don’t call me a #millennialmillennials have grown up and are choosing their path into adulthood...

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DON’T CALL ME A #MILLENNIALMillennials have grown up.

July 2016

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THE ONLY THING EVERY MILLENNIAL HAS IN COMMON IS WHEN THEY WERE BORN

Generations are defined by Age

born 1982-1995 21-34 years old

25% of Total U.S. Population

4

40%

33%

27%

Millennial GenX

No Affiliation

WHAT GENERATION

DO I FEEL LIKE I BELONG TO?

% of 21-34

year-olds

BUT I DON’T ACT LIKE A MILLENNIAL!

Millennial stereotypes draw Millennials away from their generational label

Source: Pew Research, Most Millennials Resist the ‘Millennial’ Label

…are not loyal.

…want immediate gratification.

PEOPLE SAY MILLENNIALS…

…only buy piecemeal & on-the-go.

…are self-involved & lazy.

…spend too much time online.

…don’t want to grow up.

MILLENNIALS SAY…

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So why do we all

care so much about

Millennials anyway?

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THEY ARE A HUGE SEGMENT WITH BIG INFLUENCE

Too big to ignore

LARGE & DIVERSE

79.7 million

Largest living

cohort &

most diverse

LIFE STAGE

From landing first job

and increasing

income, to marriage,

parenthood and

homeownership

$1.4 trillion

annual spending

by 2020

Will account for

50% of retail

spending in

5 years

PURCHASING POWER

Impacting

everything

from the

grocery aisle

to the

workplace

ECOMMERCEINFLUENCE

Fluidity of

shopping

behaviors

online and

instore

Source: CEB Iconoculture, US Census, Mintel

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“KIDS THESE DAYS” NO MORE

Millennials have grown up and are choosing their path into adulthood

Leaves College

Moves out of

parent’s home

Lands first job

Gets married

Starts planning a family

Buys a home Has a

Baby

Has 2nd

baby

21y/o

34y/o

Gets divorced

Has 3rd

baby

Gets remarried

Varying life-stages for Millennials now that they’ve entered adulthood.

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WHEN MILLENNIALS WERE THEIR AGE…

Life stages of GenX & Boomers when they were the age of Millennials

Source: Pew Research, How Millennials Compare to Their Grandparents & Comparing

Millennials to Other Generations; CEB Iconoculture, Millennial Ties that Bind; US Census

53%

44%

66%

47%

34%

56%52%

77%

19%

46%

64%70%

73%

15%

44%

Married Parents Employed College Educated Home Ownership

Millennials in 2015 (20-37 y/o) GenX in 1998 (21-33 y/o) Boomers in 1984 (20-38 y/o)

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BEING A MILLENNIAL MEANS SPENDING LESS & SHOPPING LESS OFTEN, BUT SPENDING ABOUT THE SAME PER TRIP

Less disposable income & more options for spending

$1,298

$1,765

$1,575

Millennials GenX Boomers

Dollars per HH

38

45

42


Trips Per HH

$34$37 $37


Dollars Per Trip Per HH

Brick & Mortar FMCG Channels | Last 52 weeks

Source: InfoScout Panel Data

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FOOD & MASS CHANNELS WIN WITH ALL GENERATIONS

Mass has slight advantage with Millennials but GenX spends more

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

Food Mass Club Drug Convenience Dollar

Millennial GenX Boomers


Dollars per Household by Generation


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Some of these Millennials are not like the others

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MILLENNIALS ARE “SETTLING DOWN” INTO ADULTHOOD

The presence of children and adapting shopping behaviors

Marriage

53%Married/

Partnered

47%Single

25%Not Financially

Stable Yet

22%Not Ready to

Settle Down

WHY?

