1. Nielsen Perishables Group
The evolution of fresh
Nielsen Perishables Group
Utah Food Industry Association

2. Who is Nielsen perishables group?
ESTABLISHED LEADERS
IN FRESH
NEW TOTAL-STORE PERSPECTIVE
EXPANDED INFORMATION AND CAPABILITIES
Meat
Produce
Deli
Bakery
Seafood

3. Economic concerns remain top of mind
What are your biggest concerns over the next six months?
CONCERNS
Share of responses
ECONOMY
20%
DEBT
12%
JOB SECURITY
13%
HEALTH 9%
FOOD PRICES 6%
FUEL PRICES
UTILITY PRICES 3%
WORK/LIFE BALANCE
What is driving confidence? Confusion?
On the plus side:
Housing
House prices surged +1.4% m/m in Feb, +11.6% y/y, and +14.3%
from their low 19 months ago, a huge difference from 2010/11/12.
The most important implications of house price increases are:
• Banks encouraged to lend
• Consumer net worth lifted
• Builders encouraged to build
• Fence-sitters incentivized to move
• Consumer spending lifted
• Consumer and business confidence lifted. •
Dow, nas and S&P yts
nemployment rates were lower in January than a year earlier in 227 of the 372 metropolitan areas, higher in 124 areas, and unchanged in 21 areas, the U.S. Bureau of Labor Statistics reported today. Twelve areas had jobless rates of at least 15.0 percent
Total nonfarm payroll employment increased by 236,000 in February, and the unemployment rate edged down to 7.7 percent, the U.S. Bureau of Labor Statistics reported today. Employment increased in professional and business services, construction, and health care
Among the major worker groups, the unemployment rate for whites (6.8 percent) declined in February while the rates for adult men (7.1 percent), adult women (7.0 percent), teenagers (25.1 percent), blacks (13.8 percent), and Hispanics (9.6 percent) showed little or no change
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.7 percent in February on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 2.0 percent before seasonal adjustment. The gasoline index rose 9.1 percent in February to account for almost three-fourths of the seasonally adjusted all items increase. The indexes for electricity, natural gas, and fuel oil also increased, leading to a 5.4 percent rise in the energy index. The food index increased slightly in February, rising 0.1 percent. A sharp increase in the fruits and vegetables index was the major cause of the 0.1 percent increase in the food at home index, with other major grocery store food group indexes mixed. The index for all items less food and energy increased 0.2 percent in February
It’s hard to not get excited about this, but claims have looked
Repeating Pattern Repeating?
good early in 2011/12 as well, only to increase in the summer
as each year’s Growth Problem unfolded.
Economy improving just doesn't feel like it
Source: Nielsen Global Omnibus Consumer Confidence Survey Q3 2013 3

4. U.S. GROWTH SLOWED Actual and Projected U.S. GDP Growth (2006-2017)
Forecast for 2014 Moderate Growth
Actual
Forecast
3.4%
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Source: IMF World Economic Outlook, Oct 2012; from Wells Fargo forecasts as of Dec ; TCG Analysis

5. Shrinking incomes in the middle class despite gdp increases
Decline in median household income in 9 of last 13 years – is this the new normal?
Median household Income in 2012 Inflation Adjusted Dollars
Source: U.S. Census Bureau

6. So what does this mean for fresh?

7. Fresh has not been immune to price increases
Volume % on Promo vs. year ago
Avg. Retail price vs. year ago
-1.2%
+2.0%
SALE
-1.7%
PRICE
PROMOTION
Source: Nielsen Perishables Group FreshFacts® Total U.S. (FCA) weeks ending 12/28/2013 vs. Year Ago

8. Despite price increases fresh departments thrive
Fresh growth continues to outpace rest of the store
FRESH DEPARTMENTS
CENTER STORE FOOD DEPARTMENTS 1%
DOLLAR GROWTH
VOLUME GROWTH
TOTAL STORE TREND
0.2%
Source: Nielsen Perishables Group FreshFacts® Total U.S. (FCA, does not include convenience, drug or dollar) weeks ending 4/26/2014 vs. Year Ago and Total U.S. - All Outlets Combined, plus Convenience ending 5/11/2014 (UPC only)

9. Winners and losers across the store
THE IMPACTS
Winners and losers across the store
Top 10 Fastest Dollar Velocity ($ per MM ACV) Growth Categories Across the Store
Bottom 10 Biggest Dollar Velocity ($ per MM ACV) Losing Categories Across the Store
Source: Combined Nielsen Perishables Group FreshFacts® and Nielsen ScanTrack point-of-sale data sets – ranked by dollars per MM ACV for 52 weeks May 2014

