TOP TRENDS in FRESH FOODS Connected Consumer and Personalization Webinar 4 of 5

BRINGING TO LIFE: TOP TRENDS in FRESH FOODS Connected Consumer and Personalization Webinar 4 of 5

Sally Lyons Wyatt Jennifer Pelino EVP & Practice Leader SVP Omni Channel Media

Copyright © 2018 Information Resources, Inc. (IRI). Confidential and proprietary. 1 FMI is the trade association that serves as the voice of food retail. We assist food retailers in their role of feeding families and enriching lives.

Our members are food retailers, wholesales and suppliers of all types and sizes

FMI provides comprehensive programs, resources and advocacy for the food, pharmacy and grocery retail industry

CONSUMER & FOOD SAFETY GOVERNMENT INDEPENDENT CENTER STORE COMMUNITY AFFAIRS & DEFENSE RELATIONS OPERATOR PRIVATE BRANDS SUPPLY CHAIN TECHNOLOGY

ASSET COMMUNICATION EDUCATION FRESH FOODS HEALTH & WELLNESS INFORMATION RESEARCH SUSTAINABILITY WHOLESALER PROTECTION SERVICE

FMI is committed to the growth and success of fresh companies and their partners. FMI provides resources and networks that support the interests of member companies throughout the global, fresh produce supply chain, including family-owned, private and publicly traded businesses as well as regional, national and international companies. Emphasis on fresh • Produce • Meat • Seafood • Deli/In-store, fresh prepared foods and assortments • Bakery Rick Stein Fresh Foods • Floral Vice President, Fresh Foods Food Marketing Institute [email protected] 202.220.0700

Research and Education Networking Advocacy In-depth information, trends and Share ideas, explore best Understand what is going on in insights to foster innovation, practices and develop business Washington and make your take advantage of new relations voice heard opportunities and help develop winning strategies

Copyright © 2018 Information Resources, Inc. (IRI). Confidential and proprietary. 5 FMI Fresh Foods Executive Committee (FEC) John Ruane (Chair) Nate Stewart John Grimes Terry Murphy Ahold USA Hy-Vee Weis Markets Wakefern

Rick Steigerwald (Co-Chair) John Haggerty Mark Doiron Scott Evans Lund Food Holdings, Inc. Burris Logistics Fresh Thyme Price Chopper/Mkt 32

Tom DeVries Mark Hilton Rick Findlay Randy Riley Giant Eagle, Inc. Harris Teeter LLC Fresh Thyme Kroger

John Beretta Geoff Wexler Jim Lemke Frank Romero Albertsons, LLC Wakefern Food Corporation CH Robinson Fresh Kroger Steve Howard Dave Bornmann Kirk Laboyteaux Bristol Farms/Lazy Acres Amanda Dentici Publix Super Markets, Inc. Brookshire Grocery Company Fairway Markets Emily Coborn Scott Bradley Dan Murphy Coborns Paul White Target Corporation SuperValu Luckys Markets Jerry Goldsmith Jerry Chadwick Pat Pessotto Spartan Nash Nicole Wegman* Fresh Solutions Longo Brothers Fruit Markets Inc. Wegmans Food Markets, Inc. Mike Papaleo Alex Corbishley Nick Carlino C&S Wholesalers Target Corporation MDI Distributors Anthony Sattler * Silent members Buddy Jones Don Sanderson C&S Wholesalers MDI Distributors Meijer, Inc. Pat Brown Dan Koch Geoff Waldau Albertsons LLC Associated Wholesale Grocers, Inc. Food Lion

John Ruane (Co-Chair) Jeff Oberman Greg Livelli Jeff Thompson Ahold USA United Fresh Produce Assoc. Hussmann Trident Seafood

Rick Steigerwald (Co-Chair) Janet Riley Robb MacKie John Dunne Lund Food Holdings, Inc. North American Meat Institute American Bakers Assoc. Acosta

