2013: RETAIL TRENDS & DRIVERS OF CONSUMER ......9 Source: Nielsen Scantrack, Total U.S. – All Outlets Combined; 52 weeks ending 6/9/2012 (vs. prior year); UPC-coded 2002 - 2007 2008

Steve Lutz January 31, 2013

2013: RETAIL TRENDS & DRIVERS OF CONSUMER PREFERENCES

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AGENDA

Presentation Overview

• Perishables Group Background

• Macro Trends

• Industry Trends to Consider

• Seafood Trends in Supermarkets

• Conclusions

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NIELSEN PERISHABLES GROUP OVERVIEW

Division of Nielsen • Data from 18,000 Stores w/ SC • 44 Markets, 100+ Retail Banners

Shopper Dynamics • Loyalty Card Data—30 million households

Consumer Demographics -Spectra demographic profiles

Advanced Analytics • Price Elasticity • Promotional impacts

MACRO TRENDS

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The world has changed

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LET’S GROUND THE CONVERSATION

Recession Officially Ends

June 2009

78% of consumers say we are in a recession

Nov. 2012

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5 YEARS OF A “NEW NORMAL”

0

20

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120

140

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2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Source: The Conference Board - Nine census regions, 5,000 US households; 1985 = 100; conducted by Nielsen

2012

CONSUMER CONFIDENCE SIGNIFICANTLY OFF PRE –RECESSION NORMS

Great Recession

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HOW CONSUMERS COPE…

52%

47%

41%

+6

+14

compare prices before deciding what to buy

use store circulars

use coupons

increase in the coupon redemptions

growth of Store Brands in the past 3 years

Source: Nielsen Scantrack & Homescan – US Buying Trends June 2012

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Source: Nielsen Scantrack, Total U.S. – All Outlets Combined; 52 weeks ending 6/9/2012 (vs. prior year); UPC-coded

2002 - 2007 2008 - 2009 2010 - 2011

Economic Growth

Great Recession

Post Recession

176 Avg Annual Trips Per

Shopper


Shopper


Shopper

SHOPPER TRIPS HAVE NOT RETURNED BUT

OTHER FACTORS ARE AT WORK

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Shopping patterns have changed

SMALLER SHOPPING BASKETS

MORE INTEREST IN LOCAL STORES

MORE EXPERIENCE SEEKING

MORE ONLINE REPLENISHMENT

Source: The Demand Institute

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CONSUMERS ARE SPLITTING THEIR TICKET MORE THAN EVER

• Grocery is the leader in fresh, but greater availability and assortment of fresh across retail channels responds to consumer demand

Nielsen Homescan, 52 weeks ending Q3 2012; Fresh = Meat, Seafood, Bakery, Deli and Produce Dept.

12% Club

9% Remaining Market

15% Mass/SuperCenter

64% Grocery

2016 Forecast:

Retail Fresh Dollar

Market Share

1 pt

2 pt

1 pt

2 pt

Point change

from 2012

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RETAILERS OFFERING FEWER PROMOTIONS, SHALLOWER DISCOUNTS

• Declining promotions playing out in both circular ads and discount strategies

Source: Market Track Promotional Data (Grocery channel only) 52 weeks ending 9/29/2012 vs. Year Ago; Nielsen Perishables Group FreshFacts® (FCA), 52 weeks ending 10/27/2012 vs. Year Ago

-0.3%

+2.5%

Circular Print Ad Count (total perishables)

Promotional Average Retail Price (total perishables)

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SMALLER PACK SIZES

LESS SPOILAGE/STORAGE

DEMAND FOR MORE

VALUE-ORIENTED PRODUCTS

Source: The Demand Institute

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1.5 to 2.1 Times

Larger with Fresh

CONSUMERS STILL FOCUS ON “FRESH”

29% Grocery

Store Sales

Sources: Homescan, TSV 52 weeks ending December 2011; Nielsen Perishables Group FreshFacts® Total US 52 weeks ending 12/31/2011 (Grocery channel only)

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AND RETAILERS KNOW IT!

