POLARIZATION & PREMIUMIZATION @ FOOD

GROWTH OPPORTUNITY FOR PASTA

Stefano Galli
Dubai October 25th, 2018
This artwork was created using Nielsen data.
Copyright © 2018 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute.
 GLOBAL CONSUMER CONFIDENCE IS STILL IMPROVING (2018 VS 2016)
with North America and Asia Pacific showing highest optimism, NA & EU strong improvement after crisis
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North Europe
America ▲6 87
▲16121

Asia Pacific
GLOBAL Middle East &

INDEX
South Africa ▲3112
Latin ▲5 92
▲5 104 America

▲3 86

Source: Nielsen Consumer Confidence

▲▼- index change Q2 2018 vs. Q3 2016 2
 HOUSEHOLD DISPOSABLE INCOME GROWING....
Household disposable income Net, Annual growth rate (%),

4,1 4,1
3,3 3,5
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2,8 2,8
2,5 2,6
1,9
1,6
1,3 1,5 1,5 1,5
1,0
0,5 0,6

Source: OECD (2018), Household disposable income (indicator).

Organisation for Economic Co-operation and Development
* 2017 vs 2016 : Canada, Denmark, France, Italy, Netherlands , Norway, Portugal , Sweden …the rest 2016 vs 2015 3
 … SPENDING INTENTIONS INCREASING BACK YEAR BY YEAR
Good or excellent time for people to buy the things they want and need over the next 12 months

GLOBAL NORTH AMERICA

60 59 62 61
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48 51 50
40 43 44 43
34 38 35

2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018

ASIA PACIFIC EUROPE 46

65 34 34 37
47 51 54 27 29 31
37 40 43

2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018

Source: Nielsen Consumer Confidence Q2 2018 4

 IN THIS CONTEXT CONSUMERS HAVE RE-CALIBRATED THEIR
FMGC SPENDING LOOKING FOR BOTH VALUE AND SAVING
Global FMCG Trend
Volume change
Unit value change 1. FMCG growth appears to be slowing
Nominal Value Growth
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3,8%
over last years in term of volume.

3,1%
2. FMCG inflation (unit value change)
3,0%
2,8%
2,8% was lower than general inflation
2,2%
2,0% 2,1% (looking for saving, value offer)
3. On the opposite side Trends are
1,0% 0,8% 0,9%
0,9% mainly driven by Value change
2015 2016 2017 2018 est.
(premium offer)
3,2 3,8 4,5
General Inflation

Source: Nielsen Growth Reporter Q2 2018

5
 PASTA CATEGORY… SIMILAR TRENDS
Global Volumes slightly growing: 6,081 Mio Kg (+0,3%)
Global Value sales still growing: +0,6% vs previous year
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Europe
3,554
(+0,3%)
Asia
319
(+8,6%)

Americas
1,960
(-0,8%) Africa
248
(+2,6%)

Source: Nielsen Global Pasta View 2018 Sell-out data mio KG on Dry Pasta within 70+ Countries – Year 2017 vs 2016 6
 DRY PASTA: 5 OUT OF 10 BACK TO GROWTH THANKS TO
Italy
GAINING SHARE OF STOMACH
836
LEVERAGING PREMIUMIZATION -0.9%

Volume Sales (mio kg) France

Germany
vs PY 413
+0.7% 456
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-1.5%
Spain
178
Argentina +1.2%
Poland
207
-6.0% 174
+0.6%
Brazil
521 Turkey
-2.3% 221
+4.0%
TOP MARKETS
U.S. Russia

627 478
+2.6%
-0.6%
Source: Nielsen Global Pasta View 2018 Sell-out data mio KG on Dry Pasta within 70+ Countries – Year 2017 vs 2016
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 DRY PASTA: TOP CONTRIBUTORS TO GROWTH THANKS TO:
PENETRATION…NEW CONSUMERS
FREQUENCY…NEW CONSUMPTION OCCASIONS
Volume Sales (mio kg)
Growth Vol contrib
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71%
Russia
(478)
16%
Morocco
(37) Turkey
(221)
12%
11%
Kazakhstan
(39)
South Africa
7% (60) Ecuador
Mexico Colombia France Philippines
6% (14)
(121) (81) (413) (65)
4% 4% 4% 4% 4%

