Understanding How Consumer Trends Shape Your Market

1. Understanding How Consumer Trends Shape Your Market Culinary Tides, Inc. Suzy Badaracco, President Toxicologist, Chef, Dietitian

2. Who We Are…What We Do • Who we are: • Private Trends Forecasting Think Tank – Staff = 7 • 2 Satellite offices – Washington DC, Tokyo • Forecast work is created through military intelligence techniques, Chaos Theory • Background: BS Criminalistics, Assoc. Culinary Arts, MS Nutrition • Toxicologist, Chef, Registered Dietitian • What we do: • Partner long term w/ food industry clients – side along Think Tank • Look for patterns in Chaos to aid future strategy • Produce custom monthly & quarterly reports for clients • Government, Technology, Adversaries / Allies, Competitors, Research, Flavor & Cuisine - tracked and forecasted specific to client • Quarterly reports include updated 12-18 month forecast for each area

3. Chaos, Blips, Shadows, Trends • Chaos • Birth • Blips • Shadows • Trends • Tracking

4. Today’s Area of Focus • Consumers • Sentiment vs. Behavior, Drivers, Recovery Behavior • Health Horizons • Generational Concerns • Health Drivers • Flavor Horizons • Meal Patterns, Settings, Preparations, Flavor Landscape • Couriers, Ricochets, Rock Stars & Rising Stars, Orphan • How to Play on a New Playground • Headwinds & Tailwinds, Forecast, Suggestions

5. Consumers

6. The Generations: Age The Depression Era • Born: 1912-1921 • Coming of Age: 1930-1939 • Age in 2013: 92 to 101 • Current Population: 11-12 million (and declining rapidly) World War II • Born: 1922 to 1927 • Coming of Age: 1940-1945 • Age in 2013: 86-91 • Current Population: 11 million (in quickening decline) Post-War Cohort • Born: 1928-1945 • Coming of Age: 1946-1963 • Age in 2013: 68 to 85 • Current Population: 41 million (declining)

7. The Generations: Age Generation Y, Echo Boomers or Millennials • Born: 1977-1994 • Coming of Age: 1998-2006 • Age in 2013: 19 to 36 • Current Population: 71 million Generation Z • Born: 1995-2012 • Coming of Age: 2013-2020 • Age in 2013: 1-18 • Current Population: 23 million and growing rapidly Boomers I or The Baby Boomers • Born: 1946-1954 • Coming of Age: 1963-1972 • Age in 2013: 59-67 • Current Population: 33 million Boomers II or Generation Jones • Born: 1955-1965 • Coming of Age: 1973-1983 • Age in 2013: 48 to 58 • Current Population: 49 million Generation X • Born: 1966-1976 • Coming of Age: 1988-1994 • Age in 2013: 37 to 47 • Current Population: 41 million

8. The Generations: Personality security uncertainty comfort familiarity discomfort Cold War known activities, environments Post War focus on self-help Boomers I Boomers II narcissism “I’m out for me” largely optimistic economic struggles skepticism -media /institutions good economic opportunities

9. The Generations: Personality lowest voting participation “what’s in it for me” pragmatism children of divorce caution skepticism “latchkey” kids best educated Gen X “lost” generation concern over family technology wise (++) price driven very brand loyal Gen Z Gen Y flexible not brand loyal sustainability driven style conscious not sustainability driven eat according to hunger more ethnically diverse involved in family purchases Influenced by peers, marketing, not parents eat according to social cues immune to traditional marketing

10. Consumer Sentiment vs. Behavior *Shows recession vs. recovery behavior NRA- restaurant performance index h NRA- restaurant performance index h Commerce Dept - consumer confidence h Black Box-restaurant $ h Black Box –same store $ h NRN-Millerpulse- same store $ h Consumer + NRN-Millerpulse- same store $ h Black Box –willingness to spend h Conference Board – consumer confidence h Census Bureau- restaurant sales h Reuters – Consumer confidence i NRF- retail $ i Black Box –restaurant traffic i Consumer - Consumer Reports- retail $ i 4/13 3/13

11. Consumer Sentiment vs. Behavior *Shows recession vs. recovery behavior Conference Board - consumer confidence h Conference Board – present situation index h Black Box –same store $ h Conference Board – sentiment index h Consumer + NRN-Millerpulse- same store $ h Commerce Dept - consumer spending h Conference Board – expectations index h Consumer - 5/13

