Part June

2021

2021 TRENDS AND EMERGING GROWTH POCKETS

Discovering Pockets of Demand 28

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EXECUTIVE SUMMARYConsumers are resuming active lifestyles while maintaining at-home habits (e.g., more meals at home). While CPG demand has remained elevated in the first half of 2021, we anticipate that demand patterns will shift as the economy reopens and there is more competition for the consumers’ wallets. This report highlights key 2021 trends and identifies emerging growth pockets for CPG manufacturers and retailers.

CHANGING SHAPE OF THE CPG DEMAND CURVE• Consumers are becoming more comfortable shopping in stores, reverting to multiple channels (i.e., non-grocery, small format),

while at the same time, many shoppers will stick with online options – behavior that will continue to drive omnichannel sales.• Younger and higher-income households drive increasing, smaller trips; low-income households represent the highest

growth opportunity as they continue to spend more for home consumption.• CPG demand continues to be idiosyncratic, with highly elevated consumption of frozen foods and baking ingredients reverting

but still above the norm, while consumption of sports drinks, sleep remedies and kitchen storage and plastic drinkware remains high. Depressed categories such as cosmetics recover, yet remain below pre-pandemic sales levels.

• Consumers continue to buy premium products while shelf price increases continue to take effect. Expect increasing trade-off vs. product value as prices creep up. Store brands, which lagged or decelerated vs. national brands in the 1H 2021, are likely to gain share in 2H as national brands raise prices.

• Holiday celebrations are shifting back to larger events.• 28% of the top 100 brands gained significant penetration in 2020, and retained >50% of gains in 2021. Manufacturers and retailers

will compete to win or retain penetration acquired in the last few quarters.

EMERGING OPPORTUNITIES• Be adept at detecting shifts in consumer needs and preferences, and react with agility as demand patterns shift.• As significant shelf price increases occur, manufacturers and retailers will have to resort to granular revenue management

strategies to drive profitable growth (e.g., net price realization, truly incremental promotions, price-pack-channel range architecture).• CPG companies cutting media budgets to offset cost inflation should optimize media ROI real time and focus on the right products,

vehicles (e.g., digital, social) and right segments and audiences that are most responsive to media to minimize share loss.• Simplify the shelf set with the right placement and tailor assortment to digital and omnichannel shoppers.• Communicate and innovate on attributes and benefits that matter to shoppers and ensure that innovation is incremental.• CPG retailers and manufacturers must continue to invest in online platforms to retain omnichannel shoppers and carefully curate

the online vs. in-store experiences.• Focus on winning retailers, categories, brands and channels (including on-the-go, food service) for growth.

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Work and SchoolReturn to on-location jobs, at least part-time for office workers. Full-time at school expected for most by fall.

ShoppingE-commerce usage sticks. Shoppers gain comfort in-store, quick trips increase.

HomeNew household formation

(especially in suburbs) continues. Ongoing enhancement of

home environment.

Leisure, Entertainment & HolidaysResumption of pro-sports events;

movie theaters re-open; larger celebrations return vs. pandemic.

Self- and Societal CareConvenienceIndulgence

Post-Pandemic Lifestyles Balance Out-of-Home Activity With Ongoing At-Home Tendencies

ConsumptionReturn to away-from-home consumption while maintaining some at-home habits. Intense home cleaning and stock-up behaviors ease.

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Household Spending Increases for Transportation and Recreation, But At-Home Consumption Remains Elevated for NowU.S. Household Consumer Spending % Change vs. 2019

% of L52

spend

Apr ’20 vs. Apr ’19

Oct ’20 vs. Oct ’19

Jan ’21 vs. Jan ’19

Apr ’21 vs. Apr ’19

Total Household Spend -19% -1% 5% 8%Health 22% -26% 0% 5% 5%Housing & Utilities 20% 4% 4% 8% 8%Recreation 9% -29% -3% 6% 12%Financial Services 9% 0% 3% 8% 9%Transportation 9% -44% -10% 0% 12%Food & Bev for At-Home 8% 9% 10% 16% 16%Foodservices (Away From Home) 5% -46% -9% -5% 4%HH Furniture & Maintenance 5% -12% 11% 22% 24%Clothing 3% -47% -3% 4% 8%Education 2% -10% -9% -6% -5%Communication 2% -4% 2% 6% 6%Accommodations 0.5% -83% -55% -55% -43%Other Goods 6% -27% -7% -1% 2%

Peak Decline2020 Post-

COVID-19 Max Beginning 2021 Latest

OpportunitiesSpending on household furniture

also remains elevated, and clothing expenditures are ramping up.

Foodservice spend is starting to recover.

From a very high rate in March and April, home improvement and car sales begin to soften

from their peaks in May.Anticipate ongoing inflation in most

areas – CPI All Items +5% May 2021 vs. YA, +0.6 vs. April –

particularly in transportation, clothing and household maintenance.

Source: BEA, Personal Consumption Expenditures by Major Type / Type of Product, 5/28/21. BLS CPI for May 2021. US Census Retail Trade advanced estimates for May 2021. IRI analysis.

