2020 VISION CARMAN ALLISON STAYING AHEAD OF THE CURVE VP, CONSUMER INSIGHTS @CarmAllison @Nielsen

Trends impacting 2017 and beyond market consumer retail So What is in Store for 2016? Well, it’s a bit of a 1 step forward, two steps back scenario. We do see dollars continuing to grow, but primarily due to rising prices with consumption remaining flat. The impact of the low Canadian dollar will continue to put more pressure on pricing in 2016. In addition to rising prices, the Canadian consumer remains uncertain about the economy, jobs and spending power – especially in the Prairie Provinces which has seen a dramatic shift in the past year due to the declining oil industry. The need for value will continue to define retail growth – whether it’s shopping discount retailers, e-commerce or buying in bulk, certain retail formats will continue to benefit from this shifting mindset in 2016. So lets dig into the some of the details defining these trends Let’s start with the consumer

In 2016 The rate of Cpg GROWTH slowed, especially in western Canada National Total West Source: Nielsen MarketTrack, Canada National All Channels – 52 weeks to January 7, 2017 - Total Tracked Sales including Fresh Random Weight

Slowing growth due to lower prices and lagging performance in the prairies Dollar Growth Tonnage Growth Source: Nielsen MarketTrack, Canada National All Channels – 52 weeks to January 7, 2017 - Total Tracked Sales including Fresh Random Weight

Retail price wars have resulted in lower levels of inflation for the second half of 2016 Q3-4 Inflation Canadian CPG Inflation CA WST Total: +0.0% -0.5% Reg: -2.3% -1.1% TPR: +4.1% +1.4% Source: Nielsen MarketTrack – All Channels, Total Tracked Sales including Fresh Random Weight – 4 weekly periods

The Recent Deflation in the west is REPORTED IN 12 OF 32 cpg DEPARTMENTS Fresh Vegetables -5.2% Processed Meat -3.9% Condiments & Sauces -2.7% Hot Beverages -2.6% Snack -2.3% Prepared Foods -1.9% Fresh Meat -1.8% Frozen Food -1.7% Fresh Bread & Rolls -1.6% Cold Beverages -0.9% Household Products -0.7% Source: Nielsen MarketTrack – Total West All Channels, Total Tracked Sales including Fresh Random Weight – 24 weeks to January 7, 2017

ALBERTA no longer leads regional growth 5 Year Sales Performance Source: Nielsen MarketTrack, National All Channels – 52 weeks to January 7, 2017 - Total Tracked Sales including Fresh Random Weight

Despite growth slowing, Albertans still spend 11% more per household Households are spending less annually % Chg -2 -4 -3 -1 Source: Nielsen Homescan, National All Channels – 52 weeks Ending December 31, 2016 - Total Expenditures

2020 Vision: Staying ahead of the curve But finding growth is difficult in this challenging and fast paced environment.

REACH The shopper’s quest for value is defining retail trends 10

The consumer balance sheet is getting worse Compared to year ago, consumers view their household finances as… BETTER MS 22% AB 17% BC 23% 20% SAME 49% MS 53% AB 49% BC 48% WORSE 31% MS 25% AB 35% BC 29% Source: Nielsen Panel Views Survey, 2016 – Total West Projected Households 14,368k

As a result, Western SPENDING POWER IN DECLINE # of Households 2014 2016 $$$ $$ $ FREE SPENDERS 11% 7% -191K LIVING COMFORTABLY 64% 64% +40k SHOPPING BASICS 25% 30% +239k Source: Nielsen Panel Views Survey, 2014 / 2016 – Total West Projected Households 4,542k 2016, 4459k 2014

The consumer’s quest to save is defining western retail trends CAUSE EFFECT 73% 40% & Trying to spend less on groceries Shopping more at discount retailers Source: Nielsen Economic Impact Survey April 2016 – Total West 13

ALBERTAN consumers are becoming more value focused – discount formats booming Grocery Composite $ Share & Growth Discount Share & % Chg Discount +2% Man/Sask 42.1 +3 Alberta 41.4 +9 B.C. 35.1 -2 Conventional +0% Source: Homescan Grocery Watch, Canada National All Channels - 52 weeks to October 01, 2016 Grocery Composite

How are western shoppers looking to save? SALE PROMOTIONS SHOPPING SELECTION 84% Stocking Up 71% Only Buy on Sale 61% Use Coupons 60% Switch Stores 46% Build Loyalty Points 45% Price Match 58% Buy Essentials 57% Buy Larger Sizes 55% Buy Store Brands Source: Nielsen Panel Views Economic impact Survey April 2016 – Total West Canada

