Value Creation in EU Consmer MCK

Quarterly Perspective
on Value Creation
in European
Consumer & Retail
Strategy & Corporate Finance Practice
4th Quarter – CPG Issue | Autumn 2023
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Contents
Macroeconomic Context
Value Creation in Consumer Packaged Goods (CPG)
McKinsey ConsumerWise – European Consumer Sentiment
McKinsey & Company 2

Real GDP growth: IMF Projections
Overall global economic situation remained broadly Percent
stable compared to the previous quarter. Consumers Oct-23 Jun-23
are still cautious with their purchases, businesses are
Global decelerating, and in some cases even contracting. In 2023 2024
majority of cases commodity prices have declined.
Summary
3.0 2.9
World 3.0 3.0
Decelerating inflation is providing some relief for
Some leading indicators improved. struggling households. However, higher interest rates United 2.1 1.1
Though outlook is still fragile. seem to be pushing expectations of higher yields States 1.8 1.1
Confidence has stabilised but among businesses, once again affecting investment 0.7 1.2
Eurozone
consumers lean toward saving. decisions of companies as well as consumption 0.9 1.4
Inflation and trade volumes continue decisions by households. United 0.5 1.0
their downward trend.
Kingdom 0.4 1.0
The latest IMF forecast echoes similar concerns.
Read the full report here Outlook remains fragile, as tightening monetary policy 5.0 4.5
China
to reduce inflation is most likely to affect economic 5.2 4.5
activity in 2023 and 2024, although countries have 6.3 6.3
India
shown remarkable resilience over the past three 6.1 6.3
quarters Brazil 2.2 1.3
1.5 1.3
Russia 3.1 1.5

2.1 1.5
Source: IMF – World Economic Outlook, October 2023 McKinsey & Company 3
Inflation has decreased to 4.3% in September driven by decreasing
energy prices, as food and beverages price inflation remains high
Inflation pressure is decreasing in the Eurozone
Harmonized Index of Consumer Prices (Eurozone) Change (%)

Index (Jan 2012=100%) Sep 2022 – 2023 Sep 2021 – 2022
170
Food and beverages 8.8 11.8
160
150 Services (all) 4.7 4.3
140
Core inflation1 4.5 4.8
130
All-items 4.3 9.9
120
110 Transport 4.2 9.9
100
Industrial goods 4.2 5.5
90
80 Energy -4.7 40.7

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
1. Overall index excluding food, energy, alcohol and tobacco
Source: Eurostat McKinsey & Company 4

Food and beverages price dynamics have become key contributor
to Eurozone inflation
Food and beverages prices are continuing to increase at higher levels than anticipated
Eurozone inflation decelerated to 4.3% in

Contribution to Eurozone annual inflation of 4.3%
September (5.2% in August). Food-price inflation
Percentage points contribution
has become the main driver behind Eurozone
inflation (8.8% in September). Excluding energy
Food and beverages 2.0 and food, inflation stood at 4.5%. The latest
reading for producer-price inflation was –8.7% in
Restaurants and hotels 0.8 August (–6.0% July).
Transport 0.7
On September 14, the ECB raised its key interest
Recreation and culture 0.6 rate to 4.50%, a hike of 25 basis points. The ECB
has also revised its inflation projections slightly
Miscellaneous goods and services 0.5 upward to 5.6% (+2 p.p.) in 2023, 3.2% in 2024
Household equipment 0.4 (+2 p.p.), and 2.1% in 2025 (–1 p.p.).
Education, communication, health 0.2 Nominal wage growth is projected at 5.3% in

2023, 4.5% in 2024, and 3.8% in 2025 –
Clothing and footwear 0.2 unchanged compared with June projections.
Slightly lower wage growth is expected for 2024
Housing and utilities (incl. energy) 0
and 2025, reflecting a weakening labour market.
Source: Eurostat McKinsey & Company 5

Nominal wage growth in the Eurozone has
started to beat inflation in 2023
Real wage growth above historical levels, offsetting slower growth during 2021-2022
Nominal wage growth Real (inflation adjusted) wage growth
Dec. 2017-Dec. 2019 Dec. 2019 – Dec. 2022 Dec. 2022 – latest available1
CAGR, % CAGR, % CAGR, %
2.0 3.3 4.8

Eurozone
5.3%
1.5 -1.3 1.4
2.7 3.7 0.9

Germany
1.0 -1.4 -3.6
France
1.7 2.4 5.8 ECB forecast of nominal
0.2 -0.5 0.2 wage growth for 20232 in
Italy
1.2 0.9 3.8 Eurozone
0.4 -4.0 2.4
2.9 5.6 7.4

United Kingdom
1.2 0.7 2.3
3.2 6.0 4.2

United States
1.1 1.0 0.5
1. US: September 2023; Italy, UK: August 2023; Eurozone, Germany, France: quarterly data through 2023:Q2
2. ECB forecasts as of September 2023
Note: Aggregate wages capture: Italy, France, Germany, Eurozone - total economy; the UK & the US - private sector
Source: National Statistical Institute of Italy, UK Office for National Statistics; BLS; German Federal Statistical Office; French Ministry of Labor/INSEE; European McKinsey & Company 6
Central Bank; Haver Analytics
Eurozone consumer confidence worsened again in August-
September, in line with economic slowdown
Consumer inflation expectations have picked up as business is ready for higher yield curve environment
Consumer confidence Price trends in the next 12 months

(left scale) (right scale; % respondents up vs. down)
Consumer confidence indicator Consumer expectations of price trends in the next 12 months 1
Percent balance, SA, through September 2023 Percent balance, SA, through August 2023
0 70
60
50
-10
40
30
20
-20
10
-30 -10
2005 2007 2009 2011 2013 2015 2017 2019 2021 2022 2023
1. Based on question: "By comparison with the past 12 months, how do you expect that consumer prices will develop in the next 12 months?". The result is calculated as difference in percent shares of answers: B = (MM + ½M) − (½P + PP);
where MM = increase more rapidly; M = increase at the same rate; P = stay about the same; PP = fall
Source: European Commission; McKinsey analysis McKinsey & Company 7
The medium- to long-term view:
A 2x2 or 3x3 world – scenarios for 2023 and beyond
The interaction of structural forces, policy choices and the energy transition speeds determine scenarios outcomes
McKinsey Macro & Markets, September 2023
Scenarios in focus
Favorable
Structural forces Policy choices
1 Return to pre-
The forces that promote α1 The fiscal, monetary
COVID norms
or constrain sustainable and regulatory policy
growth and shared choices that create the
prosperity, and are local conditions
α2
beyond the direct 2 γ2 β2 prosperity within the
control of policy global economic
• Macro uncertainty Focus on environment
Unfavorable
growth &
• Technology Near-term & long- • Government
term headwinds energy
• Energy systems 3 β3 transition spending and taxes
dominate
• Global institutions • Business regulations
& legal frameworks
γ β α • Interest rates and
Restrictive Accommodating financial conditions