Parenthood

44%Of Millennials are

parents

Source: U.S. CDC; Mintel, Marketing to Millennials; UN DESA, World

Population Prospects; CEB Millennials in 2016, Millenial Marketing

67%Of Millennials without

children say they would

like to be parents

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MILLENNIALS HAVE MORE WITH LOW INCOME, BUT THIS WILL CHANGE AS THEY PROGRESS IN THEIR CAREERS

Currently their incomes are lower than total U.S. income

Source: InfoScout Panel Data, US Census Bureau; 15

Economic Facts about Millennials – whitehouse.gov

33%High-Income

(Over $60K)

67%Low-Income

(Below $60K)

18%

27%

22%

15%

8%6%

4%

11%

20% 21%

16%

12%10% 9%

0%

5%

10%

15%

20%

25%

30%

Under $20K $20-40K $40-60K $60-80K $80-100K $100-125K $125K+

Millennials Total U.S.

LOW INCOME HIGH INCOME

47%High-Income

(Over $60K)

52%Low-Income

(Below $60K)

Total U.S. Millennials

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The Millennial Income Disparity

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MILLENNIALS DO MORE WITH LESS & UTILIZE ECOMMERCE OPTIONS

Less disposable income & more options for spending

$0

$500

$1,000

$1,500

$2,000

$2,500

- $20k $20k-40k $40k-60k $60k-80k $80k-100k $100k-125k $125k +

ANNUAL DOLLARS PER HH BY INCOME

Millennial Dollars / HH Gen-X Dollars / HH Boomer Dollars / HH

+28% +25%+26%

+26%+32%

+35%+46%Brick & Mortar FMCG Channels | Last 52 weeks


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30

40

50

$25

$35

$45

$55

Dollars & Frequency per HH

By Income

Dollars / Trip Trips per HH

MILLENNIAL

BEING A MILLENNIAL DOESN’T MEAN YOU SHOP PIECEMEAL

Other generations behave similarly based on income

Source: InfoScout Panel Data, CEB Iconoculture


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BEING A MILLENNIAL DOESN’T MEAN YOU SHOP PIECEMEAL

Other generations behave similarly based on income

Source: InfoScout Panel Data, CEB Iconoculture

30

40

50

$25

$35

$45

$55


By Income


MILLENNIAL GENX BOOMER

30

40

50

$25

$35

$45

$55


By Income


30

40

50

$25

$35

$45

$55


By Income



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THE GENERATION SADDLED WITH THE MOST STUDENT LOAN DEBT

Putting stress on Millennial incomes

Source: CEB Millennials in 2016; US Bureau of Labor Statistics, Nielsen Consumer 2015

47%Attended College

42%Paying off student loans

$30,000Median Balance

Student Loan Debt

COLLEGE-EDUCATED MILLENNIALS MEDIAN NET WORTH

$8,700

$64,700

Has Student Loan Debt

No Student Loan Debt

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Millennials say “Hello Baby. Goodbye Money.”How the presence of a child in the home affects HOW this demographic shops

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ADULTHOOD CAN MEAN BABIES. BABIES MEAN MAJOR EXPENSES.

Parents alter their basket to include items for baby

Source: USDA 2013 Annual Report- Expenditures on Children By Families

Housing$2,700 Misc.

$790

Childcare$2,920

Healthcare$850

Clothing$770

Transportation$1,700

Formula & Food$1,460

Diapers$1,000

Birth to age 18

$230,610

Babies 1st Year

$12,190

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$1,038 $1,126 $1,314 $1,482

$438 $559 $406

$562

MillennialLow Income

MillennialHigh Income

GenXLow Income

GenXHigh Income

Dollars Per HH

No Kids Kids

“BABY BUMP” BIFURCATION

No matter age or income, babies mean more money and more trips

35 3342 39

+7 +8

+6 +7

MillennialLow Income

MillennialHigh Income

GenXLow Income

GenXHigh Income

Trips Per HH

No Kids Kids

+42%+50% +31%

+38%



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The Millennial Income & Parenthood DisparitySegmenting Millennials and their shopping behavior