12. Saying One Thing…Doing Another *American Express research: Generation Y is more secretive and belligerent about money than baby boomers Disconnect Ignorance Fear Mis-informed Sub-consciously influenced Denial Cherry picked data Conscious Lie Mis-represent what they paid for item Buy something against partner’s / parents wishes To hide embarrassment Anticipate correct answer (surveys), leading q’s

13. Consumer Influencers • Children between the ages of 3 and 8 - advertisements were more influential than parents • 80% of Millennials want brands to entertain them, with 40% wanting brands to let them influence products via co-creation • 90% of adults ages 25 to 34 prepared ethnic foods at home in the last month, 91% of adults with children under 18 made ethnic food • About half of 18 and 44 year olds base brand loyalty on brand experience - video/online gaming, social media and third-party expert information through blogs and articles • 70% of consumers actively engaged in social media have made a purchase as a result of being connected to a brand online • 86% of US shoppers consider sustainability when buying groceries • 91% of consumers say they would switch brands to one that supports a cause, and 90% say they would boycott if they learned of irresponsible behavior • 36% of consumers say Meatless Monday campaign influenced their decision to cut back on meat and 47% ate more whole grains • Texas A&M • Edelman Berland, 8095 Live • Mintel • Analytic Partners • SocialVibe • Industry Intelligence • Cone Communications • FGI Research

14. Consumer Apathy / Disconnect • Just 4% of all Americans aged 15 to 25 thinks that a brand page on Facebook is a credible source of information about the product • Teen snack purchases were influenced by taxes, subsidies and the presence of peers when buying snacks • Consumers are looking for products made with less fats/oils, sodium and sweeteners, however, this has little influence on a diner’s choice of restaurant and menu item • 20% of consumers switched the companies they typically buy from, an increase of 5% over 2011. However, 85% said companies could have done something to prevent them from switching • 80% of US adults describe themselves as “extremely healthy” or “very healthy”, but only 20% have what is considered to be a “most healthy" diet • 52% of Americans said figuring out their taxes is easier than knowing how to eat healthy, 23% of obese and 44% of overweight consumers say they are not trying to lose weight • InSites Consulting • RAND Corporation • NPD • Accenture • NPD • NPD

15. Health Horizons

16. Generational Health Concerns Vision Obesity Cognitive Function (Development) Cognitive Function (Focus, Mood, Stress) Cancer Diabetes Diabetes Digestion Cognitive Function (Focus, Memory, Mood) Digestion Vision Obesity Digestion Immunity Health Issue Digestion Heart Health Obesity Obesity Muscle / Joint Immunity Cognitive Function (Focus, Memory, Mood) Boomers + Gen Z Gen X Generation Gen Y (Millennials, Echo Boomers, Boomerangers) Caffeine Salt Sat, Trans Fat Omega 3’s Caffeine Associated Elements Sat, Trans Fat Fiber Sugar Fiber Fiber Pre, Probiotics Fiber Pre, Probiotics Pre, Probiotics Caffeine Omega 3’s Pre, Probiotics Sat, Trans Fat Vit D, Calcium, Mg Sat, Trans Fat Breakfast Breakfast Breakfast Breakfast

17. Health Trends: Drivers Digestion Diabetes Vision Digestion Seasonal / Local Muscle Fiber / Grains Calories Seniors Cholesterol Joint / Bone Salt, Sugar, Fat Mood Kids h Flexitarian Acrylamide Control Prevention Obesity CVD Menu Labeling Apps Satiety Health Organic / Natural Unprocessed Trust Simplify Free From Benefit? Sustainability Health Claims Convenience Naturally Healthy Food Safety Obesity Cognitive Function Snacking Energy Stress Focus Satiety Sleep Kids Dining Out Relaxation Memory Portion Control Depression Development / Decline

18. Flavor Horizons

19. Health Couriers *Couriers shuttle trends in from neighboring industries / focuses Kids Focus Gluten free backlash Pure, Simple iSalt, Fat, Sugar Health Couriers Healthy Indulgences Botanicals Flavorful Health Mindful Snacks Double sided menus

