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LOOKING IN THE REAR-VIEW MIRROR MATTERS,
BUT LOOKING AHEAD MATTERS MORE
Todd Hale
Retail Insights Thought Leader
Principal, Todd Hale, LLC
March 5, 2017
WHAT’S IN STORE 2017 AND BEYOND
2
U.S. CURRENT STATE
• Consumer confidence rising as unemployment falls along with low food inflation and gas prices, but headwinds from aging population, low population growth, low working rate, and spending challenges remain.
• Out-of-home dining continues to grow.
Economic indicators improving, but headwinds remain
• Across Nielsen-measured retail channels, departments and categories, total store gains have been less than spectacular. Over the past four (52-week) periods, dollar sales grew, on average, by 1.8%. Low or no unit sales growth has been more problematic.
• Food deflation is having the greatest impact on supermarket growth, but most channels impacted. Produce and deli departments leading growth.
Total store sales flat as deflation impedes growth;
growth in perimeter continues
• Growth is coming from smaller more niche players, premium and value offerings.
• Channels that offer value or convenience continue to lead store expansion, but retail format is no guarantee of success.
• Ecommerce becoming more mainstream with over 31% of consumers using it to buy food.
Small manufacturers winning; retail format no guarantee of
success
• H&W trends continue to grow and evolve, but indulgence also winning consumer spend and retail investment.
• Clean labels and ancient grains driving growth, but deliver small sales compared to Gluten-free, organic and non-GMO claims.
Bifurcation of wants: health & wellness versus indulgence
3
CONSUMER OPTIMISM NOT TRANSLATING INTO MUCH GROWTH – PARTICULARLY FOR FMCG
Sources: U.S. Department of Commerce, Bureau of Economic Analysis , National Income & Product Accounts, Gross Domestic Product: Fourth Quarter 2016 (advanced estimate), 1/27/2016;
Economic Projections of Federal Reserve Board Members and Federal Reserve Bank Presidents, Change in Real GDP - Central Tendency released on 12/14/2016;
The Conference Board Consumer Confidence Index (Nielsen supplied data as of February 2011), 1/31/2017; Consumer Tailwinds & Headwinds: Various government data sources
Nielsen Answers, Total U.S. All Outlets Combined (plus Convenience), All Departments, All Brands, % Change, 52 weeks ending 1/2/2016 & 12/31/2016 (UPC-coded items only);
US Department of Commerce BEA Real
GDP
• Q1 2016:+0.8%
• Q2 2016:+1.4%
• Q3 2016: (third estimate)+3.5%
• Q4 2016:(advanced estimate)+1.9%
The Conference Board Consumer Confidence Index
• October 2016: 100.8
• November 2016: 109.4
• December 2016: 113.3
• January 2017: 111.8
US Federal Reserve GDP Forecast
• 2016: +1.8% to +1.9%
• 2017:+1.9% to +2.3%
• 2018:+1.8% to +2.2%
• 2019:+1.8% to +2.0%
Nielsen Sales Trend
• 52 Weeks Ending 1/2/2016:$ trend: +2.7%Unit trend: +0.4%
• 52 Weeks Ending 12/31/2016:$ trend: +0.8%Unit trend: +0.0%
Consumer Tailwinds
• < Unemployment
• < Gas Prices
• < Prices
• Low Working Rate
• Aging Population
• < Population Growth
• > Gas Prices
• Spending Challenges
Consumer
Headwinds
4
ARE WE REACHING FULL-EMPLOYMENT?NOT REALLY!U.S. Employment to Population Ratio (ages 16 & over)
Source: Seasonally Adjusted U.S. Employment to Population Ratio, Bureau of Labor Statistics – U.S. Department of Labor; Nicholas N. Eberstadt – 2/15/2017
59.7
52.5
55.0
57.5
60.0
62.5
65.0
67.5
“If our nation’s work rate today were
back up to its start-of-the-century highs,
well over 10 million more Americans
would currently have paying jobs.”
“Work rates have fallen off a cliff
since the year 2000 and are at their
lowest level in decades…
for every unemployed American man
between 25 and 55 years of age,
there are another three who are
neither working nor looking for work.”
RETAIL LANDSCAPE & PERFORMANCE
6
TOTAL STORE GAINS LESS THAN SPECTACULARU.S. All Departments
Source: Nielsen Answers, Total U.S. All Outlets Combined (plus Convenience), All Departments, All Brands, “trend” means % change 52 weeks vs. year ago
$774 $788 $803 $825 $831
252 254 254 255 255
52 weeks ending
1/5/13
52 weeks ending
1/4/14
52 weeks ending
1/3/15
52 weeks ending
1/2/16
52 weeks ending
12/31/16
Bil
lio
ns
Dollar Sales
Unit Volume
UPC-coded items
Dollar Trend +1.8 +1.9 +2.7 +0.8
Unit Trend +0.5 +0.0 +0.4 +0.0
Avg U Price Trend +1.2 +2.0 +2.3 +0.9
% U sold on Promo 31.7 31.6 30.9 31.2
Shouldn’t
an economic
recovery be
delivering
more growth?