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High

Income

36%

Low

Income

64%

Millennials w/ Kids

High

Income

31%

Low

Income

69%

Millennials w/o Kids

MILLENNIAL INCOME & PARENTHOOD AS DETERMINING PATHS

The path to adulthood is paved by income & parenthood

Has Kids

44%

No Kids

56%

All Millennials


High Income: Over $60,000

Low Income: Under $60,000

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“BABY BUMP” BIFURCATION OF MILLENNIAL HOUSEHOLDS

With less money to spend, Millennials still spend more when they have a child

$1,550

$1,065

$0

$1,000

$2,000

Millennial w/Kids

Millennial w/o Kids

$1,298

$0

$1,000

$2,000

Millennial

Dollars / HH

Presence of Children & High/Low Income

Dollars / HH

Presence of Children

Dollars / HH

Total Millennials


$1,685

$1,476

$1,126 $1,038

High Income w/Kids Low Income w/Kids

High Income w/o Kids Low Income w/o Kids

+19%

-18%

+30%

+14%

-13%-20%


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MASS WINS WITH LOW-INCOME MILLENNIALS, BUT NOT BY MUCH

High Income households spend at mass and food equally

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

All Millennials High IncomeMillennials

Low IncomeMillennials


Dollars per HH by Millennial income


Total Millennials High/Low Income %


67%

Low Income

33%

High Income

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MASS WINS WITH PARENTS

When you add the demographic for children, mass spikes.

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

All Millennials Millennials w/ Kids Millennials w/o Kids


Dollars per HH by Millennial Parenthood


44%Has Kids

56%No

Kids

Total Millennials With Kids & w/o Kids


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MASS DEFINITELY WINS HOUSEHOLDS WITH CHILDREN

Households with children seek the value & convenience of Mass channel

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000


High Income - Kids Low Income - Kids

High Income - No Kids Low Income - No Kids


Dollars Per Household By Millennial Segments (Income & Kids)Brick & Mortar FMCG Channels | Last 52 weeks

16%

29%

17%

38%

Total Millennials

Low Income- No kids

High Income- No Kids

Low Income- Has Kids

High Income- Has Kids

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KEY

All MillennialsHas Kids

Hi IncomeHas Kids

Low IncomeNo Kids

Hi IncomeNo Kids

Low Income

Walmart Walmart Walmart Walmart Walmart

Costco Costco Costco Costco Costco

Kroger Target Kroger Kroger Kroger

Publix Kroger Publix Target Publix

Target Sam's Club Target Sam's Club Sam's Club

Sam's Club Ahold Sam's Club Ahold Target

Ahold Aldi Safeway Safeway BJ's

Safeway CVS Aldi Whole Foods Ahold

Albertsons Walgreens Albertsons Trader Joe's Safeway

Aldi Dollar General Ahold CVS Albertsons

MILLENNIALS PICKING RETAILERS IN MASS CHANNEL OVER KROGER

Millennials are value seekers, especially when they have kids

1

2

3

4

5

6

7

8

9

10


Retailers ranked by Millennial dollars per HH

Brick & Mortar FMCG Channels | Last 52 weeksBlue: Mass

Green: Grocery

Pink: Club

Grey: Drug

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WALMART WINS DESPITE A LACK OF SATISFACTION

And Kroger ranks higher with Millennials than general population

RetailerNet

Recommended

Rank in All

Age Groups in

National

1 Amazon 55.7% 1

2 Wegmans 52.5% 4

3 Costco 52.1% 3

4 Dollar General 52.0% 2

5 HEB 49.3% 6

6 Sam’s Club 46.6% 7

7 BJ’s 45.1% 8

8 Family Dollar 44.6% 5

9 Publix 44.3% 9

10 Meijer 41.5% 11

RetailerNet

Recommended

Rank in All

Age Groups in

National

11 CVS 41.2% 10

12 Kroger 39.5% 15

13 Delhaize 36.7% 17

14 Rite Aid 35.9% 12

15 Target 35.7% 16

16 Walmart 31.7% 18

17 ShopRite 31.2% 13

18 Walgreens 31.0% 14

19 Albertsons 25.1% 19

20 Stop & Shop 21.9% 20

Overall, thinking about your purchase of XXX, how likely would you be to recommend shopping at RETAILER for XXX to a friend? (SR)

Source: Lucros Partners Shopper Intelligence

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What are Millennials buying?Kroger Category Deep-Dive

