November 8, 2017 Conference Creating Connections And Communities
UNDERSTANDING THE CHANGING CONSUMER
In 2017, Canadians will spend $155 Billion on food NPD Eating Patterns in Canada 2017 3
IF YOU REMEMBER NOTHING ELSE. 287 Annual Per Capita Paid Food Visits to Grocery and Restaurants NPD Eating Patterns in Canada 2017
THE FRAGMENTED PATH TO PURCHASE DEMAND PRE-STORE DIGITAL IN-STORE PURCHASE A shopper journey with many opportunities to intersect and change their direction
ACCESSING FOOD EVERYWHERE The food distribution channel is changing at a fast pace. 72,000 Restaurants Website Online Ordering Tablet/Mobile Chef In home Services Call Center Grocery HMR Order from anywhere, Eat anywhere Alexia and Goggle Home Subscription Meal Services Virtual Restaurants Meal Kits Grocery Stores Pick Up Food Trucks Farm to Consumers
TRENDS IMPACTING PATH TO PURCHASE CONNECT REACH ENGAGE
CONNECT Online and Digital is creating new and exciting touch points along the shopper journey
THE DIGITAL FUTURE IS HERE AND NOW Online shopping for CPG is forecasted to almost triple by 2020 2.0% 5.3% CPG online sales are projected to grow +20% year over year 7:1 Margin by which retail e-commerce sales growth will outpace brick & mortar sales growth by 2020 Source: Nielsen, Cross Outlet Facts, 52 weeks ending July 1, 2017 VAPs E-Commerce Share
CLICKS VS BRICKS: ONLINE TRIPS ARE UP WHILE VISITS TO PHYSICAL STORES ARE IN DECLINE TOTL FMCG TRIPS BRICKS & MORTAR VS. 2,242.7 Million -2% E-COMMERCE 2,270.7 Million -2% 28.0 Million +11% Source: Nielsen Homescan Channel Watch 52 weeks ending July 1, 2017
REACH More consumers are shifting their purchase destinations to nontraditional retailers
CONSUMER SAVING STRATEGIES ARE SHAPING RETAIL FORMAT TRENDS CANADA TOP SAVING STRATEGIES % TRYING TO SPEND LESS ON FMCG 71% 80% 68% 57% 55% 52% 50% Stock-up Buy on Sale Coupons Switch Stores Store Brands Large Sizes Source: Homescan Panel View Survey 2017
OVER THE PAST 5 YEARS, $4.1 BILLION HAS SHIFTED TO ONLINE, DOLLAR STORE AND WAREHOUSE CLUBS $ Share of Market Online Dollar Stores 12.1% 1.2% 1.1% 15.6% 2.0% 1.5% THE OPPORTUNITY +$4.1 +33% Billion Increase $ growth since 2013 Warehouse Clubs 9.7% 12.1% 248 million trips in 2017 2013 2017 Total sales $ $12.5B $16.6B +17% trip increase since 2013 Source: Nielsen, Cross Outlet Facts, 52 weeks ending July 1, 2017 VAPs adjusted
ENGAGE Health and Wellness is influencing and changing purchase decisions
FACTORS HEIGHTENING FOCUS ON CLEAN EATING CANADA GRAYING CHRONICALLY AILING FOOD AS MEDICINE EVOLVING HEALTH & WELLNESS
65% of consumers eating healthy is a vital part of their lives BUT 64% Agree that it is challenging to eat right Source: Nielsen
CONSUMERS ARE PUTTING THEIR MONEY WHERE THEIR MOUTH IS DRIVEN BY: 54% O F C A N A D I A N S S AY T H E Y R E W I L L I N G T O PAY M O R E F O R F O O D S A N D D R I N K S T H AT D O N T C O N TA I N U N D E S I R A B L E I N G R E D I E N T S. 47% 28% Enlighten Eating % who follow a specific diet which limits specific foods and ingredients Sensitive Stomachs % of households with a food allergy or intolerance Source: Nielsen Global Health and Ingredient Sentiment Survey Q1 2016 Canadian respondents
PLANT BASED MILKS GAINING MOMENTUM Milk $2.5 Billion $ % Chg +0% L % Chg -2% Fat Content $ Share L % Chg 2% 46.3% +0 1% 27.6% -7 Homogenized 15.7% +6 Skim 7.5% -11 What s trending in Dairy Case Beverages? Sales % Dollars Chg Almond Milk $174M +4 Coconut Milk $18M +20 Cashew Milk $14M +46 Source: Nielsen MarkeTrack; National All Channels: 52 weeks to September 16, 2017
