WHAT’S IN STORE2016 AND BEYOND
James Russo: SVP Global Consumer Insights December 15th 2015
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TODAY’S SPEAKER
JAMES RUSSOSenior Vice President, Global
Consumer Insights@JamesARusso
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PICK UP IN DOLLAR SALES, UNIT SALES LANGUISH
Source: Nielsen Scantrack – Total U.S. – All Outlets Combined (xAOC + Convenience), All Departments, All Brands (UPC), calendar years 2010 -2014 and CYTD Wks - 47 W/E 11/21/2015, $ and unit %change vs. YAGO, Nielsen Homescan – Total U.S. – All Outlets, All Buyers, All Brands (UPC), calendar years 2010-2014 and 52 weeks ending 10/24/2015, trips per shopper
3.8%3.1%
1.8% 1.9%2.5%
0.8%0.3% 0.4%
0.0%
0.2%
151 146 140 137 132
2011 2012 2013 2014 2015
Dollar Trend
Unit Trend
Trips per Shopper
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Source: Nielsen Scantrack – Total U.S. – All Outlets Combined (xAOC + Convenience), All Departments, All Brands (UPC), 52 weeks ending 11/21/2015, $ and unit % change vs. year ago
6%
5%
5%
4%
3%
2%
2%
2%
2%
2%
2%
2%
1%
1%
-1%
3%
3%
4%
2%
3%
2%
1%
0%
-1%
0%
0%
0%
0%
0%
-2%
-2%
0%
Health Care
Produce
Deli
Alcohol
Tobacco & Alternatives
Bakery
Beauty Care
Meat
Grocery
Personal Care
Household Care
Dairy
Pet Care
Frozen Foods
General Merchandise
Total All Departments
Dollar Trend
Unit Trend
NOT EVERY CATEGORY IS DECLINING
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THE DEMISE OF THE CENTER OF STORE IS OVERSTATED
Source: Nielsen Scantrack x AOC + Convenience. Period Ending August 22, 2015
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DECLINES OFFSET BY CATEGORIES WITH LARGE GAINS
+$4,751.2 5.1
+$3,870.7 7.0
+$3,129.0 4.1
+$2,540.7 8.4
+$2,297.2 5.9
+$2,291.3 3.6
+$1,717.2 7.9
+$1,585.8 6.1
+$1,301.1 6.0
+$941.1 15.7
EXPANSION Millions4yr
CAGRCONTRACTIONRTE Cereal
Soft Drinks
Gum
Sugar
Margarine
Frozen Entrees
Powder Inst Drinks
SS Juice & Drinks
Frozen Pizza
RTE Desserts
-$764.4 -2.1%
-$731.2 -0.7%
-$411.3 -3.1%
-$379.3 -3.5%
-$284.9 -4.3%
-$272.5 -0.6%
-$237.4 -6.1%
-$179.0 -0.5%
-$164.0 -0.9%
-$155.8 -5.5%
Millions4yr
CAGR
Salty Snacks
New Age Beverages
Candy
Coffee
Water
Cheese
Eggs
Yogurt
Nuts
Liquid Coffee
Source: Nielsen Scantrack x AOC + Convenience. Period Ending August 22, 2015
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Source: Nielsen Global Surveys, U.S., biggest concern over the next six months, Economy response YTD 2015 is thru 2Q15
ECONOMIC CONCERNS DIMINISHINGEconomic Concerns for US consumers
2009 2011 2014
33%41%
48%
2010 2012 2013
44%42%
40%
YTD2015
28%
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UNCERTAINTY PERMEATES THE CONSUMER MINDSET
40%Living paycheck to paycheck:
55% less than or equal to $50K
25% $150K or above
55% Believe we are still in a recession
44%Believe will not be out of a recession in the next 12 months
40%
Source: Nielsen 2Q15 Online survey of 1,000 respondents
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BEFORE WE CLOSE THE YEAR,INSIGHTS FROM NIELSEN’S HOLIDAY HEADQUARTERS
Source: Retail Market Power 2015
• New holiday selling season:o As of Halloween week, 47% of consumers had started holiday shopping
• Cyber Monday surpasses Black Friday:o Thanksgiving 30%o Black Friday 50%o Cyber Monday 60%
• Emerging segments driving growth: o Millennial and multicultural
• Online is mainstream:o 75% plan on shopping Online, followed by Mass Merchandisers (74%),
and Department Stores (72%)o Top web site used for Cyber Monday was Amazon at 81%, next closest 32%
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10
THE YEAR AHEAD
2016
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Dollars Units
2015 2016 2015 2016
Total 2.1% 2.2% -0.1% 0.1%
Alcohol 4.4% 2.4%
Pet Care 3.6% 0.8%
Dairy 3.2% 0.1%
Health and Beauty 2.8% 1.0%
Dry Grocery 1.6% 0.0%
Non-Food Grocery 1.4% -0.3%
Source: Nielsen Advanced Analytics – business consulting
NIELSEN SALES OUTLOOK 2016
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CONNECTED COMMERCE BECOMES A REALITY
