TOTAL STORE CONNECTIVITY: REVEALING NEW PATHWAYS TO WIN SPECIALTY CHEESE International Dairy Deli Bakery Association In partnership with Nielsen Perishables Group May, 2015
AGENDA Study Objectives 3 Deli Specialty Cheese Overview 4 Connectivity Results & Recommendations 8 Summary 22 Q&A 2
KEY STUDY OBJECTIVE OBJECTIVE Identify partnership opportunities across the store for co-merchandising and promoting with specialty cheese, specifically with products from dairy, deli, and bakery 3
THE ANALYSIS IS FOCUSED ON SPECIALTY CHEESE, A KEY CATEGORY IN DELI CHEESE Deli Cheese Pre-Sliced Cheese Specialty Cheese Service Cheese 4
Deli Sides Deli Dips/ Spreads/ Toppings Sushi Specialty Deli Meat Deli Snacks Pre-Sliced Cheese Deli Sandwiches Deli Entrees Deli Prepared Chicken Specialty Cheese Copyright 2013 The Nielsen Company. Confidential and proprietary. DELI SPECIALTY CHEESE HAS EXPERIENCED GROWTH Top 10 Deli Categories Ranked on Dollar Growth 18% 14% 14% 15% 11% 11% 11% 10% 10% 10% 8% 7% 7% 7% 7% 5% 5% 4% 2% 1% Dollar Share Dollars Growth Volume Growth 1% 5% 3% 1% 2% 1% 6% 6% 16% 12% Source: Nielsen Perishables Group FreshFacts 52 weeks data ending 12/27/14 IDDBA/Nielsen Perishables Group Total Store Connectivity: Revealing New Pathways to Win Specialty Cheese 5
THE DELI SPECIALTY CHEESE BUYERS ARE AFFLUENT FAMILIES AND COUPLES Deli Specialty Cheese Buyer High/Over-Indexing Demographics Households: 2+ Members/Families or Couples Income: 100K+ Location: Affluent Suburban Spreads Age: Under 54 Ethnicity: White, Hispanic Source: Nielsen Homescan Data Ending June 2014 IDDBA/Nielsen Perishables Group Total Store Connectivity: Revealing New Pathways to Win Specialty Cheese 6
SPECIALTY CHEESE HAS GAINED BUYERS AND INCREASED TOTAL BASKET VALUE IN 2014 Deli Specialty Cheese PENETRATION ANNUAL TRIP FREQUENCY ANNUAL SPEND PER HOUSEHOLD BASKET $ SIZE CURRENT 49% 3.8 $18 $92 VS. YA 1.5% -1.0% -0.1% 3.5% Compare to average fresh food basket: $48 Source: Nielsen Homescan Total Shopper View Specialty Panel, 52 weeks ending 12/27/14 IDDBA/Nielsen Perishables Group Total Store Connectivity: Revealing New Pathways to Win Specialty Cheese 2015 IDDBA in partnership with Nielsen Perishables Group 7
SPECIALTY CHEESE IS CONNECTED TO IMPORTANT AND GROWING PARTS OF THE STORE Shifts in performance of specialty cheese may impact sales across the store SPECIALTY CHEESE Has strong positive correlation (>0.5) with 83 out of 237 categories that represent 24% of total store dollars and span 8 out of 17 departments Connected to LARGE CATEGORIES: Coffee $5.4B Yogurt $5.2B Fresh Beef Steak $5.1B Fresh Chicken Breast $5.0B Crackers $4.1B Connected to FAST GROWING CATEGORIES: Cooking Greens (dol +22.7%, vol +17.8%) Avocados (dol +17.6%, vol + 5.7%) Deli Dips/Spreads/Toppings (dol+16.2%, vol + 17.2%) Deli Sides (dol +16.2%, vol + 14.1%) Produce Beverages (dol +13.2%, vol +14.6%) 8
Weak Copyright 2013 The Nielsen Company. Confidential and proprietary. Strong ADDING TRIP DETAIL HELPS TO FURTHER DIAGNOSE CONNECTIONS Weak Strong Trip Overlap Index is added as a second dimension to understand if these connections are driven by their likelihood of being in the same basket Axes Cross at Average Trip Overlap Index (100) and Statistically Significant Positive Sales Correlation (0.5) 9
Weak Copyright 2013 The Nielsen Company. Confidential and proprietary. Strong WHERE A CATEGORY FALLS DICTATES SPECIFIC ACTION Weak Weak Sales Connection & Strong Basket Connection Develop Partnerships: Find in-store ways to build sales connections to these categories through strategies such as co-promotion and co-merchandising Strong Sales Connection & Strong Basket Connection Manage Connections: Build or continue to grow connections to these already existing partners. Limit connections to declining categories Strong Weak Sales Connection & Weak Basket Connection Distinguish Category Identity: Find ways to market to new buyers. These categories offer opportunities to gain new trips Strong Sales Connection & Weak Basket Connection Demonstrate your value: These categories are buyer connections and can help demonstrate the value of your category 10
