Todd HaleSVP, Consumer & Shopper InsightsMay 2, 2014

DRIVING GROWTH IN CHALLENGING TIMES

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PANEL MEMBERS

• Barry CalpinoKraft Foods, VP of Breakthrough Innovations

• Dave DeaconPepsiCo, Director of Performance Insights

• Christian ThompsonKellogg’s, Senior Director of Shopper Insights

GROWTH CHALLENGES

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INFLATION SUBSIDES, BUT UNITS REMAIN SOFT

Source: Total U.S. All Outlets Combined (plus Convenience), All Departments, All Brands (UPC), % Change, 52 week periods vs. year ago

2009 2010 2011 2012 2013 52 w/e 03/15/2014

$698,622,107,361

$713,847,575,906

$740,149,846,801

$759,794,372,855

$771,160,987,149

$774,505,094,962

244,590,449,475

248,138,265,939

250,002,998,385

249,980,015,395

250,912,427,784

251,457,342,854

Dollar Sales Unit Volume

Billi

ons

All Departments

Dollar Trend +2 +4 +3 +1 +1

Unit Trend +1 +1 -0 +0 +0

Average U Price Trend +1 +3 +3 +1 +1

Any Promo U Trend +2 -0 -2 +0 +1

Shouldn’t an economic recovery be delivering more growth?

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CONSUMERS SHIFTING SPEND OR BUYING LESS

Source: Nielsen Scantrack, Total U.S. – All Outlets Combined (plus Convenience), 52 weeks ending 03/15/2014 (vs. year ago), UPC-coded

Fresh MeatFresh ProduceAlcoholic Bevs

DeliDry Grocery

DairyPackaged Meat

Non-Food GroceryHBA

Frozen FoodsGeneral MerchTotal All Depts

124

32

0000

-1-1

-30

All Outlets Combined (plus Convenience) – Unit Trend

Shouldn’t an economic recovery be delivering more unit growth?

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Units

“DEATH BY A 1,000 CUTS”

Aging population Delayed family starts

Smaller households

Multicultural infants Immigration

Job market Payroll taxes Income squeeze Food stamps Gas prices

Weather impactHigher

prices/reduced promotions

Alternative channels

Away-from-home consumption Prepared meals

Consumption patterns DIY movement

CONSUMER & SHOPPER INSIGHTS

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CONSUMER & SHOPPER INSIGHTS

1. How is your organization leveraging consumer & shopper understanding to drive growth today & in the future?

2. Our economic recovery is not equal for all shoppers & consumers. How attuned is your organization to this fact & how do you leverage consumer & shopper insights to align your sales, merchandising, & promotional efforts to win spending at the economic extremes?

Panel Questions

PRICE, VALUE & INNOVATION

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HOW LOW IS “LOW”?

Source: Company websites

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WALMART ROLLS OUT ONLINE SAVINGS TOOL

Source: Walmart (https://savingscatcher.walmart.com/)

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CONSUMERS WILL PAY MORE IF THE BENEFITS OUTWEIGH THE PRICE

Sources: MultiAd Kwikee, Target (k-cups) & company websites

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PRICE, VALUE & INNOVATION

1. Are you bringing greater value to income-challenged shoppers through your promotions or through product innovation?

2. How do we bring breakthrough innovation to center-store categories & how do we manage those where consumer demand or category relevance in waning?

Panel Questions

E-COMMERCE

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Apparel

Department

Mass

Liquor

Auto

Toy

Drug

Convenience/Gas

Sporting Goods

Discount Dept

E-Commerce

-4% -2% 0% 2% 4% 6% 8% 10% 12%

E-COMMERCE THE BIG WINNERCAGR 2013 to 2018

Source: Nielsen TDLinx & Nielsen Analytics

Winning Share

Average Growth

Losing Share

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0

20,000

40,000

60,000

-10010203040

Retail E-Commerce Sales% of Total Retail SalesRetail E-Commerce Sales % Change vs. Year Ago

Percent

E-COMMERCE COMING TO CPG, BUT @ WHAT SPEED

Source: U.S. Census Bureau; company reports & websites

E-Commerce steadily gaining share

Amazon

$13.4

Walmart

$7.5

Kroger

$1.6

Amazon sales growth very impressiveGlobal annual sales growth versus prior year (in billions)

Step on the gas! Who can get there faster?AmazonFresh launches in Los Angeles

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“THE NEW WAY TO SHOP FROM HOME”

https://fresh.amazon.com/dash

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AMAZON DEBUTS PRIME PANTRYBut will Amazon Prime members be willing to pay $5.99 per box?

Source: Amazon.com

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PEAPOD EXPANDS NUMBER OF PICK UP LOCATIONS“Ahold has a company-wide target to triple its online food sales by 2016”

Source: Ahold; Peapod; Crain’s Chicago Business, Chicago Tribune

Peapod also has bulked up its physical presence, adding 120 pickup locations on the East Coast, where New York-based Fresh Direct LLC leads, and five in the Chicago area since August 2012. On the East Coast…customers can pick up orders at Stop & Shop and Giant grocery stores. [In the Chicago area], customers can visit locations in Palatine, Deerfield, Lincolnshire, Schaumburg and Arlington Heights in repurposed bank branches or fast-food restaurants.

Crain’s Chicago BusinessJan. 20, 2014

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HARRIS TEETER DEBUTS ANNUAL SUBSCRIPTION$99.95 for the entire year, no limit to number of orders placed; curbside pick up

Source: Harris Teeter

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E-COMMERCE

1. Do you see e-commerce having a positive or negative impact in your categories?

2. How should brick & mortar retailers look to get engaged in e-commerce?

a) Pure-play model?

b) Click & collect?

c) ????

Panel Questions

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STAY CONNECTED

http://www.nielsen.com

Todd.Hale@nielsen.com http://www.linkedin.com/pub/todd-hale/a/353/613

@ToddHaleNielsen