Frozen Market Data

BFFF User Day

Chris Hayward – Head of UK Business Development

7th March 2017

Agenda

1. Christmas 2016 in 5 minutes

2. Current Landscape for Frozen

3. The importance of Health, and levers for growth

Christmas 2016 in 5 minutes…

And the general headlines are….

4

5

Latest 4 weeks to 1st January 2017Retailer Performance Trends – Till Roll

28.8%

17.4%

16.3%

10.7%

5.8%

5.2%

5.6%

3.8%

2.2%

28.3%

17.0%

15.8%

10.8%

5.7%

5.8%

5.7%

4.1%

2.3%

0.0% 10.0% 20.0% 30.0% 40.0%

Tesco

Sainsbury's

Asda

Morrisons

Co-op

Aldi

Waitrose

Lidl

Iceland

Share of Till Roll Grocers £%

4 weeks to 03/01/16 4 weeks to 01/01/17

1.5%

0.9%

0.5%

4.4%

2.1%

15.1%

5.5%

11.6%

7.6%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0%

Tesco

Sainsbury's

Asda

Morrisons

Co-op

Aldi

Waitrose

Lidl

Iceland

YoY % Growth

Till Roll. Kantar Worldpanel

6

Retailer advertising campaigns focused on different messages

Novelty – Emotive - Connection

Novelty - “John Lewis logged higher levels of

consumer engagement, ‘Buster the Boxer’ registered

13% higher than 2016’s ‘Man on the Moon”

Emotive -“ The ‘Love Mrs Claus’ advert generated

significantly higher motivation and engagement

among consumers than last year’s The Art of

Christmas (70% vs 51%) “

Relevance - Tesco’s ‘Bring it On’ campaign came

out on top for its adverts depicting shopping and

Christmas parties, which people can relate to.

“ Cumulatively, M&S scored highest of all

retailers on novelty, emotional impact and

relevance, delivering its surge in popularity ”

Source: Kantar TNS

7

£0m

£100m

£200m

£300m

£400m

£500m

£600m

£700m

£800m

7th

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th

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st

1st

Tho

usa

nd

s

2016

2015

Sales (£m)

Daily sales in the run-up to Christmas – Total Grocery

Christmas falling on a Sunday this year meant that we saw a double-peak across Friday and

Saturday

Source: 1w/e Total Grocery data to 01 January 2017

8

7000000

7500000

8000000

8500000

9000000

9500000

J F M A A M J J A S O N D J F M M A M J J A S O N D J F M M A M J J A S O N D J F M M A M J J A S O N D J J F M A M J J A S O N D J

Source: 4w/e Total Grocery data to 01 January 2017

Total Market

Sales (£000s)

Total Grocery Sales in the Market (£000s)

It was the biggest Christmas ever as shoppers splashed out on festive shopping

Christmas Sales

+2.9%

10

0

5

10

15

20

25

M&SWaitroseCo-opMorrisonsSainsbury'sAsdaTescoTOTAL

MARKET

12 w/e 01 Jan 17

12 w/e 03 Jan 16

% of sales on volume deal

Marked in the biggest 3 retailers, little change elsewhere

The movement away from volumes deals (multibuy and Y for £X)

RT43 (Grocery). KWP 2017 01. 12 w/e 01 Jan 17

11

Saturation for young families?

Online penetration by life stage

0

5

10

15

20

25

30

35

RetiredEmpty NestersOlder

Dependents

Family 10+

Years

Middle Family

5-9 Years

Young Family

0-4 Years

Pre-FamilyTotal

Dec 16

Dec 15

% penetration

Flat or declining Growing

RT43 (Grocery). KWP 2016 13. 12 w/e 01 Jan 17

Tipping points

13

Return to growth

Tesco revival

Promotions

Discounters

Online

5 changes that just happened

Agenda

1. Christmas 2016 in 5 minutes

2. Current Landscape for Frozen

3. The importance of Health, and levers for growth

14

Retailer or manufacturer…here’s your To-Do List

Win with a Health propositionNone of the big 4 are ‘owning’ health yet consumer demand is up and

Frozen has a role to play

Drive TransactionsGiving shoppers more reasons to buy Frozen more often is crucial to

turning around current performance

Capitalise on PremiumisationInnovation in the category is helping change consumer perceptions of

Frozen and starting to address long-term category decline

15

5 current market trends

• Imminent return to inflation /

trade-down

• Promotional levels falling

• Discounter growth slowing

• Online Growth slower than

before

• Tesco back in growth

Total Grocery Frozen?

