CONSUMER & RESTAURANT MENU TRENDS: THE CLEAN LABEL INFLUENCE March 28-29, 2017 © 2017 Technomic Inc. Table of contents Our research ❶ Consumer insights ❷ Operator insights ❸ Menu insights ❹ Key areas of opportunity ❺ © 2017 Technomic Inc. 2 Who are we? Only Technomic delivers a 360° view of the food industry. We impact growth and profitability for our clients by providing consumer-grounded vision and channel- We specialize in food industry relevant strategic insights. research from field to fork. We offer an array of custom and syndicated solutions. We serve manufacturers, distributors, operators, retailers— virtually anyone aligned with the food industry. © 2017 Technomic Inc. 3 CONSUMER INSIGHTS © 2017 Technomic Inc. 4 “Reduce my meat consumption” “Include mental and physical health” “Be well-rounded: eat healthy, indulge occasionally and be active” My definition of healthy food items has changed over the past two years “Avoid processed foods” Agree & agree completely DEFINITIONS % Overall 44% 18-34 51% of health ARE 56% 33% CHANGING 35+ 38% 43% “GMO-free and is organic” Male Female “Be more aware of additives” “Include feeling good emotionally” Source: Healthy Eating Consumer Trend Report, Technomic © 2017 Technomic Inc. 5 Perceived healthfulness: natural & organic terms Slightly & much more healthy % Overall Preservative-free 72% 75% 77% Natural 68% 74% Six out of 10 80% No artificial 70% 72% consumers sweeteners 75% Hormone-free 68% 71% feel that 74% Unprocessed 66% 71% CLEAN 76% Organic 65% claims align 74% 70% Antibiotic-free 66% with greater 70% 68% GMO-free 58% healthfulness 69% 64% Clean 59% 59% 59% Real 48% 66% 57% Source: Healthy Eating Consumer Trend Report, Technomic Male Female © 2017 Technomic Inc. 6 Consumers’ definitions What does clean food mean of clean eating to you? Clean food is… mostly focus “The absence of additives” on the absence “All-natural, no artificial flavoring” of additives “An item that is GMO-free, organic and fresh” “Clean food is local, sustainable, organic, environmentally safe because of the way it is grown” “Pesticide- and steroid-free” “Unprocessed food” “Food that hasn’t been treated with chemicals and is grown sustainably” “Food that is raw and natural with no added ingredients or preservatives and the type of food that nourishes your body” “Washed and free of contamination” “No extra stuff, organic ingredients, keeping it clean” Source: Healthy Eating Consumer Trend Report, Technomic © 2017 Technomic Inc. 7 Which of the No artificial ingredients 61% following Preservative-free 58% claims, if any, Fresh 53% do you Hormone-free 51% associate with Unprocessed 50% Antibiotic-free 49% clean eating? Non-GMO 45% Select all that apply. Gluten-free 26% Vegetarian/vegan 23% Local 19% Seasonal 16% Sustainable 15% Authentic 14% Source: Healthy Eating Consumer Trend Report, Technomic © 2017 Technomic Inc. 8 The clean label consumer skews female, millennial and slightly higher income The clean label consumer 28% 51% HH Income Female $50K-$100K 33% 54% Millennial Caucasian Source: Healthy Eating Consumer Trend Report, Technomic © 2017 Technomic Inc. 9 40% of consumers would pay more for items featuring clean claims… Impact on purchase: natural & organic terms I’d be more likely to buy and am willing to pay___ for… Natural 13% 30% 37% 80% Unprocessed 11% 28% 34% 72% Preservative-free 9% 26% 36% 71% Up Organic 11% 33% 26% 70% from 2014 Hormone-free 10% 26% 34% 70% Clean 12% 28% 29% 69% Antibiotic-free 11% 26% 31% 68% GMO-free 10% 26% 30% 67% No artificial sweeteners 9% 18% 41% 67% Real 7% 24% 36% 67% Signficantly more (>5% increase) Slightly more (≤5% increase) No more Source: Healthy Eating Consumer Trend Report, Technomic © 2017 Technomic Inc. 10 …and a similar proportion (42%) assume clean claims positively impact an item’s taste Impact on taste: natural & organic terms Food/beverage described as____ is…. Natural 53% (up from 45% in 2014) 42% 5% Real 49% 46% 5% No artificial sweeteners 44% 37% 19% Unprocessed 43% 42% 16% Clean 42% 52% 6% Organic 40% (up from 33% in 2014) 46% 14% Preservative-free 39% 49% 12% Hormone-free 33% 58% 8% Antibiotic-free 32% 60% 8% GMO-free 30% 59% 11% Slightly/much more tasty No impact on taste Slightly/much less tasty Source: Healthy Eating Consumer Trend Report, Technomic © 2017 Technomic Inc. 11 Consumers seek THE TRUTH from restaurants would like restaurants to be more TRANSPARENT 86% about what’s in their food Source: Healthy Eating Consumer Trend Report, Technomic © 2017 Technomic Inc. 12 OPERATOR INSIGHTS © 2017 Technomic Inc. 13 Operators understand they must meet evolving consumer demands Proportion of operators agreeing that the following sustainability factors will have a great or moderate influence on purchase decisions in the