Cheese on Trend

Webinar Deck WIP 2 Agenda

I. Macro Consumption Trends Jim Schafer II. Consumer Trends Driving Cheese Kelly Johnson, Brenda Bell III. Bringing to life with concepts Chef Ulrich Koberstein IV. Roundtable Discussion Team V. Q & A Team

3 Macro Cheese Consumption Trends

4 5 U.S. Cheese Consumption is at an all-time high

Per Capita Cheese Consumption (lbs.) — U.S. 36.6 35.4 32.9 31.6 29.8 26.8 24.6 22.5

17.5 14.3 11.4

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2016*

Sources: WMMB, USDA/ERS *Preliminary estimate 5 6 Consumption of Italian and American lead growth U.S. Per Capita Cheese Consumption (lbs.) — by Variety 16 15.2 lbs 14 14.3 lbs 12 10 8 6 6.8 lbs 4 2 0

American Italian All Other Cheddar, colby, curds, monterey Mozzarella, parmesan, , , Swiss, Hispanic, jack, other American ricotta, romano, other Italian muenster, blue, other

Source: WMMB, USDA/NASS 6 7 Cheese companies are working in 8 categories of new cheeses

Flavors Cheese Companies Plan to Innovate in 2018 (%)

Smoked

Herbs (basil, chives, oregano, etc.)

Cheese Blends

Hot Pepper

Bold Flavors

Fruit

Nuts

Beer/Wine

0 10 20 30 40 50

Source: Dairy Foods Magazine, April 2018, Exclusive Research study; Note: Survey respondents could select more than 1 response 7 8 How do Product and Menu Developers Differentiate with Cheese? Core vs. VA Added Framework

Core Cheddar, Pepperjack, Swiss, Provolone, Asiago

Value Added Chipotle Cheddar, Colby, Colby Jack, , Sharp Value Added Cheddar, Smoked Cheddar, Southwest, White Cheddar, Cheeses are Fontina, Gouda, Gruyere, Havarti, Muenster, Mozzarella, differentiators Herb, Colby Pepperjack, Sriracha Jack, Queso Fresco

Source: Sargento Internal Sources, 2018 8 Consumer Trends Driving Cheese

9 Cheese on Trend - Trend Areas Sensory Up In Sensations Smoke Global Flavors Plant Forward Cleaning Up

10 1 Cleaning Up • Culinary Complements • Organic, rbst-Free • IQF Cheese Blends • Packaging Options • White Cheeses

11 11 Portion Control Packaging and Culinary Complements are Examples of Products that Can Help Fight Food Waste

12 • Inherent Positives • Production (hormone • Real People • No artificial ingredients free, cage free, non • Socially Responsible • Short Ingredient lists GMO, antibiotic free, • Higher Purpose organic, pasture raised) • Scale (small batch, local)

Clean Labels Clean Production Practices Social Responsibility

Source: Hartman H+W Report 2013-2017 13 Source: Nielsen 2017 Clean Label Report 14 -Almond Shaved Brussel Sprouts

Salad with crispy shaved brussels sprouts and spring greens blend topped with shaved apple, toasted almonds and crumbled blue cheese

15 Pimento Studded Bourbon Jerky Snack Tray

On-the-go snack tray of cubed Pimento cheese, candied Bourbon beef jerky, scented almonds and ranch pretzels

16 2 Plant-Forward

17 Plant-Forward – Purposeful Eating 68% eating more produce than they did 5 years ago

Datassential Keynote Salad Report 2017 18 Plant-Forward Eating Permits Cheese Cheese leads in growing veggie centric categories Retail Bag Salad Kits With Cheese $ Sales 17% higher than Kits without Cheese

Nielsen Total U.S. XAOC - $Millions $587.2

$499.4 $355.5

$208.4

2015 2016 2017 2018 Salad Kits with Cheese Salad Kits without Cheese Source: Nielsen Total US xAOC, 52 week periods ending January 19 Cheese Varieties Have a Role In Plant-Forward Eating

Over 26% Veggie Burgers Smashburger - Spicy Cowboy Black Contain Cheese Bean Burger: Grilled garlic jalapenos, applewood smoked Incidence of Cheese Varieties on Veggie Burgers bacon, cheddar, haystacks onions and BBQ sauce Cheddar 26% ------Swiss 12% Red Robin - Gourmet Veggie Pepper Jack 12% Burger: ancient-grain-and-quinoa Jack Cheese 11% veggie patty is piled high with Swiss American 11% cheese and lightly fried, Parmesan- Mozzarella 8% sprinkled mushrooms Provolone 6% ------White Castle - The Impossible Bleu Cheese 4% Sliders: smoked , Smoked Cheese 4% pickles, onion, and served on the 3% brand’s signature bun. Feta 3% 20 Sources: Datassential Inclusions Infuse Plants and Flavor Into Cheese