10. So how does an environment like that produce a scenario like this?
Agenda (Evolutionary Traits)
Fresh is more available than ever
Fresh fits the trip
Fresh communicating consumer benefits (making a play for the need-state)
Fresh has something for almost everyone
Future of fresh – a critical piece in the total store “ecosystem”

11. Fresh is more available than ever

12. ALTERNATIVE CHANNELS Growing In Fresh
GROCERY
DRUGSTORES
DOLLAR STORES
CONVENIENCE STORES
CHANNEL2
33,445 Stores
+7%
2013 vs 2007
PERISHABLES1
Purchase Frequency
-2.6% vs YAGO
CHANNEL
41,378 Stores
+21%
2013 vs 2007
PERISHABLES
Purchase Frequency
+7.1% vs YAGO
CHANNEL
25,486 Stores
+36%
2013 vs 2007
PERISHABLES
Purchase Frequency
+2.0% vs YAGO
CHANNEL
151,282 Stores
+32%
2013 vs 2007
PERISHABLES
Purchase Frequency
+1.4% vs YAGO
Baskets with Fresh
1.5 to 2x Bigger Than The Average Basket
Source: 1. Nielsen Homescan Total Shopper View 52 weeks ending 12/28/13 versus year ago 2. Nielsen TDLinx

13. A growing number of ways to deliver fresh to consumers
City Target
Dollar General Market
Walgreen’s
Walmart Neighborhood Market
Source: Nielsen Perishables Group

14. What’s around the corner?
We’re probably not getting LESS busy
Source: Nielsen Perishables Group

15. Fresh fits the trip

16. More Outlets, More Fragmented Trips
The Fast and the Frequent
Across all outlets, more than 55% of all trips have 6 items or less
Quick Trip
Fill-in Trip
Stock-up Trip
<6 items in the basket
6-15 items in the basket
15+ items in the basket
The Power of Fresh
Trips to these outlets with fresh are up 4% (higher for quick trips)
Source: Nielsen Homescan Total Shopper View Specialty Panel, 52 weeks ending March 2014

17. Millennials drive quick trips
Overall, Millennials make more trips per household than the average shopper
Millennials are also the most important generation to quick trips, and spend the highest per quick trip
Boomers and Generation X are the most important shoppers to stock-up trips
It’s a New World
Can’t assume Millennials will make bigger trips as they age – smart quick trip strategies are critical in food retail
Source: Nielsen Perishables Group Total Shopper Study, from FreshFacts® Shopper Insights powered by DataLogix, 52 weeks ending 3/29/14,
Millennials defined as born between

18. As quick trips become more popular some fresh categories stand to gain
Notably deli and bakery, two of the fastest growing fresh departments,
QUICK TRIPS
STOCK-UP TRIPS
6 ITEMS OR FEWER
MORE THAN 15 ITEMS
MOST IMPORTANT TRIPS TO:
MOST IMPORTANT TRIPS TO:
DELI DEPT.
BAKERY DEPT.
FROZEN DEPT MEAT DEPT. PRODUCE DEPT.
DAIRY DEPT DRY GROCERY DEPT.
Quick trips are different
and offer different opportunities to win shopper dollars
Source: Nielsen Perishables Group Total Shopper Study, FreshFacts® Shopper Insights powered by DataLogix for 52 weeks ending 3/29/14

19. Fresh communicating consumer benefits

20. Consumer benefits have not changed
WHAT WE BUY
Consumer benefits have not changed
HEALTH
CONVENIENCE
QUALITY/VALUE
MULTICULTURAL/
GLOBAL
Source: Nielsen Perishables Group

21. However How consumers meet those priorities is evolving
Fresh Growth by Consumer Priority
37%
18% 7% 2%
CONTRIBUTION TO FRESH DOLLAR SALES
Source: Nielsen Perishables Group FreshFacts® Total U.S. 52 weeks ending 12/28/2013 vs. Year Ago; Products in each group are not mutually exclusive

22. Top 10 FASTEST-GROWING FRESH CATEGORIES Exemplify CONSUMER PRIORITIES
WHAT WE BUY
Top 10 FASTEST-GROWING FRESH CATEGORIES Exemplify CONSUMER PRIORITIES
DELI
PRODUCE
Specialty Fruits
$502M; +15%
Cooking Greens
$362M ; +24%
Produce Beverages
$972M; +17%
Avocados
$994M; +15%
Dips, Spreads and Toppings
$994M; +15%
Deli Breakfast Foods
$71M; +11%
Value-Added Vegetables
$1.3 B; +13%
Citrus
$2.5B; +12%
Squash and Pumpkins
$585M; +13%
MEAT
Bacon
$3B; +12%
Source: Nielsen Perishables Group FreshFacts® 52 weeks ending 12/28/13; includes categories with over 50% ACV selling over the 52 weeks ending 12/28/13