Source: Nielsen Global Pasta View 2018 Sell-out data mio KG on Dry Pasta within 70+ Countries – Year 2017 vs 2016
8
 BEHIND THE AVERAGE GROWTH, IT’S ABOUT POLARIZATION
Wealth is getting more polarized

In Italy, income ratio richest

20%/poorest 20% grew from 5,8
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to 6,3 in 2016

Source: The Washington Post – Il Sole 24 Ore Italia

9
 POLARIZATION @ FMCG TOO: WHERE/HOW TO PLAY?

Everyday low price, high promotional New offer for a more demanding
effort, Discounters and PL growth… consumer with premium offer
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Profitability reduction – Established New perspectives for the Category &

Brands under pressure Brands able to surfs winning trends

10
 THERE ARE FORCES PUSHING DOWN

Everyday low price/ BASIC offer  Wealth is more and more

polarized: the distance between
richest and poorest is growing
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 Value offer gained room in

consumer wallet thanks to
 Value channels development
(discounters in Europe, Value
chains in US...)
 Private Label share growth
 High level of promotional
Profitability reduction – Established intensity
Brands under pressure
11
 EVEN WHERE DISCOUNT IS MORE DEVELOPED, LIKE IN EUROPE, IT
IS STILL GROWING...AND EXPECTED TO CONTINUE TO GROW
Value Share # Store 24,7%
24,0% 24,2%
23,7%
23,0%
89.248
Total Turnover (Billion) €207 +4,9%
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82.248
77.387
74.812
69.175

2013 2014 2015 2016 2017

Number of Stores (000) 89,2 +8,5% Turnover growth rate by Country

Channel Value Share

on Grocery Products
24,7% +0,5pp

Source: Nielsen European Discount Book 2018

12
 IN MOST OF THE COUNTRIES PRIVATE LABEL
OUTPACED FMCG GROWTH
12%
10%
FMCG Growth PL Growth 9% 9% 9%
12% 8% 8% 11%
7%
6%
6% 6% 9%
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5% 5% 5% 5% 8%
7% 4% 4% 8%
3% 4% 4%
3% 7% 7% 7%
6%
2% 2%
5% 2% 2% 2% 2% 5% 5%
4% 1% 1% 4%
0% 0% 0% 1% 1% 3%
4%
3% 2% 0% 3% 3% 3% 3% 2% 3% 3% 3% 3%
-2%-2%-2%-2%-2% 1% 1% 2%
-3% 1% 1% 1%
0% 0% 0% 0%
0% -1%
-5%

-4%

-7%

- +
Private Label growth rate

Data Source: Growth Reporter and Nielsen RMS 2016 vs 2015 13

 THERE ARE FORCES PUSHING UP…

 60+% of categories growth New offer for a more demanding

come from Premium products consumer with premium offer
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 Pocket of growth driven by

winning trends (emerging
consumer needs and wider
offer)
 Middle class is expected to grow,
more in Far East
 Emerging small brands “better” New perspectives for the
intercepting consumer’s evolution Category & Brands able to surfs
 Digital shopping experience to winning trends
get more value
14
 “GREEN” ATTRIBUTES HAVE PREMIUM POTENTIAL
Global consumers are willing to pay a Premium price for them

Contains organic/all
42
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natural ingredients

Contains
environmentally
friendly/sustainable…
39
Delivers social
responsibility claims 31
Source: The Nielsen Global Premiumization Survey

Global average percentage who are highly willing to pay a premium for attribute
15
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SUSTAINABILITY SELLS: US 2018

16
 FROM INTENTION TO REAL BEHAVIOUR
HEALTH AND WELLNESS ARE GROWTH KEY DRIVERS
In US but not only...

THE POWER OF SUPERFOODS

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TOP TRENDING US CATEGORIES CLAIMS 72% Would buy foods that include
superfood ingredients

