NIELSEN PERISHABLES GROUP

Utah Food Industry Association8.14.2014

THE EVOLUTION OF FRESH

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

2

WHO IS NIELSEN PERISHABLES GROUP?

NEW TOTAL-STORE PERSPECTIVE

ESTABLISHED LEADERSIN FRESH

EXPANDED INFORMATION AND CAPABILITIES

BAKERYDELIMEAT PRODUCE SEAFOOD

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

3

CONCERNS SHARE OF RESPONSES

ECONOMY 20%

DEBT 12%

JOB SECURITY 13%

HEALTH 9%

FOOD PRICES 6%

FUEL PRICES 6%

UTILITY PRICES 3%

WORK/LIFE BALANCE 3%

ECONOMIC CONCERNS REMAIN TOP OF MIND

What are your biggest concerns over the next six months?

Source: Nielsen Global Omnibus Consumer Confidence Survey Q3 2013

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

4

Forecast for 2014 Moderate Growth

U.S. GROWTH SLOWEDActual and Projected U.S. GDP Growth (2006-2017)

2.7%

1.9%

-0.3%

-3.1%

2.4%

1.8%2.2%

1.5%

2.4%

3.4% 3.4% 3.3%3.4%

2006 2007 2008

2009

2010 2011 2012 2013 2014 2015 2016 2017

Forecast

Source: IMF World Economic Outlook, Oct 2012; 2012-2014 from Wells Fargo forecasts as of Dec 21 2012; TCG Analysis

Actual

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

5

Median household Income in 2012 Inflation Adjusted Dollars

Source: U.S. Census Bureau

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

$51,017

$51,100

$51,892

$53,285

$53,644

$55,627

$54,892

$54,486

$53,891

$54,079

$54,127

$54,766

$55,987

SHRINKING INCOMES IN THE MIDDLE CLASS DESPITE GDP INCREASESDecline in median household income in 9 of last 13 years – is this the new normal?

SO WHAT DOES THIS MEAN FOR FRESH?

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

7

FRESH HAS NOT BEEN IMMUNE TO PRICE INCREASES

Source: Nielsen Perishables Group FreshFacts® Total U.S. (FCA) weeks ending 12/28/2013 vs. Year Ago

PROMOTIONPRICE

SALE

VOLUME % ON PROMO VS. YEAR AGO

AVG. RETAIL PRICE VS. YEAR AGO

-1.2%

-1.7%

+2.0%

SEAFOOD

BAKERY

DELI

PRODUCE

MEAT

-1.2

0.1

-0.3

-1.5

-1.5

2.7%

0.8%

1.0%

4.4%

2.0%

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

8

MEAT PRODUCE DELI BAKERY SEAFOOD

4%

7%

6%

4%

6%

1%

3%

5%

3%

-0%

DESPITE PRICE INCREASES FRESH DEPARTMENTS THRIVE

Source: Nielsen Perishables Group FreshFacts® Total U.S. (FCA, does not include convenience, drug or dollar) weeks ending 4/26/2014 vs. Year Ago and Total U.S. - All Outlets Combined, plus Convenience ending 5/11/2014 (UPC only)

DOLLAR GROWTH

VOLUME GROWTH

Fresh growth continues to outpace rest of the store

FROZEN GROCERY DAIRY-1%

0%

2%

-2%

-0% -0%

1%

0.2%

TOTAL STORE TREND

FRESH DEPARTMENTS CENTER STORE FOOD DEPARTMENTS

Copy

right

©20

13 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

9

Dog Food (Pet)

SS Juices and Drinks

(Grocery)

Laundry Detergent

(HBC)Milk

(Dairy)Baked Bread

(Grocery)

Prerecorded Videos

(Non Food)

School/Office Supplies

(Non-Food)

Frozen Entrees (Frozen)

RTE Cereal (Grocery)

Soft Drinks (Grocery)

-$417 -$469 -$511 -$566 -$599 -$657 -$665-$783 -$785

-$1,376

Chicken (Meat)

Bacon (Meat)

Prepared Chicken

(Deli)

Berries (Produce)

Pkg Salad (Produce)

Potatoes (Produce)

Value-Add Fruit

(Produce)

Avocados (Produce)

Value-Add Veg

(Produce)

Dips/Spreads (Deli)

$636$575

$417$382 $371 $368

$300$272 $255 $237

WINNERS AND LOSERS ACROSS THE STORE

Source: Combined Nielsen Perishables Group FreshFacts® and Nielsen ScanTrack point-of-sale data sets – ranked by dollars per MM ACV for 52 weeks May 2014

THE IMPACTS

Top 10 Fastest Dollar Velocity ($ per MM ACV) Growth Categories Across the Store

Bottom 10 Biggest Dollar Velocity ($ per MM ACV) Losing Categories Across the Store

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

10

SO HOW DOES AN ENVIRONMENT LIKE THAT PRODUCE A SCENARIO LIKE THIS?Agenda (Evolutionary Traits)

• Fresh is more available than ever

• Fresh fits the trip

• Fresh communicating consumer benefits (making a play for the need-state)

• Fresh has something for almost everyone

• Future of fresh – a critical piece in the total store “ecosystem”

