WHAT GLOBAL TRENDS MEAN FOR THE FUTURE OF THE PROTEIN INDUSTRY Bruce Axtman Nielsen Perishables Group Copyright ©2012 The Nielsen Company. Confidential and proprietary. AGENDA • • • • Consumer and economic trends U.S. demographic shifts Evolving shopper behaviors Promoting for maximum impact with consumers • Fresh is in • Winning in today’s retail environment 2 CONSUMER AND ECONOMIC TRENDS Global Consumer Confidence Index 102 94 90 90 85 84 92 94 89 88 89 91 92 77 2H '0 6 2H '0 7 2H '0 Q1 8 20 0 Q3 9 20 0 Q3 9 20 1 Q4 0 20 1 Q1 0 20 1 Q2 1 20 1 Q3 1 20 1 Q4 1 20 1 Q1 1 20 1 Q2 2 20 1 Q3 2 20 12 Copyright ©2012 The Nielsen Company. Confidential and proprietary. HOVERING NEAR THREE YEAR AVERAGES Source: Nielsen Global Omnibus Consumer Confidence Survey 3Q2012 4 SECOND WAVE OF “RECOVERY” UNDERWAY Nielsen U.S. Consumer Confidence Index 92 92 85 83 93 83 83 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 80 1Q08 2005 - 2007 1Q09 1Q10 2008 - 2Q 2009 Pre-Recession Source: Nielsen Global Omnibus Consumer Confidence Survey 1Q13 1Q11 1Q12 1Q13 2010 - 1Q 2013 Recession Post-recession 5 U.S. GROWTH SLOWED Actual and Projected U.S. GDP Growth (2006-2017) Forecast for 2013 Slow Growth Actual Forecast 3.4% 3.4% 2.7% 2.4% 1.9% 2.4% 2.2% 1.8% 3.3% 1.5% Copyright ©2012 The Nielsen Company. Confidential and proprietary. v -0.3% 2006 2007 2008 2010 2011 2012 2013 2014 2015 2016 2017 2009 Source: IMF World Economic Outlook, Oct 2012; 2012-2014 from Wells Fargo forecasts as of Dec 21 2012; TCG Analysis 6 WHAT WE DISCUSS TODAY PREPARES US FOR TOMORROW Actual and Projected U.S. GDP Growth (2006-2017) Forecast for 2013 Slow Growth Actual Forecast 2.7% 2.4% Copyright ©2012 The Nielsen Company. Confidential and proprietary. 1.9% 3.4% 2015 2016 3.3% 2.4% 2.2% 1.8% 3.4% 1.5% -0.3% 2006 2007 2008 2010 2011 2012 2013 2014 2017 2009 Source: IMF World Economic Outlook, Oct 2012; 2012-2014 from Wells Fargo forecasts as of Dec 21 2012; TCG Analysis 7 SEEMINGLY A LOT HAS CHANGED IN TWO YEARS Copyright ©2012 The Nielsen Company. Confidential and proprietary. Spring 2011 Source: Nielsen Spring 2013 8 ECONOMIC CONCERNS REMAIN IN THE FOREFRONT OF CONSUMER MINDS Copyright ©2012 The Nielsen Company. Confidential and proprietary. What are your biggest concerns over the next six months: CONCERNS Q1 2013 ECONOMY 28% 27% JOBS 11% 13% DEBT 10% 8% FOOD PRICES 5% 7% HEALTH 7% 7% FUEL PRICES 11% 5% UTILITY PRICES 5% 6% WORK LIFE BALANCE 3% 5% Source: Nielsen Global Omnibus Consumer Confidence Survey 1Q13 Q4 2012 CHANGE SAME 9 IS THIS THE NEW NORMAL? DECLINING HOUSEHOLD INCOMES 2007 $53,768 2008 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 2009 2010 2011 CONSUMERS LIVING PAYCHECK TO PAYCHECK $52,546 $52,195 68% $50,830 $50,054 Source: U.S. Census Bureau; Reuters Sept 2012 survey The New York Times & USA TODAY/Sentier Research 10 U.S. DEMOGRAPHIC SHIFTS ©2012 The Nielsen Company. Confidential and proprietary. Copyright ©2013 “OLDEST OLD” CROWD GROWING RAPIDLY Source: USA TODAY (Feb. 4, 2013) 12 OLDER MORE TRIPS; YOUNGER BIGGER BASKETS Total Retail Channels Shopping Trips Per Household Millennials Gen X Boomers Greatest Gen 113 135 157 170 Basket Ring $ Per Trip Millennials Gen X Boomers Greatest Gen Copyright ©2012 The Nielsen Company. Confidential and proprietary. Basket Ring $ Per Household Millennials Gen X Boomers Greatest Gen $6,060 $7,194 $7,223 $6,156 $54 $53 $46 $36 % Dollars on Deal* Millennials Gen X Boomers Greatest Gen 31% 27% 25% 26% Millennials more deal prone Source: Nielsen Homescan, Total U.S. 52 weeks ending 12/29/2012, excludes gas only or Rx only trips; *UPC-coded products 13 ETHNIC WILL BE MAJORITY BY 2050 Distribution of the U.S. Population Hispanic 70% 65% Black 60% Asian White Non-Hispanic 60% Copyright ©2012 The Nielsen Company. Confidential and proprietary. 