Real GDP development in
Eurozone across scenarios
McKinsey Macro & Markets. Eurozone, September 2023
Real GDP Real GDP

Indexed, 2023 Q2=100 Percent change, quarterly, annual, and CAGR
115 0.9% 2.8% 2.9% 3.2% 2.6%

Reported 1.0
α1
0.5
110 α2 α1 0
β2 -0.5
105
γ2 -1.0
0.6% 1.0% 1.8% 2.2% 1.3%

β3
1.0
100
0.5
β2 0
95 -0.5
-1.0
90 0.6% -1.7% 0.9% 3.3% 1.0%

1.0
0.5
85
γ2 0
-0.5
80 -1.0
2019 20 21 22 23 24 2025 26 2023 2024 2025 2026 2030-40
Source: National statistics agencies; McKinsey analysis, in partnership with Oxford Economics McKinsey & Company 9
Eurozone Consumer price inflation versus the ECB deposit rate
McKinsey Macro & Markets. Eurozone, September 2023, percent1
ECB Deposit Rate Headline CPI Core CPI
Scenario α1 Scenario β2 Scenario γ2
10 10 10
8.4 8.4 8.4

8 8 8
5.8
6 6 6
3.9 3.9 3.9

4 3.8 4 4
1.7 2.0 2.0

2 2 2
2.73.0
2.02.0
0.2
0 0 0
-0.4 -0.4 -0.4
-2 -2 -2 2014
2014 20 21 22 23 24 25 26 2027 2014 20 21 22 23 24 25 26 2027 - 2019 20 21 22 23 24 25 26 2027
- 2019 - 2033 - 2019 - 2033 - 2033
1. CPI CAGR 2014-19, 2027-33; ECB deposit rate 2019 only, neutral rate 2027-33
Source: National statistics agencies; McKinsey analysis, in partnership with Oxford Economics McKinsey & Company 10
Over the last three months, there has been a noticeable deterioration
in consumer confidence among European households. Although
inflation has decreased, biggest concerns revolve around financial
Consumer health of households driven by a rapid increase in interest rates,
Confidence particularly affecting mortgage and consumer credit rates.
Households in merely a few countries – in the Netherlands, in the UK,

and in Switzerland – have reported improved conditions. However,
even in these countries, consumer confidence data suggests that
consumers are cautious and prefer saving over increasing their
consumption.

Consumer Confidence (1/2)
Consumer confidence has declined in most European countries over the past three months due to high interest rates
Consumer Confidence Change (%) Change (%) Change (%)

Index, Monthly Dec 20 - Dec 21 Dec 21 - Dec 22 Dec 22 - Sep 23
104
Europe1 1.5 -3.9 3.0
102
Austria 0.7 -3.6 1.3
100
Denmark -0.1 -3.7 2.7
98
France 1.6 -3.3 1.5
96 Germany 1.1 -3.2 2.4
94 Italy 2.3 -2.9 2.4
92 Netherlands -0.6 -2.1 2.3

2012 13 14 15 16 17 18 19 20 21 22 23 2024
1. All European Union Member States in the euro area
Source: OECD McKinsey & Company 12

Consumer Confidence (2/2)
Consumer confidence has declined in most European countries over the past three months due to high interest rates
Consumer Confidence Change (%) Change (%) Change (%)

Index, Monthly Dec 20 - Dec 21 Dec 21 - Dec 22 Dec 22 - Sep 23
104
Europe1 1.5 -3.9 3.0
102
Poland 1.2 -1.5 2.5
100
Russia2 0.6 0.3 1.9
98
Spain 2.7 -3.4 4.0
96 Sweden -0.1 -7.1 1.9
94 Switzerland2 2.1 -5.9 2.1
92 United 2.2 -6.9

2012 13 14 15 16 17 18 19 20 21 22 23 2024 Kingdom
1. All European Union Member States in the euro area; 2. Until Nov 2021
Source: OECD McKinsey & Company 13

Real private consumption growth in Q2 2023 (year-over-year, adjusted for
inflation) has slowed down to 0.4%, a significant decrease from the 1.3%
growth observed in the previous quarter. However, in terms of actual values,
consumption has remained stagnant throughout the entire year, essentially
Private maintaining the same level as in Q4 2019.
Consumption The situation is quite similar across countries, with the only outliers being
Greece, Ireland, and Malta, where consumption has been growing at a rapid
pace. In contrast, the biggest declines in Q2 2023 were observed in the Baltic
countries and the Netherlands.
Throughout the months of 2023, the factors contributing to this stagnation
have been intertwined, including high prices, declining real wages, and
increasing interest rates, all of which have limited households' access to
credit.

Private Consumption (1/2)
Nominal consumption slowed down in the first quarter of 2023, while real consumption remained either stable or declined
Private Consumption Change (%) Change (%) Change (%)

Nominal, Local Currency, Index (Q1 2012 = 100) Q4 20 - Q4 21 Q4 21 - Q4 22 Q4 22 – Q2 233
190
180 Europe1 10.6 9.8 4.9
170
Austria 10.6 12.8 8.7
160
150 Denmark 9.1 3.4 2.0

140
130 France 9.6 5.6 6.0
120
Germany 8.7 8.8 6.1
110
100 Italy 10.4 13.0 1.8

90
80 Netherlands 11.5 16.0 0.8

2012 13 14 15 16 17 18 19 20 21 22 2023
1. All European Union Member States in the euro area; 2. Interim results for Q4 2021; 3. CAGR
Source: Oxford Economics, National Federal Statistical Office McKinsey & Company 15
Private Consumption (2/2)
Nominal consumption slowed down in the first quarter of 2023, while real consumption remained either stable or declined
Private Consumption Change (%) Change (%) Change (%)

Nominal, Local Currency, Index (Q1 2012 = 100) Q4 20 - Q4 21 Q4 21 – Q4 22 Q4 22 – Q2 233
190
Europe1 10.6 9.8 4.9
180
170
Poland 14.3 14.9 15.7
160
150 Russia 19.1 8.1 19.8

140
Spain 11.4 7.5 7.4
130
120
Sweden 13.3 -1.2 -5.3
110
100 Switzerland 4.2 5.6 4.1

90
United
80 15.6 10.2 8.5
Kingdom
2012 13 14 15 16 17 18 19 20 21 22 2023
1. All European Union Member States in the euro area; 2: Data on Russia not seasonally adjusted; 3: CAGR
Retail sales declined across the board in Q2 2023, with few
exceptions. The category breakdown looks very similar, with only the
information and communication equipment and cultural and recreation
goods segments recording positive growth in year-on-year terms.
Retail Sales
Households continue to remain cautious despite ongoing deceleration
of inflation across all retail sales categories, as indicated by volume
data. This caution is driven by higher interest rates for consumers,
which are placing increased pressure on the cost of living, forcing
consumers to either reduce their consumption or, at the very least,
trade down to cheaper goods.

