrance
space. In 1991, the actress Elizabeth Taylor launched her own
perfume, White Diamonds in a diamond encrusted and
champagne look-a-like bottle, and it has become one of the most
iconic fragrances of all time. Taylor was quite out of the ordinary
in offering a celebrity fragrance brand at the time, and it wasn't
until the mid-2000s that an inundation of celebrity fragrances
began entering the market. Everyone from Jennifer Lopez to
Sarah Jessica Parker to Britney Spears all introduced their own
fragrance lines (Exhibit 12). The celebrity fragrance space quickly
became saturated – with Britney Spears alone offering over 20
different fragrances (especially before her shaved head incident,
I am told) (Exhibit 13).
EXHIBIT 12: Celebrity fragrances exploded in the
mid-2000s
2007 2011
Someday
Antonio (Justin Bieber)
(Antonio Banderas)
Shine

Lipstick
2005 He
(Usher) 2009 (Heidi Klum)

Lovely Meow
M Socialite (Katy Perry)
2003 (Sarah Jessica Parker)
Instinct
(Mariah Carey) (Kim Kardashian)
Celine Black Star Wonderstruck
L
(David Beckham) (Avril Lavigne) (Taylor Swift)
(Celine Dion) (Gwen Stefani)
1991
White Diamonds
(Elizabeth Taylor)

2002 2004 2006 2010

Glow Curious With Love…Hilary Duff S
2012
(Jennifer Lopez) (Britney Spears) (Shakira) Selena Gomez
3121 (Prince)
Paris Hilton Driven Lady Gaga Fame
(Derek Jeter)
23
Note: ColourPop is manufactured by the same 3rd party as Kylie Cosmetics (Michael Jordan) J
(Jennifer Aniston)
Source: Ulta.com, Bernstein analysis Xpose
(Christina Aguilera) Heat
(Beyonce)

INDUSTRY | 2

Note: these are the first or most popular fragrance of the celebrities, but most of
these celebrities have multiple different scents
Source: Bernstein Analysis

U.S. HOUSEHOLD & PERSONAL PRODUCTS BERNSTEIN 3

Ali Dibadj +1-212-756-4137 ali.dibadj@bernstein.com 27 September 2019

EXHIBIT 14: Elizabeth EXHIBIT 15: … losing market

Taylor's perfume sales share in that time
EXHIBIT 13: Some of Britney Spears' 20+ fragrances,
declined -6.5% on average
including Midnight Fantasy which is highly rated by
over the past few years…
perfume critics
Elizabeth Taylor's Sales Growth Elizabeth Taylor's Market Share
2.0 1.4

0.0 1.2

1.0
-2.0
0.8
-4.0 0.6
-5.4 0.6
-6.0 avg. -5.5
0.4
-8.0 0.2

-10.0 0.0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
-12.0
2010 2011 2012 2013 2014 2015 2016 2017 2018 Total Fragrance Market

Source: Euromonitor, Bernstein analysis Source: Euromonitor, Bernstein analysis

Source: Wikimedia commons

EXHIBIT 16: Britney Spears' EXHIBIT 17: …while losing
The popularity of celebrity fragrances stemmed from the notion perfume sales market share over the past
that while the average consumer couldn't become "the next declined -3.6%… decade
Jenny from the Block", they could at least become more like her Britney Spears' Sales Growth Britney Spears' Market Share

by wearing her immensely popular fragrance, Glow. In this period, 5.0 0.6

purchasing and wearing a celebrity fragrance was as close as 0.0

0.5

0.4
one could get to their favorite actor or singer. Jennifer Lopez's avg. -3.6
-2.3
0.3
-5.0
0.3
scent, Glow, introduced in 2002 sold $100 million of perfume in
0.2
the first year. The New York Times perfume reviewer, a -10.0

0.1
meaningful endorsement for the industry, rated Britney Spears' -15.0
0.0
Midnight Fantasy four-stars signifying an excellent review in -20.0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

2009. In 2009, Britney Spears' fragrances had sales of $30.4 2010 2011 2012 2013 2014 2015 2016 2017 2018 Total Fragrance Market

million.
Source: Euromonitor, Bernstein analysis Source: Euromonitor, Bernstein analysis
The sustainability, or lack thereof, of success of celebrity
fragrance brand can be seen by examining historical Euromonitor
data. Only 5 years ago, 8 celebrity fragrance brands existed in the EXHIBIT 18: Antonio EXHIBIT 19: …while market
database, while today only 3 of those 8 remain1 (i.e., the other Banderas had the worst share has steadily declined
brands declined so much in sales that they are no longer results of all three,
captured individually). Those remaining 3 include Elizabeth down -7.9% on average…
Taylor, Britney Spears, and Antonio Banderas (which smells Antonio Banderas' Sales Growth Antonio Banderas' Market Share
good, er, I am told). Across those brands, we've seen an ongoing 0.0 0.4

decline in sales and market share through today (Exhibits 14-19). -2.0 0.3

0.3
As we moved into the 2010s, the novelty and attraction of -4.0
0.2
celebrity fragrances seemed to dissipate. Bart Becht, former -6.0
0.2