4% 13% 14% 8% 9% 6% 7% 14% 14% 27% 30% 2040 2050 13% 16% 19% 23% 2000 2010 2020 2030 Source: U.S. Census 46% 54% 35% 5% 51% 15% 15% 14 HISPANIC BUYING POWER Hispanic consumer market in the U.S. is larger than the entire economies of all but 13 countries in the world UGA Selig Center Multicultural Economy study, May 1, 2012 $1.7 trillion $1.5 trillion Copyright ©2012 The Nielsen Company. Confidential and proprietary. $1.2 trillion $1.0 trillion $488 billion $210 billion 1990 2000 2010 Source: Selig Center for Economic Growth, University of Georgia, Athens 2012 2015 2017 15 WHO ARE U.S. SEAFOOD CONSUMERS? Highest indexing consumer characteristics 78% affluent urban and suburban areas and downscale urban areas live in Young Transitionals ©2012 The Nielsen Company. Confidential and proprietary. Copyright ©2013 No children, 35 or younger White consumers make up 56% of seafood sales in top stores, but African American, Hispanic and Asian consumers index well $75K+ HH Income Source: Nielsen Spectra College graduates 16 SHOPPER BEHAVIORS ARE EVOLVING Copyright ©2012 The Nielsen Company. Confidential and proprietary. UNDERSTAND EVOLVING SHOPPERS Eating but not cooking Engaged in food and cooking 18 Copyright ©2012 The Nielsen Company. Confidential and proprietary. EATING BUT NOT COOKING 19 STRONGEST FRESH GROWTH IN CONVENIENCE NOT JUST FOR FAMILIES DOLLAR GROWTH 8% VOLUME GROWTH 5% 4% ©2012 The Nielsen Company. Confidential and proprietary. Copyright ©2013 1% CONVENIENCE STAPLES 19% 62% CONTRIBUTION TO FRESH DOLLAR SALES Source: Nielsen Perishables Group FreshFacts® Total U.S. 52 weeks ending 9/29/2012 vs. Year Ago; Products in each group are not mutually exclusive FreshFacts Powered by Spire/Consumer Essence Segmentation 20 Copyright ©2012 The Nielsen Company. Confidential and proprietary. CONVENIENCE PRODUCT INNOVATIONS FOR DIFFERENT DAY PARTS Lunch and Dinner Source: MultiAd Kwikee & company websites Breakfast Smaller Meal Occasion: Snacking & Smaller HH 21 Copyright ©2012 The Nielsen Company. Confidential and proprietary. PACKAGING INNOVATIONS MEETING CONVENIENCE NEEDS Source: MultiAd Kwikee & company websites 22 Copyright ©2012 The Nielsen Company. Confidential and proprietary. ENGAGED WITH FOOD AND COOKING 23 Copyright ©2012 The Nielsen Company. Confidential and proprietary. ENGAGED WITH FOOD Food & cooking websites 67 to 91 million unique monthly visitors Source: Nielsen BookScan; Nielsen NetView, Home & Work; Nielsen Online Views Survey – March & April 2012 (n= 50,643) Spend more than average on both fresh and center store 24 Copyright ©2012 The Nielsen Company. Confidential and proprietary. CREATIVE restaurant quality meals at home increasingly SOPHISTICATED and global palates PASSIONATE about understanding food INTRIGUED by sourcing: production and processing methods EDUCATED on health Food Technology, January 2012 25 CATEGORIES WITH KEY ATTRIBUTES ARE DRIVING GROWTH DOLLAR GROWTH VOLUME GROWTH 8% 7% 5% 5% ©2012 The Nielsen Company. Confidential and proprietary. Copyright ©2013 3% 3% HEALTHY PREMIUM INDULGENT MULTICULTURAL GLOBAL 37% 9% 3% CONTRIBUTION TO FRESH DOLLAR SALES Source: Nielsen Perishables Group FreshFacts® Total U.S. 52 weeks ending 9/29/2012 vs. Year Ago; Products in each group are not mutually exclusive 26 Copyright ©2012 The Nielsen Company. Confidential