Applying Performance and Consumer Insights for Success in Fresh Category Management

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1 Applying Performance and Consumer Insights for Success in Fresh Category Management Presented by Bruce Axtman

2 Today s Agenda Perishables Group Background and Approach Total Perishables Overview Impact of Pricing and Promotional Changes Department-Specific Hot Topics 2

3 Applying Performance and Consumer Insights for Success in Fresh Category Management PERISHABLES GROUP BACKGROUND 3

4 Consumer and Trade Research Advanced Analytics Marketing Communications Data Services Greatest Breadth of Capabilities Internet surveys In-store shopper intercepts Focus groups Trade surveys Merchandising audits Consumer decision tree Perishables Group advisory board FreshFacts Shopper Insights Activity-based costing modeling Price elasticity modeling Category best practice development Spectra perishables consumer profiles Price and promotion modeling Market basket analysis Retail audits Branding strategy Product photography Retail toolkit design Recipe development Point-of-sale materials Social media Trade show coordination Media relations Produce, meat, seafood, deli and bakery Fixed- and randomweight POS data Item- and storelevel weekly data FreshFacts Online data analysis tool 5 years of historical data and forecasting Custom hierarchies Category integration platform and template wizard Retail partner programs The Perishables Group combines our capabilities to create a customized program to meet each client s unique business objectives 4

5 Category Leadership Approach In the modern approach to category development, it is critical to start with consumer understanding, then integrate performance benchmarking and other category insights to create a unique category strategy Performance Consumer Category Strategy Application 5

6 Applying Performance and Consumer Insights for Success in Fresh Category Management TOTAL PERISHABLES OVERVIEW 6

7 Fresh Foods Gaining Share of Store Sales Performance Comparison Dollar and Volume Growth vs. Year Ago Latest 52 Weeks Ending 8/27/11, Total U.S. Meat V -1.6% -3.2% $ 5.7% 2.7% Produce V -0.2% 0.9% $ 4.5% 3.9% Deli V 4.3% 4.6% $ 6.4% 5.5% Bakery V 1.5% 0.8% $ 3.6% 1.9% Seafood V -5.9% -5.3% $ -0.1% -2.0% Source: Perishables Group FreshFacts Powered by Nielsen 7

8 Different Needs Drive Fresh Department Trips Infrequent Department Need Lower trips, multiple department items per trip 45% trips with multiple Frequent Department Need Higher trips, multiple department items per trip Produce Deli 15 trips per year; 28% of baskets contain multiple dept items Meat 25 trips per year; 30% of baskets contain multiple dept items 31 trips per year; 43% of baskets contain multiple dept items Occasional Product Need Low frequency, typically one item per trip Average number of trips per year 5 trips annually 45 trips annually Seafood 6 trips per year; 10% of baskets contain multiple dept items Bakery 12 trips per year; 12% of baskets contain multiple dept items Source: Perishables Group FreshFacts Shopper Insights powered by Spire, 52 weeks ending 6/25/11 8 % of trips with more than one dept item 5% of trips with multiple dept items Fresh Departments Wide Reach: All fresh departments have more than 90% household penetration, except Seafood Frequent Product Need Higher trips, typically one item per trip

9 Applying Performance and Consumer Insights for Success in Fresh Category Management IMPACT OF PRICING AND PROMOTIONAL CHANGES 9

10 Average Retail Price 2011 Shaping up to Look Like 2008 Average Retail Price - Total Perishables Economic Growth Recession Post-Recession $3.00 $4.50 $2.80 $2.60 $2.40 $ and 2011 prices rose at a similar incline the first half of the year $3.50 $2.50 Average National Gas Price $2.00 $1.80 Gas prices plummet; retail prices fairly steady YTD 2011 Total Perishables Spike in gas prices correspond with rising retail prices Gas Prices $1.50 Source: Perishables Group FreshFacts Powered by Nielsen; U.S. Department of Labor Statistics 10

