Trends in the Marketing of Fresh Produce and Fresh-cut Products

Trends in the Marketing of Fresh Produce and Fresh-cut Products DR. ROBERTA COOK Dept. of Ag and Resource Economics University of California Davis September 24, 2009 New Trends in the US Food Industry In this recession all retailers have to take control of store operating expenses, only a few of which are variable. Labor, assortment and inventory are targets; in the past reducing assortment was not considered an option whereas today it is a major focus. SKU Rationalization (Rat) will also affect freshcut processors! Rat can decrease labor, inventory and hence capital costs required to operate stores. Source: Willard Bishop Competitive Edge, September 2009 1

Wal-Mart SKU Rat Approach Slash assortment levels 15-18% as part of new Win/Play/Show strategy. Win categories generate high growth, large, and credible with WM shoppers. WM will lead in assortment, prices, advertising and merchandising. Play categories have some but not all of the above attributes. E.g., could be large but not high growth, not destination categories. Show categories Direct opposite of Win. Lack growth, size/scale, and WM less credible to its shoppers in these categories. Assortment declining! Source: Willard Bishop Competitive Edge, September 2009 New Trends in the US Fresh Produce Industry Lifestyle stores and stores positioned to create greater excitement on the perimeter will continue to shrink center store space by 15-20% to make room for expanded theater. The economic slowdown should only slow but not eliminate this trend. Small Box formats in the 15-25,000 sq ft. range will continue to emerge as a format offering greater convenience Supercenters, limited assortment stores and club stores are taking a greater share of consumer expenditures. Consumers are focusing more on coupons, discounts and other promotional pricing. Source: Willard Bishop Competitive Edge, September 2009 2

Top Factors in US Consumer Selection of Their Primary Supermarket, % of Consumers Ranking as Very Important, 2009 Low prices* High-quality fruit/vegetables High-quality meat Clean, neat store Sales, money saving specials** Convenient location Great product variety Accurate shelf tags Use-before/sell-by date marked Courteous/friendly employees Store layout Fresh-Food Deli Private Label Nutrition/health info Recycle/sustaina. 26 31 44 64 65 65 6668 49 53 63 69 7275 15 19 *Was 64% in 2007 **Was 55% in 2007 Natural/organic Source: FMI Trends 2009 2008 USA Food Sales: $1,157.6 Billion Retail Sales Equivalent, and Channel Shares, Quantity and Value Dollar Sales $564.4 Billion Foodservice 48.8% Quantity Sold Foodservice 27.2% 51.2% Retail $593.2 Billion 72.8% Retail Source: PlanetRetail for dollar sales and dollar share, 2008; Technomic, Inc. for share of quantity sold, 2006. 3

U.S. Fresh Fruit and Vegetable* Value Chain, 2008 Estimated Billions of Dollars $10.1 imports institutional wholesalers produce and generalline wholesalers $48.4 food service establishments farms shippers integrated $21.2 $5.6 *Excludes nuts exports wholesaleretailers Source: Estimated by Dr. Roberta Cook, UC Davis, based on numerous public sources, incl. USDA, DOC, Progressive Grocer, and PMA. Preliminary estimate. Not for publication. $63.1 supermarkets and other retail outlets farm & public markets $1.7 $113.2 + consumers US Supermarket* Fresh Produce Sales, Quantity and Dollars, % Change 2008 vs 2007 Vegetables Fruit Total Produce Pounds 6.1 Dollars 3.9 5.1 -.9-1.8-1.3 Source: IRI *Excludes club stores and supercenters 4