Retail Sales (1/2)
Stagnation or slight contraction in retail sales volume across most countries in Europe in 2023
Retail Sales Change (%) Change (%) Change (%)

Volume index (2012=100), 3-months rolling Dec 20 - Dec 21 Dec 21 - Dec 22 Dec 22 - Aug 23
180
Europe1 7.1 -2.3 -1.7
170
160
Austria 8.1 -1.5 -2.5
150
140 Denmark 6.0 -6.5 -1.5

130
120 France 10.1 -1.2 -2.6
110
Germany 4.5 -5.5 -2.4
100
90 Italy 10.9 -2.7 -3.2

80
70 Netherlands 6.2 0.1 -1.8

2012 13 14 15 16 17 18 19 20 21 22 23 2024
Source: Eurostat, Haver, ONS McKinsey & Company 18

Retail Sales (2/2)
Stagnation or slight contraction in retail sales volume across most countries in Europe in 2023
Retail Sales Change (%) Change (%) Change (%)

Volume index (2012=100), 3-months rolling Dec 20 - Dec 21 Dec 21 - Dec 22 Dec 22 - Aug 23
180
Europe1 7.1 -2.3 -1.7
170
160
Poland 14.1 4.6 -1.1
150
140 Russia 4.8 -9.4 10.9

130
120 Spain 1.6 3.6 7.9
110
Sweden 5.3 -4.7 -3.4
100
90 Switzerland 3.8 -2.3 -0.8

80
70 United 1.1 -6.4 -1.4

2012 13 14 15 16 17 18 19 20 21 22 23 2024 Kingdom
Source: Eurostat, Haver, ONS McKinsey & Company 19

Eurozone inflation slowed for the tenth consecutive month (4.3% in
September 2023) mainly driven by a decline in natural gas prices – a
Consumer drop from double digit inflation figures seen in October of last year,
when inflation surged to an all-time high of 11.1%.
Prices
The IMF expects that inflation will reach the Central Bank’s target in
2025 as the economy stabilises, after a staggering increase of 8.4% in
2022. ECB has raised its key interest rate to 4.50%, a hike of 25 basis
points in September. Wage pressure is becoming an increasingly
relevant source of inflation; growth in compensation per employee is
projected to be 5.3% in 2023, 4.5% in 2024, and 3.9% in 2025 –
above historical averages.

Consumer Prices (1/2)
Consumer inflation in the Eurozone reached record levels last year, though slowing down in Q4 22 – Q3 23
Consumer Price Index Change (%) Change (%) Change (%)

Index (2012 Q1=100), Quarterly Q4 20 - Q4 21 Q4 21 – Q4 22 Q4 22 – Q3 232
220
210 Europe1 4.6 9.9 3.6
200
190 Austria 3.9 11.1 5.7
180
170 Denmark 3.5 10.2 0.5
160
150 France 3.3 7.0 5.1
140
130 Germany 5.4 10.8 3.7
120
110 Italy 3.7 12.4 2.0
100
90 Netherlands 5.3 13.0 1.1
2012 13 14 15 16 17 18 19 20 21 22 2023
1. All European Union Member States in the euro area; 2. CAGR
Consumer Prices (2/2)
Consumer inflation in the Eurozone reached record levels last year, though slowing down in Q4 22 – Q3 23
Consumer Price Index Change (%) Change (%) Change (%)

Index (2012 Q1=100), Quarterly Q4 20 - Q4 21 Q4 21 – Q4 22 Q4 22 – Q3 22
220
210 Europe1 4.6 9.9 3.6
200
190 Poland 7.2 15.8 7.4
180
170 Russia2 8.2 12.0 6.3
160
150 Spain 5.9 6.6 4.1
140
130 Sweden 3.9 10.3 3.1
120
Switzerland
110 1.4 2.8 2.3
100
90 United 4.9 10.8 5.0
2012 13 14 15 16 17 18 19 20 21 22 2023 Kingdom
1. All European Union Member States in the euro area; 2. CAGR
Source: Oxford Economics McKinsey & Company 22

Contents

2023 Q3 in CPG
Main developments Global stock markets are up +8% in 2023 YTD, recovering from the -13% TSR drop in 2022, bringing multiples
above long-term historical averages again. Despite losing less than most other industries in 2022 (-5% vs -13%
(TSR) total), the CPG industry has been underperforming since the start of 2023 (-5% vs +8% total).
Globally and after a difficult 2022, most CPG subsegments still show negative TSR in 2023 YTD except for
Leisure Products, the only subsegment with positive TSR. While losses were generally more severe in Europe
in 2022, the opposite is true for 2023 YTD with Europe showing better recovery.
CPG subsegments are expected to see growth slow down in 2023 vs 2022. Growth is expected to increase
again in 2024. Margins are expected to stay relatively flat – a sign that CPG companies have been able to pass
on cost pressures driven by inflation and supply issues. Indeed, despite gross margins decreasing for most
companies, majority was able to at least partially offset this through cost reductions in SG&A.
Last quarter’s earnings season saw majority of companies beating consensus on EBITDA, after which forward-
looking (2024) estimates were adjusted upwards accordingly. The Revenue picture was more diverse. Impact
on share prices was minor during the day of the earnings announcement for most cases, even though some
saw share price movements of more than 10%.
CPG companies that attract high valuations generally have higher growth and margin expectations – both in
Value creation the short and long term – continuing their superior historical performance.
drivers Growth currently is generally the biggest value driver for CPG companies, even for companies with currently
low ROICs. Packaged Foods is an exception, where margin is the biggest value driver for low ROIC
companies, given its low spread to the cost of capital.

