Why We Matter

MAY 2018 MILLENNIALS ON MILLENNIALS WHY WE MATTER

At Nielsen, data drives everything we do—even art. That’s why we used real data to create this image. CopyrightCopyright © © 2018 2018 The The Nielsen Nielsen Company Company (US), (US), LLC. LLC. Confidential Confidential and and proprietary. proprietary. Do Do not not distribute. distribute. 1 WELCOME

As we enter 2018, the Canadian fast-moving consumer goods (FMCG) landscape continues to face challenges. Dollar sales growth in the FMCG industry slowed to just 2% by the end of 2017, signalling the need for Lauren Fernandes retailers and manufacturers to remain adaptive and agile in navigating the Sr. Communications path forward. Specialist Nielsen Consumers are making fewer trips, and we’re seeing a fundamental change in what we’ve traditionally considered to be the consumer’s path- to-purchase. What was once linear is now a convoluted and complex journey that crosses many places, platforms and processes. With this added complexity comes ample challenges to how brands compete for share of consumers’ minds and wallets.

Planning ahead requires careful thought into understanding the new paths-to-purchase. Digital disruption and seismic population shifts Haley McCausland are upon us, and Millennials are at the helm of these changes. These Executive Analyst consumers are in their early adulthood, approaching key milestones while Nielsen still intertwined and influenced by the generations before them. This generation is quite literally the future, but understanding and harnessing their purchasing power can be a daunting task.

It’s imperative that manufacturers and retailers alike remain at the forefront of consumer decisions, and more importantly, Millennials’ decisions—despite this forefront existing in more ways than ever before. The traditional in-store purchase opportunities are fewer, and possibly harder to convert, but the upside in successful conversion and retention Andréa McDougall becomes larger and more imperative. Millennials have a reputation for Sr. Analyst their spontaneity, which makes them harder to predict. But, it’s all a Nielsen matter of perspective. We like to think that Millennials exhibit loyalty and plan their purchases, however, they simply manifest themselves uniquely from other generations.

As Millennials ourselves, we know that our behaviours as a cohort stand in stark contrast to previous generations. But in thinking introspectively and honestly about our own lives, we were able to draw some useful conclusions on how to more thoughtfully analyze our generation. We represent young professionals, new parents and in many ways, epitomize the “Boomerang” generation—those who return to their childhood homes after previously living on their own. We’re not one in the same, and therefore, one strategy won’t suffice in capturing our interests at the point of purchase.

We hope you’ll be invested in our analysis of, ourselves, our collective future and how “we” can win together.

Copyright © 2018 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. 2 CONTENTS WHY MILLENNIALS?...... 4 THE MILLENNIAL OPPORTUNITY...... 10 RETAILER PREFERENCES...... 14 SHOPPER INFLUENCERS...... 21 CAPITALIZING ON THE MILLENNIAL BASKET...... 24 TIME TO TAKE ACTION...... 30

In this report, the Canadian Millennial generation is defined as those individuals born between 1980 and 2000, or those who are currently between the ages of 18 and 38 years old (except where otherwise denoted). Further, the scope of the analysis used to prepare this report includes those who have self-identified as the “primary shopper”, or the individual making more than 50% of the purchases within their home. But, thinking about the age range and the breadth of life events that occur in between, there’s an array of factors that truly differentiate Millennials from other generations. Some worth noting include:

• Relationship status

• Living arrangements

• Presence of children

• Financial position SIZING THE PRIZE

Understanding the top line opportunity with Millennials MILLENNIAL POPULATION (THOUSANDS)

of Canadian 10,111 27.5% population

Million 10.1 people 5,094 5,017

Average monthly spend on FMCG $509 products, per household

Total Canada Male Female

Source: Statistics Canada, Population by sex and age group, Aged 20-39, 2017 and Nielsen Homescan, Total Trips, 52 weeks ended Mar. 4, 2018, Millennial primary shoppers.

Copyright © 2018 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. 4 According to Statistics Canada, those aged 20 - 39 years old represent roughly 27.5% of the Canadian population, with males at 13.9% and females at 13.7%. This equates to just over 10.1 million people. As a cohort, Millennials spend an average of about $509 per household per month across FMCG categories, compared to $685 for the Boomer generation.1 Accounting for just 12% of overall FMCG dollars,2 Millennials are currently spending less than what we’d expect given the size of the overall cohort.

UNDER-REPRESENTED IN PURCHASING POWER Millennials’ Importance

16% 12%

% Household % of FMCG $’s Heads 13.2 B 2.3 M

Source: Nielsen Homescan, Account Shopper Profiler, 52 weeks ended Dec. 30, 2017. Definition of Millennials: Canadian adults identified as head of households who are under 35

Millennials are a dominant force, but the bulk of the cohort are not yet the key decision-makers within their households. This dynamic is rapidly shifting, and that means Millennials’ purchasing power will continue to grow in the years to come.