Organic claims grew by 14% over the last 4 years 65% Superfoods provide a natural way
to treat and prevent aliments
Beverage with Stevia grew by 20% vs last year
Grain free, Amarant, Grass fed, Chia & Quinoa 61% Would like to learn about ways to
include superfoods in their diet
grew by 40 to 70% over the last 4 years )

Source: Nielsen retail measurement, Total U.S., 52 weeks ending September 30 th 2017 vs. Year-Ago; ‘Fresh
Perishables’ sourced via Nielsen FreshFacts, UPC-coded + random-weight PLU; All other groups sourced via Nielsen
Answers, UPC-coded data. Ranked by dollar sales growth. - Nielsen Answers, Wellness Track, Total U.S.
17
 ORGANIC IN FRANCE CONTINUES ITS STRONG PROGRESSION
DRIVEN MAINLY BY INCREASING FREQUENCY OF PURCHASE
On the wave of bio development specialist stores are increasing their coverage

20% Organic yearly growth Number of organic

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1305
stores
1125
1.042
973 1.005
838 866
Penetration Frequency Basket 742
93% 20 visites 5€60
(+2 %) (+14 %) (+3 %) 568

Nb Average
articles Value
2.5 2€30 2009 2010 2011 2012 2013 2014 2015 2016 2017
(+2.5%) (+0.5 %)

Nielsen Homescan – CAM P9 2017 / 2016

Nielsen Trade Dimensions

18
 CONSUMERS ARE POLARIZING TOO
CONSUMERS ARE POLARIZING TOO...
In Italy, growth comes from both Golden shoppers and Low price

Golden+ Low price

Italy’s Household by cluster +2 Mio Households
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Golden 12,0 15,1

+€6,6 Bn vs 2015
17,4

Mainstream
27,0 27,0 25,5

Silver
24,7 24,6 23,8
21,4 17,8 16,0
Traditional
14,9 15,6 17,4
Low Price
2015 2016 2017
Source: Italy CPS&Panel view

19
 GOLDEN SHOPPERS & FOOD: MORE CAREFUL AND AWARE

«I try to be always informed about

Pay close attention to the the relationship between nutrition 78% (+9)
relationship among nutrition, and health»
health and enviroment «I try to buy products made in a
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way 60% (+9)

ethical and eco-sustainable»

Satisfied through "specialized" Specialized Website 38% (+5)

information sources
Nutritionists 35% (+5)

I pay close attention to:

And a careful reading of the The origin of the ingredients 84% (+10)
information «On pack»
The list of ingredients 70% (+12)
Source: Italy CPS&Panel view Nutritional information 67% (+12)
20
 GOLDEN / LOW PRICE HAVE SIGNIFICANT DIFFERENCE IN FOOD
SPENDING AND… WILLINGNESS TO PURCHASE PREMIUM PRODUCT

Average Spend per Value share of

shopper
Premium products*
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in Golden Shopper food

expenditure
3780€
2860€ 33%

Golden shopper Low Price

Average spend per shopper of Golden is Golden shopper spends +

32% higher than Low price 40% on Premium products
Source: Italy CPS&Panel view

*Premium products = price index >150

21
 IN A NUTSHELL, PREMIUM FOOD PRODUCTS GREW FASTER...

Selected
basket/countries
Premium grew 5x faster
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than average
+5,0% vs category 1,1%

63% of categories growth

come from Premium
products (€346 M)
Premium: Subrand Price index > 150
Source: Nielsen RMS – FR,IT, DE, UK, USA, Beer+Chocolate tablets+Olive oli+Coffee R&G (excl Instant and
capsules)
Beer Private labels not included but GB and US 22
 THE NEW PARAGDIM OF PREMIUM: LESSON LEARNED!
Consumers have re-calibrated spending and redefined the traditional norms of value

Premium is no more only high price

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• Having a higher-than-average price tag is no more enough to trigger a

Premium product purchase

Premium = valuable proposition

• During the recession, value was about consumers trading down and making
sacrifices. Today, it is increasingly about consumers weighing not only the costs of
goods, but the multitude of benefits they offer as well

23
 WHICH ARE FOOD WINNING TRENDS?

IS PASTA RIDING THESE TRENDS?