Chairman of Coty (and a celebrity in HPP himself), in 2015 -8.0

avg. -7.9 0.1
0.1

blamed weakness in fragrances "particular on the celebrity side -10.0 0.1

-12.0 -10.9 0.0

in the U.S." which was "in decline." 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
-14.0
2010 2011 2012 2013 2014 2015 2016 2017 2018 Total Fragrance Market

Source: Euromonitor, Bernstein analysis Source: Euromonitor, Bernstein analysis

Will Kylie Cosmetics or Rihanna's Fenty line be able to achieve

brand longevity and lasting sales? Or is this just a fad that will

1Euromonitor methodology: it only breaks out brands that have

greater than 0.1% of market share in the searched
category/subcategory.

U.S. HOUSEHOLD & PERSONAL PRODUCTS BERNSTEIN 4

Ali Dibadj +1-212-756-4137 ali.dibadj@bernstein.com 27 September 2019

eventually fizzle out? The latter occurred for many different
celebrity fragrance brands that launched in the mid-2000s, and
in our view could happen to celebrity makeup brands.
While most of these celebrity makeup brands are too new, and
continue to be launched as we speak, we do have some
preliminary data on Kylie Cosmetics. Kylie reported very strong
sales of $194 million in 2016. However, we've already started to
see signs of the business plateauing, with sales growth of +25%
in 2017 now decelerating to only +5% in 2018 (Exhibit 20).
EXHIBIT 20: Kylie Cosmetics has started to see sales
decelerate to only +5% in 2018
Cosmetics' $360 brush set in 2017 and found it to be mixed
quality at best, but highly overpriced for the quality received.
Another highly reviewed brand is Fenty Beauty. Against best-
selling competitors on Sephora.com, Fenty Beauty's ranked
somewhere in the middle across its three best-selling products
(Exhibit 23).
EXHIBIT 21: Some of Kylie Cosmetics' Top "Worst" Reviews
“This is the worst product I have ever used on my lips. I can't believe that
she sold millions of lip kits. The quality is so bad, it dries your lips and I
couldn't get it off. Also when I open it and tried to use it for the first time I
could see that is was only half full. I will never ever buy something from
Kylie again.”

Kylie Cosmetics' Sales

“I was so excited to finally try Kylie's lip kit. I'm so
disappointed, it was extremely dry. I had to return it. I
300 30 believe consumers are just paying for the name. I have
$254 used cheaper products that have better quality over
$242
250 25 25 Kylie‘s.”

$194
200 20
“Immediately dried to my lips and cracked. I've even tried
other friends Kylie lip kits to see if it was just mine and it
150 15 was the same results. Waste of money, I'll stick to my
usual brands at Ulta.”

100 10
INDUSTRY | 3

50 5 5
Source: Ulta.com, Kylie Cosmetics' "Koko K Matte Lip Kit" Reviews
0 0
2016 2017 2018

Sales ($mn) - LHS YoY Growth - RHS EXHIBIT 22: Of Kylie Cosmetics' top categories, it only
received positive ratings in lipstick on Ulta.com
Kylie Cosmetic Review Comparisons
Source: Euromonitor, Bernstein analysis
7.0
Eyeshadow Palette Lip Gloss Lipstick
6.0

5.0 4.7 4.6 4.5 4.7 4.5 4.6 4.5 4.5 4.6 4.6 4.6 4.7
4.3 4.4 4.4
Meanwhile, quality and customer service seem to be challenges. 4.0 3.7 3.5
4.1

For example, reports of quality issues began for Kylie Cosmetics 3.0

in 2015 and have lasted throughout the brand's tenure. The 2.0

1.0
quality issues range from poorly designed products to products 0.0

not even accomplishing what was advertised, with one example

being makeup brushes being of very low quality with pieces
falling out. In addition to those quality issues, there have been a
multitude of customer service issues ranging from items never
being shipped, wrong items arriving, unresponsive customer Source: Ulta.com, Bernstein analysis
service representatives, and refusal to refund when products are
never shipped (Exhibit 21).
Three of Kylie Cosmetics' best-selling products on Ulta.com are
her eyeshadow palette, lip gloss, and lipstick. Among these three
products, the eyeshadow palette and lip gloss had the lowest
average rating versus other best-selling category products. Her
lipstick, the product she launched with, was notably more
positively reviewed with an average rating of 4.6, a solid
comparison versus competition (Exhibit 22).
Jeffree Star, a famous YouTube beauty artist with 15 million
subscribers and who Forbes named the 5th highest YouTube paid
star in 2018 with $18 million of earnings, reviewed Kylie

