What s Really Driving Health and Wellness Trends and How to Remain Relevant on Shelf Natural is the R&D of the CPG industry. Natural organic products are driving sustainable category growth across all channels. Natural and organic consumers are not motivated by price alone. They base their buying decision on transparency, clean-label ingredients that not only meet their nutritional needs, but products they can trust. These consumers do their research, going beyond the four corners of the package. They vote with their dollars, purchasing products from sustainable and mission-based brands. Brands that provide true innovation, are closely aligned with their core customer, and remain true to their mission are steadily capturing market share. Learn what is really behind these trends and how they are winning at shelf. Empowering Brands Raising The Bar
Daniel Lohman, CPSA BRAND SECRETS AND STRATEGIES Organic & CPG Industry Strategic Advisor Empowering Brands Raising The Bar Contributor
Consumers Are Confused Which is healthier? What do they mean to you? = A. Natural B. Non-GMO C. Organic D. Clean Label Which is best and why?
Consumers Are Confused About Organic
What Does The Core Natural Shopper Look Like? And why does this matter? = Have you ever gotten a great deal on something you didn t like Committed natural shoppers do not settle. They want what they want We are not clones! We want quality over price
Innovation Is Key To Growth = True innovation is fueling sustainable growth in every category! True innovation is putting the shoppers needs first and developing products that fully meet their needs Natural products are at the heart of the innovation that is resonating with shoppers
Transparency Is Key
Transparency Matters! The core natural organic shopper carefully reads labels, they do not settle for products that do not fully meet their needs Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources : Healthy_Living_The_New_Face_of_Healthy_Ageing 8
Attitudes Are Driving Change Shoppers are looking solutions that help with healthy aging There is a direct correlation between consumers choosing products that support both prevention and a cure Shoppers are actively looking for healthy products to replace and reduce the need for prescription medications and excessive doctor visits Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources : Healthy_Living_The_New_Face_of_Healthy_Ageing 9
What Consumers Are Shopping For Shoppers want healthy alternatives They want products they can trust that are Free From and Organic Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources : Health_and_Wellness_in_the_US 10
Healthy Solutions Are The Future Growth Driver In CPG Health focused solutions should continue to accelerate globally Organic and Free From are the primary growth drivers Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources: Health_and_Wellness_in_the_US 11
Shoppers Want Vitality! Shoppers are actively searching out products that promote health and vitality - products that enhance quality of life! Shoppers want to live more active lives, they want to feel better Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources : Health_and_Wellness_in_the_US 12
Health Focused Solutions Growth Will Accelerate These trends are forecasted to accelerate as shoppers live longer Shoppers are proactively seeking healthier more active lifestyles These health trends reduce the need of reactive solutions - problems to avoided like high blood pressure, obesity, diabetes, etc Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources : Health_and_Wellness_in_the_US 13
Consumers Are Active } Exercise habits change as we age Good nutrition plays an important role in healthy lifestyles } Activity becomes less intensive as consumers age Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources : Healthy_Living_The_New_Face_of_Healthy_Ageing 14
Copyright 2015 The Nielsen Company. Confidential and proprietary. ALMOST 4 OUT OF 10 SUFFER FROM AN AILMENT But many turn to food as medicine to help manage overall health 39% Suffer from an ailment Including some of the foremost causes of preventable death heart disease, stroke, type 2 diabetes & certain types of cancer 50% Do not seek medical attention They turn to OTC products, exercise, and better eating to improve their situation 75% believe they can manage many of their health issues through proper nutrition Source: World Health Organization; Centers for Disease Control 2012 Nielsen Ailment Panel 2015 15
