WHAT’S IN STORE 2016: CANADA EDITION...$ Share & Growth t l +7%-1% Discount Share & Growth Source:...

Carman Allison – VP Consumer Insights@CarmAllison

WHAT’S IN STORE 2016: CANADA EDITIONCENTRE OF STORE’S REINVIGORATION

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TODAY’S SPEAKER

CARMAN ALLISONVice President,

Consumer Insights North America@CarmAllison

TRENDS THAT WILL IMPACT 2016

consumermarket retail

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CANADIAN CONSUMER CONFIDENCE CONTINUES TO LOSE TRACTION WHILE THE U.S. SOARS

Source: Nielsen Global Online Consumer Confidence Surveys – Q3 2015- Chg VYA

Q3 Consumer Confidence

CANADA UNITED STATES

100

97-6

119+11

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40%

60%

44%

62%

74%

60%

JOB PROSPECTS PERSONAL FINANCES GOOD TIME TO BUY

CANADA U.S.

AMERICANS FEEL MORE OPTIMISTIC ABOUT JOBS, FINANCES AND THIS BEING THE TIME TO BUY

% Agree

Source: Nielsen Global Online Consumer Confidence and Opinion Survey - Q3 2015 - % Agree: Good and Excellent

CHG VYA -16 +7 -1 +8 -1 +8

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CANADIAN UNEMPLOYMENT BY REGIONDecember 2015 vs 2014

Newfoundland & Labrador

14.4%+2.6%

Quebec7.8%

+0.3%

Ontario6.7%-0.3%

Manitoba5.9%+0.5

Alberta7.0%+2.3%

Saskatchewan5.5%+1.8%

B.C.6.7%+1.2% P.E.I.

9.7%-1.4%

Nova Scotia8.6%+0.2%

New Brunswick

8.9%-1.1%

Canada: 7.1%+0.4%

Source: Statistics Canada, September 2015

2015

2014

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58.3

41.7

PRAIRIE CONSUMERS ARE MORE VALUE FOCUSED – DISCOUNT RETAILERS BOOMING

$ Share & Growth

Dis

cou

nt

Co

nve

nti

on

al

+7%

-1%

Discount Share & Growth

Source: Homescan Grocery Watch, Canada National All Channels - 52 weeks to September 26, 2015 Grocery Composite

Grocery Composite

Maritimes 17.1 +13

Quebec 37.8 +6

Ontario 51.0 +7

Prairies 39.8 +11

B.C. 36.2 +6

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TOP CONCERNS2015 presented new consumer pressure points

201

5

2011

Source: Nielsen Global Omnibus Consumer Confidence Survey Q3 2015 – Canada – Top 2 Combined

20152011

1) Economy2) Debt3) Jobs

4) Health

5) Food Prices

1) Economy2) Debt3) Food Prices

4) Health

5) Job Security

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RECESSIONARY MINDSET RETURNS

Source: Nielsen Global Omnibus Consumer Confidence Survey Q3 2015 – Canada

71% Yes

+25 versus Q2

Canada in a Recession? 62%

Trying to reduce household expenses

Shopping the basics (+1.7 pts)

Have no spare cash

62%

17%

30%

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CONSUMERS ARE UNCERTAIN, REMAINING CAUTIOUS AND

FOCUSED ON VALUE

“”

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Source: Statistics Canada - November

Inflation CPI

+1.4%

Food …………+3.4%

Shelter………+1.2%

Clothing……+2.1%

Gas Prices

-18%Jan. 2016……..$0.96

Jun. 2015……..$1.17

6 mo. change

DESPITE SAVING AT THE PUMP, CONSUMERS ARE SPENDING MORE OVERALL ON ESSENTIALS

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THE CANADIAN DOLLAR HAS LOST ALMOST 30% OF IT’S GLOBAL SPENDING POWER IN THE PAST 2 YEARS

Source: Bank of Canada; Daily Noon Exchange Rates; 5 year to Dec 31, 2015

0.6

0.7

0.8

0.9

1

1.1

1.2

1.3

1.4

Q210

Q410

Q211

Q411

Q212

Q412

Q213

Q413

Q214

Q414

Q215

Q415

Cost to Buy 1 US$ CAN $

$

In Q1 13

Cad dollar was at par

-28% drop from Q1 ‘13 to Q4 ‘15

$

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CONSUMER PACKAGED GOODS PERFORMANCE