Fiesta Pepper Jack • Cranberry White Cheddar • Sun Dried Basil • Garlic Herb • Colby Pepper Jack • Habanero • Pepper Jack • Pimento Cheese • Ghost Pepper Cheese

21 Harvest Burger

Our great tasting Harvest Burger is a savory blend of real vegetables, including roasted corn and green peppers, wholesome grains, cheese, and cracked . Grilled to perfection, the patty has a crispy, caramelized coating and is topped with fresh-cut lettuce, juicy tomatoes, onions and your choice of condiments served on a brioche bun.

22 Harvest Burger express screen source: Datassential SCORES™

norms reflect comparison to all items PRODUCT SCORES (AMONG: TOTAL) 100 = max possible score

69 92 88 93 unbranded uniqueness frequency draw PI

n=304 n=304 n=229 n=229 definitely or probably extremely or very would order the item would visit somewhere would buy unique all the time just for this item 47% 51% 22% 50%

50 88 87 89

versus other burger

23 4 Cheese Stuffed Roasted Vegetables Roasted and stuffed mushrooms, peppers and tomatoes with a blend of Cheddar, Mozzarella, Monterey Jack and Parmesan cheeses

24 4 Cheese Stuffed Roasted Vegetables express screen source: Datassential SCORES™

norms reflect comparison to all items PRODUCT SCORES (AMONG: TOTAL) 100 = max possible score

unbranded67 86 91 64 PI uniqueness frequency draw

n=304 n=304 n=230 n=230 definitely or probably extremely or very would order the item would visit somewhere would buy unique all the time just for this item 47% 48% 23% 42%

71 84 93 76

versus other appetizer & side

25 3 Global Flavors

Alpine Style Cheeses

Bold Flavor Varieties Mediterranean Cheeses Traditional Hispanic Cheeses

26 Alpine-Style Cheeses – excellent melting cheeses, perfect for kicking up your or other hot !

Asiago Cheese Gouda Cheese Havarti Cheese

Gruyere Cheese Fontina Cheese Emmental Cheese

27 Mediterranean Cheeses - Varieties like Feta, Goat, Authentic Italian are witnessing growth, are appealing to fast growing demographic segments and have a variety of uses across products

Parmesan Cheese Feta Cheese Goat Cheese

28 Bold Flavor Varieties - From Sriracha Jack to Habanero Pepper Jack, Cheese is the perfect vehicle to deliver bold flavors

29 Jalapeño remains the largest flavor segment in the retail cheese category, though other hot peppers (beyond jalapeño, habanero and chipotle) are gainingRetail Cheeseground. Sales by Flavor Segment Top Flavor Segments 2016-2017 Fastest Growing Flavor Segments 2016-2017 (million lbs.) Growth (thousand lbs.) Growth Jalapeno 53 3.7% Peppercorn 712 69.1% AO Hot Pepper 45 0.7% Vanilla 617 59.6% Smoked 43 11.0% Cayenne 176 45.0% Herb excl. Dill 27 0.5% Pesto 152 28.2% Pimento 26 7.1% Alcohol excl. Wine 847 27.6% Taco 24 1.4% Bacon 3,407 26.1% Berry 19 2.1% 2,435 24.6% Habanero 15 1.2% Chocolate/Fudge 93 24.4% Onion 12 1.8% Roasted 604 16.4% Garlic 11 2.7% Mushroom/Truffle 226 15.3%

Source: IRI Custom WMMB Database; MULO+C; Exact weight Products Only 30 Bold Flavor Varieties Witnessing Growth in Foodservice

Variety % Restaurant % Growth vs % Growth vs 4 Penetration YAGO YAGO Pepper Jack 15.8% +3.2% +18.5% Pimento 3.1% +0.1% +66% 1.8% +20.5% +128.7% Jalapeno Cheddar 1.6% +31.2% +100.5% Herbed Goat 1.1% +6.1% +43.6%

Source: Datassential MenuTrends Direct, 2018 31 Traditional Hispanic Cheeses - cue authenticity & are becoming more popular as our country continues to move toward a multicultural majority.

Manchego Queso Blanco Cotija

Asadero

32 Hispanic cheeses (such as Cotija, Queso Fresco, Asadero) are experiencing stronger than average growth Hispanic Cheese Sales at Retail (million lbs.)