U.S. HOUSEHOLD & PERSONAL PRODUCTS BERNSTEIN 5

Ali Dibadj +1-212-756-4137 ali.dibadj@bernstein.com 27 September 2019

September 26, 2019 - VFC: Takeaways from 2019 Investor Day

EXHIBIT 23: Against best-selling competitors on
Sephora.com, Fenty Beauty's ranked somewhere in the September 26, 2019 - U.S. Restaurants: The War for Talent and
middle what it means for earnings
Fenty Beauty Review Comparisons
September 26, 2019 - Comment: EssilorLuxottica 2019 Capital
7.0

6.0 Concealer Foundation Highlighting Powder Markets Day

4.6 4.6 4.8
5.0
4.2 4.3 4.4 4.4
4.1 4.1
4.4 4.3
4.2
3.9 3.9
4.2 4.3
4.4
September 25, 2019 - Climate Change & Decarbonization: The
4.0

3.0
3.1
Impact of Decarbonization - What it means for U.S. Food
2.0 companies
1.0

0.0 September 25, 2019 - PM/MO - Philip Morris 2.0 Up in Smoke -

Reading Between the Lines
September 25, 2019 - Nike: Q1 2020 - When clear eyes, full
hearts (plus innovation and digital) deliver
Source: Sephora.com, Bernstein Analysis
September 25, 2019 - Food Retail Kantar FR: Carrefour's poor
trading continues. Casino continues to shrink. Leclerc and Lidl
Perhaps mediocre quality and customer service has contributed continue their growth.
to Kylie's slowing sales in the form of lower repurchase rates. It
September 25, 2019 - Macau Gaming: HK protests and Xi's visit
has been reported that from the beginning of the year through
in December matter some, but soft economy is primary reason
May of 2019, Kylie Cosmetics' sales have declined -14%2.
for GGR sluggishness
Fabrizio Freda, CEO of Estee Lauder, has emphasized the
importance of quality and repurchase. He said that, "while the September 25, 2019 - European Leisure & Airlines: The winners
trial game has become more competitive and is in a way more and losers from Thomas Cook's demise
expensive to do, the repurchase game is still driven by product
September 24, 2019 - A Glance Into Consumer Minds Around
quality." Thus, while celebrity makeup brands may have initial
the World
success due to their novelty and association with the celebrity, a
lack of underlying quality and long-term consumer experience September 24, 2019 - Budweiser APAC IPO prices right at the
could lead to their demise. bottom of the range - HK$27/share

Furthermore, while lower advertising costs are benefits of September 24, 2019 - Global Catering: Salad days over?
celebrity association and promotion, having a brand so identified Highlights from our events discussing the slower growth and
with one celebrity also comes with meaningful drawbacks. Over rising disruption outlook
time, celebrities themselves can lose popularity / relevancy, also
September 24, 2019 - Quick Take: TUI pre close. 2019 ends
translating to lower demand for their products. Perhaps celebrity
strongly, Brexit/Boeing risks remain in 2020, Thomas Cook
brands that are better positioned to withstand this lack of
demise offers breathing room
stickiness over the long-term are those less attached to
celebrities themselves, such as Jessica Alba's Honest Company. September 23, 2019 - U.S. HPP: Global market share deep dive
suggests worrying trends for our coverage
Time will tell if these celebrity beauty lines are able to sustain the
strong momentum they've seen in their early days. However, we September 23, 2019 - Macau Weekly: Sep 16-22 MOP ADR
remain cautious, especially after seeing what happened to their 685mm (MTD ADR 745bn); Sep est lowered to -1% to +1% y/y.
fragrance predecessors. Key news
September 23, 2019 - Quick Take: CZR to sell Rio in Las Vegas -
Current Company Views & Weekly News
not unexpected; however, short-term leaseback was not
Latest Reports (available on FirstCall or bernsteinresearch.com): expected
September 26, 2019 - Global Consumer Tracker: Weaker September 23, 2019 - Global Catering & ESG: How sustainable
sentiment in UK, Germany, and US, while improvements are seen is your lunch?
in France
September 23, 2019 - Quick Take: TCG ceases operations - our
September 26, 2019 - Quick Take: BBY Investor Day - Great thoughts
team, assets and strategy, still questioning size of the prize
September 23, 2019 - Thomas Cook: Discontinuing coverage

2 NY Post's Kylie Jenner's cosmetics sales fall 14% as gloss dims

(July 28, 2019)

U.S. HOUSEHOLD & PERSONAL PRODUCTS BERNSTEIN 6

Ali Dibadj +1-212-756-4137 ali.dibadj@bernstein.com 27 September 2019

September 23, 2019 - The Chinese Social Media Boxing Ring

September 20, 2019 - Tesco: When even the authorities agree
that Tesco is cheaper than the discounters ...
September 20, 2019 - Sainsbury's: Bernstein and investor
expectations from our CMD poll. If only they would close the bank
...
September 20, 2019 - Budweiser APAC IPO: What's the right
price for Quality?
September 20, 2019 - Budweiser APAC IPO poll shows pricing
appetite just below the midpoint and strong downside support
September 20, 2019 - Quick Take: US Restaurants - Takeaways
from our meetings with CMG and CAKE
September 20, 2019 - DRI: 1Q20 - OG and LH widen comp gaps
to the industry; Cheddar’s still a work in progress