SHOPPERS ARE ACTIVELY CHOOSING BETTER OPTIONS Copyright 2012 The Nielsen Company. Confidential and proprietary. 53% will pay more for foods that promote health benefits 48% choose local, natural and organic when possible 40% are willing to sacrifice taste for a healthier option Source: Nielsen two week online survey (April 2016) of 1176 respondents 16
17 Fountain Of Youth Is Important Consumers continue to search for the Fountain Of Youth in healthy products Shoppers want to look and feel healthy and vital The Fountain Of Youth is found within and it radiates out Natural organic products offer the promise of better nutrition focusing on you are what you eat Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources : Healthy_Living_The_New_Face_of_Healthy_Ageing
Copyright 2015 The Nielsen Company. Confidential and proprietary. CONSUMERS ARE SEEKING OUT HEALTHIER FOOD OPTIONS 66% EAT HEALTHIER NOW THAN BEFORE 64% Try to buy healthier foods 60% Quality trumps price 57% Do online research on nutrition, fitness tips, healthy recipes Source: Nielsen two week online survey (April 2016) of 1176 respondents chg vs. 2014 18
Copyright 2015 The Nielsen Company. Confidential and proprietary. BOOMERS DRIVE DEMAND ACROSS HEALTH INGREDIENTS Fiber is the most important ingredient for Boomers % Millennials and Boomers indica:ng they want more of the following 62% 57% 57% 57% Millennials 56% Boomers 56% 54% 53% 49% 43% 38% 33% 30% 38% 34% 37% 38% 35% 26% 37% Fiber An:oxidants Heart healthy ingredients Vitamins/minerals Omega 3's Vitamin D Calcium Source: Natural Marketing Institute, all rights reserved Whole grains Healthy oils/fats Protein 19
HEALTHY CLAIMS ARE GROWING IN SALES, AND IN ITEM COUNTS NO ARTIFICIAL COLORS/ FLAVORS +7.6% CAGR +100 more items ANCIENT GRAINS +25% CAGR +34 more items BIGGEST AND FASTEST GROWING H&W CLAIMS TOTAL FOOD ORGANIC +15% CAGR +117 more items KOSHER +3.3% CAGR +645 more items Copyright 2015 The Nielsen Company. Confidential and proprietary. GMO FREE NATURAL +14.3% CAGR +204 more items +11.7% CAGR +239 more items NO HIGH FRUCTOSE CORN SYRUP Source: Nielsen x AOC. Period Ending December 26, 2015; growth since 2012 highlighted claims present in >75% categories GLUTEN FREE +8.7% CAGR +82 more items +13.6% CAGR +433 more items NO ARTIFICIAL SWEETENERS SOY +4.1% CAGR +52 more items +3.9% CAGR +170 more items 20
Mainstream Retailers Sell The Most Natural Organic Products Mainstream represents the largest share of natural organic products
WITH WELLNESS A NEW FOCUS, FRESH AND HEALTHY CAN BE FOUND AND PURCHASED EVERYWHERE SHARE OF CHANNEL SHOPPERS PURCHASING FRESH WITHIN EACH CHANNEL DRUG CONVENIENCE/ GAS MASS/ SUPERCENTER WAREHOUSE/ CLUB GROCERY 21% 34% 85% 89% 99% Copyright 2015 The Nielsen Company. Confidential and proprietary. Source: Source: Nielsen Homescan Total Shopper View Specialty Panel, GROCERY SEGMENTS 94% VALUE GROCERY 89% PREMIER FRESH 22
Shoppers Are More Connected Consumers use technology to aid in purchase decisions Brand messaging needs to extend beyond the four corners of the package Consumers want solutions that make shopping easy and convenient This includes automatic checkout Like Amazon Digital payment Apple and Samsung Pay Subscription options Like Amazon subscription One-stop-shopping Source: Euromonitor International Global Trends Survey 2017 23
The Shopping Experience Is Important Shoppers have choices! Traditional continues to be important to shoppers Experience Matters! Ease of shopping drives purchasing habits 47% of global connected consumers want to see before they buy 83% expect to purchase instore Source: Euromonitor International Global Trends Survey 2017 24
Smartphones Make Shopping Easy The shopper journey is changing Consumers use their smartphone to make purchases Shoppers use smartphones to research products before buying Cart Abandonment is an issue as consumers want to to see and try-on products before purchasing Selling extends well beyond the register - it includes input from friends, families, and other influencers Source: Euromonitor International Global Trends Survey 2017 25