23. BRANDS PLAYs an increasingly important role in the fresh perimeter
Dollars
% Growth
Branded
$56 B
6.2%
PRIVATE LABEL
$27 B 5%
Unbranded
$54 B
4.1%
+0.4
-0.4
0.0
BAKERY
DELI
PRODUCE
MEAT
SEAFOOD
$2.6 billion
25% of department sales
$10.1 billion
45% of department sales
$14 billion
33% of department sales
$26 billion
48% of department sales
$2.3 billion
39% of sales
Source: Nielsen Perishables Group FreshFacts®

24. CONVENIENT OPTIONS BECOMING MORE POPULAR; consumers pay more for a different kind of value
VALUE-ADDED FRUIT
VALUE-ADDED VEGETABLES
Meal Prep
Side Dish
Snacking
Trays
Fresh Cut Fruit
Jars and Cups
Overwrap
HOUSEHOLD PENETRATION +0.8%
PURCHASE FREQUENCY +2.1%
DOLLAR SALES +11.9%
HOUSEHOLD PENETRATION +2.0%
PURCHASE FREQUENCY +4.0%
DOLLAR SALES +13.5%
Frozen buyers are decreasing purchase of similar product
Source: Nielsen Perishables Group FreshFacts®, 52 Weeks Ending 12/28/13; Total U.S. FCA
Nielsen Perishables Group FreshFacts® Shopper Insights powered by Spire, 52 Weeks ending 12/28/13

25. EXOTIC FLAVORS AND NEW CONSUMER EXPERIENCES
SPECIALTY FRUITS
DOLLAR SALES +14.9%
SPEND PER TRIP +3.1%
MANGO SALES +17.0%
POMEGRANATE SALES +34.7%
PAPAYA SALES +21.3%
Old products deliver a new experience
Milennialls pay a premium for a unique eating experience
Source: Nielsen Perishables Group FreshFacts®, 52 Weeks Ending 12/28/13; Total U.S. FCA, PMA 2013 trade show
Nielsen Perishables Group FreshFacts® Shopper Insights powered by Spire, 52 Weeks ending 12/28/13

26. HEALTHY ISN’T HEALTHY enough
These commodities didn’t actually become healthier did they?
SUPERFOODS
CALORIE COUNTING
Opportunity for messaging of health benefits in produce
Source: PMA 2013 trade show, brand websites

27. Connecting to a specific eating occasion
RISE OF SNACKING
STRONG GROWTH IN BRANDED OPTIONS
Opportunities exist for premium-priced offerings
Source: PMA 2013 trade show, brand websites

28. It’s working in both directions; Fresh is inspiring new concepts in other parts of the store too
Haagen-Dazs Ice Cream - Japan:
Tomato-Cherry, Carrot-Orange
Magnolia Ice Cream:
Avocado, Purple Yam
Green Giant Blend-ins:
Carrot, Butternut Squash, Spinach
Garden-Lites Muffins:
Veggie Blueberry Oat, Zucchini Banana Chocolate Chip,
Zucchini Chocolate Veggie, Carrot Berry Veggie, Golden Corn Veggie
Blue Hill Yogurt:
Carrot, Sweet Potato, Beet, Parsnip
Butternut Squash ,Tomato

29. WHAT WE BUY
Lines are blurring between aisles, more ways to solve the same the same need state
WHAT’S IN?
Low fat/low trans fat/low calorie
High protein
Nutrional ingredients
Four to five smaller meals/day
WHAT’S OUT?
High fat/high calorie
Traditional, unhealthy snacks
Processed snacks
Three large meals/day
90%
of U.S. consumers eat at least one snack a day 1
FRESH CATEGORIES GAINING SHARE OF
CENTER-STORE SNACKING OCCASIONS
Dollars Per MM ACV
Dollar Per MM ACV % Change
Category
Fresh Pretzels
$5K
50.8%
Salty Snacks
$17K
0.8%
Fresh Mini Cookies
$157
7.1%
Cookies
3.1%
Source: Source: 1. International Dairy-Deli-Bakery Association, Nielsen Perishables Group FreshFacts® 52 weeks ending 3/29/14