16

7.0

11.2

11.3

28.1

26.9

27.4

38.3

39.7

40.4

8.0

5.9

5.5

7.5

8.3

8.2

8.5

6.1

5.6

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

in 2016

in 2006

in 1996

Toiletries

Household

Healthcare

Frozen

Fresh & Chilled

Ambient Groceries

Alcohol

Share of Grocery Spend

Share of spend by grocery area

Over the long term, Frozen has been squeezed by the Fresh & Chilled Sector

Source: Kantar Worldpanel – Grocery – 52 w/e 01 Jan 2017

17

Source: Kantar Worldpanel, Total FMCG, changes are 12 w.e Apr 15 vs, 12 w/e Apr 07

Grocery Inflation

+36%

Average spend

per household

+22%

+2 -1

-7

-7

Volume change Store Choice Promotions Product Choice

Total Market Long Term Shopper Coping Strategies

Shoppers will seek cheaper products as inflation rises, which provides opportunities for

Own Brand and also specifically Frozen

18

Frozen – Total Market KPIs

Frozen is accessible to all shoppers but relatively infrequently bought.

The latest annual trends suggest an increase in transactions and premiumisation

19

Iceland and Tesco are out-performing the discounters Year on Year

Kantar 12 we 01 Jan 2017

2.33.8

-2.5

3.21.5

-0.1

6.7

-9.6

1.4

-7.8

-12

-10

-8

-6

-4

-2

0

2

4

6

8

TotalMarket

Tesco Asda Sainsbury's Morrisons Co-Op Iceland FarmFoods

Aldi Lidl

Yo

Y S

pe

nd

Gro

wth

%

YoY Growth

Total Frozen| YoY Spend Growth and Share %| Latest 12 Weeks

24.7

13.211.7

8.6

3.8

16

45.6

3.6

0

5

10

15

20

25

30

Tesco Asda Sainsbury's Morrisons Co-Op Iceland Farm Foods Aldi Lidl

Spend Share %

20

Frequency is the key driver for growth, with only Iceland benefiting from

Market Premiumisation

Kantar 12 we 06 Nov 2016

Total Frozen| Total Market and Trended KPI’s| Trended 12 Weekly

-20.0

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

Total Market Tesco Asda Sainsbury's Morrisons Co-Op Iceland Farm Foods Aldi Lidl

Co

ntr

ibu

tio

n t

o G

row

th (

%)

Retailer KPI’s

Frequency Packs/Trip Price Penetration Spend

21

We are seeing decline driven by Y for £X sales, with TPR’s helping to grow the market

Kantar 12 we 06 Nov 2016

Total Frozen| Contribution to Growth by Promo-Type| Trended 12 Weekly

-15

-10

-5

0

5

10

TotalMarket

Tesco Asda Sainsbury's Morrisons Co-Op Iceland FarmFoods

Aldi Lidl

Con

trib

utio

n to

Gro

wth

%

Contribution to Growth by Promo-Type %

No Promotion TPR MultiBuy Y for £X Meal Deal Extra Free Other Promotions Total Sales

22

Core OL driving growth for Tesco and Morrisons, Iceland clearly leveraging brand strategy

Kantar 12 we 06 Nov 2016

Total Frozen| Contribution to Growth by OB Tier| Trended 12 Weekly

-10

-8

-6

-4

-2

0

2

4

6

8

TotalMarket

Tesco Asda Sainsbury's Morrisons Co-Op Iceland Aldi Lidl

Co

ntr

ibu

tio

n to

Gro

wth

%

Contribution to Growth by OB Tier %

Branded Premium Economy Other Core OB Total Sales

23

Frozne Desserts the key driver in Frozen, Frozen Meat a challenging area

(as is Fresh Meat)

Kantar 12 we 06 Nov 2016

Total Frozen| Contribution to growth by Category| Trended 12 Weeks

-15

-10

-5

0

5

10

15

Total Market Tesco Asda Sainsbury's Morrisons Co-Op Iceland Aldi Lidl

Con

trib

utio

n to

Gro

wth

%

Frozen Chips Potatoes & Veg Frozen Desserts/Ice Cream Frozen Meal Solutions Frozen Meat & Poultry Frozen Foods

24

Iceland have upgraded the majority of their estate, with a new look in-store and

online. More subtle colours and more premium feel

Post 2015Post 2013

25

Their next development is 25 stores planned to be turned into Warehouse stores

26

£1.50£1

Core products and packaging have also been given a make-over….

