WHAT’S IN STORE2016 AND BEYOND

James Russo: SVP Global Consumer Insights December 15th 2015

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TODAY’S SPEAKER

JAMES RUSSOSenior Vice President, Global

Consumer Insights@JamesARusso

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PICK UP IN DOLLAR SALES, UNIT SALES LANGUISH

Source: Nielsen Scantrack – Total U.S. – All Outlets Combined (xAOC + Convenience), All Departments, All Brands (UPC), calendar years 2010 -2014 and CYTD Wks - 47 W/E 11/21/2015, $ and unit %change vs. YAGO, Nielsen Homescan – Total U.S. – All Outlets, All Buyers, All Brands (UPC), calendar years 2010-2014 and 52 weeks ending 10/24/2015, trips per shopper

3.8%3.1%

1.8% 1.9%2.5%

0.8%0.3% 0.4%

0.0%

0.2%

151 146 140 137 132

2011 2012 2013 2014 2015

Dollar Trend

Unit Trend

Trips per Shopper

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Source: Nielsen Scantrack – Total U.S. – All Outlets Combined (xAOC + Convenience), All Departments, All Brands (UPC), 52 weeks ending 11/21/2015, $ and unit % change vs. year ago

6%

5%

5%

4%

3%

2%

2%

2%

2%

2%

2%

2%

1%

1%

-1%

3%

3%

4%

2%

3%

2%

1%

0%

-1%

0%

0%

0%

0%

0%

-2%

-2%

0%

Health Care

Produce

Deli

Alcohol

Tobacco & Alternatives

Bakery

Beauty Care

Meat

Grocery

Personal Care

Household Care

Dairy

Pet Care

Frozen Foods

General Merchandise

Total All Departments

Dollar Trend

Unit Trend

NOT EVERY CATEGORY IS DECLINING

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THE DEMISE OF THE CENTER OF STORE IS OVERSTATED

Source: Nielsen Scantrack x AOC + Convenience. Period Ending August 22, 2015

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DECLINES OFFSET BY CATEGORIES WITH LARGE GAINS

+$4,751.2 5.1

+$3,870.7 7.0

+$3,129.0 4.1

+$2,540.7 8.4

+$2,297.2 5.9

+$2,291.3 3.6

+$1,717.2 7.9

+$1,585.8 6.1

+$1,301.1 6.0

+$941.1 15.7

EXPANSION Millions4yr

CAGRCONTRACTIONRTE Cereal

Soft Drinks

Gum

Sugar

Margarine

Frozen Entrees

Powder Inst Drinks

SS Juice & Drinks

Frozen Pizza

RTE Desserts

-$764.4 -2.1%

-$731.2 -0.7%

-$411.3 -3.1%

-$379.3 -3.5%

-$284.9 -4.3%

-$272.5 -0.6%

-$237.4 -6.1%

-$179.0 -0.5%

-$164.0 -0.9%

-$155.8 -5.5%

Millions4yr

CAGR

Salty Snacks

New Age Beverages

Candy

Coffee

Water

Cheese

Eggs

Yogurt

Nuts

Liquid Coffee

Source: Nielsen Scantrack x AOC + Convenience. Period Ending August 22, 2015

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Source: Nielsen Global Surveys, U.S., biggest concern over the next six months, Economy response YTD 2015 is thru 2Q15

ECONOMIC CONCERNS DIMINISHINGEconomic Concerns for US consumers

2009 2011 2014

33%41%

48%

2010 2012 2013

44%42%

40%

YTD2015

28%

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UNCERTAINTY PERMEATES THE CONSUMER MINDSET

40%Living paycheck to paycheck:

55% less than or equal to $50K

25% $150K or above

55% Believe we are still in a recession

44%Believe will not be out of a recession in the next 12 months

40%

Source: Nielsen 2Q15 Online survey of 1,000 respondents

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BEFORE WE CLOSE THE YEAR,INSIGHTS FROM NIELSEN’S HOLIDAY HEADQUARTERS

Source: Retail Market Power 2015

• New holiday selling season:o As of Halloween week, 47% of consumers had started holiday shopping

• Cyber Monday surpasses Black Friday:o Thanksgiving 30%o Black Friday 50%o Cyber Monday 60%

• Emerging segments driving growth: o Millennial and multicultural

• Online is mainstream:o 75% plan on shopping Online, followed by Mass Merchandisers (74%),

and Department Stores (72%)o Top web site used for Cyber Monday was Amazon at 81%, next closest 32%