and proprietary. HEALTHY LABEL CLAIMS GROWING Sales range from $70B for fat claims to $64M for health claims Label Claims Dollar Sales and Unit Change $80 $70 Fat presence Natural +4% Preservative Presence +3% Billions $60 $50 $40 Salt or Sodium Presence +.5% $30 $20 Organic +9% Protein Presence +10% Hormone Antibiotic Free +12% Iron Presence +4% $10 $0 52 Weeks Ending 11/24/2012 Source: Nielsen Scantrack & Nielsen Label Trends; UPC-coded; Total U.S. - All Outlets Combined 27 Copyright ©2012 The Nielsen Company. Confidential and proprietary. ORGANICS GOING STRONG, ESPECIALLY IN MEAT Natural/ Organic Dollar Sales % Change vs. Year Ago Sources: Nielsen Scantrack & Nielsen Label Trends Total U.S. - All Outlets Combined; Photo Sources: Company websites 28 PROMOTING FOR MAXIMUM IMPACT WITH CONSUMERS RETAILERS OFFERING FEWER PROMOTIONS, SHALLOWER DISCOUNTS Declining promotions playing out in both circular ads and discount strategies CIRCULAR PRINT AD COUNT PROMOTIONAL AVERAGE RETAIL PRICE (TOTAL PERISHABLES) (TOTAL PERISHABLES) ©2012 The Nielsen Company. Confidential and proprietary. Copyright ©2013 -0.6% SALE +2% SALE Source: Market Track Promotional Data (Grocery channel only) 52 weeks ending 9/29/2012 vs. Year Ago; Nielsen Perishables Group FreshFacts® (FCA), 52 weeks ending 10/27/2012 vs. Year Ago 30 PROMOTIONS FLAT OR DOWN ACROSS FRESH -2.1% SEAFOOD Produce -1.0% Meat Copyright ©2012 The Nielsen Company. Confidential and proprietary. -0.8% Seafood Deli Bakery Bakery Deli Seafood Meat 0.3% Promotional volume down in 8 of 14 seafood categories 0.5% Produce Source: Nielsen Perishables Group FreshFacts®, Total U.S. – Fresh Coverage Area; 52-weeks ending 2/23/20123 (vs. year ago) 31 PARADIGMS ARE SHIFTING Today the predominant promotional strategy in fresh categories involves suppliers offering cost savings per box in exchange for circular ads, but printed retailer circulars are shrinking or disappearing altogether Copyright ©2012 The Nielsen Company. Confidential and proprietary. TRADITIONAL ADDITIONAL OUTLETS Direct to consumer from retailers or suppliers/manufacturers CIRCULAR AD FSI SEGMENTATION DIRECT MAIL SOCIAL MEDIA TV LOYALTY CARD ONLINE MOBILE RADIO 32 FRESH IS IN Copyright ©2012 The Nielsen Company. Confidential and proprietary. FRESH FOODS DRIVE SALES AND STORE CHOICE FRESH FOODS COMPRISE 30%-60% OF TOTAL GROCERY SPENDING GLOBALLY Source: Nielsen Global Survey of Fresh Foods, March 2013 FRESH FOODS: • Contribute a healthy percentage of total grocery spending • Drive strong retailer equity • Boost high-traffic volume • Constitute a staple for a healthy diet 34 Copyright ©2012 The Nielsen Company. Confidential and proprietary. SHOPPERS SPLITTING THEIR FRESH TICKET Source: Company websites 35 FRESH DEPARTMENT CONTRIBUTION Copyright ©2012 The Nielsen Company. Confidential and proprietary. 29% 39% 32% 16% 7% MEAT PRODUCE DELI BAKERY $70 $54 $52 $52 5% SEAFOOD FRESH FOOD CONTRIBUTION TO TOTAL STORE SALES MEAT Source: Nielsen Perishables Group FreshFacts®;2012 PRODUCE DELI BAKERY $74 SEAFOOD 36 Copyright ©2012 The Nielsen Company. Confidential and proprietary. FRESH PURCHASES REMAIN STRONG WHILE NON-FRESH CATEGORIES FIGHT DECLINES Total U.S. 52 Weeks Ending 2/23/2013 DOLLAR GROWTH VOLUME GROWTH 6% 7% 6% 5% 4% 3% 4% 3% 0% MEAT 0% PRODUCE DELI BAKERY Source: Nielsen Perishables Group FreshFacts® Total U.S. 52 weeks ending 2/23/2013 vs. Year Ago SEAFOOD 37 FRESH SEAFOOD JOINING MOMENTUM OF FROZEN Total Seafood Volume Sales Trend by Type Fresh Smoked 6% 5% 5% 5% Frozen 3% 2% Copyright ©2012 The Nielsen Company. Confidential and proprietary. 