Globally, markets are at 8% TRS in 2023, in line with average
returns over the last 15+ years
Total market weighted average shareholder returns in %, 2007 - 2023
As of September 30, 2023
36
27
24 23
18 17 19
15
12 12
9 8 8%
3 CAGR
-7 -7
-13
-39
2007 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 2023
1. Based on the top 5000 companies globally by market cap as of 12/31/2022
Source: S&P Global Market Intelligence, McKinsey Corporate Performance Analytics McKinsey & Company 25
Globally, the increase in YTD share prices has pushed multiples
above their long-term historical averages
Weighted average global market 1-year forward multiples (x), 2007 - 20231
1-Yr Forward P/E Ratio (x) 1-Yr Forward EV/EBITA Multiple2 (x)
21
19 19
17 17 17
16 16
16 16
15 15 15 15 15
14 Ø 15 14
14 14 14
13 13 13
12 13 Ø 13
11 11 12
11 11
10 10
9 9
07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 2023 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 2023
1 Based on the top 5000 companies globally by market cap as of 12/31/2022

2 Excl. financial institutions
CPG in YTD 2023 is performing worse than most other industries,
while it was among the better performing industries in 2022
Weighted average industry TSR performance, %1
2023 2022 2022 –2023
Semiconductors 36 -33 -8
Media & Entertainment 30 -39 -21
High Tech 29 -32 -12
Automotive & Assembly 25 -29 -11
Oil & Gas 13 23 39
Air & Travel 12 -12 -2
Logistics & Trading 10 -13 -4
Conglomerates 9 11 21
Consumer Durables 8 -26 -21
Healthcare Supplies & Distribution 7 -9 -2
Business Services 6 -17 -12
Industrials & Electronics 5 -21 -17
Diversified Financials 5 -20 -16
Transport & Infrastructure 5 -10 -6
Apparel, Fashion & Luxury 4 -15 -11
Telco 3 0 3
Basic Materials 2 1 3
Banks 1 -3 -1
Retail 0 -14 -14
Pharma & Biotech 0 1 0
Insurance -1 7 6
Real Estate -1 -15 -16
Aerospace & Defense -2 12 10
REITS -3 -22 -25
Healthcare Providers -3 -14 -16
Chemicals -3 -14 -17
Consumer Services -4 -9 -13
Consumer Packaged Goods -5 -5 -10
Medical Technology -7 -25 -30
Utilities -8 1 -7
Agriculture & Food Production -13 0 -13
Total 8 -13 -6
1. Based on the top 5000 companies globally by market cap as of 12/31/2022
Globally, most CPG subsegments are finding it difficult to recover
TSR in 2023
Leisure Products is the only subsegment with higher TSR in 2023 YTD versus 2022
Full period Pre-pandemic Pandemic 2022 2023 YTD

Total shareholder returns (TSR) since Dec 181
Dec 18-Sep 23 Dec 18-Dec 19 Dec 19-Dec 21 Dec 21-Dec 22 Dec 22-Sep 23
EUR, Dec 31 2018 =100 % % % % %
250 Alcoholic
Beverages 14 48 21 -10 -6
Global
Soft Drinks
200 11 22 11 11 0
Global
Home &
Personal Goods 7 24 10 -9 -2
150 Global
Packaged Food
7 27 9 -3 -5
Global
100 Leisure
Products 7 36 19 -29 2
Global
Tobacco
50 5 17 0 11 -5
Jan19 Jan20 Jan21 Jan22 Jan23 Global
1. N = 360 (Alcoholic Beverages 52, Soft Drinks 29, Home & Personal Goods 64, Packaged Food 172, Leisure Products 29, Tobacco 14)
Source: McKinsey Corporate Performance Analytics, S&P Global McKinsey & Company 28
For most European CPGs, YTD 2023 TSR performance has been
more positive when compared to the same categories at global level
In 2023 Alcoholic Beverages and Tobacco subsegments were more penalised in Europe than globally
Full period Pre-pandemic Pandemic 2022 2023 YTD

Total shareholder returns (TSR) since Dec 181
Dec 18-Sep 23 Dec 18-Dec 19 Dec 19-Dec 21 Dec 21-Dec 22 Dec 22-Sep 23
EUR, Dec 31 2018 =100 % % % % %
300 Alcoholic
Beverages 3 25 4 -8 -8
Global
250
Soft Drinks
8 15 6 -6 19
Global
200 Home &

Personal Goods 8 20 10 -9 10
Global
150 Packaged Food

8 33 9 -11 3
Global
Leisure
100 Products 17 51 32 -34 21
Global
Tobacco
50 9 31 3 25 -14
Jan19 Jan20 Jan21 Jan22 Jan23 Global
1. N = 56 (Alcoholic Beverages 9, Soft Drinks 5, Home & Personal Goods 8, Packaged Food 27, Leisure Products 4, Tobacco 3)
Sub-sector Economic Profit has been on the rise in the last 5 years
Since 2018 and in absolute terms, Packaged Food and Alcoholic beverages captured the most Economic Profit
Value created Value destroyed Net Economic Profit
Economic Profit1,2 by sub-sector from 2018 to 2022 2018 2022
EUR billions
26
21 22
18
14
Alcoholic Beverages Soft Drinks Home & Personal Goods Packaged Food Leisure Products Tobacco
1. Defined as Invested Capital incl goodwill * (ROIC incl goodwill - WACC), the return on invested capital earned above the weighted average cost of capital
2. N = 361
Globally, sub-sector revenue growth is expected to slow down after
strong growth in 2022
Margins expected to remain relatively constant while multiples are slightly decreasing given TSR downturn in 2023 YTD
Alcoholic Beverages Soft Drinks Home & Personal Goods Packaged Food Leisure Products Tobacco As Reported Estimates
2019 2024E
EV/EBITA FY+21 Revenue growth1,2 EBITA margin1,2
Dec 2018 – Sep 2023, Weighted average %, 2019 – 2024E, Weighted average %, 2019 – 2024E, Weighted average
36 37
20
17 27
17 25
15
14
14 9 17 17
7 16 16
6 6 6
5 14
11 4 12
3 3
10 1 10
9 9
0
-3
5
2018 2020 2022 2023 Alcoholic Soft Home & Packaged Leisure Tobacco
Alcoholic Soft Home & Packaged Leisure Tobacco
Q4 Q4 Q4 Q3 Beverages Drinks Personal Food Products
Beverages Drinks Personal Food Products
Goods
Goods
1. N = 360 (Alcoholic Beverages 53, Soft Drinks 29, Home & Personal Goods 64, Packaged Food 170, Leisure Products 29, Tobacco 15); only includes companies for which a 2024 estimate is available
2. 2023 and 2024 based on latest analyst consensus estimates; if 2022 actuals not available yet, latest analyst consensus estimates are used for 2022 as well
For Europe, similar patterns are observed, with sub-sector growth
expected to be lower in 2023 vs 2022
Margins expecting to remain relatively constant while multiples are slightly decreasing given TSR downturn in 2023 YTD
As Reported Estimates
2019 2024E
EV/EBITA FY+21 Revenue growth1,2 EBITA margin1,2
Dec 2018 – Sep 2023, Weighted average %, 2019 – 2024E, Weighted average %, 2019 – 2024E, Weighted average
42
41
20
16
16 9 9
8 8
15
14 5 23 23
4 4
13 34 3 3 20
21
2
12 17 18
12 13 13 13
10
5 Alcoholic Soft Home & Packaged Leisure Tobacco