All- FEC Members Galit Feinreich Jim Huston Lynn Egner FMI Fresh Executive Council Ready Pac Foods, Inc. Johnsonville Hormel Foods

Chris Dubois Tom Super Chad Gregory Sally Lyons Wyatt IRI National Chicken Council United Egg Producers IRI

Michael Eardley Jarrod Sutton Jessica Harris Wendy Reinhardt Kapsak International Dairy-Deli-Bakery Assoc. National Pork Board Earthbound/White Wave Produce for Better Health (PBH)

Jason Jerome Joe Watson Eric Gassaway Michael Lang National Cattleman's Beef Association Produce Marketing Assoc. Monsanto Invatron

Sarah Schmansky Joe Weber John Knorr Tom Daniel Nielsen Perishables Group Smithfield Foods Inc. Phillips Seafood Sterilox/Chemstar

Paul Mastronardi Art Yerecic Mike Celani Randy Evins Mastronardi Produce Yerecic Label Wonderful SAP

David Sherrod Brad Roche Chandra Macleod Tom Windish SE Produce Council Hill Phoenix Aqua Star Seafood Cargill

TOTAL STORE SALES TOTAL FRESH PERIMETER $783B $140.8B 77%

of perimeter 3- year dollar growth $5.5B coming from the $33B vs. 3 years Produce vs. 3 years ago ago department

Source: Total Store View + Perimeter Market Advantage, MULO 52-weeks ending 6-17-18 © 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 8 The Fresh Perimeter Departments Make Up a Quarter of Food & Beverage MULO Sales Driven by Produce and Meat

$54B $4.4B $95.7B FROZEN SEAFOOD $565B TOTAL F&B BEV & LIQUOR

$6.3B $49.8B

BAKERY MEAT

$55.6B $180B DAIRY $8.3B GENERAL FOOD $59.6B $12.4B DELI MEAT & CHEESE PRODUCE DELI PREPARED CENTER STORE PERIMETER

Source: Dollar Sales, IRI Total Store View + Perimeter Market Advantage, 52 weeks ending 6-17-18 vs. Year Ago; © 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 9 Perimeter is No Longer the Slam Dunk Store Sales Growth Engine of Years Ago

EDIBLES 1.9% 2.7% 1.5% 2.5% 2.5% 2.0% 1.3% 2.3% 1.0% 1.2% 3.5% 0.4%

BEVERAGES FROZEN GENERAL FOOD LIQUOR REFRIGERATED

-0.5% -0.4% -0.3% 1.6%

1.2% 0.7% 1.2% 3.5% PERIMETER BAKERY DELI CHEESE DELI MEAT DELI PREPARED 1.2% 1.3% 1.2% 1.0% 1.5%

2.5% 1.9% -0.5%

PRODUCE SEAFOOD MEAT

Source: Total Store View + Perimeter Market Advantage, MULO 52-weeks ending 6-17-18 % CHG VS. YAGO CAGR ‘15-’18 © 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 10 Fresh Perimeter Growth Slow Down in Recent Years While Edibles Heats Up

5.4%

4.5%

2.2% 2.1% 2.0% 2.2%

1.2% 1.2% 1.3% 0.7% 0.6%

CY 2014 CY 2015 CY 2016 CY 2017 Latest 52 YTD 2018

EDIBLE PERIMETER

Source: Total Store View + Perimeter Market Advantage, MULO 52-weeks ending 6-17-18 Sales change vs. Prior year by period © 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 11 Today’s Top 10 Trends

2016 2017

“Fresh”en Up @... IRI Worldwide.com/insights or fmi.org/TopTrendsInFresh

LEVERAGED CONFIRMED VALIDATED

relevance & primary & trends evolution with secondary 2016 & 2017 consumers research

We all know that consumers are “connected”, but how is it impacting shopping and purchasing Fresh today?