FRESH IS MORE AVAILABLE THAN EVER

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

12

ALTERNATIVE CHANNELS GROWING IN FRESH

Source: 1. Nielsen Homescan Total Shopper View 52 weeks ending 12/28/13 versus year ago 2. Nielsen TDLinx

DOLLAR STORES

CHANNEL41,378 Stores

+21%2013 vs 2007

PERISHABLES Purchase Frequency

+7.1% vs YAGO

CHANNEL25,486 Stores

+36%2013 vs 2007

PERISHABLES Purchase Frequency

+2.0% vs YAGO

GROCERY

CHANNEL2

33,445 Stores+7%

2013 vs 2007

PERISHABLES1 Purchase Frequency

-2.6% vs YAGO

DRUGSTORES

CHANNEL151,282 Stores

+32% 2013 vs 2007

PERISHABLES Purchase Frequency

+1.4% vs YAGO

CONVENIENCE STORES

Baskets with Fresh1.5 to 2x Bigger Than The Average Basket

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

13

A GROWING NUMBER OF WAYS TO DELIVER FRESH TO CONSUMERS

Source: Nielsen Perishables Group

Dollar General MarketCity Target

Walmart Neighborhood MarketWalgreen’s

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

14

WHAT’S AROUND THE CORNER?We’re probably not getting LESS busy

Source: Nielsen Perishables Group

FRESH FITS THE TRIP

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

16

MORE OUTLETS, MORE FRAGMENTED TRIPS

Source: Nielsen Homescan Total Shopper View Specialty Panel, 52 weeks ending March 2014

Quick Trip Fill-in Trip Stock-up Trip<6 items in the basket 6-15 items in the basket 15+ items in the basket

The Fast and the FrequentAcross all outlets, more than 55% of all trips have 6 items or less

The Power of FreshTrips to these outlets with fresh are up 4% (higher for quick trips)

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

17

MILLENNIALS DRIVE QUICK TRIPS

Source: Nielsen Perishables Group Total Shopper Study, from FreshFacts® Shopper Insights powered by DataLogix, 52 weeks ending 3/29/14,Millennials defined as born between 1980 - 1995

Overall, Millennials make more trips per household than the average shopper

Millennials are also the most important generation to quick trips, and spend the highest per quick trip

Boomers and Generation X are the most important shoppers to stock-up trips

It’s a New WorldCan’t assume Millennials will make bigger

trips as they age – smart quick trip strategies are critical in food retail

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

18

AS QUICK TRIPS BECOME MORE POPULAR SOME FRESH CATEGORIES STAND TO GAINNotably deli and bakery, two of the fastest growing fresh departments,

Source: Nielsen Perishables Group Total Shopper Study, FreshFacts® Shopper Insights powered by DataLogix for 52 weeks ending 3/29/14

QUICK TRIPS STOCK-UP TRIPS

MORE THAN 15 ITEMS6 ITEMS OR FEWER

MOST IMPORTANT TRIPS TO:

BAKERY DEPT.

MOST IMPORTANT TRIPS TO:

DELI DEPT. FROZEN DEPT. MEAT DEPT. PRODUCE DEPT.

DAIRY DEPT. DRY GROCERY DEPT.

Quick trips are different and offer different opportunities

to win shopper dollars

FRESH COMMUNICATING CONSUMER BENEFITS

Copy

right

©20

13 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

20

CONSUMER BENEFITS HAVE NOT CHANGED

MULTICULTURAL/GLOBAL

QUALITY/VALUEHEALTH CONVENIENCE

Source: Nielsen Perishables Group

WHAT WE BUY

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

21

HEALTHY CONVENIENCE PREMIUM/INDULGENCE MULTICULTURAL/GLOBAL

7% 7%

5%

9%

3%

6%

4%

7%

DOLLAR GROWTHVOLUME GROWTH

Source: Nielsen Perishables Group FreshFacts® Total U.S. 52 weeks ending 12/28/2013 vs. Year Ago; Products in each group are not mutually exclusive

37% 18% 7% 2%

CONTRIBUTION TO FRESH DOLLAR SALES

HOWEVER HOW CONSUMERS MEET THOSE PRIORITIES IS EVOLVING

Fresh Growth by Consumer Priority

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

22

TOP 10 FASTEST-GROWING FRESH CATEGORIES EXEMPLIFY CONSUMER PRIORITIES

Source: Nielsen Perishables Group FreshFacts® 52 weeks ending 12/28/13; includes categories with over 50% ACV selling over the 52 weeks ending 12/28/13