2018 2020 2022 2023 Beverages Drinks Personal Food Products Alcoholic Soft Home & Packaged Leisure Tobacco
Q4 Q4 Q4 Q3 Goods Beverages Drinks Personal Food Products
Goods
1. N = 56 (Alcoholic Beverages 9, Soft Drinks 5, Home & Personal Goods 8, Packaged Food 26, Leisure Products 4, Tobacco 4); only includes companies for which a 2024 estimate is available
2. 2023 and 2024 based on latest analyst consensus estimates; if 2022 actuals not available yet, latest analyst consensus estimates are used for 2022 as well
Gross margins are lower in LTM Q2 2023 for ~75% of CPGs versus
2021, yet over 40% have been able to at least partially offset
~25% of CPGs were able to improve gross margin from 2021 to LTM Q2 2023
Packaged Food Soft Drinks Home & Personal Goods Tobacco Alcoholic Beverages Leisure Products Bubble size = Revenues
LTM Q2 2023
Δ EBITA margin1
2021 to LTM Q2 2023, %-points Δ EBITA margin = Δ Gross margin
>=5
Δ EBITA margin better than gross
4 margin decline (n=120; 42%)
3
2
1
0
-1
-2
-3
-4 Δ EBITA margin similar or worse2 than Gross margin increased
gross margin decline (n=94; 33%) (n=74; 26%)
<=-5
<=-5 -4 -3 -2 -1 0 1 2 3 4 >=5
1. N = 288 (Alcoholic Beverages 46, Soft Drinks 23, Home & Personal Goods 55, Packaged Food 130, Leisure Products 22, Tobacco 12); only includes companies for which
both gross margins and EBITA margins were available for Q1 - Q4 2021 and Q3 2022 - Q2 2023 Δ Gross margin
2. ‘Similar’ means that this group includes companies for which gross margin declined and the change in EBITA margin was slightly better (a maximum of 0.5pp higher vs
gross margin decline) 2021 to LTM Q2 2023, %-points
Across CPG sub-sectors, 25-40% of companies suffering gross
margin decline were not able to offset through cost measures
Companies that saw gross margin increase were generally not able to fully sustain this through to EBITA
LTM as per Q2 2023 # of companies1 Δ Gross margin1,2 Δ EBITA margin1,2 Difference Δ EBITA vs Δ GM1
Count (%) LTM vs 2021, ppt LTM vs 2021, ppt ppt
Alcoholic Gross Margin increase 16 (35%) 2 2 1
Beverages Gross Margin decline, partially offset 19 (41%) -2 1 3
Global EBITA margin decline > Gross Margin decline 11 (24%) -1 -3 -2
Soft Drinks Gross Margin increase 4 (17%) 4 0 -3

Global Gross Margin decline, partially offset 13 (57%) -2 0 2
EBITA margin decline > Gross Margin decline 6 (26%) -4 -6 -2
Home & Gross Margin increase 15 (27%) 3 0 -3

Personal Gross Margin decline, partially offset 17 (31%) -3 -2 1
Goods EBITA margin decline > Gross Margin decline 23 (42%) -2 -4 -2
Global
Packaged Gross Margin increase 24 (18%) 2 1 0
Food Gross Margin decline, partially offset 66 (51%) -3 0 2
Leisure Gross Margin increase 9 (41%) 4 3 -1

Products Gross Margin decline, partially offset 4 (18%) -2 -1 2
Tobacco Gross Margin increase 6 (50%) 4 2 -3

Global Gross Margin decline, partially offset 1 (8%) -1 3 4
EBITA margin decline > Gross Margin decline 5 (42%) -4 -5 -1
1. N = 288; only includes companies for which both gross margins and EBITA margins were available for Q1 - Q4 2021 and Q3 2022 - Q2 2023
2. Medians
CPGs that were not able to offset part of the gross margin decline,
had a relatively lower growth, revenue size and SG&A intensity
Companies that were able to increase gross margin had relatively low starting gross margin
LTM as per Q2 2023 Revenue size1,2 Revenue growth1,2 Gross margin1,2 EBITA margin1,2 SG&A intensity1-3
2021, EUR M 2021 to LTM, % 2021, % 2021, % 2021, %
Alcoholic Gross Margin increase 1,722 16 60 23 22
Beverages Gross Margin decline, partially offset 3,351 29 53 16 25
Global EBITA margin decline > Gross Margin decline 961 16 55 24 24
Soft Drinks Gross Margin increase 2,089 27 42 7 35

Global Gross Margin decline, partially offset 6,027 26 46 12 30
EBITA margin decline > Gross Margin decline 2,736 19 50 20 23
Home & Gross Margin increase 1,054 10 50 15 33

Personal Gross Margin decline, partially offset 2,772 18 55 15 29
Goods EBITA margin decline > Gross Margin decline 2,808 0 53 14 30
Global
Packaged Gross Margin increase 2,312 20 25 6 14
Food Gross Margin decline, partially offset 2,782 21 38 11 19
Global EBITA margin decline > Gross Margin decline 3,081 16 31 10 13
Leisure Gross Margin increase 1,050 22 23 12 10

Products Gross Margin decline, partially offset 3,976 36 38 11 18
Global EBITA margin decline > Gross Margin decline 2,512 -4 42 22 18
Tobacco Gross Margin increase 12,797 3 43 27 11

Global Gross Margin decline, partially offset 17,830 7 65 24 31
EBITA margin decline > Gross Margin decline 2,484 6 55 26 20
1. N = 288; only includes companies for which both gross margins and EBITA margins were available for Q1 - Q4 2021 and Q3 2022 - Q2 2023
2. Medians
Across subsectors EBITDA surprises were significantly more
positive than revenue surprises in Q2 earnings announcements
Majority of Tobacco companies missed revenue consensus by 10% or more
Latest quarter revenue and EBITDA surprise effect

Delta between actuals and median estimate, % of companies within subsector <- -10% -2.5% 0% to 2.5% > 10%
10% to - to 0% 2.5% to 10%
2.5%
Revenue
42% Actuals worse Actuals better 42% 43%
than estimated than estimated
35%
28% 28% 29%
26%
24% 22%
22% 20% 20% 21%
19% 19%
13% 13% 13% 14% 14%
9% 11% 11%
8% 8% 8% 8%
5% 5% 6% 6% 4%
3%
0% 0%
EBITDA
43% 43%
40%
33% 33% 35% 33% 33% 33%
27% 27% 27%
18% 18% 19%