Retail (B&M)
Add value Make it easy
Satisfy needs
Know your shoppers
Retail /Digital
Digital
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VISION OF CONNECTED COMMERCE: TARGET LA25Digitally enabled, in-store shopping experience
“A great in-store experience featuring the latest in on-demand shopping. That means fast access to products, helpful team
members, and easy-to-use online and mobile options”
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ECONOMIC OUTLOOK 2016
Goldman Sachs Sept 2015
2016 GDP 2.4% 2.8% 2.4% 2.8%
Conference Board Nov 2015
IMF Oct 2015
World Bank June 2015
Full year 2015 GDP2.5%
"What happens in China has repercussions for the entire world economy."
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FEDERAL RESERVE MEETING DEC 15TH AND 16TH
Is it the end of the era of cheap money?
What it could mean for consumers:
Monthly credit card rates increase
Mortgage payment could go up - unless it's fixed
Savings accounts pay a little more interest
The job market cools slightly
Stocks could see more volatility
WHAT’S IN STORE 2016 AND BEYOND
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IN THE U.S.
Source: Pop-Facts® Premier 2015, Total US
Population
20202015319 Million
Pop Estimate
331Million DIVERSEPop Projection
Households 121Million
126Million CHANGING
HH IncomeAvg: $79,486Med: $57,294 SLOWING
Avg: $74,165Med: $53,706
$6.7 Trill ion
$7.1 Trillion
TOTAL CONSUMER SPEND
$5.3 Trill ion
$5.7Trillion
TOTAL RETAIL SALES & EATING, DRINKING PLACES
INFLUENCE OF MULTICULTURAL CONSUMERS
Every hour born in the U.S.:• 147 new Latino births
• 43 new Asian American births
• 41 new African American birth
• 6 new Caucasian American birth2020 Multicultural
Buying Power
$4.2 TRILLION
Share of U.S. buying power in 2020
• African-Am 8.7• Asian-Am 6.7 • Hispanics 10.6
TODAY TOMORROW
Source: The Multicultural Economy 2015, The Univ ersity of Georgia Selig Center f or Economic Growth, National Journey Next America. Article: The Economic Impact of Changing Demographics in the United States, June 2015.
By 2020, more than
1 in 5 adults (21%) will be age 65 or olderBetween now and the year 2030,every single day, 10K baby boomers will turn 65
AMERICA, AN AGING NATION
Source: Pew Center
78 million Boomers hold:
70% of disposable
income, and account for 50% of CPG
sales
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2020: NEW RETAIL AGENDA EMERGES
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FOOD AWAY FROM HOME GROWING FASTER
Source: Consumer Buying Power 2015 July, Total US
$551
$736
$584
$773
FOOD OUT OF HOME FOOD AT HOME
Total U.S.5 Year Projected $ Spend (Billions)
6%
5%
2015 20152020 2020
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Source: Consumer Buying Power 2015 July, Total US
$4,639
$6,150
$181
$248
$790
$649
$354
$124
$1,217
$406
$1,240
6.0%
5.0%
7.5%
7.5%
7.3%
7.2%
7.1%
7.1%
5.4%
4.2%
2.4%
1.7%
Food Away From Home
(Foodservice & Drinking Places)Food At Home
Juices
Carbonated Beverages
Fruits & Vegetables
Non-alcoholic Beverages
Cereals & Cereal Products
Coffee
Prepared Foods
Alcoholic Beverages At Home
Sugar & Other Sweets
Meats (All)
2020 Annual Avg per HH 5YR Projected % Growth
Average Growth
DRIVERS OF FOOD AT HOME SALES
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FIND GROWTH BY GOING DEEPER AND LOCAL Top 20 DMAs driving the “Food at Home” Growth for 2020…
Minot, NDAustin, TX
Odessa-Midland, TX
San Antonio, TXHouston, TX
Charleston, SCDenver, CO
Casper - Riverton, WYGlendive, MTRapid City, SD
Victoria, TXFt Myers, Naples FL
Salt Lake City, UTColumbus, GA
Dallas, TXFargo, ND
Washington, DCWilmington, NC
Oklahoma City, OKRaleigh, NC
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MILLENNIALS ON THE MOVE: ONLY ¼ EXPECT TO LIVE IN SAME AREA
Source: Spectra, Data Version 2015 August; only includes DMAs with projected total population of 1 million+
Highest mobility of any age break drives strong population growth in the South