11 52-Week Price Shifts 21.0% Total U.S. Perishables Department Average Retail Price Change, 52 Weeks Ending 8/27/ % 11.0% 6.0% 2.1% 2.4% 2.2% 8.2% 7.4% 5.6% 6.1% 5.9% 5.6% 2.1% 2.0% 2.1% 4.7% 7.7% 3.1% 1.0% -4.0% Bakery Meat Seafood Deli Produce Average Retail % Change vs YAGO Promotional Average Retail % Change vs YAGO Non-Promo Average Retail % Change vs YAGO Source: Perishables Group FreshFacts Powered by Nielsen 11

12 Most Recent Four Weeks Sticker Shock 21.0% Total U.S. Perishables Department Average Retail Price Change, 4 Weeks Ending 8/27/ % 16.0% 11.0% 6.0% 1.0% 3.5% 8.3% 3.1% 6.6% 6.3% 5.1% 8.9% 8.3% 7.1% 3.5% 1.5% 3.9% 10.4% 6.1% -4.0% Bakery Meat Seafood Deli Produce Average Retail % Change vs YAGO Promotional Average Retail % Change vs YAGO Non-Promo Average Retail % Change vs YAGO Source: Perishables Group FreshFacts Powered by Nielsen 12

13 Less Aggressive Promotion, More EDLP 13

14 Focus Shifts from Shelf to Shopper Following two years of focusing on promotions, 46% of retailers plan to shift their attention to better understanding consumer buying patterns and improving margins 1 Circular ad counts 2 Volume sold on promo 3 Promo lift 3 Source: Global Retail CIO Survey from Aldata; 2. Perishables Group, Market Track Promotional Reporting; 3. Perishables Group FreshFacts Powered by Nielsen 14

15 Applying Performance and Consumer Insights for Success in Fresh Category Management CONSUMERS SEEK CONVENIENCE AND HEALTH 15

16 Consumers Willing to Pay for Convenience Value-added foods experiencing growth, following sales declines during the economic downturn HH Penetration 1 Trips per Buyer 1 Average Basket 1 Dollar Growth since Prepared Fruit Prepared Vegetables Value- Added Beef +0.2% +4.8% $ % +0.8% $ % +5.7% $ % +22.6% +33.1% Source: 1. Perishables Group FreshFacts Shopper Insights Powered by Spire 52 weeks ending 6/25/11; 2. Perishables Group FreshFacts Powered by Nielsen, ( ) 16

17 . Organic and Natural Shoppers Justify Higher Prices Dollar % Change vs. Average Price Department Type Year Ago Retail Premium Bakery Conventional 3.7% $ 2.53 Natural 0.8% $ % Organic 7.9% $ % Deli Conventional 6.0% $ 4.90 Natural 9.9% $ % Organic 7.0% $ % Meat Conventional 5.6% $ 2.90 Natural 6.4% $ % Organic 18.4% $ % Produce Conventional 4.0% $ 1.34 Natural 8.3% $ % Organic 11.2% $ % Seafood Conventional -0.1% $ 6.59 Natural -1.7% $ % Organic -2.1% $ % Source: 1. Perishable News; 2. Perishables Group Consumer Research Project 2011; NMCH Research 17

18 Health and Wellness: Store Layout, Product Assortment and Consumer Messaging Source: Company websites 18

19 Applying Performance and Consumer Insights for Success in Fresh Category Management HOT TOPICS BY DEPARTMENT 19

20 Produce Department Trends Convenience Assortment Health 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% Produce 52-Week Value Added Produce Growth 13.7% 10.5% 7.2% 7.3% 7.4% 6.5% 6.3% 0.6% -1.2% Dollars % Change vs YAGO Volume % Change vs YAGO Source: Perishables Group FreshFacts Powered by Nielsen, 52 weeks ending 8/27/

21 Produce Department Trends Produce Convenience Assortment Health Fruit SKUs +38% since 2006 Veg SKUs +33% since 2006 Source: Perishables Group FreshFacts Powered by Nielsen 21

22 Produce Department Trends Produce Convenience Assortment Health Source: Perishables Group FreshFacts Powered by Nielsen 22