17% 15% 15% 15%
12%
9% 8% 8% 8% 8% 7% 7%
4% 4%
0% 0% 0% 0% 0% 0% 0%
Note: Based on most recent quarterly earnings dates, ranging from 05/27/2023 to 09/30/2023
Source: S&P Capital IQ; McKinsey analysis McKinsey & Company 36

In line with positive EBITDA surprises, forward-looking EBITDA
estimates for 2024 were adjusted upwards accordingly
In Tobacco, estimates adjusted significantly downwards
Change in Revenue and EBITDA estimates post earnings announcement (FY+2)

% of companies within subsector
< -5% -5% 0% to > 5%
to 0% 5%
Revenue Downward Upward
adjustment adjustment 57%
48%
42%
37% 39%
34% 33% 33%
31% 29%
28% 29%
22% 21% 21%
16% 17% 17% 14%
13%
6% 5% 7%
0%
EBITDA 62%
58%
50%
43%
36% 36% 35% 33% 33% 33% 33%
25% 27% 25%
18% 17%
9% 8% 7%
4% 6%
0% 0% 0%
Note: Based on most recent quarterly earnings dates, ranging from 05/27/2023 to 09/30/2023

Majority of CPG companies saw only minor share price adjustments
after most recent earnings announcements
Packaged Food and Leisure Products saw the widest spread
Share price delta less change in S&P 500 on day of most
recent 2023 earnings announcement1, # of companies Largest share price dip Largest share price rise
-24 25
116
107 -23 17
-12 11
-10 11
-9 11
-9 11
31 33 -8 10
22
-8 9
10 7
4 -8 8
<-10% -10% -5% to -2.5% 0% to 2.5% 5% to >10%
-7 8
to -5% -2.5% to 0% 2.5% to 5% 10%
1. Based on a sample size of 330 companies and only includes companies where the latest earnings announcement was Q2 2023 or later.

High-valued CPGs generally have higher long-term growth and
margin expectations, continuing superior historical performance
Even highest-valued Tobacco companies have negative long-term growth expectations
Valuation multiple1-3 Expected performance1-3 Historical performance1,3
EV/EBITA 2024E LT implied growth4 Revenue growth EBITA margin, Revenue growth EBITA margin
Times CAGR, 2025+, % CAGR, 22-24E, % 2024E, % CAGR, 19-22, % Average, 20-22, %
Alcoholic
Beverages 21 26 21 20 19
14 16 4 9 9 8
Global 11 0 5
Soft Drinks 30
Global 19 6 13 15 11 15
12 14 9 13
8 4
-3
Home & 4 9
Personal 22 17 17
13 16 -3 14 8 14
Goods 9 5
Global 0
Packaged 4
Food 22 11
11 14 -3 14 11 7 11
Global 8 4 6 9
Leisure 3 18
Products 16 17 14 20
12 17 7 11
Global 6 9 -7
3
Tobacco
19 28
Global 14 21
7 9 11 7
5 5 5
-14 -2 1
Bottom Top Bottom Top Bottom Top Bottom Top Bottom Top
Bottom Top
Q1 Q2 Q3 Q4
1. N = 352 (Alcoholic Beverages 52, Soft Drinks 29, Home & Personal Goods 64, Packaged Food 165, Leisure Products 28, Tobacco 14); 2. EV and analyst estimates as on September 30, 2023; 3. Medians within quartiles; Companies
categorised into quartiles based on Valuation Multiple as on September 30, 2023; 4. Estimated using a simple DCF model by company. Revenues and margins for 2023-2024 based on analyst consensus. 2025+ implied growth rate solves
for September 30, 2023 company Net Enterprise Value. 2025+ margin set equal to 2024 expected margin and capital turnover set equal to median of last 5 years. Continuing Value starts in 2038, where growth is capped at 4.5%. 4. Based
on a smaller sample size (n=321) because meaningful results could not be generated for all 352 companies; other results on this page are robust to using this smaller sample size
Growth is the key value driver for CPG companies, with ROIC for
most categories well above WACC
Even low ROIC companies are generally creating value in CPG by generating returns above cost of capital
Change in Net Enterprise Value from1,4-5:
ROIC1-2, WACC1,3, 1%-point increase in 2025+ 1%-point increase in 2025+ Key value
2022, % 2022, % growth, % margin, % driver
Alcoholic High ROIC 21 3 Growth
Beverages 65 7%
14
Global Low ROIC 15 6 Growth
Soft Drinks High ROIC 18 5 Growth

Global 7%
43 15 Low ROIC 10 10 Growth/Margin
Home & High ROIC 15 5 Growth

Personal Goods 8%
55 15 Low ROIC 12 7 Growth
Global
Packaged Food High ROIC 12 6 Growth
Global 7%
27 9 Low ROIC 8 13 Margin
Leisure High ROIC 10 5 Growth

Products 8%
42 25 Low ROIC 13 5 Growth
Global
Tobacco 196 High ROIC 8 2 Growth
Global 29 7%
Low ROIC 8 3 Growth
High ROIC Low ROIC
1. N = 321 (Alcoholic Beverages 47, Soft Drinks 28, Home & Personal Goods 62, Packaged Food 146, Leisure Products 26, Tobacco 12); 2. Median ROIC ex Goodwill 2022; 3. Median WACC 2022; 4. Companies are classified in High ROIC
and Low ROIC based on whether they achieved higher or lower ROIC in 2022 versus the median for the respective subsector; 5. Medians; Estimated using a simple DCF model by company. Revenues and margins for 2023-2024 based on
analyst consensus. 2025+ implied growth rate solves for company Net Enterprise Value as on September 30, 2023. 2025+ margin set equal to 2024 expected margin and capital turnover set equal to median of last 5 years. Continuing Value
starts in 2038, where growth is capped at 4.5%
Contents