Many consumers are using more online/digital resources when shopping for fresh foods vs. last year

Younger Older Total Millennials GenX Boomers Boomers Desktop/Laptop 24% 30% 24% 20% 18%

Smartphone/Tablet 40% 51% 50% 31% 11%

Source: IRI 2018 Fresh Digital Survey Copyright © 2018 Information Resources, Inc. (IRI). Confidential and proprietary. 15 Before Going to the Store, All Generations are Using Online to Look for Recipes but Millennials are Setting the Tone for the Future

Younger Older Total Millennials GenX Boomers Boomers Desktop/Laptop 15% 23% 12% 12% 7%

Smartphone/Tablet 20% 34% 21% 12% 2%

From in 2016… …to in 2018, 48% of all shoppers still use newspapers, store circulars, and magazines to plan

Indication that the traditional methods are slowly losing effectiveness

…to 2018, with half of all In fact, we see the shift from consumers going online to 2016… seek coupons and sales from coupon, retailer and manufacturers' websites

Over a third compare prices

11% compare prices using a laptop or personal computer while 17% use a digital device

9% compare prices offline

Source: IRI 2018 Fresh Digital Survey Copyright © 2018 Information Resources, Inc. (IRI). Confidential and proprietary. 19 Consumers are Leveraging Online Resources to Research Ways to Use the Products They are Going to Buy

Younger Older Total Millennials GenX Boomers Boomers Desktop/Laptop 7% 11% 5% 5% 4%

Smartphone/Tablet 14% 26% 14% 10% 0%

10% 25% 5% 31% 10% New populations from 2017 to 2022 8% 6% 13% 1.7M 14% number Hispanic Americans/year 400k 75% Number Black non-Hispanics/year 42% 51% 500k Number Asian & Pacific Islander non- Hispanics/year

Age 0-4 Millennial ('81-'97) Boomer ('46-65) All Other Non-Hispanic White Non-Hipanic Black Non-Hispanic Asian Hispanic

Source: Geoscape AMDS 2017/Average population growth Copyright © 2018 Information Resources, Inc. (IRI). Confidential and proprietary. 22 Where Consumers Bought Fresh Food would have Looked Much Different 10 Years Ago vs. Today

Farmers Market 4.2% 1.2% 2.6% Club 3.6% 100% 1.2% 3.3% Mass 17.8% 90% 25.6% 21.9% Specialty Grocery 80%

70%

60% Traditional Grocery 50%

40%

30%

20%

10%

0% Millennials GenX Babyboomers

Source: IRI 2018 Fresh Digital Survey – “Where do you typically shop for fresh food?” Copyright © 2018 Information Resources, Inc. (IRI). Confidential and proprietary. 23 Generational Influences Matter When Consumers Pick Outlets, therefore Retailers and Manufacturers Need to Think about Them in Regards to Personalization New ethnic foods/varieties 45% 39% 36% BABY MILLENNIAL GEN X BOOMERS

Foods that comply with my dietary restrictions (e.g. allergies, vegetarian diet) 20% 17% 12% BABY MILLENNIAL GEN X BOOMERS Unique/exotic food options 16% 10% 5% BABY MILLENNIAL GEN X BOOMERS

Copyright © 2018 Information Resources, Inc. (IRI). Confidential and proprietary. 24 Source: 2017 Fresh Food Shopping Trends Survey - Very Important/Primary Reason I Choose To Shop Store In Fact, Consumers are Making Different Choices when They Purchase More Fresh Food Products That are Personalized Buying less prepackaged frozen meals 52% 52% 40% BABY MILLENNIAL GEN X BOOMERS

Eating out at a restaurant less 54% 39% 39% BABY MILLENNIAL GEN X BOOMERS Getting less take-out from a restaurant 49% 35% 34% BABY MILLENNIAL GEN X BOOMERS

Source: 2017 Fresh Food Shopping Trends Survey - As you purchase more fresh food products that are personalized (e.g., new specialty products, ethnic meals, store-within-a-store items, meal kits, semi-prepared meals) - Which of the following types of activities or purchases are you doing less of compared to the past? Copyright © 2018 Information Resources, Inc. (IRI). Confidential and proprietary. 25 Consumers are Making Different Choices When They Purchase More Fresh Food Products That are Personalized Ordering less in-home delivery 41% 28% 26% BABY MILLENNIAL GEN X BOOMERS