7
FOOD DEFLATION W/GREATEST IMPACT ON SUPERMARKET GROWTH, BUT MOST IMPACTEDU.S. All Departments – Dollar Sales & Trend
Source: Nielsen Answers, Total U.S., 52 weeks ending 12/31/2016 (vs. year ago); *Club Stores, Dollar Stores, Mass-Merchandisers, Supercenters, & Military
Total measured channels: $831 Billion & up 0.8%
-0.1%
1.4%
1.8%
1.3%
$0
$50
$100
$150
$200
$250
$300
$350
$400
Bil
lio
ns Supermarkets
C-Stores
Drug Stores
Value*
No Growth High Growth
UPC-coded items
Size of bubble denotes dollar
share of Total U.S. xAOC,
including Convenience Stores
2.5%
4.1%
2.9%2.0%
Bold = same period year ago
8
U.S. STORE SIZE FALLS AS STORE COUNT RISESU.S. Store Count & Store Size Trends*
Source: Nielsen TDLinx; includes supermarkets $2MM+, conventional mass-merchandisers, supercenters, drugstores, dollar stores, warehouse clubs, & c-stores
225,000
230,000
235,000
240,000
245,000
250,000
255,000
260,000
265,000
270,000
275,000
'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
Store Count
9,900
10,000
10,100
10,200
10,300
10,400
10,500
10,600
'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
Square Footage Per Store
11.6% increase
since 2006
-3.7% decrease
since peak in 2009
*Store size adjusted for Supercenters to reflect total store
9
STORE SIZE DECLINE FUELED BY GROWTHIN SMALL FORMATS% of U.S. Store Count Expansion by Retail Channel – 2016 vs. 2006
Source: Nielsen TDLinx
35%
32%
17%
10%5%
1%Dollar Stores
C-Stores
Drug
Supermarkets $ 2MM+
Supercenters
Warehouse Club
29,096 new
stores
10
NOT ALL RETAIL CHANNELS HAVESEEN FORMATS SHRINK
Source: Nielsen TDLinx
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
Supercenters* Club Mass Merch Supermarkets
$2MM+
Dollar Stores Drugstores C-Stores
U.S. Square Footage Per Store*
+4.4%
(1.0%)
(8.7%)
+1.6% (12.4%)+6.7%
% change from
2006 to 2016
*Supercenters adjusted to reflect total store
(4.8%)
11
THE RACE FOR SCALE: SMALL FORMAT RETAILERS DOMINATE THE LISTU.S. Store Counts for 2016
Source: Nielsen TDLinx
1,8051,9491,9872,1092,2372,337
2,8043,348
3,6953,806
4,3244,5554,6164,767
5,3488,011
8,3699,688
13,31913,961
TargetCasey's
Ahold DelhaizeCST Brands/Valero
SunocoAlbertsons
Kroger Corp GroceryExxon Mobil
BPChevron Texaco
Marathon/SpeedwayRite Aid
Walmart BannerShell
Couche-TardWalgreens
7-ElevenCVS
Dollar GeneralDollar Tree
Dollar
C-Stores
Drug
Grocery
Mass Merchandisers
12
SUPERMARKETS & BIG FORMAT RETAILERS DOMINATE SALESU.S & Canada top food retailers: consumables (edible & non-edible) dollar shares
Source: SUPERMARKET NEWS (January 2017); *actuals & estimates; retail channels include grocery, drug, club, mass, drug, dollar stores, c-stores & Amazon.com
45.7 45.7
25.2 25.3
12.7 12.8
7.7 7.6
8.7 8.6
2015-2016* 2016-2017*
SN’s TOP 75
Top 4 5 to 14 15 to 24 25 to 34 All Other
Walmart: 23.9
Kroger: 10.3
Costco: 5.8
Albertsons: 5.6
Walmart: 23.8
Kroger: 10.5
Costco: 5.8
Albertsons: 5.6
13
STILL TWEAKING TO GET FRESH RIGHT!
Source: The Globe and Mail (Canada)
An affluent suburb of Hamilton, Ont. is ground zero for Lee
Tappenden’s discount store of the future… The CEO [of Wal-Mart Canada Corp.]
makes a beeline for the refrigerated (8 degrees [celcius]) walk-in fruits-and-
vegetables room – another first for Wal-Mart Canada – and admires the rows of
lettuce, strawberries and other wilt-prone produce.
In the all-important grocery section, which brings shoppers to
stores more frequently than general merchandise, Wal-Mart has rearranged
the aisles so that the fresh-food departments are more prominent and closer
together … “We’ve been in fresh [food] for 10 years but we don’t have the
credibility yet … A lot of people haven’t shopped us for fresh yet.”
The new walk-in refrigerated room with sliding doors is aimed at
boosting its “credibility” in fresh produce by helping ensure the food lasts
longer, he said. It borrows a leaf from Costco stores, which also have “cooler”
rooms, he noted. “We were worried customers wouldn’t find their way in here
and they’d think it is just part of the back room.”
Source: The Globe and Mail (2/20/2017)
14
INVESTING IN ADULT BEVERAGE EXPERIENCE
Sources: Houston Chronicle (chron.com); Whole Foods Market
Threat or opportunity for C-stores? How will these formats impact center store?
The Watering Hole: Wine & Craft Beer Bar!Beer & wine bars
15
2 STORY URBAN FORMAT W/RESTAURANT & BAR
Source: supermarketnews.com; photos by Sandy Skrovan/myRetailPOV.com
“A unique feature of the store is a second-level, 155-seat restaurant
and bar known as Table by Market District … offers full-service lunch
and dinner, and a menu inspired by fresh, seasonal ingredients”
Source: supermarketnews.com (8/19/2016)
16
FAST FORWARD!!!"Lidl and Aldi's Aggressive U.S. Invasion Spells Trouble For Supermarkets"
Sources: Business Insider, HomeWorld Business. Forbes
“The German supermarket chain
Lidl is gearing up to open 100 stores
along the East Coast by mid-2018,
with the first 20 stores opening this
summer [2017] in Virginia, North
Carolina, and South Carolina.
The chain plans to eventually open as
many as 600 stores in the US”
Source: Business Insider (2/15/2017)
“Aldi also continues to move forward
with its accelerated growth plan that
calls for the opening of 650 new stores
in the U.S. By the end of 2018, Aldi
expects to operate nearly 2,000
stores.”
Source: HomeWorld Business (2/8/2017)
“It is time that the U.S. food retailers wake
up to this competitive threat.”
