Top Trends in Fresh BALANCING THE STORE SIZE PENDULUM Sally Lyons Wyatt, EVP, IRI Center-of-Store & Produce Vertical Jonna Parker, Principal, IRI Fresh Center of Excellence July 25, 2019 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. © 2019 Information Resources Inc. (IRI). Confidential and Proprietary. 2 The Association 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 © 2019 Information Resources Inc. (IRI). Confidential and Proprietary. 3 Fresh @ FMI 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 ‒ Meat ‒ Seafood ‒ Deli / In-Store, Fresh Prepared Foods, Assortments ‒ Bakery Rick Stein Fresh Foods ‒ Floral Vice President, Fresh Foods Food Marketing Institute [email protected] 202.220.0700 © 2019 Information Resources Inc. (IRI). Confidential and Proprietary. 4 FMI Fresh Foods Research and Education Networking Advocacy In-depth information, trends and insights Share ideas, explore best practices and Understand what is going on in to foster innovation, take advantage of develop business relations Washington and make your voice heard new opportunities and help develop winning strategies © 2019 Information Resources Inc. (IRI). Confidential and Proprietary. 5 FMI Fresh Executive Committee (FEC) The FEC is Comprised of FMI Member Companies, Retailers and Wholesalers John Ruane (Chair) Dan Koch Don Sanderson Teri Rose Manuel Gonzales Ahold USA Associated Wholesale Grocers, Inc. Meijer, Inc. Kroger Northgate Gonzales Rick Steigerwald (Co-Chair) Nate Stewart Geoff Waldau Jack Bell Reade Sievert Lund Food Holdings, Inc. Hy-Vee Food Lion Save-A-Lot AWG Tom DeVries John Haggerty John Grimes Paul Kneeland Nicole Wegman* Giant Eagle, Inc. Burris Logistics Weis Markets Gelsons Markets Wegmans Food Markets, Inc. John Beretta Mark Hilton Rick Findlay Scott Evans Albertsons, LLC Harris Teeter LLC Fresh Thyme Price Chopper/Mkt 32 * Silent members Dave Bornmann Terry Murphy Jim Lemke Buddy Jones Publix Super Markets, Inc. Wakefern Food Corporation CH Robinson Fresh MDI Distributors Scott Bradley Kirk LaBoyteaux Steve Howard Amanda Becker Target Corporation Brookshire Grocery Company Bristol Farms/Lazy Acres Fairway Markets Jerry Chadwick Dan Murphy Emily Coborn Troy Vosburg Lancaster Foods, LLC SuperValu/UNFI Coborns Festival Foods Alex Corbishley Pat Pessotto Jerry Goldsmith John Beretta Target Corporation Longo Brothers Fruit Markets Inc. Spartan Nash Albertsons Co’s Buddy Jones Nick Carlino Anthony Sattler Paul White MDI Distributors MDI Distributors C&S Wholesalers Luckys Markets © 2019 Information Resources Inc. (IRI). Confidential and Proprietary. 6 FMI Fresh Foods Leadership Council John Ruane (Co-Chair) Tom Stenzel/Miriam Wolk Robb MacKie Wendy Reinhardt Kapsak Ahold USA United Fresh Produce Assoc. American Bakers Assoc. Produce for Better Health (PBH) Rick Steigerwald (Co-Chair) Julie Ann Potts/Eric Zito Jim Huston Michael Lang Lund Food Holdings, Inc. North American Meat Institute Johnsonville Invatron Chad Gregory All- FEC Members Tom Super United Egg Producers Tom Daniel FMI Fresh Executive Council National Chicken Council Sterilox/Chemstar Eric Gassaway Chris Dubois Jarrod Sutton Bayer Randy Evins IRI National Pork Board SAP John Knorr Michael Eardley Joe Watson Phillips Seafood Tom Windish International Dairy-Deli-Bakery Assoc. Produce Marketing Assoc. Cargill Mike Celani Jason Jerome Joe Weber Wonderful Michael Forrest/Ellisa Garling National Cattleman's Beef Association Smithfield Foods Inc. Thomas Foods Jim Randazzo Sarah Schmansky Art Yerecic/Elizabeth Yerecic Aqua Star Seafood Mark Molter Nielsen Perishables Group Yerecic Label ADC. Jeff Thompson Paul Mastronardi Brad Roche Trident Seafood Lance Jungmeyer Mastronardi Produce Hill Phoenix FPAA Jeff Baker David Sherrod Greg Livelli Hormel Foods Ray Fager SE Produce Council Hussmann Kings Hawaiian Sally Lyons-Wyatt IRI © 2019 Information Resources Inc. (IRI). Confidential and Proprietary. 7 We’ve Been Discussing Top Trends in Fresh for Several Years… Focus Has Been on Individual Trends d d d d d New Supply Food Convenience Holistic Customization Chains Transparency Health to Consumerism d d d d d Connected Fresh Social & Localization Atomization of Consumer Prepared Cultural Personalization Alignment Source: Top Trends in Fresh 2016 - 2018 © 2019 Information Resources Inc. (IRI). Confidential and Proprietary. 