CHANGE IN FRESH PRODUCE QUANTITY SOLD IN US SUPERMARKETS BY KEY PRODUCE CATEGORY, 2009* % Change vs. YAGO Product Volume/Store/Week Produce -3.0% Berries 12.7% Packaged Salad -5.6% Potatoes -.01% Apples -6.3% Tomatoes -3.5% Lettuce 1.2% Grapes -4.6% Citrus -10.8% Cook Veg -1.9% Source: Perishables Group FreshFacts powered by Nielsen; *52 week sales ending June 27, 2009. US Supermarket* Fresh-Cut Produce: Dollar Sales and Quantity,% Change from 2009* to 2008 % Change Sales % Change Quantity Fresh-Cut Fruit Packaged Salads +0.03 Fresh-Cut Vegetables 4.1 1.2 3.8 *Excludes club stores and supercenters 13.8 14.3 Source: Perishables Group FreshFacts powered by Nielsen; *52 weeks ending July 4, 2009. 5

Estimated Projected National Retail Fresh-Cut Produce Sales Are $5.3 Billion in 2009 vs. $5.4B in 2008; and 2009 Shares by Type Vegetables* 32.8% Fruit 9% Packaged salads 58.2% Sources: The Perishables Group and estimates by Dr. Roberta Cook US Supermarket* Bagged Salad Key Segments: $ Sales and Annual Growth Rates %, 2009* $Millions $1,000 $800 $600 $400 $200-2.4% 13.3% Number above bar represents % change vs. prior yr. -1.6% -5.8% -4.8% 8.6% 3.0% 5.5% $0 Blends Organics Source: Perishables Group FreshFacts powered by Nielsen; *52 weeks ending July 4, 2009. *Excludes club stores and supercenters Kits Garden Premium Garden Spinach Single Serve Bowl Coleslaw Total bagged salad sales $1.9 billion. 6

US CONSUMER LIKELIHOOD OF FRESH-CUT (BAGGED) SALAD PURCHASES, BY INCOME LEVEL, 2008 vs 2009* (% Purchasing) Income Level 2009 2008 <$25,000 65 57 $25-49,900 68 63 $50-99,900 77 76 $100,000+ 81 78 72% of consumers bought salad mix in 08/09 Source: Fresh Trends 2008 and 2009, Vance Publishing *2009 survey fielded Nov. 2008; 2008 survey fielded Aug. 2007 Average US Supermarket Sales Growth Rate for Total Fresh Produce, Packaged Salads, and Lettuce, 2007/2008* 6% 5% 7% 5% 6% 5% 1% 4% 3% 8% 6% 4% -3% -5% -4% National West South East Central Produce Salad Lettuce Source: Produce Merchandising, July 2008; *52 weeks ending Feb. 23, 2008. 7

Lbs. Per Capita U.S. Per Capita Utilization/Consumption of Lettuce, by Type, 1985-2008 F 40 35 30 25 20 15 10 5 0 1985 1987 1989 1991 Source: USDA/ERS, June 2008 Head Lettuce 1993 1995 1997 1999 2001 2003 Romaine All - 35.4 Leaf 2005 2007 6.8 8.5 20.1 2008F F=Forecast US SUPERMARKET BAGGED SALAD CATEGORY MARKET SHARES, BY KEY FIRM, (% of Total $ Sales) 2009 vs. 2008 and 2006 2009 2008 2006 Fresh Express 47 43 41 Dole 21 28 31 Private label 20 15 12 Ready Pac 5 5 8 Earthbound 4 5 6 Sources: IRI: *52 weeks ending Aug. 24, 2008; 52 weeks ending Oct. 8, 2006; Perishables Group, 52 weeks ending July 4, 2009. Note may not be directly comparable due to changes in sources and methodology. 8

U.S. Supermarket Bagged Salad Market Shares, Top 5 Firms and Private Label, Share of Dollar Sales Private label share 2.4% Other share 6.4% Private label share 19.6% Other share 3.6% Top 5 firms 91.2% Top 5 firms 76.9% 1994 2009 Sources: IRI for 1994; Perishables Group for 2009, 52 weeks ending July 4 Private Label Sales in Supermarkets, 2007: Top 10 Private Label Categories by Dollar Volume: Fresh Produce Becoming Important Milk Bread & Baked Goods Cheese Fresh Eggs Fresh Produce Paper Products Deli Dress., Salads, Prep'd Foods Pkg'd Meat Unprep'd Froz. Meats, Seafood Frozen Vegetables $1,900 $1,400 $1,300 $1,200 $1,100 $2,100 $2,000 $3,500 $3,100 $7,400 Millions Source: The Food Institute s Food Industry Review, 2008. 9

