ORGANIC AFFORDABILITY & ACCESSIBILITY Thursday, September 14, 2017 4:00-5:00 p.m. SPEAKERS Maxine Wolf, Publisher, KIWI Magazine / Mom s Meet Andrew Mandzy, Director of Strategic Insights, Nielsen Patrick Knight, Director of Consumer Insights, SPINS MODERATOR John Grubb, Managing Partner, The Sterling Rice Group @OrganicTrade #ExpoEast #Organic
AFFORDABILITY / ACCESSIBILITY INCREASING EVERYONE S ACCESS TO ORGANIC EXPO EAST SEPTEMBER 14, 2017 JOHN GRUBB MANAGING PARTNER JGRUBB@SRG.COM 1
WE GROW BRANDS for some of the most sophisticated, as well as entrepreneurial, brands in the world. Boulder-based. 34 years old. 120 people. 2
GROWTH in once fringe segments now 4X conventional. 3
Organic at Retail 1970 1980 1990 2000 2010 2017 Banner Game Changers Brands 4
ACCESS AND MOTIVATION Buying organic is often life-stage or event driven Nearly $50 Billion in total sales 75% of categories 82% of households 5
AFFORDABILITY BARRIER Price is most often mentioned purchase barrier $2.43 $3.87 + 60% Source: USDA ERS 6
SUPPLY CHALLENGES Transition Costs and Demand Uncertainty Building Fertility Managing Pests Knowledge Gaps Peer Pressure 7
FUNDAMENTAL DEMAND SHIFTS Damaged brand equity and enterprise valuation have stimulated commitments to change. Shorter ingredient lists, natural colors, whole grain, ABF free, Non-GMO, B Corp, other steps on the path to organic! 8
Private food and beverage challenger brands: $5.9B in investment capital in 1,300 deals disrupting categories across the store in past 5 years Source: CB Insights 9
ACCESS: Non-brick-and Mortar Food Choices Farmers Markets Grocery Delivery $52M $189M 3 rd Party $400M $50M Meal Kits & Solutions Hot meals $135M $211M $120M 10
ACCESSIBILTY This changes everything! + 11
MARKET VALUATION $485B: 2016 SALES $136B: 2016 2,300,000 EMPLOYEES 340,000 $21B PROFIT $3.7B 1% Growth SALES 27.1% Growth $227M TOTAL VALUE $468B 12
INCUMBENT CHALLENGES It is not the strongest of the species that survive nor the most intelligent species. It is the one that is most adaptable to change Attributed to Charles Darwin 13
The Mom Market: A Compilation of Consumer Data on Organic Affordability and Accessibility Maxine Wolf, CEO May Media Group, LLC Affordability / Accessibility: Increasing Everyone s Access to Organic September 14, 2017 momsmeet.com, 2017 May Media Group, LLC, All rights reserved.
Overview of Moms Meet & Methodology Online community of over 132,000 health-minded moms Influencers and change agents in their communities and on social media Raising awareness and trial of over 400 better-for-you products and brands since 2010 Group Sampling Programs o o 65,000 Mom Ambassadors, trained to educate group members and record group consensus on surveys 1.3MM opinions (~ 20 members per group) o Awareness + Education + Trial + Community = Purchase momsmeet.com, 2017 May Media Group, LLC, All rights reserved. 2
Organic sampling Data: groupprograms: sampling summary programs Data from over 100 organic product sampling programs from 2011 2016 Sampling groups represent ~ 760,000 individual moms Product categories: o o o o o o o o o Dairy/dairy alternatives Soup, sides, meals Beverages Snacks Produce Eggs Sweeteners Personal care Store brands momsmeet.com, 2017 May Media Group, LLC, All rights reserved. 16% Products targeted to babies/toddlers/kids 3
Top purchase drivers Q: Please indicate how important each of the following attributes are to you and most of your group members when you are considering buying [product category]. (Very important, Somewhat important, Not very important, Not at all important) 92% 93% Taste 81% 83% Available where I shop 74% 72% Brand I can trust Price Organic Organic products All products 63% 65% 55% Source: Moms Meet MA group sampling programs of organic and other food products, 2016 N= 51 programs, 35K groups, 700K opinions momsmeet.com, 2017 May Media Group, LLC, All rights reserved. 4