MAINSTREAM FRESH Basic fresh foods and categories used for everyday cooking SPECIALTY CHEESE IS HIGHLY CONNECTED TO OTHER PREMIUM AND FRESH CATEGORIES Specialty Cheese Sales: $2B Reach: 49% Frequency: 3.8 trips per HH Weak Sales Connection & Strong Basket Connection Strong Sales Connection & Strong Basket Connection Develop Partnerships Manage Connections PREMIUM FRESH Categories used for cooking from scratch and fine entertaining. Most of these are growing categories. TRADITIONAL CONVENIENCE Categories with less focus on health and more focus on convenience Distinguish Category Identity Weak Sales Connection & Weak Basket Connection Demonstrate Your Value Strong Sales Connection & Weak Basket Connection BAKERY FOCUSED Categories in the bakery department, primarily indulgent 11
STRONG SALES & BASKET CONNECTION WITH FRESH HOME-COOKING AND ENTERTAINING ITEMS Specialty Cheese Strong Sales Connection & Strong Basket Connection Entertaining Products Scratch- Cooking Products Manage Connections: Build or continue to grow connections to these already existing partners. Limit connections to declining categories. 12
BUILD PARTNERSHIPS WITH PRODUCTS FOR ENTERTAINING OCCASIONS $1.6B category Why a good partner Deli Dips/Spreads/Toppings 43% +16% $1.0B category $4.76M category Bakery Breads Deli Snacks Buyer Overlap 94% 28% % Change vs YA +3% Dollars Dollars +10% Dollars Households that purchase specialty cheese are more likely to also buy these partner categories than the average consumer +1% Volume +17% Volume +9% Volume Recommendations Co-Merchandise/ Co-Promote: Leverage the fine entertaining connection between specialty cheese and these categories by cross-merchandising and promoting to encourage shoppers to buy them together Strive to get in the basket on more trips by developing marketing and crossmerchandising to promote the everyday snack-ability of specialty cheese, dips and snacks 13
INVEST IN PARTNERSHIPS WITH FRESH, AT-HOME COOKING CATEGORIES $5.1B category Fresh Beef Steak % Change vs YA +3% -1% $779M category Produce Herbs, Spices and Seasonings % Change vs YA +8% +5% Why a good partner Buyer Overlap 66% Basket Value Dollars Volume Households that purchase specialty cheese are more likely to also buy these partner categories than the average consumer Dollars Buyer Overlap 24% Basket Value High-value basket when specialty cheese and these $148 $123 partner categories are bought on the same trip Volume Income greater than $100K, Age 45 to 54, Large HH s with older children Income greater than $70K, Under age 45, Large HH s with children under 6 Recommendations Co-Merchandise/Co-Promote: Co-promote to provide inspiration for consumers to cook new exciting recipes, like a chef, at home Showcase total meal solutions to encourage shoppers to buy these products together by cross-merchandising in-store, highlighting how to combine these items to create premium meals from scratch 14
LEVERAGE CONNECTION TO DELI BULK MEAT AS AN EASY MEAL SOLUTION DELI SPECIALTY CHEESE+ DELI BULK MEAT BUYER Why a good partner 2.0 Deli Bulk Meat + Deli Specialty Cheese Trips Annually $118 Average basket value with Deli Bulk Meat + Deli Specialty Cheese in the basket Over-indexing demographics: Households: 3+ Members High Income Range Older Bustling Families Kids ages 13 to 17 Recommendations Co-Merchandise/Co-Promote: Leverage the in-store deli connection and invest in partnerships with bulk meat to encourage consumers to add specialty cheese to the basket Use co-promotion to get in the basket on more trips by encouraging families to make premium sandwiches for easy, weeknight meals 15
