MACRO INDUSTRY OVERVIEW. The Rise of Specialty Snacking HOW QUICK EATS ARE CHANGING THE INDUSTRY. Susan Szymanski

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1 The Rise of Specialty Snacking HOW QUICK EATS ARE CHANGING THE INDUSTRY Susan Szymanski VP Marketing MACRO INDUSTRY OVERVIEW Channel Trends Category Contributions Category Insights 1

2 Who Is SPINS? SPINS is the leading provider of retail consumer insights, analytics, and consulting for the Natural, Organic, and Specialty Products Industries. We transform raw data into intelligent and actionable business solutions. Retail Sales Data & Analytics Business Intelligence (BI) Tools Custom Reports & Consultation Brand Growth Solutions Consumer Insights & Solutions Digital & Mobile Applications Thought Leadership & Industry News Spins Cross-channel Reporting Only SPINS delivers a complete view of product distribution EXCLUSIVE Natural Supermarkets Specialty Gourmet Supermarkets Conventional Supermarkets Large Scale Retailers SPINSscan Natural SPINSscan Specialty Gourmet SPINSscan Conventional Food SPINSscan Conventional Multi Outlet, Convenience, Drug 2

3 Channel Performance Cross Channel Reporting We capture the natural & specialty stores where many health & wellness products originate alongside the traditional supermarkets and mass retailers such as Walmart and Target. NATURAL SPECIALTY GOURMET CONVENTIONAL MULTI OUTLET $8.2 B Channel Sales $8.2 B Channel Sales $607B Channel Sales +6.3% Total Channel Sales -0.9% Total Channel Sales +0.5% Total Channel Sales +6.6% Natural Products +0.8% Natural Products +8.9% Natural Products (NPI) +5.5% Specialty/Wellness Products +0.4% Specialty/Wellness Products +4.0% Specialty/Wellness Products Total U.S. Retail Dollar Sales Natural, Specialty Gourmet, and Conventional MULO Channels, 52 Weeks Ending 3/19/17 Channel Performance Natural Channel Product Mix Natural Products (NPI) Health & Wellness Products (HWI) $ Sales ($MM) $ % Change Natural Channel $ Growth ($MM) % Dollar Volume Contribution $6, % $402 80% $1, % $56 13% Natural products comprise lion s share of sales mix and drive bottom line growth Conventional products continue to grow in the channel Conventional Products $ % $32 6% Total Universe $8, % $ % Total U.S. Retail Dollar Sales Natural Channel, 52 Weeks Ending 3/19/17 3

4 Channel Performance Specialty Gourmet Channel Product Mix Natural Products (NPI) Health & Wellness Products (HWI) Specialty Gourmet Channel $ Sales ($MM) $ % Change $ Growth ($MM) % Dollar Volume Contribution $2, % $19 28% $2, % $9 27% Natural and Health/Wellness Products are contributing all growth in the channel, while Conventional products are driving the decline in total channel sales Conventional Products $3, % -$61 40% Total Universe $8, % -$74 100% Total U.S. Retail Dollar Sales Specialty Gourmet Channel, 52 Weeks Ending 3/19/17 Natural Product Growth Growth is strong for natural products, but off historical highs. Natural Channel Specialty Channel Convenience Channel Multi-outlet Channel Combined Channel $ Sales ($MM) $ % Change $ Sales ($MM) $ % Change $ Sales ($MM) $ % Change $ Sales ($MM) $ % Change $ Sales ($MM) $ % Change Natural Products $6, % $2, % $2, % $43, % $54, % Specialty & Functional Products $1, % $2, % $24, % $76, % $103, % Conventional Products $ % $3, % $53, % $486, % $543, % Total Universe $8, % $8, % $79, % $606, % $702, % Total U.S. Retail Dollar Sales Natural, Specialty Gourmet, and Conventional MULO Channels, 52 Weeks Ending 3/19/17 4

