Part 6 – Innovation Lessons from the Great Recession to Apply Today

Special COVID-19 Series: Recession-Proof Your Business PART 6 – INNOVATION LESSONS FROM THE GREAT RECESSION TO APPLY TODAY

June 12, 2020 The Latest Recession-Focused Reports from IRI (click to see full report)

CLICK HERE TO ACCESS THE 2019 NEW PRODUCT PACESETTERS REPORT

© 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 2 Context Executive Summary Every recession varies in scope and duration, but LESSONS FROM EMERGING TRENDS COVID-19 is ushering in unique THE GREAT RECESSION IN THE 2020 RECESSION behavioral changes, including • Sales of the Top 10 food and beverage • Big companies continue to be well-positioned heightened awareness of products during the Great Recession were for innovation. personal health and safety. lower than pre-recession levels as • In-home professional services will be a key opportunity The impact of these changes consumers stuck with tried and true as consumers shift from salon-style services, restaurant will be best reflected in CPG products and hunted for value. going or medical and dental practices due to health and innovation that meets changing • Particularly in non-food categories, financial stress; however, bifurcated income means many consumer needs and wants. Pacesetter products promoted multi- are willing to pay a premium. functional benefits and co-branding. • Given channel shifts (e.g., greater adoption of e- IRI has been tracking New • Among a few products, continued focus on commerce, value and grocery), as well as new shopping Product Pacesetters* for 25 brand building with well-timed advertising behaviors (e.g., shoppers spending less time in stores), years. Even top-selling products and promotions drove year-2 sales to further manufacturers should follow five principles: propel brand health. − Focus on attributes that really matter need continued marketing • Successful Pacesetters products focused on: − Develop clear and more impactful positioning support and innovation to sustain − Premiumization − Define and execute against the RIGHT distribution long-term contributions to − More value by focused occasions − Promote in Year 1 and beyond − Set realistic sales expectations manufacturer and retailer growth. − Brand extendibility − Package size innovation • Trusted brand status, endorsements and price This report features learnings − Private label expansion promotions are vital for building awareness of products. from 2008-2010 New Product Pacesetters and offers strategies • The IRI COVID-19 Impacts on how to approach innovation as HOW CAN Innovation Requires Sophisticated we emerge from the pandemic. • The COVID-19 Dashboard IRI HELP? Strategies: IRI New Product Pacesetters, Brand Optimization Engine, Brand • IRI CPG Demand Index™ Landscape, Assortment Optimization • IRI Inflation Tracker™

*Criteria for New Product Pacesetters and data used for this report can be found in the Appendix © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 3 Innovation During the Great Recession

• Sales of the Top 10 Pacesetters during the 2008-2010 recession were cumulatively lower than pre-recession levels. • Smaller manufacturers had fewer products in the New Product Pacesetter ranks, but were more successful than large and medium manufacturers. − PepsiCo, General Mills, and Kraft were the top 3 manufacturers with the greatest total food and beverage New Product Pacesetter sales in 2008- 2010. However, the incrementality and sustainability rate for Pacesetters among the largest innovators was lower than average. − Procter & Gamble, Johnson & Johnson and L’Oréal were the top 3 non- food manufacturers with the greatest total Pacesetter sales 2008-2010. − Popular, high-penetration categories exhibited a lower incrementality rate with innovation, while high-growth categories (e.g., energy drinks, yogurt, snacks nuts/seeds/corn nuts) had more success. • High-growth food categories included energy drinks, yogurt, and snack nuts / seeds / corn nuts. Among non-food departments, Beauty and Health were the highest innovating departments. • Themes that emerged during the recession included professional quality for at-home use, premium pet products, multi-serving, multifunctional, and on-the-go consumption.

© 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 4 Recessions Prove Challenging for Innovation: Shoppers in a Recession are More Inclined to Plan Purchases Pre-Shop; Discretionary Spending Curbed Purchase Decisions During the Great Recession: % of Shoppers, 2007-2009

Before Entering Store 60% 75% 83%

In-Store 40% 25% 17%

2007 2008 2009 Longitudinal Economic Study, IRI AttitudeLink, n=1,000+ shoppers 10/2009: Zero-Moment of Truth: Redefining the Consumer Decision-Making Process. IRI Consulting Analysis / IRI Consumer Survey, Top 2 box 8/2008 / 9/2008

© 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 5 Cumulative Sales of the Top F&B New Product Pacesetters Were Down During the Great Recession; Median Sales Did Not Vary Dramatically New Product Pacesetter Sales in $B

Total F&B Pacesetters Top-10 Pacesetters Median Launch $5.0 $4.1 $25.0 $3.5 $4.0 $19.3 $19.9 $18.9 $20.0 $17.5 $2.8 $2.7 $16.7 $3.0 $15.8 $2.4 $2.3 $15.0 $2.0 $1.3 $10.0 $0.7 $0.8 $0.8 $1.0