CONSUMERS ARE USING FOOD AS MEDICINE The power of Superfoods Superfoods used for Health Condition 69% Would buy foods that include superfood ingredients To Treat % of users To Prevent 64% Superfoods provide a natural way to treat and prevent aliments 28% Maca Powder 15% Turmeric 14% Chia Seeds 55% Coconut Oil 54% Hemp Seeds 50% Black Garlic 60% Would like to learn about ways to include superfoods in their diet 14% Coconut Oil 13% Acai Berries 50% Turmeric 49% Chia Seeds Source: Nielsen Global Survey Q3 2016- Canada respondents
OPPORTUNITIES ALONG THE PATH TO PURCHASE CONNECT REACH ENGAGE Online and Digital is creating new and exciting touch points along the shopper journey More consumers are shifting their purchase destinations to nontraditional retailers Health and Wellness is changing and influencing instore purchase decisions
Coffee In Canada 21
Past-day day coffee penetration stable, indicating a healthy market overall. 100 Percent Drinking Any Coffee Past-day 90 80 70 66 67 64 63 65 63 65 63 62 65 64 65 65 63 67 67 71 60 50 40 30 20 10 0 Telephone data collection Online data collection '98 '99 '01 '03 '05 '06 '07 '08 '09 '10 '11 '12 '13 14 '15 '16 '17 Source: Coffee Association of Canada annual beverage tracking.
In-home coffee preparation declines in 2017. Percent Drinking Past Day By Place Of Preparation 79 81 79 80 77 37 38 37 37 40 In Home (NET) Out Of Home (NET) 2013 2014 2015 2016 2017 Source: Coffee Association of Canada annual beverage tracking.
Foodservice coffee volume is stable 35% Share of Foodservice Occasions that include a coffee. 2.6 Billion coffee servings Source: The NPD Group / CREST YE August 2016 NPD Group/CREST Total Foodservice YE Sep 2017
Taste, convenience, unique beverages and the quality of the experience key to choosing to drink more coffee out of home. % Major Reason For Drinking More In Restaurants Or Cafes Tastes great To give myself a treat Convenient Can make drinks that I can't make at home To give myself a break, me-time Energy boost Makes me feel good A chance to relax Helps me to focus Warms me up Makes my commute more enjoyable A chance to socialize A ritual in my day A place to work/have meetings Had a lifestyle change Satisfies my thirst I want coffee as part of a meal or with food A cool/trendy thing to do Helps to pass the time Free Wi-Fi Affordable Healthy 14 21 24 23 23 27 26 30 28 35 35 35 35 33 41 41 41 43 45 47 53 53 Source: Coffee Association of Canada annual beverage tracking.
Taste, convenience, affordability, ritual and the quality of the experience key to choosing to drink more coffee in home. % Major Reason For Drinking More At Home Tastes great A ritual in my day Convenient Affordable A chance to relax Energy boost Makes me feel good Had a lifestyle change (started working, started To give myself a break, me-time Warms me up Helps me to focus To give myself a treat I make coffee at home to take with me while Something to drink while using the computer To offer hospitality to my guests I want coffee as part of a meal or with food Satisfies my thirst Helps to pass the time Something to drink while watching TV I've learned to make more kinds of coffee drinks A chance to socialize I work/have meetings from home Healthy A cool/trendy thing to do 36 34 34 31 31 29 28 27 25 24 24 24 21 20 18 18 15 15 12 10 53 52 50 48 Source: Coffee Association of Canada annual beverage tracking.
