Convenience Store Trends 2017

Agenda 1 Snacking Overview 2 Foodservice Trends 3 Bundling / Meal Deals 4 Innovation 5 McCain Solutions

Snackification: The tendency of modern consumers to substitute a series of snacks over the course of the day in place of the traditional "three square meals" schedule Source: CSP Industry News 2016

What makes it a snack? Although today, anything can be a snack. But consumers increasingly define snacks based on portion size. It’s important to them that snacks aren’t too large. Source: 2016 Technomic Snacking Occasion Trend Report

2.7 46% of consumers snack 3 or more times per day Consumers are increasingly snacking, while still eating three meals during a typical day 46% of consumers snack 3 or more times per day Up 5 pts in one year 2.7 Avg number of snacks consumed per day Source: IRI 2016 Snacking Survey

The acceleration of snacking is expected to continue 1 Busier lifestyles 2 Foodservice snacks more readily available 3 Increased role of snacks in everyday lives Source: 2016 Technomic Snacking Occasion Trend Report

% of consumer snack consumption by daypart Growth in snacking is driven by morning occasion, but afternoon represents the largest percentage of consumer snacking % of consumer snack consumption by daypart 2010 2016 Early Morning 7% 20% 22% 37% Morning 51% 69% Afternoon 44% 57% Evening Late Evening 24% 45% Source: IRI 2016 Snacking Survey

% of consumers eating snacks in the early morning Younger generations are driving the majority of early morning snacks consumption % of consumers eating snacks in the early morning 52% Ages 18-24 69% Ages 25-34 Consumers are far more likely to replace meals with snacks earlier than later in the day Younger consumers are slightly more likely to skip breakfast than lunch, while the opposite is true of older consumers Younger consumers’ busy lifestyles may mean that they don’t have enough time to eat breakfast, while older consumers tend to have smaller appetites and may prefer smaller portions at lunch vs. 31% for all other age groups Source: IRI 2016 Snacking Survey % of consumers eating at least 1 or more per week

Breakfast fare expands into snacking occasion All-day breakfast is a major industry trend; as a result, research suggests breakfast fare to emerge as snacks Consumers find breakfast items more appealing throughout the day over foods from other dayparts Lower price and smaller portion size make breakfast items suitable for snack occasion 41% of consumers agree that any food can be a snack if the portion size is small Source: 2016 Technomic Snacking Occasion Trend Report

Breakfast items often appeal to consumers as afternoon and evening snacks AM Afternoon Evening Late Night 70% 40% 23% 10% AM Afternoon Evening Late Night 63% 52% 40% 14% When asked at what time of day consumers purchase these items as snacks? Source: 2016 Technomic Snacking Occasion Trend Report

In addition to breakfast items, younger consumers purchase a wide array of items as snacks more often than their older counterparts Appetizers Baked Goods Small entrée 73% 63% 63% 60% 39% 37% Sides Beverages Younger consumers’ greater affinity for appetizer and beverage snacks aligns with their broader definition of snacks compared to those of their older counterparts and their greater likelihood to eat what they want, when they want it, no matter the time of day Positioning offerings as suitable for snacks may help drive incremental traffic and sales Ages 18-34 Ages 35+ 65% 66% 68% 63% Source: 2016 Technomic Snacking Occasion Trend Report

Hungry consumers have many choices A shift is occurring in terms of where consumers purchase snacks Hungry consumers have many choices

Fast Food restaurants are leading source of snacks, but down from 2014 As consumers grow more reliant on foodservice and snack more often, they seek less traditional locations for their purchases Foodservice Segment Growth Fast Food / QSR Fast Food restaurants are leading source of snacks, but down from 2014 2016 +1.8% 2017 +2.0%* Supermarket Grocery Store snack purchases from prepared foods section are associated with quality 2016 +6.0% 2017 +6.0%* C-Stores More consumers say they’re satisfied with the value they receive at c-stores 2016 +1.2% 2017 +1.3%* Source: 2016 Technomic Market Intelligence Report *2017 Forecast

14% of C-Store combos feature foodservice sides3 As part of their value proposition, bundles and combo deals can help C-Stores compete with fast food restaurants 14% of C-Store combos feature foodservice sides3 25% of on-the-go snacking growth in restaurants was from combo item deals1 71% of Millennials prefer sides in their combo meal2 “Combo deals” beyond the standard “combo meal” may be more appealing to c-store visitors as snacking continues to rise Source: 2016 NPD Group1; C-Store Products Online2; Q1 2017 Technomic C-Store Marketbrief3

Improved Foodservice offerings will cause C-Stores to continue gaining share from restaurants 25% of customers have increased foodservice purchases over the past month at the expense of fast food restaurants 75% of consumers purchase snacks at C-Stores on a monthly basis Foodservice snack items account for almost 50% of purchased snacks 30% of consumers say they’ve increased their foodservice spending at C-Stores Source: 2016 Technomic Convenience Store Consumer Marketbrief

Foodservice also benefits the operator as the most profitable category within C-Stores 77% of operators say foodservice is profitable, while 43% say it is VERY profitable to their stores The most profitable foodservice items include traditional foods such as pizza, breakfast sandwiches, and hot dogs, as well as non-traditional foods with higher price points like veggie burgers Operators indicate the most profitable foods are unique products like veggie burgers (due to higher price points) or traditional foods such as pizza, breakfast sandwiches, and hot dogs due to higher volume Source: 2016 C-Store Datassentials

As the core consumer, it is vital that C-store retailers understand what millennials want, how they want it, and how best to fulfill the needs Consumers’ eating norms and attitudes towards snacks are shifting Opportunity to position an ever-widening array of foodservice options to fill snacking needs Consider offering breakfast fare in handheld form to meet consumers snacking need Competition may require C-Stores to reposition foodservice programs Availability of snack sizes or more bundled snack options to meet the wide variety of snack need states

Millennial Preferences Drive Potato & Snack Innovation and Profits

Business Opportunities McCain can help you expand your snack options to appeal to your target consumers all throughout the day

Breakfast Lunch and Dinner Snacks McCain delivers on restaurant quality products across all dayparts Breakfast Add a consumer favorite hash brown selection to warmers during the morning meal daypart Create add-on combos with breakfast items or as a morning snack side with coffee or hot beverage purchase Lunch and Dinner Add classic potato wedges or tater tots to warmers during the lunch and PM Snacking dayparts Create add-on combos with burgers, sandwiches, hot dogs and even pizza to create complete meal deals Snacks Add products like mozzarella sticks, jalapeno bites or onion rings to warmers as a side or snack during all snacking dayparts Make it easy to satisfy consumer cravings on the fly