U.S. HOUSEHOLD & PERSONAL PRODUCTS BERNSTEIN 7

Ali Dibadj +1-212-756-4137 ali.dibadj@bernstein.com 27 September 2019

DISCLOSURE APPENDIX

TICKER TABLE
26 Sep 2019 TTM EPS Adjusted P/E Adjusted
Closing Target Rel.
Ticker Rating Price Price Perf. 2018A 2019E 2020E 2018A 2019E 2020E
AVP M USD 4.56 3.50 104.8% USD 0.03 0.16 0.20 175.4 28.59 22.25
CLX M USD 150.59 144.00 (2.3)% USD 6.32 6.35 6.73 23.84 23.73 22.36
CL M USD 72.72 69.00 5.9% USD 2.97 2.85 3.01 24.45 25.53 24.14
EPC M USD 32.57 37.00 (32.6)% USD 3.52 3.48 3.75 9.26 9.37 8.68
EL O USD 195.34 213.00 35.4% USD 5.34 5.94 6.65 36.60 32.88 29.38
KMB M USD 140.11 130.00 21.4% USD 6.61 6.80 7.21 21.20 20.62 19.43
PG O USD 124.31 132.00 46.8% USD 4.52 4.86 5.22 27.52 25.56 23.80
SPX 2,977.62 159.61 162.91 179.71 18.66 18.28 16.57

O - Outperform, M - Market-Perform, U - Underperform, N – Not Rated

CLX,EL,PG base year is 2019;. CLX eps type is EPS Reported;. CLX valuation type is P/E Reported;.

U.S. HOUSEHOLD & PERSONAL PRODUCTS BERNSTEIN 8

Ali Dibadj +1-212-756-4137 ali.dibadj@bernstein.com 27 September 2019

VALUATION METHODOLOGY
U.S. Household & Personal Products
Our primary valuation methodology is based on market multiples, with price-to-forward-earnings (P/FE) serving as our preferred metric. We
evaluate historical trends of each company's multiples relative both to the overall market (the S&P 500 index) and the relevant industry
group which informs our choice of target multiple. This multiple is then applied to our EPS estimate for the period 13-24 months from now
to calculate a target share price in 12 months' time.
This P/FE market multiple approach is then validated through the application of two independent, yet complementary discounted cash flow
(DCF) valuation methodologies. Each of these DCF models are based on annual cash flow forecasts over an explicit period, combined with a
continuing value component intended to capture the firm’s value into perpetuity. The first method (what we refer to as our “Traditional DCF”)
estimates fair value based on explicit annual projections for NOPAT, working capital investment and net capital expenditures made within
our current earnings model over the forecast period. The second method (what we refer to as our “ROIC-based DCF”) uses normalized
expectations for operating profit growth and marginal return on invested capital (ROIC) as the primary inputs in establishing current intrinsic
value. The fair-market value of common equity determined by each of these methods is divided by the current diluted share count and
multiplied by one plus the cost of equity minus the current dividend yield (1 + Ke – d) to calculate a target share price in 12 months' time..

RISKS
U.S. Household & Personal Products
Within our U.S. Household & Personal Products coverage, our price targets are subject to a number of macroeconomic and company-
specific risks; these include:
 Changes in the degree of competitive activity within any key market;
 Changes in the nature of our coverage companies' relationships with their key customers (including Wal-Mart) and/or suppliers;
 Commodity cost and/or FX fluctuations;
 Changes in our coverage companies' ability to deliver on anticipated growth and/or margin improvement opportunities, whether
due to internal or external causes;
 Changes in our companies' stances towards M&A or the prioritization of cash in general;
 Changes in the credit environment or broader economy;
 Changes in consumer preferences, consumer demand, and/or government regulation.

U.S. HOUSEHOLD & PERSONAL PRODUCTS BERNSTEIN 9

 REQUIRED REGULATORY DISCLOSURES
 References to "Bernstein" relate to Sanford C. Bernstein & Co., LLC, Sanford C. Bernstein Limited, Sanford C. Bernstein (Hong Kong) Limited 盛博香
港有限公司, Sanford C. Bernstein (Canada) Limited, Sanford C. Bernstein (India) Private Limited (SEBI registration no. INH000006378) and Sanford
C. Bernstein (business registration number 53193989L), a unit of AllianceBernstein (Singapore) Ltd. which is a licensed entity under the Securities
and Futures Act and registered with Company Registration No. 199703364C, collectively. On and as of April 1, 2019, AllianceBernstein L.P.
acquired Autonomous Research. As a result of the acquisition, the research activities formerly conducted by Autonomous Research US LP have
been assumed by Sanford C. Bernstein & Co., LLC, which will continue to publish research under the Autonomous Research US brand and the
research activities formerly conducted by Autonomous Research Asia Limited have been assumed by Sanford C. Bernstein (Hong Kong) Limited 盛
博香港有限公司, which will continue to publish research under the Autonomous Research Asia brand.