Produce Beverages

$972M; +17%Cooking Greens

$362M ; +24%

PRODUCE

Avocados

$994M; +15%Specialty Fruits

$502M; +15%

Squash and Pumpkins

$585M; +13%

DELI

Dips, Spreads and Toppings$994M; +15%

Deli Breakfast Foods$71M; +11%

MEAT

Bacon$3B; +12%

Citrus

$2.5B; +12%Value-Added Vegetables

$1.3 B; +13%

WHAT WE BUY

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

23

BRANDS PLAYS AN INCREASINGLY IMPORTANT ROLE IN THE FRESH PERIMETER

Source: Nielsen Perishables Group FreshFacts®

BAKERY DELI MEATPRODUCE SEAFOOD

$14 billion33% of department

sales

$2.6 billion25% of department

sales

$10.1 billion45% of department

sales

$26 billion48% of department

sales

$2.3 billion39% of sales

Unbranded39.7%

Private Label20.0%

All Brands40.3%

Dollar Share of Total Perishable Sales52 weeks ending 6/28/14

+0.4

0.0

-0.4

Brand Dollars % Growth

Branded $56 B 6.2%

PRIVATE LABEL $27 B 5%

Unbranded $54 B 4.1%

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

24

CONVENIENT OPTIONS BECOMING MORE POPULAR; CONSUMERS PAY MORE FOR A DIFFERENT KIND OF VALUE

Source: Nielsen Perishables Group FreshFacts®, 52 Weeks Ending 12/28/13; Total U.S. FCANielsen Perishables Group FreshFacts® Shopper Insights powered by Spire, 52 Weeks ending 12/28/13

Fresh Cut FruitJars and Cups

Overwrap

Meal PrepSide DishSnacking

Trays

HOUSEHOLD PENETRATION +0.8%PURCHASE FREQUENCY +2.1%

DOLLAR SALES +11.9%

HOUSEHOLD PENETRATION +2.0%PURCHASE FREQUENCY +4.0%

DOLLAR SALES +13.5%

VALUE-ADDED FRUIT VALUE-ADDED VEGETABLES

Frozen buyers are decreasing purchase of similar product

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

25

EXOTIC FLAVORS AND NEW CONSUMER EXPERIENCES

Source: Nielsen Perishables Group FreshFacts®, 52 Weeks Ending 12/28/13; Total U.S. FCA, PMA 2013 trade show Nielsen Perishables Group FreshFacts® Shopper Insights powered by Spire, 52 Weeks ending 12/28/13

DOLLAR SALES +14.9%SPEND PER TRIP +3.1%

MANGO SALES +17.0%POMEGRANATE SALES +34.7%

PAPAYA SALES +21.3%

SPECIALTY FRUITS

Milennialls pay a premium for a unique eating experienceOld products deliver a new experience

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

26

HEALTHY ISN’T HEALTHY ENOUGH

Source: PMA 2013 trade show, brand websites

Opportunity for messaging of health benefits in produce

SUPERFOODS CALORIE COUNTING

These commodities didn’t actually become healthier did they?

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

27

CONNECTING TO A SPECIFIC EATING OCCASION

Source: PMA 2013 trade show, brand websites

Opportunities exist for premium-priced offerings

RISE OF SNACKING STRONG GROWTH IN BRANDED OPTIONS

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

28

IT’S WORKING IN BOTH DIRECTIONS; FRESH IS INSPIRING NEW CONCEPTS IN OTHER PARTS OF THE STORE TOO

Garden-Lites Muffins:Veggie Blueberry Oat, Zucchini Banana Chocolate Chip,Zucchini Chocolate Veggie, Carrot Berry Veggie, Golden Corn Veggie Blue Hill Yogurt:

Carrot, Sweet Potato, Beet, ParsnipButternut Squash ,Tomato

Haagen-Dazs Ice Cream - Japan:Tomato-Cherry, Carrot-Orange

Magnolia Ice Cream:Avocado, Purple Yam

Green Giant Blend-ins:Carrot, Butternut Squash, Spinach

29Copy

right

©20

14 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

Fresh Pretzels $5K 50.8%

Salty Snacks $17K 0.8%

Fresh Mini Cookies $157 7.1%

Cookies $5K 3.1%

LINES ARE BLURRING BETWEEN AISLES, MORE WAYS TO SOLVE THE SAME THE SAME NEED STATE

Source: Source: 1. International Dairy-Deli-Bakery Association, 2005 2. Nielsen Perishables Group FreshFacts® 52 weeks ending 3/29/14

WHAT’S IN?

• Low fat/low trans fat/lowcalorie

• High protein

• Nutrional ingredients

• Four to five smaller meals/day

WHAT’S OUT?

• High fat/high calorie

• Traditional, unhealthy snacks

• Processed snacks

• Three large meals/day90% of U.S. consumers eat at least one snack a day 1

FRESH CATEGORIES GAINING SHARE OF CENTER-STORE SNACKING OCCASIONS

CategoryDollar Per MM ACV % Change

Dollars Per MM ACV

WHAT WE BUY

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

30

TO RECAP, CONSUMER BEHAVIOR IS EVOLVING AND IN SOME WAYS IT’S FAVORED FRESH PARTS OF THE STORE

More outlets offer us more options in more

ways -> Wider, harder battle

ground

Understand us and connect with our

priorities-> get in our basket more

Stock-up trips still where we spend big ->

but not the only opportunity to win our

dollars

Source: Nielsen Perishables Group

WHERE WE SHOP HOW WE SHOP WHAT WE BUY

SHOPPER

Is the whole store going to be fresh soon?