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Dollar Sales

Unit Sales

Trips per Shopper

Canadian CPG

Source: Nielsen MarketTrack, Canada National All Channels – 52 weeks, 52 weeks to December 12, 2015 - Total Tracked Sales excluding Fresh Random WeightHomescan Canada Grocery Composite: 52 weeks Year End. Current 52 weeks to September 26, 2015

2015 SHOWING THE IMPACT OF RISING PRICES

0.50.1

0.20.5 0.6

2.4 2.5

1.52.0

3.4

2011 2012 2013 2014 2015

132 130 126 123 122

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MIXED RESULTS WITHIN THE STORE

Source: Nielsen MarketTrack, Canada National All Channels – 52 weeks Ending December 12, 2015Total Tracked Sales including Fresh Random Weight

TOP 5 BOTTOM 5

+10% Processed Meat

+8% Hot Beverages

+8% Vegetables

+7% Fresh Meat

+7% Home Meal Replacements

+0% Household Products

+0% Pet Needs

+0% Shaving

+1% Paper Products

+1% Baking Needs

REINVIGORATING THE CENTRE OF THE STORE

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CENTRE OF STORE CHALLENGES

MODERATE GROWTH WITH SALES SHIFTING TO FRESH

CONSUMERS ARE REDEFINING HOW THEY EAT

SHOPPING SHIFTS ARE PRESENTING NEW OPPORTUNITIES

1

2

3

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DEFINING CENTRE OF STORE VS. PERIMETER

GroceryFrozen

Dairy

Bakery

Produce

Deli

Meat & Seafood

CENTRE PERIMETER

FOOD FRESH

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IN THE PAST 5 YEARS, CENTRE OF STORE HAS LOST 2.2% SHARE OF TOTAL STORE FOOD SPEND

Source: Nielsen MarketTrack + FreshTrack Grocery Banner + WMSC – Total Food – Canada, 52 weeks ending September 19, 2015

CENTRE PERIMETER

2015

2011

44.6%

42.4%

55.4%

57.6%

(+2.2 pts)

Dollar % Share of Food

% Chg CAGR

+2.4% +4.8%

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PERIMETER

4 Year CAGR

PERIMETER SHARE OF FOOD GROWTH FUELED BY INCREASED SPENDING DUE TO HIGHER PRICES

+4.8%

+0.4%

$’s Vol

FRESH

Meat & Seafood

Produce

Deli

Bakery

$ Share $ Vol

38.8% +5.1 +0.9

37.7% +5.5 +0.6

16.6% +1.8 -1.2

6.9% +6.6 +1.3

4 Year CAGR


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CENTRE OF STORE- TOTAL -

CENTRE OF STORE - FOOD -

CENTRE OF STORE- NON FOOD -

$57.3B$39.0B

$18.4B

+1.9%+0.5%

$4.2B

+2.1%+0.5%

$3.1B

+1.6%+0.5%

$1.1BAbsolute $ growth(Billions)

$CAGR (from 2011)Units CAGR

Latest 52 weeks(Billions)

THE DEMISE OF THE CENTRE OF STORE IS GROSSLY OVERSTATED

Source: Nielsen MarketTrack, Canada All Channels – 52 weeks ending September 19, 2015 Excluding General Merchandise

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CENTRE OF STORE - FOOD -

$39.0

+2.1%

$3.1Absolute $ growth(Billions)

CAGR (from 2011)

Latest 52 weeks(Billions)

GROCERY DAIRY FROZEN

$22.7 $10.8 $5.5

+2.7%

$2.3

+2.2%

$.45

+0.9%

$.37

Share of Centre Food Growth

71% 12% 15%

GROCERY AND DAIRY CASE CONTRIBUTING TO THE LARGEST CENTRE OF STORE GROWTH

Source: Nielsen MarketTrack, Canada All Channels –52 weeks ending September 19, 2015

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BUT NOT ALL IS GROWING IN CENTRE OF STORE FOOD

Consumers are changing their

eating habits across some significant

categories

Source: Nielsen MarketTrack, Canada All Channels – 52 weeks ending September 19, 2015