$1.0 $0.6 $5.0 Median Year Median One $- $- in Pacesetters$M 2006 2007 2008 2009 2010 2011

$4.0 $3.2 $20.0 $2.7 $2.7 $17.1 $3.0 $15.3 $15.7 $2.4 $15.4 $2.5 $15.0 $13.9 $2.1 $13.3 $2.0 $10.0 $0.8 $0.9 $1.0 $0.9 $1.0 $0.6 $0.7 $5.0

$- $- Median Year Median One 2006 2007 2008 2009 2010 2011 in Pacesetters$M Total Non-Food Pacesetters Top-10 Pacesetters Median Launch

*CLICK HERE TO ACCESS THE 2019 NEW PRODUCT PACESETTERS REPORT

Premiumization – consumers were willing to spend more on DIY services, small indulgences and higher quality entrées, often as a tradeoff for not dining out or scaling back on coffeehouse purchases.

While “Value” Multi-Serving Products – Technology played a role in upgrading the quality of microwaveable products but Was a Key consumers were also drawn to products that delivered more.

Product Attribute Multi-Function Products – The power of two brands came together to win over consumers drawn to known brands that could deliver During the Great multiple benefits, delivering both time and money savings.

Recession, it Expansion into Adjacent Categories – Several brands, including Kellogg’s Special K, Dove, Gatorade, Starbucks and Crest, successfully Didn’t Mean pushed into adjacent categories to tap into pockets of growth. “Cheap” Private Label Expansion – During the Great Recession, retailers invested in tiers of private label products, delivering value and often innovation that was unique to their store banners.

© 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 7 Premiumization was a With a Recessionary Response Fueling “Value Key Winner in 2008-2010 for the Money” Creating Better-Life Experiences

Top New Product Pacesetters delivered IN-HOME PROFESSIONAL QUALITY at premium prices.

An array of at-home DIY SERVICES including nail care, dental care and skin care products were an AFFORDABLE TRADE-OFF to professional services.

Source: IRI New Product Pacesetters Archived Reports. © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 8 Multi-Serving Products Were Not Only Focused on Price Value; Many Were Led by New Technology to Create a More Premium Experience

Multi-serving products helped consumers see VALUE FOR THE MONEY, but often delivered a MORE PREMIUM PRODUCT, including Bertolli’s Oven Bake Meals and Stouffer’s Easy Express. Technology supported advancements in microwaveable fare. Plant-based dairy alternatives and a new wave of enhanced beverages also emerged.

CO-BRANDED, MULTI-BENEFIT PRODUCTS were embraced by consumers looking to consolidate purchases during the recession.

DUAL-FUNCTION PRODUCTS were, and continue to be an important innovation platform to fuel consumers’ need for SPEED AND EFFICIENCY.

Source: IRI New Product Pacesetters Archived Reports. © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 10 Pre-Recession and Post-Recession Innovation Illustrates Changing Consumer Preferences

Pre-Recession Post-Recession

Pro-quality, use of Post-recession saw the technology and better continued impact of for you lead 2006-2007 K-cups, on-the-go Pacesetters. consumption and BFY.

Non-food began to see Trends continue, the conversion from RX especially in Rx to OTC to OTC to drive broader and pet foods begin to adoption. Technology win with natural and positioning allow Fusion positioning benefits. to shave the competition.

Source: IRI New Product Pacesetters Archived Reports. © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 11 Small Manufacturers with Fewer New Product Pacesetters Had More Incremental Sales Than Large and Medium Manufacturers Innovation Performance by Manufacturer Size, 2008-2010 New Product Pacesetters

FOOD & BEVERAGE NON-FOOD Number of Number Of Pacesetters Incremental Pacesetters Incremental Number of with Incr. Total Sales ($M) Number of With Incr. Total Sales ($M) Pacesetters Share Gain Pacesetters % of Total Pacesetters - Share Gain Pacesetters % of Total Manufacturer Average per (% of Total Launch Year Pacesetters Average per (% of Total Launch Year Pacesetters Size Manufacturer Pacesetters Sales ($ M) Sales Manufacturer Pacesetters Sales ($ M) Sales Large 152 67 1,536 234 111 $2,536 (>$5 billion) $4,154 $5,342 (21.7) (44%) (37%) (10.2) (47%) (47%) N = 7 Medium 85 46 1,580 111 $283 ($1-5 billion) $2,801 38 (3.8) $659 (4.0) (54%) (56%) (47%) (43%) N = 21 Small 52 37 919 24 $336 (<$1 billion) $1,230 35 (1.2) $620 (1.3) (71%) (75%) (69%) (54%) N = 40