Branded Importance to US Consumers of Fresh-Cut Fruit Prefer store brand Prefer brand/ 4% will not pay more 13% Prefer brand/ will pay more 15% No Preference 68% Source: Fresh Summit 2007 Ripe for the Picking, Perishables Group, Oct. 2007. 74% of Fresh-Cut Veg Consumers Have No Preference 2009* US FRESH-CUT VEGETABLE CATEGORY MARKET SHARES, BY KEY FIRM, (% of Total $ Sales) and Change in $ Sales 2008/09* % Change in $ Sales Firm Share vs. YAGO Private label 45.3% 16.5% Mann s 5.9% -30.7% Eat Smart 4.5% -16.8% Fresh Express 3.1% 8.0% Greenline 3.1% -4.7% Dole 3.0% 2.2% Grimmway 2.3% -11.3% All other 33.0% -10.7% Source: Perishables Group *52 weeks ending July 4, 2009. 10

US FRESH-CUT VEGETABLE CATEGORY SHARES, BY KEY ITEM, (% of Total Supermarket Fresh-Cut Veg $ Sales), and GROWTH RATES, 2008/2009* Item Share, % $ Sales % Chg YAG Carrots 31.5-1.3% Meal Prep 28.5 1.8% Side Dish 24.5-0.4% Snacking 15.5-7.1% Total 100.0-1.2% Source: Perishables Group *52 weeks ending July 4, 2009. U.S. Per Capita Consumption of Selected Fresh Vegetables, 1985-2009 F Pounds per capita 25 20 15 10 5 0 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2008 Carrots Bell Peppers Broccoli Tomatoes Cucumber F=Forecast Source: USDA/ERS, Vegetables and Melons Situation and Outlook Yearbook, May 2009 11

U.S. Supermarket Fresh-Cut Vegetable Shares, Quantity and Dollar Sales, by Key Product Category 2009* Snacking 8% 23% Side Dish Meal Prep 30% Carrots 39% Snacking 16% Carrots Side Dish 32% 25% Meal Prep 29% Quantity Dollars Source: Perishables Group, *52 weeks ending July 4, 2009. Snacking quantity sold down 17% vs. YAGO. 2009* US FRESH-CUT FRUIT CATEGORY MARKET SHARES, BY KEY FIRM, (% of Total $ Sales) and Change in $ Sales 2008/09* % Change in $ Sales Firm Share vs. YAGO PRIVATE LABEL 25.2%.5% Del Monte 18.7% -8.9% Ready Pac 15.4% -24.7% Crunch Pak 7.0% -1.7% Garden Highway 7.0% 3.3% Chiquita 6.5% -53.1% All other 20.2% -9.0% Source: Perishables Group *52 weeks ending July 4, 2009. 12

US SUPERMARKET FRESH-CUT FRUIT CATEGORY SHARES, BY KEY ITEM, (% of Total Fresh-Cut Fruit $ Sales), and GROWTH RATES, 2008/2009* Item Share, % $ Sales % Chg YAG Melons 21.6-15.8% Fruit Mix 21.1-21.7% Apples 18.8-8.8% Trays 18.4-12.6% Pineapple 14.6-10.0% All Other 3.4 59.4% Mango 2.2-38.5% Total 100.0-13.8% Source: Perishables Group *52 weeks ending July 4, 2009. U.S. Supermarket Fresh-Cut Fruit and Vegetable Market Shares, Top 5 Firms and Private Label, Share of Dollar Sales, 2009* 25.2% 20.2% Other Private label Fruit Top 5 54.6% Top 5 Other 19.4% 35.3% Private Label 45.3% Veggies Source: Perishables Group *52 weeks ending July 4, 2009. 13