Organic sampling programs: recommendations Purchase influenced by recommendations On average, higher than purchase intent Less affected by purchase barriers than purchase intent Each group member recommends to about 16 friends 95% 28% Probably would Definitely would 67% Likely to recommend 92% 39% 53% Likely to purchase Source: Moms Meet MA organic product group sampling programs 2010-2016 momsmeet.com, 2017 May Media Group, LLC, All rights reserved. 5
Organic sampling programs: purchase barriers Top purchase barriers Q: Which of the following best describes why any of your group members might not or would not purchase [product]? Price 43% 36% Availability Happy with current Product (taste/texture) 15% 6% Source: % of groups indicating they Probably would purchase, Probably would not purchase, or Definitely would not purchase the product being sampled. Moms Meet MA organic product group sampling programs 2010-2016 momsmeet.com, 2017 May Media Group, LLC, All rights reserved. 6
Purchase intent : Price relationship 95% Purchase intent (Top2Box) 73% Purchase barrier (% Price) 90% 88% 30% 24% Eggs (one dozen) Bread (one loaf) Milk (half-gallon) Store brand (average): $1.95 $1.28 $2.09 Organic brand SRP: $5.99 $5.50 $4.49 Source: Moms Meet MA organic product group sampling programs, 2016 momsmeet.com, 2017 May Media Group, LLC, All rights reserved. 7
Moms shop an average of 2.2 times per week Q:. How many times per week do you generally shop for groceries? Average = 2.2 times per week 35% 22% 20% 8% <1 8% 1 2 3 4 5% 5 2% 6 70% shop 2 or more times per week Source: Moms Meet MA Grocery Shopping Habits Survey, July 2016 momsmeet.com, 2017 May Media Group, LLC, All rights reserved. 8
When shopping for groceries, ~ 90% of moms go to 2 or more stores to get all desired items Q: When you shop for groceries, how many stores do you generally shop at in order to get all of the items you need? Average = 2.5 stores 44% 31% 12% 9% 3% 1 2 3 4 5 1% 6 88% go to 2 or more stores per shopping trip Source: Moms Meet MA Grocery Shopping Habits Survey, July 2016 momsmeet.com, 2017 May Media Group, LLC, All rights reserved. 9
Price, Availability, Store location and Specialty departments are reasons for multiple trips Q: For each of the following statements, please indicate how likely they are to be the reason why you might shop at more than one store. (Very likely, Somewhat likely, Not very likely, Not at all likely) Availability Price "Very likely" The product I want is on sale at another store 58% The product I want has a lower everyday price at another store 57% The brand or product I want is not available at the same store where I am 55% I have a store-specific coupon They are out of stock I need something last-minute and the store is conveniently located I prefer another store's specialty department (Produce, Bakery, Meat, etc.) 50% 34% 57% 50% Source: Moms Meet MA Grocery Shopping Habits Survey, July 2016 momsmeet.com, 2017 May Media Group, LLC, All rights reserved. 10
Concluding remarks Purchase drivers: Price is important, but not the most important. Attributes such as taste, organic, availability, and brand trust matter, too. Purchase barriers: Price and availability are the top barriers to purchase, and the main reasons why moms shop multiple times a week at multiple retailers per trip. Purchase = Awareness, education, trial, community Drive purchase by educating moms about new products, give them an easy way to try new products and grow brand trust, and leverage their natural desire to share their experiences, opinions, and recommendations. momsmeet.com, 2017 May Media Group, LLC, All rights reserved. 11
