Todd Hale Consultant, Nielsen Principal, Todd Hale LLC Tracking Trends That Matter Landscape & Performance U.S. retail current state

Economic Total store sales Bifurcation of Retail format no indicators soft; growth in wants: guarantee of improving, but perimeter health & wellness success headwinds remain continues versus indulgence Total store gains weaken

Total U.S. All Outlets Combined ( Convenience); All Departments; upc-coded $790 $806 $829 $838 $841 Dollar Sales 254 254 255 255 252 Unit Volume Billions

52 weeks ending 52 weeks ending 52 weeks ending 52 weeks ending 52 weeks ending 1/4/14 1/3/15 1/2/16 12/31/16 12/30/17 $ sales up just Dollar Trend +2.0 +2.8 +1.1 +0.3 0.3% as unit Unit Trend -0.0 +0.5 +0.1 -1.2 sales fell 1.2% & despite Avg U Price Trend +2.0 +2.3 +1.0 +1.6 moderate price % U sold on Promo 32 31 31 31 increase of 1.6%

Source: Nielsen Answers Retail format no guarantee of success Same-Store-Sales Growth: average latest 52-weeks 10% 5% 0% -5% -10% -15% Home Depot Home Lowe's CVS Aid Rite Club Sam's Sprouts Whole General Dollar Target

Source: Company press releases (excluding gas) Improving trend for top chains Same-Store-Sales Growth: last six reported quarters Costco sales heavily skewed to affluent; 10% online sales up 34% 8% in latest 24-weeks Walmart reported 6% 23% growth in U.S. 4% e-commerce net sales in the 4th quarter, but 2% down from 44% for 0% the entire year -2% Kroger reported 90% increase in digital 1st 2nd 3rd 4th 5th 6th revenue in 2017 (current) Costco Walmart Kroger

Source: Company press releases (excluding gas) Growth slips in all channels All Departments (Dollar Sales & Trend)

Bold Italics = same period year ago $400 Size of bubble denotes $350 dollar share of Total U.S. -1.0% 0.0% xAOC, including

Billions $300 Convenience Stores 1.6% 1.9% $250 Value* $200

$150 1.4% 1.9% $100 C-Stores $50 -1.3% 1.3% $0 Drug Stores -2.0% -1.5% -1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5%

UPC-coded items *Club Stores, Dollar Stores, Mass-Merchandisers, Supercenters, & Military Source: Nielsen Answers, Total U.S., 52 weeks ending 12/30/2017 (vs. year ago) Small formats & value drive long-term growth

Expansion from all formats but Drug & Mass Merchandisers in 2017 vs. 2016

U.S. Store Counts 88% of long-term growth & 389% of short-term growth from niche formats*

Convenience Supermarkets Mass Warehouse Drug Stores Dollar Stores Supercenters Stores $2MM+ Merchandisers Clubs 2005 140,655 38,513 31,590 18,579 2,462 4,578 1,067 2016 154,535 43,636 34,114 29,415 4,327 3,507 1,370 2017 154,958 43,169 34,178 30,873 4,393 3,254 1,387

*Niche formats include , Save-A-Lot, , Trader Joe’s, Whole Foods, Sprouts, , and Natural Grocers Source: Nielsen TDLinx, U.S. counts are for open stores during month of December 15, 2017 Small formats dominate the list Increases in U.S. Store Counts: 2017 versus 2007

Dollar Tree 11,298 6,202 Couche Tard 3,554 CVS 3,426 7-Eleven 2,227 Albertsons 1,994 10 of top 20 chains adding the Walgreens 1,884 most stores were c-stores Marathon/Speedway 1,585 Delhaize 1,259 Walmart Banner 1,095 Dollar Aldi 886 GPM Investments 740 C-Stores Casey's 548 Andeavor 519 Drug Sunoco 472 353 Grocery Pilot Flying J 335 Kroger Corp Grocery 305 Mass Merchandisers 295 QuikTrip 285

