Understanding, Adaption, and Persistence Equals Real Growth Digital Disruption Understanding, Adaption, and Persistence Equals Real Growth February 2018

The Power of Independents February 2018

Gaining consensus on the market impact of Independents 21,000 Stores 25% of the retail grocery industry sales $131B in retail sales (2nd largest overall food retailer is the US) 1% of the US GDP

The Focus of Our Research Efforts 2017 Topics of discussion The Focus of Our Research Efforts 2017 Summarizing Our Shopper Findings A Panel Discussion on How to Compete as an Independent Making the Store Hyper Local Differentiating in the Shopping Experience Competing in the Digital World Recommendations to Win Closing Thoughts

Framing the realities of US retailing in 2018 NO RETAIL ARMAGEDDON YES RETAIL METAMORPHASIS Successful grocery retailers and manufacturers will balance and execute Omnichannel flawlessly

Structural disruptors continue Clicks to Bricks Vertical Integration New Channels Auto Replenishment Pharmacy Manufacturer Direct to Consumer Internet of Things Home Manufacturing Bricks to Clicks ??

A best in class integrated view of Independents The Nielsen Independent Grocery Shopper Database and Analytics (See and Understand the Past) Multiple Dimensions of Shopper Behaviors at Independent Grocers Delivering to the Independent Grocer First Mover Advantage in Shopper Knowledge and Actionability The Harris Poll Independent Grocery Shopper Annual Survey (2017) (Crystalize Today and the Future)

A new asset to develop real growth strategies and capabilities Household-level window into where and how shoppers shop, and what they purchase Nielsen Homescan Consumer Panel 100K Households Nielsen Independent Grocery Shopper Panel 44K Households Source: Nielsen Homescan, Total US, 52 weeks ending Q2 2017; Independent shopper defined as 1x+ in 52 weeks; Independent Shopper Share of Wallet defined within Grocery Channel 44K Households across Nine US Census Divisions First ever view of independent grocery shoppers in regional markets Source: Nielsen Homescan, Total US, 52 weeks ending Q2 2017; Independent shopper defined as 1x+ in 52 weeks; Independent Shopper Share of Wallet defined within Grocery Channel

Windows into competing in your local trading regions The power to benchmark in your region, multiple similar regions, and nationally 4,200 7,400 8,000 3,100 5,700 6,800 1,900 2,800 4,500 Source: Nielsen Homescan, Total US, 52 weeks ending Q2 2017; Independent shopper defined as 1x+ in 52 weeks; Sample size by regions

National views do not tell the true power of shoppers at Independents Source: Nielsen Homescan, 52 weeks ending 7/1/2017, All Shoppers, Total Store % of Grocery Channel Dollars Household Penetration Annual Spend Annual Trips per Household Average Dollars per Trip Grocery Channel 100% 98% $2,376 50.2 $46 Independents 21% 56% $884 19.7 $44 All Other Grocery Banners 79% 94% $1962 40.8 Source: Nielsen Homescan, Total US, 52 weeks ending Q4 2017; Independent shopper defined as 1x+ in 52 weeks

Illustrating the buying power of shopper loyalty at Independents Independent Shopper (1x+ Shopper) Independent Shopper w/ 50%+ SOW Independent Shopper w/ <50% SOW Share of Wallet of Total Market 13% 69% 11% Percent of Independent Shoppers 100% 10% 90% Annual Spend $884 $3,287 $641 Trips per Household 19.7 52.7 16.5 Dollars per Trip $44 $62 $38 More Loyal Households Less Loyal Households Source: Nielsen Homescan, Total US, 52 weeks ending Q4 2017; Independent shopper defined as 1x+ in 52 weeks

Getting local – the ability to prioritize real growth Red text: Lower than total US Green text: Higher than total US Independent shoppers that spend more than 50% of their dollars in independents Pacific Annual Spend: $3,499 Dollars per Trip: $68 Trips Per Year: 50.9 Share of Wallet: 70% Household Penetration: 3% Percent Sold on Deal: 20% West North Central Annual Spend: $2,730 Dollars per Trip: $52 Trips Per Year: 52.4 Share of Wallet: 66% Household Penetration: 4% Percent Sold on Deal: 28% Mid Atlantic Annual Spend: $3,383 Dollars per Trip: $61 Trips Per Year: 54.7 Share of Wallet: 72% Household Penetration: 20% Percent Sold on Deal: 44% Total USA Annual Spend: $3,287 Dollars per Trip: $62 Trips Per Year: 52.7 Share of Wallet: 69% Household Penetration: 6% Percent Sold on Deal: 35% New England Annual Spend: $3,498 Dollars per Trip: $71 Trips Per Year: 49.2 Share of Wallet: 72% Household Penetration: 17% Percent Sold on Deal: 26% Mountain Annual Spend: $3,937 Dollars per Trip: $63 Trips Per Year: 61.9 Share of Wallet: 69% Household Penetration: 1% Percent Sold on Deal: 25% East North Central Annual Spend: $2,905 Dollars per Trip: $58 Trips Per Year: 49.4 Share of Wallet: 60% Household Penetration: 5% Percent Sold on Deal: 31% West South Central Annual Spend: $2,942 Dollars per Trip: $53 Trips Per Year: 54.3 Share of Wallet: 64% Household Penetration: 2% Percent Sold on Deal: 18% East South Central Annual Spend: $2,985 Dollars per Trip: $57 Trips Per Year: 51.7 Share of Wallet: 67% Household Penetration: 3% Percent Sold on Deal: 13% South Atlantic Annual Spend: $3,120 Dollars per Trip: $61 Trips Per Year: 50.3 Share of Wallet: 68% Household Penetration: 1% Percent Sold on Deal: 27% Source: Nielsen Homescan, 52 week Q4 2017, Independent Grocer