While the list of top 10 most populous DMAs is projected to remain the same in five years, DMAs with the highest growth of Gen Zers and Millennials diverge
<20 growth concentrated in
larger cities/college towns
Texas and Florida see
high growth across age breaks
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20 FASTEST GROWING METRO AREAS What don’t you see? Atlanta, Boston, Dallas, NY, Miami, LA, Phoenix, Wash DC
Memphis, TN-MS-AR
Tampa-St. Petersburg-Clearwater, FL
Jacksonville, FL
Milwaukee-Waukesha-West Allis, WI
St. Louis, MO-IL
Baltimore-Towson, MD
Chicago-Joliet-Naperville, IL-IN-WI
Detroit-Warren-Livonia, MI
New Orleans-Metairie-Kenner, LA
Pittsburgh, PA
20% Philadelphia-Camden-Wilmington, PA-NJ-DE-MD
Columbus, OH
Buffalo-Niagara Falls, NY
Virginia Beach-Norfolk-Newport News, VA-NC
Sacramento-Arden Arcade-Roseville, CA
Hartford-West Hartford-East Hartford, CT
Orlando-Kissimmee-Sanford, FL
Charlotte-Gastonia-Rock Hill, NC-SC
Cincinnati-Middleton, OH-KY-IN
Kansas City, MO-KS
33%
18%
12%
23%
19%
14%
16%
14%
20%
15%
33%
32%
30%
30%
29%
29%
28%
26%
27%
14%
14%
16%
13%
13%
15%
12%
15%
14%
12%
26%
25%
25%
25%
25%
24%
24%
23%
23%
22%
Source: Nielsen A Tale of 2000 Cities
PRICE GAIN
2012-2015 2012-2018
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E-COMMERCE CONTINUES TO BE THE BIG WINNER
Sources: Nielsen TDLinx & Nielsen Analytics; CAGRs (compounded annual growth rates – dollar basis)
-4% -2% 0% 2% 4% 6% 8% 10% 12% 14%
Consumer ElectronicsToy
Dept StoresOfficeBooksMass
Home/Bed/BathAuto
SupermarketsSuper Centers
ApparelDrug
Home ImprovementLiquor
ClubConvenience
Disc Dept StoresPet
Sporting GoodsDollar
Ecommerce
Average Growth
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NATURAL GOURMET CONTINUES TO TAKE SHARE BITE FROM MAINSTREAM SUPERMARKETS
Source: Nielsen TDLinx & Nielsen Analytics; *Aldi & Save-A-Lot; **Whole Foods, Trader Joe’s, Fresh Market & Sprouts
Supermarket % $ Channel Shares
0%
25%
50%
75%
100%
2006 2015 2020 forecast
Limited AssortmentDeep Discount*
Natural Gourmet**
MainstreamSupermarkets
2015-2020 CAGRs: Gourmet 8.1%, Ltd Assortment 2.4% , Mainstream 1.6%
Point Change 2020 forecast vs. 2015
+ NC
+ 2.7
-2.8
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BY 2020, PROXIMITY RETAILING WILL BE THE NORM AND KEY TO SUSTAINED GROWTH
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. Promise Is Realized The Internet Of Things Become Mainstream 2020: CONNECTIVITY
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NEARLY EVERYONE WILL BE ONLINE BY 2020
Source: Internet World Stats
World Internet UsagePercentage of the population using the internet by region and how usage has grown since 2000
2005 Today 2020
15% of the
world population
34% of the
world population
85% of the
world population
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MOBILE USAGE 7 TIMES HIGHER THAN 2010
Source: KPCB Internet Trends 2015 Code Conference, May 2015
2015 first year that mobile usage accounts for at least half of digital media time
0.4 – 7% of total
2.4 – 42% of total
2.8 – 51% of totalMobile
Desktop / Laptop
Other Connected Devices
Time spent per Adult UserPer Day with Digital Media2015
5.6 hoursper day
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IN AN AGE OF PROLIFERATION, THE TIME TO CONNECT AND RESONATE WILL BE REDUCED
Source: Multiple sources
Apps that center on brevity have seen meteoric adoption since 2010
‘10 ‘11 ‘12 ‘13 ‘14 ‘15
Snapchat released
100 millionactive users
400 million+snaps per day
60 million+ registered users
10 million users
20 million images shared
per day
Video sharing launched
(end of 2012-early 2013)
2nd highest photo
sharing site Facebook #1
200 millionmonthly active
users
1.5 billionVine loops played
daily
Official launch (Jan)
Most downloaded
free app for iOS (Apr)
Company founded
(June)
Acquired by Twitter
(Oct)
40 million registered users
(end of 2013-early 2014)
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INTERNET OF THINGS BECOMES MAINSTREAM
Sources: wareable.com, pocket-lint.com
By 2020, industry experts estimate that more than 50 billion physical objects will be connected to the internet