Over the past 5 years, $1.7 billion has shifted to Online, Dollar Stores and warehouse clubs Total West Share of Wallet 17.6% +$1.7 +40% 78 +29% Billion Increase $ growth since 2012 million trips in 2016 trip increase since 2012 13.0% Online Dollar Stores Warehouse Clubs 2012 2016 Total sales $ $4.2B $5.9B Grocery Share 42.1% 42.4% Source: Nielsen, Cross Outlet Facts, 52 weeks ending October 1, 2016 – Total West

WAREHOUSE CLUBS: CPG department MOVERS and SHAKERS MARKET SHARE 5 YR SHARE GAINS 24.4% Paper Products 21.3% Produce 19.6% Hhld Products 18.8% Snack 17.2% Condiments +5.3 Hhld Products +4.8 Produce +4.6 Paper Products +4.3 OTC +4.0 Frozen Source: Homescan Cross Outlet Facts: Warehouse Clubs – 52 weeks to October 10, 2016 - Total Tracked Sales- Dollars – Total West

84% of consumers view stocking-up as a #1 savings strategy don’t forget about the role of larger sizes – a value play without the need to discount 84% of consumers view stocking-up as a #1 savings strategy Is BIGGER better? If you need to take a price increase, 72% of consumers prefer larger sizes to reduce cost per use VS. 57% of consumers buy larger sizes in order to save money Source: Nielsen – April 2016 Panel Views Survey – Total West

Promotional activity increasing faster in the west – but still less than Canadian average 52 week % Dollars Sold on TPR Pt Chg +0.4 +1.3 +0.9 +1.3 +1.5 $ % Chg +3 +5 +4 +3 +8 Source: Nielsen MarketTrack, Regional GB+DR+MM - 52 week period ending January 7, 2017

Getting your assortment right can improve the Cannibalization effect…and profit Item A Item B Item C High Performing Items $100 $90 $70 Item A Item B Item C Item D Item E High Cannibalization Sales rate ($ sales per point of distribution) Low Cannibalization Size of bubble: $ volume Overlap: Level of cannibalization

Maximizing revenue Promote for Win-Wins: It’s not about spending more, it’s about promoting and pricing smarter for sustainable growth and profitability for both the manufacturer and the retailer Assortment Management: Vary assortment based on knowing which items within a category contribute to overall growth. Reducing items with high level of cannibalization will maximize revenue opportunities. 21

CONNECT Online and Digital is creating new and exciting touch points along the shopper journey 22

WEST STORE TRAFFIC IS IN DECLINE ANNUAL TRIPS PER HOUSEHOLD TOTAL WEST OUTLET TRIPS (Millions) In 2016 668.4 Million Trips -7% Since 2012 (53 million fewer trips) Nielsen Homescan Cross Outlet Facts: 52 weeks to October 1, 2016 Total West, Trips/ HH National All Channels 52 weeks ending April 19, 2016

THE FRAGMENTED PATH TO PURCHASE SALE DEMAND PURCHASE PRE-STORE DIGITAL IN-STORE

THE DIGITAL FUTURE FOR CPG IS HERE AND NOW Online shopping for CPG in forecasted to almost triple by 2020 CPG online sales are projected to grow 7:1 20% year over year Margin by which retail e-commerce sales growth will outpace brick & mortar sales growth by 2020 5.3% 1.8%

WHICH CPG DEPARTMENTS ARE TRENDING ONLINE? FOOD HEALTH & BEAUTY NON GROCERY Beverages 0.7% Condiments 0.7% Baking Needs 0.6% Confectionery 0.5% Prepared Foods 0.5% Cosmetics 2.7% Baby Care 2.3% Body Care 1.9% Oral Hygiene 1.5% OTC 1.3% Gen Merch 3.5% Pet Needs 1.1% Household 1.0% Paper 0.8% Source: Nielsen, Cross Outlet Facts, 52 weeks ending October 1, 2016 – E-Commerce $ share – Total West

75% 63% 48% 48% BARRIERs TO ONLINE grocery SHOPPING In-person experience QUALITY AND freshness Fulfillment and delivery Ease of site usage 75% 63% 48% 48% Prefer to examine the products before purchasing Concerned over freshness and expiration dates Concerned deliveries happen when not at home Browsing to find products too time consuming % who agree Source: Nielsen Global Connected Commerce Survey, Q3 2015 - Canada