 References to “Autonomous” in these disclosures relate to Autonomous Research LLP and, with reference to dates prior to April 1, 2019, to
Autonomous Research US LP and Autonomous Research Asia Limited, and, with reference to April 1, 2019 onwards, the Autonomous Research US
unit and separate brand of Sanford C. Bernstein & Co., LLC and the Autonomous Research Asia unit and separate brand of Sanford C. Bernstein
(Hong Kong) Limited 盛博香港有限公司, collectively.

 References to "Bernstein" or the “Firm” in these disclosures relate to Sanford C. Bernstein & Co., LLC, Sanford C. Bernstein Limited, Sanford C.
Bernstein (Hong Kong) Limited 盛博香港有限公司, Sanford C. Bernstein (Canada) Limited, Sanford C. Bernstein (India) Private Limited (SEBI
registration no. INH000006378), Sanford C. Bernstein (business registration number 53193989L), a unit of AllianceBernstein (Singapore) Ltd.
which is a licensed entity under the Securities and Futures Act and registered with Company Registration No. 199703364C and, with reference to
April 1, 2019 onwards, Autonomous Research LLP, collectively.

 Bernstein analysts are compensated based on aggregate contributions to the research franchise as measured by account penetration, productivity
and proactivity of investment ideas. No analysts are compensated based on performance in, or contributions to, generating investment banking
revenues.

 Bernstein rates stocks based on forecasts of relative performance for the next 6-12 months versus the S&P 500 for stocks listed on the U.S. and
Canadian exchanges, versus the MSCI Pan Europe Index for stocks listed on the European exchanges (except for Russian companies), versus the
MSCI Emerging Markets Index for Russian companies and stocks listed on emerging markets exchanges outside of the Asia Pacific region, and
versus the MSCI Asia Pacific ex-Japan Index for stocks listed on the Asian (ex-Japan) exchanges - unless otherwise specified. We have three
categories of ratings:

Outperform: Stock will outpace the market index by more than 15 pp in the year ahead.

Market-Perform: Stock will perform in line with the market index to within +/-15 pp in the year ahead.

Underperform: Stock will trail the performance of the market index by more than 15 pp in the year ahead.

Not Rated: The stock Rating, Target Price and/or estimates (if any) have been suspended temporarily.

 As of 09/26/2019, Bernstein's ratings were distributed as follows: 278 Outperform - 47.6% (0.0% banking clients) ; 256 Market-Perform - 43.8%
(0.0% banking clients); 50 Underperform - 8.6% (0.0% banking clients); 0 Not Rated - 0.0% (0.0% banking clients). The numbers in parentheses
represent the percentage of companies in each category to whom Bernstein provided investment banking services. All figures are updated quarterly
and represent the cumulative ratings over the previous 12 months. These ratings relate solely to the investment research ratings for companies
covered under the Bernstein brand and do not include the investment research ratings for companies covered under the Autonomous brand. This
information is provided in order to comply with Article 6 of the Commission Delegated Regulation (EU) 2016/958.

 Ali Dibadj is an associated person of AllianceBernstein L.P., the parent company of Sanford C. Bernstein & Co., LLC (“Bernstein”). In addition to Mr.
Dibadj’s role as a research analyst for Bernstein, Mr. Dibadj is also the portfolio manager of the AB Concentrated Engagement Fund (“the Fund”)
interests of which is seeded by firm capital of AllianceBernstein L.P. The Fund invests in companies whose performance may be enhanced through
outside engagement. No companies covered under Bernstein research coverage will be maintained within the Fund portfolio.

 A family member of Brandon Fletcher is employed by Wal-Mart Stores, Inc. (“WMT”) and maintains a long position in Wal-Mart Stores, Inc. (“WMT”).

 Bruno Monteyne will be entitled to certain retirement benefits as a member of the Tesco (TSCO.L) defined benefit pension plan. In addition, as a
result of Mr. Monteyne’s former employment with Tesco, the company is responsible for preparing his foreign tax returns covering the period of his
employment. In connection with these foreign tax filings, Tesco may be liable to make additional tax payments under a tax equalization agreement.

 Accounts over which Bernstein and/or their affiliates exercise investment discretion own more than 1% of the outstanding common stock of the
following companies AVP / Avon Products Inc, CLX / Clorox Co, CL / Colgate-Palmolive Co, EPC / Edgewell Personal Care Co, EL / Estee Lauder
Cos Inc, KMB / Kimberly-Clark Corp, PG / Procter & Gamble Co.

