PowerPoint Presentation

Grocerys Place in the Changing Foodservice Landscape

Presented By:Penny Anderson

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Where Do Restaurants Fit In? The Quick Service Restaurant LandscapeOpportunities for Grocery FoodserviceAgenda

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Consumer restaurant behavior, captured through online surveys from a maintained, representative panel.

We refer to this asWhat Do We Capture? CREST CREST = Consumer Reporting of Eating Share Trends

Source is consumers, not restaurantsSyndicated study of commercially prepared meals and snacks (including retail foodservice) for immediate consumptionAsk consumers about their visit yesterday

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We Ask ConsumersWhat they ate and drankWhere they ate and drankWhen they ate and drankWith whom they ate and drankHow much they paid for their meal

Motivations, Need States and Satisfaction

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Commercial Foodservice

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NPD CREST Industry DefinitionsQuick Service Restaurants (QSR)Traditional QSRQSR Retail

Fast CasualPerceived as fast food/take-outTypically has a food specialty (Hamburger, Ice Cream, Chicken, Donut ,Pizza, etc.Lower average eater checksC-Stores, Grocery Stores, Department/Variety/Discount Stores, and Price ClubsFood/Beverage items purchased for immediate consumption (within 6 hours) only NPDs aggregate of 60+ chains that have 20+ units; Higher average eater checks; Greater proportion of adult-only, and on-premises occasions; Higher customer satisfaction ratings.Chain must also position itself as fast casual on website or in marketing materials

Source: CREST

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Where Do Restaurants Fit In?

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Todays Consumer

Stay RelevantDifferentiate

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The majority of meals source to HomeSource: Eating Patterns of America Report 2014Restaurants19%Restaurants49%

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Battle For ShareBattle For ShareBattle For ShareThe Ongoing Battle For Share

Recession

Sluggish Economy

Cautious Consumer

Declining Restaurant Traffic

Today

Improving Economy

Cautious Consumer

Flat Restaurant Traffic

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Restaurants were hit hard by the recessionSource: The NPD Group/CREST, YE December

Source: CREST YE August The New Normal Commercial Restaurant Traffic (Billions)

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Full-service operators drove overall declinesShare of QSR Traffic (%)Traffic Change vs. 2008+634 Million$5.56$13.50$ Avg. Guest Check Source: CREST YE August

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Consumers are dining out less over timeSource: Eating Patterns of America Report 2014; Per Capita data charted on different axesChange vs. 08+23-17

In-Home Per Capita

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Reasons We Choose to Eat at Home Instead of Going to a RestaurantSource: NPD Custom Study, March 2015

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Quick Service Restaurants

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Traditional QSRs lost visits to Retail Foodservice and Fast CasualShare of QSR Traffic (%)Traffic Change vs. 2008 Source: CREST YE August

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Consumers visit all segments within QSRQSR Visit ShareSource: QSR Plus Retail Market Monitor/March through June 2015

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Grocery Store needs are most like Fast CasualTraditional QSR Price Driven Treating Myself Someone Else Chose

Grocery Stores Price Driven Healthy/Light Meal Food Variety/Quality

Convenience Stores Price Driven Personal Loyalty Treating Myself

Fast Casual Food Variety/Quality Healthy/Light MealPrice Driven

Source: CREST YE August 15 Top Need States (ranked on share of visits)

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Fast Casuals set the bar high from the start Source: CREST YE August $7.81$5.97$4.26$3.65Avg. CheckOverall Customer Satisfaction (% Excellent)

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Fast Casuals: Promoting quality, freshness, and customization

Our dough is made from 100% certified organic wheat prepared fresh every day, hand thrown and fire baked until uniquely crisp. We combine select ingredients such as Wisconsin skim mozzarella, 100% certified organic tomato sauce, MSG free pepperoni, and additive free sausage. Even our fresh produce sets us apart. Exotic delights

We feature high-quality food in a warm, inviting, and comfortable environment. With our identity rooted in handcrafted artisan bread, we bake fresh bread every day.- Company Description from 2014 SEC

Our handcrafted burgers are smashed, seared and seasoned to order, using our fresh, never frozen 100% Certified Angus Beef. There are over 250,000 possible ways to order a burger at Five Guys.We use only fresh ground beef.There are no freezers in Five Guys locations, just coolers. Nothing is ever frozen.We use only Peanut oil.Our menu is trans-fat free.

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Long term Retail growth sourced to Convenience StoresShare of Retail Traffic (%)Traffic Change vs. 2008 Source: CREST YE August

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Convenience Store FoodserviceMove away from gasoline dependencyTap into a new source for traffic growth and profitTwo types of C-StoresTraditional C-StoresGasoline dependentMinimal foodservice capabilityFood Forward C-Stores Established Foodservice OfferingDiverse and sophisticated merchandise mixEngaged in multiple foodservice occasions

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Share among Fast Food buyers relative to Traditional C-StoresFood Prepared Onsite

Restrooms are Neat and Clean

Product Quality

Overall Store Appearance

Name of Convenience Store

Clean, Bright Store

Good Selection of Products

1234567Reasons for Store Choice Relative Importance Source: Convenience Store Monitor YE June 15

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Major Innovation is Happening

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Grocery Foodservice

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Home Meal Replacement is most prevalentSource: The NPD Group/CREST, YE December

Source: CREST YE August

10-Year Forecast*+10%*2012 projection to 2022Grocery Foodservice Traffic (Billions)

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Grocery HMR*Share by Daypart BreakfastLunchDinnerSnacks*Prepared Food Purchased At Grocery Stores Eaten At Home Traffic PCYA vs. 080%+3%+5%-14% Source: CREST YE August Grocery Store success has been at lunch and dinner

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Motivations For Visiting

Grocery Wins At:Good PriceGood Variety Of FoodsAlways Go ThereHealthy ChoicesWanted a Light Meal

QSR Wins At:I Like it ThereSpecial Taste/CravingHas Take Out/DeliveryKids Like it ThereHad a Coupon

Top 5 Reasons (ranked on share gap)

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Differentiate and Stay Relevant

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QSR Food Trends

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Top 10 Foods/Beverages at Restaurants1984Carb Soft DrinkFrench FriesBurgersCoffeeSaladsDeli SandwichesBreadPizzaChickenTea2015Carb Soft DrinkDeli SandwichesChickenFrench FriesBurgersCoffeeTeaMexicanSalads Pizza

Source: CREST YE August

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Top Growing Chains By Specialty

Mexican

Chicken

Sandwiches

Pizza

Burger

Source: CREST YE August 15

CoffeeC-Stores

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Share of Food and Beverages By QSR SegmentSource: :QSR Plus Retail Market Monitor/March through June 2015

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Grocery Store Food and Beverage Satisfaction

StrengthsFood Was Fresh

Variety of Foods

Healthy Options

OpportunitiesTaste/Flavor of Food

Prepared How I Like

Quality of Beverages

Largest +/- gap to QSRs

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In SummaryConsumers have endless choices and they visit everywhere, so differentiation and relevance is paramountContinuous innovation and newsCapitalize on Convenience, Freshness, and VarietyLearn from Fast Casual: Customization, Crave-ability, and Experience

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Thank You!penny.anderson@npd.com

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