Today, Millennials represent just 16% of those who consider themselves the head of their households in Canada. But given the variety of living arrangements within this generation, the head of the household and primary shopper may not be one in the same. A Millennial living with an older relative, for example, would not be the head of the house, but could be responsible for most of the shopping. Considering those who make over 50% of their household purchase decisions, we reach a larger proportion of the cohort. Twenty-three percent of all Canadian primary shoppers identify as Millennials, and we expect this number to continue to grow.3 We’ve already seen great shifts in growing Millennial purchasing power, and the time to understand and act on present and future opportunities, is now.

1Nielsen Homescan, Total Trips, 52 weeks ended Mar. 4, 2018 Primary shoppers 2Nielsen Homescan, Account Shopper Profiler, 52 weeks ended Dec. 30, 2017 3Based upon a sample of 7,462 primary shoppers, Nielsen Homescan, 52 weeks ended Mar. 4, 2018

Copyright © 2018 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. 5 Millennials with children and those without have completely different household needs, and therefore present unique opportunities to be reached in different aisles of the store. Tapping into trip types and needs that represent the highest potential for your business will not only require knowledge of Millennials as a whole, but also insights into the unique behaviours of each sub-group.

With current market conditions, going beyond understanding consumers, to embracing and engaging with them is essential to grow and capitalize on opportunities with the highest return. LIVING ARRANGEMENTS

The lifestyles of the Millennial generation are changing. As marriages and relationships are delayed, and in many cases forgone completely, the proportion of those aged 20-34 living separately from their parents has declined. In fact, back in 2001, about half of young adults (49%) lived with a partner, spouse or child, independently from their parents. Today, that number is down to just 42%. With that said, the overall number of young adults living on their own has still shown growth. Compared with 2001, about 3% more young adults now live alone (or with roommates/relatives that aren’t their parents).

In 2016, nearly 35% of young adults aged 20-34 lived with their parents. Up from 30.6% in 2001, we’re seeing growth in the breadth and length of interdependence and time spent between younger and older generations.

YOUNG AND INDEPENDENT, OR STILL DEPENDENT? More young adults live with their parents today than in 2001 % OF YOUNG ADULTS (AGED 20-34)

49.1 41.9 2001 34.7 2016 30.6 23.4 20.3

Living With Living with spouse, Living alone (or with Parents partner or child roommates or other (not parents) relatives besides parents)

Source: Statistics Canada, Census of Population, 2001-2016

Millennials often seek out city centres, with roughly 32% residing in high density urban areas.4 Attracted by the hustle and bustle, Millennials tend to migrate to downtown cores as they branch off from their parents’ homes, and as a result drive down the average age of household heads in these areas. Most notably, Calgary was deemed one of the youngest cities in Canada based on the 2016 Statistics Canada Census of Population, where senior citizens represented only 11% of the local population.

With that said, relocating to city centres can come with challenges such as high costs of living. Therefore, it’s important to understand and distinguish where we’re seeing impacts of Millennials who live with their parents. Across Canada, Ontario has the highest percentage of young adults living with their parents: over two in five (42% of) young adults in Ontario live with their parents. This is up notably from 2001, when just 35% lived with their parents.5 WHERE THE BOOMERANG EFFECT IS HITTING HARDEST Two in every five young adults in Ontario live with their parents % OF YOUNG ADULTS (AGE 20-34) LIVING WITH THEIR PARENTS

Total Canada 35 Toronto 47 Oshawa 47 Hamilton 45 Windsor 43 Barrie 41 St. Catharines–Niagara 41 Brantford 40 Abbotsford–Mission 39 Vancouver 39 Kitchener–Cambridge–Waterloo 35 Winnipeg 35 Montréal 33 Ottawa–Gatineau 33 Calgary 29 Edmonton 27 Québec 24

Source: Statistics Canada, Census of Population, 2016 4Nielsen Economic Impact survey of 14,438 respondents, 2017 5Statistics Canada, Census in Brief, 2016

Copyright © 2018 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. 7 Interestingly, nearly one out of every two young adults in Toronto live with their parents. Other Ontario-based cities making this list include, Oshawa, Hamilton, Windsor and Barrie, where young adults still at home represent 47%, 45%, 43% and 41% of the local Millennials, respectively.

Notably, many French-Canadian cities have far fewer young adults living with their parents. In the census metropolitan areas of Quebec, just 24% of young adults live with their parents. Comparatively, the rate is almost double for Toronto. Socio-economic factors such as record-low unemployment rates, lower-cost of living in urban centers and prevalence of common-law relationships may factor into why French Canadians are more likely than average to leave home during their young adult years.

