NATIONAL ICE CREAM MIX ASSOCIATION ANNUAL MEETING THE CHANGING RETAIL ENVIRONMENT BY DR. JOHN L. STANTON PROFESSOR OF FOOD MARKETING

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1 NATIONAL ICE CREAM MIX ASSOCIATION ANNUAL MEETING THE CHANGING RETAIL ENVIRONMENT BY DR. JOHN L. STANTON PROFESSOR OF FOOD MARKETING

2 APPROACH OF THIS PRESENTATION I will discuss how the retail industry is changing and we we can discuss how this specific change will positively, negatively or not affect our industry

3 FIRST I WANT TO READ TO YOU A LETTER FROM MY 12 YEAR OLD GRANDSON I was fun to spend the week with you. Thanks for letting me stay up let and watch movies. Thanks for taking me to Lucy s In the week he spent with me he chose to thank me for taking him to a soft ice cream shop!

4 LET S LOOK AT SOME OF THE CAUSES TO ALL THIS CHANGE AND THEN THE CHANGES!

5 IT S A WHOLE NEW WORLD OUT THERE. AMERICAN FAMILY MODERN FAMILY

kids: adult children who return to live with their parents

6 CONUSMERS HAVE CHANGED Sandwich generation: adults who care for their parents as well as their own children Boomerang kids: adult children who return to live with their parents Spend less on household items and more on entertainment SJU FOOD MARKETING

7 MILLENNIALS

11 A Supermarket? Yep!

13 THE RISE OF THE GROCERANT DEFINITION: A GROCERY AND RESTAURANT MERGED INTO ONE

14 SUPERMARKET GIANT KROGER IS OPENING A 'COMFORT FOOD' RESTAURANT AND WHY 'GROCERANTS' ARE THE NEW TREND, TAKING BITE OUT OF RESTAURANTS

15 THE BIG THEME IN TECH THIS YEAR WAS CONSOLIDATION NOT IN TERMS OF MERGERS AND ACQUISITIONS BUT IN THE BIG COMPANIES EXTENDING THEIR REACH AND TRYING TO CONQUER NEW MARKETS. The most important deal of the year, though, was Amazon's $13.7 billion acquisition of Whole Foods. In one swoop, Amazon disrupted groceries, retail delivery, and even the enterprise IT market.

16 IS THIS A DEPARTMENT STORE OR GROCERY STORE Kohl's is looking to drive traffic by leasing space in its stores to food retailer

18 The World s First Virtual Supermarket: Life Just Got Easier

19 Amazon Go

20 WHAT HAS REALLY CHANGED: CONVENIENCE STORES According to NPD Millennials Trade 'Down,' C-Stores Step Up FOR FOOD AND BEVERAGE STOPS, CONVENIENCE STORES ARE ALMOST TWICE AS IMPORTANT TO MILLENNIALS (18 TO 34) AS FAST-CASUAL RESTAURANTS,

21 CONVENIENCE STORES ARE AFTER MORE THAN HOTDOGS: THEY WILL SELL GAS TO GET YOU TO STOP AND THEN SELL YOU FOOD!

23 COUPONS ARE BEING PRINTED FOR IMMEDIATE PURCHASE INSIDE THE STORE!

24 EVERYONE WILL TRY TO SELL CONSUMERS THEIR NEXT MEAL

Some channels are no longer alternative. Once considered alternative, the warehouse club and value channels are growing sales faster than traditional channels, i.e. supermarkets and supercenters (mass).

25 Some channels are no longer alternative. Once considered alternative, the warehouse club and value channels are growing sales faster than traditional channels, i.e. supermarkets and supercenters (mass) US: Channel Sizes by Sales, f (USD bn) f 2017f Supermarkets Mass channel Drugstores Convenience stores* Warehouse clubs Value channel *Note: Convenience store sales represent merchandise sales only Source: US Department of Commerce, National Association of Convenience Stores and Planet Retail

26 Market share across grocery channels is shifting. Supermarkets are losing share at the expense of Value, Clubs and Convenience. Mass channel (i.e. supercenter) share is holding steady, but this could change. US: Channel Share of Total Grocery Format Sales 3.4% 4.3% 5.1% 9.0% 10.1% 10.4% 12.1% 12.7% 14.0% 14.5% 13.1% 12.7% Value channel Warehouse clubs Convenience stores Drugstores 27.4% 27.4% 26.6% Mass channel Supermarkets 33.7% 32.4% 31.2% f 2017f *Note: Convenience store sales represent merchandise sales only Source: US Department of Commerce, National Association of Convenience Stores and Planet Retail