THERE IS NO SINGLE ONLINE SHOPPER DIGITAL DODGERS INDIFFERENT & IMPULSIVE DIGITAL DEAL DIGGERS CLICKING CONNOISSEURS Technology Averse Digital Reluctants Grab & Go Non-Planners Tech Savvy Value Seekers Researcher Digital Advocates LOW TRUST LOW TECH SAVVY LOW VALUE SEEKING LOW SHOPPING ENJOYMENT RESEARCH DRIVEN TECH SAVVY ENJOY SHOPPING ONLINE CANADA 38% 22% 30% 10% U.S. 35% 17% 29% 15% Source: Nielsen PanelViews, Digital Shopping survey, 2016

STRATEGIES FOR OMNI-CHANNEL SUCCESS BE SHOPPER-CENTRIC Take the time to understand what happens along the path to purchase. Prioritize initiatives around the tools and features consumers use and desire most. 1 2 PRIORITISE PERSONALIZATION Can have big benefits for the bottom line, including increased visitor engagement and improved customer experience, as well as increased conversion rates and lead generation. THINK DIGITAL. BUT DON’T NEGLECT IN-STORE Physical stores maintain many key advantages over online-only channels, and retailers and manufacturers should look for ways to optimize the in-store experience by leveraging digital tools. 3

ENGAGE Generational shift in spending power 30

Millennials and Boomers: the top 2 consumer powerhouses <19 ‘Gen Z’ 16% 19-37 ‘Millennials’ 27% 38-47 ‘Gen X’ 14% 48-67 ‘Boomers’ 28% 68+ ‘Greatest’ 14% Source: Statistics Canada – Census 2011

Currently millennials are under represented in purchasing power Millennials’ Importance 27% 16% 14% % of Population % Household Heads % of CPG $’s Total West 18% 15% Source: Source Nielsen Homescan – 52 weeks to December 31 ,2016

Millennials will surpass boomers by 2020 2010 2020 2030 8.9 M 9.7 M 10.0 M 9.4 M 11.0 M 8.3 M 34.2 M 38.4 M 42.1 M Total Canada Millennials Boomers Source: Statistics Canada M: Millions

The CPG growth engine will switch gears By 2024… MILLENNIALS BOOMERS +$12.6 B +107% -$4.3 B -9% Source: Nielsen Homescan 52 weeks to March 29, 2014 – HH <35 years – Based on older generation spend

Resulting in a shift in future shopper traffic flow Day of Week: Millennials 45% Sat-Sun 46% Thurs-Fri Older Boomers Time of Day: Millennials 45% > 3 pm 41% < 12 pm Older Boomers Source: Nielsen Panel Views Survey 2013 - Canada

Which CPG departments are most commonly found in a millennials’ shopping basket? Tl West Relative Dollar Index <35 years Baby Care 336 Desserts 144 Body Care 123 Cosmetics 122 Fresh Meat 118 Produce 116 Hair Care 115 Prepared Foods 113 Snack Foods 108 Refrigeration & Dairy Nielsen Homescan – Dollar Consumption Index – 52 wks to December 31, 2016 – Consumer Facts CPG Departments Adjusted Relative Index (85 for total)

Millennials are value driven and connected 73% Price is the first thing they look at (58% for total Canada) 42% Of Wallet in Discount Retailers (33% for Boomers) 26% Don’t subscribe to cable TV (12% for Boomers) 83% Have a smartphone (60% for total Canada) Source: Nielsen Panel Views Survey 2013/5

INNOVATE Health and Wellness is changing and influencing in-store purchase decisions 38

Centre of Store Food is now outperforming Perimeter In the past 5 years, Centre of store has lost ALMOST 3 share POINTS of food spend $ Importance to Total Food and Growth TOTAL WEST CAGR +5.4% +2.7% VYA +0.7% +1.8% Perimeter Centre of Store Food is now outperforming Perimeter (+1.6 pts) Centre of Store 2011 2016 Source: Nielsen MarketTrack, 52 Weeks to January 7, 2017 – Total West Grocery Banner + Mass Merchandisers + Drug

Not all in growing in the Centre of store 5 yr CAGR Contraction expansion Absolute $ Chg Millions 5 yr CAGR Absolute $ Chg Millions -$19.7 -5% -$16.6 -1% -$15.4 -11% -$14.1 0% -$12.0 -$10.1 -2% -$6.6 -3% -$6.2 -$5.8 -7% -$3.9 -0% +$121.3 +6% +$112.1 +9% +$111.1 +7% +$58.1 +$55.0 +3% +$37.2 +$35.0 +$32.5 +$32.4 +11% +$31.6 +13% Margarine SS Juice & Drinks Frozen Fruit Beverages Milk Proc. Cheese Slices Frozen Pizza Cottage Cheese Sugar Canned Pasta RTE Cereal Snack Foods R&G Coffee Chocolate Eggs Yogurt Dried Fruit/Nuts/Seeds Butter Candy Frz. Fruit Meat Sticks/Jerky Source: Nielsen MarketTrack, 52 Weeks to January 7, 2017– Total West G+MM+D