DEVELOP CONNECTIONS WITH CATEGORIES THAT HAVE DIFFERENT USAGE OCCASIONS Specialty Cheese Weak Sales Connection & Strong Basket Connection Develop Partnerships: Find in-store ways to build sales connections to these categories through strategies such as co-promotion and co-merchandising 16
Basket Value In Basket Copyright 2013 The Nielsen Company. Confidential and proprietary. ENHANCE THE DAIRY CHEESE CONNECTION BY POSITIONING IT AS COMPLIMENTARY Deli Specialty Cheese Dairy Cheese Deli Specialty Cheese + Dairy Cheese 1% 10% 51% of trips of trips of Specialty Cheese trips Why a good partner $92.43 $78.49 $115.05 Recommendations Co-Promote: Collaborate with dairy cheese to grow basket value as consumers don t consider the products replacements, but complimentary Leverage the ubiquity of dairy cheese in promotions encouraging consumers to add specialty cheese to the basket when buying dairy cheese 17
DEMONSTRATE THE CONNECTION BETWEEN SPECIALTY CHEESE AND THE IN-STORE BAKERY Specialty Cheese Strong Sales & Weak Basket Connection Demonstrate your value: These categories are buyer connections and can help show the value of your category on different trips &/or in different channels 18
LEVERAGE THE STRONG CONNECTION BETWEEN DELI AND BAKERY TO MAXIMIZE CO-PURCHASING Differences between the specialty cheese and in-store bakery consumer How to showcase your value Bakery and Deli departments are highly connected in the store 40% of Deli Specialty Cheese baskets also include In-Store Bakery products Specialty Cheese College Grad Affluent Suburban Spread Most common level of education Most common neighborhood Bakery High School Grad Modest Working Town The in-store bakery tends to be geared toward a different type of consumer than specialty cheese Recommendations Display/Expand the offering: Offer more premium in-store bakery products to resonate with the specialty cheese shopper Strive to get specialty cheese and bakery in the same basket more often by displaying products together for unique occasions, like fine entertaining, snacking or breakfast 19
THESE CATEGORIES OFFER OPPORTUNITY TO GAIN NEW BUYERS AND NEW OCCASIONS Specialty Cheese Weak Sales & Weak Basket Connection Resonate with Buyers: Opportunities to market to new buyers and new occasions through these categories 20
BUILD A CONNECTION TO DELI PREPARED SANDWICHES TO GET IN QUICK TRIP BASKETS How to gain more trips Despite both selling in the deli department, only 6% of specialty cheese baskets also include a deli prepared sandwich Specialty Cheese Prepared Sandwiches % sold on a 6% 31% quick trip Deli prepared sandwiches are purchased on a different type of trip than specialty cheese Recommendations Display/Co-promotion: Invest in displays and promotions at premium deli prepared sandwich counters to promote specialty cheese as a meal complement for busy families who want dinner to-go Encourage retailers to use the specialty cheese they sell in-store on their prepared deli sandwiches to gain interest and boost future specialty cheese sales 21