FEELING FINANCIAL OPTIMISM Sentiments on financial position % RESPONDENTS

28 25 23 24 23 19 18

Greatest Boomers Generation X Millennials Generation

Worse off financially now than a year ago Better off financially now than a year ago

Source: Nielsen Homescan, Canadian Economic Impact survey of 14,438 respondents, 2017

Copyright © 2018 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. 8 With the cost of living rising, Canadians have financial concerns about the future. Despite these concerns, however, it seems that Millennials are living in the moment and feeling positively about their current financial situation. Nearly three in 10 (28% of) Millennial households indicate they are in a better financial position now than a year ago. Then it’s not surprising that the majority of Millennials (64%) have, in the past year, felt they’ve been able to “live comfortably” and bought some things just because they liked them.

When dissected by household type, this sentiment of living comfortably holds true across all Millennials (64% of those with kids, 63% of those without kids, and 60% of those who still live at home). Comparatively, only 51% of Boomers with kids have felt the same level of financial freedom. While Millennials have certainly been affected by the high cost of real estate, the cost of borrowing has been relatively low during their adult years. Borrowing is easier today than it has been historically, and though low interest rates may help bolster Millennial optimism now, this may shift over time.

Source: Nielsen Homescan, Canadian Economic Impact survey of 14,438 respondents, 2017

Now that we understand the size of prize of the Millennial group, the question becomes, how can we capitalize on the opportunity they represent?

On the whole, Canadians continue to make fewer total outlet trips—with steep declines from 2012 through 2017. This means manufacturers and retailers face fewer opportunities to capture shoppers at the shelf and influence decisions in-store. And Millennials are no exception to this trend.

In the last year, Millennials have not only contributed to, but have driven trip declines in Canada. Millennials’ rate of decline in trips per household was approximately twice that of the overall Canadian population. In addition, Millennials make 43 fewer trips than the average Canadian household on an annual basis.

MILLENNIALS ARE MAKING FEWER TRIPS TO THE STORE

TOTAL FMCG TRIPS IN CANADA (THOUSANDS) TRIPS PER HOUSEHOLD

vs. Year-Ago

2,500.0 Total Canada 153 -3% 2,400.0 2,300.0 Millennials 110 -5% 2,200.0 2,100.0 2,000.0 Boomers 183 -1% 2012 2013 2014 2015 2016 2017

Source: Nielsen Homescan - Cross Outlet Facts, Total Trips, 52 weeks ended Source: Nielsen Homescan, Total Trips, 52 weeks ended Mar. 4, 2018 Sept. 30, 2017 vs. Year-Ago Millennial primary shoppers

Despite making fewer trips on average, Millennials are likely to spend more than other cohorts per occasion. This is where the opportunity lies.

MILLENNIALS DRIVE HIGHEST AVERAGE BASKET RING

Average dollars spent per trip

vs. Year-Ago:

Total Canada $48.21 +$1.12

Millennials $55.45 +$2.11

Boomers $44.82 +$0.64

Source: Nielsen Homescan, Total Trips, 52 weeks ended Mar. 4, 2018 vs. Year-Ago, Millennial primary shoppers

While the number of trips Millennials made declined by 5% in the last year, the amount they spent per household grew by 4%. Compared with the total Canadian population and the Boomer generation specifically, Millennials tend to shop less frequently but spend more per trip. In fact, Millennials spent just over $7 more per trip than the average Canadian household and close to $11 more than Boomer households in the last year.6

Millennials may be swapping trips to the store with trips to restaurants. According to The NPD Group, Millennials led other age cohorts in trips per capita to restaurants during the last year.7 And given the constraints felt by city core dwellers, this makes sense. It’s not uncommon for Millennials in city centres to forgo a traditional dining room or additional storage space due to costs of living. Furthermore, the sheer concentration of restaurant options with eclectic cuisines makes dining out a desirable and easy alternative to cooking at home.