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THE YEAR AHEAD

2016

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Dollars Units

2015 2016 2015 2016

Total 2.1% 2.2% -0.1% 0.1%

Alcohol 4.4% 2.4%

Pet Care 3.6% 0.8%

Dairy 3.2% 0.1%

Health and Beauty 2.8% 1.0%

Dry Grocery 1.6% 0.0%

Non-Food Grocery 1.4% -0.3%

Source: Nielsen Advanced Analytics – business consulting

NIELSEN SALES OUTLOOK 2016

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CONNECTED COMMERCE BECOMES A REALITY

Retail (B&M)

Add value Make it easy

Satisfy needs

Know your shoppers

Retail /Digital

Digital

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VISION OF CONNECTED COMMERCE: TARGET LA25Digitally enabled, in-store shopping experience

“A great in-store experience featuring the latest in on-demand shopping. That means fast access to products, helpful team

members, and easy-to-use online and mobile options”

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ECONOMIC OUTLOOK 2016

Goldman Sachs Sept 2015

2016 GDP 2.4% 2.8% 2.4% 2.8%

Conference Board Nov 2015

IMF Oct 2015

World Bank June 2015

Full year 2015 GDP2.5%

"What happens in China has repercussions for the entire world economy."

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FEDERAL RESERVE MEETING DEC 15TH AND 16TH

Is it the end of the era of cheap money?

What it could mean for consumers:

Monthly credit card rates increase

Mortgage payment could go up - unless it's fixed

Savings accounts pay a little more interest

The job market cools slightly

Stocks could see more volatility

WHAT’S IN STORE 2016 AND BEYOND

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IN THE U.S.

Source: Pop-Facts® Premier 2015, Total US

Population

20202015319 Million

Pop Estimate

331Million DIVERSEPop Projection

Households 121Million

126Million CHANGING

HH IncomeAvg: $79,486Med: $57,294 SLOWING

Avg: $74,165Med: $53,706

$6.7 Trill ion

$7.1 Trillion

TOTAL CONSUMER SPEND

$5.3 Trill ion

$5.7Trillion

TOTAL RETAIL SALES & EATING, DRINKING PLACES

INFLUENCE OF MULTICULTURAL CONSUMERS

Every hour born in the U.S.:• 147 new Latino births

• 43 new Asian American births

• 41 new African American birth

• 6 new Caucasian American birth2020 Multicultural

Buying Power

$4.2 TRILLION

Share of U.S. buying power in 2020

• African-Am 8.7• Asian-Am 6.7 • Hispanics 10.6

TODAY TOMORROW

Source: The Multicultural Economy 2015, The Univ ersity of Georgia Selig Center f or Economic Growth, National Journey Next America. Article: The Economic Impact of Changing Demographics in the United States, June 2015.

By 2020, more than

1 in 5 adults (21%) will be age 65 or olderBetween now and the year 2030,every single day, 10K baby boomers will turn 65

AMERICA, AN AGING NATION

Source: Pew Center

78 million Boomers hold:

70% of disposable

income, and account for 50% of CPG

sales

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2020: NEW RETAIL AGENDA EMERGES

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FOOD AWAY FROM HOME GROWING FASTER

Source: Consumer Buying Power 2015 July, Total US

$551

$736

$584

$773

FOOD OUT OF HOME FOOD AT HOME

Total U.S.5 Year Projected $ Spend (Billions)

6%

5%

2015 20152020 2020

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Source: Consumer Buying Power 2015 July, Total US

$4,639

$6,150

$181

$248

$790

$649

$354

$124

$1,217

$406

$1,240

6.0%

5.0%

7.5%

7.5%

7.3%

7.2%

7.1%

7.1%

5.4%

4.2%

2.4%

1.7%

Food Away From Home

(Foodservice & Drinking Places)Food At Home

Juices

Carbonated Beverages

Fruits & Vegetables

Non-alcoholic Beverages

Cereals & Cereal Products

Coffee

Prepared Foods

Alcoholic Beverages At Home

Sugar & Other Sweets

Meats (All)

2020 Annual Avg per HH 5YR Projected % Growth

Average Growth

DRIVERS OF FOOD AT HOME SALES

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FIND GROWTH BY GOING DEEPER AND LOCAL Top 20 DMAs driving the “Food at Home” Growth for 2020…