23 2010 Contribu to Total Perish Deli Department Trends Deli 8% 17% Convenience Consumers are looking for quick-prep and ready-to-eat options to fit their time-strapped lives Assortment Health Deli entrees +6.3% Deli dips: +11.4% Deli prepared chicken: +5.2% Source: Perishables Group FreshFacts Powered by Nielsen, 52 weeks ending 8/27/

24 2010 Contribu to Total Perish Deli Department Trends Deli 8% 17% Convenience Assortment Health From 2005 to 2010, available deli cheese flavors increased 56.8% In 2010, 26% of items with impression growth were exotic or bold flavors Source: Perishables Group FreshFacts Powered by Nielsen 24

25 2010 Contribu to Total Perish Deli Department Trends Deli 8% 17% New dietary guidelines and product labeling are keeping health top of mind in the deli Convenience Assortment Health Nationally, low-sodium SKU count increased 20.7% in 2011 for deli meat Sushi increased dollar sales 14% while deli salads Increased 4.9% Source: Perishables Group FreshFacts Powered by Nielsen, 52 weeks ending 8/27/

26 Bakery Department Trends Bakery Making the case for kids Convenience Assortment Health Multiple retailers are adding a kidfocused area with everyday products Child-oriented cake sales up 15% Sources: Perishables Group FreshFacts powered by Nielsen 26

27 Bakery Department Trends Bakery Third-party and store-brands co-exist in almost half of in-store bakeries today 1 Convenience Assortment Health Bakers Square Pie Sales up 50% over 5 years 1 Branded Breads/Rolls Sales: +8.4% in Sources: 1- Perishables Group FreshFacts powered by Nielsen ; latest 52 weeks ending 8/27/11; 2- Time; 3- Spectra 27

28 Bakery Department Trends Bakery Convenience Assortment In-store bakery trends keeping up with center-store and foodservice when it comes to size options Center Store Trend: Limited Calorie/Carb Food Service Trend: Portion-control indulgence ISB Bulk Case: built-in consumer portion control Health Mini Muffins Household Penetration on the Rise Cupcake Sales: Cake Slice Sales up 65% since $320 million (+74% since 2005) Sources: Perishables Group FreshFacts powered by Nielsen; 2. Perishables Group FreshFacts Shopper Insights powered by Spire 28

29 Meat Department Trends Consumers demanding more value added meats, despite higher prices Meat Convenience Assortment Health Value added chicken, beef, and pork impressions increased 107% compared to a year ago Fastest growing flavors of fully cooked and value added beef, chicken and pork items include: Southwestern Stuffed Bacon Wrapped Cheddar Stuffed Sources: 1- Perishables Group FreshFacts powered by Nielsen 29

30 Seafood Department Trends Convenience Consumers purchase seafood 5.7 times a year Number of seafood purchase occasions per buyer declined 0.5% Assortment Prepared Mussels +34% Prepared Lobster +22.4% Health Prepared Octopus +20.5% Prepared Crab +12.4% Source: Perishables Group FreshFacts powered by Nielsen; Perishables Group FreshFacts Shopper Insights powered by Spire 30

31 Consumers Drive Fresh Department Trends Consumers Tired of Pinching Pennies Health Claims Justify Higher Price Points New Flavor Profiles Emerge Consumers Shop Pack Size to Fit Household s Needs Consumers Willing to Spend More for Convenience Driving Trends 31

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33 Applying Performance and Consumer Insights for Success in Fresh Category Management APPENDIX: DATA BACKGROUND 33

34 FreshFacts Point-of Sale Data Overview Data includes retail census sales data for grocery store chains in the total U.S., with more than $2 million annual ACV* sales per store Approximately 63% ACV and 13,000 stores nationwide Data by week, by store, by item Data is for all products sold in the fresh departments: Food Channel ** Other 37% Grocery 63% UPC PLU System 2 Not included: Mass/Club *All commodity volume; **Logos include but are not limited to all inclusive retailers 34