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Leading Indicators Signal Decreasing At-Home CPG Demand in 2H 2021U.S. Consumer Mobility vs. F&B At-Home Volume / % Change from Pre-COVID-19 (Jan. to Mid-Feb. 2020) Base, 4 Week Rolling Average, Est. Total Omnichannel

-50

-40

-30

-20

-10

0

10

20

30

40

4/1/

2021

10/1

/202

0

4/1/

2020

1/1/

2020

7/1/

2020

1/1/

2021

7/1/

2021

10/1

/202

1

Forecast

Median Forecast

Q1

‘21

Q2

‘21

Q3

‘21

Q4

‘21

+6%vs. Jan.-

Feb. 2020+3%

vs. Jan.-Feb. 2020

~+8%vs. Jan.-Feb. 2020

2020 F&B volume~+10-12% vs.

Jan.-Feb. 2020 +3%vs. Jan.-

Feb. 2020

Omnichannel = MULO+C + Costco + E-commerce – Overlap. Source: Google Mobility – Workplace. IRI POS data. IRI Strategic Analytics models. IRI analysis.

F&B Volume

Workplace Mobility

Leading Indicators of At-Home CPG Demand

CPG Shopping Behaviors

Away-From-Home Activity

On-the-Go / Convenience Store VisitsBoosted with Memorial Day yet remain negative vs. pre-COVID-19 and skewed toward evening activity. Rising gas prices, +~$1/gal since start of year.

Restaurant SalesRestaurant sales improving, yet below normal levels in Northeast & Great Lakes; seated dining and fine-dining improving. Dining out remains skewed toward dinner while many consumers continue to work from home.Other Household SpendRising inflation across all items +5% vs. YA, highest growth since 2008. Transportation costs rising most. Significant increase in entertainment activity in last month, including pro-sports events and movie theaters.

Store tripsIn-store quick trips increasing

Key cohort growthMillennials and lower income driving CPG growth

Impact on In-Home CPG Consumption

Strong positive

Strongnegative

Mild positive

Mildnegative

Current Level

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On-Site Dining Improves, While Take-Out and Delivery Hold High Demand Rates May 2021 % chg. vs. May 2019

March 2021 % chg. vs. March 2019

154

108126

116

77

113

Driven by increasing prices

ON-SITE TAKE-OUT DELIVERY

Full-Service Restaurant Recovery Indicators Strongest restaurant recovery in Southern U.S.; lagging trends in the Northeast are expected to improve as they reopen.

Dollars Trips $ / Trip Dollars Trips $ / Trip $ / TripDollars Trips

-12

-27

21

-3

-19

19190

10

91

140

-3

59

Note: Includes casual and fine dining full-service restaurants. Based on sample set of restaurants selling in 2019 and 2021 (excludes closed restaurants). Excludes limited-service restaurants. Dwell time based on minutes order-receipt.

Source: IRI On Premise.

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In 1H 2021, CPG Demand Remains Elevated; Price / Mix is IncreasingCPG Trends % Change vs. 2YA / Total OmnichannelNot Shown: Greatest Q2 Price Acceleration in Fresh Meat (+14% vs. Q1) & Produce (+8% vs. Q1)

5.9

18.9 17.7 17.912.2

24.720.8

26.12019 2020 Q1 2021 Q2 2021

3.3 5.3 5.7 7.25.7 7.9 7.5 8.3

2.4

12.9 11.4 10.06.215.6 12.4

16.5

D O L L A R S

P R I C E / M I X *

E S T I M A T E D V O L U M E 1

1.Estimated average omnichannel volume change across categories based on price/mix trends in MULO+C. Based on 205 Tracked Categories. Omnichannel includes MULO+C, Costco, eCommerce , excluding MULO+C-eCommerce overlap.

*Price / Mix based on MULOC

Edible excl Perishables

Nonedible

Source: IRI data ending 06/13/21 Omnichannel Model.

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Retailers and Brands Will Continue to Fight to Retain or Improve Market Share

Retailers Will Be Fighting for Market Share Even as Some In-Home Consumption Switches to Out-of-Home

Brands Will Strive to Retain 2020 Share Gains

Largest Share Gainers in 2020 with Continued Gains in 2021*

Source: Earnings Reports. US Comparable Sales Growth excludes Fuel for most Retailers, comparison vs same period in 2020 overlaps COVID surge in 2020 for some retailers.