Shopping farmers markets less 9% 11% 16% BABY MILLENNIAL GEN X BOOMERS Shopping ethnic food stores less 7% 12% 17% BABY MILLENNIAL GEN X BOOMERS

Source: 2017 Fresh Food Shopping Trends Survey - As you purchase more fresh food products that are personalized (e.g., new specialty products, ethnic meals, store-within-a-store items, meal kits, semi-prepared meals) - Which of the following types of activities or purchases are you doing less of compared to the past? Copyright © 2018 Information Resources, Inc. (IRI). Confidential and proprietary. 26 Therefore, We Need to Meet Consumers Where They Are Along the Path to Purchase and Beyond…

Make/Use Shop

Plan

The kaleidoscope of demographic changes and income bifurcation and technology in the US is driving the atomization of American lives, how they plan and consume.

Resulting in continued rise of specialty departments and customized services, as well as, explosion of assortment demands driving the need for personalization.

Did It Impact Consumer Behavior?

Did It Result In A Sale?

Did It Drive A Trip?

Know your Deliver key against needs consumers & wants at and the right shoppers time, channel & message

Understand Engage what they shoppers are looking when, where for in & how it products & matters most message

PERSONAL MAGICAL

SIMPLE EMPATHETIC

two four

This Just In

Look At This Tweet This

SALE Like This

Personal information US internet users willing to share with a brand for a more tailored personal experience

Email Address 72% 81% First Name 69% Gender 67%

Of consumers are comfortable exchanging their Age 63% private information with grocery stores for relevant Last Name 50%

Shopper Preferences 47%

Hobbies or Interests 46%

Source: 84.51°, IRI Growth Summit Ethnic Demographics 37% Avionos, The 2018 Consumer Expectations Report

71% 33% 72% 66% Of consumers want Are more likely to buy Effortless Program where Personalized Offers Based more personalized from a brand that sends Offers are Automatically on Purchase History are experiences online tailored messaging Redeemed more appealing

Source: Forbes & The Loyalty Divide conducted by Morar HPI

Consumer Generated

Purchase Based Targeting In-store Actions

© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 38 Consumer Generated Sales Can Add Life to a New Product; Cannoli Chips Saw Success with a Social Media Personality Posting a Recipe

Lisa Huff = 4.3M monthly viewers

ACV $ sales Weighted

Copyright © 2018 Information Resources, Inc. (IRI). Confidential and proprietary. 39 Consumers are a Flutter Over Heart Topics on Social Media Talking Healthy Eating, Diet and Exercise…But are Retailers Helping Consumers?

#’s revolve around education of heart disease, heart healthy eating, living, guidelines, diets and exercises

Copyright © 2018 Information Resources, Inc. (IRI). Confidential and proprietary. 40 There is Opportunity for Retailers to Drive Positive Associations & Consumer Connections During American Heart Association Month with Fresh Messaging

Despite consumer chatter online, most heart-healthy produce not seeing lift in Feb., except citrus, asparagus and berries

Citrus

NC Apples Berries

Tomatoes

Kale

Beans

Asparagus

Broccoli

Garlic

Product

-6% -4% -2% 0% 2% 4% 6% 8%

Source: IRI Social Advantage & IRI TSV February average $ sales % difference than Q1 avg Copyright © 2018 Information Resources, Inc. (IRI). Confidential and proprietary. 41 Use Social Platforms to Stay Relevant and Assist Your Connectivity with Consumers as the Conversation is Evolving

Rising #’s include: Mediterranean Diets, Avocadoes, and Sustaining a Healthy Living

Topline words/phrases Cooking, Eating, Vegan, Paleo, Organic Diets Ingredients and recipes