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BUT NOT ALL IS GROWING IN CENTRE OF STORE FOOD

Shelf Stable Juice & Drinks

• Shift to other beverages

• Deflation

• Increased Promotion

• 49% Sold on TPR today

• Up from 44% in 2011


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+$509.1 +14.4%

+$327.1 +5.2%

+$221.5 +4.0%

+$194.2 +3.5%

+$169.2 +8.7%

+$165.0 +5.2%

+$131.9 +39.1%

+$128.9 +2.1%

+$117.5 +4.1%

+$114.2 +14.5%

Absolute $ Chg

Millions

4 yr CAGR

R&G Coffee

Snack Foods

Yogurt

Chocolate

Snack Fruit & Nuts

Eggs

Rice / Non Dairy Bev

Frz Dinners / Entrées

Frz Seafood

Frz Fruit

INDULGENCE, CONVENIENCE AND HEALTH ARE DRIVING CENTRE OF STORE GROWTH TRENDS

EXPANSION


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+$101.2 +20.9%

+$95.8 +5.6%

+$86.7 +3.0%

+$54.6 +9.2%

+$51.1 +1.5%

+$46.1 +7.6%

+$40.4 +3.0%

+$38.4 +2.4%

+$36.9 +2.1%

+$36.0 +1.7%

Absolute $ Chg

Millions

4 yr CAGR

Energy & Nutrition

Natural Health Supplements

Face Care

Med. Nutritional Supplements

Bathroom Tissue

Incontinent Products

Dishwashing

Cat Food

Dog Food

Shampoo + Cond

CONTRACTION

Laundry Detergent

Air Care

Batteries

Razor Blades

Hair Colouring

Hair Fixatives

Bar Soap

Glucose Test Strips

Spot Removers

Facial Tissues

-$61.7 -2.5%

-$49.5 -6.4%

-$25.0 -2.1%

-$20.8 -1.7%

-$19.4 -2.1%

-$17.0 -2.7%

-$13.4 -2.2%

-$11.2 -6.8%

-$10.8 -7.2%

-$9.1 -0.8%

4 yr CAGR

WHAT’S TRENDING IN CENTRE OF STORE NON-FOOD?

Absolute $ Chg

Millions


EXPANSION

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CONSUMERS ARE REDEFINING HOW THEY EAT

OUT OF HOME

MEALSOLUTIONS

HEALTH AND WELLNESS

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IN HOME MEALS ARE THE MAJORITY OF MEAL OCCASIONS

Source: Canadian Consumption Diary, 2014-2015

FOOD SERVICE

+3.2%Ontario +4.8%B.C. +4.5%Alberta +0.9%

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RETAILERS AND CONSUMERS ARE RESPONDING

RETAILERS NEED TO WIN CONSUMERS’ SHARE OF STOMACH

Welcome to the Grocerant4 Year CAGR

+8.7%

+4.1%

$’s Vol

Home Meal Replacement Performance


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CENTRE OF STORE CATEGORIES ACCOUNTS FOR 50% OF THE PLATE

% of Meal Occasion

Source: Canadian Consumption Diary, 2014-2015

48%52%

Breakfast Lunch Dinner

51%49% 51%49%

Perimeter Centre of Store

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MORE THAN HALF OF CANADIANS ARE ACTIVELY TRYING TO LOSE WEIGHT

Source: Nielsen Global Online Consumer Confidence Surveys – Q3 2014 - Canada

59%consider

themselves overweight

52%are trying

to lose weight

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DIET DOMINATES WEIGHT LOSS EFFORTS, AMONGST THOSE TRYING TO LOSE WEIGHT

Source: Nielsen Global Online Consumer Confidence Surveys – Q4 2014 - Canada

84% are making a

change in their diet

Eating less fats

Eating less sugary foods

Eating more fresh foods

Portion control

Less processed foods

68%

62%

58%

56%

53%

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HEALTH & WELLNESS TODAY IS VERY FRAGMENTED

21ST CENTURY 20TH CENTURY

Wellness Characteristics

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MAJOR SHIFT IN “WELLNESS” THAT DRIVES GROWTH

21ST CENTURY 20TH CENTURY

Wellness Characteristics

+6%

CAGR

0%

CAGR

Source: U.S. Nielsen xAOC 52 weeks ending Q1 2012 vs Q1 2015

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ACTIONS TO DRIVE CENTRE OF STORE GROWTH

MAXIMIZE ASSORTMENT

IN STORE MATTERS

MOST

FOCUS ON REVENUE GROWTH

THINK OUTSIDE THE

AISLE

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-4.7

+2.2

+1.9

+0.1

+0.1

+0.1

+0.3

CONSUMERS’ SHARE OF WALLET FOR CENTRE OF STORE FOOD IS SHIFTING AWAY FROM GROCERY STORES

70.2

10.8

10.7

3.5

1.3

0.7

0.4

GROCERY

WAREHOUSE CLUBS

MASS MERCH

DRUG STORES

GENERAL MERCH

DOLLAR STORES

ONLINE

2015 2011

Share pt. chg

Source: Nielsen Homescan, Canada National Total Outlets, 52 weeks ending June 27, 2015