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

31

Power Store Shopper Power Banana Shopper

Power Packaged Salad ShopperFresh Focused

>32%

Moderates17-24%

Center Store

Enthusiasts 11-16%

Center Store Focused<10%

Fresh Enthusiasts

25-32%

Percent of Households 10% 23% 33% 23% 10%

Fresh Segmentation: All households segmented by ratio of fresh to total store spending

Dividing Metric:% fresh share of

all spending

WE ARE ALL TOTAL STORE SHOPPERS

We are all total store shoppers

WHO BUYS WHAT

Source: Nielsen Perishables Group

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

32

Fresh Focused& Enthusiasts

Center Store Focused & Enthusiasts

FrozenFrozen Vegetables

Unprepared Frozen Meat

Frozen MealsFrozen Novelties (Ice Cream Snacks)

Frozen Pizza Frozen Potatoes

CannedCanned Corn

Canned BeansCanned Tomatoes

Canned Green BeansCanned PineappleCanned Peaches

Canned Spaghetti

DrinksMilk

Refrigerated JuiceCarbonated Beverages

Shelf-Stable Juice

SweetsBaking Supplies Bakery Desserts

Chocolate CandyCookies

Bakery Desserts

Fresh Fruits Fresh GrapesFresh Oranges

Fresh Stone FruitFresh Melons

Fresh BananasFresh ApplesFresh Berries

Fresh Vegetables Fresh TomatoesFresh Celery

Fresh PeppersFresh Mushrooms

Fresh LettuceFresh PotatoesFresh OnionsFresh Carrots

CONSUMERS USE THE STORE TO SOLVE THE MEAL IN DIFFERENT WAYS

Source: Nielsen Homescan Panel, 52 weeks ending 03/29/2014

THE FUTURE OF FRESH

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

34

FUTURE ISN’T A FRESH TAKE-OVER, BUT UNDERSTANDING THE ROLE FRESH IS GOING TO PLAY IN THE STOREWe’ve already observed many factors have played a role in the growth of fresh

Source: Nielsen Perishables Group

Total store as a complex “ecosystem” with many players that have impact on one another

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

35

DRAWING CONNECTIONSQuantify impact, Identify friends and foes, Act with new paths to win

Source: Nielsen Perishables Group

314

Categories across the

entire store (incl. food &

non-food)

49,449

Sales Correlations

calculated for every store and

every week

+19 Million

Trips

across all outlets

New dataset for Nielsen Advanced Analytics combining UPC and non-UPC category retail sales data

NIELSEN TOTAL STORE

CONNECTIVITY STUDY

Improved Nielsen Homescan Total Shopper View, a specialty panel where shoppers track UPC items and random-weight

category purchases

Enabling Total Store Sales Analytics Enabling Total Store Buyer Analytics

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

36

DEFINING RANGES OF SALES CONNECTIVITY ACROSS THE STORE

Source: Nielsen Total Store Connectivity Study, 2014

-1 0 +1

Strong positive

correlation

Weakcorrelation

Strong negative

correlation

Average correlation factor between any two categories = .32

-0.5 +0.5

Category sales trend in opposing direction

measured over time (week/store level)

Category sales trend in the same direction

over time (week/store level)

Copy

right

©20

13 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

37

INITIAL CONNECTIVITY CONFIRMATIONS AND SURPRISES – ABOUT MEAT

Average correlation between any two categories

Average correlation between beef and any other category

BEVERAGES: Tea & Cocoa: 0.70Water: 0.64New age bev: 0.63

INGREDINTS: Sauces/seasonings: 0.74Condiments: 0.72Fresh Onions: 0.65

SIDE DISHES: Fresh Potatoes 0.71Canned goods: 0.68FZ vegetables: 0.62

SNACKS: Salty Snacks: 0.69

Fresh Grapes: 0.68Dairy Brick cheese: 0.71

.42

.32

Fresh beef is an ANCHOR category with strong

connections across occasions and aisles throughout the

TOTAL STORE

BEEF

SWEETS/DESSERTS: Frozen Dessert: 0.69Fresh Cakes: 0.68Fresh Cookies: 0.56

Source: Nielsen Total Store Connectivity Study sales correlation modeling, preliminary findings as of July 2014

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

38

SHIFTS IN “ANCHOR” CATEGORY PERFORMANCE CAN IMPACT SALES ACROSS THE ENTIRE STORE

Volume %Chg vs. YAGO

Total Beef ARP* %Chg vs. YAGO

+16% +11% +10% +11% +12% +12% +13% +13% +12% +15% +11% +9%

Source: Nielsen Perishables Group FreshFacts, Total U.S. – Traditional Grocery;Nielsen Scantrack, Total U.S. – All Outlets Combined;

*ARP = Average Retail Price (per pound)Source: Nielsen Perishables Group FreshFacts, Total U.S. – Traditional Grocery; Nielsen Scantrack, Total U.S. – All Outlets Combined;

Many center-store products were directly impacted when fresh beef prices increased in 2011. What will happen in

2014?

