Total Frozen Performance

Kantar Worldpanel - 52 w/e 31th December 2017

Chris Hayward

Agenda

2

1. Market Context – Christmas

2. Frozen Review

Discounters and Tesco performed best over the 12 weeks of Christmas

Source: Kantar Worldpanel Till Roll 12 w/e data to 31 December 2017

12w/e Retailer Christmas Performance

28.2%

16.7%

15.5%

10.9%

6.0%

6.0%

4.4%

5.3%

2.3%

1.2%

28.0%

16.4%

15.3%

10.7%

6.8%

5.8%

5.0%

5.2%

2.2%

1.3%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%

Tesco

Sainsbury's

Asda

Morrisons

Aldi

Co-op

Lidl

Waitrose

Iceland

Ocado

Share of Till Roll Grocers £%

12 Weeks to 01/01/17 12 Weeks to 31/12/17

3.1%

2.0%

2.2%

2.1%

16.8%

-0.2%

16.8%

2.3%

2.9%

8.4%

-2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0%

Tesco

Sainsbury's

Asda

Morrisons

Aldi

Co-op

Lidl

Waitrose

Iceland

Ocado

YoY % Growth

3

We Three Themes….

3 key themes through 2017…are they still true at Christmas?

5

Inflation Own Label Promo De-escalation.

-10

-8

-6

-4

-2

0

2

4

6

831

-Jan-1

6

28

-Fe

b-1

6

27

-Ma

r-16

24

-Apr-

16

22

-May-1

6

19

-Jun-1

6

17

-Jul-16

14

-Aug-1

6

11

-Sep-1

6

09

-Oct-

16

06

-Nov-1

6

04

-Dec-1

6

01

-Jan-1

7

29

-Jan-1

7

26

-Fe

b-1

7

26

-Ma

r-17

23

-Apr-

17

21

-May-1

7

18

-Jun-1

7

16

-Jul-17

13

-Aug-1

7

10

-Sep-1

7

08

-Oct-

17

05

-Nov-1

7

03

-Dec-1

7

31

-Dec-1

7

co

ntr

ibu

tio

n to

ch

an

ge

%p

ts

Volume change Store Choice Promotions Product Choice

Consumers traded up this Christmas by indulging in quantity through cheaper products

Source: Kantar Worldpanel Grocery 4 w/e 31st December 2017

Trended Market Coping Strategies

6

Source: Kantar Worldpanel Grocery 4 w/e 31st December 2017

7

However it was Standard Own Label that saw the biggest gains this Christmas

Standard

Own Label

Branded

Premium

Own Label

Loss

Gain

GainLoss

£1.5m

£1.6m

£1.4m

£6.6m

Value Own

Label

Switching by Product Tier: Total Market

7

Penetration % pt Change

Ultimate success was found in those that could drive penetration across the tiers

8Source: Kantar Worldpanel Grocery 4 w/e 31st December 2017

OL Tier Penetration Change

-2

0

2

4

6

8

10

12

Tesco Asda Sainsbury's Morrisons Waitrose Co-op Aldi Lidl Iceland M&S Ocado

Value OL

Standard OL

Premium OL

9

20172016

Full Price

Price Cuts

MultiBuy

Y for £X

Meal Deal

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

D J J F M A M J J A S O N D D

2017 was a year of pulling back from promotions, however this changed at Christmas

%Growth

Source: Kantar Worldpanel Grocery 4 w/e 31st December 2017

Promotional Contribution to Growth

Despite extra activity compared to the rest of 2017, Christmas promotions were lower than ever

Spend % on promotion

Source: Kantar Worldpanel Grocery 4 w/e 31st December 2017 10

40.0

36.9

36.2

Christmas 15 Christmas 16 Christmas 17

Spend £% on promo

3 key themes through 2017…are they still true at Christmas

11

Inflation Own Label Promo De-escalation.

3 key takeouts…

12

Everyone’s a Winner

Something for everyone this

Christmas as shoppers shop

around more.