Minot, NDAustin, TX

Odessa-Midland, TX

San Antonio, TXHouston, TX

Charleston, SCDenver, CO

Casper - Riverton, WYGlendive, MTRapid City, SD

Victoria, TXFt Myers, Naples FL

Salt Lake City, UTColumbus, GA

Dallas, TXFargo, ND

Washington, DCWilmington, NC

Oklahoma City, OKRaleigh, NC

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MILLENNIALS ON THE MOVE: ONLY ¼ EXPECT TO LIVE IN SAME AREA

Source: Spectra, Data Version 2015 August; only includes DMAs with projected total population of 1 million+

Highest mobility of any age break drives strong population growth in the South

While the list of top 10 most populous DMAs is projected to remain the same in five years, DMAs with the highest growth of Gen Zers and Millennials diverge

<20 growth concentrated in

larger cities/college towns

Texas and Florida see

high growth across age breaks

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20 FASTEST GROWING METRO AREAS What don’t you see? Atlanta, Boston, Dallas, NY, Miami, LA, Phoenix, Wash DC

Memphis, TN-MS-AR

Tampa-St. Petersburg-Clearwater, FL

Jacksonville, FL

Milwaukee-Waukesha-West Allis, WI

St. Louis, MO-IL

Baltimore-Towson, MD

Chicago-Joliet-Naperville, IL-IN-WI

Detroit-Warren-Livonia, MI

New Orleans-Metairie-Kenner, LA

Pittsburgh, PA

20% Philadelphia-Camden-Wilmington, PA-NJ-DE-MD

Columbus, OH

Buffalo-Niagara Falls, NY

Virginia Beach-Norfolk-Newport News, VA-NC

Sacramento-Arden Arcade-Roseville, CA

Hartford-West Hartford-East Hartford, CT

Orlando-Kissimmee-Sanford, FL

Charlotte-Gastonia-Rock Hill, NC-SC

Cincinnati-Middleton, OH-KY-IN

Kansas City, MO-KS

33%

18%

12%

23%

19%

14%

16%

14%

20%

15%

33%

32%

30%

30%

29%

29%

28%

26%

27%

14%

14%

16%

13%

13%

15%

12%

15%

14%

12%

26%

25%

25%

25%

25%

24%

24%

23%

23%

22%

Source: Nielsen A Tale of 2000 Cities

PRICE GAIN

2012-2015 2012-2018

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E-COMMERCE CONTINUES TO BE THE BIG WINNER

Sources: Nielsen TDLinx & Nielsen Analytics; CAGRs (compounded annual growth rates – dollar basis)

-4% -2% 0% 2% 4% 6% 8% 10% 12% 14%

Consumer ElectronicsToy

Dept StoresOfficeBooksMass

Home/Bed/BathAuto

SupermarketsSuper Centers

ApparelDrug

Home ImprovementLiquor

ClubConvenience

Disc Dept StoresPet

Sporting GoodsDollar

Ecommerce

Average Growth

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NATURAL GOURMET CONTINUES TO TAKE SHARE BITE FROM MAINSTREAM SUPERMARKETS

Source: Nielsen TDLinx & Nielsen Analytics; *Aldi & Save-A-Lot; **Whole Foods, Trader Joe’s, Fresh Market & Sprouts

Supermarket % $ Channel Shares

0%

25%

50%

75%

100%

2006 2015 2020 forecast

Limited AssortmentDeep Discount*

Natural Gourmet**

MainstreamSupermarkets

2015-2020 CAGRs: Gourmet 8.1%, Ltd Assortment 2.4% , Mainstream 1.6%

Point Change 2020 forecast vs. 2015

+ NC

+ 2.7

-2.8

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BY 2020, PROXIMITY RETAILING WILL BE THE NORM AND KEY TO SUSTAINED GROWTH

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. Promise Is Realized The Internet Of Things Become Mainstream 2020: CONNECTIVITY

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NEARLY EVERYONE WILL BE ONLINE BY 2020

Source: Internet World Stats

World Internet UsagePercentage of the population using the internet by region and how usage has grown since 2000

2005 Today 2020

15% of the

world population

34% of the

world population

85% of the

world population

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MOBILE USAGE 7 TIMES HIGHER THAN 2010

Source: KPCB Internet Trends 2015 Code Conference, May 2015

2015 first year that mobile usage accounts for at least half of digital media time