5 SPINS Product Library Leading Snacking Attributes Top 10 Natural Product Categories by Channel (by volume) Gluten Free Labeled Gluten Free Labeled Full Fat Non GMO Claim Full Fat Gluten Free Labeled Non GMO Project Verified Non GMO Claim Low or Reduced or Non Fat Organic Non GMO Project Verified Prebiotic or Probiotic 84% Of Natural Product Sales in the Channel Full Fat USDA Organic Prebiotic or Probiotic 89% Of Natural Product Sales in the Channel Prebiotic or Probiotic Low or Reduced or Non Fat Hormone Free 30% Of Natural Product Sales in the Channel Non GMO Claim Non GMO Project Verified Hormone Free Vegan Organic Organic Gluten Free Certified Gluten Free Certified Gluten Free Certified Hormone Free USDA Organic Whole Grain Council Certified Natural Channel Specialty Gourmet Conventional Total U.S. Retail Dollar Sales Natural, Specialty Gourmet, Conventional MULO, Convenience Channels, 52 Weeks Ending 12/25/16 Snacking Segment CHANNEL DYNAMICS 5

6 Definition Of Snacking Segment SPINS considers a number of categories as snacks: CHIPS & PRETZELS & SNACKS CRACKERS & CRISPBREADS REFRIGERATED YOGURT & KEFIR NUTS & TRAIL MIX & DRIED FRUIT COOKIES & SNACK BARS WELLNESS BARS & GELS JERKY & MEAT SNACKS BREAD & BAKED GOODS FRUITS & VEGETABLES CANDY Growth of Snacking Growth Of Snacking NATURAL CHANNEL $55,707,232 DOLLAR SALES $21,752, % DOLS, %CHG, YAGO 4.8% $643,588,086 NATURAL POSITIONING GROUP SPECIALTY & WELLNESS POSITIONING GROUP CONVENTIONAL POSITIONING GROUP NATURAL POSITIONING GROUP SPECIALTY & WELLNESS POSITIONING GROUP -2.9% CONVENTIONAL POSITIONING GROUP 12 SPINSscan Natural (proprietary), SPINS EATING OCCASION SNACK 52 Weeks Ending

7 Growth of Snacking Growth Of Snacking SPECIALTY GOURMET CHANNEL $311,885,187 DOLLAR SALES $319,523,678 DOLS, %CHG, YAGO 2.5% $151,753,386 NATURAL POSITIONING GROUP SPECIALTY & WELLNESS POSITIONING GROUP -1.0% -0.6% CONVENTIONAL POSITIONING GROUP NATURAL POSITIONING GROUP SPECIALTY & WELLNESS POSITIONING GROUP CONVENTIONAL POSITIONING GROUP 13 SPINSscan Specialty Gourmet (proprietary), SPINS EATING OCCASION SNACK 52 Weeks Ending Growth of Snacking Growth Of Snacking MULO + Convenience Channel DOLLAR SALES $7,754,684, % DOLS, %CHG, YAGO $6,520,347, % $42,905,590,120 NATURAL POSITIONING GROUP SPECIALTY & WELLNESS POSITIONING GROUP CONVENTIONAL POSITIONING GROUP NATURAL POSITIONING GROUP SPECIALTY & WELLNESS POSITIONING GROUP -0.2% CONVENTIONAL POSITIONING GROUP SPINSscan Natural (proprietary), Specialty-Gourmet (proprietary), Conventional (powered by IRI) and Convenience (powered by IRI), 52 Weeks Ending

8 Category Rank NATURAL CHANNEL $16,432,170 $28,552,942 $39,318,483 $44,153,743 $72,082,931 $12,294,955 $12,079,944 DOLLAR SALES $184,837,197 REFRIGERATED YOGURT & KEFIR CHIPS & PRETZELS & SNACKS WELLNESS BARS & GELS CRACKERS & CRISPBREADS NUTS & TRAIL MIX & DRIED FRUIT COOKIES & SNACK BARS JERKY & MEAT SNACKS CANDY RICE CAKES FRUITS & VEGETABLES $170,604,689 $114,522,613 SPINSscan Natural (proprietary), SPINS EATING OCCASION SNACK 52 Weeks Ending Category Rank NATURAL CHANNEL DOLS, %CHG, YAGO 6.1% 7.5% 4.4% 11.0% 8.8% 7.8% 16.5% 4.4% 3.4% REFRIGERATED YOGURT & KEFIR CHIPS & PRETZELS & SNACKS WELLNESS BARS & GELS CRACKERS & CRISPBREADS NUTS & TRAIL MIX & DRIED FRUIT COOKIES & SNACK BARS JERKY & MEAT SNACKS -9.2% CANDY RICE CAKES FRUITS & VEGETABLES DOLLAR SHARE 25.6% 23.7% 15.9% 10.0% 6.1% 5.5% 4.0% 2.3% 1.7% 1.7% REFRIGERATED YOGURT & KEFIR CHIPS & PRETZELS & SNACKS WELLNESS BARS & GELS CRACKERS & CRISPBREADS NUTS & TRAIL MIX & DRIED FRUIT COOKIES & SNACK BARS JERKY & MEAT SNACKS CANDY RICE CAKES FRUITS & VEGETABLES SPINSscan Natural (proprietary), SPINS EATING OCCASION SNACK 52 Weeks Ending