30. Is the whole store going to be fresh soon?
To Recap, Consumer behavior is evolving and In some Ways It’s favored fresh parts of the store
Where We Shop
HOW We Shop
WHAT WE BUY
More outlets offer us more options in more ways ->
Wider, harder battle ground
Stock-up trips still where we spend big -> but not the only opportunity to win our dollars
Understand us and connect with our priorities-> get in our basket more
SHOPPER
Is the whole store going to be fresh soon?
Source: Nielsen Perishables Group

31. We are all total store shoppers
WHO BUYS WHAT
We are all total store shoppers
Fresh Segmentation: All households segmented by ratio of fresh to
total store spending
Fresh Focused
>32%
Moderates
17-24%
Center Store Enthusiasts
11-16%
Center Store Focused
<10%
Fresh Enthusiasts
25-32%
Dividing Metric:
% fresh share of all spending
Power Store Shopper
Power Banana Shopper
Power Packaged Salad Shopper
Percent of Households
10%
23%
33%
We are all total store shoppers
Source: Nielsen Perishables Group

32. Consumers use the store to solve the meal in different ways
Fresh Focused
& Enthusiasts
Center Store Focused &
Enthusiasts
Frozen
Frozen Vegetables
Unprepared Frozen Meat
Frozen Meals
Frozen Novelties (Ice Cream Snacks)
Frozen Pizza
Frozen Potatoes
Canned
Canned Corn
Canned Beans
Canned Tomatoes
Canned Green Beans
Canned Pineapple
Canned Peaches
Canned Spaghetti
Drinks
Milk
Refrigerated Juice
Carbonated Beverages
Shelf-Stable Juice
Sweets
Baking Supplies
Bakery Desserts
Chocolate Candy
Cookies
Fresh Fruits
Fresh Grapes
Fresh Oranges
Fresh Stone Fruit
Fresh Melons
Fresh Bananas
Fresh Apples
Fresh Berries
Fresh Vegetables
Fresh Tomatoes
Fresh Celery
Fresh Peppers
Fresh Mushrooms
Fresh Lettuce
Fresh Potatoes
Fresh Onions
Fresh Carrots
Source: Nielsen Homescan Panel, 52 weeks ending 03/29/2014

33. The future of fresh

34. TOTAL STORE CONNECTIVITY
Future isn’t a fresh take-over, but understanding the role fresh is going to play in the store
We’ve already observed many factors have played a role in the growth of fresh
TOTAL STORE CONNECTIVITY
Total store as a complex “ecosystem” with many players that have impact on one another
Source: Nielsen Perishables Group

35. +19 Million 314 Drawing Connections
Quantify impact, Identify friends and foes, Act with new paths to win
Enabling Total Store Sales Analytics
Enabling Total Store Buyer Analytics
New dataset for Nielsen Advanced Analytics combining UPC and non-UPC category retail sales data
Improved Nielsen Homescan Total Shopper View, a specialty panel where shoppers track UPC items and random-weight category purchases
NIELSEN TOTAL STORE CONNECTIVITY STUDY
49,449
+19 Million
314
Sales Correlations
calculated for every store and every week
Categories across the entire store (incl. food & non-food)
Trips
across all outlets
Source: Nielsen Perishables Group

36. defining ranges of Sales connectivity across the store-1 +1
-0.5
+0.5
Strong negative
correlation
Weak
correlation
Strong positive correlation
Category sales trend in opposing direction measured over time (week/store level)
Category sales trend in the same direction over time (week/store level)
Average correlation factor between any two categories = .32
Source: Nielsen Total Store Connectivity Study, 2014

37. Initial Connectivity Confirmations and Surprises – About Meat
BEVERAGES:
Tea & Cocoa: 0.70
Water: 0.64
New age bev: 0.63
SNACKS:
Salty Snacks: 0.69
Fresh Grapes: 0.68
Dairy Brick cheese: 0.71
.32
Average correlation between any two categories
SWEETS/DESSERTS:
Frozen Dessert: 0.69
Fresh Cakes: 0.68
Fresh Cookies: 0.56
.42
Average correlation between beef and any other category
BEEF
INGREDINTS:
Sauces/seasonings: 0.74
Condiments: 0.72
Fresh Onions: 0.65
Fresh beef is an ANCHOR category with strong connections across occasions and aisles throughout the TOTAL STORE
SIDE DISHES:
Fresh Potatoes 0.71
Canned goods: 0.68
FZ vegetables: 0.62
Source: Nielsen Total Store Connectivity Study sales correlation modeling, preliminary findings as of July 2014