Source: IRI Archived Reports 2008-2010. © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 12 The Largest Food & Beverage Innovators Succeeded with a Few Products, But High-Penetration, Slow-Growth Categories Struggled Innovation Performance for Top 10 Largest Innovators / 2008-2010 Pacesetters

Manufacturer Sources of Incremental Share Gain, Incremental Sales Gain and Sustainable Sales Areas of Challenge Quaker Mini Delights and Lay's Cracker Crisps gained share. Meanwhile, despite failing to grow share, Doritos Collisions and Dewmocracy grew incremental sales. Quaker Mini Delights and In line with the industry average, 4 of 5 CSD Doritos Collisions had strong sustainable sales. New Product Pacesetters failed to grow share. Most successful launches were extensions under the Yoplait line of yogurt. 4 out of 5 gained incremental share, even though only 1 had sustainable sales. New granola bar products also had The largest launch was in cold cereal, but the Pacesetters incremental share, but were less successful in sustaining their sales. failed to gain incremental share.

Thirteen new products in various categories were able to gain incremental sales and share, but only New Pacesetters in crackers and cookies failed to gain Jell-O Fruit Passions and Crystal Light Enhanced were able to sustain sales. incremental share and sales.

Gained share and sales with 2 Powerade introductions. Coca-Cola also had successes with Simply All CSD and bottled water Pacesetters struggled to gain Grapefruit and Simply Apple introductions and Nestea Enviga. share or incremental sales.

While Nestlé was able to gain incremental sales and share in various categories, only Nestlé Good Pacesetters in frozen dinner were less successful, with Start Supreme Natural succeeded in sustaining sales. only 1 out of 5 managing to gain share.

Out of 24 new products, only All Bran Crackers, Kashi Pizza, and FiberPlus Bars managed to be Similar to the industry trend, Pacesetters in cold cereal incremental and sustain sales. 5 other products in crackers and granola bar categories were also incremental, but did not have sustainable sales. failed to gain incremental share. Campbell’s V8 V Fusion and Pepperidge Farm (Goldfish and Deli Flats) innovations drove strong 4 Pacesetters in the soup category struggled with no incremental sales and share gain. incremental sales or share gain.

All 9 introductions in beer/ale/alcoholic cider gained incremental sales, and 4 of those had 5 Pacesetters in the same category did not gain incremental share and sustainable sales. Bud Light Lime drove the majority of gains. incremental share or sustainable sales.

Marie Callender’s Home Style Creations and Healthy Choice All Natural, in the shelf-stable-dinner and frozen-dinner categories, respectively, gained incremental share and sales. 2 introductions in the 3 other Healthy Choice Pacesetters failed to contribute salty snacks category also achieved the same success. incremental sales and share. Uncle Ben’s Ready Whole Grain Medley succeeded to grow share and sustainable sales. M&M’s All Pacesetters in gum and non-chocolate candy Premium and Wrigley’s Extra Fruit Sensation, while incremental, had weak sustainable sales. categories did not gain incremental share.

Source: IRI New Product Pacesetters 2008-2010 © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 13 Most Small F&B Manufacturers with Greatest New Product Pacesetter Success Were Pure-Players Focused on High-Growth Categories, Health-Oriented Products Innovation Performance for the 10 Most Successful Small-Sized Manufacturers / 2008-2010 Pacesetters Mfr. Number of Size Pacesetters / Manufacturer ($M) Incr. Sales ($M) Sources of Success Agro Farma operates only in the high-growth greek yogurt subcategory (130% growth rate), holding 50% share of 559 1 / 146 Greek yogurt and 12% of total yogurt category with New Product Pacesetter Chobani. Roll Global operates in 9 categories, with the high-growth snack nuts as its biggest category where it introduced 404 2 / 109 Pacesetters Wonderful Pistachios and Everybody’s Nuts. Green Mountain released 2 products in the high-growth single-cup coffee subcategory (87% growth rate) with its new 422 2 / 77 Single Cup Coffee product and cross-branding with Newman’s Own brand with Newman’s Own Single Cup Coffee. Most of this manufacturer’s business is in the medium-growth baked beans category, where the manufacturer launched 521 1 / 46 2009 Pacesetter Grillin’ Beans as a premium baked beans product with additional sauces and mixed-in vegetables. Blue Diamond mainly manufactures snack nuts and also operates in 8 other nut-related categories. In 2010, it 321 1 / 41 moved into the milk substitute category with Almond Breeze which was successful due to its health benefits and high growth (79%) in the almond milk subcategory. Ocean Spray operates in 16 categories with shelf stable bottled juice as its main business. While the category has 849 2 / 36 high penetration and low growth, its 2 Pacesetters On the Go drink mixes and Cranergy bottled juice were successful due to focus on health benefits and convenience. United Foods operates almost exclusively in the low-growth frozen plain vegetables category with 8% category 154 2 / 33 share. In 2009 it released the Pictsweet Steam’ables line, which offers frozen vegetables in convenient steamer bags and are a cheaper alternative to competitor Birds Eye’s Steamfresh Pacesetter product. 289 1 / 27 The manufacturer is well known in the margarine/butter, shortening oil and peanut butter categories on top of 10 other smaller categories. In 2010, Smart Balance introduced a Pacesetter in the milk category. The Wine Group launched Cupcake Vineyards in the high-growth wine category, with this product mostly targeting 583 1 / 27 women. 712 1 / 21 Snyders-Lance filled the growing demand for healthy salty snacks with its Multigrain Pretzels and Crackers.