Source: Nielsen TDLinx , U.S. counts are for open stores during month of December Small formats winning race for scale U.S. Store Counts for 2017

Dollar Tree 14,585 Dollar General 14,434 CVS 9,732 7-Eleven 8,338 Walgreens 7,848 Couche Tard 6,594 9 of top 20 chains with the Walmart Banner 4,637 most stores were c-stores Shell 4,519 4,500 Marathon/Speedway 4,386 Dollar Chevron Texaco 3,809 BP 3,644 C-Stores 3,401 Kroger Corp Grocery 2,792 Drug Albertsons 2,324 Grocery Sunoco 2,279 Casey's 2,011 Mass Merchandisers 1,960 Target - Total 1,836 Aldi 1,733

Source: Nielsen TDLinx , U.S. counts are for open stores during month of December 3rd DGX urban small format Geared to meet the needs of the Millennial shopper & attract urban customers

• Store locations: Raleigh, Nashville, Philadelphia • Square footage ranges from Stores range from 3,400 to 4,800 square feet 3,400 to 4,800

Sources: Dollar General; Age Plans to have 100+ by end of 2019

Target Small Formats: • Expand into key urban neighborhoods & college campuses • Customize for each community • Function as stores & hyper-local fulfillment centers

Source: Target Ahold Delhaize & Kroger …while “Publix is betting the next big pull back on fresh-focused concept thing will be the continued growth of stores… organic foods”

Publix plans to open its first newly redesigned GreenWise Market concept store in Tallahassee, Florida in late 2018 and a second store in Mount Pleasant, South Carolina in early 2019. “Unlike typical Publix stores, which measure 45,000 square feet … GreenWise stores will be about half that size, and feature scores of unique items for consumers.”

Sources: Company websites and Business Observer of Florida Future Retail Landscape Who will fall prey to e-commerce next?

Difference in Open Store Count U.S. E-Commerce Sales 2017 versus 2007 Linear (U.S. E-Commerce Sales) Dollar 11,249 $500 Convenience/Gas 8,664 Drug 5,632 $450 Liquor 3,528 $400 Discount Department 3,422 Billions Pet 2,602 $350 Auto 2,265 Supermarkets 2,249 $300 Supercenters 1,295 $250 Up Home Improvement 1,041 Sporting Goods 593 $200 $316B Club 235 Toy -457 $150 since Home/Bed/Bath -604 $100 Vulnerability Scale Vulnerability Department Stores -638 Mass -791 $50 2007 Office -865 Books -1,066 $0 Apparel -4,125 Consumer Electronics -6,425

Sources: Nielsen TDLinx, U.S. counts are for open stores during month of December; U.S. Census Bureau, U.S. Retail E-Commerce Sales (released on 2/16/2018) “A TSUNAMI OF STORE CLOSINGS”

Major Chain Store Closings 14,000

12,000 CLOSED 10,000

8,000

6,000

4,000

2,000

0 2008 2016 2017 2018 2019 2008 2016 2017 2018 2019 Forecasted Source: businessinsider.com; Cushman & Wakefield Modifying the box experience

“US retailers lure customers with spas, parties and restaurants … After a torrid year of historic bankruptcies and store closures, retailers are getting creative to convince people to buy in store instead of on their laptops at home.”

• Tiffany’s flagship store on ’s Fifth Avenue offers a restaurant on the fourth floor that for $29 you can have an actual Breakfast at Tiffany’s. • Saks unveiled a “wellness” spa at its flagship store, complete with a salt bath chamber and fitness classes Audrey Hepburn starred in the movie at a “prison-style boot camp”. “Breakfast at Tiffany’s” (1961) • American Eagle is offering free laundry facilities to students at a new concept store. • Urban Outfitters is selling pizza alongside hoodies in some shops. • Walmart is hosted 20,000 “holiday parties”, offering a Santa Claus and toy simulations, to lure people to its stores for the 2017 holiday season.