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DRIVERLESS CARS CREATE THE ULTIMATE MOBILE DEVICE TO CONNECT
• Driverless cars will be in use all over the world by 2025
• Uber fleet to be driverless by 2030
• Ford CEO expects fully autonomous cars by 2020
• Tesla CEO expects true autonomous driving by 2023
• Fully autonomous vehicles could be ready by 2025, predicts Daimler chairman
• Nissan to provide fully autonomous vehicles by 2020
• Sergey Brin plans to have Google driverless car in the market by 2018
• Continental to make fully autonomous driving a reality by 2025
• Intel CTO predicts that autonomous car will arrive by 2022
Sources: Google web searches and company reports
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I CAN BE IN TWO PLACES AT ONCE!One of the most sought-after functions is the ability to carry out simple tasks when away from home
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2020: TECHDriving Consumer Optimism Towards 2020
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TECH DRIVES OPTIMISM!Americans are most optimistic about technology’s impact, followed by the global economy, environment, and politics
Technology Global Economy Environment Politics
56%18% 18% 14%
Source: CINA Survey Q1610 Do you anticipate each of the following impacting your life more positively or negatively in 2020? Summary Of Much/Somewhat More Positively
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DRIVEN BY YOUNGER AND OLDER MILLENNIALSAmericans 45+ report lower optimism than total sentiment (70% net optimistic)
Total – 70%
18-25 – 81%
26-34 – 79%
35-44 – 71%
45-54 – 65%
55-64 – 65%
65+ – 61%
Source: CINA Survey Q1605 Overall, how optimistic or pessimistic do you feel about the next five years? Optimistic (Net)
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CONSUMERS HEDGING ON INCREASED CORPORATE RESPONSIBILITYAffluent, educated, and student demographics drive belief that environmental and social responsibility will increase - % increase in importance
Environmentalresponsibility
of brand
Socialresponsibility
of brand
Learn aboutcompanies behindbrands I purchase
Decide not topurchase a brand
because ofcompany’s conduct
Social media’sinfluence on my
purchasingdecisions
Number ofbrands I followon social media
76% 38% 35% 34% 22% 20%
Source: Nielsen CINA Survey Q1625 Compared to today, do you think each of the following will increase, decrease or remain the same in 2020? Summary Of Increase
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YM WILL BE MOST ENGAGED IN 2020Young millennials drive increases across attributes for corporate social responsibility, pre-purchase due diligence, and social media importance
Young millennials have highest perception of “increase” for all attributes
Source: Nielsen CINA Survey
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OVER HALF OF AMERICANS WILL SHOP ONLINE MORE93% of Americans currently shop online or expect to do so in 2020
• Young millennials lead all other age breaks with expectation that online shopping will increase (68%)
• Additionally, 64% of young millennials expect virtual reality will be part of their 2020 shopping experiences
Will shop online more – 51%
Won’t change habits – 37%
Will shop less online – 5%
Don’t shop online and don’t plan to – 7%
Source: Nielsen CINA Survey
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2020: TECH TITANSDisrupting Retail
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ECOMMERCE ROOTED IN START UP COMPETITORS
Source: Retail Market Power 2015
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NEW RETAIL COMPETITORS EMERGING
Source: Retail Market Power 2015
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APPLE’S FOCUS
KILL CABLE TV OWN RETAIL
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TECH WILL BECOME VITAL PLAYERS IN RETAIL
Owning retail and fully integrated marketing efforts, keeping people in their eco system
Marketing to consumers in a digital system.