future Health & Buying No chemicals/ Clean wellness local pesticides labels 89% 84% 84% 82% Sustainably No hormones/ Humane animal produced antibiotics treatment 82% 79% 79% Source: Foodservice Planning Program Operator Survey, Technomic © 2017 Technomic Inc. 14 Clean label menu mentions spiked 19% in 2016 at commercial operations Clean label claims on the menu Clean label claims, by mealpart 1,419 Entree/main dish 850 1,052 1,191 Appetizer/starter 104 125 Nonalcohol 95 beverage 87 Add-on 45 47 Dessert 48 46 299 317 Side/extra 23 31 Kids menu 26 Menu incidence Operators offering 31 2015 2016 Source: MenuMonitor, Technomic © 2017 Technomic Inc. 15 Overall, more commercial operators menued clean label claims in 2016, compared to 2015 Operator penetration By segment (2016) 45.6% 35.2% 32.3% 24.6% 22.0% 19.8% 19.0% 9.0% Overall Quick Service Fast Casual Midscale Traditional Contemporary Upscale CDR Fine Dining CDR CDR 2015 20.7% 8.0% 22.1% 17.9% 17.0% 30.4% 37.1% 49.3% Source: MenuMonitor, Technomic © 2017 Technomic Inc. 16 Commercial operators are increasingly calling out food that is free of any additives Top “clean” keyword mentions on menus Organic 4,359 Natural 2,642 Local 1,234 Free-range 343 Grass-fed 275 Fastest-growing clean keywords (YOY) Cage-free 213 Sustainably caught +1,100.0% Sustainable 181 Hormone-free 176 No steroids/steroid-free +250.0% Antibiotic-free 134 Humanely raised 117 Humanely raised +159.0% Grade A 79 GMO-free 74 GMO-free +138.7% Fair trade 70 Cage-free +32.3% Grain-fed 53 Naturally raised 41 Source: MenuMonitor, Technomic © 2017 Technomic Inc. 17 Beef-centric dishes featured more clean labeling in 2016 at commercial operations Top items featuring clean labels Fastest-growing items featuring clean labels 103 Rib-eye Steak 300.0% Specialty Burgers 87 49 Filet/Filet Mignon 142.9% Chicken Sandwich/Wrap 38 32 Turkey Sandwich/Wrap 133.3% Cheeseburger 34 29 Strip Steak 120.0% Burrito/Chimichanga 28 25 Coffee/Filter Coffee 22 Salmon 90.9% 25 Bacon Cheeseburger 22 Scrambled Eggs 83.3% 24 Chicken Salad 16 Chicken Strips/Nuggets 75.0% 21 Turkey Sandwich/Wrap 9 Bacon, Egg & Cheese 66.7% 21 Salmon 11 Fish Sandwich/Wrap 57.1% 21 Hamburger 17 Chicken Salad 50.0% 21 Specialty Salad 22 Other Chicken Dish 45.5% Mexican Bowl 18 17 Grilled Chicken 37.5% Filet/Filet Mignon 17 7 Barbecue Burger 37.5% Other Chicken Dish 16 11 Breakfast Platter 14 37.5% Chicken Strips/Nuggets 8 13 Chicken Sandwich/Wrap 29.0% Roasted Chicken 18 12 Chicken 25.0% Rib-eye Steak 3 12 Hamburger 23.5% Caesar Salad 11 12 Specialty Burgers 18.4% Taco/Taquito 12 12 Coffee/Filter Coffee 13.6% Turkey Burger 12 Bacon Cheeseburger 13.6% 2016 2015 Source: MenuMonitor, Technomic © 2017 Technomic Inc. 18 Clean label menu mentions were down overall in 2016 at noncommercial operations Clean label claims on the menu Clean label claims, by mealpart 229 310 Entree/Main Dish 296 219 40 Appetizer/Starter 37 22 Side/Extra 20 8 Nonalcohol Beverage 8 85 80 3 Kids Menu 6 7 Dessert 5 Menu Incidence Operators Offering 1 Add-on 1 2015 2016 Source: MenuMonitor, Technomic © 2017 Technomic Inc. 19 Overall, fewer noncommercial operators menued clean label claims in 2016 Operator penetration by segment (2016) 66.1% 34.8% 23.8% 20.0% 15.0% 10.0% Overall College & Hospitals Lodging Recreation Retailers Universities 2015 25.3% 18.0% 10.0% 64.3% 34.8% 24.0% Source: MenuMonitor, Technomic © 2017 Technomic Inc. 20 Clean label mentions by claim type Local 157 165 Cage-free 77 64 Sustainable 24 LOCAL remains the 20 Grass-fed 17 leading clean label 18 Free-range 15 claim, despite 26 Unprocessed 14 declines in 2016 at 9 Locally sourced 10 noncommercial 14 Fair trade 4 Cage-free claims grew on menus in 2016, referencing 5 egg dishes, along with sustainable and unprocessed Locally farmed 2 claims 2 Sustainably sourced 1 1 Hormone-free N/A 1 Sustainably raised N/A 1 2016 2015 Source: MenuMonitor, Technomic © 2017 Technomic Inc. 21 Breakfast items featured more clean labeling in 2016 at noncommercial operations, compared to 2015 Top items featuring clean labels Fastest-growing items featuring clean labels 13 Breakfast Platter 9 13 Crepes/Blintzes 13 Shrimp 100.0% 12 Quiche/Frittata 10 10 Cheese/Cheese Platter 10 Eggs Benedict/Florentine 60.0% 8 Eggs Benedict/Florentine 5 7 Create-Your-Own Omelet 6 7 Other Omelet 50.0% Eggs Any Style 7 6 Shrimp 3 6 Other Omelet 4 Breakfast Platter 44.4% 6 Roasted Chicken 5 6 Burrito/Chimichanga 6 Other Nonbreaded Protein 25.0% 6 Cheeseburger 8 6 Specialty Burgers 11 5 Quiche/Frittata 20.0% Other Nonbreaded Protein 4 5 Scrambled Eggs 7 4 Specialty Salad 2 Roasted Chicken 20.0% 4 Other Salads 2 4 Steak & Eggs 3 Create-Your-Own Omelet 16.7% 4 Hamburger 5 3 Mixed Vegetables 1 Source: MenuMonitor, Technomic 2016 2015 © 2017 Technomic Inc.