Source: Forbes (9/27/2016)
17
ALDI INVESTING $1.6 BILLION TO RE-FRESH STORES
Source: theshelbyreport.com
“Aldi plans to remodel more than 1,300
U.S. stores by 2020, costing the retailer
an estimated $1.6 billion, the company
said Wednesday. The grocery chain says
the upgraded stores will deliver “on its
customers’ desire for a modern and
convenient shopping experience with a
focus on fresh items, including more
robust produce, dairy and bakery
sections.” Aldi, based in Germany,
operates more than 1,600 stores in the
U.S., across 35 states.”
theshelbyreport.com (2/8/2017)
18
E-COMMERCE THE BIG WINNERCAGR 2016 to 2021
Sources: Nielsen TDLinx & Nielsen Analytics; CAGRs (compounded annual growth rates – dollar basis);
Retail Dive; Twice via MorningNewsBeat.com
-1.9%-1.1%-0.9%
0.7%1.7%
2.0%2.2%
2.6%3.0%3.1%
3.4%3.8%
4.1%4.6%
4.9%5.2%
5.6%5.8%6.0%6.1%
13.4%
DepartmentConsumer Electronics
OfficeApparel
BooksSporting Goods
ToyDrug
MassHome/Bed/Bath
SupermarketsSupercenters
AutoLiquor
Home ImprovementClub
Discount DepartmentPet
DollarConvenience/Gas
E-Commerce
Average Growth
Analysts expect Amazon “will
dethrone Macy’s as the largest
U.S. clothing retailer in 2017”;
Twice reports that Amazon is
now # 2 to Best Buy in
consumer electronics
19
GROWTH FROM OUT OF HOME FOOD & DRINKING PLACES CONTINUED IN 2016
Source: US Census : Monthly Retail Trade and Food Services, 722: Food Services and Drinking Places: U.S. Total, Seasonally Adjusted Sale, % $ Change vs. Year Ago
7.3%
-2.2%
8.2%
1.9%
10.3%
2.4%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Food Services & Drinking Places: U.S. Total
$ % Change vs. Year Ago
Is dip in December a
sign of softer growth?
20
FAST-FOOD RESTAURANT MAKEOVERS
Source: AdWeek; Photos: KFC/Richard Cadan, Arby’s/Dena Dendy, Taco Bell
“Good design is no longer reserved
for high-end experiences”Susan Cantor, CEO of Red Peak Branding
“Arby's, KFC
and Taco Bell
appeal to
millennials”AdWeek
21
“THE 5 BIGGEST FAST CASUAL OPENINGS OF 2016”
Source: qsrmagazine.com
“Chef-driven was the theme of the year”
“Porano Pasta - St. Louis
You could say 2016 was the Year of the Chef in fast
casual. Given the landscape of the restaurant industry,
where casual dining was the worst performing segment
for 10 of the 12 months, according to TDn2K, even the
most accomplished culinary professional began to see the
limited-service light. St. Louis chef Gerard Craft, who has
a James Beard Award to his name, joined the movement
with his Porano Pasta early in the year. The concept, built
around authentic Italian ingredients layered in bowls,
allows guests to walk down the line and customize the
experience, a la the tried and true Mexican-themed
model. As far as what’s next, expect to see the menu
keep evolving. The concept added pizza in the fall.”
qsrmagazine.com (1/19/2017)
WHAT’S SELLING?
23
PRICE VOLATILITY & DEMAND BEHINDSHORT-TERM TRENDSU.S. All Outlets Combined (plus Convenience) – Dollar Trend
Source: Nielsen Answers, Total U.S. – All Outlets Combined (plus Convenience), 52 weeks ending 12/31/2016 (vs. year ago)
All departments except Dairy, Meat, General Merchandise, & Frozen Foods growing
1%
-4%
-3%
-2%
0%
0%
1%
1%
1%
1%
2%
2%
3%
4%
4%
4%
Total All DepartmentsDairyMeat
General MerchandiseFrozen Foods
Beauty CareGrocery
Personal CareBakery
Household CarePet Care
Tobacco & AlternativesHealth Care
AlcoholDeli
Produce
UPC-coded items
24
CONSUMERS SHIFTING SPEND OR BUYING LESSU.S. All Outlets Combined (plus Convenience) – Unit Trend
Source: Nielsen Answers, Total U.S. – All Outlets Combined (plus Convenience), 52 weeks ending 12/31/2016 (vs. year ago)
Perimeter growth w/stronger perceptions around freshness & intense retailer focus!
0%
-2%
-1%
-1%
-1%
-1%
0%
0%
0%
0%
0%
1%
1%
3%
4%
6%
Total All DepartmentsBeauty Care
MeatDairy
Frozen FoodsGeneral Merchandise
Pet CareHousehold Care
Personal CareGroceryBakery
Tobacco And Tobacco AlternativesHealth Care
AlcoholProduce
Deli
UPC-coded items
25
PRODUCTS CLOSER TO THE POINT OF CONSUMPTION WINNINGU.S. shoppers choose meals & meal components over ingredients as demand for
immediacy grows
Source: Nielsen Perishables Group FreshFacts, Total U.S., 52 weeks ending 12/31/2016 (vs. year ago)
14%8%
6%5%
5%4%4%
4%3%
2%2%
1%0%0%
0%
SushiSoups
DessertsSnacksSalads
Prepared ChickenSandwiches
EntreesDips/ Spreads/ Toppings
SidesPizza
PlattersBreakfast Foods
CondimentsAppetizers
Deli Prepared Food Volume Trend
UPC-coded & non-UPC-coded items
“designed to emphasize
freshness, quality, value and
the “sense of something cooking
in the kitchen,” referring to the
on-site food preparation”