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….Whilst developing & selling new products –

carving a Premium and Health niche within the Frozen sector

28

Iceland have been able to attract brand new shoppers to Iceland

through their NPD tie up with Slimming World

27.4 24.1

21.014.5

51.661.4

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

% Spend% Shoppers

New to Frz Ready

Meals & New to Iceland

New to Frz Ready

Meals, Existing Iceland

Shoppers

Existing Iceland Frz

Ready Meal ShoppersFrozen Ready

Meals Profile

1.02m extra

shoppers, new to

Iceland in the latest

12 weeks, with

ABC1 over-index of

113

Iceland Customer Profile – Frozen Ready Meals

29

12.6 12.1 14.1

11.5 10.114.0

7.9 8.36.1

8.3 9.9 6.9

11.2 11.8 12.8

22.9 23.6 25.5

25.5 24.2 20.5

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Average Shopper Iceland Average Shopper Slimming World Shopper

Pre-Family

Young Family 0-4 Years

Middle Family 5-9 Years

Family 10+ Years

Older Dependents

Empty Nesters

Retired

% Spend Profile By Life Stage

And specifically the range has driven a younger shopper to Iceland

£1.5m per week (12w/e Oct 16)

30

Agenda

1. Christmas 2016 in 5 minutes

2. Current Landscape for Frozen

3. The importance of Health, and levers for growth

31

15 year trend

This has meant Health as a reason for consuming food has

doubled in popularity in 15 years

32

And as such and the average shopping basket is getting healthier

2.1

0.7

-0.4

1.1 0.81.4

3.7

Volume Calories Sugars Saturates Sodium Protein Fibre

33

Consumers are choosing healthier options across multiple food categories, but the

biggest long term growth has come from Frozen Foods.

% Share of Consumption for Health (Servings), % change YoY

FRESH & CHILLED FROZEN

2016: 44.5%2015: 43.9%

2014: 44%2013: 42.8%

2016: 17%2015: 16.2%

2014: 16.1%2013: 12.9%

Kantar Worldpanel Usage – 52 w/e 04 Dec 2016 – Total Food

+1%vs LY +1%

vs 2YA +4%vs 3YA

+5%vs LY +6%

vs 2YA +32%vs 3YA

34

And therefore shoppers consider a wider health proposition

including Brands as well as Own Brand

Kantar 12 we 06 Nov 2016

Top “Healthy” brands – consumer defined

35

13.8

1.2

13.3

44.2

16.4

2.2

0 5 10 15 20 25 30 35 40 45 50

Total Snacks

Teatime

Evening Meal

Lunch

Breakfast

Total Total Frozen

% frozen presence by occasion

LUNCH & KIDS TEA THE NATURAL STRETCH

Evening meal key for frozen, breakfast becoming more popular – Lunch and Teatime

the more natural adjacencies

36

13.3

24.1

14.9

16.2

5.3

29.8

4.4

230 5 10 15 20 25 30 35

37

Weekday IH lunch adult

relaxed shari

Weekday IH adult quick

sharing

Weekday IH lunch adult

relaxed alone

Weekday IH lunch adult

quick alone

Weekday in home lunch

with kids

Saturday lunch in home

Sunday lunch in home

Total Lunch Total Frozen

OVEN QUICK COOK TECHNOLOGY?

% frozen presence by occasion

KWP USAGE 52 W/E DEC 2016

TIME-RELAXED OCCASION

TIME-RELAXED OCCASION

Lunch is currently an under-trade for Frozen, and

specific focus on time-relaxed occasions could generate interest

37

Imagine if frozen food was only

available one day a week?

It is.

Frozen is consumed

at one meal in

seven.

38

Giving more reasons to buy Frozen with you is crucial – and

shoppers are prepared to pay more for thisMATCH THE OFFER TO THE NEED & SPEND

I spend 19% more to save time (convenient/ready-made)

I spend 5% more for health

I spend 25% more taste

I spend 234% more for solutions

I spend 87% more when it’s for a special meal Save time uplift based on ready made v homemade; Health based on low sugar/fat category case study;; solutions based on meal deals v average cost of a meal for two;

special meal based on consumer perception of special meal and amount spent v mean; taste based on Premium Own label category case study

39

The To-Do List

Win with a Health propositionNone of the big 4 are ‘owning’ health yet consumer demand is up and

Frozen has a role to play

Drive TransactionsGiving shoppers more reasons to buy Frozen more often is crucial to

turning around current performance

Capitalise on PremiumisationInnovation in the category is helping change consumer perceptions of

Frozen and starting to address long-term category decline

• Product Mix

• NPD

• Price Cut Promotions

• Marketing Comms

• Brand & Own Brand

• Category Choices

• Marketing Comms

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Thank you

Chris Hayward

Tel.: +44 (0)7943 811656

chris.hayward@kantarworldpanel.com

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