20. Meal Patterns Kids Meal Evolution All Day Breakfast American Regionalism Daypart Disintegration Seasonal Meal Types Vibrant Perpetual Snacking Farm Branded Ingredients Fast Casual Copycats Family Friendly Fine Dining

21. Meal Settings & Preparation *Scratch Prep, Wildcrafting *Approachable, Family Friendly *Adventure, Discovery *Vibrant, Inspired, Risk Taking *Portion Size i, Portion Options h *Seasonal, Regional, Authentic *Authentic, Rustic *Fast Casual, Approachable Fine Dining *Minimally Processed *Rock Star Butchers, Millers, Bar Chefs *Meatless *Open Flame, Foraged *Communal Tables, Shared Spaces *House Smoked, Herb Infused *Street Food, Underground Restaurants *Pickled, Fermented, Peppered *Pop-ups, Speakeasies Preparation Settings Factor Inspiration Translation

22. Happy Hours h NZ Great Barrier Reef Spain Speak-Easies Multi-Destination Africa Northern Lts Sports Leap/Bucket List Chile Italy Settings Earthing Argentina Themed Regions Rotating/Guest Bartender France Experiential Scandinavia Sparkling Iceland Philippines Styles Arctic Sweden Sweet Red Nepal Asia Norway Vouvray Petit Verdot Antarctica Burma Muscato Belize Central America Caribbean Panama Ethiopia Africa South America Congo Guatemala Middle East Sudan Brazil Argentina Jordan Peru Israel Oman Lebanon Wine & Travel Trends *Couriers - shuttle trends in from neighboring industries / focuses Flights Space Spa Cocktails Wine Cambodia House blends Travel Tasmania Galapagos Cuba Pacific

23. Food & Flavor Landscape 2013 *Grapefruit *Culinary Cocktails Protein *Horseradish Fruit/Veg Dairy *Oats Macro Grain *Wild Game Beverage Seasoning *Greek Yogurt *Coconut *Micro-Distilleries *Farmstead Cheese *Citrus *Citrus *Quinoa Familiar / Historical *Coconut *Berries *Smoke *French Pastry *Lemonade *Offal *Chilies *Lentils *Ancient Tea *Beans *Roots *Pickling *Ricotta *Chilies *Almond Butter *World Salt *Kale *Eggs Personality *Barrel Aged Cocktail *Muntries *Huacatay *Chia *White Strawberries *Lebanese Yogurt *Nordic *Sprouted *Kombucha *Flowers *Hibiscus *Ashes *Paneer *Finger Limes *Freekah *Flavored Heat *Vietnamese Coffee Experimental *Kimchee *Global Noodles *Plant Based Dairy *Sunchokes *Dessert Cocktail *Sour/Fermented *Burrata *Sipping Vinegar *Miso *Grits *Mizuna *Kefir *Agua Fresca *Arepas *Seaweed *Popcorn *Zip code honey *Sardines *Oysters *Artisan soft serve *Pumpkin *Moonshine *Multi-grain Tortillas *Goat Cheese *Hand Crafted Soda *Chutney *Waffles Tree Huggers Sensuals Interpreters Type A Cage-Dancers Bi-Polars *Goat, Lamb Bellies *Black rice *Bone Marrow *Bubbles *Blood *Skin *Fin to Tail *Geranium leaf *Insects *Farro *Wild Greens *Lethal *Savory ice cream *Curry *Invasivors *Salumi *Hyssop

24. Rock Stars Soul Food Asia – Korea, Vietnam Central America –Regional Mexico South America – Peru Middle East Rising Stars Africa – Egypt, Morocco, S. Africa, Kenya Caribbean, Pacific- Cuba, Fiji, Tasmania Asia – Nepal, Cambodia, Philippines Central America –Nicaragua, Guatemala, Belize South America- Ecuador Arctic – Denmark, Scandinavia, Norway Flavor & Cuisines – Rock / Rising Stars Pathways: USA – Regional, Regional Specialty Foreign Familiar (think Mexican) – Regional, Regional Comfort Nuevo Foreign (think Middle East) – National, National Comfort