Pilot store celebrates food
26
FISHING WHERE THE FISH ARE W/NEW PRODUCTS!Campbell Fresh Division launching products to compete in a fresher market
Source: foodnusinessnews.net
Plant-Based
Milk
Plant-Based
Protein
Drinks &
Organic
Smoothies
New Flavors
of Hummus
& Salsa
“Ultra-
Premium”
Organic
Soup
27
VINEGAR & COOKING WINE DELIVERING SOLID DOLLAR & UNIT GROWTHU.S. Vinegar & Cooking Wine
Source: Nielsen Answers, Total U.S. All Outlets Combined (plus Convenience), All Departments, All Brands, “trend” means % change 52 weeks vs. year ago
$442 $476 $508 $549$610
191 202 210 217 230
52 weeks ending
1/5/13
52 weeks ending
1/4/14
52 weeks ending
1/3/15
52 weeks ending
1/2/16
52 weeks ending
12/31/16
Mil
lio
ns
Dollar Sales
Unit Volume
UPC-coded items
Dollar Trend +7.6 +6.9 +8.0 +11.1
Unit Trend +5.4 +4.4 +3.2 +5.8
Avg U Price Trend +2.1 +2.4 +4.6 +5.0
% U sold on Promo 15 16 14 15
Aided by
rising prices,
but low
promotion
support
28
CIDER VINEGAR BIGGEST DRIVER OF GROWTH, WHITE VINEGAR LEADER IN SALESU.S. Dollar Sales: Vinegar & Cooking Wine
Source: Nielsen Answers, Total U.S. – All Outlets Combined (plus Convenience); CAGR = compound annual dollar growth rate
$216
$190
$165
$39
$0
$50
$100
$150
$200
$250
1/5/2013 1/4/2014 1/3/2015 1/2/2016 12/31/2016
Mil
lio
ns
White Vinegar Cider Vinegar Specialty Vinegar Cooking Wine
UPC-coded items
52 Weeks Ending
4-YR $ CAGR
6.3%
0.7%
2.3%
22.8%
29
MODEST $ GROWTH, BUT FLAT TO DECLINING UNIT SALES FOR CATEGORIES INCLUDING VINEGARU.S. Vinegar Ingredient Categories
Source: Nielsen Answers, Total U.S. All Outlets Combined (plus Convenience), All Departments, All Brands, “trend” means % change 52 weeks vs. year ago
$17.2 $17.3 $17.4 $17.7 $17.8
7.6 7.6 7.6 7.6 7.5
52 weeks ending
1/5/13
52 weeks ending
1/4/14
52 weeks ending
1/3/15
52 weeks ending
1/2/16
52 weeks ending
12/31/16
Bil
lio
ns
Dollar Sales
Unit Volume
UPC-coded items
Dollar Trend +0.5 +0.6 +1.5 +0.9
Unit Trend -0.6 -0.1 -0.3 -0.7
Categories delivering nearly $18 billion in total measured sales
30
SEVEN CATEGORIES WITH SALES NEAR OR ABOVE $1 BILLION IN ANNUAL SALESU.S. Vinegar Ingredient Categories – Top Tier Dollar Sales Ranking
$564,021,931
$687,956,521
$769,928,405
$829,748,434
$973,320,078
$1,433,949,420
$1,820,244,482
$1,902,449,603
$2,123,357,393
$2,124,913,947
$2,136,623,310
Ref. Condiments
Olives
Catsup
Prepared Beans
Pickles & Relish
Mexican Sauce
Mayonnaise
Meat & Fish Sauce
Shelf Stable Fish
Multipurpose Cleaners
Salad Dressing
Source: Nielsen Answers, Total U.S. – All Outlets Combined (plus Convenience), 52 weeks ending 12/31/2016
UPC-coded items
31
SMALLER CATEGORIES A MIX OF ESTABLISHED & NEWER (REFRIGERATED) CATEGORIESU.S. Vinegar Ingredient Categories – Bottom Tier Dollar Sales Ranking
$9,611,107
$10,300,860
$58,791,465
$62,389,408
$130,315,097
$216,961,566
$239,316,383
$242,720,042
$250,408,950
$374,603,617
$407,062,563
$447,931,306
Meat Glaze
Ref. Baked Beans
Cooking Sauce
Ref. Cider Juice Drink
Shelf Stable Cider Juice Drink
Glass & Surface Cleaners
Marinades
Ref. Pickled Veggies
Refried Beans
Ref. Salad Dressing
Asian Sauces
Mustard
Source: Nielsen Answers, Total U.S. – All Outlets Combined (plus Convenience), 52 weeks ending 12/31/2016
UPC-coded items
32
GROWTH FROM LARGE & SMALL CATEGORIESU.S. Vinegar Ingredient Categories – Top Growth Categories
1.1%
1.9%
2.2%
2.3%
3.7%
3.8%
4.2%
4.3%
5.2%
7.1%
Shelf Stable Cider Juice Drink
Multipurpose Cleaner
Mexican Sauce
Olives
Meat & Fish Sauce
Ref. Pickled Veggies
Ref. Salad Dressing
Ref. Condiments
Asian Sauce
Meat Glaze
Source: Nielsen Answers, Total U.S. – All Outlets Combined (plus Convenience), 52 weeks ending 12/31/2016; % change year ago
UPC-coded items
Top Tier $ Sales
Bottom Tier $ Sales
33
STRONGEST GROWTH IN CANADA, U.S., & BRAZIL
Show ranking of
countries already
using online order
for delivery to
home – do with
map
Source: Nielsen Retail Measurement
Vinegar & Cooking Wine Sales: Value Sales Growth (2016 versus 2015)
11.1%
10.9%
11.3%
France: 2.3%
Germany: 1.6%
Great Britain: 2.2%*
Italy: 3.1%
Spain: -1.2%*Thailand: 4.4%
*Excludes Cooking Wine
BRANDS VERSUSPRIVATE BRANDS
35
U.S. PRIVATE BRAND SHARE IN THE MIDDLE OF THE PACKWeighted Global Average: 16.1% (with China); 18.1% (without China)
Source: Nielsen
44%42%
40%
34%
31%31%29%28%27%
26%26%25%24%24%24%23%22%22%
20%18%18%18%18%
17%16%
12%10%
9%7% 6% 6% 5% 5% 5% 5% 4% 4% 4% 4% 3% 3%
2% 1% 1%
Switze
rlan
d
UK
Spa
in
Ge
rma
ny
Be
lgiu
m
Po
rtug
al
Au
stria
Fran
ce
Ne
the
rlan
ds
De
nm
ark
Swe
de
n
Hu
ng
ary
Finla
nd
Slova
kia
Po
lan
d
No
rwa
y
Au
stralia
Cze
ch R
ep
.