Marketing Imperatives Understanding consumer preferences for your product is becoming mandatory Your customer - the commercial buyer - is not the consumer and may not fully grasp consumer preferences for your product Your customer increasingly expects you to provide consumer insights to help them do a better job of right sizing for merchandising displays, pricing and promos by store format/location type Category management is evolving to category development, with retailers expecting best practices recommendations from suppliers Marketing Imperatives In short, buyers expect their suppliers to take service to a new level, it is not just about the product Differentiation is key, whether in products and/or services The back of the truck cannot be your customer! Marketing is the art of creating genuine customer/consumer value; for suppliers this includes being account-driven in your go-tomarket strategies 14

Marketing Imperatives Managing through and beyond the recession will take unprecedented speed, without effective use of information technology you won t be competitive Consolidation is still unfolding at the grower-shipper level in response to not only buyer consolidation but to buyer strategies to more closely align themselves with key, preferred suppliers Growers must carefully take this into account when selecting marketers who are their customers and how do they go to market? Changing US Culture of Food Natural Organic Fresh Local Locale Sustainable? What about safe? That used to be taken as a given for fresh produce. Source: Hartman Group, adapted and expanded by Roberta Cook 15

Eating Patterns According to the Hartman Group, over 90% of consumers believe that freshness is the key to health There is no longer any need to trade-off freshness for convenience and fresh-cut benefits Consumers seek a consistent flavor experience applied to relevant flavor trends, available in a convenient form explains the success of Trader Joe private label products, Muir Glen, Annie s, etc. Taste/quality matter more than ever after years of consumers seeking higher quality/taste experiences at the right price point, which depends not only on the consumer and the product but on the eating occasion. However, most consumers say they are not willing to pay a lot more for better tasting produce hard to cut thru the marketing clutter and people want it all. In general, how much extra would you be willing to pay for better-tasting fresh fruits and vegetables? 14% 5% 2% 10% 69% A lot extra A little extra Nothing Extra Combination Don't know Source: PMA Consumer Perceptions on Flavor and Taste, April 2007 16

Income and price matter: apple example The 2008 Fresh Trends illustrates that 94 percent of households with an income of $100,000 or more are likely to buy apples, versus 76 percent of households with less than $25,000. Apples remain the 2nd most purchased fruit in the USA, 2008, so it is logical that fresh-cut apples hold market potential. Apple dippers are one of the fresh-cut fruit products that can help mom s encourage healthy eating, both purchased at retail for in-home consumption, and via purchase in fast food restaurants. Yet quantity sales declined by 13% in 2009. Consumers Reporting Diet Could Be A Lot Healthier, by Household Type and Income, At vs. Away From Home, 2009 Food At Home Away Household Type Children 16% 46% No children 11 49 Income Level $35-49.9K 11% 19% Over $100K 12 23 Source: U.S. Grocery Shopper Trends 2009, FMI, 2009. 17

Annual Growth Rate in US Sales of Organic Foods, 1998-2008 25.0% 20.0% 19.3% 15.0% 10.0% 13.4% 5.0% 0.0% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: Nutrition Business Journal and USDA/ERS Organic s Share of US Food Sales, 1997-2008 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 0.8% Source: Nutrition Business Journal and USDA/ERS 3.4% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 18

Estimated US Sales of Organic Foods, 2000-2010, by Key Product Category Hartman Organizes the World of US Organic Consumers, of the 69% that are users, 2008 Core Mid-Level Periphery 21% 65% 14% Consumption of organic foods and beverages Importance of organic vs. nonorganic when shopping for produce Knowledge and concern about how food affects health and the environment Source: Organics 2008 Report, Hartman Group Periphery Authenticity Social Responsibility Environmental Impact Local Knowledge Experience Expert Opinion Personal Benefits Price Convenience Mid-Level Core 19