38. Shifts in “anchor” category performance can impact sales across the entire store
Volume %Chg vs. YAGO
Many center-store products were directly impacted when fresh beef prices increased in What will happen in 2014?
+16%
+11%
+10%
+12%
+13%
+15%
+9%
Total Beef ARP* %Chg vs. YAGO
Source:  Nielsen Perishables Group FreshFacts, Total U.S. – Traditional Grocery;
Nielsen Scantrack, Total U.S. – All Outlets Combined; *ARP = Average Retail Price (per pound)
Source:  Nielsen Perishables Group FreshFacts, Total U.S. – Traditional Grocery; Nielsen Scantrack, Total U.S. – All Outlets Combined;

39. Low number of touch points across the store
Initial Connectivity Confirmations and Surprises – About Deli Prepared Foods
Despite their size and growth, some categories remain relatively independent
DELI PREPARED FOODS
$12.6 B, up 7.6%, 95% HH penetration
Average correlation between deli prepared categories and others
.17
INDEPENDENT =
Low number of touch points across the store
.32
Average correlation between any two categories
Growth in INDEPENDENTS like deli prepared indicate a retailer is winning a unique buyer, a unique trip or both
Source: Nielsen Total Store Connectivity Study sales correlation modeling, preliminary findings as of July 2014

40. Share of Sales By Trip Type
Strong sales in INDEPENDENT categories can DRIVE incremental growth for retailers
Share of Sales By Trip Type
DELI PREPARED
SANDWICHES
$1.3B, up 6%, 29% HH penetration
DELI PREPARED
PIZZA
$667M, up 3%, 18% HH penetration
TOTAL STORE
Quick trip
Fill-in trip
Stock-up trip
<6 items in the basket
Most deli prepared buying happens on quick trips and does appear to cannibalize stock-up meal solutions from other parts of the store
6-15 items in the basket
15+ items in the basket
Source: Nielsen Homescan Total Shopper View Specialty Panel, 52 weeks ending 03/29/2014

41. conclusion

42. Key Take-Aways
The market environment is always changing (economy, natural events, store openings and closings)
There are some “constants” (the desire for quality, convenience, savings etc…)
What’s evolving is how consumers solve for these “constants” – the increasing diversity of consumer types, store formats and products competing for the same need state makes this whole ecosystem a little more complex
Today we’ve investigated some examples of fresh products that are winning in the current environment, but fresh success doesn’t always lead to total store success
Success down the road relies on understanding how consumers use not only fresh, but all products in the store to solve the meal
Source: Nielsen Perishables Group

43. SUCCESS IN THE “ECOSYSTEM”
Put more simply
The evolution of analytics is a model that puts the consumer at the center
PAST
FUTURE
SUCCESS IN THE “ECOSYSTEM”
Source: Nielsen Perishables Group

44. Thank You
Source: Nielsen Perishables Group

45. Questions? Contact NIELSEN PERISHABLES GROUP
Chris Balzer │

46. Initial Connectivity Confirmations and Surprises – About Meat
BEVERAGES:
Tea & Cocoa: 0.70
Water: 0.64
New age bev: 0.63
SNACKS:
Salty Snacks: 0.69
Fresh Grapes: 0.68
Dairy Brick cheese: 0.71
.32
Average correlation between any two categories
SWEETS/DESSERTS:
Frozen Dessert: 0.69
Fresh Cakes: 0.68
Fresh Cookies: 0.56
.42
Average correlation between beef and any other category
BEEF
INGREDINTS:
Sauces/seasonings: 0.74
Condiments: 0.72
Fresh Onions: 0.65
Fresh beef is an ANCHOR category with strong connections across occasions and aisles throughout the TOTAL STORE
SIDE DISHES:
Fresh Potatoes 0.71
Canned goods: 0.68
FZ vegetables: 0.62
Source: Nielsen Total Store Connectivity Study sales correlation modeling, preliminary findings as of July 2014

47. Shifts in “anchor” category performance can impact sales across the entire store
Volume %Chg vs. YAGO
Many center-store products were directly impacted when fresh beef prices increased in What will happen in 2014?
+16%
+11%
+10%
+12%
+13%
+15%
+9%
Total Beef ARP* %Chg vs. YAGO
Source:  Nielsen Perishables Group FreshFacts, Total U.S. – Traditional Grocery;
Nielsen Scantrack, Total U.S. – All Outlets Combined; *ARP = Average Retail Price (per pound)
Source:  Nielsen Perishables Group FreshFacts, Total U.S. – Traditional Grocery; Nielsen Scantrack, Total U.S. – All Outlets Combined;