Source: IRI New Product Pacesetters 2008-2010 © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 14 The Largest Non-Food Innovators Succeeded With a Few Products, But High-Penetration Categories Struggled Innovation Performance for the Top 10 Largest Non-Food Manufacturer Innovators / 2008-2010 Pacesetters

Manufacturer Sources of Incremental Share Gain, Incremental Sales Gain and Sustainable Sales Areas of Challenge 25 new products in various categories gained incremental sales, with most gains in home care under Most introductions in hair care category under Clairol and Tide, Mr. Clean, Swiffer and Febreze brands. Similar success in personal care and cosmetics Pantene brands, along with new products under Gillette achieved under Cover Girl and Crest products, which also have sustainable sales. razors didn’t grow share. Roughly a fourth of L'Oréal‘s 45 brand launches experienced growth in incremental sales. L'Oréal and Most shampoo and conditioner introductions under Garnier Maybelline Cosmetics and Garnier Hair Coloring drove incremental gain and sustainable sales. and L'Oréal brand failed to gain incremental share.

Out of 22 new products, 9 products were able to gain incremental sales. The most significant gains New mouthwash & sanitary napkin products failed to gain were seen in KY lubricants, and Aveeno Active Naturals hair care products. incremental share. Zyrtec tablets had incremental share, but weren’t sustainable. New introductions in Unilever’s Vaseline, Tresemme, and Axe lines experienced incremental sales and share gain. New Dove lines Men Plus Care, Cream Oil and Go Fresh line all achieved Other Dove lines such as Pro Age, Daily Moisture and tremendous success. Damage Theraphy weren’t as successful. All introductions in pet food under Friskies were able to gain incremental share and sales while only Purina Cat Chow, Chef Michaels, One Vibrant Maturity some of Purina introductions such as Purina Selects and Beneful Playful were as successful. and Busy Chewnola did not gain incremental share. Most of GSK’s Aquafresh and Sensodyne innovations were in the toothpaste category and 4 out of 5 innovations saw increases in incremental sales and share gain. Additionally, GSK’s weight control line, Aquafresh ISO Active toothpaste wasn’t able to gain Alli, experienced strong growth in incremental sales and share. share or sustain incremental sales Colgate-Palmolive introduced 15 new products, but only saw gains in share and incremental sales with While able to gain incremental sales, Softsoap soap Irish Spring Body Soap. Colgate dental had better success with sustainable sales. products struggled to gain share. New introductions under Mitchum deodorant, Revlon Revlon’s Beyond Natural, Colorstay Mineral and Custom Creations facial cosmetics lines, in Matte line and several other cosmetic products did not addition to its Revlon Colorist Women’s Hair Coloring line gained incremental sales. gain incremental share. All four new products introduced by Novartis gained share and incremental sales: Excedrin Back and Incremental share is lowest in internal analgesics Body pain reliever, Prevacid 24hr., Alcon Contact lenses, and Zaditor Eye Care. category. Three products in home care department (Purex fabric softener, laundry detergent and Renuzit air Personal care products (Dial and Right Guard soap and freshener) succeeded to gain incremental sales and share. deodorants) failed to contribute incrementality.

Source: IRI New Product Pacesetters 2008-2010 © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 15 Most Small Non-Food Manufacturers with the Greatest New Product Pacesetter Success Were Pure-Players Innovation Performance for the 10 Most Successful Small-Sized Manufacturers / 2008-2010 Pacesetters