22.9%

15.2%

11.8%

7.2%

6.0%

1.7%

-4.1%

-4.6%

Comparable Sales Growth

5.9

1.0

3.5

1.2

1.5

3.7

1.5

1.2

1.8

4.4

Largest Share Gainers in 2020

5.9

5.4

2.4

2.0

1.8

1.7

1.6

1.4

1.3

1.0

Share Gain in 2021 vs YA

*12 weeks ending 05/16/21

Latest Fiscal Year Latest Quarter Quarter Ending

14.1% May 1, 2021

9.2% May 9,2021

16.9% February 27, 2021

11.8% April 30, 2021

8.6% April 30, 2021

14.4% March 31, 2021

14.1% May 22, 2021

16.3% April 30, 2021

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Increasing, Smaller Trips to Non-Grocery Channels As Mobility IncreasesQ2 2021 vs. Prior Quarter CPG Trip Trends

-0.9-0.1

0.10.8

-1.8

-0.8

0.4

2.3

Quick TripSpecial Purpose

Pantry Stocking Fill-In

Trip Types / Q2 2021 % of TripsPpt. ∆ vs. Q1 2021

Trips Q2 2021 % Change vs. Q1 2021

All OutletsGrocery retailer A

15.5% 15.5% 17.6% 51.4%

% of trips Q2 ’21,

All Outlets

2

-1

4

1

4

5

3

MassX

All Outlets

Grocery

Dollar

Drug

Walmart

Club

“We are also seeing

customers shopping

more frequently as COVID-19 restrictions

ease.”

-Kroger FQ1 Earnings,

FQ1 6/17/21

“

”Note: Grocery trips remain higher than 2019, but below 2020 levels. While accelerating, quick trips remain lower than pre-COVID (54% of trips in Q2 2019). Data through 6/13/21

Source: IRI Consumer Panel, All Outlets. IRI retailer gateway.

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Younger and Higher-Income Cohorts Increase Trip Activity Most; Largest Sales Growth Among Low-Income HouseholdsTotal CPG Dollar Sales & Trips % Change vs. 2YA by Demographic

0

2

4

6

8

10

12

14

16

18

20

22

Boomer $

13 WE12/13/20

Millennial Trips

13 WE3/14/21

13 WE6/13/21

Millennial $Gen X $

Gen X Trips

Boomer Trips

0

2

4

6

8

10

12

14

16

18

20

22

13 WE12/13/20

Mid Income $

13 WE6/13/21

Mid Income Trips

Low Income $

13 WE3/14/21

High Income Trips

High Income $

Low Income Trips

Source: IRI Consumer Panel, All Outlets.

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Some Categories (e.g., Frozen, Sports Drinks) Maintain Elevated Consumption Levels, Some Begin to Improve (e.g., Bakery) While Others Revert Latest 4 Weeks Category Volume Elevation vs. 2020 Volume Elevation, MULO

Improving ConsumptionReverting ConsumptionHigh Consumption Holding Minimal Impact

Perimeter Edible NonedibleCATEGORY TYPE

Source: IRI data for MULO (multi-outlet) / ending 6/13/21 / IRI analysis / Note: Includes top categories by size

Category 2020 L4Drinkware 22 18

Fresh Seafood 28 16

Frozen Seafood 35 13

Frozen Fruit 29 12

Sports Drinks 12 9

Sleeping Remedies 13 7

RTD Tea/Coffee 13 6

Frozen Dinners 11 6

Baby Formula/ Electrolytes 4 9

Category 2020 L4Perimeter Bakery -21 3

Eye Cosmetics -14 3

Chocolate Candy 0 3

Snack Bars -6 0

Prepared Deli -20 -4

Deodorant -11 -4

Facial Cosmetics -25 -7

Gum -27 -12

Prepared Salads -21 -14

Category 2020 L4Pain Relief 0 0

Pet Food -1 0

Laundry Detergent 0 -3

Water 2 0

Skin Lotion 2 2

Skin Care -2 -3

Category 2020 L4Frozen Vegetables 15 -1

Flour 31 0

Paper Towels 20 1

Pasta 20 1

HH Cleaner 27 3

Vitamins 17 3

Soap 32 4

Baking Mixes 23 4

Baking Needs 25 6

Fresh Vegetables 14 6

2020 Volume Elevation: ppt difference 52 WE 2/21/21 Growth Rate – 3 Year CAGR; L4 Volume Elevation: ppt difference L4W vs 2019 – 3 Year CAGR.

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Memorial Day Behavior Indicates the Return of Large Summer CelebrationsMemorial Day Performance Indicators

Memorial Day Week Saw Overall Growth, Especially Edible for At-Home Consumption

Out-of-Home Behaviors Increased During the Holiday Weekend and Show Positive Signs for Summer

Memorial Day Week Lift, MULO

Note: Lift versus 2 weeks prior to Memorial Day week. Source: IRI POS data ending 6/6/21. JPMorgan. Google Mobility. OpenTable.

Edible Nonedible Lift Δ ’17-’19 Avg.Beer/Ale/Alcoholic Cider 24% -1.2Carbonated Beverages 12% +1.6Salty Snacks 9% +1.2Fresh Bread & Rolls 11% +1.1Bottled Water 8% +3.2Suntan Products 48% -2.6Frankfurters 37% -6.1Cups & Plates 12% +0.7

Category Lift, MULO

Open Table Rolling 7-day Average, % Change vs 2019

-80

-60

-40

-20

01/1/2021 3/1/2021 5/1/2021 7/1/2021

Memorial Day

Convenience, Memorial Day Week Lift

Spend on other entertainment increased vs pre-COVID-19, but not to pre-COVID-19 holiday levels

Pro sports: -20% vs -80% 2 wks. priorMovie Theaters: -60% from -90% before Memorial DayTSA Airport travelers: -30% vs -40% wk. prior

Con

tribu

tion

to T

otal

Sto

re L

ift

4.5%5.5%

2.5%2.3% 2.7%1.6%

Total Store Edible Nonedible

2021 17-’19 Avg.