48. Initial Finding: An “Anchor” like fresh beef connects In Different Ways to Different Buyers
Each connection reveals a unique buyer profile- showing opportunity for different solutions even in similar categories
SIDE DISHES1:
Potatoes 0.71
Canned goods: 0.68
FZ vegetables: 0.62
SWEETS/DESSERTS1:
Frozen dessert: 0.69
Fresh cakes: 0.68
Grocery cookies: 0.56
Highest Indexing Demographics/Fresh Segment for Beef And Side Dishes:
Highest Indexing Demographics/Fresh Segment for Beef And Sweets:
Canned Veg2
Frozen Desserts2
Grocery Cookies
Frozen Veg
BEEF
BEEF
Empty Nesters
Less Educated
Couples
Hispanic-skew
Fresh/Center Moderates
Gen X to Boomers
Affluent
Higher Education
HH with older children
Fresh Enthusiasts
Empty Nesters and
HH w older children
Affluent
Comfortable country
Fresh Enthusiast
Gen X
Less educated
Young families
Mid-income
Hispanic
Fresh Potatoes
Fresh Cakes
Boomers and older
Lower education levels
Couples
Hispanic-skew
(Similar to Canned Veg)
Rural
Fresh Focused
Small and young families
Mid-income to affluent
Hispanic
Fresh Enthusiasts
Sources: 1- Nielsen Total Store Connectivity Study sales correlation modeling, preliminary findings as of July 2014 ; 2- Nielsen Homescan Total Shopper View Specialty Panel, latest 52 weeks ending 3/29/14

49. Low number of touch points across the store
Initial Connectivity Confirmations and Surprises – About Deli Prepared Foods
Despite their size and growth, some categories remain relatively independent
DELI PREPARED FOODS
$12.6 B, up 7.6%, 95% HH penetration
Average correlation between deli prepared categories and others
.17
INDEPENDENT =
Low number of touch points across the store
.32
Average correlation between any two categories
Growth in INDEPENDENTS like deli prepared indicate a retailer is winning a unique buyer, a unique trip or both
Source: Nielsen Total Store Connectivity Study sales correlation modeling, preliminary findings as of July 2014

50. Share of Sales By Trip Type
Strong sales in INDEPENDENT categories can DRIVE incremental growth for retailers
Share of Sales By Trip Type
DELI PREPARED
SANDWICHES
$1.3B, up 6%, 29% HH penetration
DELI PREPARED
PIZZA
$667M, up 3%, 18% HH penetration
TOTAL STORE
Quick trip
Fill-in trip
Stock-up trip
<6 items in the basket
Most deli prepared buying happens on quick trips and does appear to cannibalize stock-up meal solutions from other parts of the store
6-15 items in the basket
15+ items in the basket
Source: Nielsen Homescan Total Shopper View Specialty Panel, 52 weeks ending 03/29/2014

51. Solutions center shopping
Trying to redefine convenience

52. fighting for foot traffic
Piggy backing partners

53. Blur the lines to create an experience
Source: Mariano’s (Business Wire & Facebook); Leopardo (drawing); Source: KSDK-St. Louis; Photography by J. Pollack Photography
Sources: Supermarket News; quote by Randy Edeker, Hy-Vee chairman, president & CEO

54. Make it even easier than ever for shoppers
You don’t even have to leave your home

55. A FULL STORE PERSPECTIVE WILL HELP KRAFT…
 …understand how to maximize product performance based on understanding competitive threats in the store but also aligning more strategically with key fresh drivers
…optimize trade investments by designing and evaluating more compelling cross-aisle partnerships
…innovate new fresh concepts with Kraft product lines and identify white space opportunities (product innovation, acquisitions, retail targeting)
…provide total store leadership to retail partners – new solutions to win bigger baskets and more frequent trips

56. Trip Types: Frequency or Spend?
Larger item trips still drive two-thirds of a supermarkets’ bottom line – but they only happen around one-quarter of the time
Quick Trip
Fill-in Trip
Stock-up Trip
Share of Trips- Supermarket Grocery2
41%
32%
27%
13%
24%
63%
Share of Store Sales
Shifting Focus
Quick trips are becoming increasingly important to win
Source: 1- Nielsen Homescan Total Shopper View Specialty Panel, 52 weeks ending March FreshFacts® Shopper Insights powered by DataLogix, 52 weeks ending May 2014