 This research publication covers six or more companies. For price chart disclosures, please visit www.bernsteinresearch.com/go/disclosures, you
can also write to either: Sanford C. Bernstein & Co. LLC, Director of Compliance, 1345 Avenue of the Americas, New York, N.Y. 10105 or Sanford C.
Bernstein Limited, Director of Compliance, 50 Berkeley Street, London W1J 8SB, United Kingdom; or Sanford C. Bernstein (Hong Kong) Limited 盛
博香港有限公司, Director of Compliance, 39th Floor, One Island East, Taikoo Place, 18 Westlands Road, Quarry Bay, Hong Kong, or Sanford C.
 Bernstein (business registration number 53193989L) , a unit of AllianceBernstein (Singapore) Ltd. which is a licensed entity under the Securities and
Futures Act and registered with Company Registration No. 199703364C, Director of Compliance, One Raffles Quay, #27-11 South Tower,
Singapore 048583.

12-Month Rating History as of 09/25/2019

Ticker Rating Changes
AVP M (RC) 07/03/07
CL M (IC) 05/07/07
CLX M (RC) 07/18/11
EL O (RC) 04/07/14
EPC M (RC) 11/06/12
KMB M (IC) 05/07/07
PG O (RC) 08/08/11

Rating Guide: O - Outperform, M - Market-Perform, U - Underperform, N - Not Rated

Rating Actions: IC - Initiated Coverage, DC - Dropped Coverage, RC - Rating Change

OTHER IMPORTANT DISCLOSURES

Bernstein produces a number of different types of research products including, among others, fundamental analysis and quantitative analysis. In addition,
Sanford C. Bernstein & Co., LLC, Sanford C. Bernstein (Hong Kong) Limited 盛博香港有限公司, and Bernstein’s affiliate, Autonomous Research LLP, each
issue research products under the “Autonomous” publishing brand independently of the “Bernstein” publishing brand. Recommendations contained
within one type of research product may differ from recommendations contained within other types of research products, whether as a result of differing
time horizons, methodologies or otherwise. Furthermore, views or recommendations within a research product issued under the Autonomous brand may
differ from views or recommendations under the same type of research product issued under the Bernstein brand.

Where this material contains an analysis of debt product(s), such material is intended only for institutional investors and is not subject to the independence
and disclosure standards applicable to debt research prepared for retail investors. Please contact Bernstein to request that such institutional debt
research not be provided.

This document may not be passed on to any person in the United Kingdom (i) who is a retail client (ii) unless that person or entity qualifies as an authorised
person or exempt person within the meaning of section 19 of the UK Financial Services and Markets Act 2000 (the "Act"), or qualifies as a person to whom
the financial promotion restriction imposed by the Act does not apply by virtue of the Financial Services and Markets Act 2000 (Financial Promotion) Order
2005, or is a person classified as an "professional client" for the purposes of the Conduct of Business Rules of the Financial Conduct Authority.

This document may not be passed onto any person in Canada unless that person qualifies as "permitted client" as defined in Section 1.1 of NI 31-103.

To our readers in the United States: Sanford C. Bernstein & Co., LLC, a broker-dealer registered with the U.S. Securities and Exchange Commission (“SEC”)
and a member of the U.S. Financial Industry Regulatory Authority, Inc. (“FINRA”) is distributing this publication in the United States and accepts
responsibility for its contents. Any U.S. person receiving this publication and wishing to effect securities transactions in any security discussed herein
should do so only through Sanford C. Bernstein & Co., LLC. Where this report has been prepared by research analyst(s) employed by a non-US affiliate
(such analyst(s), “Non-US Analyst(s)”) of Sanford C. Bernstein & Co., LLC, such Non-US Analyst(s) is/are (unless otherwise expressly noted) not registered
as associated persons of Sanford C. Bernstein & Co., LLC or any other SEC-registered broker-dealer and are not licensed or qualified as research analysts
with FINRA or any other US regulatory authority. Accordingly, reports prepared by Non-US Analyst(s) are not prepared in compliance with FINRA’s
restrictions regarding (among other things) communications by research analysts with a subject company, interactions between research analysts and
investment banking personnel, participation by research analysts in solicitation and marketing activities relating to investment banking transactions, public
appearances by research analysts, and trading securities held by a research analyst account.

To our readers in the United Kingdom: This publication has been issued or approved for issue in the United Kingdom by Sanford C. Bernstein Limited,
authorised and regulated by the Financial Conduct Authority and located at 50 Berkeley Street, London W1J 8SB, +44 (0)20-7170-5000.

To our readers in member states of the EEA (except Ireland): This publication is being distributed in the EEA (except Ireland) by Sanford C. Bernstein
Limited, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority and holds a passport under the Markets in Financial
Instruments Directive.

To our readers in Ireland: This publication is being distributed in Ireland by Sanford C. Bernstein Ireland Limited, which is authorised and regulated by the
Central Bank of Ireland.
To our readers in Hong Kong: This publication is being distributed in Hong Kong by Sanford C. Bernstein (Hong Kong) Limited 盛博香港有限公司, which is
licensed and regulated by the Hong Kong Securities and Futures Commission (Central Entity No. AXC846). This publication is solely for professional
investors only, as defined in the Securities and Futures Ordinance (Cap. 571).