Personalization Is Important Shoppers want the shopping journey to be focused on their specific needs Personalized shopping experiences are the key to sustainable sales Source: Euromonitor International Global Trends Survey 2017 26
Belief Drives Choices Young shoppers are taking the lead when it comes to purchases driven by values and beliefs Natural organic products frequently support important causes that resonate with consumers Shoppers choose retailers that align with their core values Shoppers want to feel good about their purchase decisions Source: Euromonitor International Global Trends Survey 2017 27
Subscription Services Offer Convenience Subscription Service Use by Generation, 2017 Shoppers want convenience! Subscription services continue to gain in popularity Subscription services appeal most to younger shoppers Source: Euromonitor International Global Trends Survey 2017 28
Balancing Privacy With Convenience Continues to Be Challenging Shoppers want what they want - more importantly they want brands and retailers who listen to their needs Source: Euromonitor International Global Trends Survey 2017 29
Consumers Shop Multiple Channels
The Share Of Organic Is Growing In Retail Share Organic Organic sales are up in both food and non-food. The share of organic products continue to increase across the entire store SOURCE: ORGANIC TRADE ASSOCIATION S 2017 ORGANIC INDUSTRy SURVEy CONDUCTED 2/2/2017 3/31/2017 ($MIL., CONSUMER SALES). 31
Shoppers Are Willing To Pay More For What They Want
Natural Organic Overview Total US Food sales are up +1.9% Total US Dairy sales are up +1.5% Total US Natural/Organic sales are up +11.0% Total US Natural/Organic Dairy sales are up +12.1% Natural Organic Dairy sales sales represent just just 7.7% 9.8% of of total total US US food sales Total US Food Dairy sales without natural organic are up +1.2% +0.5% Natural organic sales are responsible for the sustainable sales and profit growth in total US food! Source: Nielsen Total US xaoc Latest 52 Wks - W/E 01/23/16. All insights above come from Nielsen Answers Total US Food, Drug, Mass, Walmart, Sam s, BJ s, Dollar Stores, and Convenience.
Fresh Is More Important Than Natural
Similar Product Themes Cross All Categories
Organic Is Growing Across All Departments
Produce Is The Gateway To Center Store
Total Produce share vs all other perishables depts. 38
Produce Dept. organic size and trend Organic produce $4.9 billion in 2017 retail channel sales - $4,233 per store per week + 7.3% 2017 vs. 2016 Organic Produce Dollars 39
Store Within A Store Natural Natural organic products are merchandised in a separate area
Integrated Segregated Natural Natural organic products are merchandised next to mainstream products Organic produce is the entry point for healthy products
Integrated Segregated Natural organic and mainstream products are merchandised side by side in separate sections
Integrated Segregated Recommended product placement Integrating natural organic and mainstream products together allows shoppers to make the best choice to meet their needs. This is how you grow category sales.
Recommendations The key to your success depends on how well you satisfy your shoppers needs. Shoppers can t buy what they can t find Product placement is key for every item and brand This includes every place consumers can purchase your brand Integrate natural and mainstream together - focus on the way consumers shop the category Commitment to develop a collaborative relationship between retailers and brands Become an expert on the category shopper, trends, and your completion Take an active role in helping your broker/distributor manage and grow your business. Develop scorecards to hold them accountable for your success and growth Education: Commit to developing your category management, sales management and trade marketing management teams by teaching them the best practices to help grow your business sustainably To Download this presentation: categorymanagementsolutions.com/cma2018 To learn more about the Natural Organic shopper, listen to the BRAND SECRETS AND STRATEGIES podcast, visit CategoryManagementSolutions.com (CMS4CPG.com)