Out Of Home: Breakfast dominates coffee consumption. After breakfast, between meal snacking occasions are key. 78 Percent Drinking Coffee By Daypart Among Past Day Drinkers - 2017 43 22 30 11 17 Breakfast Morning Lunch Afternoon Dinner Evening Source: Coffee Association of Canada annual beverage tracking.
What we are drinking
Shifts are occurring in terms of what coffee beverages consumers are choosing. Percent Drinking Past-day 65 63 67 67 71 55 53 Traditional coffee flat 55 53 52 Espresso-based beverages growing 13 14 16 17 23 Emergence of new formats 7 8 Total Coffee Traditional Coffee Espresso-based Beverages (EBB)* Non-Espresso-Based Beverages (N-EBB)** 2013 2014 2015 2016 2017 Source: Coffee Association of Canada annual beverage tracking.
EBB beverage growth driven by espresso, latte and flat white. Percent Drinking Past-day 23 14 1617 13 3 3 4 3 3 4 5 6 5 5 6 6 4 4 4 5 4 4 4 5 1 1 1 1 2 7 8 4 4 2 2 3 4 3 3 3 1 2 4 4 1 1 Espressobased Beverages (EBB) Cafe Mocha Cappuccino Espresso Latte Macchiato Caffe Americano Flat White Non- Espresso- Based Beverages (N-EBB) Frozen Blended Coffee Cold brew coffee Nitro coffee 2013 2014 2015 2016 2017 Source: Coffee Association of Canada annual beverage tracking.
Out Of Home Specialty coffee is growing Share of Specialty Coffee 25 25 24 23 23 2013 2014 2015 2016 2017 NPD Group/CREST Total Foodservice YE Sep 2017
Consumers are reducing their use of cream in coffee. 72 69 67 70 Percent Adding To Coffee Half and half use consistently declining 26 27 23 24 19 16 27 29 7 8 8 7 5 5 3 4 3 5 Milk alternatives niche but growing 9 10 9 12 4 4 4 3 Half and Half/Milk/Creamer (NET) Half and half Reduced fat milk Whole milk Fat free/skim milk Milk alternatives (NET) Liquid Creamer Powdered creamer 2014 2015 2016 2017 Source: Coffee Association of Canada annual beverage tracking.
Sweetening in general and white sugar specifically declining. 49 51 50 44 41 41 39 38 39 31 34 26 Percent Adding To Coffee White sugar declining Raw sugar niche but growing 8 7 8 8 8 4 6 5 3 2 3 3 1 1 Sweetening (NET) Sugar/Raw Sugar (NET) White Sugar Artificial sweetener Stevia Raw sugar Honey Other natural sweetener 2014 2015 2016 2017 Source: Coffee Association of Canada annual beverage tracking.
Out Of Home Specialty beverages are sustaining the coffee category Coffee Share by Type 10% Cold Specialty +40M servings (since 2013) 14% Hot Specialty +10M servings (since 2013) Source: The NPD Group / CREST YE August 2016 NPD Group/CREST Total Foodservice YE Sep 2017
Coffee Preparation and Consumption
Shifts are also occurring in how coffee is prepared, with drip eroding and single-cup plateauing. Drip erodes 53 50 49 47 41 Single-cup plateaus 28 25 27 29 25 Percent Using Coffee Preparation Method New brewer type which might be confused with single-cup Instant erodes 15 14 13 14 10 11 11 8 10 11 12 4 2 3 3 3 2 1 1 Drip Single-cup Bean-to-cup Instant Espresso machine RTD Cold brewing 2013 2014 2015 2016 2017 Source: Coffee Association of Canada annual beverage tracking.