Sou
th A
frica
Italy
Co
lom
bia
Ca
na
da
USA
Gre
ece
Tu
rkey
Ne
w Z
ea
lan
d
Ch
ile
Arg
en
tina
Mé
xico
Sing
ap
ore
Israe
l
Ho
ng
Ko
ng
Ind
ia
Ukra
ine
Sou
th K
ore
a
Bra
zil
Ru
ssia
Ve
ne
zue
la
Ta
iwa
n
Th
aila
nd
Ma
laysia
Ind
on
esia
Ch
ina
Ph
ilipp
ine
s
Reference Period: 2015
36
EUROPEAN RETAIL BRANDS VALUE SHARETREND STALLS11 years & 17 countries*
* Austria, Belgium, Czech Rep, Denmark, Finland, France, Germany, Hungary, Italy, Netherlands, Norway, Poland, Portugal, Slovakia, Spain, Sweden, Switzerland, UK
Source: Nielsen
“Private Label is no longer a generic trend. Now it’s about details and micro trends – category-by-category
and retailer-by-retailer. When we look at category numbers, we observe all kinds of direction.”
–Jean-Jacques Vandenheede, Nielsen Europe
24.6% 25.4% 25.6% 26.7% 27.7% 28.5% 28.6% 29.5% 30.2% 30.6% 30.5%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
37
Denmark
Finland
Poland
France
Germany
SpainPortugal
Italy
Switzer-land
Austria
CzechRepublic
Hungary
Slovakia
Great Britain
Norway
Nether-
lands
Belgium
Sweden
Value Share >30%
Value Share between 25-30%
Value share < 25%
DIVERSITY IN SHARE LEVELS & GROWTH
Source: Nielsen
40%
25%
27%
22%
24%
34%
26%
26%
28%
29%
18%
23%
24%
24%
31%
31%
42%
44%
Norway
Increasing compare to 2014
Decreasing compare to 2014
38
U.S. PRIVATE BRANDS GROWTH LAGGING BRANDEDU.S. Private Brands $ Share – All Departments
Sources: Nielsen Strategic Planner (2009 data) & Nielsen Answers (2010-2016 data), Total U.S. – All Outlets Combined (xAOC), Total All Departments,
16.2%
16.8%
17.4% 17.4% 17.6% 17.7% 17.7%17.4%
2009 2010 2011 2012 2013 2014 2015 2016
UPC-coded items
Dollar Sales Percent Change vs. Year Ago
Private Brand +4.9% +8.1% +3.0% +2.5% +2.7% +2.2% -0.9%
Branded +1.2% +3.3% +2.7% +1.6% +1.4% +2.5% +0.9%
39
PRIVATE BRANDS GAIN SHARE IN ALL SEGMENTS BUT CIDER VINEGAR, WHERE BRANDS NOW LEAD
78.6
56.0
15.2
8.2
78.8
31.6
16.110.1
White Vinegar Cider Vinegar Specialty Vinegar Cooking Wine
Private Brand $ Share
52 w/e 11/3/12 52 w/e 10/29/16
U.S. Vinegar & Cooking Wine
Source: Nielsen Answers, Total U.S. – All Outlets combined
UPC-coded items
Private Brand share growth
CONNECTING WITH SHOPPERS THAT MATTER
41
WE HAVE NEVER BEEN MORE DIVERSE: MAKING MASS-MARKETING LESS VIABLE
Source: U.S. Census Bureau, 2014 National Projections (released in March 2015); Hispanic origin is considered an ethnicity, not a race. Hispanics may be of any race.
198
5542
17
182
119
6039
White Non-
Hispanic
Hispanic Black Asian
U.S. Population (millions)
2014 2060
62%
17%13%
5%
44%
29%
14%9%
White Non-
Hispanic
Hispanic Black Asian
Percentage of U.S. Population
2014 2060
Change in respective demographic groups, 2060 vs. 2014: -8%, +115%, +42%, and +128%
42
GOOD NEWS: VINEGAR SEGMENTS ATTRACT SALES ACROSS YOUNG & OLDU.S. $ Sales Per 1,000 Households Index
Source: Nielsen Homescan, Total U.S. 52 weeks ending 12/31/2016; >=110 is above average and <=90 is below average
CATEGORY MILLENNIALS GEN X BOOMERS GREATEST GEN
Grocery Department 101 109 100 84
Cider Vinegar 100 95 109 100
White Vinegar 98 102 102 110
Specialty Vinegar 96 103 97 96
Cooking Wine 92 123 85 63
UPC-coded items
Cooking Wine less developed among older segments
43
LIKE THE GROCERY DEPARTMENT, FUTURE GROWTH CHALLENGES & OPPORTUNITIESU.S. $ Sales Per 1,000 Households Index
Source: Nielsen Homescan, Total U.S. 52 weeks ending 12/31/2016; >=110 is above average and <=90 is below average
Mixed development across demographic segments driving population growth
CATEGORY WHITE BLACK ASIANHISPANIC(any race)
Grocery Department 102 90 83 104
Specialty Vinegar 108 51 118 96
White Vinegar 104 77 76 99
Cooking Wine 102 84 167 149
Cider Vinegar 88 169 97 93
UPC-coded items
44
SPECIALTY VINEGAR & COOKING WINE ATTRACT SHOPPERS WITH SPENDING POWERU.S. $ Sales Per 1,000 Households Index
Wide attraction for White & Cider Vinegar
CATEGORY < $20k $20 –
29.9k
$30 –
39.9k
$40 –
49.9k
$50 –
69.9k
$70 –
99.9k
$100k+
Grocery Department 82 89 94 101 104 107 111
White Vinegar 97 89 97 100 109 103 100
Cider Vinegar 95 91 101 102 108 108 97
Specialty Vinegar 61 59 72 73 102 111 159
Cooking Wine 52 69 89 84 94 121 145
Source: Nielsen Homescan, Total U.S. 52 weeks ending 12/31/2016; >=110 is above average and <=90 is below average
HEALTH & WELLNESS VERSUS INDULGENCE
FACTORS HEIGHTENING FOCUS ON CLEAN EATING
CHRONICALLY AILING
FOOD AS MEDICINE
GLOBAL GRAYING
EDUCATED & CONNECTED CONSUMERS
Source: The Nielsen Global Health and Ingredient-Sentiment Survey, Q1 2016
TWO-THIRDS OF
GLOBAL
RESPONDENTS (68%)
SAY THEY’RE WILL ING
TO PAY MORE FOR
FOODS AND DRINKS
THAT DON’T CONTAIN
UNDESIRABLE
INGREDIENTS.