Those most successful

performed well all the way up to

New Years Eve.

Multi-tier strategy wins

Own Label continues to

outperform Brands.

Just focusing on one tier (e.g.

premium) is not enough to win.

Targeted strategy through Value,

Standard and Premium meets

the customers’ needs.

Price remains key

‘Christmas Essentials’ is the

most important driver of store

choice at Christmas.

Retailers targeted different

strategies to win, but Morrisons

saved themselves most cash vs

Xmas 2016.

2018 could be tougher for the Retailers with less “free” growth from inflation

Source: Kantar Worldpanel Grocery 4w/e 31st December 2017

Latest 12 weeks

inflation = 3.7%

2018 expected to settle

2% -2.5%*

*Projected inflation rate based on current economic and supply conditions

Agenda

14

1. Market Context – Christmas

2. Frozen Review

Before we start…..

To turn the Frozen category into a £10 Billion market.

When inflation stops driving Frozen growth, new growth levers will need to be found.

The Online channel is a contributing force in growing the category and needs to be further considered in future growth.

AAmbition

BBarrier

CConclusion

EXECUTIVE SUMMARY

Frozen is in strong growth of +6.4%, largely due to higher average prices.

Although the higher prices haven’t dissuaded shoppers to buy Frozen foods less frequently.

Total Frozen | Measure Tree | 52 w/e 31st December 2017 18

Measure52 w/e 01

Jan 17

52 w/e 31

Dec 17

Change

(Actual)

Change

(%)Spend (£000) 5,734,289 6,099,458 +365,169 +6.4%Volume (000 kg) 2,022,443 2,067,566 +45,123 +2.2%Penetration (%) 99.07 99.24 +0.18 +0.2%

Frequency 47.59 48.36 +0.77 +1.6%Spend per Buyer (£) 213.43 224.43 +11.00 +5.2%Volume per Buyer (kg) 75.27 76.08 +0.80 +1.1%Spend per Trip (£) 4.48 4.64 +0.16 +3.5%Volume per Trip (kg) 1.58 1.57 -0.01 -0.5%Price per kg (£) 2.84 2.95 +0.11 +4.0%

Value up 6.4% worth £365.2m

-100,000 0 100,000 200,000 300,000 400,000 500,000

Spend (£000)

+£365.2m

£6099.5m (+6.4%)

Price per kg (£)

+£235m

£2.95 (+4%)

Buyers

+£67.1m

27.2m (+1.2%)

Volume (000 kg)

+£130.2m

2067.6m (+2.2%)

Volume per Buyer (kg)

+£63.1m

76.1 kg (+1.1%)

Frequency

+£94.1m

48.4 trips (+1.6%)

Volume per Trip (kg)

-£30.9m

1.6 kg (-0.5%)

Penetration (%)

+£10.3m

99.2% (+0.2%)

GB HH Population

+£56.8m

27.4m (+1%)

Frozen prices are

increasing above that of

Total Grocery (+3%)

Category growth has continuously picked up over the year.

This comes in unison with price increases starting around March 2017.

Total Frozen | Trended Measure Tree | 52 w/e 31st December 2017 19

-200,000

-100,000

0

100,000

200,000

300,000

400,000

500,000

Contr

ibution

Frequency Trip Volume (kg) Price per kg Penetration (%) GB HH Population Total Contribution (£000s)

How can the category maintain

growth once inflation stabilizes?

Total Frozen | Future Growth | 52 w/e 31st December 2017

At current levels of growth, it’ll take the Take-Home Frozen market 4 years to be

worth £7.5B

20

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Year 1 Year 2 Year 3 Year 4

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9

Growth with current levels of Inflation Growth at current level without Inflation

Sp

en

d (

£B

)

£7.5B

Total Grocery | Category Value and Growth | 52 w/e 31st December 2017

The Frozen category has achieved the strongest growth at Total Grocery.

Beating Ambient and Fresh & Chilled in its yearly performance.