Number of Pacesetters / Manufacturer Incr. Sales ($M) Sources of Success 1 / $78 Watson’s Next Choice Female contraceptives, the company’s new pregnancy prevention product, generated incremental share in the contraceptives category due to low innovation and competition in the emergency contraceptive subcategory. 4 / $52 Under the Nivea brand, Beiersdorf introduced “A Touch of” and “A Kiss of” lines in Soap and Lipcare respectively. It also released a men’s line Nivea For Men to increase the breadth of its consumer segments which originally only had women. Kao Corporation, which is based in Japan, mostly operates in the beauty department, particularly personal care and hair 2 / $27 care products. In US, it grew by acquiring well-known beauty companies such as Molton Brown and John Frieda, the latter being regularly featured in the annual Pacesetter list. 1 / $24 Thin Care International focuses on weight control products, and innovations were spearheaded by its Jillian Michaels Weight Control supplements. Vogue International focuses on personal care and salon hair care products. It’s introduction of Organix in 2008 provided 1 / $24 shampoo, conditioner, and styling product in a variety of scents designed to be healthier for hair due to its organic components. 2 / $21 BIC operates in stationary, lighters, and razors. The addition of its Soleil razors and cartridges in 2008 allowed the company to rebrand its product offerings to expand its reach to women. 1 / $17 Only operating in dog food category, Ainsworth leverages its expertise in manufacturing nutritious and healthy dog food. The pacesetter Rachel Ray Nutrish is a joint venture with famous celebrity chef Rachael Ray. 1 / $10 This Finnish company’s main business is in the disposable tableware & dinnerware categories. Its pacesetter Chinet disposable cups are expansions to their tableware & dinnerware products. 1 / $10 Elations is a pharmaceutical company specializing in vitamins or supplements that improve joint comfort and osteoarthritis . The new pacesetter Elations Liquid Supplements are new vitamins/supplements offered in a new liquid format. 1 / $9 Mostly known for Botox and facial products, its pacesetter product Optive lens/eye care is an addition to their growing eye care business.

Source: IRI New Product Pacesetters 2008-2010 © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 16 Maintaining Media and Merchandising Spend, as Well as Increasing Offerings Help Grow and Sustain Trial and Repeat, Resulting in Healthy Sales Silk Pure Almond Milk Substitute

YEAR 1 – YEAR 2 – CURRENT CURRENT

Total Media $$$ (000) $16,993 $16,788 Add Cum Wghtd Weeks Any Merch 5.33 10.96

Average Items 1.9 3.3

ACV Weighted Distribution 58.3 80.9

% Trial 5.31 10.55

% of Triers Repeating - Cumulative 48.81 55.13

Dollar Sales (53.8% Growth) $61MM $132MM

Source: IRI New Product Profiler / *See Appendix for Additional Case Studies © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 17 Even Start-Up Brands with Little Media Support Generated Excitement Through Merchandising Strategies, Expanded Distribution and New Products to Try Chobani Yogurt

YEAR 1 – YEAR 2 – CURRENT CURRENT

Total Media $$$ (000) $0 $207 Add Cum Wghtd Weeks Any Merch 4.02 8.82

Average Items 6.0 7.5

ACV Weighted Distribution 18.6 43.1

% Trial 2.88 9.69

% of Triers Repeating - Cumulative 56.90 58.75

Dollar Sales (71.3% Growth) $47MM $164MM

Source: IRI New Product Profiler / *See Appendix for Additional Case Studies © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 18 © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 19 Out-Sized Innovation Bucked a Declining Trend of New Product Pacesetter Sales New Product Pacesetter* Sales in $B

$3.3 $3.5 Total F&B Pacesetters Top-10 Pacesetters Median Launch $25.0 $3.0 $2.4 $19.3 $20.0 $2.5 $2.2 $14.5 $2.2 $14.3 $14.3 $2.0 $15.0 $1.3 $1.5 $0.8 $10.0 $1.0 $0.8 $0.8 $5.0

$0.5

Median Year Median One Pacesetters in in Pacesetters$M $- $- 2016 2017 2018 2019

$3.0 $2.6 $2.2 $2.7 $20.0 $16.9 $2.3 $17.7 $13.8 $13.9 $15.0 $2.0 $1.3 $1.1 $0.9 $10.0 $1.0 $0.7 $5.0

$- $- Median Year Median One 2016 2017 2018 2019 in Pacesetters$M Total Non-Food Pacesetters Top-10 Pacesetters Median Launch

*CLICK HERE TO ACCESS THE 2019 NEW PRODUCT PACESETTERS REPORT

Source: IRI 2019 New Product Pacesetters analysis. © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 20 Big Manufacturers Continue Capture More of Total New Product Pacesetters Dollar Sales

% of Total New Product % of Total New Product Pacesetter Product Count Pacesetter Dollars 4% 8% 8% 7% 12% 15% 14% 23% 11% 16% 19% 19% 34% 28% 37% 22% 30% 49% 30% 27%

31% 35% 30% 23% 52% 43% 46% 36% 19% 20% 19% 24%

2016 2017 2018 2019 2016 2017 2018 2019 Small and Extra Small Companies together While just 24% of New Product Pacesetters, Large account for more than half of New Product Pacesetter companies in 2019 account for 52% of total Pacesetter products. Mid-sized companies are contributing sales dollars. Medium-sized companies represent a fewer Pacesetters year-on-year. declining share (22%) of total Pacesetter sales dollars.