To our readers in Singapore: This publication is being distributed in Singapore by Sanford C. Bernstein, a unit of AllianceBernstein (Singapore) Ltd., only to
accredited investors or institutional investors, as defined in the Securities and Futures Act (Chapter 289). Recipients in Singapore should contact
AllianceBernstein (Singapore) Ltd. in respect of matters arising from, or in connection with, this publication. AllianceBernstein (Singapore) Ltd. is a licensed
entity under the Securities and Futures Act and registered with Company Registration No. 199703364C. It is regulated by the Monetary Authority of
Singapore and located at One Raffles Quay, #27-11 South Tower, Singapore 048583, +65-62304600. The business name "Bernstein" is registered
under business registration number 53193989L.

To our readers in the People’s Republic of China: The securities referred to in this document are not being offered or sold and may not be offered or sold,
directly or indirectly, in the People's Republic of China (for such purposes, not including the Hong Kong and Macau Special Administrative Regions or
Taiwan), except as permitted by the securities laws of the People’s Republic of China.

To our readers in Japan: This document is not delivered to you for marketing purposes, and any information provided herein should not be construed as a
recommendation, solicitation or offer to buy or sell any securities or related financial products.

For the institutional client readers in Japan who have been granted access to the Bernstein website by Daiwa Securities Group Inc. (“Daiwa”), your access
to this document should not be construed as meaning that Bernstein is providing you with investment advice for any purposes. Whilst Bernstein has
prepared this document, your relationship is, and will remain with, Daiwa, and Bernstein has neither any contractual relationship with you nor any
obligations towards you

To our readers in Australia: Sanford C. Bernstein & Co., LLC, Sanford C. Bernstein Limited and Sanford C. Bernstein (Hong Kong) Limited 盛博香港有限公
司 are exempt from the requirement to hold an Australian financial services licence under the Corporations Act 2001 in respect of the provision of the
following financial services to wholesale clients:

 providing financial product advice;

 dealing in a financial product;

 making a market for a financial product; and

 providing a custodial or depository service.

To our readers in Canada: If this publication is pertaining to a Canadian domiciled company, it is being distributed in Canada by Sanford C. Bernstein
(Canada) Limited, which is licensed and regulated by the Investment Industry Regulatory Organization of Canada ("IIROC"). If the publication is pertaining
to a non-Canadian domiciled company, it is being distributed by Sanford C. Bernstein & Co., LLC, which is licensed and regulated by both the SEC and
FINRA into Canada under the International Dealers Exemption. This publication may not be passed onto any person in Canada unless that person qualifies
as a "Permitted Client" as defined in Section 1.1 of NI 31-103.

To our readers in India: This publication is being distributed in India by Sanford C. Bernstein (India) Private Limited (SCB India) which is licensed and
regulated by Securities and Exchange Board of India ("SEBI") as a research analyst entity under the SEBI (Research Analyst) Regulations, 2014, having
registration no. INH000006378 and as a stock broker having registration no. INZ000213537. SCB India is currently engaged in the business of providing
research and stock broking services.

SCB India is a private limited company incorporated under the Companies Act, 2013, on April 12, 2017 bearing corporate identification number
U65999MH2017FTC293762, and registered office at Level 6, 4 North Avenue, Maker Maxity, Bandra Kurla Complex, Bandra (East), Mumbai 400051 ,
Maharashtra, India (Phone No: +91-22-68421401).

SCB India does not have any disciplinary history as on the date of this report.

The associates of SCB India or their relatives may have financial interest(s) in the subject company.

SCB India or its associates do not have actual/beneficial ownership of one percent or more securities of the subject company. SCB India is not engaged in
any investment banking activities, as such, SCB India has not managed or co-managed a public offering in the past twelve months. In addition, neither
SCB India nor any of its associates have received any compensation for investment banking services or merchant banking services from the subject
company in the past 12 months.

SCB India or its associates may have received compensation for brokerage services from the subject company in the past twelve months.

SCB India or its associates may have received compensation for products or services other than investment banking or merchant banking or brokerage
services from the subject company in the past twelve months.

SCB India and its associates have not received any compensation or other benefits from the subject company or third party in connection with the
research report.

The principal research analysts who prepared this report, a member of his or her team, are not (nor are any members of their household) an officer,
director, employee or advisory board member of the companies covered in the report.
 SCB India and its associate company(ies) may act as a market maker in the financial instruments of the companies covered in the report.

Sanford C. Bernstein & Co., LLC., Sanford C. Bernstein Limited, Sanford C. Bernstein (Hong Kong) Limited 盛博香港有限公司, Sanford C. Bernstein
(Canada) Limited and AllianceBernstein (Singapore) Ltd., Sanford C. Bernstein (India) Private Limited are regulated, respectively, by the Securities and
Exchange Commission under U.S. laws, by the Financial Conduct Authority under U.K. laws, by the Hong Kong Securities and Futures Commission under
Hong Kong laws, by the Investment Industry Regulatory Organization of Canada, by the Monetary Authority of Singapore under Singapore laws, and
Securities and Exchange Board of India, all of which differ from Australian laws.