21

Total Ambient

£29.6B

+3.2%

Total Frozen

£6.1B

+6.4%

Total Fresh & Chilled

£44.5B

+4%

Frozen is currently 7.6% of Food & Drink

(excluding Alcohol)

Turkey was the main winner this year through both Fresh & Frozen formats

Fresh Meat & Poultry & Gammon Performance

Source: Kantar Worldpanel MLC9 4 w/e 31st December 2017 22

-5,000 -4,000 -3,000 -2,000 -1,000 0 1,000 2,000 3,000 4,000 5,000 6,000

Fresh Beef Roasting

Fresh Lamb Roasting

Fresh Pork Roasting

Total Fresh Turkey

Total Frozen Turkey

Gammon

Penetration % Purchase Frequency Trip Volume (kg) Price per kg GB HH Population

-0.7

6.0

-1.2

6.0

9.6

5.7

% Change

Total Frozen | Demographic Growth | 52 w/e 31st December 2017

Who are the shoppers driving the Frozen market?

The driving force behind Frozen growth are older, less affluent shoppers.

23

47.3 47

52.7 53

34 33.3

66 66.7

68 68.4

32 31.6

54.6 55.2

45.4 44.8

52 w/e 01 Jan 17 52 w/e 31 Dec 17

3 + Member HHs

1 & 2 Member HHs

With Children

Without Children

Shopper Aged 45+

Shopper Aged under 45

Class C2DE

Class ABC1

+4.9%

+5%

+7%

+7.5%

+4.2%

+7%

+5.7%

+7.6%

Total Grocery | Grocery Area by Life-stage | 52 w/e 31st December 2017

How does shopper buying habits evolve by life-stage?

As people age, and begin families, their frozen food consumption increases.

24

36.9 37.3 38.2 39.9 40.2 37.4 36.6 34.3

55.5 55.3 53.5 51.5 50.8 54.3 56.1 59

7.6 7.4 8.2 8.6 9 8.3 7.3 6.6

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Total Lifestage Pre-Family Young Family 0-4 Years Middle Family 5-9 Years Family 10+ Years Older Dependents Empty Nesters Retired

Spend S

hare

(%

)

Total Ambient Groceries Total Fresh+Chilled Total Frozen

Total Frozen | Channel Growth and Share | 52 w/e 31st December 2017

There is a shift in the way people buy Frozen food.

Main Stores are growing behind the market, with the Discounters and Online retailers pushing growth furthest.

25

52.4 51.3

21.4 21.4

9.7 10.8

8.7 9

6 5.6

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

52 w/e 01 Jan 17 52 w/e 31 Dec 17

Spend S

hare

(%

)

Total Bargain Stores

High St

Convenience

Online

Discounters

Freezer Centre

Main Store

+36.7%

+4.1%

+8.9%

-0.3%

+9.9%

+18.8%

+6.4%

The Main Store has struggled to improve shopper engagement, growing through price.

Reaching £10B is unlikely to come through Main Estate alone, focusing on the discounters and online gives

Frozen the best chance of success.

Total Frozen | Channel Comparative Measure Tree | 52 w/e 31st December 2017 26

-100,000 -50,000 0 50,000 100,000 150,000 200,000

Main Store

Freezer Centre

Discounters

Online

Convenience

High St

Total Bargain Stores

Penetration % Purchase Frequency Trip Volume (kg) Price per kg GB HH Population

4.1

6.4

18.8

9.9

-0.3

8.9

36.7

% Change

Both Brands and Own Label are driving Online success.

Brands fair better online than in the Total Market.

Total Frozen | Brand/Private Label Share and Growth | 52 w/e 31st December 2017 27

45.3 50.4

54.7 49.6

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Total Frozen Frozen Online

Spen

d S

har

e (%

)

Private Label

Branded

+11.3%

+8.6%+2.4%

+9.9%

How can the online channel help Frozen reach £10B?

Unlike in Main Estate, shoppers are buying Frozen more often online, and at the higher average prices.