PUT INSIGHTS TO ACTION Connected Category Bakery Bread Deli Dips, Spreads and Toppings Deli Snacks Findings Call to Action Merchandising Idea -Sales trends in bakery bread have a strong statistical association with specialty cheese -94% of households that buy specialty cheese also buy bakery bread -Bakery bread sales are UP 2.7% -Sales trends in deli dips, spreads and toppings have a strong statistical association with specialty cheese -Deli dips, spreads and topping sales are UP 16.2% -Sales trends in deli snacks have a strong statistical association with specialty cheese -Deli snack sales are UP 10.0% -Cross-merchandise and co-promote to encourage shoppers to buy both products for fine entertaining occasions -Co-promote and cross-merchandise bakery bread and specialty cheese to inspire consumers to make premium sandwiches at home -Cross-merchandise and co-promote to encourage shoppers to buy both products as appetizer toppings for fine entertaining occasions -Pair with crackers and highlight the convenient snack-ability of both these categories to encourage consumers to keep them stocked at home -Cross-merchandise and co-promote to encourage shoppers to buy both products as fine entertaining appetizers -Highlight the everyday snack-ability of these products to get them in baskets more often -Showcase ingredients for an antipasto platter in a fine entertainment destination center, including parmesan, bread sticks, focaccia, olives and salami -Include hummus, feta and pita bread in a Middle Eastern-themed appetizer display -Showcase pretzel chips with goat cheese and fig jam in an inspiring snacking display 22
PUT INSIGHTS TO ACTION Connected Category Produce Herbs, Spices and Seasonings Fresh Beef Steak Deli Bulk Meat Findings Call to Action Merchandising Idea -Sales trends in produce herbs, spices and seasonings have a strong statistical association with specialty cheese -Produce herbs, spices and seasoning sales are UP 7.6% -Sales trends in fresh beef steak have a strong statistical association with specialty cheese -66% of households that buy specialty cheese also buy beef steak -Fresh beef steak sales are UP 3.0% -Sales trends in deli bulk meat have a strong statistical association with specialty cheese -Deli bulk meat sales are UP 3.4% -Provide inspiration for consumers to make bold, flavorful meals at home through merchandising and crosspromotions -Create meal solutions where all the ingredients for a recipe are merchandised together -Provide inspiration for consumers to make premium meals at home through cross-promotions and recipes -Create grilling season meal solutions where all the ingredients needed for a premium dinner made on the grill are merchandised together -Co-promote deli bulk meat and specialty cheese to encourage busy families to make exciting, restaurantstyle sandwiches for quick, weeknight meals -Showcase the myriad ways to pair mozzarella with fresh basil in a display with recipe cards -Showcase a display that includes a chef-inspired recipe pairing the perfect blue cheese with beef steak -Create a St. Patrick s Daythemed promotion on ingredients to make a Ploughman s Sandwich including deli-sliced ham, Irish cheddar, and Dijon mustard 23
PUT INSIGHTS TO ACTION Connected Category Dairy Cheese Bakery Deli Prepared Sandwiches Findings Call to Action Merchandising Idea -Sales trends in dairy cheese have a weak statistical association with specialty cheese -51% of specialty cheese baskets also contain dairy cheese -Dairy cheese sales are UP 2.7% -Sales trends of categories in the bakery department have a strong statistical association with specialty cheese -40% of specialty cheese baskets also contain at least one item from the instore bakery -Bakery department sales are UP 3.4% -Sales trends in deli prepared sandwiches have a weak statistical association with deli specialty cheese -Only 6% of specialty cheese baskets also contain deli prepared sandwiches -Deli prepared sandwich sales are UP 5.1% -Co-promote dairy cheese and specialty cheese to encourage dairy cheese shoppers to add specialty cheese to the basket -Upgrade the bakery department s offering to appeal to a more premium specialty cheese shopper -Merchandise specialty cheese with complimentary bakery products, especially around fine