Dimensions of Consumption: Hartman Organizes the World of Organics Core organic consumers are 14% of all US consumers (and they are opinion leaders) 45% of US consumers are Mid-Level organic users and 10% of US consumers are Periphery organic users Source: Organics 2008 Survey, The Hartman Group Properties Suggested by Organic (Increasingly Defined as the Absence of) Absence of pesticides No artificial flavors/colors/ preservatives Absence of herbicides Absence of growth hormones Absence of antibiotics Absence of genetically modified foods Safer for one's health Environment-friendly Better for one's health Absence of food irradiation Fresh Absence of Mad Cow Disease (BSE) Higher nutritional content Premium product Better taste Better treatment of farm animals Locally grown Family (small-scale) farms Sustainable production Source: Hartman Group, 2008 34% 31% 27% 27% 24% 22% 17% 83% 78% 78% 75% 69% 67% 64% 63% 58% 57% 48% 45% Absence of growth hormones increased from 67% in 2005 to 75% in 2008. Absence of antibiotics increased from 49% in 2005 to 69% in 2008. 20

When selecting foods and beverages to purchase, how important are the following labels or phrases to you? Fresh Pesticide-free Hormone-free Natural Certified humane Origin of Locally grown Sustainable USDA Organic Fair trade Seasonal Free range Organic Grass-fed Heirloom 5% 35% 32% 31% 28% 23% 21% 19% 18% 17% 16% 15% 14% 48% 76% Top 2 Box based on 7-point scale ranging from Not at all important (=1) to Extremely important (=7). All respondents (n=2,161) Source: Organics 2008 Report, Hartman Group Organic Users: Reasons for Not Using More Organics Too expensive Can't tell if really organic Only recently began purchasing organic foods/beverages Not readily available Don't really believe they're more nutritious Don't really believe they're safer Can't find brand(s) we like Don't want to change from products we're used to Don't stay fresh as long as nonorganics Often do not look appealing Requirements for organic certification are increasingly weakening 23% 20% 20% 11% 8% 7% 7% 6% 6% 6% Limited organic buyers (Primary HH shoppers who have purchased organic, but fewer than 4 product categories, in past 3 months) (n=537) 69% Source: Organics 2008 Report, Hartman Group 21

When selecting foods and beverages to purchase, how important are the following labels or phrases to you? Fresh Pesticide-free Hormone-free Natural Certified humane Origin of Locally grown Sustainable USDA Organic Fair trade Seasonal Free range Organic Grass-fed Heirloom 5% 35% 32% 31% 28% 23% 21% 19% 18% 17% 16% 15% 14% 48% 76% Top 2 Box based on 7-point scale ranging from Not at all important (=1) to Extremely important (=7). All respondents (n=2,161) Source: Organics 2008 Report, Hartman Group Primary reasons given by US consumers for purchasing locally grown fresh produce, spring 2009 Freshness 21% Support local farmers/local economy 14% Best price 12% Convenience/availability 12% Best quality 9% Grown locally 8% Best taste 7% Health reasons/food safety 5% Trust local farmers/good reputation 4% Other 7% Source: Consumer Trends in the Produce Category (Spring 2009) PMA and The Hartman Group 1. How far is local? Most consumers say in-state. 2. 50% of fresh produce grown in Ca. 3. Higher and more diverse fruit and veggie consumption (eating healthier) in last 2 decades was based on long distance shipping, due to seasonal production constraints. 22

Consumer Attitudes About Local, Organic and/or Sustainable Fresh Produce, Spring 2009 If asked to choose, consumers overwhelmingly (75%) prefer local over organic produce. Almost half (48%) of consumers consider it important to purchase local fresh produce when available. While 65% of consumers say their produce purchases are influenced by sustainability concerns at least sometimes, only 17% say it s usually and 6% say always. 82% of consumers say they buy locally grown due to freshness, 75% for support of the local economy, 58% due to taste (FMI Grocery Shopper Trends 2009). Source: Consumer Trends in the Produce Category (Spring 2009) PMA and The Hartman Group Leading US Fresh Market Vegetable States in 2008: Geographic concentration of production (due to climate) limits local sourcing potential, yet it is growing in the summer/fall Area Harvested Production Value State % of Total State % of Total State % of Total CA 44 CA 49 CA 50 FL 11 FL 10 FL 15 AZ 7 AZ 7 AZ 7 GA 6 GA 5 GA 4 NY 4 NY 4 NY 4 Source: NASS/USDA, Vegetables 2008 Summary, January 2009 23