9 Category Rank SPECIALTY GOURMET CHANNEL $22,729,696 $24,664,610 $40,591,142 $56,736,994 $81,234,605 $19,331,220 $10,991,251 DOLLAR SALES $232,142,476 CHIPS & PRETZELS & SNACKS REFRIGERATED YOGURT & KEFIR CRACKERS & CRISPBREADS NUTS & TRAIL MIX & DRIED FRUIT WELLNESS BARS & GELS COOKIES & SNACK BARS REFRIGERATED CHEESE & PLANT BASED CHEESE FRUITS & VEGETABLES CANDY PRODUCE $147,636,332 $109,990,876 SPINSscan Specialty Gourmet (proprietary), SPINS EATING OCCASION SNACK 52 Weeks Ending Category Rank SPECIALTY GOURMET CHANNEL DOLS, %CHG, YAGO 12.4% -0.1% -1.1% CHIPS & PRETZELS & SNACKS REFRIGERATED YOGURT & KEFIR 0.2% 0.1% CRACKERS & CRISPBREADS NUTS & TRAIL MIX & DRIED FRUIT -2.9% WELLNESS BARS & GELS -5.2% COOKIES & SNACK BARS 2.1% REFRIGERATED CHEESE & PLANT BASED CHEESE -2.5% -1.7% FRUITS & VEGETABLES CANDY PRODUCE 29.6% DOLLAR SHARE 18.9% 14.0% 10.4% 7.2% 5.2% 3.1% 2.9% 2.5% 1.4% CHIPS & PRETZELS & SNACKS REFRIGERATED YOGURT & KEFIR CRACKERS & CRISPBREADS NUTS & TRAIL MIX & DRIED FRUIT WELLNESS BARS & GELS COOKIES & SNACK BARS REFRIGERATED CHEESE & PLANT BASED CHEESE FRUITS & VEGETABLES CANDY PRODUCE SPINSscan Specialty Gourmet (proprietary), SPINS EATING OCCASION SNACK 52 Weeks Ending

10 Category Rank MULO + Convenience Channel $2,535,815,703 $2,697,392,729 $2,908,235,517 $3,654,576,975 $1,616,345,454 $1,553,818,848 DOLLAR SALES $22,318,965,479 CHIPS & PRETZELS & SNACKS CRACKERS & CRISPBREADS REFRIGERATED YOGURT & KEFIR NUTS & TRAIL MIX & DRIED FRUIT COOKIES & SNACK BARS WELLNESS BARS & GELS JERKY & MEAT SNACKS BREAD & BAKED GOODS FRUITS & VEGETABLES CANDY $5,331,290,283 $5,441,345,126 $5,779,508,663 SPINSscan Natural (proprietary), Specialty-Gourmet (proprietary), Conventional (powered by IRI) and Convenience (powered by IRI), 52 Weeks Ending Category Rank MULO + Convenience Channel 1.4% 2.2% 0.1% 0.5% DOLS, %CHG, YAGO 9.0% 6.1% 3.7% 1.4% CHIPS & PRETZELS & SNACKS CRACKERS & CRISPBREADS REFRIGERATED YOGURT & KEFIR NUTS & TRAIL MIX & DRIED FRUIT -4.8% COOKIES & SNACK BARS WELLNESS BARS & GELS JERKY & MEAT SNACKS BREAD & BAKED GOODS FRUITS & VEGETABLES -2.2% CANDY 39.0% DOLLAR SHARE 10.1% 9.5% 9.3% 6.4% 5.1% 4.7% 4.4% 2.8% 2.7% CHIPS & PRETZELS & SNACKS CRACKERS & CRISPBREADS REFRIGERATED YOGURT & KEFIR NUTS & TRAIL MIX & DRIED FRUIT COOKIES & SNACK BARS WELLNESS BARS & GELS JERKY & MEAT SNACKS BREAD & BAKED GOODS FRUITS & VEGETABLES CANDY SPINSscan Natural (proprietary), Specialty-Gourmet (proprietary), Conventional (powered by IRI) and Convenience (powered by IRI), 52 Weeks Ending

