Today’s Consumer

1. Today’sConsumer Tomorrow’s Catalysts for Industry Change

2. The Changing Consumer • Excerpt from 1950’s Home Economics Handbook: • “Have dinner ready: Plan ahead even the night before to have a delicious meal on time. This is a way of letting him know that you have been thinking about him and are concerned about his needs…” --Leslie Blankenship, Columbus, OH

3. The Changing Consumer • Working women • Wealthier HH’s • Family redefined • Growth of ethnic • Aging population

4. Who is the consumer? • Depends on market strategy • Retailers • Wholesalers • Foodservice • Primary Shopper

5. Today’s Issues • Dynamic Consumers • Global Marketplace • Convenience • Consolidation • Food Safety Concerns • Health & Wellness Attitude • Technology & Science

6. The Dynamic Consumer

7. Dynamic Consumer Implications • Generation X – wants more specialty produce w/ bold and varied flavors in their foodservice meals. • Baby Boomers - are aging and their food choices will be influenced by health, travel and new experiences.

8. Dynamic Consumer Implications • Population Segmentation • Hispanics are the major produce consumer by race and this population segment is growing nine times faster than other races. • Ethnic Foods – will account for about 15% of growth in food sales in the next 10 years • 75% of ethnic food sales are to mainstream consumers. • The largest ethnic categories are Mexican, Chinese and Italian.

9. The Global Marketplace • New varieties • Year-round availability • Fewer limitations on shipments • NAFTA/WTO/GATT • Increased travel • Higher disposable incomes

10. Fruit Per Capita Consumption(lbs)

11. Vegetable Per Capita Consumption(lbs)

12. Top Growth Categories(Fresh Trends-% growth store sales-99-2000)

13. Top Sales Contribution to Chain(Fresh Trends 99-2000)

14. Convenience Trends • Aging, dual-income, busy families want and will pay for convenience • NOTE: The fresh-cut industry has grown by 20+% and the Home Meal Replacement (HMR) industry has grown by 10%. • Common Convenience Items • Bagged Salads, Peeled Carrots, Cut Melons • Growing Convenience Categories • Apples, Potatoes, Vegetable Medleys

15. Consolidation Trends • The Retail Industry experienced nearly 40 mergers in 1999 • The Foodservice Industry experienced over 100 • Top eight chains are responsible for over 50% of produce sales

16. Top Five Players($ Billion Grocery Sales)

17. Why Consolidation? • Take advantage of economies of scale • Survive global competition • Take advantage of all available food dollars • Establish private label programs

18. Food Safety Concerns • Consumers fear unknowns such as… • cross contamination, pesticide residues, biotechnology and terrorism • 76% of all consumers believe their produce is safe, yet 65% still have concerns about harmful chemical residues • Apples, grapes, strawberries, lettuce and tomatoes rank highest among consumers of at risk produce

19. Food Safety Trends • Move towards increased demand for Organic Foods • Produce represents over 50% of organic food sales • Organic produce sales account for 3% of total produce sales • Tomatoes and apples are the most often purchased organic produce • Ages 45-54 and 18-34 are the prime consumer • The West Coast is the strongest organic market

20. Improving Food Safety • Research to improve breeding and reduce pesticide use • Increased tracking of product from field to fork • Third party safety and sanitation audits • Increased education for handlers and consumers

21. Health & Wellness Attitudes • Today’s consumer is better educated and more aware • Media influences perception of self • Consumers want miracle cures for anti-aging, cancer prevention, etc. • Lycopene: watermelon, tomatoes, grapefruit • Anti-Oxidants - blueberries • Diets are still popular and 68% of consumers choose fruit and vegetables as the key component

22. Total US Fresh Produce Consumption (lbs)

23. Technology & Science • Biotechnology • Category Management • Returnable Plastic Containers (RPC’s) • Online Shopping • Electronic Data Interchange (EDI) • PLU codes replaced by scan data

24. Additional Consumer Trends & Comments • Apples, bananas, oranges and watermelons account for over 60% of fresh fruit consumed • Consumers buy more fruit than vegetables • Average produce purchase is about $3.76 • Produce snacking is up • In 1999, 14% of consumers used produce as a snack compared to 31% in 2000 • Vegetables account for over 64% of produce sales

25. Reasons for Produce Growth • Increasing ethnic populations • Health Conscious Consumers • Rising interest in ethnic specialties • Exposure to new varieties and exotic produce • Growing proliferation of fresh cut and convenience products • Use of produce in foodservice

26. Additional Retail Trends & Comments • Bulk produce accounts for about 74% of sales • Produce contribution to store profits exceeds 20% • Gross margin has remained flat at about 35% (difference between cost of produce and selling price) • Size of produce department increased from 2600 sq ft to 3600 sq ft • Number or stock keeping units (SKU’s) increased from 200 to 600 • Today more consumers pick their supermarket based on produce selections

27. Retail Share of Produce Sales

28. What Can We Expect • An Always Changing Consumer • A Smaller Global Marketplace • More Convenience Items • Increased Consolidation • Heightened Food Safety Concerns • Growing Health & Wellness Attitudes • Better Technology & Sound Science

29. Opportunity Factor Ability to Adapt to Change + Vision for the Future + Sound Planning – Fear = Opportunity