Copy

right

©20

13 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

39

Growth in INDEPENDENTS like deli prepared indicate a retailer is winning a

unique buyer, a unique trip or both

Average correlation between deli prepared categories and others.17

INDEPENDENT=

Low number of touch points across the store

DELI PREPARED FOODS$12.6 B, up 7.6%, 95% HH penetration

INITIAL CONNECTIVITY CONFIRMATIONS AND SURPRISES – ABOUT DELI PREPARED FOODS Despite their size and growth, some categories remain relatively independent

Source: Nielsen Total Store Connectivity Study sales correlation modeling, preliminary findings as of July 2014

.32Average correlation between any two categories

Copy

right

©20

13 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

40

Quick Trip; 62%Fill-In Trip; 22%

Stock-Up Trip; 17%

Quick Trip; 72%

Fill-In Trip; 16%

Stock-Up Trip; 12%

STRONG SALES IN INDEPENDENT CATEGORIES CAN DRIVE INCREMENTAL GROWTH FOR RETAILERS

Source: Nielsen Homescan Total Shopper View Specialty Panel, 52 weeks ending 03/29/2014

Quick trip

Fill-in trip

Stock-up trip

Quick Trip; 13%

Fill-In Trip; 24%Stock-Up Trip;

63%

Share of Sales By Trip Type

TOTAL STORE DELI PREPARED SANDWICHES

$1.3B, up 6%, 29% HH penetration

DELI PREPARED PIZZA

$667M, up 3%, 18% HH penetration

<6 items in the basket

6-15 items in the basket

15+ items in the basket

Most deli prepared buying happens on quick trips and does appear to cannibalize stock-up meal solutions from other parts of the

store

CONCLUSION

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

42

KEY TAKE-AWAYS

• The market environment is always changing (economy, natural events, store openings and closings)

• There are some “constants” (the desire for quality, convenience, savings etc…)

• What’s evolving is how consumers solve for these “constants” – the increasing diversity of consumer types, store formats and products competing for the same need state makes this whole ecosystem a little more complex

• Today we’ve investigated some examples of fresh products that are winning in the current environment, but fresh success doesn’t always lead to total store success

• Success down the road relies on understanding how consumers use not only fresh, but all products in the store to solve the meal

Source: Nielsen Perishables Group

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

43

INNOVATION

PRICING/ PROMOTION

SHOPPER

GO-TO-MARKET

MARKETING/MESSAGING

MERCHANDISING/ASSORTMENT

CATEGORY

PUT MORE SIMPLYThe evolution of analytics is a model that puts the consumer at the center

PASTFUTURE

SUCCESS IN THE “ECOSYSTEM”Source: Nielsen Perishables Group

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

44

THANK YOU

Source: Nielsen Perishables Group

QUESTIONS?

CONTACT NIELSEN PERISHABLES GROUP

CHRIS BALZER │ CHRIS.BALZER@NIELSEN.COM773.929.7013

Copy

right

©20

13 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

46

INITIAL CONNECTIVITY CONFIRMATIONS AND SURPRISES – ABOUT MEAT

Average correlation between any two categories

Average correlation between beef and any other category

BEVERAGES: Tea & Cocoa: 0.70Water: 0.64New age bev: 0.63

INGREDINTS: Sauces/seasonings: 0.74Condiments: 0.72Fresh Onions: 0.65

SIDE DISHES: Fresh Potatoes 0.71Canned goods: 0.68FZ vegetables: 0.62

SNACKS: Salty Snacks: 0.69

Fresh Grapes: 0.68Dairy Brick cheese: 0.71

.42

.32

Fresh beef is an ANCHOR category with strong

connections across occasions and aisles throughout the

TOTAL STORE

BEEF

SWEETS/DESSERTS: Frozen Dessert: 0.69Fresh Cakes: 0.68Fresh Cookies: 0.56

Source: Nielsen Total Store Connectivity Study sales correlation modeling, preliminary findings as of July 2014

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

47

SHIFTS IN “ANCHOR” CATEGORY PERFORMANCE CAN IMPACT SALES ACROSS THE ENTIRE STORE

Volume %Chg vs. YAGO

Total Beef ARP* %Chg vs. YAGO

+16% +11% +10% +11% +12% +12% +13% +13% +12% +15% +11% +9%

Source: Nielsen Perishables Group FreshFacts, Total U.S. – Traditional Grocery;Nielsen Scantrack, Total U.S. – All Outlets Combined;

*ARP = Average Retail Price (per pound)Source: Nielsen Perishables Group FreshFacts, Total U.S. – Traditional Grocery; Nielsen Scantrack, Total U.S. – All Outlets Combined;

Many center-store products were directly impacted when fresh beef prices increased in 2011. What will happen in

2014?