Source: The Nielsen Global Health and Ingredient-Sentiment Survey, Q1 2016
55%
48
ANCIENT GRAINS & FREE-FROM CLAIMS DELIVERING THE BEST GROWTHU.S. claims delivering both double-digit short- & long-term growth
Source: Nielsen Answers, Wellness Track, Total U.S. – All Outlets Combined, plus Convenience, 52-weeks ending 12/31/2016;
Wellness claims are not additive; CAGR = compound annual growth rate
GMO Free
Organic
No Artificial Color
Nut Free
Hormone Antibiotic Free
Cage FreeAbsence of Specific Oil
Low GlycemicCorn Free
Antibiotic Free
Cruelty Free
Quinoa
Grain Free
Grass Fed
Fruit & VegetableFree Range
Amaranth
0%
10%
20%
30%
40%
50%
60%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 110% 120% 130%
Do
llar
Pe
rce
nt
Ch
an
ge v
ers
us
Yea
r A
go
Dollar CAGR across four-years
UPC-coded items
Size of circle based
on Dollar Sales
49
WELLNESS CLAIMS GAINING TRACTION: CLEAN LABELS & HEALTH BENEFITSU.S. claims delivering positive short- & long-term growth w/faster short-term growth
Source: Nielsen Answers, Wellness Track, Total U.S. – All Outlets Combined, plus Convenience, 52-weeks ending 12/31/2016;
Wellness claims are not additive; CAGR = compound annual growth rate
Carb Conscious
No Artificial Sweeteners
No Sugar Added
Brain Health
No Artificial Color
No MSG
Stevia
Comparative Protein Claim
Flax or Hemp Seed
Arthritis
Saturated Fat Free
Excellent Source of Mineral
Oil Free
0%
5%
10%
15%
20%
25%
0% 5% 10% 15% 20%
Do
llar
Pe
rce
nt
Ch
an
ge v
ers
us
Yea
r A
go
Dollar CAGR across four-years
Size of circle based
on Dollar Sales
UPC-coded items
50
FREE FROM: COST OF DOING BUSINESS BUT DO YOU GAIN ANY COMPETITIVE ADVANTAGE
Source: General Mills 2016 Annual Report
Growing Our Core Cereal Brands
“More than half of U.S. consumers
told us they want to avoid artificial colors and
flavors. So we announced our commitment to
remove artificial flavors and colors from
artificial sources from all of our cereals. Today,
90 percent of our cereals meet this claims, and
we continue to work on the remainder of our
portfolio. In addition, all of our cereals are free
of high fructose corn syrup. By putting the
consumer first, we saw improved retail sales
trends for our U.S. cereals in fiscal 2016.”
--General Mills, 2016 Annual Report
DIGITAL RETAILING & DIGITAL SHOPPING
52
E-COMMERCE SALES FOR Q4 2016 ACCOUNTED FOR 8.3% OF TOTAL RETAIL SALES; UP FROM 7.6% YEAR AGOU.S. Q4 2016 sales reached $102.7 billion – an increase of 14.3% from year ago
Source: U.S. Census Bureau, Quarterly U.S. Retail E-Commerce Sales
-20%
0%
20%
40%
60%
80%
$0
$200
$400
$600
$800
$1,000
$1,200
Q1
20
00
Q1
20
01
Q1
20
02
Q1
20
03
Q1
20
04
Q1
20
05
Q1
20
06
Q1
20
07
Q1
20
08
Q1
20
09
Q1
20
10
Q1
20
11
Q1
20
12
Q1
20
13
Q1
20
14
Q1
20
15
Q1
20
16
Q4
20
16
U.S
. D
oll
ars
(b
illi
on
s)
Retail E-Commerce Sales % of Total Retail Sales Retail E-Commerce Sales % Change vs. Year Ago
53
AMAZON GROWTH & PROFITABILITY ACCELERATES IN 2016Amazon Performance Metrics
Source: Company Reports
27%
22%20% 20%
27%
2012 2013 2014 2015 2016
% Change in Net Sales
631
-39
274
-241
596
2,371
-$500
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
2011 2012 2013 2014 2015 2016
Net Income (millions)
54
AMAZON ON PACE TO GROW NET SALESTO NEARLY $380 BILLION BY 2021
Source: Amazon.com; Todd Hale, LLC forecast
$0
$50
$100
$150
$200
$250
$300
$350
$400
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Amazon Net Sales (billions)
Actuals Forecast
Grabbing
$242 billion
dollar in
sales
from???
55
AN INNOVATION MACHINE
Sources: Amazon; GlobalSources.com; FORTUNE
MORE EASY
WAYS TO SHOP
FROM HOMEDash, Dash buttons and a little Dash wand
VOICE-
CONTROLLED
DEVICES
EXPANDING THE SEASON;
NOW WITH DELIVERY UNDER
AN HOUR IN SOME MARKETS
56
AMAZON SAME-DAY-DELIVERY GETTING CLOSER TO MORE & MORE SHOPPERS
Source: Amazon.com (12/30/2016)
“Prime members in 29 major cities receive FREE
Same-Day Delivery on qualifying orders over
$35. Order in the morning (typically until noon),
and your package will be delivered by 9pm,
seven days a week. Order in the afternoon or
evening, and get FREE One-Day Shipping.”
57
“THE WORLD’S MOST ADVANCEDSHOPPING TECHNOLOGY”
Source: Amazon.com
“Our checkout-free shopping
experience is made possible by the
same types of technologies used in
self-driving cars: computer vision,
sensor fusion, and deep learning.
Our Just Walk Out technology
automatically detects when
products are taken from or
returned to the shelves and keeps
track of them in a virtual cart.
When you’re done shopping, you
can just leave the store. Shortly
after, we’ll charge your Amazon
account and send you a receipt.”