0.4 – 7% of total

2.4 – 42% of total

2.8 – 51% of totalMobile

Desktop / Laptop

Other Connected Devices

Time spent per Adult UserPer Day with Digital Media2015

5.6 hoursper day

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IN AN AGE OF PROLIFERATION, THE TIME TO CONNECT AND RESONATE WILL BE REDUCED

Source: Multiple sources

Apps that center on brevity have seen meteoric adoption since 2010

‘10 ‘11 ‘12 ‘13 ‘14 ‘15

Snapchat released

100 millionactive users

400 million+snaps per day

60 million+ registered users

10 million users

20 million images shared

per day

Video sharing launched

(end of 2012-early 2013)

2nd highest photo

sharing site Facebook #1

200 millionmonthly active

users

1.5 billionVine loops played

daily

Official launch (Jan)

Most downloaded

free app for iOS (Apr)

Company founded

(June)

Acquired by Twitter

(Oct)

40 million registered users

(end of 2013-early 2014)

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INTERNET OF THINGS BECOMES MAINSTREAM

Sources: wareable.com, pocket-lint.com

By 2020, industry experts estimate that more than 50 billion physical objects will be connected to the internet

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DRIVERLESS CARS CREATE THE ULTIMATE MOBILE DEVICE TO CONNECT

• Driverless cars will be in use all over the world by 2025

• Uber fleet to be driverless by 2030

• Ford CEO expects fully autonomous cars by 2020

• Tesla CEO expects true autonomous driving by 2023

• Fully autonomous vehicles could be ready by 2025, predicts Daimler chairman

• Nissan to provide fully autonomous vehicles by 2020

• Sergey Brin plans to have Google driverless car in the market by 2018

• Continental to make fully autonomous driving a reality by 2025

• Intel CTO predicts that autonomous car will arrive by 2022

Sources: Google web searches and company reports

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I CAN BE IN TWO PLACES AT ONCE!One of the most sought-after functions is the ability to carry out simple tasks when away from home

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2020: TECHDriving Consumer Optimism Towards 2020

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TECH DRIVES OPTIMISM!Americans are most optimistic about technology’s impact, followed by the global economy, environment, and politics

Technology Global Economy Environment Politics

56%18% 18% 14%

Source: CINA Survey Q1610 Do you anticipate each of the following impacting your life more positively or negatively in 2020? Summary Of Much/Somewhat More Positively

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DRIVEN BY YOUNGER AND OLDER MILLENNIALSAmericans 45+ report lower optimism than total sentiment (70% net optimistic)

Total – 70%

18-25 – 81%

26-34 – 79%

35-44 – 71%

45-54 – 65%

55-64 – 65%

65+ – 61%

Source: CINA Survey Q1605 Overall, how optimistic or pessimistic do you feel about the next five years? Optimistic (Net)

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CONSUMERS HEDGING ON INCREASED CORPORATE RESPONSIBILITYAffluent, educated, and student demographics drive belief that environmental and social responsibility will increase - % increase in importance

Environmentalresponsibility

of brand

Socialresponsibility

of brand

Learn aboutcompanies behindbrands I purchase

Decide not topurchase a brand

because ofcompany’s conduct

Social media’sinfluence on my

purchasingdecisions

Number ofbrands I followon social media

76% 38% 35% 34% 22% 20%

Source: Nielsen CINA Survey Q1625 Compared to today, do you think each of the following will increase, decrease or remain the same in 2020? Summary Of Increase

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YM WILL BE MOST ENGAGED IN 2020Young millennials drive increases across attributes for corporate social responsibility, pre-purchase due diligence, and social media importance

Young millennials have highest perception of “increase” for all attributes

Source: Nielsen CINA Survey

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OVER HALF OF AMERICANS WILL SHOP ONLINE MORE93% of Americans currently shop online or expect to do so in 2020

• Young millennials lead all other age breaks with expectation that online shopping will increase (68%)

• Additionally, 64% of young millennials expect virtual reality will be part of their 2020 shopping experiences

Will shop online more – 51%

Won’t change habits – 37%

Will shop less online – 5%

Don’t shop online and don’t plan to – 7%

Source: Nielsen CINA Survey

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2020: TECH TITANSDisrupting Retail

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ECOMMERCE ROOTED IN START UP COMPETITORS

Source: Retail Market Power 2015

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NEW RETAIL COMPETITORS EMERGING

Source: Retail Market Power 2015

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APPLE’S FOCUS

KILL CABLE TV OWN RETAIL

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TECH WILL BECOME VITAL PLAYERS IN RETAIL

Owning retail and fully integrated marketing efforts, keeping people in their eco system

Marketing to consumers in a digital system.