Indulgence, convenience and health ARE driving Centre of store growth TRENDS 5 yr CAGR Contraction expansion Absolute $ Chg Millions 5 yr CAGR Absolute $ Chg Millions -$19.7 -5% -$16.6 -1% -$15.4 -11% -$14.1 0% -$12.0 -$10.1 -2% -$6.6 -3% -$6.2 -$5.8 -7% -$3.9 -0% +$121.3 +6% +$112.1 +9% +$111.1 +7% +$58.1 +$55.0 +3% +$37.2 +$35.0 +$32.5 +$32.4 +11% +$31.6 +13% Margarine SS Juice & Drinks Frozen Fruit Beverages Milk Proc. Cheese Slices Frozen Pizza Cottage Cheese Sugar Canned Pasta RTE Cereal Snack Foods R&G Coffee Chocolate Eggs Yogurt Dried Fruit/Nuts/Seeds Butter Candy Frz. Fruit Meat Sticks/Jerky Source: Nielsen MarketTrack, 52 Weeks to January 7, 2017– Total West G+MM+D

CONSUMERS ARE PUTTING THEIR MONEY WHERE THEIR MOUTH IS 54% OF CANADIANS SAY THEY’RE WILLING TO PAY MORE FOR FOODS AND DRINKS THAT DON’T CONTAIN UNDESIRABLE INGREDIENTS. DRIVEN BY: Enlighten Eating % who follow a specific diet which limits specific foods and ingredients 47% Sensitive Stomachs % of households with a food allergy or intolerance 28% Source: Nielsen Global Health and Ingredient Sentiment Survey Q1 2016 – Canadian respondents

DIETARY DIVERSITY: THE INGREDIENTS WE AVOID LESS IS MORE WHEN IT COMES TO FOOD INGREDIENTS DIETARY DIVERSITY: THE INGREDIENTS WE AVOID PERCENTAGE WHO SAY THEY TRY TO AVOID SPECIFIED INGREDIENT OR ATTRIBUTE Source: Nielsen Global Health and Ingredient Sentiment Survey Q1 2016 – Canadian respondents

Consumer health & wellness Attitudes are shaping Centre of store category trends FLAVOURED SOFT DRINKS FROZEN CONFECTIONS YOGURT JAM Diet/Light Regular -2% +2% -4% +4% -16% +9% -5% +5% Source: Nielsen MarkeTrack; National All Channels: 52 weeks to December 10, 2016 – Total West

BACK TO BASICS IS BACK IN DEMAND MORE PLEASE! food products we want more of on the shelves PERCENTAGE WHO SAY THEY WISH THERE WERE MORE OF THESE FOOD PRODUCTS ON THE STORE SHELVES + Source: Nielsen Global Health and Ingredient Sentiment Survey Q1 2016 – Canadian respondents

The higher the fat, the higher the sales growth Milk $2.6 Billion $ % Chg +0% L % Chg +1% Fat Content $ Share L % Chg 2% 44.1% +4 1% 28.7% -2 Homogenized 16.8% +6 Skim 9.0% -11 Source: Nielsen MarkeTrack; National All Channels: 52 weeks to December 10, 2016 – Total West

CONSUMERS ARE SHIFTING TO PLANT BASED MILKS $2.6 Billion $ % Chg +0% L % Chg +1% What’s trending in Dairy Case Beverages? Sales % Dollars Chg Fat Content $ Share L % Chg Almond Milk $66M +4 Coconut Milk $7M +22 Cashew Milk $4M +92 2% 44.1% +4 1% 28.7% -2 Homogenized 16.8% +6 Skim 9.0% -11 Source: Nielsen MarkeTrack; National All Channels: 52 weeks to December 10, 2016 – Total West

Growth strategies for innovation KEEP IT SIMPLE Remove or replace undesirable ingredients, especially those seen as objectionable. 1 2 INNOVATE. INVEST. ACQUIRE. New product development is critical. Don’t go at it alone. 3 MAKE IT CONVENIENT, COST EFFECTIVE AND TASTY. Combine these attributes to help time-crunched consumers.

Trends impacting path to purchase REACH CONNECT ENGAGE INNOVATE Value remains an influencer so drive profit through promotional effectiveness Online and Digital is creating new and exciting touch points along the shopper journey The future growth engine will switch gears due to generational shifts in spending power Health and Wellness is changing and influencing in-store purchase decisions and selection

Thank You! Stay Connected to Consumer and Media Trends For the latest insights, visit nielsen.com @CarmAllison @Nielsen