The Consumer World of Sustainability Core 13% 12 88% Inside the World of Sustainability Outside the World of Sustainability Mid- Level 66% Periphery 21% Source: The Hartman Group Sustainability 2008 Survey, Sept. 2008 (n=1,856) Sustainability Trend from the Consumer Vantage Point Hartman Research Results Most consumers have very limited understanding or usage of the concept of sustainability In general, food terms as used by the food industry are not understood: functional foods, IPM, food miles Sustainability is becoming an umbrella term for health, wellness, organics, environmental consciousness, fair trade, simple living, buying local, etc. Personal sustainability linked to environmental sustainability for some 24

Entry point to the world of organics has been personal benefit and key product gateways are fresh produce and milk Organic sales are still growing, albeit at a lower level than pre-recession In times of economic hardship, sustainable products are a way to express personal values Implications: natural/green products are considered to be good for me AND good for the environment Right now with regard to fresh produce, many consumers are sticking to staples and reducing freshcut and organic purchases to save money, and some are planting gardens, while core users are remaining loyal Source: Adapted from Harvey Hartman In the past 12 months, have you stopped purchasing any food product because of safety concerns? Percent Yes 2005 2006 2007 2008 2009 All Shoppers 11% 9% 38% 26% 31% Source: FMI US Grocery Shopper Trends 2009 25

2009: What food products did you stop purchasing in response to food safety concerns Percent Yes 2006 2007 2008 2009 Peanut Products NA NA NA 74 Beef / Poultry 64 15 20 7 Seafood 5 2 2 1 Fruit / Veg Net 8 84 34 32 Spinach NA 74 25 14 Lettuce NA 16 6 5 Bagged Salad NA 9 6 2 Peppers NA NA NA 2 Tomatoes NA NA NA 16 Source: FMI US Grocery Shopper Trends 2009 NA= Not available How confident are you that the food in your supermarket is safe? 90% 60% 83% Completely or somewhat confident 30% 0% '96 '96 '98 '98 '00 '00 '03 '03 '05 '05 '07 '07 Source: FMI US Grocery Shopper Trends, various years, including 2009 '09 '09 26

Which food-related items constitute a serious health risk to US shoppers?, 2009 Bacteria or germs 53% BSE (Mad Cow Disease) 47% Product tampering 45% Avian Influenza 39% Terrorist tampering 41% Residues from pesticides 43% Antibiotics/hormones in livestock 36% Food handling in supermarkets 22% Foods produced by biotechnology 25% Irradiated foods 22% Declining since 1992 Source: FMI US Grocery Shopper Trends 2009 and other issues Conclusions: The supply chain is becoming more market- and consumer-oriented as intense competition forces innovation and differentiation Quality is being redefined, consumers are becoming more sophisticated and while more are focusing on health it is NOT at the expense of pleasure or increasingly price; consumers focus on the important items, where quality matters more to them, and trade down in others Healthy-eating, organic and local are increasingly more secondary experiential attributes when feeding a family, but still matter for consumers pursuing authentic quality eating experiences Locale may trump local, if it is premium and has a story, e.g., Frog Hollow Farm summer fruits, Hood River pears; not yet fully exploited by produce Health and wellness evolving to quality experiences and living the good life mind, body, spirit this will grow again after the recession In the meantime, fundamental changes are occurring to improve supply chain efficiency, with information technology leading the way 27