8 2019 Fresh Trends Educational Plan MAY JUL OCT 23 25 24 The Consumer The Geographic The Store Size The Total Pendulum Pendulum Pendulum Store Pendulum 2019 Fresh Trends – How have different regions How do large, medium and How can both fresh Balancing the Consumer and markets succeeded in small size footprints fare in and center-store Pendulum fresh? fresh? win consumers? May 23 July 25 October 24 © 2019 Information Resources Inc. (IRI). Confidential and Proprietary. 9 In Case You Missed it – Key Learnings from Balancing the Consumer Pendulum • Fresh sales grew only 1% 2018 this past year, 3 % points FUTURE is HERE and is DISRUPTIVE less than 2014 • Center-store sales growth • Millennials & Gen Z are most culturally diverse ever outperformed Fresh Foods • Growth lies in impact of the changing U.S. demographic landscape for the first time in the decade • Generational, multi-cultural and socio-economic lenses reveal a critical path CONSUMERS we • Fresh has added $7B are key in sales since 2014 • 3 key targets illustrate growth opportunities of nearly $5B see • Health and Convenience continue • Its not about wide distribution – its being distributed perfectly what’s to be vital, impacting • Fresh is increasing in importance – but interest in buying traditional categories fresh at alternative channels is also up from past years working https://www.iriworldwide.com/en-US/Insights/Webinars/Balancing-the-Consumer-Pendulum © 2019 Information Resources Inc. (IRI). Confidential and Proprietary. 10 Geographic Pendulum Summary: No Single Path 1 | Things Are Changing Rapidly Fresh is not keeping pace at retail as consumers seek new solutions and are more diverse than ever 2 | Consumers Still Want Fresh Beneficial fresh foods, even if pre-packaged, are growing rapidly across the U.S. by meeting convenience, health needs 3 | Embrace Diversity and Change Growing regions and markets carry wider, differentiating assortment and lean into trends quickly to keep competition at bay 4 | Connect With Opportunity Consumers $5 billion of growth is available in three consumer segments who reside in key markets. Use fresh strategies these diverse groups want to win © 2019 Information Resources Inc. (IRI). Confidential and Proprietary. 11 Fresh Perimeter Has Grown Over $7B Since 2014, but Growth is Slowing Fresh Perimeter Food & Bev (Ex Fresh) 5.0% 2.1% 2.1% 1.1% 2015 2016 2017 2018 L52 YTD 2019 Gap Fresh +2.9 pts Gap Fresh -1 pts F&B Minus Fresh to F&B Minus Fresh Source: Total Store View + Perimeter Market Advantage incl. Fixed Weight Fresh, MULO ending 12-2-18 Source: Total Store View + Perimeter Market Advantage, MULO ending 6-16-19, Perimeter includes both FW/RW definition, Sales change vs. prior year by period © 2019 Information Resources Inc. (IRI). Confidential and Proprietary. 12 Within Multi-Outlet, Total Store Sales Continue to Grow; Fresh Not Keeping Pace TOTAL STORE SALES 23% TOTAL FRESH PERIMETER Of total store sales since 2015 but $803B $180B $13B $1.6B 2015 2017 L-52 2019 vs. Last Year vs. Last Year 31% 24% 13% Of total store growth Source: Total Store View + Perimeter Market Advantage, MULO 52-weeks ending 6-16-19 © 2019 Information Resources Inc. (IRI). Confidential and Proprietary. 13 The Fresh Perimeter Departments Make Up a Quarter of Food & Beverage MULO Sales Driven by Produce and Meat $803B – Total Store $576B – Total Food & Beverage Non Food & Edibles Perimeter Non-Food General Food Produce Meat $226B $160B $60B $60B Bev & Liquor Dairy Bakery (Aisle & ISB) Deli $99B $56B $30B $21B Frozen Refrigerated Floral Seafood $51B $30B $5B $5B Source: Dollar Sales, Custom IRI Total Store View + Perimeter Market Advantage with FW/RW Combined for Perimeter Depts, MULO 52 weeks ending 6-16-19 © 2019 Information Resources Inc. (IRI). Confidential and Proprietary. 14 Many Center Store Food Departments Experiencing Both Dollar and Unit Growth, Unlike Most Perimeter Departments F&B 3.4% 2.0% 1.5% 3.2% 3.1% 0.3% 2.0% 0.0% 0.3% 0.7% -0.4% 1.5% 2.2% -0.7% BEVERAGES FROZEN GENERAL FOOD LIQUOR REFRIGERATED DAIRY 1.7% -0.3% 0.4% 2.2% PERIMETER -1.0% -2.6% -0.1% 0.9% 0.9% -0.2% PKG & FRESH BAKERY DELI CHEESE (RW) DELI MEAT (RW) DELI PREPARED 2.6% 0.2% 1.0% 2.4% 0.2% 0.3% 0.0% $ % CHG VS. YAGO -3.9% UNIT % CHG VS. YAGO PRODUCE SEAFOOD MEAT FLORAL Source: Total Store View + Perimeter including FW & RW Custom Departments, Market Advantage, MULO 52-weeks ending 6-16-19 © 2019 Information