Source: What’s Selling? Deli, produce & meat have over delivered Edible Departments (excluding Alcoholic Beverages)

$ Share of Gains Performance Index (Share of 2017 gains indexed to from 2013 to 2017 share of sales in 2013) 1.5 3.9 10 5.5 Dairy 7.7 Frozen 33 12.0 Bakery 101 20.4 Meat 146 But ½ of Deli 445 gains 49.0 339 from Produce grocery Grocery 91

52 Weeks Ending 12/30/2017

Source: Nielsen Answers, Total U.S. – All Outlets Combined (plus Convenience), 52-weeks ending 12/30/2017 versus 4-years ago “On the corner of happy & healthy” Non-Edibles Departments (including Alcoholic Beverages)

$ Share of Gains Performance Index (Share of 2017 gains indexed to from 2013 to 2017 share of sales in 2013) 1.5 4.4 Beauty Care 28 9.6 64 10.7 Pet Care 20.8 Personal Care 68 Household Care 55 26.1 Tobacco & Alternatives 86 26.9 Health Care 195 Alcoholic Beverages 166 52 Weeks Ending 12/30/2017

Source: Nielsen Answers, Total U.S. – All Outlets Combined (plus Convenience), 52-weeks ending 12/30/2017 versus 4-years ago Price & demand behind short-term trend All Outlets Combined (plus Convenience) – Dollar Trend

Deli 7% Produce 3% Health Care 2% Tobacco & Alternatives 2% Alcohol 1% Meat 1% Pet Care 1% Frozen Foods 1% Grocery 0% Household Care 0% Personal Care 0% Bakery 0% Dairy -2% Beauty Care -2% General Merchandise -4% Total All Departments 0%

Source: Nielsen Answers, Total U.S. – All Outlets Combined (plus Convenience), 52 weeks ending 12/30/2017 (vs. year ago) Largest share in supermarkets but off

Private Dollar Share Private Brands Unit Share

19.8 23.4 Supermarkets Supermarkets 18.4 22.4

15.2 18.4 Value* Value* 17.9 21.5

16.3 17.4 Drug Stores Drug Stores 15.9 16.6

3.8 5.2 C-Stores C-Stores 4.7 6.5

52 Weeks Ending: 1/4/2014 1/3/2015 1/2/2016 12/31/2016 12/30/2017

Source: Nielsen Answers, Total U.S.;*Club Stores, Dollar Stores, Mass-Merchandisers, Supercenters, & Military Fight Out-of-home growth slows

Food Services & Drinking Places: U.S. Total 12% 10% 8% 6% 4% 2% 2.2 0% -2% Latest Period Ending -4% January 2018 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 $ % Change vs. Year Ago Source: US Census : Monthly Retail Trade and Food Services, 722: Food Services and Drinking Places: U.S. Total, Seasonally Adjusted , % $ Change vs. Year Ago What matters: convenience & good prices

% Comp-Same-Store Sales Growth: latest 52-weeks Domino's 8% Chipotle 6% Taco Bell 4% McDonald's 4% Americas 3% Burger King 3% Wendy's N.A. 2% KFC 1% Dunkin' Donuts 1% Papa John's 0% At least 50% or more of sales from the top 3 pizza chains are from digital orders

Source: Company Press Releases – U.S. Results; dominos.com; fools.com But not all chains are growing Comp-Same-Store Sales Growth: latest 52-weeks

“Applebee’s isn’t quite done -2% IHOP closing restaurants on its way to becoming what it hopes will be a better performing company. The casual dining chain’s parent -2% Pizza Hut company Dine Brands Global (DIN, +0.44%) said on Tuesday it would close as many as 80 -3% Sonic Drive-In Applebee’s restaurants this year on top of the nearly 100 it shuttered last year, while opening between 10 and 15 as it -5% Applebee's looks to improve the restaurant’s fortunes.”

Source: Company Press Releases; fortune.com 2/20/2018 Full-service restaurant & food court

Source: photos by Todd Hale, LLC Walking the sweet goods gauntlet You don’t need to go to the center of the store!