Conclusions For firms at all levels of the fresh produce supply chain this means taking management practices to a higher level Better information technology is a necessary but not sufficient condition for meeting today s and future standards for efficiency and performance Companies must develop cultures of continuous improvement and innovation in order to fully exploit the potential benefits of information technology Understanding consumer segments as they relate to preferences for a product/retail format is vital The fresh produce value chain is becoming more vertically coordinated, enabling buyers and sellers to more closely align their incentives and rewards, and supply and demand Taste... appearance... price... feeling... lifestyle... Wellness! 28

Supplemental Information US PER CAPITA VEGETABLE CONSUMPTION, POUNDS, 1976-2009 F Pounds per capita 450 400 350 300 250 200 150 100 50 0 359 119 76 49 115 150 422 127 37 175 1976 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009F Processed Vegetables (Excl. potatoes) Processed Potatoes Fresh Potatoes Fresh Vegetables Source: USDA/ERS, Vegetables and Melons Situation and Outlook Yearbook, June 2009 83 29

Pounds per capita US PER CAPITA FRUIT CONSUMPTION, POUNDS 1976-2007 300 250 200 150 100 50 255 78 93 30 55 267 102 0 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 Source: USDA/ERS, Oct. 2008; may not sum to 100 due to rounding; excludes nuts. 69 21 77 Process Noncitrus Process Citrus Fresh Citrus Fresh Noncitrus Sources of Takeout* Food in the U.S. in 2009 Pizza & Chinese 30% Fast Food 25% Supermarket 15% Full-Service Restaurant Gourmet or Specialty Store Convenience Store 1% 1% 6% Vs 2008: Fast food stable, Pizza/Chinese down 8 pts, full-service restaurants down 4 pts. Source: U.S. Grocery Shopper Trends 2009, FMI, 2009 30

Total US Food Service $513.186 Billion, Forecast, July 2007, share of dollar sales Bars & Restaurants B$328.982 B Limited Service 52% 47% Other B$184.204 Travel, Bus. & Ind. Leisure Educ. 21% 12% 14% 23% 11% 19% 1% Bars, Taverns Full Service Retail Hosts Remainder Source: Industry Size July 2007, Technomic Inc. Healthcare Sales and Store Numbers in Major US Grocery Channels, by Key Format, 2007, Excluding: Membership Clubs, C-Stores, Grocery Stores with Sales <$2M/Yr., and Dollar Stores Format # of % of Sales, % of Stores Total Stores Million $ Total Sales Total 34,256 100.0% $568,839 100.0% Supermarkets* 27,485 80.2% $405,892 71.4% Supercenters** 2,957 8.6% $135,956 23.9% Combined ltd assort and fresh/natural 3,814 11.1% $26,991 4.7% formats *Conventional supermarkets and super warehouse formats. **Sales of supermarket-type items only (food and non-food grocery). Source: Calculated by Roberta Cook based on data in The Future of Food Retailing, Willard Bishop, June 2008. 31

US Shoppers Eating Habits - 2008 3+ 1-2 1-3 < than times times times once a Percent of Shoppers weekly weekly mo ly month Eat home-cooked 82 11 3 2 meals at home Dine out at full-service 3 18 39 37 restaurants Eat meals at home 5 15 36 37 that aren t prep d at home - takeout/delivery Eat out at fast-food rest. s 3 15 36 36 Ethnic meals at home or out 5 16 36 30 Source: FMI US Grocery Shopper Trends 2008 What task related to managing food portions do you find most difficult to do? Eating only at mealtimes (no snacking) Avoiding restaurant portion sizes that encourage overeating Limiting eating to particular times of day Finding preportioned single-serve multipacks that don t cost too much Avoiding snacks offered at work 56% 52% 51% 44% 44% Source: Portion Control: Minimize Me, Please! The Hartman Group, 2007. 32

Consumers Reporting Diet Could Be A Lot Healthier, by Household Type and Income, At vs. Away From Home, 2008 Food At Home Away Household Type Children 13% 33% No children 11 26 Income Level $35-49.9K 12% 31% Over $100K 6 21 Source: U.S. Grocery Shopper Trends 2008, FMI, 2008. 33