2017 Top Trends in Fresh Foods

Home , Albertsons, Giant Eagle, Grocery store, Meijer, Publix, Target Corporation

SOCIAL STRATEGY & CULTURAL ALIGNMENT

Copyright © 2017 Information Resources, Inc. (IRI). Confidential and proprietary. 2 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 Rick Stein • Meat Vice President, Fresh Foods • Seafood Food Marketing Institute • Deli/In-store, fresh prepared foods and [email protected] Fresh Foods assortments 202.220.0700

John Ruane (Co-Chair) Dan Koch Geoff Waldau Richard Cashion Ahold USA Associated Wholesale Grocers, Inc. Delhaize America Healthy Markets

Rick Steigerwald (Co-Chair) John Grimes Brett Bremser Mike Papaleo Lund Food Holdings, Inc. Weis Hy-Vee C & S Wholesalers Fresh Foods

Tom DeVries (Past Chair) John Haggerty Jim Lemke Blaine Bringhurst* The FEC seeks to Giant Eagle, Inc. Burris Logistics Robinson Fresh Price Chopper Supermarkets • identify areas of collaboration across all John Beretta Mark Hilton Emily Coborn Nicole Wegman* fresh foods Albertsons, LLC Harris Teeter LLC Coborns Wegmans Food Markets, Inc. departments Dave Bornmann Chris Lane Mark Doiron • promote understanding Publix Super Markets, Inc. Wakefern Food Corporation Schnuck Markets, Inc. and cooperation

Scott Bradley Mike Malone Geoff Wexler throughout the industry Target Corporation Brookshire Grocery Company Wakefern and with sister fresh associations Jerry Chadwick Dan Murphy Steve Howard • maximize common Lancaster Foods, LLC Unified Grocers, Inc. Bristol Farms learning’s between Alex Corbishley Pat Pessotto Buddy Jones fresh categories and to Target Corporation Longo Brothers Fruit Markets Inc. MDI create a vision of leadership for the Chris Darling Jerry Suter Nick Carlino entire fresh category Albertsons, LLC Meijer, Inc. MDI

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

Our Study

Trend Overviews

Social Strategy Deep Dive

3 – 5 Year Projection/Implications

2017 Education Series Rollout

Objective

Define the major trends that are driving Perimeter sales outperformance and will directly impact long-term success of retailers and suppliers over the next 3- 5 years

Inputs

industry interviews primary data analysis secondary research

3.8% 2.1X 2.6% 2.3% 1.8% 1.4% 1.1%

0.5%

Frozen General Food Refrigerated Beverages Total Food Total F&B Fresh Perimeter

$48.2B

$6.4B

$2.8B

$62.5B $11.3B

Meat Seafood Deli Prep Produce Bakery Deli Cheese Deli Meat Deflation Strength Growth Churn Softening Strength Stable

VOLUME VOLUME VOLUME VOLUME VOLUME VOLUME VOLUME 2.3 5.3 5.0 5.3 3.2 1.… 0.… % % % % %

DOLLAR DOLLAR DOLLAR DOLLAR DOLLAR DOLLAR DOLLAR 3.1 -3.0% 3.8 6.2 4.8 1.3 3.8 % % % % % %

Holistic Atomization of Social Strategy & Health Personalization Cultural Alignment

RETAILER RESPONSE: Customization Hyper to New Localization Consumerism

Trends still in early stages

Embracing these trends drives sales outperformance

Forms foundation for next generation of success

Which option is your primary source to learn more about the fresh foods you purchase?

a Social Media

b Newspapers/Magazines

c Television

d Your local store

Copyright © 2017 Information Resources, Inc. (IRI). Confidential and proprietary. 17 Copyright © 2017 Information Resources, Inc. (IRI). Confidential and proprietary. 18 Social Strategy & Cultural Alignment

A company’s ability to grow sales by integrating the underlying consumer motivations and values that ultimately impact sales

722,389 972,222 FACEBOOK LOGINS SWIPES

150 MILLION $233,596 EMAILS SENT IN SALES

527,760 2.98 MILLION SNAPCHAT VIDEO VIEWS STORIES

20.8 MILLION+ 76,194 MESSAGES INSTAGRAM PHOTOS

1Billion +8 Billion +10 Billion YouTube hours Facebook Snapchat watched daily videos viewed videos viewed 3.5 Billion Photos shared