Source: photos by Todd Hale, LLC “relaxing, multi-sensory experience”

“Our aim is to continually create new experiences in our stores and to make them more beautiful, easy to move through, and enjoyable. We want Gelson’s to be a unique place where people can try exciting food concepts, have a drink in a social setting, and feel like a new culinary discovery is just around every corner.” President & CEO Rob McDougall.

Source: Gelson’s Markets; founded in 1951, operates 27 full-service specialty grocery stores in Southern “Finding Love In The Frozen-Food Aisle” “As traditional hangouts shrink, grocery stores are becoming the place where people meet to socialize – even fall in love”

“Parents now bring their children here to play, retirees gather for Bingo, and singles find romance.”

Source: , March 12, 2018; photo by Todd Hale, LLC “Finding Love In The Frozen-Food Aisle” “As traditional hangouts shrink, grocery stores are becoming the place where people meet to socialize – even fall in love”

“I once dated a women from the potato section at Mariano’s”… “The next thing you know we’re at the wine bar and then we’re dating”

Source: The Wall Street Journal, March 12, 2018; photo by Todd Hale, LLC Rutter’s adds 25+ seafood items to extensive menu

Source: Rutter’s Connecting With Shoppers That Matter Except in c-stores, females drive trips Share of Retail Channel Shopping Trips 2004 2017

46% 63% 63% 66% 70% 74% 75% 49% 62% 64% 68% 70% 72% 74%

54% 37% 37% 34% 30% 26% 25% 51% 38% 36% 32% 30% 28% 26%

C-Store Club Grocery Drug Supers Mass Dollar C-Store Club Grocery Drug Supers Mass Dollar Males Females Males Females

UPC-coded & non-UPC-coded items Source: Nielsen Homescan, Total U.S., excludes gas-only or Rx-only trips 7-Eleven launches make-ups Simply Me Beauty™ was created to appeal to millennial women; all items are affordably priced between $3 and $5

Source: 7-Eleven Is there an opportunity for upscale c-stores?

Distribution of Dollars – Household Income

14% 22% 16% 31% 31% 31% 27% 11% 43% 13% 16% 13% 15% 11% 17% 17% 17% 9% 15% 11% 18% 13% 14% 14% 14% 12% 9% 10% 12% 9% 8% 8% 17% 13% 10% 10% 16% 9% 9% 9% 7% 12% 13% 10% 6% 9% 10% 21% 24% 6% 13% 14% 11% 6% 11% 11% Total Outlets Club Mass Grocery Drug Supers Conv/Gas Dollar

<$20k $20k-29.9k $30k-39.9k $40k-49.9k $50k-69.9k $70k-99.9k $100k+

UPC-coded items Source: Nielsen Homescan, Total U.S., 52-week period ending 12/30/17 “ growth through it’s restaurant appeal”

Expanding its delivery service with in select locations in NJ

“The retailer's first Washington, D.C. location also stands out for being a non-gas location… With more than 9,000 square feet to work with, Wawa found a lot of room to boast new features — like an interactive social media board and touchscreen order kiosks located throughout the store, not just at the foodservice station — and offer Wawa's newest foodservice initiatives, including built-to-order salads and nitro cold brew coffee.” “The urban customer is time-strapped and looking to get in and out quickly,” said Chris Gheysens, the company’s president and chief executive. “We’re not thinking about this as a , but more of a restaurant-style store. Especially when you take out the fuel, it competes with more of a Panera than a 7-11.”