Copy

right

©20

13 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

48

INITIAL FINDING: AN “ANCHOR” LIKE FRESH BEEF CONNECTS IN DIFFERENT WAYS TO DIFFERENT BUYERS

Each connection reveals a unique buyer profile- showing opportunity for different solutions even in

similar categories

Sources: 1- Nielsen Total Store Connectivity Study sales correlation modeling, preliminary findings as of July 2014 ; 2- Nielsen Homescan Total Shopper View Specialty Panel, latest 52 weeks ending 3/29/14

SIDE DISHES1: Potatoes 0.71

Canned goods: 0.68FZ vegetables: 0.62

BEEF

Frozen VegCanned

Veg2

Gen X to BoomersAffluentHigher EducationHH with older childrenFresh Enthusiasts

Empty NestersLess EducatedCouplesHispanic-skewFresh/Center Moderates

Boomers and olderLower education levelsCouplesHispanic-skew(Similar to Canned Veg)RuralFresh Focused

Fresh Potatoes

SWEETS/DESSERTS1: Frozen dessert: 0.69

Fresh cakes: 0.68Grocery cookies: 0.56

BEEF

Grocery Cookies

Frozen Desserts2

Gen XLess educatedYoung familiesMid-incomeHispanic

Empty Nesters and HH w older childrenAffluentComfortable countryFresh Enthusiast

Small and young familiesMid-income to affluentHispanicFresh Enthusiasts

Fresh Cakes

Highest Indexing Demographics/Fresh Segment for Beef And Side Dishes: Highest Indexing Demographics/Fresh Segment for Beef And Sweets:

Copy

right

©20

13 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

49

Growth in INDEPENDENTS like deli prepared indicate a retailer is winning a

unique buyer, a unique trip or both

Average correlation between deli prepared categories and others.17

INDEPENDENT=

Low number of touch points across the store

DELI PREPARED FOODS$12.6 B, up 7.6%, 95% HH penetration

INITIAL CONNECTIVITY CONFIRMATIONS AND SURPRISES – ABOUT DELI PREPARED FOODS Despite their size and growth, some categories remain relatively independent

Source: Nielsen Total Store Connectivity Study sales correlation modeling, preliminary findings as of July 2014

.32Average correlation between any two categories

Copy

right

©20

13 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

50

Quick Trip; 62%Fill-In Trip; 22%

Stock-Up Trip; 17%

Quick Trip; 72%

Fill-In Trip; 16%

Stock-Up Trip; 12%

STRONG SALES IN INDEPENDENT CATEGORIES CAN DRIVE INCREMENTAL GROWTH FOR RETAILERS

Source: Nielsen Homescan Total Shopper View Specialty Panel, 52 weeks ending 03/29/2014

Quick trip

Fill-in trip

Stock-up trip

Quick Trip; 13%

Fill-In Trip; 24%Stock-Up Trip;

63%

Share of Sales By Trip Type

TOTAL STORE DELI PREPARED SANDWICHES

$1.3B, up 6%, 29% HH penetration

DELI PREPARED PIZZA

$667M, up 3%, 18% HH penetration

<6 items in the basket

6-15 items in the basket

15+ items in the basket

Most deli prepared buying happens on quick trips and does appear to cannibalize stock-up meal solutions from other parts of the

store

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

51

SOLUTIONS CENTER SHOPPINGTrying to redefine convenience

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

52

FIGHTING FOR FOOT TRAFFICPiggy backing partners

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

53

BLUR THE LINES TO CREATE AN EXPERIENCE

Source: Mariano’s (Business Wire & Facebook); Leopardo (drawing); Source: KSDK-St. Louis; Photography by J. Pollack PhotographySources: Supermarket News; quote by Randy Edeker, Hy-Vee chairman, president & CEO

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

54

MAKE IT EVEN EASIER THAN EVER FOR SHOPPERSYou don’t even have to leave your home

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

55

A FULL STORE PERSPECTIVE WILL HELP KRAFT…

• …understand how to maximize product performance based on understanding competitive threats in the store but also aligning more strategically with key fresh drivers

• …optimize trade investments by designing and evaluating more compelling cross-aisle partnerships

• …innovate new fresh concepts with Kraft product lines and identify white space opportunities (product innovation, acquisitions, retail targeting)

…provide total store leadership to retail partners – new solutions to win bigger baskets and more frequent trips

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

56

TRIP TYPES: FREQUENCY OR SPEND?

Source: 1- Nielsen Homescan Total Shopper View Specialty Panel, 52 weeks ending March 2014 2- FreshFacts® Shopper Insights powered by DataLogix, 52 weeks ending May 2014

Share of Trips- Supermarket Grocery2

Share of Store Sales

Quick Trip Fill-in Trip Stock-up Trip

41% 32% 27%

63%24%13%

Larger item trips still drive two-thirds of a supermarkets’ bottom line – but they only happen around one-quarter of the time

Shifting FocusQuick trips are becoming increasingly important to win

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

57

DESPITE TIGHTENING WALLETS, INTEREST IN TRADITIONAL PROMOTION WANES

Source: 1. Nielsen; 2. Market Track

Of the $216B in promoted sales,

only 17% is mutual growth that benefits both retailers and suppliers

Trade promotional spend is among the largest expenses for manufacturers, but success is low, even in a period of rising food costs.