SINGLE SERVE PENETRATION FLAT Single Serve Penetration 34.1 2010 2011 2012 2013 2014 2015 2016 2017 Source: Nielsen Homescan National All Channels L52 Weeks PE Sept 30, 2017 2016 Conference INNOVATION: Design for the Future
ON DEMAND STILL REPRESENTS OVER 43% OF THE COFFEE CATEGORY SALES R&G 46% (+1) Inst 11% (+0) On Demand 43% (-1) R&G Instant On Demand Inflation Item Chg* +1 +5.7-2 +0.9 +0 +2.6 108 different on demand items sold in stores on average* $1.46 billion dollars in total coffee retail sales Source: Nielsen MarketTrack, Nat all channels, L52 weeks ending Sept 30, 2017 vs YA *Nielsen MarketTrack, Nat GDM,L52 weeks ending Sept 30, 2017
Breakfast trends Out Of Home 65% OOH breakfast occasions include coffee Breakfast sandwiches are the fastest growing food item in all of foodservice. 36% of all coffee foodservice occasions at breakfast include a breakfast sandwich + = $ NPD Group/CREST Total Foodservice YE Sep 2017
Coffee on-the-go is growing +46M (5-year) +54M (5-year) +42M (5-year) CONSUMED IN CAR (25% SHARE) DRIVE THRU (30% SHARE) CONSUMED AT HOME (15% SHARE) NPD Group/CREST Total Foodservice YE Sep 2017
Ethnic Analysis
Past-day coffee penetration similar across ethnicities. Some other beverages see clear ethnic skews. Percent Drinking Past-day 71 75 67 70 66 69 75 64 55 44 46 44 44 43 37 46 31 35 33 34 26 32 21 14 Total Coffee Tap Water Bottled Water Milk/Milk Beverages Tea Juice/Juice Beverages Alcohol Pop/Soft Drinks Caucasian (A) South Asian (B) East/Southeast Asian (C) Source: Coffee Association of Canada annual beverage tracking.
Traditional coffee stronger among Caucasians. Gourmet stronger among Asian-Canadians. Percent Drinking Past-day 71 67 70 56 39 41 Net Gourmet Coffee Beverages (GCB) Caucasians: 40% South Asians: 54% East/Southeast Asians: 51% 21 30 31 7 20 7 Total Coffee Traditional Coffee Espresso-Based Beverages (EBB)* Non-Espresso-Based Beverages Caucasian (A) South Asian (B) East/Southeast Asian (C) Source: Coffee Association of Canada annual beverage tracking.
Caucasians tend to be heavier coffee drinkers. Mean Number Of Cups Among Past-day Coffee Drinkers 18+ 3.2 2.4 2.1 Caucasian South Asian East/Southeast Asian Source: Coffee Association of Canada annual beverage tracking.
Caucasians are more likely to be in-home only drinkers. Percent Drinking Past-day Caucasian 60 20 20 South Asian 34 38 28 East/Southeast Asian 40 44 16 In-Home ONLY Out-of-Home ONLY Both In-Home and Out-of-Home Source: Coffee Association of Canada annual beverage tracking.
Trends Affecting Coffee 46
Morning Meal is stealing share in foodservice Traffic by Daypart (Millions) Lunch 1,202,060 1,284,653 1,452,124 1,557,210 1,626,594 Breakfast Supper Afternoon Snack Morning Snack Evening Snack 2013 2014 2015 2016 2017 NPD Group/CREST YE Aug Total 2017 Foodservice YE Sep 2017
Breakfast Innovation
Digital Door 126M Total Digital Orders (+19% since 2016) 17M Digital Coffee Orders 32M Mobile Payments NPD Group/CREST Total Foodservice YE Sep 2017
Demographics are shifting Change in visits since 2013 +204M +9M < 18 years old 18-34 years old 35-44 years old 45-64 years old 65+ years old -49M -5 M -14 M NPD Group/CREST Total Foodservice YE Sep 2017 CREST YE Aug 2017
And coffee is shifting too. Change in coffee servings since 2013 +12 M +102 M +3 M < 18 years old 18-34 years old 35-44 years old 45-64 years old 65+ years old -75 M -45 M NPD Group/CREST Total Foodservice YE Sep 2017
The Future OF Coffee..Innovation, Health, Distribution 52
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