Emerging European consumer trends in Q3 2023
1 2 3 4 5
Overall consumer Consumers expect to …by trading down Omnichannel is the ESG has become a key
mood has stabilised continue reducing their across all categories preferred purchasing factor in most
and remains neutral spending slightly… model purchasing decisions
Consumer confidence stable 1 in 2 consumer have 8 in 10 European consumers Across all key regions, Consumers care deeply
after improvement in Q2 ’23 reduced savings to finance are trading down, mostly by consumers prefer an about brand sustainability,
spending adjusting quantities and omnichannel shopping transparency and willingness
Confidence varies by region
with Spain showing a strong Going forward, consumers buying lower priced brands approach to care for their people and
are willing to pay for it
positive trend, with Germany expected to spend less in Downtrading is stronger Younger consumers having a
experiencing a slight decline non-essential categories, amongst younger consumers larger preference for ESG importance varies
although trend has stabilised – 9 in 10 GenZs have traded omnichannel shopping slightly across markets and
Inflation remains the top
down in the last 3 months compared to older ones, generations with Gen Z
concern for consumers,
preferring in-store shopping being most conscious
followed by climate change
2 in 3 Only 3 40% 2/3 1 in 2

consumers are still very Categories have a positive consumers are changing of consumers prefer consumers consider when
concerned about inflation net intent retailers omnichannel shopping model ESG factors when shopping
Source: McKinsey ConsumerWise EU5 Sentiment Data (UK, Germany, Spain, Italy and France), August 2023, [n=5000] McKinsey & Company 42
EU5 consumer sentiment remains strong, in line with Q2’2023
Confidence level in own country’s economic conditions1, % respondents
18 15 15 15 15 16 14 14 14 Optimistic
21 24 26 26 The economy will rebound in
34 2-3 months, and that the
economy will grow the same or
faster than before
43
49 50
52 55 53 55 55 53
Mixed
55 51 51 53 The economy will be impacted
for 6-12+ months and will take
49
a longer time to recover
43 Pessimistic
32 37 36 The economy will be impacted
30 30 30 31 31 long-term and will lead to a
24 25 23 22
17 recession/one of the worst
recessions we have seen
Mar-20 Apr-20 May-20 Jun-20 Sep-20 Nov-20 Feb-21 Aug-21 Mar-22 Apr-22 Jun-22 Sep-22 Apr-23 Aug-23
20202 2021 2022 2023
1. Q: What is your overall confidence level surrounding economic conditions in EU5? Rated from 1 “very optimistic” to 6 “very pessimistic.” Top, middle, and bottom 2 boxes of scale aggregated to "Optimistic," “Neutral,“ and "Pessimistic.“
Figures may not sum to 100%, because of rounding. Question prior to Aug 2022 framed as: What is your overall confidence level surrounding economic conditions after the coronavirus (COVID-19) crisis subsides (ie, once there is herd
immunity)?
2. Average of weekly pulse surveys shown for Apr 2020.
Source: McKinsey ConsumerWise Global Sentiment Data, August 2023, [n=5000] McKinsey & Company 43
Inflation remains top concern, but has decreased in importance vs
Q2 mildly while sustainability and immigration concerns grow
Greatest sources of concern, X% > +1% increase X% < -1% decrease

% respondents who selected factor as top 3 source of concern
Versus Q2 2023,
p.p. change
Economic Rising prices / inflation 58 -2%
Ability to make ends meet 24 0%
Unemployment / job security 19 0%
Stock market performance 5 0%
Political International conflicts 27 -2%
Immigration 23 4%
Cost and accessibility of healthcare 18 0%
Political polarization / political uncertainty 12 1%
Abortion laws 4 0%
Social Climate change / sustainability 34 4%
Growing inequality in the society, polarization of incomes 16 0%
Gun violence / personal safety 16 2%
Discrimination against certain group of people 7 0%
COVID-19 pandemic 5 -1%
None of these None of these 1 0%
Others Others 0 0%
31% of consumers monitor expenses more carefully as 29% have
dipped into savings and reduced income going to savings
Changes in household finances1, % of respondents Savings measures taken2, % of respondents

Increased slightly/a lot About the same Reduced slighly/a lot X% > +1% increase X% < -1% decrease
Versus Q2 2023,
p.p. change
10 10
16 16
Reduced spend on food/struggled to find money to cover groceries 22 -2%
44 Dipped into savings to cover expenses 29 -1%

51 37 39 Reduced the amount of my income going to savings 29 -1%
Used credit card more 19 0%

56 56
Took on another job/worked more hours 10 1%
34 Skipped or paid less than minimum amount due for a bill 8 0%

30
54 51 Used a buy now 14 0%
Started tracking my expenses more carefully 31 -2%

28 28
19 22
Applied for government support 8 -1%
Q2 2023 Q3 2023 Q2 2023 Q3 2023 Q2 2023 Q3 2023 None of these 19 1%

Spending Income Savings
1. Q: How have the following changed over the past 3 months?
2. Q: Which, if any, of the following have you done in the past 3 months?
Consumers continue to reduce spend on semi-discretionary items,
though the trend has stabilised vs Q2’2023 (1/2)
Will spend less on this category Will spend about the same amount Will spend more on this category Above 1% Between 1% and -15% Below -15%
Net intent,
Expected spending per category over the next three months compared to usual1, % of respondents Net intent Q3 vs Q2
Essentials Fresh produce 11 70 19 7% 1%
Meat & dairy 18 69 13 -6% 2%
Center store / shelf stable groceries 15 73 12 -3% 1%
Non-alcoholic beverages 24 68 8 -17% 2%
Pet food & supplies 14 75 11 -3% 3%
Gasoline 18 60 22 4% 5%
Baby supplies 20 58 22 2% 2%
Household supplies 18 74 9 -10% 2%
Semi-
Personal care products 15 77 8 -6% 2%
discretionary
Fitness & wellness 24 61 14 -10% 4%
Toys 39 48 13 -26% 7%
Vitamins, supplements, and OTC medicine 24 66 10 -14% 5%
Vehicles 37 48 15 -22% -4%
Skincare & make-up 32 58 10 -23% 2%
1. Q: Over the next 3 months, do you expect that you will spend more, about the same, or less money on these categories than usual?
Consumers continue to reduce spend on non-essential items,
though the trend has stabilised vs Q2’2023 (2/2)
Will spend less on this category Will spend about the same amount Will spend more on this category Above 1% Between 1% and -15% Below -15%
Net intent,
Expected spending per category over the next three months compared to usual1, % of respondents Net intent Q3 vs Q2
Accessories 51 41 8 -43% 2%
Discretionary
Alcoholic beverages 37 56 7 -29% 2%
Apparel 41 48 11 -29% 2%
Cruises 32 49 19 -14% 0%
Decorations and products for home 49 42 9 -39% 6%
Domestic flights 35 47 18 -17% 3%
Electronics for home or personal use 46 43 11 -35% 6%
Entertainment at home 25 67 8 -17% 1%
Entertainment away from home 40 49 11 -28% 4%
Food delivery from an app 41 47 12 -30% 3%
Footwear 41 50 9 -31% 2%
Furniture 50 36 14 -37% 3%
Home improvement & gardening supplies 46 45 9 -37% -7%
Hotel / resort stays 37 45 18 -19% -2%
International flights 33 46 21 -13% 2%
Jewelry 51 38 11 -40% 2%
Meal at a sit-down restaurant 40 48 12 -28% 0%
Meal at quick service restaurants in restaurant, for takeout, etc. 44 47 9 -35% 2%
Personal care services 31 61 8 -23% 1%
Petcare services 23 64 13 -11% 5%
Short-term apartment or house rentals 37 49 13 -24% -2%
Sports & outdoors equipment & supplies 40 49 11 -29% 1%
1. Q: Over the next 3 months, do you expect that you will spend more, about the same, or less money on these categories than usual?
Consumers in all income …with stronger effect seen in
classes are trading down… younger generations
Percent of respondents changing their shopping behavior and