Copyright 2017 The Nielsen Company. Confidential and proprietary. ACCESSIBILITY OF ORGANICS THE BLURRING OF CHANNEL LINES IN DELIVERING ORGANIC PRODUCTS ANDREW MANDZY, DIRECTOR OF H&W STRATEGIC INSIGHTS, NIELSEN Copyright 2017 The Nielsen Company. Confidential and proprietary. 1
MORE CONSUMERS ARE FOCUSED ON SUSTAINABILITY COMPOSITION OF SEGMENTS TRENDED 2006-2016 22% 23% Copyright 2017 The Nielsen Company. Confidential and proprietary. Source : NMI 2017 State of Su stain ab ility in Am e rica 16% Lifestyle of Health & Sustainability 16% Conventionals 2
CLEANER, SUSTAINABLE PRODUCTS ARE GAINING SHARE Levels of Clean Label and Food & Beverage Sales Growth vs YA Copyright 2017 The Nielsen Company. Confidential and proprietary. 44% say they trust industrially prepared foods Nielsen Product Insider, powered by Label Insight, 52 weeks ending 04/29/2017 3
SUSTAINABILITY MEANS DIFFERENT THINGS Sustainability in Food And Beverage Products - Growth VS Year Ago Packaging Material Sustainable Fishing Animal Welfare Production Methods Business Practices Sustainable Farming Copyright 2017 The Nielsen Company. Confidential and proprietary. 2.5% 3.2% 3.9% 4.2% 10.8% 11.4% 4
ORGANIC IS GROWING ACROSS THE STORE ORGANIC CLAIM $ GROWTH BY DEPARTMENT VS YA Copyright 2017 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. 29% of U.S. Respondents said that organic claims are important Source: Nielsen 2017 Health Care Homescan Survey Source: Nielsen Answers On Demand, 52 Weeks Ended 8/26/2017 Source: Nielsen FreshFacts, 52 Weeks Ended 7/29/2017 10% 10% 31% 6% 13% 6% Organic claim sales up +9.8% vs YAG 5
ORGANICS ARE MORE ACCESSIBLE THAN EVER ORGANIC SPEND DISTRIBUTION BY OUTLET AND SHIFT VS 2YA Copyright 2017 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. CONVENTIONAL GROCERY WAREHOUSE CLUB SHIFT vs 2YA +0.6pts +0.8pts -3.4pts +1.2pts +0.8pts Source: Nielsen Answers On-Demand Syndicated Panel, 52 weeks ending 07/29/2017 *UPC Coded PREMIER GROCERY SUPERMARKET VALUE MASS GROCERY 21% 27% 26% 18% 7% 6
BUT WHERE CONSUMERS THINK ABOUT ORGANIC CAN DIFFER % OF U.S. SHOPPERS THAT SAID ORGANIC WAS IMPORTANT WHEN PURCHASING THIS CATEGORY Copyright 2017 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. BABY FOOD YOGURT EGGS VITAMINS 40% 15% 14% 12% 9% Source: Nielsen 2017 Category Shopper Fundamentals Survey PASTA SAUCE MILK 8% LOTION 6% ICE CREAM 4% 7
ORGANICS COST MORE, AND MAY IMPACT CONSUMER DECISION MAKING PRICE OF ORGANIC & % DIFFERENCE FROM NON-ORGANIC Copyright 2017 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. 41% Of U.S. Respondents said that financial costs associated with eating healthier foods are a barrier to their personal health Source: 2017 Nielsen Barriers to Health Survey Source: Nielsen Answers On Demand, 52 Weeks Ended 8/26/2017 +20% +78% +122% +40% BABY FOOD PASTA SAUCE YOGURT EGGS VITAMINS +43% +87% +55% +41% MILK LOTION ICE CREAM 8
PRIVATE LABEL CAN BRING VALUE TO ORGANIC % DISCOUNT PRIVATE LABEL COMPARED TO BRANDED Copyright 2017 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. BABY FOOD YOGURT EGGS VITAMINS Source: Nielsen Answers On Demand, 52 Weeks Ended 8/26/2017 PASTA SAUCE MILK LOTION -37% -12% -29% -20% ICE CREAM -18% -18% -6% -21% 18% Lower price for this organic basket private label basket compared to branded organic basket 9
CALL TO ACTION Understand the trends. Organic products and sustainability will continue to drive growth across the store. Copyright 2017 The Nielsen Company. Confidential and proprietary. By category, understand the pricing decisions that consumers make around organic products. Do not miss out. Transparency and organic products are a mainstream trend, and competition for this consumer will continue to increase. 10
Copyright 2017 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. THANK YOU!