Share of category Volume Sales Annual Percent Growth1 2017 8.2% 7.0% 7.2% 7.2% 2.7% 6.5% 101.3 87.4 94.6 76.6 81.6

1.1% 1.0%

Total Cheese Hispanic Non-Hispanic 2013 2014 2015 2016 2017 Cheese Cheese

1Compound Annual Growth Rate Source: IRI Custom WMMB Database; MULO+C; Exact weight and random weight combined 33 Traditional Hispanic Varieties Witnessing Growth in Foodservice

Variety % Restaurant % Growth vs % Growth vs 4 Penetration YAGO YAGO Queso 15.3% +6.3% +22.8% Queso Fresco 5.3% +13.8% +74.8% Cotija 4.6% +2.4% +77.3% Manchego 3.0% -1.2% +24.9% Chihuahua 2.2% -0.8% +18.1% Queso Blanco 1.2% +9.2% +67.1%

Source: Datassential MenuTrends Direct, 2018 34 Loaded India Curry

Spicy curry fries and tater tots loaded with tandoori chicken, curry Cheddar sauce, Sriracha Jack cheese, cilantro and pickled red onions

35 Flame Grilled Cheese Tacos

South of the border tacos stuffed with flame grilled Queso Fresco cheese and topped with chipotle crema and avocado

36 4 Up In Smoke

Source: IRI Custom WMMB Database; MULO+C; Exact weight Products Only 37 Specificity of Smoke Flavor in Cheese is Climbing

SMOKED CHEESE 2016 Rising RISING Smoked Gouda Emerging Smoked Cheddar Smoked Swiss Smoked Provolone Smoked Gruyere Smoked Mozzarella

38 Smoked Flavored Ingredients Enhance Food

SAFE & ADVENTUROUS SMOKED CHEESE can provide a flavor bridge for products

Smoke cheese is a safe place It has a dual purpose of mixing Its flavors and notes marry for product development and up the everyday eating experience well across most platforms menu exploration, it’s edgy and bringing a premium feel to ranging from fresh and without being polarizing upscale a classic prepared and frozen foods 600 Product Launches with Smoke Flavors # of Items 400

200 CAGR 16.5% 0 2014 2015 2016 2017

Source: Innova Market Research, U.S. Product Launches with Smoke Flavor, excludes Meat, Fish and Egg categories 39 Where Smoke Cheese Flavor Innovation is Heading

Generic Smoke Specific Smoke More Wood Types Call-outs Cheese Flavors in like Maple and Snacks and Seasoning carriers migrating to , Burgers and e.g. Chipotle , Vegetable Hand-Helds Cheddar in QSR and Pasta Side and Frozen Dishes Sections

Emerging Migrating Rising Mainstream

40 Smoked Cheese Brings Flavor to Innovation Cheddar Gouda Provolone

Morrisons Spanish Chorizo & Oak Sweet Earth Farmstand Breakfast Waitrose Italian Selection Meat & Smoked Cheddar Stuffed Mushrooms , Sausage, Egg & Smoked Gouda Smoked Provolone Snack

Sam’s Applewood Fitza Smoked Arby’s Smoked Smoked Gouda & Italian Porchetta Cheddar And Bacon Roasted Red & Smoked Mashed Potatoes Pepper Pizza Provolone July 2017 Sandwich

41 Sources: Innova Market Research and Datassential Insider – New Product Launches and Menu Items Triple Smoke Stacked Brisket Sandwich

Grilled Smoked Brisket sandwich topped with Andouille Sausage and Smoked Cheddar cheese with apple slaw on buttery Texas toast

42 Triple Smoke Stacked Brisket Sandwich express screen source: Datassential SCORES™

norms reflect comparison to all items PRODUCT SCORES (AMONG: TOTAL) 100 = max possible score

86 99 98 97 unbranded uniqueness frequency draw PI

n=304 n=304 n=247 n=247 definitely or probably extremely or very would order the item would visit somewhere would buy unique all the time just for this item 53% 58% 26% 53%

86 98 99 98

versus other sandwiches

43 Chicken Smoked Mozzarella and Mango Salad

Salad with smoked chicken and Mozzarella cheese on spinach and arugula with sliced mango and cashews

44 5 Sensory Sensation

Multi-sensory Cheese experiences can help people “eat with their eyes”

45 Consumers Seek Sensory Experiences

46 Cuts, Forms, Texture Send Sensory Cues Crunchy Cheese MenuMenu PenetrationPenetration +301%

Shaved +19%

Thick Cut

Datassential: January 2018 4 year % Change Penetration +25% 47 High Sensory Cheeses Gaining Appeal With Gen Z Elastic and Melt-able Textures, Blends, and High Flavor Cheeses satisfy functional needs Gen Z requires for favorite foods like Mexican dishes, Pizza and for Snacking