Market Differentiation

Quality Prepared Foods Selection of Meat & Fish

Quality Fresh Food

Customer Service Quality Fresh Food

Pleasant Store Environment

Top 3 Shopper Equity

Retail Brand

Source: Nielsen Shopper Trends 2010 Correspondence Analysis Results Among Dependable Shoppers in retailers’ primary census region #

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RETAIL SPENDING REFLECTS THE ECONOMY

Retail Spending: 2 year trend

About 20% of HHs earn

over $100k

Source: Nielsen Homescan, 52 w/e 10/1/2012 versus 10/3/2010 excludes gas-only or Rx-only trips

-9%

-1%

-3%

-8%

-1%-1%

4%

< $20K $20K - $29K $30K - $39K $40K - $49K $50K - $69K $70K - $99K $100K +

Household Income

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Source: Nielsen Scantrack, Total U.S. – All Outlets Combined; 52 weeks ending 6/9/2012 (vs. prior year); UPC-coded

HIGH END STORES

MAINSTREAM STORES

VALUE STORES

8% Same Store

Sales Growth

RETAIL IS CHANGING

6% Same Store

Sales Growth

3% Same Store Sales Growth

Source: Company financials, most recent reporting: Dollar General, Dollar Tree, Costco, Sam’s, CVS Macys, Target, Kroger, Rite aid, Wal-mart, Whole Foods, Nordstroms

INNOVATION

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CONSUMER PRIORITIES DRIVING SUCCESSFUL PRODUCTS

• Across fresh, products that fit into four main consumer priority areas are proving successful

MULTI-CULTURAL/

GLOBAL HEALTHY PREMIUM/

INDULGENT

CONVENIENCE

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CATEGORIES WITH PRIORITY ATTRIBUTES DRIVING GROWTH

Source: Nielsen Perishables Group FreshFacts® Total U.S. 52 weeks ending 9/29/2012 vs. Year Ago; Products in each group are not mutually exclusive

Healthy Convenience Premium/

Indulgence Multicultural/

Global

Contribution to Fresh Dollar Sales

37% 19% 9% 3%

4%5%

8%7%

8%

1%

3%

5% 5%

3%

Dollar Growth

Volume Growth

4%5%

8%7%

8%

1%

3%

5% 5%

3%

Dollar Growth

Volume Growth

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CONSUMERS SWITCHING ACROSS DEVELOPED CATEGORIES

• Record-high meat prices fueling switching more than ever before

• Ground beef a substitute for multiple beef and chicken cuts

• Pork substitution within the protein

• Seafood substitutes for all three proteins

Source: Nielsen Perishables Group Meat Department Consumer Decision Tree Study 2011

Also opting for value-added meats

instead of traditional, despite higher

price points

• Small household penetration, but

sales growing consistently as

people seeking convenient options

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CONSUMER OVERVIEW

• Consumers smarter /more responsive than ever

• New purchase priorities are driving sales

• “Fresh” is the key

• Retailers forced to shift tactics

• Seafood has momentum into 2013

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STRATEGIC CONSIDERATIONS

• Consumers 2013 are in pursuit of “value”

• Fresh Seafood is largely undifferentiated and dominated by commodity products

• Retailers have no road map for success

• How do you drive success at retail?

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Cost Consumer = Price

Value Consumer = Benefits/Price

VALUE INCREASINGLY THE NEW CATEGORY DRIVER

Avg Price +121% higher Dollar Sales 160% Unit Sales 203%

Dollar Sales 3% Unit Sales 1%

Remaining Yogurt Total Greek Yogurt

Dollar Sales 6% Unit Sales

Mainstream Chocolate Premium Chocolate

Dollar Sales -2% Pound Sales 1%

Pasta Excluding Health Healthy Pasta

Dollar Sales 4% Unit Sales -4%

Mainstream Coffee Premium Coffee Pod Coffee Mid-Tier Toothpaste


Dollar Sales -8% Unit Sales -3%

Super Premium Toothpaste

Price Premium +63% Dollar Sales +4% Volume +8%

Roma Tomatoes Value

Hot House Vine Tomatoes Added Value

Snacking Tomatoes Premium Value

Price Premium +126% Dollar Sales +10% Volume +5%

Dollar Sales +.1% Volume -10%

Premium Consumer

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Cost Consumer = Price Value Consumer = Benefits/Price

VALUE INCREASINGLY THE NEW CATEGORY DRIVER

Source: Nielsen Perishables Group FreshFacts® Total U.S. 52 weeks ending 11/24/2012 vs. Year Ago


Dollar Sales 3% Unit Sales 1%

Remaining Yogurt Total Greek Yogurt

Dollar Sales 6% Unit Sales

Mainstream Chocolate Premium Chocolate

Dollar Sales -2% Pound Sales 1%

Pasta Excluding Health Healthy Pasta

Dollar Sales 4% Unit Sales -4%

Mainstream Coffee Premium Coffee Pod Coffee

Avg Price 40% higher Dollar Sales 115% Unit Sales 99%

Mid-Tier Toothpaste


Dollar Sales -8% Unit Sales -3%

Super Premium Toothpaste

Price Premium +53.1% Dollar Sales +33.5% Volume +37.5% Price Chg. - 2.6%

Farm Fillet Value

Wild Salmon Added Value

Copper River Salmon Premium Value

Price Premium +110% Dollar Sales +37.8% Volume +54.1% Price Chg. -10.5%

Dollar Sales +11.8% Volume +16.4% Price $6.92 Price Chg. -11.6

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“VALUE” OFTEN MORE POWERFUL THAN PRICE…