11 Nuance Within Natural Trends By Brand Position NATURAL STANDARDS Marketed and sold in Natural retailers. Meets the strictest quality standards demanded by core natural consumers. SPECIALTY NATURAL Marketed as artisan, premium quality, imported/regional or ethnic/cultural. Quality standards similar to a Natural Standard brand. $273MM +11.8% $40MM +20.7% $2.8B +9.3% $867MM +11.9% Snacking Segment - Total U.S. Retail Dollar Sales Conventional MULO & Convenience Channels, 52 Weeks Ending 12/25/16 Nuance Within Natural Trends By Brand Position NATURALLY PERCEIVED Targets shoppers looking for an entry point to make better purchasing decisions. Broader distribution across various retail channels. CONVENTIONAL NATURAL Developed by traditional CPG brands but has added value such as organic content, Fair Trade ingredients, or allergy free claims. $263MM +22.2% $2MM (27.7%) $1.1B +17.2% $406MM +33.5% Snacking Segment - Total U.S. Retail Dollar Sales Conventional MULO & Convenience Channels, 52 Weeks Ending 12/25/16 11

12 Category Share Of Natural Snacking Growth Wellness Bars & Gels and SS Chips, Pretzels & Snacks contribute most to the sales volume of total Snacks. But Wellness Bars & Gels have taken over SS Chips, Pretzels & Snacks in Contribution to Growth, which is a change from last year. $5,728 MM $676 MM 1.9% 1.1% 0.4% 1.8% 0.4% 4.2% 5.3% 1.3% 1.0% 4.1% 33.1% 33.8% SS SALSAS & DIPS SS RICE CAKES RF SALSAS & DIPS SS NUTS & TRAIL MIX & DRIED FRUIT SS JERKY & MEAT SNACKS SS WELLNESS BARS & GELS SS CRACKERS & CRISPBREADS SS COOKIES & SNACK BARS SS CHIPS & PRETZELS & SNACKS SS CANDY 7.0% 10.9% 33.1% 5.3% Contribution to Sales 11.5% 13.0% 20.6% 9.8% Contribution to Growth Snacking Segment - Total U.S. Retail Dollar Sales Conventional MULO & Convenience Channels, 52 Weeks Ending 12/25/16 SNACKING ON TREND PRODUCTS 12

13 Trendwatch: Bars With Horsepower Small bars are expected to pack a big punch with high-quality proteins, savory flavors, and nutrient-dense ingredients. Trendwatch: Extreme Chocolate Even our biggest indulgences are expected to deliver added benefits, as chocolates go the extra mile to nourish and sustain. 13

14 TRENDWATCH: Best of Snacks Expo West 27 TRENDWATCH: Comfort Veggies Looking beyond the standard potato, the new generation of chips continue to feature vegetables like beets and jicama, as well as savory flavor profiles and added probiotic and protein content. 14

15 TRENDWATCH: What s Next We are seeing interesting packaging and ingredients coming into the market A QUICK LOOK AT CANDY 15

16 Focus of Analysis / Natural Insights CANDY SPINS positioning within each channel Absolute Dollars % YoY Growth MULO + Conv CONVENTIONAL POSITIONING GROUP $23.3B -1.5% NATURAL POSITIONING GROUP $320.0M 26.4% INNOVATION DRIVER SPECIALTY & WELLNESS POSITIONING GROUP $1.7B -1.5% Natural CONVENTIONAL POSITIONING GROUP $5.1M 1.1% INNOVATION DRIVER NATURAL POSITIONING GROUP $133.1M 5.6% SPECIALTY & WELLNESS POSITIONING GROUP $11.0M -6.8% Specialty CONVENTIONAL POSITIONING GROUP $88.9M -3.2% INNOVATION DRIVER NATURAL POSITIONING GROUP $34.6M 5.1% This is SPECIALTY good news & as WELLNESS it shows the Naturally POSITIONING positioned products gaining traction in the MULO (and other) channels $56.7M -11.7% GROUP Selection Status: Reporting Level: UPC, Product Universe: TPL SPINSscan Natural, Specialty Gourmet, MULO + Conv, 52 w/e 3/19/17 Channel Insights / Macro Overview CANDY New Product Growth New Items in Reporting New Prod $ New Prod MULO + Conv % 98.6% 5.9% New Prod as % Total Prod Natural %.6% 10.5% Specialty %.7% 9.3% All Total Channels 6030 Selection Status: Reporting Level: UPC, Product Universe: TPL SPINSscan Natural, Specialty Gourmet, MULO + Conv, 52 w/e 3/19/17 16