Seafood Produce Deli Bakery Meat

-7.0%

-6.0%

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

-4.3%-3.8%

-1.6%

-0.5%

-6.3%

Volume % Lift on Promotion Change vs YAGO: Per-ishables Departments

Volume % Lift on Promotion Change vs YAGO

Discounts down 2 pts

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

58

Same-Store Sales: Average Growth, latest 52 weeks

Hom

e Depot

Whole Foods

CostcoD

ollar General

Petsmart

KrogerN

ordstromFam

ily Dollar

Lowe's

Dollar Tree

Macy's

Walgreens

CVSSafew

aySam

's ClubTargetW

almart

Kohl'sRite AidKm

artjcpenney

-25

-20

-15

-10

-5

0

5

10

DESPITE TIGHTENING WALLETS, SPECIALTY RETAILERS WIN ON INNOVATIVE EXECUTION AND EXPERIENCESuccessful retailers are nailing jobs

Source: Company press releases; monthly or quarterly news releases – excluding gas

Strong affluent shopper attraction

Strong lower income attraction

No strong attraction

59Copy

right

©20

14 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

6-Count Muffins

Deli Breakfast Eggs

Strudel

Mini Bagels

Deli Breakfast Sandwiches

French Toast/Pancakes/Waffles

+94%

+49%

+47%

+26%

+22%

+15%

+76%

+22%

+31%

+18%

+13%

+21%

DOLLAR % GROWTHVS YAGO

VOLUME % GROWTH VS YAGO

FRESH BREAKFAST CATEGORIES

Breakfast heating up outside store

PRIORITY AREAS IMPACT MEAL OCCASIONS ACROSS THE STORE: BREAKFAST

Source: 1. International Dairy-Deli-Bakery Association, 2005 2. Deli Business, Jan. 2014 3. Nielsen Perishables Group 52-weeks ending 2/22/14 3. Supermarket News

WHAT WE BUY

60Copy

right

©20

14 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

PRIORITY AREAS IMPACT RETAILERS: THE MOST HEALTH-ENGAGED SHOP AND SPEND

Source: Natural Marketing Institute (NMI), Health & Wellness Segmentation, Nielsen Homescan for Total U.S. – 52 weeks ending 12/28/2013; segment definitions in appendix

Across All Outlets Combined

WELL BEINGS are active shoppers & spend the most annually

WELL BEINGS

FOOD ACTIVES

MAGIC BULLETS

FENCE SITTERS

EAT, DRINK & BE MERRYS

157

153

151

142

137

Shopping Trips per Household

WELL BEINGS

FOOD ACTIVES

MAGIC BULLETS

FENCE SITTERS

EAT, DRINK & BE MERRYS

$49.40

$45.80

$46.72

$48.01

$45.38

Basket Ring $ per Trip

WELL BEINGS

FOOD ACTIVES

MAGIC BULLETS

FENCE SITTERS

EAT, DRINK & BE MERRYS

$7,754

$7,021

$7,047

$6,827

$6,210

Basket Ring $ Per Household

WHAT WE BUY

Concern Towards

Health & Wellness

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

61

THESE CONCEPTS GO BEYOND FRESHHealth, convenience, quality/value and global are driving trends:

Inside the Store And Beyond

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

62

WHO’S DRIVING YOUR GROWTH?While a category may be growing or declining overall, performance within segments varies signaling where focus should be to grow the category

Fresh Focused

Fresh Enthusiasts Moderates

Total Center Store Enthusiasts

Center Store Focused

Fres

h Ch

icke

nCa

nned

Sou

pW

ine

Dollar Growth by Segment:

Source: Nielsen Homescan Panel, 52 weeks ending 03/29/2014 & YAGO

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

63

Fresh Focused Fresh Enthusiasts Moderates Center Store Enthusiasts

Center Store Focused

Who are they more likely to be? Affluent singles Affluent, mid-size

families Large families Start-up families Senior singles

THEY SHOP DIFFERENTLY- BUT EACH SEGMENT HAS AN IMPACT ACROSS AISLES AND OUTLETS

Source: Fresh Segmentation, Nielsen Homescan Total Shopper View Panel, 52 weeks ending 03/29/2014

$36.85 $37.35 $35.15 $33.22 $32.16

125 trips 138 trips 162 trips 189 trips 197 trips

>120<80

Index to Total Panel

Channel: Mass/Super WarehouseConvenience/Gas Drug$2MM+ Grocery

Avg Store Trip

Store Visits

Channel Trips Index

Avg Fresh Trip

Avg Center Trip

$21.13 $17.87 $14.69 $11.88 $8.84

$23.31 $25.36 $25.39 $24.64 $23.25

WHO BUYS WHAT

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

64

FloristCafe

Dry Grocery

HBC FrozenBeverage

Center

Produce

Deli

SeafoodMeat Dairy

BakeryRx

Non-Food

BUT IT’S STILL ALL CONNECTED AND STEADY– BEYOND DEPARTMENT AND AISLE BORDERS

Source: Nielsen Perishables Group Total Shopper Study, Homescan Total Shopper View Specialty Panel, 52 weeks ending 3/29/14

= size indicates % of trip dollars

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

65

EVOLUTION OF FOOD RETAIL

PAST PRESENT FUTURE

Fresh:commodity driven

Put shoppers at the center, take a holistic

approach

SHOPPER

Retailer: grocery dominated

Center store: brands, innovation

Fresh: growing more savvy

Retailer: more & more competition

Center store:disparate growth

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

66

CONVENIENT OPTIONS BECOMING MORE POPULAR; CONSUMERS PAY MORE FOR A DIFFERENT KIND OF VALUE

Source: Nielsen Perishables Group FreshFacts®, 52 Weeks Ending 12/28/13; Total U.S. FCANielsen Perishables Group FreshFacts® Shopper Insights powered by Spire, 52 Weeks ending 12/28/13