Engaged 3,008 U.S. adults, 18 years of age and older Who We Talked To Engaged 3,008 U.S. adults, 18 years of age and older Representing regional versus just national Independent Grocer shopper groups Shoppers who self-identified as spending 50% or more of their grocery shopping at an Independent grocery store Note: Data weighted to represent the U.S. general population, age 18 and over

Switched to local supermarkets in the past 12 months Convenience tops list of reasons to shop at Independents, followed by price Reasons to Shop at Independents SUPERMARKET LOCAL 100% Spend at least 50% more at an Independent store Switched to local supermarkets in the past 12 months 14%

Key areas that most drive satisfaction for Independents Higher satisfaction... leads to these critical shopping behaviors: Features low prices Store resolves shopping /product/service issues immediately Sells high quality meats Sells high quality fruits & vegetables Primary Attribute Drivers Independent Grocery Shopper Continue to shop at the store instead of shopping online Speak positively about the local supermarket Secondary Attribute Drivers Has courteous, friendly employees Has a store layout that makes it easy for me to shop Pays attention to customers' special requests or needs Is active in and supports our local community Is a clean, neat store Recommend the store to others through word of mouth Support the local supermarket because it is linked to the community through employees, local programs, and community donations Recommend the store to others through social media

Independent shoppers value price, quality and local items, a clean store with an easy layout and friendly employees the most KEY DIFFERENTIATORS TABLESTAKES Features low prices Sells high quality fruits & vegetables Sells high quality meats Is a clean, neat store Has courteous, friendly employees Offers locally grown produce & other packaged goods Has a store layout that makes it easy for me to shop Store resolves shopping/ product/ service issues immediately Pays attention to customers’ special requests or needs Has a Frequent Shopper Program that offers benefits BASE: ALL QUALIFIED RESPONDENTS (Total n=3008) Q6 Please indicate which of the following considerations will be most important and which will be least important when you are shopping for groceries over the next 12 months. Experience-related Product-related

For the most part, purchasing has stayed the same Department Purchase Change BASE: ALL QUALIFIED RESPONDENTS (Total n=Base Varies) Q33 Have your purchases at your local supermarket in the following departments…

Consumers expect Independents to support healthy living For a Healthier Lifestyle, Independent Shoppers Want... But, 37% do not expect their Independent store to provide this type of assistance BASE: ALL QUALIFIED RESPONDENTS (Total n=3008) Q30 Which of the following would you like your local supermarket to offer you when helping you live a healthier lifestyle? Please select all that apply?

7 in 10 consumers have no plans to switch from their independent store But for those who do, Walmart or Kroger is where they plan to shop in the future Supermarket Planning to Switch To Likelihood to Switch Local Supermarket in Next 12 Months 9% 4% 3% 9% Likely (Net) BASE: ALL QUALIFIED RESPONDENTS (Total n=3008) Q37 Within the next 12 months, how likely are you to switch your local supermarket? BASE: SOMEWHAT OR VERY LIKELY TO SWITCH IN NEXT 12 MONTHS (Total n=218) Q38 What supermarket are you planning to switch to?

Making the Store Hyper Local – Personalization What does this mean to your shoppers and you? Is it necessary to win in the new world of retailing? How is it being implemented? How does it create differentiation? What are the plusses and minuses?

Differentiating the Shopping Experience – How to? How are you achieving this today? What difference is it making to your shoppers? Where do you believe are the key investment areas? How do you motivate employees? What are the cost implications? What is next for you in experience differentiation?

Competing in the Digital World – E-commerce How do you view the go forward impact of digital on your business? Where is digital in you strategic growth plan? What investments are you making and what are the priorities? What is the importance of seamless (Omni channel) to your shoppers?

Recommendations to Win – “Big Bets” and Growth Strategies Where do you believe “big bets” should be placed? Where are the growth gaps? What are the go forward growth investment strategies? What happens if you do not embrace digital?

Closing Thoughts – The Power of Independents What one idea should every retailer and manufacturer take away from today’s conversation?

The Power of Independents February 2018