Extra Small Companies <$100M Small Companies $100M- <$1B Medium Companies $1B - $5.5B Big Companies >$5.5B

Customization / Experiential: indulgent, Personalization: make it sensorial, exciting

your own, lifestyle products 2016 2018 Expectation: Targeted Benefits: needs- results, energy, based results, performance performance

Healthy Attributes: Simplicity: healthy, prevention, simple convenient, natural indulgence, living well PRE-COVID-19 INNOVATION

MID-DECADE INNOVATION Premium: ingredients, Niche Appeal: small- positioning, packaging company perceptions, targeted products Self-Care: nutrition, protein-forward, Rx- Nutrient Boost: added strength personal care nutrition, healthier base ingredients

Indulgence: flavors, 2017 decadent treats, textures 2019 Lifestyle: high energy, natural

Source: IRI 2018, 2019 New Product Pacesetters Analysis. © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 22 During the Pandemic, Consumers are Focused on Speeding Up Their Time In-Store, and Are Less Interested in New Product Discovery

Approach to Shopping for New Food / Beverages During Past 2 Months Among those looking for new products, more will look less often in the coming weeks / Base = 1,400

35% 25% 24% 21% I haven't been looking I haven't been looking I haven’t noticed I've only been looking for new products as for new products as many new products for new products to try much because I was much because I have offered in the store if my usual product focused on just getting been rushing to spend was unavailable the basics as little time in the store as possible

New products are either totally new brands within the marketplace, or new versions (such as flavors, formulations, etc.) of brands that already existed.

Source: IRI Survey 2020, IRI Consumer Network™ Panel representing Total U.S. Primary Grocery Shoppers, 5/22-5/24/20. © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 23 New Products Still Make the Basket, but More Consumers Report They’ll Look Less Than Those Who Will Search More for New Products

Plans to Look for New Food / Beverages in the Next 4 Weeks Among those looking for new products, more will look less often in the coming weeks / Base = 1,400

9% 73% 18% Will look for new products Will look for new products Will look for new products more often than I did in about the same amount as less often than I did in the the past 4 weeks I did in the past 4 weeks past 4 weeks Among shoppers who purchase new products, one third “felt like trying something new.”*

New products are either totally new brands within the marketplace, or new versions (such as flavors, formulations, etc.) of brands that already existed.

Source: IRI Survey 2020, IRI Consumer Network™ Panel representing Total U.S. Primary Grocery Shoppers, 5/22 – 5/24/2020. / *IRI New Trier Database © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 24 Shoppers are Focused on Limiting Their Time in Store; Marketers Will Need to Provide Pre-Shopping Incentives to Scout New Products

Shopping Behaviors on Change in Time Spent Grocery Shopping Last Regular In-Store Trip for Groceries vs. Similar Store Trip Prior to COVID-19

Base = Those Who Have Shopped for Base = Those Who Have Shopped for Groceries In-Store in the Past Month = 1,226 Groceries In-Store in the Past Month = 1,226 56% 35% Went straight to the usual Skipped a lot of 42% location for the items I aisles / sections wanted; didn't usually look to limit my time Spent less time shopping at displays (end of aisle in the store than I did for a similar type or other special displays of trip before COVID-19 around the store)

Q. How much time did you spend shopping on this Q. Which of the following, if any, did you do during latest grocery trip, compared to how long you would your last regular grocery shopping trip to a store? have shopped on a similar trip prior to COVID-19?

Source: IRI Survey 2020, IRI Consumer Network™ Panel representing Total U.S. Primary Grocery Shoppers, May 22 – 24, 2020. © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 25 Omni-Channel Presence is Critical in Post-COVID-19 World; Shoppers Seek New Products Both Online and In-Store

Looking For New Grocery Products Online vs. In-Store Base = Those Who Have Shopped for Groceries Online in the Past 2 Months = 518

25% 25% 29% 22% I'm more likely to I look at new products I'm more likely Does not apply, look at new products about the same to look at new I rarely look for to try when whether I'm shopping products when new products either shopping online online or in-store shopping in-store online or in stores

Q. How likely are you to look for new products while shopping online for groceries vs. while shopping inside a store? New products may be totally new brands within the marketplace, or new versions (such as flavors, formulations, etc.) of brands that already existed.

Source: IRI Survey 2020, IRI Consumer Network™ Panel representing Total U.S. Primary Grocery Shoppers, May 2020. © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 26 Despite More In-Home Consumption, Fewer Consumers Are Seeking New Products than Pre-COVID-19

Pre-COVID-19 Current Base = 4,121 Total 2020 Respondents Base = 1,400 Total Respondents, 5/22 – 5/24

12% 20% I generally don't I generally don't purchase new purchase new products in this products in this category category

Categories Description on Approach – Food Current Approach to New Products – Food

Q. For each of the following categories, please select Q. Please select the statement that best reflects the the statement that best reflects the approach you take approach you currently take for each of the following to new consumer packaged goods products. categories. Select one answer for each category.