Sources: Wawa and Convenience Store News Digital Shopping & Digital Retailing E-commerce growth accelerates

$120 Q4 2017, 119 80% Total U.S. Retail Sales: • $1,233.9B for Q4 2016 70% • $1,304.3B for Q4 2017 Billions $100 60% Total U.S. Retail E-Commerce Sales 50% $80 • $101.8B for Q4 2016 • $119.0B for Q4 2017 40%

$60 30% E-Commerce $ %Change vs. Year Ago Q4 2017, 16.9 • 14.4% for Q4 2016 20% • 16.9% for Q4 2017 $40 10% E-Commerce Share of Total Retail Sales Q4 2017, 9.1 0% • 8.2% for Q4 2016 $20 • 9.1% for Q4 2017 -10%

$0 -20% Q4 2000 Q4 2001 Q4 2002 Q4 2003 Q4 2004 Q4 2005 Q4 2006 Q4 2007 Q4 2008 Q4 2009 Q4 2010 Q4 2011 Q4 2012 Q4 2013 Q4 2014 Q4 2015 Q4 2016 Q4 2017

Source: U.S. Census Bureau, Quarterly U.S. Retail E-Commerce Sales (released on February 16, 2018) ends 2017 in impressive fashion Amazon Performance Metrics

% Change in Net Sales Net Income (millions) 38% 34% 3,033 31% 2,371 27% 27% 25% 1856 22% 23% 20% 20%

596 724 274 197 256

-39 -241 2012 2013 2014 2015 2016 2017 2012 2013 2014 2015 2016 2017 Q1'17 Q2'17 Q3'17 Q4'17 Q1'17 Q2'17 Q3'17 Q4'17

Source: Company Reports Amazon online grocery equivalent to next nine

2016 online dollar sales of -type products (millions)

SN’s Digital Top 10

Amazon $6,200 Walmart $2,000 Ahold Delhaize $833 $795 Kroger $788 Costco $725 Fresh Direct $600 Albertsons $347 Target $300 Wakefern/ $291

Source: supermarketnews.com – July 6, 2017 “Amazon firing on all cylinders” Amazon’s growing physical footprint

• Whole Foods: With the acquisition of Whole Foods, Amazon now owns over 400 grocery stores nationwide. • Amazon & Whole Foods Markets: Two-hour delivery of natural and organic products from through in , San Francisco, , Cincinnati, & Virginia Beach with plans for continued expansion across the U.S. throughout 2018. Larger Whole Foods stores to serve as delivery hubs for Amazon orders • Bookstores: Amazon has opened 14 bookstores since 2015 with others planned for this year. • Trucks: Amazon & Whole Foods Market announced that will pop up at various Whole Foods Market locations across the country with new offers and incentives. • : Amazon Go is a completely cashier-less store that makes check-out free shopping possible and is now open to the public in . Unclear if others are planned. • Pop-up stores: There are currently over 40 Amazon pop-up stores across the country, mainly designed to showcase its hardware products. • Kohl's: Through its partnership with Kohl's, Amazon sells some of its hardware in-store and lets its online purchases make returns through select Kohl's shops. • Lockers: Amazon has pick-up lockers in thousands of retail stores, including select Whole Foods stores. • College pick-ups spots: Dozens of schools have set up on-campus pick-up spots for Amazon deliveries.

Sources: Amazon & various media sources (see notes page); slide title credited to CNBC.com (September 19, 2017) Walmart – no membership fee needed!

In May of 2017, Jim Cramer was “checking to see if WMT could step up in the fight for e- commerce dominance. Nine months later, in February 2018, Cramer says, “Walmart woes tell me it’s time to buy Amazon; consumers probably gave Walmart’s e-commerce wares a try, then switched back to Amazon.”

Source: Walmart.com; cnbc.com; TheStreet.com Door-to-car, door-to-door, or inside home or fridge

• Amazon opened grocery pickup sites in Seattle for Prime members; exploring ways to deliver items to your car trunk; launched delivery inside your home with Amazon Key

• Walmart plans to expand its online grocery delivery service from six to 100+ U.S. markets, and expand online grocery pickup service from 1,200 stores to more than 2,200 stores, by the end of 2018; testing grocery delivery straight to your fridge while you are not home

• Conversely, Kroger slows ClickList & home delivery expansion with focus on existing customers & their shopping experience

Sources: Yahoo! Finance, Amazon, The Street, Retail Leader, Mashables, Seattle Times Not just for big players 3-store supermarket chain w/mobile app for ordering dine in or carryout pizza

Sources: dorothylane.com; morningnewsbeat.com Grocery delivery services catching on

Instacart • “ has quickly scaled to over 190 markets and partnered with retailers across North America, including popular national chains as well as local, regional grocers.” Shipt • Claims to be the nation's fastest growing online grocery marketplace serving “tens of millions of households” across the U.S.