6Nielsen Homescan, Total Trips, 52 weeks ended Mar. 4, 2018 vs. Year-Ago, Millennial and Boomer primary shoppers 7Nielsen and The NPD Group, Eating Patterns in Canada Report, 2017

Annual Restaurant 241 Trips Per Capita 228 220 214 197 195 186 174 152 140 124 94 2013 2014 2015 2016 2017

Under 13 Teens 18-34 35-44 45-64 65+

Source: Nielsen and The NPD Group, Eating Patterns in Canada Report, 2017 Read as: Those aged 18-34 made 228 trips (per capita) to restaurants in 2013, and by the year 2017, made 241 trips (per capita) to restaurants

FAMILY DYNAMICS HAVE AN IMPACT

114 -7% Millennials with Kids $62.27 +$1.75 Trips Per Household $ Per Trip

Millennials 107 -4% without Kids $48.90 +$2.88

Source: Nielsen Homescan, Total Trips, 52 weeks ended Mar. 4, 2018 vs. Year-Ago, Millennial primary shoppers

Copyright © 2018 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. 12 Millennials with kids make more trips to the store than their counterparts without kids. But basket size, or the amount they spend during those trips, also differentiates these two groups of Millennials. Regardless, declining traffic is an issue that all Millennials are driving.

Time, convenience and life stage all play a role in challenging Millennials’ trip rates. In order to drive trips among Millennials as a cohort, manufacturers and retailers should view store traffic as a task worth actioning across all Millennial homes, regardless of whether children are in the mix.

Knowing that Millennials with kids spend substantially more per trip than Millennials without kids, there lies an opportunity to identify and capitalize on where and what this consumer group is spending the most on.

Millennials are driving trip declines in FMCG, but they tend to compensate by spending more on the trips they make. In order for retailers and manufacturers to uncover how best to reach this shopper demographic, it’s important to understand their retailer preferences across brick-and-mortar and online. BEYOND THE GROCERY STORE

Grocery represents the No.1 preferred channel for FMCG categories in Canada, followed by mass merchandise. Nearly half of all shoppers (48%) consider grocery their preferred channel to fulfill their FMCG shopping needs. Comparatively, Millennials have significantly less appeal for grocery stores, with only 37% of them indicating a preference to shop in this channel across categories. This suggests that although these consumers still rely greatly on traditional grocery, they’re also spreading their shopping trips across alternative channels to a greater extent.

Purchase behaviour can shed some light on what’s driving some of these channel preferences. For example, compared to Boomers, Millennials spend nearly 10x as much on baby care products.8 With the affordability of mass merchandise, we expect more Millennials will turn to this channel in future for their growing household needs. MILLENNIALS HAVE LESS APPEAL FOR GROCERY STORES Preferred channel to shop for FMCG categories - % of Category Responses

37% Millennials

19% 12% 11% 6% 6% 3% 2% 1% 1%

Grocery Mass Warehouse Drug C-store Dollar Online Liquor Pet Online Merch Club Delivery Pick-up

Index to Total Canada 77 121 95 126 203 155 177 101 120 216

Source: Nielsen Canada, Category Shopping Fundamentals, 2017 (n=27,608)

8Nielsen Homescan, Key Department Ranking, 52 weeks ended Jan. 13, 2018, Millennial primary shoppers

Millennials are more likely to select a store based on the availability of best everyday prices and product selection. Therefore, it’s not surprising that mass merchandise is the second-most preferred channel among Millennials to shop for FMCG products.

In line with previous generations, Millennials are creatures of habit. They are just as likely as any to prefer shopping at their “usual stores.” However, what Millennials define as their “usual stores” may be different from other generations. For example, in addition to mass merchandisers, Millennials tend to prefer dollar, drug and convenience stores more than the average shopper.

DRIVERS OF STORE SELECTION

% Of Category Responses

63%

Millennials

16% 7% 6% 2%

Usual Best everyday Best sale Best Redeem/collect store prices price selection loyalty points

Index to Total Canada 99 125 68 120 92

Source: Nielsen Canada, Category Shopping Fundamentals, 2017, (n=18,276)

Millennials show no greater propensity to shop within warehouse club outlets than the overall Canadian population. However, income level may be a factor limiting this behaviour at present. While it would be reasonable to think that larger household size would have a greater impact on Millennials are more likely than dollars spent in warehouse club stores, channel shoppers skew toward other cohorts to seek products high-income households to a greater extent. In 2017, 51% of Millennial with lower prices per unit across households earned more than $70,000 annually. Conversely, 59% of the store: warehouse club shoppers earned this much. Since many Millennials have Perimeter of Store yet to break through the $70,000 income threshold, their likelihood to Index to Total frequent the warehouse club channel will grow as they advance in their Canada: 160 careers.