57. Despite tightening wallets, interest in traditional promotion wanes
Trade promotional spend is among the largest expenses for manufacturers, but success is low, even in a period of rising food costs.
Of the $216B in promoted sales, only 17% is mutual growth that benefits both retailers and suppliers
Discounts down 2 pts
Source: 1. Nielsen; 2. Market Track

58. Despite tightening wallets, specialty retailers win on innovative execution and experience
Successful retailers are nailing jobs
Same-Store Sales: Average Growth, latest 52 weeks
Strong affluent shopper attraction
Strong lower income attraction
No strong attraction
Source: Company press releases; monthly or quarterly news releases – excluding gas

59. Priority Areas Impact meal occasions Across the Store: BREAKFAST
WHAT WE BUY
Priority Areas Impact meal occasions Across the Store: BREAKFAST
DOLLAR % GROWTH
VS YAGO
VOLUME % GROWTH VS YAGO
FRESH BREAKFAST CATEGORIES
6-Count Muffins
Deli Breakfast Eggs
Strudel
Mini Bagels
Deli Breakfast Sandwiches
French Toast/Pancakes/Waffles
+94%
+49%
+47%
+26%
+22%
+15%
+76%
+22%
+31%
+18%
+13%
+21%
Breakfast heating up outside store
Source: 1. International Dairy-Deli-Bakery Association, Deli Business, Jan Nielsen Perishables Group 52-weeks ending 2/22/ Supermarket News

60. Concern Towards Health & Wellness
WHAT WE BUY
Priority AREAS Impact Retailers: THE Most Health-Engaged shop and SPEND
Concern Towards Health & Wellness
Across All Outlets Combined
WELL BEINGS are active shoppers & spend the most annually
Source: Natural Marketing Institute (NMI), Health & Wellness Segmentation, Nielsen Homescan for Total U.S. – 52 weeks ending 12/28/2013; segment definitions in appendix

61. These concepts go beyond fresh
Health, convenience, quality/value and global are driving trends:
Inside the Store
And Beyond

62. Who’s driving your growth?
While a category may be growing or declining overall, performance within segments varies signaling where focus should be to grow the category
Dollar Growth by Segment:
Fresh Focused
Fresh Enthusiasts
Center Store Enthusiasts
Center Store Focused
Total
Moderates
Fresh Chicken
Canned Soup
Wine
Source: Nielsen Homescan Panel, 52 weeks ending 03/29/2014 & YAGO

63. Center Store Enthusiasts Who are they more likely to be?
WHO BUYS WHAT
They shop differently- But Each segment has an IMPACT Across Aisles and OUTLETS
Fresh Focused
Fresh Enthusiasts
Moderates
Center Store Enthusiasts
Center Store Focused
Who are they more likely to be?
Affluent singles
Affluent, mid-size families
Large families
Start-up families
Senior singles
>120
<80
Index to Total Panel
Avg Store Trip
$36.85
$37.35
$35.15
$33.22
$32.16
125 trips
138 trips
162 trips
189 trips
197 trips
Store Visits
Channel Trips
Index
$21.13
$17.87
$14.69
$11.88
$8.84
Avg Fresh Trip
$23.31
$25.36
$25.39
$24.64
$23.25
Avg Center Trip
Channel:
Mass/Super
Warehouse
Convenience/Gas
Drug
$2MM+ Grocery
Source: Fresh Segmentation, Nielsen Homescan Total Shopper View Panel, 52 weeks ending 03/29/2014

64. = size indicates % of trip dollars
BUT It’s STILL All Connected And STEADY– Beyond DEPARTMENT and Aisle Borders
Seafood
Dairy
Meat
Deli
Dry Grocery
Beverage Center
HBC
Non-Food
Frozen
Produce
Percent of trips
Cafe
Florist Rx
Bakery
= size indicates % of trip dollars
Source: Nielsen Perishables Group Total Shopper Study, Homescan Total Shopper View Specialty Panel, 52 weeks ending 3/29/14

65. Evolution of food retail
PAST
PRESENT
FUTURE
SHOPPER
Retailer: grocery dominated
Retailer: more & more competition
Center store:
brands, innovation
Center store:
disparate growth
Put shoppers at the center, take a holistic approach
Fresh:
commodity driven
Fresh: growing more savvy