Sources: IRI 2020 New Product Survey, January 2020; IRI Consumer Network™ Panel representing Total U.S. Primary Grocery Shoppers, May 2020. © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 27 Trusted Brand Status, Endorsements and Price Promotions are Vital for Building Awareness of New Products, Especially During a Financially Stressful Time

Influence of Source of Awareness – Top Box Summary Base = 4,121

Pre-COVID-19, displays drove just 13% of new product awareness among new product triers, but the importance of displays will likely increase as consumers consciously control their time in store.*

41% 23% 48% 22% 18% Item price Shopper loyalty Previous usage Coupons Mentioned / card discounts / trust of brand from home recommended by family / friend

Q. How does each of the following sources influence your awareness of new products?

• Innovate on the attributes that matter to consumers. Create products that include benefits that consumers are willing to pay more for, e.g., antibiotic- and gluten-free. • Ensure clear and impactful positioning. Consumers need to know what your product delivers and how it meets their needs • Be distributed perfectly, not perfectly distributed. Maintain distribution to build trial and repeat; if shoppers can’t obtain a product, there’s no chance of a repeat purchase. • Commit to and support well-timed promotions in year-one and beyond. • Anticipate realistic total and incremental sales. Manufacturer forecast factors include distribution targets, advertising, trial and repeat. Retailers will need to know how products fit their portfolio and how they will drive incremental category volume.

Premiumization More is More Brand Expandability Pack Size Innovation Private Label The Great Recession saw Multi-serve food products Leverage brand equity to Package innovation can High quality private a new product evolution satisfied a financial need expand into adjacent be just as important in a brands are an important that brought professional with high quality food and categories and make the recession as brand new innovation platform as services home, including indulgent products. most of growth pockets. products. Estimate the retailers enhance their restaurant-branded Products trending now Alcohol has been demand for multi-pack, commitment to shoppers. frozen entrées and include multi-serving identified as a category multi-serving or larger Emerging categories teeth whitening. premium chocolates and ripe for innovation. sizes as a way to answer include plant-based meats For the current recession, non-chocolate candy. Traditional spirit brands consumer demand. Beer and dairy alternatives, as premiumization will take Multi-function laundry and can adapt to at-home and cereal are just two well as CBD products. the form of restaurant- home care with sanitizing cocktail machines a la examples of recent large quality meals for home properties and perceived Keurig Drinkworks, or pack innovation shifts consumption and convenience will become develop branded frozen that feed a need to personalized DIY kits increasingly important in slushy concoctions. “pantry stock.” for services including the coming months. hair treatments, nail care and color.

Social Intelligence Brand Optimization Brand Analytics & Brand Value Analysis Engine Landscape • Provides feedback on what • Applies augmented decision • Gives broad multi-category brand consumers are saying about your making to prioritize growth views with cross-category cultural brand online opportunities based on size, attributes to identify and activate • Determines which functional and demographics and execution brand strategy initiatives emotive attributes you “own” and difficulty • Easily identifies competitive set, which are “table stakes” • Assesses source of volume and explores specific structure • Builds improved messaging incrementality to brand or category segments or walking attributes to campaigns and identifies • Aids in choice of the right media assess business performance opportunities for brand growth spend, distribution and price to • Updates dynamic structures with • Grows both top and bottom line capture most switchers new products, most recent size and while also driving market share trend POS data plus demographic and panel measures monthly

ACTION and IMPACT ACTION and IMPACT ACTION and IMPACT • >10% growth in sales • Doubles the odds of new product • Identifies macro changes to • Increases brand value success while cutting the cost of consumer demand as they happen • Enables more effective media innovation dramatically • Continually aligns brand portfolios campaigns • Continually identifies and activates against future shopper needs against growth opportunities

© 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 31 Insights and Strategic Guidance for Better Decisions IRI’s Online Resources Include Real-Time Updates and Weekly Reports Which Track the Impact of the Virus on CPG and Retail

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© 2020 Information Resources Inc. (IRI). © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 38 38 © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 39 Measures of Innovation Success Used in This Report