Index to Total Canada WAREHOUSE CLUB MILLENNIAL SHOPPERS SHOPPERS

Centre of Store Front of Store Index to Total Index to Total Canada: 128 Canada: 125

Millennials are more likely than HOUSEHOLD COMPOSITION other cohorts to seek products with the lowest absolute prices 93 1-2 Members 78 when purchasing: Frozen Foods Index to Total 113 3+ Members 138 Canada: 123

HOUSEHOLD ANNUAL INCOME

83 Income <$70,000 99

117 Income ≥$70,000 101 Fresh Foods Index to Total Canada: 124

Source: Nielsen Homescan, Total Trips, 52 weeks ended Mar. 4, 2018, Millennial primary shoppers

Although we’ve seen that the presence of children in Millennial households has an impact on the number of trips they make to the store, it also affects how their spending is spread across their most preferred channels: grocery, mass merchandise and warehouse club. Compared to those without children, Millennials with kids spend 7% more of their annual FMCG budget in mass merchandisers and warehouse clubs combined. Grocery still commands the majority share of Millennial wallets. However, as young adults start families of their own, we can expect to see an increasing trend of Millennials with kids favouring mass merchandise and warehouse club. As such, there’s potential for major share shifting down the road that could redefine the importance of the grocery channel to Millennial households years from now.

MILLENNIALS - % DOLLARS SPENT BY CHANNEL

Total Millennials Millennials with kids Millennials without kids

29% 32% 25% 14% 14% 13% 25% 20% 30% 12% 15% 17%

47% 48% 45%

Warehouse club Mass merchandise Grocery All other channels

Source: Nielsen Homescan, Total Trips, 52 weeks ended Mar. 4, 2018, Millennial primary shoppers

Millennials’ spending patterns clearly demonstrate that best everyday prices matter. These consumers are putting pressure on retailers and manufacturers to reduce their regular prices across the store due to their heightened price sensitivity. When probed about their preferred means for cost cutting, 71% of Millennials say they would opt for more selection in economy sizes, compared with 64% of Boomers and 50% of Greatest Generation. Over 30% more Millennials households would prefer this over other cost cutting strategies, suggesting it’s one worth considering for retailers and manufacturers who aren’t already offering these pack sizes.

When it comes to saving, Millennials are more likely than other cohorts to shop at specific retailers to collect loyalty points, and will opt for less expensive alternatives, such as lower-priced cuts of meat, where possible. With this in mind, Millennials are more likely to be swayed by loyalty rewards and furthermore, could be enticed to try a new product based on the relative cost savings alone.9

What consumers prefer when manufacturers and retailers need to account for rising raw material costs TOP PREFERRED ACTIONS - % RESPONDENTS

Total Canada Total Millennials Millennials with Kids Millennials without Kids

Offer larger economy sizes with lower price per usage/serving 65% 71% 76% 67% New smaller pack sizes at a lower price 38% 40% 44% 36% Same # sales, but Downsizing but keep price point the same less of a savings 30% 25% 25% 26%

Source: Nielsen Homescan, Canadian Economic Impact survey of 14,438 respondents, 2017 9Reads: Nielsen Canada Homescan survey of 14,438 respondents, Economic Impact survey, 2017, reported by National Consumer Panel

Millennials show a greater propensity toward online shopping for FMCG categories than other generations. This spans both online shopping with home delivery (14% of Millennials) and with pick-up at a designated location (9% of Millennials). Across both online fulfillment methods, consideration of online shopping decreases with age. This inclination to shop online is being fueled in part by Millennials desire to spend less, with approximately 15% of Millennials claiming to shop more online as a means of cutting costs.10 Ultimately, digital is upon us, and while in the past the online and offline worlds have been viewed separately, and often in competing ways, it’s becoming more and more relevant to think of the two as complementary and connected.

ONLINE CHANNEL CONSIDERATION BY GENERATION

% Responses 14% 11% 9% 6% 6%

3% 3% 1%

Online delivery Online pick-up

Millennials Generation X Boomers Greatest Generation

Source: Nielsen Canada, Category Shopping Fundamentals, 2017 (n=124,412)

However, it’s important to understand that the consideration of a channel does not necessarily translate into secured and repeated purchases within it. Therefore, it is vital for manufacturers and retailers who choose to develop their online presence, to focus on the conversion of shoppers from “considering” to “preferring” to shop online. Compared to the rest of Canada, Millennials are nearly twice as likely to use digital tools to influence their FMCG purchases.11 Understanding the e-commerce assets you possess today and offering an inviting online shopping experience will be essential to future success.

10Nielsen Homescan, Canadian Economic Impact survey of 14,438 respondents, 2017 11Nielsen Canada, Category Shopping Fundamentals, 2017 (n=9,094)

What sections of the store are Millennials more likely to consider (and prefer) purchasing online with delivery? % of purchases influenced by Perimeter of Store 7% Considered 1% Preferred PRE-STORE DIGITAL IN-STORE MOBILE

Looked online / websites, mobile Used mobile device to help app, retailer e-mail, online ad with purchase decision

Centre of Store Front of Store 15% Considered 15% Considered 4% Preferred 4% Preferred

22% Millennials 4% What departments are Millennials more likely to consider purchasing 12% Total Canada 2% online with delivery?