1% -1% 2010 2011 2012 -5% Source: Nielsen Perishables Group FreshFacts®, Total U.S. – Fresh Coverage Area; Stable Stores; Nielsen Scantrack, Total U.S. – Food + WMT + Sam’s + Target 38 FRESH SEAFOOD RETAIL PERFORMANCE OVERVIEW After recession-related decline, fresh seafood is making a comeback 3-year History YTD through March 9% 7% 6.5% 5%7.0% 5% 2% 1% 0% Copyright ©2012 The Nielsen Company. Confidential and proprietary. 7% -1% -1% -1% -5% 2010 2011 Dollar % Change 2012 -0.5% Volume % Change Source: Nielsen Perishables Group FreshFacts®, Total U.S. – Fresh Coverage Area; 52-weeks ending 2/23/20123 (vs. year ago) Average Retail % Change 39 FRESH SEAFOOD DRIVING GROWTH • Sales growth was positive across seafood varieties • Fresh seafood driving department dollar and volume growth Copyright ©2012 The Nielsen Company. Confidential and proprietary. Seafood Department, Total U.S. GROWTH DRIVERS: Crabs Salmon Lobster Tilapia Sea Bass 8% 7% 6% 3% 4% 2% 2% 1% -1% Fresh Seafood Dollar % Change Prepared Seafood Volume % Change Source: Nielsen Perishables Group FreshFacts®, Total U.S. – Fresh Coverage Area; 52-weeks ending 2/23/20123 (vs. year ago) Other Seafood Average Retail % Change 40 SALMON Strong supply bolstered the top-selling fin fish Salmon Trend Comparisons Total U.S., 52 Weeks Ending 2/23/13 Salmon purchased by 16% OF U.S. 23% 13% HOUSEHOLDS Copyright ©2012 The Nielsen Company. Confidential and proprietary. (+1 pt from a year ago) 3% -8% Salmon Dollar Growth Volume Growth Average Retail Growth Distribution Points Selling Growth Source: Nielsen Perishables Group FreshFacts®, Total U.S. – Fresh Coverage Area (vs. year ago); Nielsen Perishables Group FreshFacts® Shopper Insights 41 TILAPIA Tilapia Trend Comparisons Total U.S., 52 Weeks Ending 3/30/13 Tilapia purchased by 18% OF U.S. 15% 9% 2% HOUSEHOLDS (+1 pt from a year ago) Copyright ©2012 The Nielsen Company. Confidential and proprietary. -6% Tilapia Dollar Growth Volume Growth Average Retail Growth Distribution Points Selling Growth Source: Nielsen Perishables Group FreshFacts®, Total U.S. – Fresh Coverage Area (vs. year ago); Nielsen Perishables Group FreshFacts® Shopper Insights 42 SHRIMP Shrimp Trend Comparisons Total U.S., 52 Weeks Ending 2/23/13 8% Shrimp supplies 6% expected to decline 3% Copyright ©2012 The Nielsen Company. Confidential and proprietary. in 2013 2% Total Shrimp Dollar Growth Volume Growth Average Retail Growth Distribution Points Selling Growth Source: Nielsen Perishables Group FreshFacts®, Total U.S. – Fresh Coverage Area (vs. year ago); Nielsen Perishables Group FreshFacts® Shopper Insights 43 CANNED TUNA Suffering due to price increases Canned Tuna Trend Comparison 2012 Copyright ©2012 The Nielsen Company. Confidential and proprietary. 13% -2% -9% Dollar Growth Volume Growth Source: Total U.S. – Fresh Coverage Area; Stable Stores; Nielsen Scantrack, Total U.S. – Food + WMT + Sam’s + Target Average Retail Growth 44 WINNING IN TODAY’S RETAIL ENVIRONMENT Copyright ©2012 The Nielsen Company. Confidential and proprietary. HOW SEAFOOD CAN WIN IN TODAY’S RETAIL ENVIRONMENT • Opportunities that seafood may adopt that are winning in other fresh departments. • Consumer targeting • • • • Different offerings for different consumers Product development • Convenience • Premium • New varieties/flavors Strategic promotions • Connecting to consumers lifestyles • Aggressively leveraging health Expanded distribution • New channels 46 QUESTIONS? For more information: Bruce Axtman Bruce.Axtman@nielsen.com