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MILLENNIAL CATEGORY MIX CHANGES WITH PARENTHOOD

A Millennial parent’s top categories are different from those without kids

Millennials Without KidsMillennials With Kids

Categories Rank

Index

to all

HHs

Dollars /

HH

$ Increase (vs. all HHs

with kids)

Formula 1 144 $126.85 $38.93

Aerosol & Spray Deodorant 2 124 $12.10 $2.31

Breakfast & Cereal Bars 3 121 $8.18 $1.42

Wipes & Wipe Holders 4 120 $18.93 $3.18

Baby Food 5 118 $38.94 $5.93

Disposable Diapers 6 117 $70.83 $10.16

Air Freshener Sprays 7 116 $11.59 $1.58

Baby Cereal 8 115 $9.71 $1.25

Pantiliners 9 113 $7.99 $0.92

Hot Cocoa 10 113 $5.21 $0.59

Categories Rank

Index

to all

HHs

Dollars /

HH

$ Increase(vs. all HHs

w/o kids)

Performance Bars 1 108 $6.53 $0.51

Nutritious Snacks 2 106 $17.55 $1.06

Safer Sex (Contraceptives) 3 106 $11.23 $0.62

Rice 4 106 $10.06 $0.55

Face Make-up 5 105 $9.52 $0.47

Utensils & Gadgets 6 103 $4.97 $0.17

Fresh Seafood 7 103 $27.90 $0.88

Grains & Rice 8 103 $5.09 $0.16

Couscous 9 103 $5.48 $0.16

Oil & Blemish Control 10 103 $8.49 $0.24


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Formula

Aerosol & Spray Deodorant

Breakfast & Cereal Bars

Wipes & Wipe Holders

Baby Food

Disposable Diapers

Air Freshener Sprays

Baby Cereal

Pantiliners

Hot Cocoa

Kroger Other Food Mass Drug Club Dollar Convenience

OPPORTUNITY TO GAIN DIAPER DOLLARS FROM MILLENNIAL PARENTS WHO SHOP AT KROGER

• Food items do better

than non-food items

• Kroger has an

opportunity to gain

disposable diaper dollars

from the mass channel

Millennials with children share of wallet at Kroger

Last 52 weeks

81%

45%

80%

51%

66%

28%

47%

66%

57%

41%

Spend by CategoryCategories Purchased at Kroger & Other Channels


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OPPORTUNITY TO GAIN PERFORMANCE BAR DOLLARS FROM MILLENNIALS WITHOUT KIDS WHO SHOP AT KROGER

• Food items do better

than non-food items

• Kroger has an

opportunity to gain

performance bar dollars

from the mass channel

Millennials without children share of wallet at Kroger

Couscous

Face Make-up

Fresh Seafood

Grains & Rice

Nutritious Snacks

Oil & Blemish Control

Performance Bars

Rice

Safer Sex (Contraceptives)

Utensils & Gadgets

Kroger Other Food Mass Drug Club Dollar Convenience

87%

52%

88%

59%

54%

46%

50%

62%

68%

52%

Last 52 weeks

Spend by CategoryCategories Purchased at Kroger & Other Channels


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65.9%

53.4%45.9%

40.9% 39.4%

16.4%

% Recommend

MILLENNIAL CATEGORY SATISFACTION AT KROGER

Do Millennials recommend their top categories at Kroger?

FORMULA

BREAKFAST BARS

DIAPERS ENERGY DRINKS

BABY FOOD

SPICES

Source: Lucros Partners Shopper Intelligence

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FOR MILLENNIAL PARENTS, ONLY TWO TOP CATEGORIES EXCEED 10% SPEND ONLINE COMPARED TO IN-STORE

Despite fear of ecommerce, the majority of Millennial spend is going to brick & mortar

96.0%

100.0%

98.1%

89.2%

97.8%

88.8%

99.7%

98.0%

97.2%

97.9%

4.0%

1.9%

10.8%

2.2%

11.2%

0.3%

2.0%

2.8%

2.1%

50% 60% 70% 80% 90% 100%

Formula

Aerosol & Spray Deodorant

Breakfast & Cereal Bars

Wipes & Wipe Holders

Baby Food

Disposable Diapers

Air Freshener Sprays

Baby Cereal

Pantiliners

Hot Cocoa

Instore Online

• In-store still has the

leg up.