Copyright © 2018 Information Resources, Inc. (IRI). Confidential and proprietary. 43 …But Gluten Free Labeling has an Opportunity in Fresh Whereas the Rest of the Store Is Capitalizing on These Valuable Consumers

Key Category Sales Increases – Spins Attribution

Gluten Free Buyers spend 13% more annually on food categories outside perimeter

Gluten-Free labeling is not shown in fresh random-weight items…Make it Easy for consumers to find

Source: IRI Market Advantage with SPINS attribution – Filtered on “Labeled Gluten Free” Items across Edibles IRI Household Panel, diet segmentation survey 2017 Copyright © 2018 Information Resources, Inc. (IRI). Confidential and proprietary. 44 How Can you Capitalize?

• Make a strong first impression • Boost blog engagement • Help consumers discover relevant content • Let your content drive shopping • Provide quick access to similar products • Make finding products simple with the attributes they want

Purchase Based Targeting

Consumer Generated In-store Actions

Hey, we both like the same account on Instagram. We must have a lot in common.

Copyright © 2018 Information Resources, Inc. (IRI). Confidential and proprietary. 47 Purchased-based Behavior Targeting Avoids Key Missteps in Personalization Efforts Jamie, a Foodie and Avid Facebook User, Gets a Sponsored Ad for Beef, What’s For Dinner Ads…

But her actual cash register receipts shows she is a vegetarian

Current Lapsing Current High shoppers buyers shoppers of propensity Of our of our key food to buy our brands/ brands trends brands categories

Product Uplift Increases Over 3x–4x Purchase-based Targeting Alone by Using Purchase-based Targeting Far Exceeds Other Targeting Tactics

Purchase-Based Household- Indexed $/HH Uplift level transaction PBT done byPBT 84.51 100 Behavioral data PBT Purchased collected PBTBehavioral done elsewhere 26 propensity passively Contextual data ContextualCONTEXTUAL 18 collected by Online surveys, DEMOGRAPHIC behavior search Demographic 17 Demographic data (clicks, history, etc. views) OtherOTHER 37 Life-stage collected by data cookies collected by the census Traditional Good Better Best

Residence Restaurants and Retailers Purchases Fast Casual Visited Places Visited

Copyright © 2018 Information Resources, Inc. (IRI). Confidential and proprietary. 51 Seafood Presents a Great Opportunity for Purchase-based Targeting Since There are key Drivers of Consumers Choice In and Out of Home

Home Restaurant Situation- Preferred Preferred based

Help visitors Integrate discover Use dynamic email and relevant calls to action website content experiences

Drive Target cross conversations selling & with carry upselling to through consumers messages

Copyright © 2018 Information Resources, Inc. (IRI). Confidential and proprietary. 53 Opportunities Exist to Convince Consumers Eating Seafood At Fast Casual Restaurants to Purchase Seafood at Retail and Cook at Home

45MM Households Purchase at Retail 16MM Consumer Visits

7.7 Million 5.7 Million

1.4 Million 1.7 Million

Source: IRI FSP Data and PlaceIQ observed visits in past 6 months Copyright © 2018 Information Resources, Inc. (IRI). Confidential and proprietary. 54 Attract Consumers NOT Purchasing Seafood at Retail but Clearly Like Seafood

Provide quick access to Drive conversations from Offer step by step recipes accompanying products coupons to experiences and do so on video for easy meal preparation

Deliver consistent Offer a personal shopper messaging across channels

Those who post associate fresh seafood with minimalistic, simple eating, good mood

Recipes are reminiscent of vacations and exotic destinations

Will result in strong Will deflate positive long lasting sentiment, relationships & relationships & foster brand sales encourage switching

In-store Actions

Consumer Generated Purchase Based Targeting

INTEGRATED MESSAGING

CONSUMER EDUCATION ENGAGEMENT

PERSONALIZED PERSONALIZED SOLUTIONS NUTRITION

CONVENIENCE VALUE

SPECIALTY STATIONS MEAL KITS PACKAGING

In Store/ At Home

In Store Online

Source: IRI & The Power of Meat, 2018 Copyright © 2018 Information Resources, Inc. (IRI). Confidential and proprietary. 60 INTEGRATED MESSAGING Connected messaging with Simple Seafood Recipes and Instructions