12% Generation X 2% Personal Care 19%

6% Boomers 1%

4% Greatest Generation 1%

General Baby Care 30% Merchandise 37%

Source: Nielsen Canada, Category Shopping Fundamentals, 2017 (n=9,094)

The Millennial path-to-purchase is not linear. Instead, there are many consumer touchpoints that manufacturers and retailers can use to trigger a Millennial purchase. Therefore, having a comprehensive understanding of the Millennial shopper experience, both pre-store and in-store, remains vital. DON’T FORGET

Millennials Rely On In-Store Reminders

Though Millennials plan the majority (64%) of their category purchases before they enter a store, these consumers are more likely to rely on in-store reminders as a means of completing their shopping list compared to the average Canadian household.

With approximately 20% of all Millennial category purchases triggered by in-store reminders—versus 9% of all Boomer purchases—marketers should tailor their in-store marketing efforts to attract this younger cohort who may not have it all written down. PURCHASE TRIGGERS

% Of Category Responses

71% 76% 64% MILLENNIALS OVER INDEX ON REMINDED PURCHASES VS. TOTAL 20% 17% CANADA (INDEX = 143) 14% 9% 15% 15%

Planned Reminded Impulse

Total Canada Millennials Boomers

Source: Nielsen Canada, Category Shopping Fundamentals, 2017, (n=127,972, n=28,428, n=61,794) Read as: 20% of FMCG category purchases made by Millennials were needed or wanted, but only remembered once in-store. Index value can be read as: Millennials are 43% more likely than average to make an FMCG purchase based on a reminder.

In addition to planning less for what categories to buy, Millennials place a slightly different emphasis on planning variety, quantity and dollars to be spent on their basket than other cohorts. In fact, while Boomers place a greater focus on the variety and quantity of products they plan to pick up in-store, Millennials show greater tendencies to plan the amount they intend to spend.

Knowing that Millennials are more price-conscious when selecting a store for their shopping trip, it’s not surprising to see this decision-making cascade down to what they plan to spend at the category level as well.

WHAT’S THE PLAN?

Elements of planning - % of Category Responses

49% 49% 47% 44% 45% 40%

29% 23% 20%

Variety to buy Quantity to buy Dollars to spend

Total Canada Millennials Boomers

Source: Nielsen Canada, Category Shopping Fundamentals, 2017, (n=74,809, n=14,267, n=38,293)

Millennials are less likely than other cohorts to shop on auto-pilot, or to purchase their usual products without considering other options in-store. In fact, across total store purchases, Millennials indicated that they buy products on auto-pilot 42% of the time, versus Boomers at 49%.

Ultimately, because Millennials tend to be engaged shoppers, meaning they pay attention to the products and messaging found in aisles, there are more opportunities to interrupt the Millennial path-to-purchase in-store than there are among other cohorts. How these shoppers are browsing shelf sets, price checking and/or seeking advice and reviews online only emphasizes the importance of in-store interruption points and means by which manufacturers and retailers can trigger purchases among this group. PAYING ATTENTION

Level of engagement in-store - % of Category Responses

Total Store Food Non-Food

46% 42% 49% 46% 43% 48% 46% 40% 51%

54% 58% 57% 60% 51% 54% 52% 54% 49%

Total Millennials Boomers Total Millennials Boomers Total Millennials Boomers Canada Canada Canada

Engaged Auto-Pilot

Source: Nielsen Canada, Category Shopping Fundamentals, 2017, (n=119,334)

Now that we’ve discussed the frequency in which Millennials are shopping and the influencers that drive their purchase decisions, let’s talk about what Millennials are actually purchasing to meet their household needs. WHAT’S IN THE BASKET?

Perhaps not surprisingly, the categories most frequently purchased by Millennials are the staple items you’d find in the average Canadian household basket. However, after ranking all categories by number of trips, there are several categories among our top list that stand out. From the food landscape, easily prepared foods like cereal, pre-cut produce and potato chips, are all examples of categories that Millennials buy more frequently than Boomers.

These insights reinforce that key value items like milk, eggs, produce and bread are integral to all Canadians, including Millennial households. Knowing that Millennials take fewer trips to the store, co-promotion and in-store interaction with these food essentials will be key to converting purchase occasions among Millennials. These items remain key trip drivers for this cohort and can largely influence the retailer this group chooses to shop within.