• Target Corp. acquired Shipt on December 13, 2017: • “Target will begin offering same-day delivery of groceries, household essentials, home goods and electronics through Shipt in the coming months. It plans to have the service up and running from half of its 1,800 stores by this summer and from most of its stores by next winter.” • On January 25, 2018, Target announced plans to roll out its first Shipt-powered deliveries to 57 stores in , AL and South Florida beginning Feb. 1, ahead of a promise to launch the program this springtime.

Sources: Shipt, Instacart, Target, Minneapolis Star Tribune Meaningful sales for non-edibles U.S. E-commerce Share of Dollar Sales

Beauty Care 31% Pet Care 28% Health Care 14% Personal Care 11% Household Care 9% Packaged Grocery 3% Produce 2% Meat 2% Dairy 1% Bakery 1% Alcohol 1% Frozen Foods 1%

Source: Nielsen e-commerce measurement, 52 weeks ended Oct. 28, 2017. Projected from ~1MM e-commerce FMCG consumers and cooperating ePOS retailers based on reported commodity groups that may not prior custom or syndicated category definitions. Share of Total FMCG via Nielsen Retail Measurement Services (xAOC+C). Abundance of meal kits

Campbell Soup invested $10 million in Chef’d

Unilever invested $9 million in Sun Basket

Albertsons acquired for $200 million

Sources: Company websites & Fast Company How will these impact online subscriptions?

Plans for 2018 … Amazon meal kits are sold in Amazon Go stores

Albertsons bought Plated in September 2017 – plans for a nationwide rollout

Kroger plans to expand sales of its Prep+Pared meal kits to more divisions

Walmart announced it will expand the sales of meal kits from 250 stores to 2,000 stores

Weight Watchers plans to sell its new fresh quick-prep in retail stores

Blue Apron plans to sell its meal kits in retail stores

Sources: FoodDive (12/11/2017), Forbes (3/6/2018, quote for slide title), Albertsons, Kroger, Walmart, Weight Watchers, Why go out when you can order in?

Grubhub Statistics: • Features more than 80,000 online & mobile ordering restaurants in over 1,600 U.S. cities & London

Q4 2017 Highlights: • Revenues: $205.1 million, a 49% year-over-year (YOY) increase

• Net Income: $53.5 million, a 293% YOY increase

• Active Diners were 14.5 million, a 77% YOY increase

• Gross Food Sales were $3.8 billion, a 26% YOY increase

Source: grubhub.com “war in the $100 billion delivery market”

How will this impact trips to your stores? • “KFC and Taco Bell announced plans to roll out delivery at thousands of restaurants through a partnership with Grubhub. • McDonald's rolled out delivery with UberEATS at 5,000 locations in the US in 2017, and says that the service is driving sales. • McDonald's still has the upper hand — but with the Grubhub deal, KFC and Taco Bell have a major opportunity to enter the fast-food deliver war.”

The Grubhub deal proves McDonald's is modernizing Taco Bell has been trying KFC and Taco Bell finally — and has a huge everything, while KFC plays getting serious about advantage on speed catch up delivery

Source: , February 8, 2018 Pick-up & delivery: what do your shoppers want?

Do you go it alone or partner & how do you price to make profitable?

Source: Company websites Predictions Stars Aligned For Growth – Are you?

Clean Label, Ethnic, Comfort, & Convenience Innovation

Basket Building Personalized Marketing Seven Predictions Fresh Ideas For Center-Store

Department Trip Magnets

Private Brands Resurgence

Strange Bedfellows Thank You

[email protected] http://www.linkedin.com/pu @ToddHaleLLC b/todd-hale/a/353/613 Todd Hale Consultant, Nielsen Principal, Todd Hale LLC