Pick your own 5 for $10 Build your own pizza Personalize you lunch box

Pick your own potatoes or grapes Build your own Poke Bowl Pour your own Kombucha Made-to-order stations

Bag your own pasta Grind your own nut You select your eggs – butter as many as you want

Pick the right entrée and side for you and/or your family Copyright © 2018 Information Resources, Inc. (IRI). Confidential and proprietary. 63 CONSUMER ENGAGEMENT Engagement Today is Taking Shopper to New Levels…like the Rooftop!

Rooftop Food Truck

Rooftop Yoga Beer & Bites Tasting

Membership offers Kids Only Creative signage to capture attention and action Themed sampling

Copyright © 2018 Information Resources, Inc. (IRI). Confidential and proprietary. 64 SPECIALTY STATIONS Having Specialty Stations Elevate Your Stores Relevance and Minimize the Need for Consumers to go to Specialty Markets

Bulk Spices & Spice Master Growlers

Produce Butcher - value-added produce by the pound, either mix and match your own or pre-pack

Pre-cut vegetables you pick Fresh made juices

Copyright © 2018 Information Resources, Inc. (IRI). Confidential and proprietary. 66 Meal Kits at Retail is a Rapidly Evolving Space with Rapid MEAL KITS Expansion$56M and Success 21.9% $ sales growth vs. year ago double prior year growth rate <40% had sales the prior year

AMAZON MEAL KITS

Source: IRI Fresh COE Custom Analysis from Total Store View + Perimeter Market Advantage, MULO 52-weeks ending 6-17-18 Copyright © 2018 Information Resources, Inc. (IRI). Confidential and proprietary. 67 VALUE Consumers Love to Get a Deal…

Free offers Combined meal deal Free delivery options

Bulk with more variety Meal deal and healthy living discounts

“I buy the same brand of almond milk all the time because it’s the only one that has a smoothie recipe on it, so I know it goes well with smoothies” – Male Great Lakes Young Millennial Consumer

Luciano – 30 – Covina, CA

© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 71 Consumers are looking for information on what is in their food, how to store and work with fresh foods online – make sure to offer assistance in-store as well

27.5 articles returned for “Which produce do I Million put in the fridge?”

In August 2018, “15 Foods You Should Not Refrigerate” was the top-trending article on the Food Network

Cooking School

Signage

United Fresh Produce Innovation Awards Focused on Produce packaging now also aims at Consumer-Education Packages convenience and cooking solutions Best Fruit 2018 Growers Express Meal Bowls

Best Packaging 2018 Fresh Express Saute Kits

Source: United Fresh & IRI © 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 73 In summary, opportunity exists to create and/or expand truly integrated media, messaging, and personalization programs

INTEGRATE LEVERAGE THE CONNECT AT MARKETING AND SAME HOME, ONLINE TARGETING MERCHANDISING & IN STORE EFFORTS EVERYWHERE

COORDINATE ALIGN TIMING ANALYZE CREATIVE ACROSS TOTAL IMPACT EXECUTION ELEMENTS

Feb 22 APR 25 AUG 16 SEP 13 OCT 11

Holistic Health Food Transparency Customization to Atomization of New Supply Chains the New Personalization Convenience Social & Cultural Consumerism Hyper Localization Alignment Connected Customization Consumer Prepared Foods Continuum

Copyright © 2018 Information Resources, Inc. (IRI). Confidential and proprietary. 75 Copyright © 2018 Information Resources, Inc. (IRI). Confidential and proprietary. 76 THANK YOU! Connected Consumer and Personalization Webinar 4 of 5

Sally Lyons Wyatt Jennifer Pelino EVP & Practice Leader SVP Omni Channel Media