entertaining, snacking and breakfast -Consider developing this partnership by having specialty cheese and wine displays at premium deli sandwich counters to get on more quick trips -Encourage retailers to use the specialty cheese they sell in-store on their prepared deli sandwiches to boost future sales -Develop a Catalina coupon promotion to trigger future purchases together for Buy shredded dairy cheese, get a discount on spreadable cheese, showcasing their unique usage occasions -Showcase baguettes with brie and seasonal fruit in a fine entertainment destination center -Develop a Picnic To-Go offering for delis to sell in summer, including deli prepared sandwiches, snacking cheese, grapes and a dark chocolate bar 24
METHODOLOGY
APPROACH: CONNECTIVITY METHODOLOGY A comprehensive view across the entire store, including the fresh perimeter TOTAL STORE CONNECTIVITY ANALYTICS QUANTIFY connections IDENTIFY behavioral drivers Sales correlation drawn from 65 trillion unique category combinations 257 categories including fresh non-upc 18,000 stores 104 weeks Shopper behavior drawn from 19 million trips 60,000 static households All food outlets represented 104 weeks Includes all category buyingincluding fresh non-upc PROJECT SCOPE FOCUS CATEGORY - Specialty Cheese TIME PERIOD - 52 Weeks Ending May 2014 GEOGRAPHY -Total U.S. Fresh Coverage Area ~18,000 stores across grocery, mass/supercenter and club 26
STUDY PARAMETERS STUDY PARAMETERS Focus category: Specialty Cheese Period: 52 weeks ending May 2014* Geography: Total U.S. *Except where noted 27
A SAMPLE OF CATEGORY DEFINITIONS Deli Snacks Candies All Other Candies Deli Snacks Candies Chocolate Deli Snacks Candies Mixes Deli Snacks Candies NA Deli Snacks Chips Potato Deli Snacks Chips Tortilla Deli Snacks Crackers NA Deli Snacks Deli Snack Bars NA Deli Snacks Meat/ Cheese Snack Sticks NA Deli Snacks Nuts And Seeds NA Deli Snacks Other Deli Snacks Fruit Deli Snacks Other Deli Snacks Mixes Deli Snacks Other Deli Snacks NA Deli Snacks Popcorn NA Deli Snacks Pretzels NA Deli Cheese Deli Cheese Deli Cheese Deli Meat Deli Meat Deli Meat Pre-Sliced Cheese Service Cheese Specialty Cheese Deli Bulk Meat Deli Pre-Sliced Meat Specialty Deli Meat Source: IDDBA/Nielsen Perishables Group Total Store Connectivity: Revealing New Pathways to Win Specialty Cheese Deli Dips/ Spreads/ Toppings Bruschetta NA Deli Dips/ Spreads/ Toppings Dips Artichoke Dip Deli Dips/ Spreads/ Toppings Dips Bean Dip Deli Dips/ Spreads/ Toppings Dips Cheese Dip Deli Dips/ Spreads/ Toppings Dips Guacamole Deli Dips/ Spreads/ Toppings Dips Other Deli Dips/ Spreads/ Toppings Dips Seafood Dip Deli Dips/ Spreads/ Toppings Dips Spinach Dip Deli Dips/ Spreads/ Toppings Dressings NA Deli Dips/ Spreads/ Toppings Dressings Oils Deli Dips/ Spreads/ Toppings Dressings Vinegar Deli Dips/ Spreads/ Toppings Hummus NA Deli Dips/ Spreads/ Toppings Other Dips/ Spreads/ Toppings Sun-Dried Tomatoes Deli Dips/ Spreads/ Toppings Salsa NA Deli Dips/ Spreads/ Toppings Sauces Bbq Sauce Deli Dips/ Spreads/ Toppings Sauces Gravy Deli Dips/ Spreads/ Toppings Sauces Horseradish Sauce Deli Dips/ Spreads/ Toppings Sauces Hot Sauces Deli Dips/ Spreads/ Toppings Sauces Other Sauces Deli Dips/ Spreads/ Toppings Sauces Pasta Sauce Deli Dips/ Spreads/ Toppings Sauces Seafood Sauce Deli Dips/ Spreads/ Toppings Seasonings & Spices NA Deli Dips/ Spreads/ Toppings Spreads Butters Deli Dips/ Spreads/ Toppings Spreads Caviar Deli Dips/ Spreads/ Toppings Spreads Chopped Liver Deli Dips/ Spreads/ Toppings Spreads Honey Deli Dips/ Spreads/ Toppings Spreads Jellies/ preserves Deli Dips/ Spreads/ Toppings Spreads Mustards Deli Dips/ Spreads/ Toppings Spreads Other Deli Dips/ Spreads/ Toppings Spreads Pate Deli Dips/ Spreads/ Toppings Spreads Peanut Butter 28