Where Price Matters

Where Innovation Pays

TRIED AND TRUE

CONVENIENCE

SUBSTITUTION COMMODITY ITEMS

NEW FLAVORS ORGANIC/LOCAL

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Women control $12 of $18 trillion in global consumer spending—close to 70%

Women in 95% of countries say

quality is the #1 driver of

brand loyalty

Transitions strategy from pricing to

quality; includes production,

marketing, packaging, in-store

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NEW REALITY

• Complex categories

• Dynamic retail environment

• Retailers/Consumers looking for: • Local, healthy foods

• Flavor & Convenience

• Unique food experiences

• “Commodity” products earn commodity returns

SEAFOOD OVERVIEW

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KEY BUSINESS QUESTIONS

• What are the base category trends?

• How is fresh seafood performing across various retail chains?

• Does performance vary much from retailer to retailer?

• How do we go about identifying target retailers?

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KEY FRESH SEAFOOD RETAIL OBSERVATIONS

• Fresh Seafood is the 2012 Center Plate Star

• Strong growth, but driven by key categories

• Retail price appears to have played a big role

• = Significant Opportunities for Growth

Retailers need your help in identifying best practices to drive sales

(promotion, merchandising, assortment, etc.)

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52 WEEK PERFORMANCE—KEY PROTEINS


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Source: Nielsen Perishables Group, 52 weeks vs. year ago through 11/24/2012

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FRESH SEAFOOD—CATEGORIES RANKED 1-10


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FRESH SEAFOOD—CATEGORIES RANKED 11-20


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FRESH SEAFOOD—TOP CATEGORIES


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LOYALTY CARD BASKET FACTS

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HOUSEHOLD PENETRATION—52 WEEKS

Nielsen Perishables Group FreshFacts® Shopper Insights powered by Spire, 52 weeks ending 9/29/2012 vs. Year Ago

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HOUSEHOLD PENETRATION—52 WEEKS


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TRIPS PER BUYER


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TRIPS PER BUYER


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TRIPS PER BUYER PERCENT CHANGE VS. YAGO


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TRIPS PER BUYER PERCENTAGE CHANGE


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VOLUME PER TRIP


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VOLUME PER TRIP


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VOLUME PER TRIP % CHANGE VS YAGO


IMPACT OF SUPERMARKET PRACTICES A TALE OF TWO MARKETS

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TILAPIA PERFORMANCE METRICS


Top 4/5 Bottom 5

Dollars per $MM ACV $1,086 $530

Dollar Contribution 8.4% 7.9%

Volume per $MM ACV $311 $159

Volume % Change 20.9% 0.1%

Non-Promo Ave Retail $3.82 $4.35

Promo Ave Retail $3.52 $3.91

Impressions per Store/Week 4.4 3.6

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TOP L.A./PHOENIX RETAILERS (NAMES MASKED)


Geography

Dollars per

$MM ACV

L. A. Discounter $4,419

Phoenix Mainstream $1,243

Phoenix Mainstream $1,132

Phoenix Mainstream $988

L.A. Mainstream $983

Average $1,086

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BOTTOM L.A./PHOENIX RETAILERS (NAMES MASKED)


Geography

Dollars per

$MM ACV




Phoenix Mainstream $456


Average $530

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A TALE OF TWO RETAIL BANNERS (SAME CHAIN)


Weekly Tilapia Retail Dollar Sales

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A TALE OF TWO RETAIL BANNERS (SAME CHAIN)


Phoenix Socal

Dollars per $MM ACV $1,243 $597

Dollar Contribution 7.8% 5.4%

Volume per $MM ACV 295 173

Volume % Change 23.5% -1.8%

Non-Promo Ave Retail $3.88 $3.66

Promotional Average Retail $2.98 $2.98

Impressions per Store/Week 4.0 3.2

CONCLUSIONS

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WHAT CAN WE LEARN?

• Many avenues to increase seafood performance

• Category segmentation needed • Local

• Variety

• Flavor/Convenience

• Seafood needs higher household penetration and increased consumer confidence

• Need know:

• Causes for retail performance variances

• HOW to address opportunities

QUESTIONS?

Contact :Steve Lutz at the Nielsen Perishables Group:

509.421-4677

[email protected]

mailto:[email protected]

Documents

2013: RETAIL TRENDS & DRIVERS OF CONSUMER ......9 Source: Nielsen Scantrack, Total U.S. – All Outlets Combined; 52 weeks ending 6/9/2012 (vs. prior year); UPC-coded 2002 - 2007 2008