Total Frozen | Total Online | Measure Tree | 52 w/e 31st December 2017 29

£547.6M(+9.9%, +£49.3M)

22.4% GB Penetration

(+1.3%, +£6.7M)

12.9 trips over the year

(+4.8%, +£24.4M)

2.3KG per shop

(-1.7%, -£8.2M)

£3.08 per KG

(+4.2%, £21.4M)

Online continues to attract new

shoppers.

+138,600 new Frozen shoppers via the

Online channel.

Total Grocery | Total Online | Category Share and Growth | 52 w/e 31st December 2017

How does Frozen compare to the other Grocery categories Online?

Similar to at Total Grocery, Frozen leads the pack, being the fastest growing Grocery category Online.

30

39.4 39.6

28 28.1

9.7 9.7

9.7 9.4

6.5 6.6

5.6 5.4

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

52 w/e 01 Jan 17 52 w/e 31 Dec 17

Spend S

hare

(%

)

Total Healthcare

Total Toiletries

Total Frozen

Total Household

Total Alcohol

Total Ambient Groceries

Total Fresh & Chilled

+6.1%

+7.5%

+3.8%

+9.9%

+4.7%

+8.0%

+8.0%

Total Frozen | Total Online | Category Share and Growth | 52 w/e 31st December 2017

Frozen Prepared Foods and Confectionery have been key to Online success.

With fewer households scratch cooking over the past few years, the emphasis is on prepared foods to provide a

convenient solution.

31

57.620.8

13.4

5

3.2

Frozen Prepared Foods

£315.5M, growing at +9.8%Frozen Confectionery

£113.9M, growing at +13.6%

Frozen Fish

£73.2M, growing at 8.8%

Frozen Poultry & Game

£27.3M, growing at +1.7%

Frozen Meat

£17.6M, growing at 7.4%

Online added £49.3M to the Frozen category. What are the top sub-sectors driving this?

Frozen Ready Meals added £6.1M to online Frozen despite being smaller than the other top 5 sectors.

Total Frozen | Total Online | Top Contributing Sectors | 52 w/e 31st December 2017 32

£84.3M £49.7M £73.2M £55.6M £66.8M+£11M +£6.1M +£5.9M +£4.9M +£4.6M

Value (£M)Growth (£M)

Ice-Cream Frozen Ready Meals Frozen Fish Frozen Vegetables Frozen Potato Products

Frozen is out performing many corresponding Chilled sectors.

Chilled Ready Meals has been a driving force for Chilled performance, however Frozen now grows ahead.

Total Frozen | Total Online | Sector Performance | 52 w/e 31st December 2017 33

Chilled Convenience Frozen Prepared Foods Chilled Ready Meals Frozen Ready Meals

+7.9% +9.8% +9.8% +14%

EASE OF PREPARATION HAS BECOME MORE IMPORTANT THAN SPEED

Source: Kantar Worldpanel Usage – 52 w/e 26TH March 2017

Total In Home/Carried Out consumption

7.6

7.8

8

8.2

8.4

8.6

8.8

9

9.2

D M J S D M J S D M J S D M

Total Consumption – Practicality Needs

201620152014

Quick to prepare

Easy to prepare

Servings Vert %

2017

Time has become less important. Making my life easier is now more of a driver. RTC products which take 30

minutes in the oven are a prime example of this.

35

SPENDING MORE TO SAVE TIME

Total Savoury Meals

35 minutes

Scratch Cooking

43 minutes

Ready Meals &

pizzas

27 minutes

£2.28 £2.8456p per person

to save 16 minutes

KWP Usage: Average prep time & cost per meal occasion52 w/e March 2017

It’s not just about the time saving in food preparation. They could be quicker/easier to wash up as well as

perhaps providing a dish that the respondent could not make themselves.

WHAT’S NEXT

To turn the Frozen category into a £10 Billion market.

When inflation stops driving Frozen growth, new growth levers will need to be found.

The Online channel is a contributing force in growing the category and needs to be further considered in future growth.

AAmbition

BBarrier

CConclusion

EXECUTIVE SUMMARY