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Source: Nielsen Homescan, Canada

82% of Canadian live in a city

28% Urban Core

‘SMALL’ IS THE NEW ‘BIG’ AS CANADA’S URBAN CORES CONTINUE TO GROW

LARGE FORMAT

SMALL FORMAT

AVERAGE 35,000-45,000 SQ.FT. STORES

10,000 - 30,000 SQ.FT URBAN STORES

Proposed

• The Market By Longo’s: 7,000 sq ft (Toronto)

• Sobeys Urban Fresh: 20,000 sq ft (Toronto)

• The Box by No Frills: 10,000 sq ft (Calgary)

• FreshCo: 20,000 sq ft (Toronto)

• Loblaws: 10,000 sq ft (Toronto)

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SMALLER STORES PUT MORE PRESSURE ON CENTRE OF STORE ASSORTMENT – NEED TO GET IT RIGHT

$100

$90

$70

Item

A

Item

B

Item

C

Item

D

Item

E

High Performing

Items

Item A Item B Item C

High Cannibalization

LowCannibalization

Size of bubble: $ volumeOverlap: Level of cannibalization

Sale

s ra

te (

$ s

ales

per

po

int

of

dis

trib

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on

)

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CENTRE OF STORE FOOD HAS A HIGHER PERCENT OF SALES ON PROMOTION – BUT THEY DON’T WORK

Source: Nielsen MarketTrack: Canada National GDM = 52 wks to September 19, 2015Nielsen Trade Promotion Landscape Analysis 2015, Canada

% Sold on Promotion

% of Promotions that Don’t Make Money

36.3%

27.8%

41.3%

Total Store

Centre Food

Centre Non- Food

Need to focus on promotional effectiveness to drive sales and profit

42%

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THINK OUTSIDE THE AISLE TO FIND NEW GROWTH

What is our value to the rest of the store, and how do we demonstrate that value to retail customers?

How do we leverage partners in the store to drive new growth with shoppers?

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FIND THE SWEET SPOTLeverage the correlation between consumer preference and sales

Highsales

correlation

High buyer

overlap

SWEET SPOT

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LEVERAGE CATEGORIES TO CAPTURE INCREMENTAL PURCHASES

Source: Nielsen Total Store Connectivity Study, 2014 in the U.S.

91% of purchases DON’T include

Diet Carbonated Soft Drinks

90% of purchases DON’T include

Regular Carbonated Soft Drinks

Find similar buyers, but rare basket affinities

HIGH INCOME, older large FAMILIES or empty nesters

Deli PreparedChicken Buyers

HIGH INCOME, large FAMILIES ranging in age

Regular CarbonatedSoft Drink Consumers

HIGH INCOME, older large FAMILIES or empty nesters

Diet CarbonatedSoft Drink Consumers

DIE

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Do we need a slide describing the campaign? (VO option is below)

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INCREASED BASKET SIZES DRIVES JOINT BENEFIT

Source: Nielsen U.S. Homescan Total Shopper View:YAGO: 8/5/12-12/29/12; Test: 8/4/2013- 12/28/13Source: Nielsen Homescan Total Shopper View: 8/4/2013- 12/28/13 versus year ago“Coke Effortless Meals Products” refers specifically to the packs included in the Effortless Meals program

CAMPAIGN PRODUCTS EXPERIENCED

53% GROWTH IN SALES

INCREASE IN HOUSEHOLDS BUYING DELI PREPARED FOODS8%

WERE ALSO NEW TO COKE AT THE STORE

19%

basket size with the other product (vs. without)

DELI PREP FOODS SHOPPERS

COCA-COLA SHOPPERS

+59%

+47%

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CREATE VALUE FOR EVERYONE

• Leverage the growing importance of Fresh

• Stay on trend with meal preparation and recipes

• Think outside the aisle for growth partners

• Know your brands’ relationship with other categories

• Focus on promotional effectiveness to drive sales and profit

• Maximize assortment to reduce cannibalization

• Connect with new 21st Century growth drivers of health

and wellness

Win with RETAILERS

Win with SHOPPERS

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WHAT’S IN STORE 2016: CANADA EDITION...$ Share & Growth t l +7%-1% Discount Share & Growth Source:...

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