Personalized retail experiences

Connecting people - F8 reintroduced instant messenger platform, future of connecting, a consumer and retailer connecting and ultimately commerce

Putting the consumer in control, making their lives more efficient, productive, etc

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UNCOVER STRATEGIES IN SHOPPING TRIPS

Stock-up Routine Fill-in Immediate

6% 12% 21% 61%

Currently retailers such as Amazon compete in the 40%, noted above, the goal is the 60% being missed, this is the game changer in the next 5 years and why Amazon Prime Air, Same day delivery will be common place.

Source: Nielsen consumer panel 2015

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2020: FOODThe Age Of Customization

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RE-IMAGINING MEAL TIMES

In the future, food will be prepared, delivered and consumed in ways, at times, and in places very different than they are today. Customization is producing goods and services to meet individual customer’s needs with near mass production efficiency.

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RE-IMAGINING MEAL TIMES

Source: Euromonitor International from national statistics; Euromonitor Ready Meals, Retail Value 2012; US Bureau of Labor Statistics May, 2014

Mealtimes Will be Under Pressure

Time Spent Preparing Meals Will Decline

Eating Habits Will Become More Flexible

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GIVES RISE TO NEW WAYS OF CONSUMING IN AN INCREASINGLY BUSY WORLD

Untapped Global Opportunity

Snack as meal replacement

Accessible

Portable

Nutritious

Flavorful

45%

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NEW COOKING YIELDS NEW OPPORTUNITIES

What we’ve seen What’s to come

• Microwave

• Keurig

• Nespresso

• Soda Stream

• Juicers

• Food Processors

• Induction

• Sous Vide/Immersion

• Solar

• Hot Vending

• In Car

• Foodservice

Source: International Flavors & Fragrances Inc. Nov 2014 study

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NEW AND NOVEL SNACK APPLICATIONS

Exotic Protein

ReinventingBreakfast

UniqueConvenience

InfantSnacking

Hot Vending

Source: International Flavors & Fragrances Inc. Nov 2014 study

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CONSUMERS PROACTIVELY ENGAGED IN TAKING CARE OF THEIR HEALTH

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AUGMENTED HEALTH

People's approach to life-long health will become

anticipatory and aspirational. Food and beverages will be expected to

go beyond general health claims and make commitments to helping people

achieve their near and long term goals.

Source: IFF study 2015

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AUGMENTED HEALTH IS ABOUT PREVENTION

Source: Euromonitor; Cisco VNI Service Adoption Forecast, 2013-2018 Cisco Systems, Inc.; United Nations, Pop Div, DESA, BCG Analysis

Profiling Tools Will Create Individualized Awareness

Radical Solutions Will Meet Aspirational Goals

Health & Wellness Market

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AND WE WILL TURN TO FOOD AS MEDICINE

INGREDIENT BENEFIT

Brain Function

UV Protection

Nail Breakage

Dry Skin Repair

Healthy Skin/Nails

Metabolic Stimulant

Skin Tone/Aging

Sleep/Relaxation

Citicoline

Fern Extract

Biotin

Idebenone

Gamma Linolenic Acid(Primrose/Blackberry)

CoQ10

Lycopene

Gamma Aminobutyric Acid (GABA)

Source: International Flavors & Fragrances Inc. Nov 2014 study

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LEVERAGING TOMORROW’S TRENDS, TODAY

Challenges Insights

Sector and channel forecasts in the next five years

Understanding the impact of tech titans on retail

Re-imagining food in 2020

• Food away from home sales are projected to grow 6%, while food at home sales are projected to grow 5%

• Beverages, Fresh, Coffee and Cereal are expected to increase at about the food at home average• Top channel for growth will be Online, followed by Specialty, Convenience, Club, and Dollar

• Nearly everyone will be online by 2020• Driverless cars will become the ultimate mobile device

• 56% of consumers believe technology will positively impact their lives in the next 5 years• As tech giants focus on closing the gap of immediate shopping trips new competitor will emerge

• Specialty food stores are expected to grow by 7%• News ways of preparing food is emerging creating new markets

• Food will increasingly be used to enhance health to slow aging, increase brain function and help sleep

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