• Non-food items are an

opportunity area for

Kroger to differentiate

themselves from

ecommerce.


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FOR MILLENNIAL WITHOUT KIDS, THEIR AFFINITY FOR FRESH FOODS KEEPS THEM IN-STORE

Despite fear of ecommerce, the majority of Millennial spend is going to brick & mortar

97.9%

99.8%

100.0%

100.0%

98.2%

97.4%

100.0%

99.5%

97.3%

97.4%

2.1%

0.2%

1.8%

2.6%

0.5%

2.7%

2.6%

50% 60% 70% 80% 90% 100%

Couscous

Face Make-up

Fresh Seafood

Grains & Rice

Nutritious Snacks

Oil & Blemish Control

Performance Bars

Rice

Safer Sex (Contraceptives)

Utensils & Gadgets

% Instore % Online

• In-store still has the

leg up for food

categories.

• Non-food items are an

opportunity area for

Kroger to differentiate

themselves from

ecommerce.


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HOW THE INSTORE EXPERIENCE GIVES BRICK & MORTAR A LEG UP

Compete with ecommerce by creating an authentic in-store experience for Millennials

Source: Eventbrite - Harris survey - Millennials Fueling the Experience Economy: July 2014

“The key to retail success in this era of robot-like online shopping lies in finding creative ways to turn it into a real experience.”

- Daniel Newman, Forbes Contributor “How Social and Digital Create The New Retail Experience”

78%Choose to spend money

on an experience over

ownership of goods

70%believe experiences make

them feel more connected

to their community

69%experience FOMO which

drives Millennials to show

up, share and engage

60%shared their experiences on

social media in the past year

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WHERE CAN KROGER GET THE BIGGEST BANG FOR THEIR BUCK?Demand Index & Sales Data

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STORES WITH HIGH DEMAND, BUT LOW SALES ON DIAPERS CREATE OPPORTUNITY FOR KROGER

• Harris Teeter markets &

Southern California are

opportunity areas

Areas of Maryland, North Carolina, & Southern California are opportunity areas for Kroger

High Sales – High Demand

High Sales – Low Demand

Low Sales – High Demand

Low Sales – Low Demand

Source: Spectra Demand Data; Nielsen Scan Data

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STORES WITH HIGH DEMAND, BUT LOW SALES ON CONTRACEPTIVES CREATE OPPORTUNITY FOR KROGER

Areas of Southern California & Metropolitan areas of Texas are opportunity areas for Kroger

High Sales – High Demand

High Sales – Low Demand

Low Sales – High Demand

Low Sales – Low Demand

• Areas of Southern

California & Metropolitan

areas are places to

maintain your lead with

non-baby Millennials

Source: Spectra Demand Data; Nielsen Scan Data

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RECOMMENDATIONS

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SO WHAT’S THERE TO KNOW ABOUT #MILLENNIALS?

When it comes to how Millennials think about themselves & your brand

They expect authenticity

in their relationships

with brands.

They have an affinity

for fresh foods.

They value sharable

experiences that make

them feel a part of

something bigger

than themselves.

Don’t think of

Millennials as kids or

teenagers who don’t

want to grow up.

They are savvy shoppers

who look for promotions

and value, particularly

those with children.

They consistently shop at

the same retailers,

despite being known for

lacking in loyalty.

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RECOMMENDATIONS FOR KROGER

Give Kroger the Baby

Destination feel.

Support busy parents by

focusing on how to make

their trip convenient.

Assist cash-strapped,

value-seeking Millennials

by catering to their need

to stretch incomes.

Mix items with low

satisfaction into a meal kit,

appealing to desire for

cooking & convenience.

Remind this segment to

purchase self-improvement

items with healthy foods.

Hyper-personalize

your 84.51 loyalty

program

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THANK YOU

don’t call me a #millennialmillennials have grown up and are choosing their path into adulthood...

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