17 Top Claims / Natural Channel Trends Top CHOCOLATE CANDY Claims by YOY Growth Product Attributes Absolute Dollars % YoY Growth Natural PALEO POSITIONED 121.9% $1.4M Natural CERTIFIED ORGANIC 70-94% 87.3% $2.1M Natural PROBIOTIC 18.1% $195Th Same Claims in MULO + Conv for comparison: Product Attributes Absolute Dollars % YoY Growth MULO + Conv PALEO POSITIONED 11.1% $22.8Th MULO + Conv CERTIFIED ORGANIC 70-94% 308.1% $2.6M MULO + Conv PROBIOTIC % $11.9M Selection Status: Reporting Level: UPC, Product Universe: TPL SPINSscan Natural, MULO + Conv, 52 w/e 3/19/17 Alternative Sweetener Use / Cross Channel Trends Chocolate Candy Sweetener Trends Sum of Dollars NATURAL & ARTIFICIAL SWEETENER BLENDS $96,255,725 SORBITOL $41,609,160 OTHER ARTIFICIAL ALTERNATIVE SWEETENERS $20,665,931 STEVIA $14,849,157 MALTITOL $9,636,566 Selection Status: Reporting Level: UPC, Product Universe: TPL SPINSscan Natural, Specialty Gourmet, MULO + Conv, 52 w/e 3/19/17 17

18 Key Brands in Natural / Product Types Chocolate Candy - Trends Chocolate Bar Chocolate Cup Chocolate Truffle Chocolate Fudge Chocolate Coated Hu Kitchen, new brand highlighting stoneground cacao with Paleo and Vegan labeling Theo Chocolate, established brand recently released almond butter cups Alter Eco s recently featured a new line of truffles Honey Mama s mouth watering fudge, and a SPINS Winter Fancy Food show pick Little Secrets, a top newer brand driving sales for this Product Type Channel Overview Non Chocolate Candy Absolute Dollars % YoY Growth MULO + Conv $6.9B -0.5% Natural $20.8M 2.9% Specialty $37.0M -3.7% All Total Channels $7.0B -0.5% Selection Status: Reporting Level: UPC, Product Universe: TPL SPINSscan Natural, Specialty Gourmet, MULO + Conv, 52 w/e 3/19/17 18

19 Non Chocolate Candy where the growth is Key Product Type Growth Absolute Dollars % YoY Growth Natural Other Candy $4.2M 7.2% Natural Licorice $4.0 M 15.1% Natural Gummy Candy $3.3M 16.8% Insight: Gummy Candy is growing both in Natural and Conventional Selection Status: Reporting Level: UPC, Product Universe: TPL SPINSscan Natural, Specialty Gourmet, MULO + Conv, 52 w/e 3/19/17 Key Brands / Product Types Non Chocolate Candy Other Candy Licorice Gummy Candy Caramels Candy Canes Torie & Howard is a growth driver with their fruit chews Yumearth, established brand and leader in licorice Surf Sweets stand out in the gummy space, from bears to worms sweet to sour Cocomels, a top brand focused on dairy-free - substituting coconut milk Trusweets is the growth driver for candy canes no surprise being that they re organic! 19

20 Alternative Sweetener Use Non Chocolate Candy Sweetener Trends Sum of Dollars SORBITOL $90,626,306 NATURAL & ARTIFICIAL SWEETENER BLENDS $65,409,766 OTHER ARTIFICIAL ALTERNATIVE SWEETENERS $41,907,703 MALTITOL $4,731,562 XYLITOL $4,161,751 Wonka Sweetart Rope Candy 5 Oz $13,537, % Selection Status: Reporting Level: UPC, Product Universe: TPL SPINSscan Natural, Specialty Gourmet, MULO + Conv, 52 w/e 3/19/17 THANK YOU! Susan Szymanski VP Marketing sszymanski@spins.com ext Citation / Source 20