trading down by generation and income <70 <80 <85 >=85
% of respondents
Income Generation
EU 5 France Germany Italy Spain UK Country : EU 5 France Germany Italy Spain UK
Low Income 79% 80% 78% 81% 82% 73% Generation z 86% 81% 89% 84% 89% 90%
Medium 79% 81% 78% 81% 81% 74% Millennial 85% 87% 86% 84% 87% 83%
Income
High Income 77% 79% 74% 78% 78% 75% Generation X 78% 82% 72% 82% 80% 74%
Boomers and
Silent 68% 71% 66% 75% 72% 56%
Source: McKinsey ConsumerWise EU5 Sentiment Data (UK, Germany, Spain, Italy and France), August 2023, [n=5000] McKinsey & Company 48
Consumers are most likely to splurge on dining-out, apparel and
travel with GenZ also planning to splurge on beauty
Categories where consumers intend to treat themselves Below market average (<-5 vs market) Above market average (>5 vs market)
of all respondents with intent to splurge
Intent to splurge by generation
Baby
Categories Gen Z Millennials Gen X boomers
Apparel 34 42% 33% 32% 24%
Beauty & personal care 21 28% 22% 18% 13%
Electronics for home or personal use 20 21% 23% 18% 13%
Fitness 14 17% 15% 11% 8%
Footwear 26 28% 29% 24% 18%
Groceries / food for home 24 22% 24% 24% 26%
Household essentials 10 11% 12% 7% 3%
Items for your home 15 15% 15% 15% 15%
Jewelry & accessories 16 23% 17% 12% 5%
Others 2 1% 1% 2% 4%
Out of home entertainment 20 24% 21% 17% 17%
Restaurants, dining out, bars 35 35% 34% 33% 43%
Travel 33 24% 32% 39% 42%
Vehicles 12 14% 14% 8% 7%
Our team tracks and integrates consumer sentiment,
behaviour, and spend around the world to provide
customised, differentiated, and actionable insights
through a combination of:
Want to learn more about Consumers?
ConsumerWise
The 360-degree view of the
Growing suite of Insights Clear and
consumer insights products experts and timely
and resources advisors perspectives
360-Degree View of the Consumer

An ‘always on’ view of how consumers are behaving and
feeling through proprietary sentiment research & spend data
>22,000 ~20 >500 30+

Consumers Key global Data points Behavior tracked
surveyed markets tracked across 30+
Interested in the latest globally tracked quarterly for categories and
articles or to learn more? each market industries
Check out mckinsey.com/consumerwise McKinsey & Company 50
Marcus Jacob Werner Rehm Meeke de Jong
Senior Partner, Partner, Associate Partner,
Berlin New Jersey Amsterdam
Your quarterly
perspective
team Gizem Gunday
Partner,
Stijn Broekema
Solution
Tomasz
Mataczynski
London Specialist, C&I Specialist,
Amsterdam Wroclaw
Jose Alvares Marco Krzysztof

C&I analyst Blochlinger KwiatkowskiC
Lisbon C&I Specialist, &I Specialist,
Zurich Waltham
You can contact us via: Corporate_Finance_in_Consumer_Team@mckinsey.com
McKinsey & Company 51 51

Disclaimer
These are suggested practices, in many cases adopted by companies across sectors.
We do not offer recommendations on sufficiency, adequacy or effectiveness of these measures.
You can derive no rights or make decisions based on this material.
We do not provide legal, accounting, tax, medical or other such professional advice normally
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Quarterly Perspective

CONFIDENTIAL AND PROPRIETARY

McKinsey & Company 2

Russia 3.1 1.5

Harmonized Index of Consumer Prices (Eurozone) Change (%)

150 Services (all) 4.7 4.3

110 Transport 4.2 9.9

80 Energy -4.7 40.7

1. Overall index excluding food, energy, alcohol and tobacco

Source: Eurostat McKinsey & Company 4

Eurozone inflation decelerated to 4.3% in

Education, communication, health 0.2 Nominal wage growth is projected at 5.3% in

Source: Eurostat McKinsey & Company 5

2.0 3.3 4.8

2.7 3.7 0.9

2.9 5.6 7.4

3.2 6.0 4.2

Consumer confidence Price trends in the next 12 months

McKinsey & Company 8

Real GDP Real GDP

115 0.9% 2.8% 2.9% 3.2% 2.6%

0.6% 1.0% 1.8% 2.2% 1.3%

90 0.6% -1.7% 0.9% 3.3% 1.0%

8.4 8.4 8.4

3.9 3.9 3.9

1.7 2.0 2.0

-0.4 -0.4 -0.4

Households in merely a few countries – in the Netherlands, in the UK,

McKinsey & Company 11

Consumer Confidence Change (%) Change (%) Change (%)

96 Germany 1.1 -3.2 2.4

94 Italy 2.3 -2.9 2.4

92 Netherlands -0.6 -2.1 2.3

1. All European Union Member States in the euro area

Source: OECD McKinsey & Company 12

Consumer Confidence Change (%) Change (%) Change (%)

96 Sweden -0.1 -7.1 1.9

94 Switzerland2 2.1 -5.9 2.1

92 United 2.2 -6.9

Source: OECD McKinsey & Company 13

McKinsey & Company 14

Private Consumption Change (%) Change (%) Change (%)

180 Europe1 10.6 9.8 4.9

150 Denmark 9.1 3.4 2.0

130 France 9.6 5.6 6.0

100 Italy 10.4 13.0 1.8

80 Netherlands 11.5 16.0 0.8

Private Consumption Change (%) Change (%) Change (%)

150 Russia 19.1 8.1 19.8

100 Switzerland 4.2 5.6 4.1

McKinsey & Company 17

Retail Sales Change (%) Change (%) Change (%)

140 Denmark 6.0 -6.5 -1.5

120 France 10.1 -1.2 -2.6

90 Italy 10.9 -2.7 -3.2

70 Netherlands 6.2 0.1 -1.8

Source: Eurostat, Haver, ONS McKinsey & Company 18

Retail Sales Change (%) Change (%) Change (%)

140 Russia 4.8 -9.4 10.9

120 Spain 1.6 3.6 7.9

90 Switzerland 3.8 -2.3 -0.8

70 United 1.1 -6.4 -1.4

Source: Eurostat, Haver, ONS McKinsey & Company 19