Changes in Retail and Their Impact on Packaging How to Win in Today’s Evolving Retail Marketplace Ron Sasine Hudson Windsor, LLC - Retail Packaging Strategy & Execution www.hudsonwindsor.com

Three Big Messages, and a Recommendation Retail is becoming increasingly disconnected from its past and moving in new directions Millennial Moms will make most of the important decisions affecting business today and for the next 30 years Successful packaging development and innovation will need to support retail strategy Put yourself inside the head of your customers— the CPG companies—and think about how they interact with their retail customers

Why Packaging? …a Refresher Course Convey Farm or factory/distribution/POS/consumer Communicate Product Identity Product Needs and Safety Destination Convince Present the Brand Promise Call to Action Drive After-Purchase Consumption

Driving your Biggest Future Opportunities and Threats Convey Corrugated has a long-held, prominent position Increasing challenges from RPC’s and other pooled resources Massive emerging opportunities in e-commerce Shifts in transportation methods, distances, modes Speed to shelf and POS

Driving your Biggest Future Opportunities and Threats Communicate Changes in Wal-Mart’s print requirements for its largest categories are designed to streamline back- room operations $2.7 billion investment in in-store labor requires associates to move from low-value added activities to higher value-added activities On-shelf availability is key to sales, and new consumers treat out-of-stock items differently Knowing what you have and where you have it is key to retail, and cluttered backrooms get in the way

Driving your Biggest Future Opportunities and Threats Convince Brands need new places to communicate their Promise as TV commercials become irrelevant and consumers seek out other sources of product information New methods and vehicles give seamless access to products with an instant call to action Are consumers ready for and do they want simple, unprinted functional packaging? How will new packaging formats live and express themselves in consumers’ homes?

“I want it cheap, with free shipping, by tomorrow” 1962 – birth of Big Box Retail Retail Disintermediation in 2000’s Growth of On-line Purchases Showrooming Mobile technology New Retail Drivers in 2010’s Social influencers Social purchasing Seamless Media shopability

New Ways to Solve Old Problems Glass Packaging production hit its peak in 1979 Baby food, beverages, condiments, pickles, dairy, sauces Paperboard Packaging production hit its peak in 1998 Breakfast cereal, cookies, crackers, frozen foods, milk Metal Packaging production hit a cyclical peak in 2010 Beverages, shelf-stable foods, pet foods Plastic Packaging continues to take market share from each of these traditional material classes Source: U.S. Environmental Protection Agency, 2014

New Moms, New Formats, New Challenges 80 million Millennial consumers (b. 1980-1999) Largest generation ever, surpassing Baby Boom (1946-1964) $2.4 trillion in combined annual purchasing power In 2016, 51% of all children have a Millennial Mom Delayed entry into adulthood: low home ownership, later marriage, high debt levels Connectivity: social media, social influencers, social consumption Abundance of choices: hyper-individualization, experimentation, anything/anywhere, quality of life vs. quantity of possessions Marketers’ task: understand, integrate and harness these emerging consumption drivers Source: MarketWatch, Fortune

Millennial Definition of Quality Function: Expectations of technology and innovation Freshness: Authenticity of products and alignment to personal goals Flavors: Adventure, experience, and novelty; high propensity to share results of their experimentation Socialization: Collaboration and shared goals; companies that figure out ways to co-create with millennials will have an edge Values: Millennials care about what’s genuine and authentic and buy products from companies that support causes they care about Source: Forbes, Boston Consulting Group Source:

Today’s In-Store Environment Let’s take a walk and see what’s working…

Function …new packaging options both accompany and displace traditional formats Orlando Kansas City

Freshness …challenging venerable standards in center store Orlando Kansas City

Socialization …requires the right kind of influencers Bentonville Bentonville

Flavors …with structural innovation being used to communicate authenticity Jane, MO Jane, MO

Packaging Innovation and Retail Reality …pay attention to price point, shelving, operational ease …does your new format help establish a new price point? Orlando Kansas City

Packaging Innovation and Retail Reality …what does your packaging format require of operations? …how complicated is it to stock, shop and face? Jane, MO Jane, MO

Packaging Innovation and Retail Reality …how does the package impact carrying capacity of the shelf? Chicago Chicago

Packaging Innovation and Retail Reality …does the new package format drive price point evolution? Chicago Chicago

Consumer Preferences …packaging will drive preference when it fulfills an untapped need or drives new usage Chicago Orlando

Replenishment Efficiency …how many actions are required to stock your product? …does your product need help to stand up and get noticed? Chicago, IL Jane, MO

Retail-Ready Packaging is here, driven by three factors Consumers need to instantly locate and identify products during ever-shorter shopping trips Mobile is easy, instant and helpful On-line products are always where you expect them to be—often in an automatic, pre-set list of repeat buys Retailers need labor savings Walmart is spending an additional $2.7 billion on in- store labor $15 minimum wage would raise costs $4.95 billion/year Stores need to refocus their associates toward customer service and away from low value activities Source: Walmart, UC Berkeley

Questions? Ron Sasine ron@hudsonwindsor.com www.hudsonwindsor.com 479/657-0177 © 2016 Hudson Windsor, LLC