Ranked by # of Trips

Food Non-Food 1 PRE-PACKAGED PRODUCE & FRUIT 1 BATHROOM TISSUES

2 MILK 2 PLASTIC BAGS

3 PRE-PACKAGED BREAD PRODUCTS 3 TOOTHPASTE

4 YOGURT 4 LIQUID LAUNDRY DETERGENT

5 EGGS 5 FACIAL TISSUES

6 POTATO CHIPS 6 SHAMPOO

7 PRE-PACKAGED CHEESE 7 PAPER TOWELS

8 READY-TO-EAT CEREAL 8 DISH DETERGENT

9 CARBONATED SOFT DRINKS 9 PERSONAL DEODORANT STICKS

10 FRUIT JUICES 10 DRY DOG FOOD

Millennials are more likely to have the above categories in their basket on any given trip, over other categories available in-store.

Over-indexed on % of total Under-indexed on % of total Under-indexed on % of total dollars spent on this category dollars spent on this category households who bought the over the year vs. Boomers over the year vs. Boomers category in the year vs. Boomers

Source: Nielsen Homescan, Grocery Composite, National - All Channels, 52 weeks ended Jan. 13, 2018, Millennial primary shoppers

Millennials spend more than the average Canadian household on categories that are geared toward young children. In fact, Millennials more frequently buy items like infant feeding products, disposable diapers and baby and junior foods, compared to the average Canadian. Given that Millennials represent many of today’s young parents, this makes sense. But what’s important to understand is that many grab-and-go foods are purchased by this cohort as well.

Specifically, 21% of Millennial shoppers buy lunch kits, which is far more than the Canadian average of 14%. Millennials also spend more than average on yogurt, infant and baby snacks/foods, and portable snacks of many varieties. Whether multi-tasking as career-focused independent singles, or seeking ease and convenience in feeding their young ones, Millennials are more likely to buy quick or ready-to-eat snacks and meals than other cohorts. Many personal care categories over-index in the non-food space, including feminine hygiene, suncare, diapers and training pants.

WHAT MILLENNIALS ARE BUYING

Top food and non-food categories purchased by Millennial households, based on index to Total Canada

% of households buying % of households buying Index Index Top 12 Food categories Millennials to Total Top 12 Non-Food categories Millennials to Total Canada Canada Infant & toddler snacks 23% 275 Children diapers 35% 271 Baby & junior foods 22% 240 Liquid headache remedies 25% 265 Cheese-based yogurts 21% 178 Children training pants 21% 258 Canned spaghetti 23% 165 Tampons 28% 168 Processed fruit snacks 53% 155 Wipes 45% 139 Water-based frozen treats 23% 150 Pads & liners 56% 130 Compartment snacks 28% 149 Toothbrushes 40% 128 Lunch kits 21% 148 Suncare products 34% 127 Pizza snacks 43% 144 Face cleansers & cold cream 33% 127 Ready-to-eat desserts 47% 139 Hair conditioner 55% 120 Drinkable yogurt 46% 138 Shower gels, foams & body wash 61% 119 Frozen breakfasts 21% 135 Cotton swabs 34% 116

Source: Nielsen Homescan, Grocery Composite, National - All Channels, 52 weeks ended Jan. 13, 2018, Millennial primary shoppers Note: The above lists include only categories purchased by 20% or more of Millennial households Index read as: 21% of Millennial households purchase lunch kits, which is 48% higher (index of 148) than what we could expect relative to the % of Canadian households purchasing lunch kits

How kids in the household impact category purchases

Top 15 categories purchased, % Of Millennials INDEX TO MILLENNIALS based on index With Kids Buying WITHOUT KIDS 1 Children vitamins 30% 655 2 Children training pants 36% 547 3 Candles 15% 459 4 Baby shampoos 21% 396 5 Cheese-based yogurts 33% 390 6 Liquid headache remedies 40% 354 7 Infant & toddler snacks 35% 319 8 Compartment snacks 42% 311 9 Water-based frozen treats 34% 301 MILLENNIALS 10 Diaper rash products 19% 272 WITH KIDS 11 Ice cream cones 21% 270 12 Lunch kits 30% 267 13 Baking mixes 26% 262 14 Raisins 33% 260 15 Baby feeding cups 21% 259

Top 15 categories purchased, % Of Millennials INDEX TO MILLENNIALS based on index Without Kids Buying WITH KIDS 1 Face creams & lotions 30% 163 2 Face care products 30% 155 3 Vitamin B 14% 152 4 Coconut water 14% 136 5 Melba toast & rusk 14% 135 6 Canned milk products 31% 135 7 Carbonated soda water 14% 133 8 Vitamin C 15% 132 MILLENNIALS 9 Alternative sweeteners 13% 129 WITHOUT KIDS 10 Crispbread & flatbread 17% 129 11 Specialty japanese food 30% 128 12 Specialty eastern foods 23% 128 13 Liquid & replacement egg products 13% 126 14 Surface cleaning systems 24% 125 15 Tofu, meat & dairy alternatives 35% 124

Copyright © 2018 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. 27 As we’ve discussed, having children in the home drives both a greater number of trips to the store, and is a significant driver of the dollars spent on each trip. Therefore, it comes as no shock that the Millennial shopping basket shifts based on stage of life.