NATURAL & ORGANIC REACH Natural & Organic Products are purchased by nearly all households. Total NPI Food & Beverage SPINS Organic* Food & Beverage 99% NATURAL & ORGANIC (NPI) 84% ORGANIC* * at least 70% organic content Percent of Households Buying at Least Once in the last year. All Outlets, Total US, 52 Weeks Ending 12/25/16 CONFIDENTIAL Copyright 2017
NATURAL & ORGANIC ATTITUDES but households purchase Natural & Organic for different reasons. Environment and sustainability is important to me. I want my kids to be as healthy and happy as possible. Natural & Organic is healthy, but it also needs to be convenient! I trust the brands I have always used to be healthy.. CONFIDENTIAL Copyright 2017
SPINS/IRI NATURALINK SPINS and IRi have partnered to create NaturaLink. NaturaLink is unique in that it reflects a representative sample of the Total U.S. population not just those who buy Natural/Organic products. METHODOLOGY 5,000 demographically balanced respondents were surveyed. Survey Topics included a broad range of attitudinal, behavioral and demographic information. Over 45,000 HHs were then typed for richer insight into purchase behavior across total population.. CONFIDENTIAL Copyright 2017
SPINS/IRI NATURALINK Percentage of Total Shoppers 26% 12% Percentage of Total Natural & Organic Dollar Sales 16% 12% 14% 11% 9% True Believers Enlightened Environmentalists Healthy Realists Strapped Seekers Indifferent Traditionalists Struggling Switchers Resistant Non-Believers 10% (+16) 10% (+2) 14% (+2) 10% (+2) 25% (-9) 17% (-6) 15% (-6) NaturaLink presents a powerful combination of attitudes and purchase behaviors. Two segments form the leading edge of Natural/Organic trends: True Believers and Enlightened Environmentalists.. CONFIDENTIAL Copyright 2017
NATURAL & ORGANIC Consumer sentiment regarding All-Natural and Organic is highly polarizing. 65 62 62 All Natural Organic 35 47 41 OVERALL IMPORTANCE All Natural: 31% 20 21 Organic: 15% 13 2 9 1 4 1 True Believers More Natural/Organic inclined Enlightened Environmentalist s Healthy Realists Strapped Seekers Indifferent Traditionalists Struggling Switchers Resistant Non-Believers Less Natural/Organic inclined. CONFIDENTIAL Copyright 2017
Total Organic Dollar Sales by NaturaLink Group While sales for Organic items are increasing across all groups, some groups are increasing faster Struggling Switchers are increasing their purchases of Organic items across the store +34% versus the previous year Percent Total Dollars Spent 100 90 80 70 60 50 10.5 16.0 11.9 16.3 +1.4 pts +0.3 pts Core Natural/Organic will always be at the heart of industry sales, but Struggling Switchers represent where much of the incremental growth is happening 40 30 20 10 13.6 31.2 12.4 27.9-1.2 pts -3.2 pts So who are these people??? 0 2015 2016. Data citation
STRAPPED SEEKERS I m passionate about. Trying new things and living a healthy lifestyle (but sometimes I know I should make healthier food choices than I do). My friends often come to me for product recommendations! I make a point to seek out Natural/Organic products, but my limited budget is often a barrier to buying name brands. That s okay, because I think store brand products are just as good. Bottomline, though, product taste/efficacy are my biggest 10% priorities. 10% US Households 12% Natural Product $ Volume MY AVG. AGE 45 I ATTENDED 63% Caucasian I LIVE MY MEDIAN INCOME IS $45K MY FAMILY All Levels of School Food & Beverage Personal Care Home Care BUT I BUT SKEW I SKEW DISPROPORTIONATELY All Natural Non-White All Natural Eco-Friendly Organic Eco-Friendly All Natural Northeast & Skew South West These Are My Top 3 Priorities For Food & Beverage Personal Care Home Care Best taste Free of chemicals Most effective Made w/all natural ingredients Is on sale/coupon Most effective ingredients Made w/all natural ingredients These Things Are Important and I m Willing to Pay More Is on sale/coupon Multi-purpose Eco-Friendly Organic Organic Non-GMO Fair Trade WHAT Holds Me Back Expense of natural/organic products Availability of natural/organic options at local store No all-natural/organic options available for products I like HOW I GET Information. CONFIDENTIAL Copyright 2017
ORGANIC AFFORDABILITY & ACCESSIBILITY QUESTIONS? SPEAKERS Maxine Wolf, Publisher, KIWI Magazine / Mom s Meet Andrew Mandzy, Director of Strategic Insights, Nielsen Patrick Knight, Director of Consumer Insights, SPINS MODERATOR John Grubb, Managing Partner, The Sterling Rice Group @OrganicTrade #ExpoEast #Organic