2.1%3.1%

1.0%

2.2%2.7%

1.6%

Total Store Edible Nonedible

2021 17-’19 Avg.

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Channel % $ Share of F&B

% contrib. to growthvs. 2019

Fair Share Index

$ CAGR 2019-2021

Trend vs. 2020

Grocery 31% 70 6%

Mass 23% 94 8%

Club 9% 123 11%

Discount 3% 68 6%

C-store 15% 57 5%

Drug 4% 15 1%

Pure Play E-com 13% 298 37%

All other 3% -86 -6%

Omnichannel 100% 9%

Consumers Revert to Multiple Channels in Recent Months, Spending Less in Grocery than During COVID-19 and Continuing E-Commerce UsageRetailer Contribution to Omnichannel (MULO+C + Costco + E-Commerce) CPG Sales Q2 2021 vs. 2YA

Index >120 Index < 80

In-S

tore

and

E-C

omm

Incl

uded

W

ith R

etai

ler f

or B

&M

Ret

aile

rs

22

100

22

11

2

9

1

37

-2

Grocery contributed 44%, 1.4x its fair share to growth in 2020

Total e-comm (including digital sales from B&M

retailers) contributed ~50% to growth in this period vs. 2YA

Front-end drug channel sales benefited from

vaccination trips

Note: Brick & Mortar channels include Pickup and Delivery E-comm sales. Pure play e-com includes Total eCommerce excluding Click and Collect. All other includes Military, Specialty Stores.

Source: IRI POS, Panel. eMarket Insights data ending 06/13/21. Q2=12 weeks ending 06/13/21

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Super Premium

Premium

Mainstream

Value

Store Brands

NONEDIBLEEDIBLE

24.5%

Post Stock-UpQ3 ’20

23.7%

9.6%

34.9%

Pre-COVID-1952 WE 2-23-20

12.4%

19.4%

9.8%

34.4%

12.2%

19.0%

33.3%

26.1%

9.9%

11.6%

19.1%

CurrentQ2 ’21

Accelerated Premiumization is Holding; We Expect this Trend to Reverse as Consumers Increase Spend Elsewhere Price Tiers, $ Share Ppt. Chg. vs YA

14.0%

8.1%

13.6% 15.1%

8.6%

16.4%

52.6%

Pre-COVID-1952 WE 2-23-20

15.2%

8.7%

8.4%

15.9%

53.7%

8.3%

Post Stock-UpQ3 ’20

8.5%

52.9%

CurrentQ2 ’21

0.4

0.1

-0.3

-0.1

0.0

1.2

0.2

-0.5

-0.2

-0.7

0.8

0.0

0.2

-0.3

-0.6

vs. YA vs. YA vs. YA

1.4

0.1

0.1

-0.7

-0.9

vs. 2YA vs. YA vs. YA

0.5

0.0

-1.0

-0.3

0.7

1.5

0.3

-0.4

-0.7

-0.7

1.3

0.1

-1.1

-0.2

-0.2

vs. YA vs. 2YA

2.3

0.2

-1.8

-0.8

0.1

Note: Price Tiers calculated at Brand Level from Subcategory Price/Vol as Premium > 1.25*Avg, Value < .75*Avg in Grocery Channel. Store Brands includes all private label brands across retailers and price levels.

Source: IRI POS, MULO, data ending 6/13/21

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EggsSalty SnacksCarbonated BeveragesBeer/Ale/Alcoholic CiderFresh Bread & RollsRTD Tea/CoffeeFz Dinners/EntréesLuncheon MeatsHot CerealToothpasteFood & Trash BagsRfg Juice & DrinksVitaminsCookiesCrackersBreakfast MeatsSnack Bars/ Granola BarsFz/Rfg PoultryShelf Stable Seafood

Shelf-Price Increases Begin to Manifest in Some Categories With Rising Costs Expected to Flow Through the Remainder of 2021Decomposition of Price per Volume % Change vs. Prior 8 Weeks in Leading Accelerating Price / Mix CategoriesGrocery Channel / 8 WE 5/16/21

-2.0%

1.5%

-0.5%

0.9%

0.0%

-0.7%

0.7%

2.0%

1.2%

1.6%

1.0%

1.0%

1.6%

2.6%

3.1%

2.0%

1.0%

3.3%

3.4%

0.7%

1.0%

1.4%

0.3%

1.4%

3.1%

0.7%

0.5%

2.3%

1.6%

0.5%

0.6%

0.6%

0.7%

1.0%

0.7%

1.1%

2.5%

3.1%

2.4%

0.9%

0.8%

0.6%

0.5%

0.3%

0.3%

0.3%

0.3%

0.3%

0.3%

0.2%

0.2%

1.7%0.2%

0.1%

0.2%

0.1%

0.1%

6.5%0.0%

1.1%

1.8%

3.3%1.6%

1.7%1.8%

2.8%

2.8%

2.2%

3.8%3.5%

2.5%1.8%

3.6%4.3%

2.8%

5.8%

Tot Price/ Vol chg.

Increased Everyday Price

Change in Promotion

Mix Shift/ PremiumizationEDIBLE / NONEDIBLE Though some early

indications of increased shelf price, most price increase

announcements by manufacturers and retailers are yet to be fully realized

Kroger reported inflation rates around 1% –

particularly short-term volatility in meat, produce –

with increasing costs starting to flow through

Mix shift driven by growth of

more premium brands and

products; also some recovery of

smaller packs

Note: Everyday price at item level. Promos include promotion frequency and depth (driven by freq.). Mix shift refers to difference in product mix vs. YA, driven by shifts to more premium brands (positive effect) countering shift to larger pack sizes (negative effect).

Source: IRI POS 8 weeks ending 5/16/21, Grocery channel. Kroger Q2 2021 earnings call commentary.

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Ret

aile

rsM

anuf

actu

rers

IRI estimates that many CPGs are planning scenarios of up to ~5% shelf price increases; this could lead up to a 7-10% growth in price / mix vs. YAG.

Managing Inflation Richard Galanti, Costco Executive VP & CFO

“There are a variety of inflationary pressures that we and others are seeing. There has been a lot of CPG companies that have announced increases. And many of them are sticking because we and other retailers are aware of the underlying costs associated with it.” FQ3 2021 earnings call, 5/27/21

Rodney McMullen, Kroger Chairman & CEO“Typically, our business operates best when inflation is 3% to 4% and we have a meaningful amount of fixed costs. [At this rate], customers don't overly react to that inflationary environment.” FQ1 2021 earnings call, 6/17/21

Vivek Sankaran, Albertsons Cos. President & CEO“We expect a rational competitive environment to prevail, driven by tight supply, promotion management and more digital promotions. If it goes beyond 3% to 4%, we are going to have difficult conversations on how much we can accept, because we are not going to pass through all of it.” FQ4 2020 earnings call, 4/16/21

Retailers expect to pass along 3-4% inflation in response to rising costs in labor, freight, container shortages and port delays, higher commodity prices, and higher import and F/X costs.

Mark Clouse, Campbell’s Soup Company President & CEO“[Pronounced cost inflation] partially offset by productivity improvements reflect about a third of gross margin erosion. We expect to benefit from pricing actions and our productivity plans to mitigate this inflation pressure [starting in second half of 2021]. We're being very thoughtful on how we're reflecting critical price thresholds.” FQ3 earnings call, 6/9/21Carlos Abrams-Rivera, Kraft-Heinz U.S. Zone President“We will make sure we continue to renovate our portfolio to drive better value, improve the creative content of our marketing and strengthen and diversify our media impressions. We will return to supporting the key [holiday] promotional window – ensuring we show up in those moments.” FQ1 Earnings call, 4/29/21

Besides passing on some of the costs to consumers via price increases, manufacturers balance other costs and implement revenue management strategies to manage rising costs.

Source: CPG retailer and manufacturer earnings reports.

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Large Manufacturers Lead in Price Acceleration, Particularly in Edible; Others Will Likely Follow; Invest in Granular Revenue Management to Drive Pricing EffectivenessPrice Growth by Manufacturer SizePrice per Volume % Change L8 Weeks vs. Q1, Grocery

Edible

Nonedible

1.51.9

-0.1

0.9 1.0

1.81.4 1.3

0.90.5

Total Grocery Large Medium Small Store

Brands

Private label growth continues to accelerate along with

national brands, though PL sees more price / mix

growth in nonedible.

OpportunitiesSmaller CPGs are likely to

follow price increases due to universal rising costs.Balance shelf price increases across

channels, brand tiers.Ensure adequate opening

price points and value products, while driving sales

of premium products.Continuously monitor price and promotional effectiveness at retailer,

shopper-segment levels to drive maximum return and

drive truly incremental sales.Note: Manufacturer Size calculated with MULOC 2020 Sales as XS<$100M, Small>$100M, Medium>$1B, Large>$6B. Extra Small manufacturers with higher price/mix growth not shown. Dollar-weighted price per volume change across categories.

Source: IRI POS, 8 weeks ending 5/16/21, Q1 12 weeks ending 3/21/21.

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NONEDIBLEEDIBLE

Store Brands Growth Lagged or Decelerated vs. National Brands in 1H 2021;Store Brands Likely to Gain Share in 2H as National Brands Raise PricesStore Brand Trends: % Change vs. 2YA MULO

1.27.6 4.1

9.812.5 15.47.7 10.5

National Brands Store Brands

2019 2020 Q1 2021 8 WE 5/16/21

7.7 7.7 6.8 7.04.7 8.5 9.8 11.1

-6.0 -2.5

2.67.5 6.3

-1.9 -0.6-0.1

Dollars

Price / Mix*

Volume

3.2

17.1 15.1 15.28.3

18.4 13.6 11.3

2019 2020 Q1 2021 8 WE 5/16/21

4.6 6.3 6.2 7.2

-0.3

3.4 3.7 4.9

-1.4

10.2 8.4 7.48.614.5 9.6 6.2

18.8% 18.8% 18.8% 18.0%+0.7 +0.2 -0.2 -0.5

18.8% 19.1% 19.0% 18.6%+1.6 +1.1 +0.5 0.0

*Dollar-weighted price per volume change across categories. Source: IRI data ending 5/16/21.

PL $ Share

$ Share PPTChange vs. 2YA

“If we have inflation that is not driven by true cost changes, Our Brands gain share at the expense of national brand players.” Kroger FQ1 earnings, 6/17/21

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Most Top Brands Compete to Retain 2020’s Buyer GainsCPG Brands Gaining and Retaining Buyer Growth in 2020 and 2021 / Among Top 100 CPG Brand Franchises

29

100

74

9

168911 Continued to grow buyers

# of Brands that retained 2020 HH Pen Gains in 2021

Top 100 CPG Brand Franchises

# Brands that gained >+0.5ppts. HH Pen. In 2020

75-100% retained

0-25% retained

50-75% retained25-50% retained

53

28% of Top 100 Brands Gained Significant Penetration in 2020

and Retained

>50% of Gains in 2021

Source: IRI Consumer Panel.

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It Is Critical to Optimize Media ROI Real-Time, Even as Some Consider Reducing Spend to Maintain ProfitabilityImplications of Reducing Media SpendTypical CPG Brand – IRI Benchmarks

75.0%

17.5%

7.5%MediaTrade &

Promotions

Core Drivers(Distribution,

Price, Competition)

Short-Term Drivers Typical CPG Brand

Optimize Marketing Spend

Maintain focus on the right products, right vehicles, and right segments and audiences that are most

responsive to media.Invest in higher ROI mediato minimize losses. Monitor

media ROI real time to optimize investments across

messages and properties to drive sales and share.

Leverage analytic models to maintain effectiveness while

optimizing for efficiency.Invest in digital and

social media that continue to maintain strong ROIs

and retailer media that fits with brand objectives.

A cut in media investment can help achieve near-term

profit targets, but is likely to be

detrimental in the long term as even in-home demand wanes.

E.g., a 10% reduction in media investments could cut ~1% volume in the short term, and ~2% in the long term.

Source: IRI Marketing Mix & Trade Promotion models.

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Promotion Frequency Increases Slightly, But Depth of Discounts Shrinks, Leading to Lower Overall Promotion InvestmentsPromotion Investment, Frequency, and Depth Index to 2019 Average / Grocery Channel

FREQUENCY

DEPTH

Weeks & items on promotion (as measured by % base sales on Merch)Index to 2019 Average

Weighted average % price reduction on any merchandising conditionIndex to 2019 Average

2019 Average Q1 '20 Q2 '20 Q3 '20 Q4 '20 Q1 '21 L8

Edible 29% 86 62 90 95 92 93

Nonedible 19% 88 52 77 83 85 87

2019 Average Q1 '20 Q2 '20 Q3 '20 Q4 '20 Q1 '21 L8

Edible 21% 100 106 94 92 92 89

Nonedible 18% 98 99 92 93 95 89

Edible

Nonedible

9167 78 84 80 77

93

5164 72 72 69

Q1 '20 Q2 '20 Q3 '20 Q4 '20 Q1 '21 L82019 Average: 10%

2019 Average: 6%

INVESTMENT% of dollar sales invested in promo markdown

Index to 2019 Average

Q1 '20 Q2 '20 Q3 '20 Q4 '20 Q1 '21 L8

Note: Investment = (Base price – promoted price) * promoted volume. Frequency = % of base sales sold on Any Merch. Source: IRI data ending 5/16/21 POS, Grocery.

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 22

OpportunitiesAnalyze promotional

effectiveness to identify micro opportunities at

account, shopper-segment levels to reduce discount

while maintaining lift.Assess return by event and

direct investment to highest ROI events.

Q1 '20 Q2 '20 Q3 '20 Q4 '20 Q1 '21 L8

At the Same Time, Promotional ROI is Almost as Effective as Pre-COVID-19 Levels; Use Promotions Strategically to Drive Highest Return and Truly Incremental SalesPromotion Effectiveness Index vs. 2019

11085 87 103 95 96

11790 94 100 91 96

E D I B L E

N O N E D I B L E

1.59 1.23 1.27 1.49 1.38 1.40

2.14 1.65 1.72 1.84 1.68 1.77

Indicates 1.8x return from incremental sales over promotional markdown costs

2019 Avg.1.45

2019 Avg.

1.84

Promo Effectiveness Index Calculated as: ((Dollars Invested in Promo markdown/ total Dollar Sales) in Current Time Period / 2019 Average)*100. Source: IRI data ending 5/16/21 POS, Grocery.

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Reduced Assortment During COVID-19 is Mostly Recovered; Retailers and Manufacturers Will Likely Continue to Seek Reduced Complexity% Change in Avg. Weighted Wkly Assort. Selling vs. 2YA MULO

-15

-10

-5

0

5

Nonedible

11-2

9-20

01-2

6-20

04-1

9-20

07-1

2-20

02-2

3-20

03-2

2-20

09-0

6-20

05-1

7-20

06-1

4-20

08-0

9-20

10-0

4-20

11-0

1-20

12-2

7-20

01-2

4-21

02-2

1-21

03-2

1-21

04-1

8-21

05-1

6-21

Edible

COVID-19 Stock-Up

Period

2020 Post COVID L4 WeeksNutrition +2% +8%Health Remedies -11% -4%HH Cleaning -16% -6%Paper Products -39% -19%

2020 Post COVID L4 WeeksLiquor +12% +8%Snacks -2% +4%CSD -4% -2%Fz. Fruit -10% -2% Opportunities

Work with retailers that are simplifying the

shelf set and ensure that your portfolio gets the

right placement.Ensure innovation is incremental to the category and

brand portfolio.Tailor assortment to

new digital and omnichannel shoppers.

Note: Dollar-weighted average change across categories for edible / non-edible. Source: IRI POS data ending 5/16/21. IRI PTA engagements.

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 24

Immune Support$521MM

Mountain Dew Rise

Organic$14.6B

Annie’s Peel-A-Parts

Antioxidant$2.9B

Bai Boost

Plant Protein$65.8B

Beyond Sausage

Ketogenic$66.2B

Wonderworks Keto Friendly Cereal

Electrolyte$5.2B

Reign Total Body Fuel

Whole Grain$6.3B

belVitaLemon Poppyseed

Low Sugar$19.9B

Rebel Ice Cream

Pre / Probiotic$2.5B

Bragg Refresher

Gluten Free$240.9B

Hu Grain-FreeCookies

Communicate and Innovate on Relevant Attributes and Benefits that Matter to ConsumersAccelerating Product Claims in Edible and Example Innovations – F&B L52 Size

Δ % chg. vs YAL8 vs. Prior Period

Example Innovation

Δ % chg. vs YAL8 vs. Prior Period

Example Innovation

+/- 0 to 10 ppts+/- 10 ppts or more

To learn more about Innovations, read New Product Pacesetters 2020. Note: Innovations launched within the last 52 weeks.

Source: IRI POS data ending 5/16/21, Prior Period 8 weeks ending 3/21/21, MULO. Label Insights Attributes, Health and Wellness Claims.

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“We pulled forward demand by 3-4 years based on the way that customers already engaged in digital over the last 12 months. There is going to be some normalization this year. From there, we're building to the commitment of doubling the business over the next few years. In [FQ1 2021], we reduced the amount of time taken to pick a digital order by 5% and increased media revenue per digital basket by 33%.”

-- Kroger FQ1 earnings call, 6/17/21

OpportunitiesAfter gaining significant new omnichannel buyers during

COVID-19 peaks, one grocery retailer continues to see a high

rate of retention among converted omnichannel buyers

while new buyers trying digital shopping returns to

pre-COVID-19 levels.CPG retailers and manufacturers must continue to invest in online platforms to retain omnichannel shoppers and carefully curate the online vs. in-store experiences.

As E-Commerce’s Presence Sticks, CPGs Must Continue to Invest in the Increased Role of DigitalDollar % Share of E-Commerce in Omnichannel

6.19.5 10.7 11.2 10.7

2019 Q1 2021

2020 Q2 2021

Q4 2020

H2 2021 (F)

~12.0

23.8

31.234.4 33.1 33.5

Q4 2020

2019 Q1 2021

2020

~35.0

Q22021

H2 2021 (F)

Edible CPG Nonedible CPG

Note: Based on 205 CPG categories currently tracked in e-commerce. Estimated 2020 e-commerce share for all CPG categories is 7.8% for edible and 22.3% for nonedible, accounting for $175B total CPG ecommerce sales. E-commerce data is based on projected receipt-based sample and reported data with varying levels of granularity and accuracy available. Source: IRI Omnichannel, data ending 06/13/21

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 26

Implications for CPG Manufacturers and Retailers

Consumer

Pricing & Promotion

Assortment &Innovation

Marketing

• Be adept at detecting shifts in consumer needs and preferences and leverage information, including unconscious and unarticulated needs, in addition to search, social media and purchase data.

• Segment omnichannel users to target products, solutions and services to meet a variety of consumer needs.• Build unique in-store and online experiences to drive traffic, encourage discovery and impulse and increase occasion-

based purchases.

• Monitor price elasticity at a granular level with high frequency to capitalize on pricing opportunities as demand and supply evolve.• Continuously track promotional effectiveness and direct investments to efforts that deliver the highest returns.• Understand channel and consumer price-pack opportunities and assess potential evolution, especially with e-commerce vs. in-store.• Ensure adequate opening price points and value products, while driving sales of premium and super-premium products.• Understand the effect of pricing and promotion on specific shopper segments, and tailor strategies to different cohorts to

drive penetration and incremental revenue.

• Understand brand trust, emotional connection and brand experiences and build on key strengths.• Determine which preferences are must-haves using advanced analytics and algorithms from actual purchases of millions

of shoppers across broad demand spaces to ensure that innovation is incremental to the category and brand portfolio.• Innovate on trends that last and cater to different occasions and price points.• Work with retailers that are simplifying the shelf set to ensure that products get the right placement.

• Maintain focus on the right products, right vehicles, and right segments and audiences that are most responsive to media.• Invest in digital and social media that continue to maintain strong ROIs and retailer media that fits with brand objectives.• Articulate product attributes, so consumers understand benefits and are willing to pay the right price. Leverage trade-off

models to understand which benefits matter to consumers. • Build baskets for holidays and events, in partnership with retailers, to cater to store- and omnichannel shoppers.

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 27

Mark ClousePresident and CEO, Campbell Soup CompanyNovember 10, 2020

Stuart AitkenChief Merchant & Marketing Officer, The Kroger Co.September 3, 2020

Vivek SankaranPresident & CEO, Albertsons CompaniesAugust 25, 2020

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 28

IRI’s Latest CPG and Retail Insights Reports to Manage the Impact of COVID-19Discovering Pockets

of DemandThe Changing Shape of the CPG Demand Curve

COVID-19 Emerging Point of View

Recession Proof Your Business

IRI COVID-19 Impact Assessment Reports

5. Revenue Growth in an Inflationary Environment

4. Winning in CPG E-Commerce3. Innovation for a Post-

Pandemic World2. Harness Growth in 20211. The Premium Opportunity

15. Opportunities to Attract SNAP Shoppers

14. Vitamins, Minerals, Supplements13. America Is Ready for Football12. Revenue Management

Opportunities in a Pandemic11. Home for the Holidays10. Powering the Future of

Convenience Retail9. Reignite In-Store

Merchandising in Grocery8. SNAP Benefits7. U.S. CPG Growth Leaders6. E-Commerce5. Boomers4. A Global Perspective3. Tracking Transformation2. Meat and Millennials1. Anticipate the Future

5. COVID-19 Vaccine Update: Impact on CPG Industry

4. Anticipated Vaccine Adoption & Impact on the CPG Industry

3. Potential Impact of Reduced Unemployment Benefit Changes on F&B Spending

2. Consumer Stimulus, Unemployment Benefit Spending & Shopping Behavior

1. The Impact of a Second Round of Stimulus on the CPG Demand Curve

7. Defending and Recapturing the Shelf

6. Innovation Lessons From the Great Recession to Apply Today

5. Building Brands During Recessionary Times

4. Recessionary Lessons to Apply to Private Label Today

3. How Big Brands Performed During the Great Recession

2. Maintaining Pricing Discipline During a Recession

1. How the Great Recession Reshaped CPG Demand Curve

5. Anticipating Life After COVID-19

4. Consumers Provide a Pessimistic View of Coming Months

3. Tracking the Dramatic Pivot of U.S. Consumer and Shopper Behavior

2. Then and Now: Consumer CPG Behavior During Economic Downturns

1. COVID-19: Impact on CPG and Retail

IRI Leaderboard

2. Q1 2021 Emerging Growth1. Year-End 2020 Trends, 2021

Emerging Growth Pockets

© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 29

The IRI CPG Demand Index™ provides a standard metric for tracking changes in spending on consumer packaged goods. U.S. Demand Index™ Forecasts are delivered through a proprietary, fully automated forecasting solution that anticipates consumer demand.Channel Shift Index™ provides a standard metric for tracking changes (migration) in spending on consumer packaged goods across select channels. The IRI E-Commerce Demand Index™ provides a standard metric for tracking changes in spending on consumer packaged goods purchased online. Inflation Tracker™ provides the well-known price per unit metric for tracking changes in pricing of consumer packaged goods. Supply Index™ provides a standard metric for tracking changes in product availability (i.e., in-stock rates) in stores for consumer packaged goods.Out-of-Stock Levels for Top-Selling Subcategories by Market Area in the U.S.Top U.S. Topics from IRI Social Pulse™

CPG Economic IndicatorsAccess IRI’s industry-standard metrics for consumer product demand and supply during the pandemic, our CPG inflation tracker and the latest data on category trends, out-of-stock levels, consumer sentiment and more.

Demand Index™ U.S. Demand Index™ Forecasts

Channel Shift Index™

E-Commerce Demand Index™

Inflation Tracker™ Supply Index™ Out-of-Stock Levels

for SubcategoriesU.S. Topics from IRI Social Pulse™

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