What Makes a New Product Pacesetter? • Completed a full year of sales in calendar-year • Begin tracking year-one sales after 30% ACV weighted distribution achieved across multioutlet geography; must have 30% ACV or higher at date of year-one completion. • New Product Pacesetters are the Top 100 new banners (for each, f&b, and non-food) based on year-one sales across multi-outlet geography. • MULO/multi-outlet = supermarkets, drugstores, mass market retailers, military commissaries, and select club and dollar retail chains. Measure – Incremental manufacturer sales Objective – Assess magnitude of New Product Pacesetter sales that contribute to dollar growth for the manufacturer Method – Compare the manufacturer’s sales in the associated category during the 52 weeks pre-launch to the launch year or later years Key Analyses • Incremental sales % of total New Product Pacesetter sales (launch year) measures the efficiency of new products by calculating the portion of the Pacesetter sales that are incremental to the manufacturer. • Manufacturer % sales growth from incremental sales (launch year) assesses what percent growth the New Product Pacesetter(s) contributed to total manufacturer growth in thecategory. • % of incremental sales sustained (year 2 and beyond) evaluates the portion of incremental sales that the New Product Pacesetter is able to maintain after the launch year. This is measured by comparing subsequent year sales to the pre-launch and launch year sales. Sales from new Pacesetters introduced by the manufacturer in the same category in subsequent years are subtracted to isolate the ongoing value from the original product. Measure – Incremental manufacturer share Objective – Determine ability of New Product Pacesetter to drive share gain for the manufacturer Method – Compare the manufacturer’s share in the associated category during the 52 weeks pre-launch vs. 52 weeks post-launch Key Analyses • Incremental share points gained (launch year) indicates the share growth gained by the manufacturer in the category due to the New Product Pacesetter. • % of products with share gain (launch year) provides the success rate of manufacturers with multiple Pacesetter launches.

Notes: 1) Other typical measures of new product success include metrics around total new product sales, such as launch year sales and % of sales from new products. 2) Incremental share and sales to the brand is also analyzed, but this report focuses on the ultimate goal of driving gains for the manufacturer. 3) In cases where a pacesetter spans multiple categories or a manufacturer introduces multiple products in the same category during the same time period, incremental sales are calculated separately and share gain is weighted by product size.

Source: IRI New Product Pacesetters 2008-2010. © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 40 Strong Media Spending Drove Adoption for Many Brands, But Others Relied Upon Word-of-Mouth to Achieve Success Bertolli Oven Bake Meals – Multi Serve Frozen Dinners / Entrees

YEAR 1 – YEAR 2 – CURRENT CURRENT

Total Media $$$ (000) $32,134 $9,575 Add Cum Wghtd Weeks Any Merch 12.36 15.90

Average Items 3.3 4.3

ACV Weighted Distribution 70.5 77.8

% Trial 4.01 6.53

% of Triers Repeating - Cumulative 28.16 34.73

Dollar Sales (71.3% Growth) $39MM $41MM

Source: IRI New Product Profiler © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 41 Strong Media Spending Drove Adoption for Many Brands, But Others Relied Upon Word-of-Mouth to Achieve Success Dunkin’ Donuts Ground Coffee

YEAR 1 – YEAR 2 – CURRENT CURRENT

Total Media $$$ (000) $16,125 $15,345 Add Cum Wghtd Weeks Any Merch 12.66 15.91

Average Items 3.0 3.0

ACV Weighted Distribution 79.0 86.1

% Trial 4.88 8.54

% of Triers Repeating - Cumulative 53.86 57.45

Dollar Sales $84MM $104MM

Source: IRI New Product Profiler © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 42 Strong Media Spending Drove Adoption for Many Brands, But Others Relied Upon Word-of-Mouth to Achieve Success Freschetta PizzAmore – Frozen Pizza

YEAR 1 – YEAR 2 – CURRENT CURRENT

Total Media $$$ (000) $15,368 $8,816 Add Cum Wghtd Weeks Any Merch 11.10 12.70

Average Items 4.2 3.4

ACV Weighted Distribution 47.1 53.9

% Trial 4.38 8.03

% of Triers Repeating - Cumulative 26.08 30.37

Dollar Sales $42MM $46MM

Source: IRI New Product Profiler © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 43 Strong Media Spending Drove Adoption for Many Brands, But Others Relied Upon Word-of-Mouth to Achieve Success Green Giant Valley Fresh Steamers – Frozen Prepared Vegetables

YEAR 1 – YEAR 2 – CURRENT CURRENT

Total Media $$$ (000) $0 $1,260 Add Cum Wghtd Weeks Any Merch 12.05 16.49

Average Items 4.1 4.4

ACV Weighted Distribution 76.2 85.3

% Trial 11.15 19.68

% of Triers Repeating - Cumulative 30.65 42.33

Dollar Sales $46MM $58MM

Source: IRI New Product Profiler © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 44 Strong Media Spending Drove Adoption for Many Brands, But Others Relied Upon Word-of-Mouth to Achieve Success Hormel Compleats – Shelf Stable Dinners

YEAR 1 – YEAR 2 – CURRENT CURRENT

Total Media $$$ (000) $3,197 $2,301 Add Cum Wghtd Weeks Any Merch 8.90 13.00

Average Items 5.9 9.3

ACV Weighted Distribution 60.2 88.0

% Trial 7.11 13.06

% of Triers Repeating - Cumulative 37.67 46.78

Dollar Sales $52MM $83MM