58
WALMART OFFERS FREE 2-DAY SHIPPINGWITHOUT MEMBERSHIP FEEFree shipping in 3 to 5 days for items not covered (minimum $35 spend)
Source: Walmart.com
59
WIDE ARRAY OF CATEGORIES AVAILABLEFOR FREE 2-DAY SHIPPING PROGRAM
Source: Walmart.com
60
WALMART RAPIDLY EXPANDING CLICK & COLLECT TO MORE THAN 100 MARKETS & MORE TO COME!
Sources: The Street.com, walmart.com; Photo: https://www.instagram.com/jtreeproject/
“Walmart is about to put the sleepy
supermarket industry on notice.”
61
THE RACE FOR CONVENIENCE: DOOR-TO-CAR VERSUS DOOR-TO-DOOR
Source: company websites; *Kroger Q3 2016 Earnings Conference Call (12/1/2016)
ClickList in more
than 550 stores*
62
KROGER CLICK-LIST LEADS TO MORE STORE JOBS& HOME DELIVERY COMING IN THE NEAR FUTURE?
Source: THE TENNESSEAN, USA TODAY Network (2/17/2017)
63
FRESH INGREDIENTS DELIVERED TO YOUR DOOR TO PREPARE HOME-COOKED “CHEF-DESIGNED” MEALS
Source: Company websites
Ahold offering meal kits for in-store
purchase or delivery via Peapod
64
GOING DIRECT WITH UNIQUE CONTAINERS
Source: geekwire.com; tidycats.com
65
7-ELEVEN & FLIRTEY MAKE FIRST U.S. DRONE DELIVERY & SLURPEE DRINKS WERE INCLUDED
Sources: 7-Eleven; drugstorenews.com
“7-Eleven partnered with independent
drone delivery service Flirtey and the
Nevada Institute for Autonomous Systems
(NIAS) to complete two deliveries from a
store in Reno, Nevada on Sunday, July 10.
7-Eleven merchandise, including hot and
cold food items, were loaded into a Flirtey
drone delivery container and flown
autonomously using precision GPS to a
local customer’s house.”
drugstorenews.com.com (7/22/2016)
66
$1 IF BY LAND
Source: Washington Post; morningnewsbeat.com
“These robots, the Washington Post story said, "began
rolling autonomously last month through parts of London
and Tallinn, Estonia’s capital, using proprietary digital maps
and sophisticated software. They can also be guided over
the web by an operator if they get stumped on their way.
To make delivery cheap — from $1 to $3 dollars a trip,
hopefully dropping to under $1”
Morningnewsbeat.com (4/4/2016)
67
IT’S A BIRD, IT’S A PLANE: NO IT IS A FLYING WAREHOUSE & DELIVERY SYSTEM
Source: USATODAY
“The patent says the warehouse could
remain at a high altitude, and drones "with
ordered items may be deployed from the
AFC to deliver ordered items to user
designated delivery locations."
The patent also says shuttles could deliver
more inventory to the warehouse, as well
as transport employees.
Images accompanying the patent feature a
blimp as the chosen airship for the
fulfillment center, although it's not clear
the vehicle will be part of Amazon's final
design.”
usatoday.com (12/29/2016)
68
CONNECTING DIGITALLY TO ALLOW PAYMENT, COMMUNICATE & REWARD CUSTOMERS
Sources: Starbucks; Google Play Store
Starbucks “Mobile Order & Pay
had a banner quarter, representing
more than 7% of total transactions,
double the figure from Q1 last year,
and we now have nearly 1200
stores with 20% or more Mobile
Order & Pay transactions at peak,
compared to only 13 stores one
year ago. The overwhelming
success of Mobile Order & Pay has
increased Rewards engagement
and created efficiencies at point of
sale. …
voice enabled ordering capability
…will begin deployment in the
coming months.”
Starbucks Earnings Call, 1/27/2017
69
THE FUTURE IS HERE!California Fresh Market's new app lets shoppers skip the checkout line!
Source: PRNewsFoto/FutureProof Retail
“San Luis Obispo's
California Fresh Market
will be the first store in
the world to
incorporate such
technology from
opening day, offering
San Luis Obispans the
ability to skip the line
and checkout on their
phones.”
“The app lets
shoppers scan items'
barcodes to add
them to their
purchase, and works
for produce as well.
… Payment happens
on the phone via
credit card or
ApplePay”
70
“UBEREATS, AMAZON VYING FOR GLOBAL FOOD DELIVERY DOMINATION”
Sources: Reuters; UberEats; Amazon Restaurants
UberEats currently operates in six countries; plans to enter 22+ countries in the near future
Amazon Restaurants (exclusively for PRIME members) currently operates in two countries; future plans have not been released
Local & international players are at Uber & Amazon’s heels!
71
THE CONNECTED FRIDGE… WITH APPS FOR ALL“revolutionary new refrigerator with a Wifi enabled touchscreen that lets you manage
your groceries, connect with your family and entertain like never before.”
Source: Samsung.com (May 10, 2016)
Plus calendar, weather, internet browser,
white board, photo album & more!
71
“WHAT’S IN-STORE FOR ONLINE GROCERY SHOPPING”
73
Note: Percentages may not equal 100% due to rounding
Source: The Nielsen Global Connected Commerce Survey, Q3 2016; Nielsen’s WHAT’S IN-STORE FOR ONLINE GROCERY SHOPPING report, January 2017
36%
39%
27%
29%
28%
30%
6%
9%
6%
7%
15%
11%
4%
6%
4%
5%
22%
14%
54%
47%
63%
59%
34%
44%
North America
Latin America
Africa/Middle East
Europe
Asia-Pacific
Global
Considerers: “I am
currently not buying
online, but will consider
it in the near future”
Avoiders: “I prefer to buy
at a physical store and will
not consider buying online”Regulars: “I am currently
buying online regularly”
Trialists: “I have
bought online in the
past, but haven’t
recently”
Attitudes towards buying fresh & household groceries online
Except for
Asia-Pacific,
low demand
for “regular”
buying &
“trial”, but
reasonably
high
“future”
interest
across the
globe
Except for
Asia-Pacific,
demand for
buying in
stores
dominates,
but what
percentage
of total
spend will go
online or
remain in
stores?