One or more of the officers, directors, or employees of Sanford C. Bernstein & Co., LLC, Sanford C. Bernstein Limited, Sanford C. Bernstein (Hong Kong)
Limited 盛博香港有限公司, Sanford C. Bernstein (India) Private Limited, Sanford C. Bernstein (Canada) Limited, Sanford C. Bernstein (business
registration number 53193989L), a unit of AllianceBernstein (Singapore) Ltd. which is a licensed entity under the Securities and Futures Act and
registered with Company Registration No. 199703364C, and/or their affiliates may at any time hold, increase or decrease positions in securities of any
company mentioned herein.

Bernstein or its affiliates may provide investment management or other services to the pension or profit sharing plans, or employees of any company
mentioned herein, and may give advice to others as to investments in such companies. These entities may effect transactions that are similar to or
different from those recommended herein.

All Bernstein branded research publications are disseminated to our clients through posting on the firm's password protected website,
www.bernsteinresearch.com. Certain, but not all, Bernstein branded research publications are also made available to clients through third-party vendors
or redistributed to clients through alternate electronic means as a convenience. For access to all available Bernstein branded research publications,
please contact your sales representative or go to http://www.bernsteinresearch.com

Bernstein and/or its affiliates do and seek to do business with companies covered in its research publications. As a result, investors should be aware that
Bernstein and/or its affiliates may have a conflict of interest that could affect the objectivity of this publication. Investors should consider this publication
as only a single factor in making their investment decisions.

This publication has been published and distributed in accordance with Bernstein's policy for management of conflicts of interest in investment research,
a copy of which is available from Sanford C. Bernstein & Co., LLC, Director of Compliance, 1345 Avenue of the Americas, New York, N.Y. 10105, Sanford
C. Bernstein Limited, Director of Compliance, 50 Berkeley Street, London W1J 8SB, United Kingdom, or Sanford C. Bernstein (Hong Kong) Limited 盛博香
港有限公司, Director of Compliance, 39th Floor, One Island East, Taikoo Place, 18 Westlands Road, Quarry Bay, Hong Kong, or Sanford C. Bernstein
(business registration number 53193989L) , a unit of AllianceBernstein (Singapore) Ltd. which is a licensed entity under the Securities and Futures Act
and registered with Company Registration No. 199703364C, Director of Compliance, One Raffles Quay, #27-11 South Tower, Singapore 048583, or
Sanford C. Bernstein (India) Private Limited, Chief Compliance Officer, Level 6, 4 North Avenue, Maker Maxity, Bandra Kurla Complex, Bandra (East),
Mumbai 400051. Additional disclosures and information regarding Bernstein's business are available on our website www.bernsteinresearch.com.

This report has been produced by an independent analyst as defined in Article 3 (1)(34)(i) of EU 296/2014 Market Abuse Regulation (“MAR”).

This publication is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of, or located in any locality,
state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject
Bernstein or any of their subsidiaries or affiliates to any registration or licensing requirement within such jurisdiction. This publication is based upon public
sources we believe to be reliable, but no representation is made by us that the publication is accurate or complete. We do not undertake to advise you of
any change in the reported information or in the opinions herein. This publication was prepared and issued by Bernstein for distribution to eligible
counterparties or professional clients. This publication is not an offer to buy or sell any security, and it does not constitute investment, legal or tax advice.
The investments referred to herein may not be suitable for you. Investors must make their own investment decisions in consultation with their professional
advisors in light of their specific circumstances. The value of investments may fluctuate, and investments that are denominated in foreign currencies may
fluctuate in value as a result of exposure to exchange rate movements. Information about past performance of an investment is not necessarily a guide to,
indicator of, or assurance of, future performance.

CERTIFICATIONS
 I/(we), Richard J Clarke, FCA, Ali Dibadj, Callum Elliott, CFA, ACA, Brandon Fletcher, CFA, Alexia Howard, Euan McLeish, Jamie Merriman, Bruno
Monteyne, Sara H. Senatore, Trevor Stirling, Vitaly Umansky, Senior Analyst(s)/Analyst(s), certify that all of the views expressed in this publication
accurately reflect my/(our) personal views about any and all of the subject securities or issuers and that no part of my/(our) compensation was, is, or
will be, directly or indirectly, related to the specific recommendations or views in this publication.

Approved By: RP

Copyright 2019, Sanford C. Bernstein & Co., LLC, Sanford C. Bernstein Limited, Sanford C. Bernstein (Hong Kong) Limited 盛博香港有限公司, and AllianceBernstein (Singapore) Ltd.,
subsidiaries of AllianceBernstein L.P. ~1345 Avenue of the Americas ~ NY, NY 10105 ~212/756-4400. All rights reserved.