27 CLUB STORES SALES ARE GROWING FASTER THAN THE INDUSTRY

28 NOT ALL IS ROSY, SAM'S CLUB CLOSING DOZENS OF STORES; SOME BEING CONVERTED TO DISTRIBUTION CENTERS

29 EVERYONE WILL TRY TO SELL CONSUMERS THEIR NEXT MEAL

31 YE OLDE CONVENIENCE STORE HAS CHANGED

32 COUPONS ARE BEING PRINTED FOR IMMEDIATE PURCHASE INSIDE THE STORE!

34 NOT JUST THE USA TESCO CLICK+COLLECT GROCERIES NOW AVAILABLE IN 300 LOCATIONS

35 EVERYONE WILL TRY TO SELL CONSUMERS THEIR NEXT MEAL HSN and QVC are already into food but just starting. One show sold $1million in of pasta sauce 30 minutes! (at $14.00 a jar)

36 WHAT DOES HSN SELL?? Appetizers & Sides (15) Beverages (77) Bread, Muffins & More (7) Brownies, Cakes & Cupcakes (92) Chocolate & Confections (50) Coffee & Tea (20) Cookies (25) Entrees (33) Food Storage (14) Fruits & Nuts (13) Meats & Poultry (55) Mixes (45) Sauces & Seasonings (10) Seafood (9) Sweet & Salty Snacks (36) Donatella Arpaia 5 lbs. Veal Shallot $60

37 BLUE APRON MEAL KITS NOW EXCEEDS $1,000,000,000 WHAT IS THE COMMON DENOMINATOR? PRODUCE!

38 IT IS NOT ONE COMPANY Blue Apron 43% Hello Fresh 33% Other 25% Plated 20% Sun Basket 17 Green Chef 16 Peach Dish 16 Martha & Marley Spoon 14 Based on data collected through July 2017 survey of over 2,191 U.S. adults

39 WHAT DOES HSN SELL?? Appetizers & Sides (15) Beverages (77) Bread, Muffins & More (7) Cookies (25) Entrees (33) Food Storage (14) Fruits & Nuts (13) Brownies, Cakes & Cupcakes (92) Chocolate & Confections (50) Coffee & Tea (20) Meats & Poultry (55) Mixes (45) Sauces & Seasonings (10) Seafood (9) Sweet & Salty Snacks (36) Donatella Arpaia 5 lbs. Veal Shallot $60

40 Supermarkets in Airports? The new 300sqm supermarket, operated by the BILLA chain, is located between terminals 1 and 2 to ensure maximum convenience for airport customers and visitors. Companies like Campbell soup in involved

41 SUPERMARKET AT SCHIPHOL AIRPORT

42 VENDING WILL BE UBIQUITOUS Not just soda and candy. Cash, credit or debit? Robo shop is already open. Here come the big guys. Consumers will follow-slowly.

43 SUPERMARKET VENDING

44 44 Yiqi Shan, a cashier-free store in southwest China's Chongqing metropolis, registered its 1,800th sale, two weeks after opening.

46 PLACES SUCH AS STAPLES AND OFFICE DEPOT ARE SELLING MORE FOOD EVERY YEAR. CURRENTLY IT IS NON-PERISHABLES. HOW ABOUT NEXT YEAR?

47 IS SELLING FOODS THAT GO WITH THEIR PRODUCTS FOR EXAMPLE THEY SELL PASTA SAUCE WITH THE POTS, SPICES, OILS, CANDY, MIXES FOR TORTILLAS ETC.

48 THE ELEPHANT IN THE ROOM E-COMMERCE SOCIAL MEDIA

49 5 FUNDAMENTAL CPG / GROCERY FULFILLMENT MODELS Source: RNG research & analysis 49

50 DIGITAL INFLUENCE > DIGITAL RETAIL FOR FOOD & CPG Source: RNG research & analysis Source: RNG research & analysis; *Top down analysis 50 Ecommerce- A non-store trip Digital-influenced - A trip to a store that is influenced digitally Analog-only - A trip to a store that is not digitally influenced

52 52

53 ARE YOU IGNORING THE EMERGING DISTRIBUTION FOR FOOD? Are you putting all their eggs in one basket

54 DARWIN HAS OFTEN BEEN MISQUOTED AS SAYING ONLY THE STRONGEST SURVIVE. However, what he really said was In the struggle for survival, the fittest win out at the expense of their rivals because they succeed in adapting themselves best to their environment. Charles Darwin ( ) The Origin of Species 1859

By Dr. John L. Stanton Professor of Food Marketing

By Dr. John L. Stanton Professor of Food Marketing I have been a Professor of Food Marketing @ Saint Joseph s University for 28 years. Consulted for and worked with many produce groups including Mushroom