Personalized retail experiences
Connecting people - F8 reintroduced instant messenger platform, future of connecting, a consumer and retailer connecting and ultimately commerce
Putting the consumer in control, making their lives more efficient, productive, etc
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UNCOVER STRATEGIES IN SHOPPING TRIPS
Stock-up Routine Fill-in Immediate
6% 12% 21% 61%
Currently retailers such as Amazon compete in the 40%, noted above, the goal is the 60% being missed, this is the game changer in the next 5 years and why Amazon Prime Air, Same day delivery will be common place.
Source: Nielsen consumer panel 2015
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2020: FOODThe Age Of Customization
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RE-IMAGINING MEAL TIMES
In the future, food will be prepared, delivered and consumed in ways, at times, and in places very different than they are today. Customization is producing goods and services to meet individual customer’s needs with near mass production efficiency.
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RE-IMAGINING MEAL TIMES
Source: Euromonitor International from national statistics; Euromonitor Ready Meals, Retail Value 2012; US Bureau of Labor Statistics May, 2014
Mealtimes Will be Under Pressure
Time Spent Preparing Meals Will Decline
Eating Habits Will Become More Flexible
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GIVES RISE TO NEW WAYS OF CONSUMING IN AN INCREASINGLY BUSY WORLD
Untapped Global Opportunity
Snack as meal replacement
Accessible
Portable
Nutritious
Flavorful
45%
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NEW COOKING YIELDS NEW OPPORTUNITIES
What we’ve seen What’s to come
• Microwave
• Keurig
• Nespresso
• Soda Stream
• Juicers
• Food Processors
• Induction
• Sous Vide/Immersion
• Solar
• Hot Vending
• In Car
• Foodservice
Source: International Flavors & Fragrances Inc. Nov 2014 study
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NEW AND NOVEL SNACK APPLICATIONS
Exotic Protein
ReinventingBreakfast
UniqueConvenience
InfantSnacking
Hot Vending
Source: International Flavors & Fragrances Inc. Nov 2014 study
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CONSUMERS PROACTIVELY ENGAGED IN TAKING CARE OF THEIR HEALTH
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AUGMENTED HEALTH
People's approach to life-long health will become
anticipatory and aspirational. Food and beverages will be expected to
go beyond general health claims and make commitments to helping people
achieve their near and long term goals.
Source: IFF study 2015
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AUGMENTED HEALTH IS ABOUT PREVENTION
Source: Euromonitor; Cisco VNI Service Adoption Forecast, 2013-2018 Cisco Systems, Inc.; United Nations, Pop Div, DESA, BCG Analysis
Profiling Tools Will Create Individualized Awareness
Radical Solutions Will Meet Aspirational Goals
Health & Wellness Market
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AND WE WILL TURN TO FOOD AS MEDICINE
INGREDIENT BENEFIT
Brain Function
UV Protection
Nail Breakage
Dry Skin Repair
Healthy Skin/Nails
Metabolic Stimulant
Skin Tone/Aging
Sleep/Relaxation
Citicoline
Fern Extract
Biotin
Idebenone
Gamma Linolenic Acid(Primrose/Blackberry)
CoQ10
Lycopene
Gamma Aminobutyric Acid (GABA)
Source: International Flavors & Fragrances Inc. Nov 2014 study
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LEVERAGING TOMORROW’S TRENDS, TODAY
Challenges Insights
Sector and channel forecasts in the next five years
Understanding the impact of tech titans on retail
Re-imagining food in 2020
• Food away from home sales are projected to grow 6%, while food at home sales are projected to grow 5%
• Beverages, Fresh, Coffee and Cereal are expected to increase at about the food at home average• Top channel for growth will be Online, followed by Specialty, Convenience, Club, and Dollar
• Nearly everyone will be online by 2020• Driverless cars will become the ultimate mobile device
• 56% of consumers believe technology will positively impact their lives in the next 5 years• As tech giants focus on closing the gap of immediate shopping trips new competitor will emerge
• Specialty food stores are expected to grow by 7%• News ways of preparing food is emerging creating new markets
• Food will increasingly be used to enhance health to slow aging, increase brain function and help sleep
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