MOST COMMON APPS

37 12 3 5

Average Average Average # of Hours spent # of apps # of apps apps to 80% on phone installed used daily usage per day

INFORMATION IS MORE POWERFUL • Real/Live video connectivity exploding Millennials: Tech Savvy Gen Z: Tech Innate • Real and self-claimed authorities

REACTION TIME IS SHORT • Brand health/equity can erode in months • Critical mass of opinion forms quickly

IRI Social Advantage (40 million sites) with full context filtering over 5 years • Activist-led vs. Consumer-led

Consolidation and normalization of data

Survey and sales results

Executive interviews

Which of these five key issues most impacts your purchase decisions on brands/items? (Select one)

a Seafood Sustainability

b Animal Welfare

c Meat Certifications

d Food Waste

e Workforce Treatment

ANIMAL FOOD WELFARE WASTE +120% +50%

MEAT FAIR FOOD/ SEAFOOD CERTIFICATION/ FAIR WAGE SUSTAINABILITY CLAIMS +97% +223% +104%

ANIMAL FOOD WELFARE WASTE NOAA+120% reports - Depletion of fishing stocks+50% Erosion of historical habitats MEAT FAIR FOOD/ SEAFOOD Controversial catchCERTIFICATION/ methods FAIR WAGE SUSTAINABILITY CLAIMS Activist concerns evolving into consumer concerns +97% +223% +104%

Target Stock Bycatch Habitat Management

Impression Key Insights Conversations tilt toward restaurants, Sources but grocery focus is growing 50% 34% 10% Consumers are concerned about microblog news blogs environmental health and their own health 5% 1% social sites message boards “Aquaculture” is a rising concern– is it sustainable, healthy?

Top conversation influencers go beyond niche advocacy organizations

2.2MM+ downloads

Seafood growth outperforms F&B

Fin Fish Shellfish +3.9% +2.6% 2016 Sales Growth 2016 Sales Growth

Strong sustainability programs sell more seafood

FIN FISH +3.9% SHELLFISH +2.6% Strong/Average Weak Program Strong/Average Weak Program Program Program +7.9% -2.7% +4.8% 0% YOY dollar sales YOY dollar sales YOY dollar sales YOY dollar sales

Ratings Source: Greenpeace USA, Grocery Store Scorecard Data Source: IRI FreshLook POS, MULO, latest 52 weeks ending 10-2-2016 Copyright © 2017 Information Resources, Inc. (IRI). Confidential and proprietary. 32 Seafood Sustainability Aligns to Values

Top Rated Retailers typically sell 11% more sustainable Fin Fish than Low Rated Retailers

Top Rated Retailers grow sustainable fish sales 2X faster than Low Rated Retailers

Data Source: IRI FreshLook POS, MULO, latest 52 weeks ending 10-2-2016 Ratings Source: Greenpeace USA, Grocery Store Scorecard

ANIMAL FOOD WELFARE WASTE +120% +50%

MEAT FAIR FOOD/ SEAFOOD CERTIFICATION/ FAIR WAGE SUSTAINABILITY CLAIMS +97% +223% +104%

Cage-Free Eggs Gestation Crate-Free Pork Antibiotic-Free Meat

12.5% 170

OF US FLOCKS PLEDGES FROM IN JAN 2017 RESTAURANTS

• Industry-wide retailer and • Massive cost increases and manufacturer pledges by 2025 industry consolidation • Demand may not be met

CRATE FREE PLEDGE

15% 50%

SALES IN 2015 SALES IN 2022

Major pledges from contract Major retail and foodservice and company farms commitments planned/implemented

Exploding 7% Food Service Commitment

OF TOTAL MEAT RETAIL SALES

15% of 2016 chicken sales 3.6% of 2016 beef and pork sales • Future ABF change less than chicken by 2022 40% • New USDA rules in 2017

AVERAGE BASKET $42.59 4.1% 24% HH Buying HH Buying

2.5 $18.87 3.4 $27.58 $105.08 $106.90 trips/buyer Per buyer trips/buyer Per buyer ORGANIC NO ANTIBIOTIC FZ/REFRIGERATED FZ/REFRIGERATED MEAT/POULTRY MEAT/POULTRY/ ORGANIC CLAIMS NO ANTIBIOTICS CLAIMS SEAFOOD CLAIM SEAFOOD CLAIM