25. Other Flavor Factions & Their Parentage • Central America • Fusion birth, Parents = Travel & So. American flavor trends • Costa Rica, Panama, Guatemala, Nicaragua, El Salvador, Belize, Honduras • Asian Shift • Courier birth, Parent = Travel • Shift away from Thai, Japanese, Korean & towards Malaysia, Laos, Cambodia, Nepal • Shift due to rise in consumer confidence, risk taking, adventure seeking • Caribbean & Pacific • Courier birth, Parent = Economic recovery translated to travel shifts • Cuba, Bora Bora, New Zealand, Tasmania, Fiji, French Polynesia • Travel here signals luxury, time h, $$, playfulness • Arctic • Fusion birth, Parents = Travel, Economic Recovery • Cross ties Arctic & EU – Antarctica, Nepal, Lapland, Iceland, Norway, Scandinavia, Finland, Netherlands, Ukraine • Travel here signals solitude, bravery, $$, fearlessness, curiosity, exploration

26. Nordic: 1/11-3/13 Bakery Packaging Food Mnft./RCA/IFT/ASTA Wine Ind. *Birth Family / Quick Serve Restaurants Travel Ind. Overseas – Not USA Hi-End Restaurant/ Celebrity Chef Universities Diet Ind. Bars/Cocktails Governments Industry Mags USA Hollywood TV/News Mags Book Publishers Consumer Mags Cosmetics / Beauty Grocery Pharmaceutical Consumer Biotech ADA AMA AACC

27. How to Play on a Changing Playground

28. Consumer Drivers - Recovery Recession Rejection Cost / Value Co-exist Portion Options Resilience Brands=Value Wellness=Quality Deal Chic Men Evolve Mobile Relationships Kids Optimism Economy Family Meals Pure Risk Taking Health Simplicity Snacking Motivation Playfulness FOP Drivers Authenticity Legacy Value Control, Safety Escapism Reassurance Brands Sustainability Invigorating Indigenous Accountability Animal Rights Seasonal Stability Never Eat Alone GMO Green Verification Re-commerce Affordable Green

29. Red Herrings Red Herring • Gluten free • Private Label • Functional Food • Rock star chefs • Comfort Food • “Foodies” • Budget • Trade down • Frugality • Local Re-Focus Diabetes (low GI) Brands make comeback, Brands = Value Whole food, Nutrient density, Pure Rock star butchers, Bar chefs, Farmers Global Comfort, Playfulness, Adventure, Risk Butcher, Baker, Agri, Renegade, YouTube Chef Convenience Trade off Recession Rejection, Resilience, Value (not $) Global, Seasonal

30. Value • Educate • Efficiency • Explore • Worth • Ease • Return to restaurants • Coupon use i • Desserts in spotlight • Value trumps budget • Convenience trumps budget • Exotic, experimental trumps comfort • Green spending h • Brands rebound • Luxury, Indulgence rebound • Organic rebounds • Playfulness, risk returns • Travel abroad h • Trade off trumps trade down Consumer Behavior: Recovery Forecast Factor Spending Food & Flavor Priorities Inspiration Income h Fear i Time i Cause Translation • Wine varietals, regions h

31. Forecast: 12-18 months • Convenience Store new competition for Grocery, QSR, Fast Casual • Restaurant performance, consumer confidence continue upward swing • Breakfast is mealtime to watch for signals of economic recovery • Breakfast traffic h = sign that economy h • Vegetarian / Flexitarian #s will be linked directly to sustainability, obesity • Sustainability & Obesity h = expect Veg / Flex h • Flavors / cuisines- more extreme, adventurous items as recovery unfolds • Wines will cross borders to unfamiliar regions, varietals • Beverages regionalize • Vegetable/seasonings demonstrate consumer experimentation vs. caution • Beverage, meat, dessert categories act as barometers for consumer mood • Cocktails, craft beer, wine $ h, desserts h, insect eating = recovery behavior • Cheap domestic beer, wine $ i, cocktails i, desserts i, meatloaf = recession behavior

32. Suggestions • Know the birth and lifecycle of a trend prior to deciding to enter so you can foretell how to navigate it • Neither love nor hate a trend – emotions will fog the trend’s true pattern and you may be blindsided when it shifts • Spend more time researching a trend’s personality and trajectory than worrying about what your competitors are doing – after all, they may be idiots

33. Thank You! Culinary Tides, Inc. Suzy Badaracco President www.culinarytides.com sbadaracco@culinarytides.com https://twitter.com/sbadaracco (503) 880-4682