Top Growing: (Annual Eatings Per Capita pt. ∆ vs. ’13) • Mozzarella (+3.4) • Cheddar, Sharp (+1.0) • Cheddar, Extra Sharp (+1.0) • Pizza Flavored (+0.9) • Mexican Blend (+0.9) • Muenster (+0.8) • Sharp/Extra Sharp (+0.7) • Cheddar/Mozzarella Blend (+0.6) Gen Z Born 1997-2017 • Parmesan (+0.6)

Source: The NPD Group/National Eating Trends; data for 2 years ending November 2017 48 Cheese Has Multiple Ways to Please Sensory Sensibilities

Flavor Combinations

• 2 to 5 Flavor Blends • Mozzarella/Provolone • Regional Combinations • 5 Cheese Italian • Global Blends • 4 Cheese Southwest • Sharpness and Aged • Sharp Cheddar Jack • Heat • Cheddar/Mozzarella • Double Cheddar • Parmesan/Romano/Asiago • Cracked Black Pepper Cheddar

49 Cheese Has Multiple Ways to Please Sensory Sensibilities

Textures

• Buttery Crunch • Curds • Crispy Cheese • Fried and Par-Fried • Meltability • String Cheese • Exteriors • Grated • Edges • IQF Cheese Blends • Elasticity

50 Cheese Has Multiple Ways to Please Sensory Sensibilities

Cuts

• Thick • Slices • Thin • Shreds - Different Cuts • Mini • Mozzarella Bites • Forms • Shapes, e.g. Stars • Shapes

51 California Skirt Burger

Chargrilled burger highlighted by an oversized crispy "skirt" of Cheddar Jack cheese

52 California Skirt Burger express screen source: Datassential SCORES™

norms reflect comparison to all items PRODUCT SCORES (AMONG: TOTAL) 100 = max possible score

65 93 92 66 unbranded uniqueness frequency draw PI

n=304 n=304 n=252 n=252 definitely or probably extremely or very would order the item would visit somewhere would buy unique all the time just for this item 46% 51% 23% 42%

45 89 92 38

versus other burger

53 On-the-Go Authentic Italian Snack Pack

Italian snack pack with red wine infused salami, thin sliced prosciutto, sliced 5 cheese Italian and rosemary crackers

54 On-the-Go Authentic Italian Snack Pack express screen source: Datassential SCORES™

norms reflect comparison to all items PRODUCT SCORES (AMONG: TOTAL) 100 = max possible score

55 82 99 54 unbranded uniqueness frequency draw PI

n=304 n=304 n=230 n=230 definitely or probably extremely or very would order the item would visit somewhere would buy unique all the time just for this item 44% 46% 28% 40%

59 79 100 68

versus other appetizer & side

55 Parmesan Garlic Cheese Curds Italian white cheese curds, coated in a savory blend of garlic and parmesan, and fried until deep golden brown. 56 Parmesan Garlic Cheese Curds consumer response source: Datassential SCORES™

norms reflect comparison to all items PRODUCT SCORES (Among: TOTAL) 100 = max possible score

75 88 83 64 unbranded uniqueness frequency draw PI

n=1000 n=1000 n=786 n=786 definitely or probably extremely or very would order the item would visit somewhere would buy unique all the time just for this item 49% 48% 21% 42%

79 85 86 76

versus other appetizer & side

57 Cheese on Trend Sensory Plant Global Up In Sensations Cleaning Forward Flavors Smoke • Mozzarella/Provolone • 5 Cheese Italian Up • Cranberry White Cheddar • Feta • Gouda • Bleu • Cheddar • 4 Cheese Southwest • Sun Dried Tomato Basil • Sharp Cheddar Jack • Culinary Compliments • Goat • Provolone • Garlic Herb Jack • Cheddar/Mozzarella • Organic, rbst-Free • Swiss/Gruyere • Mozzarella • Colby Pepper Jack • Double Cheddar • IQF • Gouda • Habanero Jack • Parm/Romano/Asiago • Packaging Options • Pepper Jack • Havarti • Hispanic Cheeses • Cracked Black Pepper • White Cheeses • Fiesta Pepper Jack Cheddar • Sriracha Jack • Pimento Cheese • Muenster • Ghost Pepper • IQF Cheese Blends

58 Cheese on Trend Final Thoughts

❖Consider different ways to fight food & packaging waste and clean up labels ❖Plant-forward eating permits cheese and cheese with veggie and herb inclusions also align with the trend ❖Continue to explore globally inspired flavors across your product lines and menus they’re a great way to upscale a flavor profile ❖Smoked cheeses are moving toward flavor specific call-outs and consumers see them as both safe and edgy in products ❖Capitalize on cues cheeses can provide like flavor combinations, texture and cuts to satisfy consumers desire for elevated sensory experiences

59 60 61 61