Top 20% of ABF/Organic Retailer RMAs grew pounds 32% faster across Total Fresh Meat 3.6% pound growth vs 2.8% Total 2016 US growth

30% 50% 12%

EXTREMELY WILLING TO OF ANIMALS IMPORTANT/ PAY A PREMIUM COVERED BY IMPORTANT FOR THE PROGRAMS PURCHASE

KEY ISSUES: • Differing standards and practices • USDA and industry standards set • No definitive standard

% POSITIVE SENTIMENT COMPANY EXAMPLE 100% 90%

Adopted key welfare practices 80%

70% Top 3 competitors did not 60%

Brand health and sentiment 50%

strong 40%

30% Outperformed on sales 20%

Brand A Top 3 Competitors

Source: IRI Social Advantage: Total US 2016

Slow Growth Chickens

KEY ISSUES: • Activist-led • Early acceptance by foodservice • Similar pattern to cage-free movement (without videos)

ANIMAL FOOD WELFARE WASTE +120% +50%

MEAT FAIR FOOD/ SEAFOOD CERTIFICATION/ FAIR WAGE SUSTAINABILITY CLAIMS +97% +223% +104%

2.8 trillion 40% totaling of food is $165B lbs of waste globally wasted

21% Food 16% of municipal waste of methane landfill use is emissions

A 15% reduction in US food waste could feed 25 million people

U.K. Retailers have 50% 50% reduced reduction increased food HH waste reduction bank donations by 2030 by 2030 by 18% by 10x since over 4 2006 years

Major public Increased relations donations, impact across recycle / Europe reuse

France outlawed food waste from supermarkets 35,000 tons already donated New 2016 laws in place annually Supermarkets cannot deliberately destroy dated product

Must sign donation contracts with 15% increase food banks and charities = New simplified process for donation 10 million more meals

Continued integration between industry and food banks

Preventable waste becomes more visible in operations

Increased focus on right size portions/packaging

Amplified consumer engagement and communication

ANIMAL FOOD WELFARE WASTE +120% +50%

MEAT FAIR FOOD/ SEAFOOD CERTIFICATION/ FAIR WAGE SUSTAINABILITY CLAIMS +97% +223% +104%

Worker Issues are Holistic

Wage Levels Immigration

Fair Wage / Food Retailer/grower partnerships:

Worker conditions Pay/Wage agreements Formal governance Structure Education commitments

Company A’s school to work platform helps A outperform

Company A Nuts / Citrus / Juices Snacks Nuts / Citrus / Rfg Juices +13.0% +6.6% 2016 Sales Growth 2016 Category Sales Growth

HEALTH & COMMUNITY EDUCATION SUSTAINABILITY WELLNESS

Investing in the Empowering the next Changing the Protecting and communities where generation to live, paradigm of health conserving our we live, work and play learn and thrive care in the Central natural resources Valley

Changing from trend to a business imperative

Will be the base for perimeter growth and change over next 5–10 years

Increasing rate of retailer integration and importance

• Expect rapid mainstreaming of key issues

• Understand the issue impact on: • Brand health • Brand equity

• Integrate listening/monitoring capabilities into core marketing processes

• Develop your own 3-5 year view on how drivers and category trends will evolve: • Product requirements • Sales impact

Feb 23 Mar 23 Apr 27 June 1 July 13 Aug-Sept

Holistic Social Strategy Personal - Hyper Retail Integrated Health and Cultural ization Localization Response White Alignment Paper Webinar Webinar Webinar WebinarWebinar Webinar Summary Presentation

Sally Lyons Wyatt Chris DuBois Sally Lyons Wyatt Chris DuBois Steve Ramsey

Copyright © 2017 Information Resources, Inc. (IRI). Confidential and proprietary. 58 Copyright © 2017 Information Resources, Inc. (IRI). Confidential and proprietary. 59 Thank You! Chris DuBois Rick Stein SVP, Strategic Accounts VP, Fresh Foods [email protected] [email protected] (312) 342-8916 (202) 220-0700