DOES PASTA DNA INCLUDE SUCCESS

INGREDIENTS?
Let’s do a reality check within
developed countries
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 WINNING TRENDS IDENTIFIED ACROSS FOOD CATEGORIES AND
COUNTRIES TO DRIVE GROWTH & PREMIUMIZATION
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HEALTHY & MADE IN SELECTED CRAFTSMANSHIP INNOVATIVE*

SUSTAINABLE ORIGIN

5 WINNING TRENDS:RIGHT INGREDIENTS @ PASTA?

* Innovative is about packaging, flavour, technology, convenience

25
 PREMIUM FOOD PRODUCTS GREW FASTER...@ PASTA TOO!
Mature markets (IT+FR+DE) have further space for Premium Products

Volume Trend
Volume Sales in Mio Kg vs 2016
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1.011 1.018 Tot Dry Pasta

+0,8%
199 210
Premium
+5,7%

No Premium
812 808 -0,5%

Year 2016 Year 2017

* Premium products: Price Index No Promo >= 130 vs Tot Dry Pasta - in 2017 – Channel Hyper+Super 26
 PREMIUM PASTA SEGMENTS GROWING FASTER...@ DDG!
Mature markets (IT+FR+DE – Channel: Super+Iper)
Volume Sales in Mio Kg - Trend vs 2016

Tot Dry Pasta Tot Dry Pasta Tot Dry Pasta

1.011 +0,8% 1.018 1.011 +0,8% 1.018 1.011 +0,8% 1.018
Copyright © 2018 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute.

29 33 9 10
37 42
BIO GF WW
+16,9% +9,3% +13,2%

No BIO No GF No WW
+0,3% +0,7% +0,3%
982 985 1.002 1.008
973 976

Year 2016 Year 2017 Year 2016 Year 2017 Year 2016 Year 2017

Organic Gluten Free Whole Wheat

27
 IS PASTA RIDING WINNING TRENDS...?
PASTA: SUSTAINABLE BY DEFINITION... + HEALTH BENEFITS

HEALTHY & SUSTAINABLE MADE IN

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Granoro Integrale
La Molisana Integrale Panzani BIO
100% Biologico Italiano
IT Volume trend FR Volume trend IT Volume trend
+164% +1176% +44%
* Premium products: Price Index No Promo >= 130 vs Tot Dry Pasta - in 2017 – Channel Hyper+Super Italy/France 28
 IS PASTA RIDING WINNING TRENDS...?
SPECIFIC PLACE/SPECFIC INGREDIENTS/STORY TELLING

SELECTED ORIGIN CRAFTSMANSHIP

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Voiello 100% grano aureo

IT Volume trend +11%

Garofalo Standard
IT Volume trend +2%

* Premium products: Price Index No Promo >= 130 vs Tot Dry Pasta - in 2017 – Channel Hyper+Super 29
 IS PASTA RIDING WINNING TRENDS...?
NEW INGREDIENTS & CONVENIENCE

INNOVATIVE*
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Birkel Nudel-Inspiration
DE Volume trend +125%
Barilla 3 minuti Barilla 5 cereali
FR New launch IT Volume trend +1576%

* Premium products: Price Index No Promo >= 130 vs Tot Dry Pasta - in 2017 – Channel Hyper+Super * Innovative is about packaging, flavour, technology 30
 IS PASTA RIDING THESE TRENDS?
YES!
DOES PASTA DNA INCLUDE SUCCESS
INGREDIENTS?
YES!

LET’S RIDE THE GROWTH!!!

THANK YOU!
STEFANO.GALLI@NIELSEN.COM
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