74
% BUYING CONSUMABLES ONLINEHAS ROOM TO GROW
27%
29%
38%
40%
41%
43%
50%
55%
58%
Video Game Related Products
Furniture, Décor, Tools
Beauty & Personal Care Products
Consumer Electronics
Event Tickets
IT & Mobile
Books/Music/Stationery
Travel
Fashion
Global % who say they ever purchased category online
13%
14%
18%
18%
21%
23%
23%
24%
27%
Pet Food & Supplies
Wine & Alcoholic Beverages
Products for Baby & Young Kids
Flowers or Gift Sets
Fresh Groceries
Hhld Cleaning & Paper Products
Medicine or Health Care
Products
Packaged Grocery Food
Restaurant or Meal Kit Delivery
Source: The Nielsen Global Connected Commerce Survey, Q3 2016; Nielsen’s WHAT’S IN-STORE FOR ONLINE GROCERY SHOPPING report, January 2017
Durables
Consumables
75
6 OF TOP 10 ONLINE PACKAGED GROCERYBUYING COUNTRIES FROM ASIA
Show ranking of
countries already
using online order
for delivery to
home – do with
map
Source: The Nielsen Global Connected Commerce Survey, Q3 2016; Nielsen’s WHAT’S IN-STORE FOR ONLINE GROCERY SHOPPING report, January 2017
Top countries: % ever buying packaged groceries online*
16%
*adjusted for internet penetration
13%South Korea: 40%
Japan: 26%
China: 24%
Taiwan: 23%
UK: 23%
Ireland: 17%
Australia: 16%
US: 16%
Israel: 15%
Hong Kong: 14%
Packaged grocery food
(e.g., canned food,
beverages, packaged
snacks, seasonings)
z
76
HOME DELIVERY BEST CHOICE FOR CURRENT USERS; PICK-UP AT STORE HAS POTENTIAL TOOGlobal % willing to use fulfillment options for online grocery shopping
Source: The Nielsen Global Connected Commerce Survey, Q3 2016; Nielsen’s WHAT’S IN-STORE FOR ONLINE GROCERY SHOPPING report, January 2017
55%
60%
57%
57%
52%
55%
57%
55%
Pick-up Curbside
Use Drive-Through Pick-up
Pick-up Inside Store
Delivery to Home
Definitely/Somewhat Willing To Use
11%
11%
15%
28%
10%
12%
12%
25%
Pick-up Curbside
Use Drive-Through Pick-up
Pick-up Inside Store
Delivery to Home
Already Using
35%
29%
27%
14%
37%
33%
31%
21%
Pick-up Curbside
Use Drive-Through Pick-up
Pick-up Inside Store
Delivery to Home
Not Willing To Use
2014
2016
DIGITAL SHOPPING “SCORECARDING”
78
Using* Definitely Would Use* Wealth** Combined Score
China China Singapore United States (11)
India India Norway Japan (34)
United States (3) United States (3) United Arab Emirates South Korea (43)
Brazil Brazil Hong Kong United Kingdom (46)
Indonesia Mexico United States (5) China (54)
Japan Indonesia Switzerland Germany (55)
Viet Nam Japan Saudi Arabia Brazil (57)
South Korea Russia Netherlands France (60)
Philippines Philippines Ireland Russia (60)
United Kingdom Viet Nam Australia Saudi Arabia (61)
SCORECARD: ORDER GROCERIES ONLINE FOR HOME DELIVERY
Source: The Nielsen Global Connected Commerce Survey, Q3 2016; Nielsen’s WHAT’S IN-STORE FOR ONLINE GROCERY SHOPPING report, January 2017;
United Nations Population Division 2017 estimates; *populations adjusted for internet penetration cited in Nielsen report; **Global Finance Magazine GDP (PPP)
Top 10 Country Rankings
If your product category has
consumer appeal in these countries,
you should consider these countries
as your primary focus & collaborate
with retailers in these countries to
assist them in creating online
grocery ordering for home delivery
services.
79
Using* Definitely Would Use* Wealth** Combined Score
China China Singapore United States (11)
India India Norway Japan (40)
United States (3) United States (3) United Arab Emirates United Kingdom (49)
Brazil Brazil Hong Kong Russia (52)
Indonesia Mexico United States (5) Saudi Arabia (53)
Russia Indonesia Switzerland France (53)
Turkey Philippines Saudi Arabia China (54)
Philippines Russia Netherlands Brazil (57)
Mexico Japan Ireland Mexico (60)
Japan Turkey Australia Turkey (61)
SCORECARD: ORDER GROCERIES ONLINE PICK-UP IN STORE
Source: The Nielsen Global Connected Commerce Survey, Q3 2016; Nielsen’s WHAT’S IN-STORE FOR ONLINE GROCERY SHOPPING report, January 2017;
United Nations Population Division 2017 estimates; *populations adjusted for internet penetration cited in Nielsen report; **Global Finance Magazine GDP (PPP)
Top 10 Country Rankings
If your product category has
consumer appeal in these countries,
you should consider these countries
as your primary focus & collaborate
with retailers in these countries to
assist them in creating online
grocery ordering for pick-up in store
services.
SUMMARY THOUGHTS
81
WINNING IN THE FUTURE MEANSSTAYING ON & AHEAD OF TREND WITH:
Demand for fresh, now &
for me: products need
to have appearance of
being less prepared, more
convenient & experiential
Health & wellness:
transparency & free from
movement key now, but what’s next & how do you stand out
from the pack? Don’t forget indulgence!
Staying connected with
winning retailers &
managing the rest
Helping retailers
enhance their in-store & out-
of-store experiences
Helping retailers with
negative & positive
impacts of e-commerce,
while building your own (or collaborating on) direct-to-
consumer efforts
Shift from mass-marketing
to niche-marketing among a diverse
population and an ever
increasing & fast-paced digital age