Diving further, we see some interesting contrasts emerge. Millennials with kids buy lunch kits more frequently, while those without purchase more so from specialty ethnic food selections in-store. As young parents, Millennials with kids clearly spend more on child-related products (e.g., diapers, baby and junior foods), while those without kids over-index on categories associated with personal care and preventative health (e.g., vitamins, face care).

Further understanding key value items enables optimized assortment. Knowing your audience is essential, especially when such variances exist across a single generational cohort. Understanding these differences is imperative for both retailers and manufacturers who wish to resonate with this demographic.

PRODUCT CLAIMS THAT RESONATE WITH MILLENNIALS

Compared to the average shopper, Millennials are:

more likely to consider Socially Responsible 20% products

more likely to consider 30% Organic products

more likely to consider Environmentally Friendly 20% products

Source: Nielsen Canada, Category Shopping Fundamentals, 2017 (n=27,323)

Copyright © 2018 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. 28 Brand familiarity and trust still reigns supreme when it comes to product purchase drivers, with 32% of Millennials considering this attribute important to purchase.12 However, Millennials view brand trust as less important than other cohorts. Instead, Millennials are more likely than others to consider brands that are deemed socially responsible, organic and environmentally friendly.

As a cohort that has grown up in a world more attuned to health and dietary needs, Millennials show a greater likelihood to consider products that claim to be free from gluten, soy, nuts, dairy or lactose. Therefore, it will be vital for manufacturers to recognize the impact of ingredient trends in order to satisfy the diverse needs of this generation.

12Nielsen Canada, Category Shopping Fundamentals, 2017 (n=27,323)

Millennials are multi-faceted. Spanning different life stages, their purchase behaviours are driven by multiple factors such as the presence of children and their living arrangements. Though they may be driving a contraction in trips at a total industry level, the weight and importance of each Millennial trip makes converting opportunities both necessary and worthwhile. Learning how to capitalize begins with sizing the opportunity and follows with a detailed assessment of retailer preferences, shopping basket metrics and shopper influencers.

Influenced less by brand loyalty and highly digitally savvy, it’s hard to harness the recipe for success among Millennials. That’s because they are a generation in-flux. They’re moving dynamically and with agility through key life milestones, driving purchases that require fast and nimble responses by manufacturers and retailers.

Trust in brands is important, but even more so are the attributes like social and environmental sustainability. And while overall prices do matter, it’s value through everyday low pricing that seems to resonate. Activating these ideals in-store through innovation, assortment and messaging is essential, but even more than that, it’s important to keep up with current trends to maintain a competitive edge.

What we know to be true: Winning in the marketplace starts with a deep understanding of the consumer. Know their sources of stress, confusion or inconvenience and the compromises they make; understand what drives them to choose brands and what matters to them. In simple terms, make the consumer the Centre of your entire operation and recognize the importance of a 360-degree communication approach through all touchpoints.

Take this foundational research a step further with the following: EATING PATTERNS IN CANADA (EPIC) 2018: MILLENNIALS

Nielsen and The NPD Group have joined together to provide an unparalleled view of the Millennial generation in Canada. EPIC 2018: MILLENNIALS is the definitive source for detailed information on eating and drinking habits of this dynamic cohort. It provides a unique look at the motivations behind Canadian Millennial choices about what they eat and drink in and out of the home. ENHANCED DEMOGRAPHICS

To gain an understanding of the Canadian consumer, manufacturers and retailers need to dive deeper into household dynamics. Enhanced Demographics will provide insights into how Millennial households behave differently than the average Canadian Household. Investing in demographic cohort analysis via Nielsen Homescan - Enhanced Demographics can empower your reach and resonance among Millennials.

CONTACT YOUR NIELSEN REPRESENTATIVE FOR MORE INFORMATION

Nielsen Holdings plc (NYSE: NLSN) is a global measurement and data analytics company that provides the most complete and trusted view available of consumers and markets worldwide. Our approach marries proprietary Nielsen data with other data sources to help clients around the world understand what’s happening now, what’s happening next, and how to best act on this knowledge. For more than 90 years Nielsen has provided data and analytics based on scientific rigor and innovation, continually developing new ways to answer the most important questions facing the media, advertising, retail and fast-moving consumer goods industries. An S&P 500 company, Nielsen has operations in over 100 countries, covering more than 90% of the world’s population. For more information, visit www.nielsen.com.

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