66. CONVENIENT OPTIONS BECOMING MORE POPULAR; consumers pay more for a different kind of value
VALUE-ADDED FRUIT
VALUE-ADDED VEGETABLES
Meal Prep
Side Dish
Snacking
Trays
Fresh Cut Fruit
Jars and Cups
Overwrap
HOUSEHOLD PENETRATION +0.8%
PURCHASE FREQUENCY +2.1%
DOLLAR SALES +11.9%
HOUSEHOLD PENETRATION +2.0%
PURCHASE FREQUENCY +4.0%
DOLLAR SALES +13.5%
Frozen buyers are decreasing purchase of similar product
Source: Nielsen Perishables Group FreshFacts®, 52 Weeks Ending 12/28/13; Total U.S. FCA
Nielsen Perishables Group FreshFacts® Shopper Insights powered by Spire, 52 Weeks ending 12/28/13

67. EXOTIC FLAVORS AND NEW CONSUMER EXPERIENCES
SPECIALTY FRUITS
DOLLAR SALES +14.9%
SPEND PER TRIP +3.1%
MANGO SALES +17.0%
POMEGRANATE SALES +34.7%
PAPAYA SALES +21.3%
Old products deliver a new experience
Milennialls pay a premium for a unique eating experience
Source: Nielsen Perishables Group FreshFacts®, 52 Weeks Ending 12/28/13; Total U.S. FCA, PMA 2013 trade show
Nielsen Perishables Group FreshFacts® Shopper Insights powered by Spire, 52 Weeks ending 12/28/13

68. HEALTHY ISN’T HEALTHY enough
These commodities didn’t actually become healthier did they?
SUPERFOODS
CALORIE COUNTING
Opportunity for messaging of health benefits in produce
Source: PMA 2013 trade show, brand websites

69. Connecting to a specific eating occasion
RISE OF SNACKING
STRONG GROWTH IN BRANDED OPTIONS
Opportunities exist for premium-priced offerings
Source: PMA 2013 trade show, brand websites

70. EXAMPLE of CONNECTIVITY FINDINGS
Correlations and household in common can confirm and surprise with the strength of what’s connected
Fresh meat sales connections strongest outside of fresh while the fresh departments are most tied to each other
Growth in INDEPENDENTS like deli prepared foods indicate a retailer is winning a unique buyer, a unique trip or both
BEEF
INDEPENDENT =
Low number of touch points across the store – incremental opportunities
ANCHOR =
Highly connected categories – critical to everyone’s success
.32
.17
.42
Average correlation between any two categories
Average correlation between deli prepared categories and others
Average correlation between beef and any other category
Source: Nielsen Perishables Group Total Store Connectivity Study

71. EXAMPLE CONNECTIVITY STUDY FINDINGS
Demographics and behavioral factors also play a vital role in understanding which consumers drive category connections across the store
Chicken breasts
Macaroni and cheese
Pork chops
Macaroni and cheese
Ground beef
Macaroni and cheese
Purchase pairing indexes high for…
Purchase pairing indexes high for…
Purchase pairing indexes high for…
Convenience and value focused
Low – middle income
Families with children in-home
Health-focused
Middle – affluent income
Families with young children or
Couples without children
Price-focused
Families with children
Couples without children
The Power of Sales + Shopper in Connectivity Demographics and behavioral factors also play a vital role in understanding which consumers drive category connections
Source: Nielsen Perishables - The Full Article At

72. Initial Finding: An “Anchor” like fresh beef connects In Different Ways to Different Buyers
Each connection reveals a unique buyer profile- showing opportunity for different solutions even in similar categories
SIDE DISHES1:
Potatoes 0.71
Canned goods: 0.68
FZ vegetables: 0.62
SWEETS/DESSERTS1:
Frozen dessert: 0.69
Fresh cakes: 0.68
Grocery cookies: 0.56
Highest Indexing Demographics/Fresh Segment for Beef And Side Dishes:
Highest Indexing Demographics/Fresh Segment for Beef And Sweets:
Canned Veg2
Frozen Desserts2
Grocery Cookies
Frozen Veg
BEEF
BEEF
Empty Nesters
Less Educated
Couples
Hispanic-skew
Fresh/Center Moderates
Gen X to Boomers
Affluent
Higher Education
HH with older children
Fresh Enthusiasts
Empty Nesters and
HH w older children
Affluent
Comfortable country
Fresh Enthusiast
Gen X
Less educated
Young families
Mid-income
Hispanic
Fresh Potatoes
Fresh Cakes
Boomers and older
Lower education levels
Couples
Hispanic-skew
(Similar to Canned Veg)
Rural
Fresh Focused
Small and young families
Mid-income to affluent
Hispanic
Fresh Enthusiasts
Sources: 1- Nielsen Total Store Connectivity Study sales correlation modeling, preliminary findings as of July 2014 ; 2- Nielsen Homescan Total Shopper View Specialty Panel, latest 52 weeks ending 3/29/14