Fresh Cut FruitJars and Cups

Overwrap

Meal PrepSide DishSnacking

Trays

HOUSEHOLD PENETRATION +0.8%PURCHASE FREQUENCY +2.1%

DOLLAR SALES +11.9%

HOUSEHOLD PENETRATION +2.0%PURCHASE FREQUENCY +4.0%

DOLLAR SALES +13.5%

VALUE-ADDED FRUIT VALUE-ADDED VEGETABLES

Frozen buyers are decreasing purchase of similar product

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

67

EXOTIC FLAVORS AND NEW CONSUMER EXPERIENCES

Source: Nielsen Perishables Group FreshFacts®, 52 Weeks Ending 12/28/13; Total U.S. FCA, PMA 2013 trade show Nielsen Perishables Group FreshFacts® Shopper Insights powered by Spire, 52 Weeks ending 12/28/13

DOLLAR SALES +14.9%SPEND PER TRIP +3.1%

MANGO SALES +17.0%POMEGRANATE SALES +34.7%

PAPAYA SALES +21.3%

SPECIALTY FRUITS

Milennialls pay a premium for a unique eating experienceOld products deliver a new experience

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

68

HEALTHY ISN’T HEALTHY ENOUGH

Source: PMA 2013 trade show, brand websites

Opportunity for messaging of health benefits in produce

SUPERFOODS CALORIE COUNTING

These commodities didn’t actually become healthier did they?

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

69

CONNECTING TO A SPECIFIC EATING OCCASION

Source: PMA 2013 trade show, brand websites

Opportunities exist for premium-priced offerings

RISE OF SNACKING STRONG GROWTH IN BRANDED OPTIONS

Copy

right

©20

13 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

70

EXAMPLE OF CONNECTIVITY FINDINGS

Source: Nielsen Perishables Group Total Store Connectivity Study

BEEF

Average correlation between any two categories

Fresh meat sales connections strongest

outside of fresh while the fresh departments are

most tied to each other

Growth in INDEPENDENTS like deli prepared foods

indicate a retailer is winning a unique buyer, a

unique trip or both

INDEPENDENT=

Low number of touch points across

the store – incremental

opportunities

.32Average correlation between deli prepared categories and others

.17

Average correlation between beef and any other category

.42

ANCHOR=

Highly connected categories – critical

to everyone’s success

Correlations and household in common can confirm and surprise with the strength of what’s connected

Copy

right

©20

12 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

71

The Power of Sales + Shopper in Connectivity

Demographics and behavioral factors also play a vital role in understanding which consumers drive category connections

Chicken breasts

Pork chopsGround beef Macaroni and cheese

Macaroni and cheese

Macaroni and cheese

Purchase pairing indexes high for…

Price-focusedFamilies with childrenCouples without children

Purchase pairing indexes high for…

Purchase pairing indexes high for…

Convenience and value focusedLow – middle incomeFamilies with children in-home

Source: Nielsen Perishables - The Full Article At http://www.perishablesgroup.com/dnn/Newsletter/CurrentNewsletter.aspx

EXAMPLE CONNECTIVITY STUDY FINDINGS Demographics and behavioral factors also play a vital role in understanding which consumers drive category connections across the store

Health-focusedMiddle – affluent incomeFamilies with young children or Couples without children

Copy

right

©20

13 T

he N

iels

en C

ompa

ny. C

onfid

entia

l and

pro

prie

tary

.

72

INITIAL FINDING: AN “ANCHOR” LIKE FRESH BEEF CONNECTS IN DIFFERENT WAYS TO DIFFERENT BUYERS

Each connection reveals a unique buyer profile- showing opportunity for different solutions even in

similar categories

Sources: 1- Nielsen Total Store Connectivity Study sales correlation modeling, preliminary findings as of July 2014 ; 2- Nielsen Homescan Total Shopper View Specialty Panel, latest 52 weeks ending 3/29/14

SIDE DISHES1: Potatoes 0.71

Canned goods: 0.68FZ vegetables: 0.62

BEEF

Frozen VegCanned

Veg2

Gen X to BoomersAffluentHigher EducationHH with older childrenFresh Enthusiasts

Empty NestersLess EducatedCouplesHispanic-skewFresh/Center Moderates

Boomers and olderLower education levelsCouplesHispanic-skew(Similar to Canned Veg)RuralFresh Focused

Fresh Potatoes

SWEETS/DESSERTS1: Frozen dessert: 0.69

Fresh cakes: 0.68Grocery cookies: 0.56

BEEF

Grocery Cookies

Frozen Desserts2

Gen XLess educatedYoung familiesMid-incomeHispanic

Empty Nesters and HH w older childrenAffluentComfortable countryFresh Enthusiast

Small and young familiesMid-income to affluentHispanicFresh Enthusiasts

Fresh Cakes

Highest Indexing Demographics/Fresh Segment for Beef And Side Dishes: Highest Indexing Demographics/Fresh Segment for Beef And Sweets: