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Confidential & Proprietary • Copyright © 2008 The Nielsen Company U.S. Retailing & Consumer Trends Jeff Gregori The Nielsen Company October 23 rd , 2008

Confidential & Proprietary Copyright © 2008 The Nielsen Company U.S. Retailing & Consumer Trends Jeff Gregori The Nielsen Company October 23 rd, 2008

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Page 1: Confidential & Proprietary Copyright © 2008 The Nielsen Company U.S. Retailing & Consumer Trends Jeff Gregori The Nielsen Company October 23 rd, 2008

Confidential & Proprietary • Copyright © 2008 The Nielsen Company

U.S. Retailing& Consumer Trends

Jeff GregoriThe Nielsen CompanyOctober 23rd, 2008

Page 2: Confidential & Proprietary Copyright © 2008 The Nielsen Company U.S. Retailing & Consumer Trends Jeff Gregori The Nielsen Company October 23 rd, 2008

April 18, 2023 Confidential & ProprietaryCopyright © 2008 The Nielsen Company

U.S. Retailing & Consumer Trends

Page 2

• Economic Outlook

•U.S. Retail Trends

• Key Consumer Trends Health & Wellness

• Key Insights & Recommendations

Agenda

Page 3: Confidential & Proprietary Copyright © 2008 The Nielsen Company U.S. Retailing & Consumer Trends Jeff Gregori The Nielsen Company October 23 rd, 2008

April 18, 2023 Confidential & ProprietaryCopyright © 2008 The Nielsen Company

U.S. Retailing & Consumer Trends

Page 3

Overall Cost of Living Rising SharplyConsumers Can Not Keep Up With Necessities

Source: U.S. Department of Labor Statistics (Consumer Price Index; U.S. City Average); USDA, NAR, BLS

Fuel OilGallon

GasolineGallon

Breadpound

GroundBeefpound

Chickenpound

Eggsdozen

Milkhalf

gallon

48%

35%27%

16%10%13%

7% 3%

Wages

Housing

- 8%

12 Month Percentage Increase, Selected Items (March 2007 vs. March 2008)

Page 4: Confidential & Proprietary Copyright © 2008 The Nielsen Company U.S. Retailing & Consumer Trends Jeff Gregori The Nielsen Company October 23 rd, 2008

April 18, 2023 Confidential & ProprietaryCopyright © 2008 The Nielsen Company

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Page 4

Consumers Combining Trips, Eating Out Less, Staying Home, Cutting Spending @ Alarming Levels!

78% combining shopping trips & errands (+ 10 pts from YAGO),

52% eating out less (+ 14 pts),

51% staying home more often (+ 12 pts) &

63% of U.S. consumers are reducing spending (+ 18 pts)!

Nielsen Homescan Gas Impact Study

Saving Money in What & How they Buy & Where They ShopImpact higher gas prices had on driving & spending habits? Check all

Jun/Jul ‘05

Jun/Jul ‘06

Jun‘07

Jun‘08

Buy less expensive grocery brands 17% 22% 19% 35%

Use more coupons 20% 24% 21% 32%

Shop more @ Supercenters 22% 26% 23% 28%

Buy Larger, Economy Size 10% 11% 10% 16%

Page 5: Confidential & Proprietary Copyright © 2008 The Nielsen Company U.S. Retailing & Consumer Trends Jeff Gregori The Nielsen Company October 23 rd, 2008

April 18, 2023 Confidential & ProprietaryCopyright © 2008 The Nielsen Company

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Page 5

So, Tough Times for Growth & How Important Are Value, Variety & Convenience to You?

• How are you equipped to compete against Value, Variety or Convenience?• Are you providing Value,

Variety & Convenient solutions to categoryconsumers & retail shoppers?• An integral part of these

themes is innovation

Page 6: Confidential & Proprietary Copyright © 2008 The Nielsen Company U.S. Retailing & Consumer Trends Jeff Gregori The Nielsen Company October 23 rd, 2008

April 18, 2023 Confidential & ProprietaryCopyright © 2008 The Nielsen Company

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Page 6

U.S. Retailing Trends

Page 7: Confidential & Proprietary Copyright © 2008 The Nielsen Company U.S. Retailing & Consumer Trends Jeff Gregori The Nielsen Company October 23 rd, 2008

April 18, 2023 Confidential & ProprietaryCopyright © 2008 The Nielsen Company

U.S. Retailing & Consumer Trends

Page 7

145,624

37,399

32,027

6,584

19,805

3,178

1,167

124,516

39,660

30,682

6,421

13,151

1,583

907

Convenience

Drug

Supermarkets

Mass Merch

Dollar Stores

Supercenters

Warehouse Clubs

2001Mid-2008

Value & Convenience Winning As Evidenced By Increased Store Count

U.S. Store counts

Supermarkets have not grown at the rate of other retail channels – no wonder the channel has lost

shopping trips!

Source: Trade Dimensions® & TDLinx®, services of The Nielsen Company

Page 8: Confidential & Proprietary Copyright © 2008 The Nielsen Company U.S. Retailing & Consumer Trends Jeff Gregori The Nielsen Company October 23 rd, 2008

April 18, 2023 Confidential & ProprietaryCopyright © 2008 The Nielsen Company

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Page 8

Shopping Behavior Trends

• Retailers can grow their sales by:– Increasing their shopper base–Driving shopping frequency–Building baskets

• Leveraging categories & brands that impact one or more of these components• Driving “need state” trip

opportunities–Health & wellness–Meal occasions–Large versus small trips–Time-starved consumers

Source: Homescan®, a service of The Nielsen Company

Page 9: Confidential & Proprietary Copyright © 2008 The Nielsen Company U.S. Retailing & Consumer Trends Jeff Gregori The Nielsen Company October 23 rd, 2008

April 18, 2023 Confidential & ProprietaryCopyright © 2008 The Nielsen Company

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Page 9

99

81

81

64

68

51

41

3.8

100

95

86

59

51

50

45

3.6

Grocery

Mass Merch

Drug

Dollar

Supercenters*

Warehouse

Conv/Gas

Military2001

Mid-2008

*Includes Kmart, Target & Wal-Mart Supercenters

Value Winning As Evidenced By Consumer Acceptance

Benefits from new store openings

% US household penetration

Source: Homescan®, a service of The Nielsen Company** Note: Conv/Gas channel behaviors understated because of the high level of gasoline only buys & purchases of immediate consumables

Page 10: Confidential & Proprietary Copyright © 2008 The Nielsen Company U.S. Retailing & Consumer Trends Jeff Gregori The Nielsen Company October 23 rd, 2008

April 18, 2023 Confidential & ProprietaryCopyright © 2008 The Nielsen Company

U.S. Retailing & Consumer Trends

Page 10

59

26

15

14

14

13

11

20

72

20

24

15

15

11

10

24

Grocery

Supercenters*

Mass Merch

Drug

Conv/Gas

Dollar

Warehouse

Military2001

Mid-2008

Grocery & Mass trips continue to drop

*Includes Kmart, Target & Wal-Mart Supercenters

Value Channels Grabbing TripsTrips per household

Source: Homescan®, a service of The Nielsen Company** Note: Conv/Gas channel behaviors understated because of the high level of gasoline only buys & purchases of immediate consumables

-17%

-18%

Page 11: Confidential & Proprietary Copyright © 2008 The Nielsen Company U.S. Retailing & Consumer Trends Jeff Gregori The Nielsen Company October 23 rd, 2008

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Page 11

Value Retailing Driving Price Compression

$98

$64

$49

$40

$23

$19

$14

$63

$82

$51

$39

$32

$19

$10

$11

$59

Warehouse

Supercenters*

Mass Merch

Grocery

Drug

Conv/Gas

Dollar

Military

2001

Mid-2008

*Includes Kmart, Target & Wal-Mart Supercenters**Source: Progressive Grocer

Average $ basket ring—total expenditures

**

Source: Homescan®, a service of The Nielsen Company** Note: Conv/Gas channel behaviors understated because of the high level of gasoline only buys & purchases of immediate consumables

One Stop Shopping

A Key Strength For Military

Page 12: Confidential & Proprietary Copyright © 2008 The Nielsen Company U.S. Retailing & Consumer Trends Jeff Gregori The Nielsen Company October 23 rd, 2008

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Page 12

Military Channel mostly competing for Larger Stock Up Trips (>$64) very similar to Club

7

14

22

32

51

55

73

12

16

24

28

30

24

23

18

18

30

32

28

26

13

10

6

29

47

30

23

12

11

11

3

41

Warehouse Clubs

Supercenters

Mass Merch

Grocery

Drug

C-Stores

$ Stores

Military

Immediate Fill In Routine Stock-up

Total US—Nielsen Homescan—52 weeks ending 7/1/2006

% of channel dollars by trip type

Immediate = <$31Fill In = >$31 <= $64Routine = $64 - $125

Stock Up = >$125

Page 13: Confidential & Proprietary Copyright © 2008 The Nielsen Company U.S. Retailing & Consumer Trends Jeff Gregori The Nielsen Company October 23 rd, 2008

April 18, 2023 Confidential & ProprietaryCopyright © 2008 The Nielsen Company

U.S. Retailing & Consumer Trends

Page 13

0

20

40

60

80

100 $100k +

$70 - $99.9k

$50 - $69.9k

$40 - $49.9k

$30 - $39.9k

$20 - $29.9k

< $20k

Next to Club, no channel appeals more to higher income households than the Military Channel

What can the Military Channel learn from Club

retailers?

% sales from all shoppers

Source: Homescan®, a service of The Nielsen Company―Total US—52 weeks ending 6/28/2008

Page 14: Confidential & Proprietary Copyright © 2008 The Nielsen Company U.S. Retailing & Consumer Trends Jeff Gregori The Nielsen Company October 23 rd, 2008

April 18, 2023 Confidential & ProprietaryCopyright © 2008 The Nielsen Company

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Page 14

Value channel (Dollar, Mass & Club) growth coming from ALL income segments!

-10

0

10

20

Dollar Stores Total Mass Grocery Club Drug

Low Income Mid-Income High Income

Source: MY 2008 Vs. MY 2007 Account Shopper Profiler

Low Income = < $20K, Mid Income $20K-$99.9K, High Income >$100K

$ % Chg V. Year Ago - By Income Group

Flat

Page 15: Confidential & Proprietary Copyright © 2008 The Nielsen Company U.S. Retailing & Consumer Trends Jeff Gregori The Nielsen Company October 23 rd, 2008

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Page 15

Low income households unlikely to trade up, but high income households will trade down

7884

4030

79

46

65

87

6350

81

4147

78 7568

83

33

DollarStores

Wal-Mart Target Club Drug C-Stores

Low Income Mid-Income High IncomeSource: Mid-Year 2008 Homescan

Low Income = < $20K, Mid Income $20K-$99.9K, High Income >$100K

Penetration By Income Group

11 MillionHH’s

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Page 16

Dollar Stores Expanding Assortment

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Page 17

Retailers – How Are the Winners Winning?

Convenient Shopping Solutions

BAG & CHECKOUT ASYOU SHOP!

ANTICIPATE SHOPPERNEEDS

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Page 18

Marketside – Wal-Mart’s Newest Banner

• First 4 Locations Near Phoenix, AZ– 7561 E. Baseline Road, Mesa– 910 E. Elliott Road, Gilbert– 950 N. McQueen Road, Chandler– 838 W. Elliott Road, Tempe

• 15,000-20,000 Square Feet of Selling Space–Half the Size of a Neighborhood Market

This new banner allows Wal-Mart to attract upscale shoppers without the Wal-Mart name or the “Big Box” image.

http://www.marketside.com

Page 19: Confidential & Proprietary Copyright © 2008 The Nielsen Company U.S. Retailing & Consumer Trends Jeff Gregori The Nielsen Company October 23 rd, 2008

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Page 19

Retailers Performing Well In Tough Economy

•Costco July sales rose 14%, same-store up 10%•BJ’s July same-store sales up 16.7%, excluding gasoline,

same-store up 7%•Dollar Tree posted 12.5% increase in sales during fiscal

2nd qtr, comp-store up 6.5%•Kroger 1st qtr sales up 11.5%, identical supermarket

sales up 9.2% with fuel & 5.8% without • Family Dollar July sales rose 7.2%, same-store up 4.6%•Walgreen Co. July sales up 10.7%, same-store up 4.1% •Wal-Mart 2nd qtr sales up 10.1%, same-store up 4.5%

Source: Industry e-newsletters & company web sites

= Stock-up & Save Consumer Motivation

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Retailers Performing Well In Tough Economy

•Costco July sales rose 14%, same-store up 10%•BJ’s July same-store sales up 16.7%, excluding gasoline,

same-store up 7%•Dollar Tree posted 12.5% increase in sales during fiscal

2nd qtr, comp-store up 6.5%•Kroger 1st qtr sales up 11.5%, identical supermarket

sales up 9.2% with fuel & 5.8% without• Family Dollar July sales rose 7.2%, same-store up 4.6%•Walgreen Co. July sales up 10.7%, same-store up 4.1% •Wal-Mart 2nd qtr sales up 10.1%, same-store up 4.5%

Source: Industry e-newsletters & company web sites

= Value SeekingConsumer Motivation

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Retailers Performing Well In Tough Economy

•Costco July sales rose 14%, same-store up 10%•BJ’s July same-store sales up 16.7%, excluding gasoline,

same-store up 7%•Dollar Tree posted 12.5% increase in sales during fiscal

2nd qtr, comp-store up 6.5%•Kroger 1st qtr sales up 11.5%, identical supermarket

sales up 9.2% with fuel & 5.8% without• Family Dollar July sales rose 7.2%, same-store up 4.6%•Walgreen Co. July sales up 10.7%, same-store up 4.1% •Wal-Mart 2nd qtr sales up 10.1%, same-store up 4.5%

Source: Industry e-newsletters & company web sites

= Value & ConvenienceConsumer Motivation

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Retailers Performing Well In Tough Economy

•Costco July sales rose 14%, same-store up 10%•BJ’s July same-store sales up 16.7%, excluding gasoline,

same-store up 7%•Dollar Tree posted 12.5% increase in sales during fiscal

2nd qtr, comp-store up 6.5%•Kroger 1st qtr sales up 11.5%, identical supermarket

sales up 9.2% with fuel & 5.8% without• Family Dollar July sales rose 7.2%, same-store up 4.6%•Walgreen Co. July sales up 10.7%, same-store up 4.1% •Wal-Mart 2nd qtr sales up 10.1%, same-store up 4.5%

Source: Industry e-newsletters & company web sites

= Value & 1-Stop ShopConsumer Motivation

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Page 23

Key Consumer Trends

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• Make them key component of messaging and/or understand how to take advantage of indulgent consumers

• Improve reaction time to new diets & eating trends

• In-store health clinics growing–Wal-Mart to add 400 by 2010

Short & Long-term Growth Can Be Accomplished With Consumer FocusHealth & Wellness opportunities are here to stay

GrainsVeggiesFruitsOilsDairyMeat/Beans

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Page 25

Many Health & Wellness Claims ShowStrong Growth vs. Year Ago

Health & 52-Week Chg VsWellness Claim Dollar Sales Year AgoNatural $21.8 Billion +11.4%Low Fat $14.9 Billion +3.9%Absence of Specific Fat $13.3 Billion +30.5%

(Trans Fat or Saturated Fat)

Reduced Calories $11.3 Billion +9.7%Cholesterol Free $10.6 Billion +8.6%Fat Free $10.0 Billion +5.2%Reduced Fat $8.5 Billion +9.6%No Calories $5.8 Billion -0.6%Caffeine Free $5.5 Billion -2.2%Organic $4.7 Billion +22.5%Multi-Grain $2.1 Billion +16.6%Antioxidants $1.9 Billion +15.8%Good Source of Fiber $1.6 Billion +1.8%

Source: Nielsen LabelTrends, Total U.S. FDMxWM, 52 Weeks Ending 9/6/08

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Page 26

12%

12%

6%

6%

23%

15%

32%

37%

24%

19%

73%

143%

Fat Presence

Natural

Calorie Presence

PreservativePresence

Organic

Fiber Presence

% Chg. 4 Yrs. Ago

% Chg. YA

$4.7 Billion

$3.5 Billion

Organics Have Grown Considerably Over 4 Years, but Sales Volume Small Compared to Other H&W Trends

$13.6 Billion

$17.3 Billion

$21.9 Billion

$46.8 Billion

52 Week Sales

Source: Nielsen Strategic Planner, 52 Weeks Ending 8/9/08

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Recent Weeks Show Less Aggressive Organic Growth

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

% Chg. $ Sales

% Chg. Units

Source: Nielsen Strategic Planner

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Organic % Chg. Organic Shr.Department Dollar Sales YA of Dept.

Fresh Produce (UPC-coded) $869 Million +26% 6.3%Dairy $1,475 Million +20% 3.5%Fresh Meat (UPC-coded) $30 Million +23% 1.9%Dry Grocery $1,836 Million +24% 1.3%Frozen Foods $339 Million +23% 1.1%Deli (UPC-coded) $28 Million +27% 0.5%Packaged Meat $37 Million +25% 0.4%Alcoholic Beverages $24 Million +32% 0.1%HBA $41 Million +27% 0.1%Total Organics $4,680 Million +23% 1.3%

In which aisles are Organic products most prevalent? UPC Fresh Produce & Dairy

Source: Nielsen Strategic Planner, 52 Weeks Ending 8/9/08

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Organic Sales % Organic ShareCategory Dollar Sales Chg.YA of CategoryMilk $1,018 Million +18% 7.5%Fresh Produce (UPC-coded) $869 Million +26% 6.3%Soft Drinks – Non Carb $67 Million +4% 6.1%Yogurt $180 Million +21% 5.0%Baby Food $167 Million +23% 4.4%Eggs $142 Million +29% 4.1%Dessert/Fruit/Toppings Froz $40 Million +36% 3.6%Soup $139 Million +17% 3.3%Dried Fruit $34 Million +46% 3.0%Jams/Jellies/Spreads $52 Million +45% 2.9%Tea $70 Million +28% 2.8%Cereal $185 Million +12% 2.5%Breakfast Foods $56 Million +60% 2.4%Flour $12 Million +37% 2.4%Canned Vegetables $72 Million +36% 2.2%Total Organics $4,680 Million +23% 1.3%

Organics Comprise Less Than 1% Share for Most Categories

Source: Nielsen Strategic Planner, 52 Weeks Ending 8/9/08Nielsen tracks 76 categories with organic claim.

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“Big Names” in Organics Some Manufacturers have created Organic Line Extensions

Source: Nielsen Strategic Planner: FDM 52 Weeks Ending 1/27/2007

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“Big Names” in Organics Several Large Manufacturers Produce Organic Products

Under a Different Brand Names

Source: Organic News

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Driven to health by all means

Dedicated to health through smart nutrition and weight management

High belief in the value of supplements – less concern with food

Low belief in the value of healthy categories

16% FOOD

ACTIVES

19% FENCE

SITTERS

19%MAGIC

BULLETS

25%WELL

BEINGS

(% of U.S. general population adults…)

17% EAT, DRINK & BE

MERRYS

Least concerned & knowledgeable

about health & healthy eating

Meet the Health &Wellness Segments:

Health & Wellness – Nielsen & NMI Service Introduction

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Page 33

1823 22

14

2319 20 23

15

24

Well Beings Food Actives Magic Bullets Fence Sitters Eat Drink &Be Merry

Total Military Shoppers Total Mkt Shoppers

23% of Military Shoppers are Food Actives

% Shoppers

Source: Homescan®, a service of The Nielsen Company

93 117 98 95 95Shopper

Index

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Military Shoppers most likely to be FOOD ACTIVES and EAT DRINK & BE MERRY type shoppers

WELL BEINGS

FOOD ACTIVES

MAGIC BULLETS

FENCE SITTERS

EAT DRINK & BE MERRYS

MILITARY 97 108 98 89 105

Whole Foods 241 35 162 45 23

Wegmans 134 127 71 88 88

Costco 111 111 117 81 82

Sam’s Club 88 117 118 85 91

Safeway Grocery Corp 106 93 105 106 94

Target Banner 105 101 92 100 103

Wal-Mart Banner 84 93 94 110 115

Read as: Costco $ sales are 11% greater than industry among WELL BEINGS

Dollar Spend Index v. Avg HH

Source: Homescan®, a service of The Nielsen Company―Total US—52 week ending 09/06/2008

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FOOD ACTIVES

FOOD ACTIVE 16%Health-Related Eating healthy is vital, over three-fourths eat

heart smart

Believe maintaining proper weight is key to healthful living

Low use of natural and organic food

Most apt to count calories and use artificial sweeteners instead of sugar

Highest use of prescription drugs; lowest use of alternative healthcare

(% of population…)

Branding Influences Most likely to choose products for which they

have a coupon

Lower than average levels of LOHAS environmental values

Branding Influences Most likely to choose products for which they

have a coupon

Lower than average levels of LOHAS environmental values

Dedicated to health through healthy eating, avoiding negatives and adding those with nutritional benefits. FOOD ACTIVES are driven by a desire for balance of exercise, nutrition, and weight management.

Dedicated to health through healthy eating, avoiding negatives and adding those with nutritional benefits. FOOD ACTIVES are driven by a desire for balance of exercise, nutrition, and weight management.

Health & Wellness – Nielsen & NMI Service Introduction

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Page 36

Health & Wellness Segments Show Different Category Preferences

WELL BEINGS

FOOD ACTIVES

MAGIC BULLETS

FENCE SITTERS

EAT DRINK & BE MERRYS

Yeast 159 129 69 155 27

Flour 130 100 108 91 78

Fresh Produce 120 111 108 91 77

Yogurt 119 112 111 84 80

Wine 129 125 113 78 66

Beer 91 95 90 107 114

Read as: Flour $ sales are 30% greater than average HH among WELL BEINGS

Source: Homescan®, a service of The Nielsen Company―Total US—52 week ending 09/06/2008 – upc-coded products

Dollar Spend Index v. Avg HH

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Page 37

Summary & Closing Thoughts

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Page 38

Key Insights & Recommendations

1. More than ever, shoppers of all economic means are seeking “value”

– Combining shopping trips

– Eating more meals at home & doing more “at-home” entertaining

– Seeking the right mix of value, variety, & convenience

– BUT AT ACCELERATED LEVELS

The Military Channel is more important than ever to its customers

– More shoppers are taking advantage of the Military Channel as UPC product penetration has increased to 3.8% (4.4 MM) but shopping frequency is has eroded

– How aggressive are we advertising “The Military Channel Value proposition” to shoppers versus Mass, Dollar & Club stores?

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2. The Military Channel Health & Wellness strategy should consider the following elements:

– Key Assortment Drivers of Health & Wellness

o Natural, Preservatives, Fat and Calorie Presence Claims offer the Military Channel opportunity to build Health & Wellness equity with its customers more than Organics

o Potential Organic category entry points for the Military Channel includes:

Primarily Center Store - Non-Carb Soft Drinks, Baby Food, Soup, Dried Fruit, Jams/Jellies, Tea, Cereal, Breakfast Foods & Canned Vegetables

Perimeter Areas – Milk, Yogurt, Eggs

Organic Frozen can be a differentiation point for Military versus competitive channels. This sector is undeveloped for Organics, but the Total Frzoen Dept is real strength at Military.

Key Insights & Recommendations

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3. The “Food Actives” Shopper Segment is a significant opportunity for the Military channel to drive growth with Health & Wellness

o A big target for Military as 23% are considered Food Actives (1MM+ Shoppers)

75% eat Heart Smart and Count Calories

Most likely to use Artificial Sweeteners instead of Sugar

Most likely to choose products for which they have a Coupon

o While these shoppers already spend 8% more than the average shopper in Military, we need to define ourselves somewhere between Sams (117) & Wegmans (127)

Key Insights & Recommendations

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Confidential & Proprietary • Copyright © 2008 The Nielsen Company

Thank You!

Mid-Year Update

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Appendix

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Health & Wellness Segmentation Methodology

Health & Wellness – Nielsen & NMI Service Introduction

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• NMI’s analysis of the U.S. population’s attitudes and behaviors regarding health and wellness has long indicated that there are clearly identifiable psychographic health and wellness segments.

• In 2001, NMI developed a proprietary health and wellness segmentation of U.S. consumers. Based on more than 40 measures, the Health and Wellness segmentation has become a cornerstone of the Health & Wellness Trends Report (HWTR). The five segments identified have been quite robust over time, displaying strong consistency from year to year.

• NMI’s analysis of the U.S. population’s attitudes and behaviors regarding health and wellness has long indicated that there are clearly identifiable psychographic health and wellness segments.

• In 2001, NMI developed a proprietary health and wellness segmentation of U.S. consumers. Based on more than 40 measures, the Health and Wellness segmentation has become a cornerstone of the Health & Wellness Trends Report (HWTR). The five segments identified have been quite robust over time, displaying strong consistency from year to year.

NMI Health & Wellness Segmentation Methodology

Health & Wellness – Nielsen & NMI Service Introduction

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• The formal analytical model measures commonalities and differences between five distinct consumer groups using k-means cluster analysis. The comprehensive statistical modeling process used to derive NMI’s health and wellness consumer segmentation is based on the following techniques and methodologies:

• Exploratory and confirmatory factor analysis of nearly 200 measures of consumer attitudes and behaviors regarding health and wellness, organic products, supplements, exercise, and many other topics. The analysis identified more than 25 potential factors

• The identification of 31 measures from the factor analysis that best represented each of the potential factors identified and maintained consistency with the previous years’ segmentation solution

• K-means cluster analysis which examined numerous potential solutions to determine which segmentation model provided the optimal solution, based on the following criteria:

•Maximum differentiation between consumer groups

•Maximum homogeneity within each consumer group

• The formal analytical model measures commonalities and differences between five distinct consumer groups using k-means cluster analysis. The comprehensive statistical modeling process used to derive NMI’s health and wellness consumer segmentation is based on the following techniques and methodologies:

• Exploratory and confirmatory factor analysis of nearly 200 measures of consumer attitudes and behaviors regarding health and wellness, organic products, supplements, exercise, and many other topics. The analysis identified more than 25 potential factors

• The identification of 31 measures from the factor analysis that best represented each of the potential factors identified and maintained consistency with the previous years’ segmentation solution

• K-means cluster analysis which examined numerous potential solutions to determine which segmentation model provided the optimal solution, based on the following criteria:

•Maximum differentiation between consumer groups

•Maximum homogeneity within each consumer group

NMI Health & Wellness Segmentation Methodology

Health & Wellness – Nielsen & NMI Service Introduction

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NMI: Unparalleled Expertise in Health, Wellness & Sustainability

NMI is an international strategic consulting, market research, and business development company specializing in the health, wellness, and sustainability marketplace.

Since 1990, NMI has focused on the well-being of people and products, and the environmental and social responsibility of the planet. NMI owns the only H&W consumer database.

Health & Wellness – Nielsen & NMI Service Introduction

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EAT, DRINK & BE MERRYSEAT, DRINK & BE

MERRYS 23%

Health-Related Least likely to agree that consumption of healthy,

nutritious food is important to a healthy lifestyle

Lowest monthly expenditure on healthy and natural products

Driven more by taste and to select emotional, “feel-good” products

Least likely to read labels

(% of population…)

Branding Influences Most likely to choose store brand and buy on price

Least likely to associate personal values with brand choice

Branding Influences Most likely to choose store brand and buy on price

Least likely to associate personal values with brand choice

Least concerned about health and healthy eating; least knowledgeable about health-related benefits. Know they should eat healthier, but don’t. Most focused on taste.

Least concerned about health and healthy eating; least knowledgeable about health-related benefits. Know they should eat healthier, but don’t. Most focused on taste.

Health & Wellness – Nielsen & NMI Service Introduction

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WELL BEINGS

WELL BEING 25%Health-Related High use of healthy food such as soy

food/beverages, fiber, organic food/beverages

Spend significantly more on healthy and natural products

As challenged to eat right as other segments, yet are the most successful at healthy eating

Choose natural/organic over conventional

Above average use of alternative healthcare

(% of population…)

Branding Influences Least likely to base purchase decisions on price; choose

quality regardless of cost; concerned about brand image

Most likely to shop natural channel, including Trader Joe's and Whole Foods Market

Early adopters and influencers

Purchase from companies that share their values

Branding Influences Least likely to base purchase decisions on price; choose

quality regardless of cost; concerned about brand image

Most likely to shop natural channel, including Trader Joe's and Whole Foods Market

Early adopters and influencers

Purchase from companies that share their values

Driven to health by all means, including food, supplements, and other products. Strong preference for concepts that are natural and organic, with strong environmental linkage.

Driven to health by all means, including food, supplements, and other products. Strong preference for concepts that are natural and organic, with strong environmental linkage.

Health & Wellness – Nielsen & NMI Service Introduction

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MAGIC BULLETS

MAGIC BULLETS 19%Health-Related Above average interest in, understanding, and use

of organic and natural food/ beverages

Highest use of functional/fortified food/beverages

Highest usage of weight loss food and artificial sweeteners

Highest use of OTC, alternative healthcare, homeopathic remedies, condition specific supplements, VMHS; high use of Rx

(% of population…)

Branding Influences Average brand loyalty, less concerned with brand

image

After WELL BEINGS, most likely to shop Trader Joe’s and Whole Foods Market

More likely to choose products for which they have a coupon

Branding Influences Average brand loyalty, less concerned with brand

image

After WELL BEINGS, most likely to shop Trader Joe’s and Whole Foods Market

More likely to choose products for which they have a coupon

High belief in and usage of supplements for health, andless concern with food. Among the groups most actively managing weight, sensitive to environmental concerns, and some leanings toward natural and organic. Healthy convenience resonates with this group.

High belief in and usage of supplements for health, andless concern with food. Among the groups most actively managing weight, sensitive to environmental concerns, and some leanings toward natural and organic. Healthy convenience resonates with this group.

Health & Wellness – Nielsen & NMI Service Introduction

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FENCE SITTERS

FENCE SITTERS 17%

Health-Related Lower belief in the connection between diet and

health

Less than average use of most healthy food categories

Less concerned about sugar, high fructose corn syrup, and artificial sweeteners

(% of population…)

Branding Influences Average brand loyalty

Concerned about brand image

More likely to buy on price

Less environmentally sensitive

Branding Influences Average brand loyalty

Concerned about brand image

More likely to buy on price

Less environmentally sensitive

Primarily younger households with kids, who buy on price and are driven by the “family” diet. They are neutral on most health issues, with a low belief in the value of healthy categories

Primarily younger households with kids, who buy on price and are driven by the “family” diet. They are neutral on most health issues, with a low belief in the value of healthy categories

Health & Wellness – Nielsen & NMI Service Introduction

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Good Alignment Between NMI & Homescan – Consistent Segment Sizes

25 19

1619

19 22

17 16

23 24

NMI H&WS Homescan H&W

EAT, DRINK, & BEMERRYS™

FENCE SITTERS™

MAGIC BULLETS™

FOOD ACTIVES™

WELL BEINGS™

% Population % Households

Source: NMI 2007 H&W Consumer Trends Database™; Homescan®, a service of The Nielsen Company

Health & Wellness – Nielsen & NMI Service Introduction

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Who is the Military Shopper?

• HHLD Income $40K+• Female Head Age 55+• Affluent Suburban Spreads• Younger Bustling Families• Empty Nest Couples• Senior Couples• Not In Work Force• African American• Asian• Non-Caucasian

Demographics of the average Military Shopper

• HHLD Income $40K+• Female Head Age Under 35• Female Head Age 65+• 2 Member Household• 3 – 4 Member Household• 5+ member Household• Affluent Suburban Spreads• Younger Bustling Families• Empty Nest Couples• Senior Couples• Not In Work Force• African American• Asian• Non-Caucasian

Demographics of HEAVY Military Shopper

Your Most Important shoppersHeavy Shoppers represent approximately

82% of total military volume

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Who is the Military Shopper?

• HHLD Income $40K+• Female Head Age 55+• Affluent Suburban Spreads• Younger Bustling Families• Empty Nest Couples• Senior Couples• Not In Work Force• African American• Asian• Non-Caucasian

Demographics of the average Military Shopper

• HHLD Income $50K - $99k• Female Head Age 65+• Modest Working Towns• Senior Couples• Not In Work Force• African American• Asian• Non-Caucasian

Demographics of LIGHT Military Shopper

Light “occasional” shoppersLight Shoppers represent approximately

18% of total military volume