Consumer Trends 2013

1. Consumer Trends 2013 American Sugar Alliance 30th International Sweetener SymposiumRon Sterk, Senior Editor, MarketsSosland Publishing CompanyKansas City, MOMilling & Baking News, Food Business NewsSosland SweetenerReport

2. Consumer Trends 2013 Sosland Publishing Companywww.sosland.comNews, data, market insight and resources for domestic and global baking, food processing, grain milling and related industries.Real-time websitesDaily and weekly market updates/newslettersWeekly and monthly magazines (print & digital)Directories, resource booksSosland Purchasing Seminar

3. Consumer Trends 2013 • Disclaimer • We are reporters, editors and commodity journalists at Sosland, not analysts or economists. • These are my observations, comments and conclusions; I am not speaking for Sosland Publishing. • We have no trading position in the markets and do not stand to gain or lose financially from our comments, news stories or published prices.

4. Consumer Trends 2013 My priorities for 2013 #3 - Speaking at the American Sugar Alliance 30th Annual International Sweetener Symposium

5. Consumer Trends 2013 My priorities for 2013 #2 - The return of Hostess Twinkies on July 15, 2013

6. Consumer Trends 2013 My priorities for 2013 #1 - First Grand Baby born July 16, 2013

7. Consumer Trends 2013 • Info bombardment: • Fructooliogosaccharides (scFOS) • Robots - labor • GMOs • Obesity/diabetes • Hunger • Economy • Energy • Obamacare

8. Consumer Trends 2013 • Info bombardment: • Large sugary drinks • Global warming • Food safety • Food waste • Food Security • Crime • Immigration • Terrorism

9. Consumer Trends 2013 • Info bombardment: • Social media – tweets, posts, etc. • Internet • Smart phones • Smart cars • Television & Radio • Snail mail & email • Magazines – print and online • Newspapers – print and online

10. Consumer Trends 2013 • Info bombardment: • How do you know what the consumer wants, or is it what someone or some group says the consumer wants? • “Everybody but consumers seem to be focused on calories. It’s time to rethink how we talk about calories.” • - Lynn Dornblaster, Mintel International

11. Consumer Trends 2013 • What are real trends? • Defined • Prevailing inclination • A general direction or movement • Veer in a new direction • Global • Domestic • Sweetener Industry

12. Consumer Trends 2013 • Some global trends • Many factors affect consumer trends • Economic & political uncertainty • Income growth & increased food demand in developing countries • Population growth & food production capacity • Increasing adoption of GMO crops

13. Consumer Trends 2013 • Some global trends • Economic & political uncertainty • Less disposable income currently • Unrest in Middle East & other areas • Terrorism – domestic • Consumers remain cautious with discretionary income

14. Consumer Trends 2013 • Some global trends • Income growth & increased food demand in developing countries • Population/income growth in China & India • Enough food not as much an issue as what kind of food • Increased demand for protein & sweeteners

15. Consumer Trends 2013 • Some global trends • Population growth vs food production • Loooong-term: population increasing 1% annually; 9 billion by 2050 • Need to increase crop output 50% by 2050 • Issue may be more about infrastructure than amount of land or crop yields • Reduce food waste (30% wasted now) • Gains from GMOs critical

16. Consumer Trends 2013 • Some global trends • Increasing adoption of GMO crops • About 90% of corn and cotton, 93% of soybeans and 95% of sugar beets in the U.S. are of bioengineered varieties. • Some estimate as much as 70% of processed food in U.S. contains ingredients from bioengineered crops. • Would labeling really have an impact? Do consumers care?

17. Consumer Trends 2013 • Some domestic trends • Increased control on businesses via regulation, third party agendas and lawsuits • Increased numbers on entitlement roles • Sustainability • Aging and more diverse population

18. Consumer Trends 2013 • Some domestic trends • Increased control on businesses via regulation, third party agendas and lawsuits • Goal is to affect what consumers buy • Increased role of courts to set policy • “Consumer” class action lawsuits • Assault on GMOs, fat, salt, sugar, etc.

19. Consumer Trends 2013 • Some domestic trends • Sustainability • While not necessarily a consumer trend, many are aware of it. How much they care is another question. • Producers have led the way without calling it sustainability • Proactive efforts by food processors score benefits internally & externally • Retailers (Walmart) will force the issue

20. Consumer Trends 2013 • Some domestic trends • Aging and more diverse population • Two largest “groups” – Boomers (about 75 million) and Millennials (about 80 million) make up about half of U.S. population. • Different needs, wants, lifestyles • Boomers still have greatest buying power • Boomers want products that have health benefits with focus on cholesterol & heart • Boomers want added nutritional value

21. Consumer Trends 2013 • Some domestic trends • Aging and more diverse population • Millennials establishing themselves as household leaders with financial pressures • Millennials seek value/price in box stores • Millennials also seek convenience • Millennials want natural & maybe organic • Millennials tend to buy prepared food and take it home • Millennials tend not to eat 3 “set” meals

22. Consumer Trends 2013 • Some domestic trends • Aging and more diverse population • Campbell plans 200 new products, with focus on millennials- headline in GMA Brief • Millennials are more tech savvy • “Our fans, namely millennial consumers, have high food IQs and high expectations.” • - Nestle Prepared Foods Co. comment in re-launch of Hot Pockets

23. Consumer Trends 2013 • Some domestic trends • Aging and more diverse population About 1 in 5 Americans will be Hispanic by 2018 and 1 in 3 by 2060. U.S. Census Bureau 78% % of total population

24. Consumer Trends 2013 • Trends directly affecting food • Lawsuits, ballot initiatives & regulations • Pressure on “BIG THREE” • Weight management • Healthy and authentic replace natural • Distinction between sugar & HFCS • Non-caloric sweeteners & mid-cal drinks • Lack of personal responsibility • Regulate the industry, not the person • Obesity classified as a disease by AMA

25. Consumer Trends 2013 • Trends directly affecting food • Lawsuits, ballot initiatives & regulations • New York Mayor Bloomberg’s attempt to ban “large sugary drinks” • GMO labeling initiatives in about 25 states • Proposition 37 – defeated for now • Revisions to school lunch, SNAP, WIC related to nutrition density • Etc., etc., etc. – Not consumer led

26. Consumer Trends 2013 • Trends directly affecting food • Pressure on “BIG THREE” • Fat – Focus fading; consumer confusion • Salt – Battle raging • Sweeteners – Assault just beginning • Many companies are taking initiative to reduce all of these – Will it be enough?

27. Consumer Trends 2013 • Trends directly affecting food • “Weight management” • Retail sales expected at $38 billion in 2013 and forecast at $41 billion by 2016 • Dairy (skim/low-fat milk) largest category • Low or no calorie carbonated beverages • Soda sales (regular & diet) at Coca-Cola, PepsiCo and Dr. Pepper Snapple all down so far this year • Commercial weight loss/management programs

28. Consumer Trends 2013 • Trends directly affecting food • Healthy and authentic replace natural • Lack of definition for natural from FDA • Natural didn’t resonate with consumers • Organic seen as “healthier” but expensive • But outside groups will continue use “natural” in seeking legislation or taking court action to control food processors • Rise of gluten free – it’s perceived as healthy

29. Consumer Trends 2013 • Trends directly affecting food • Distinction between sugar & HFCS • Numerous studies indicate consumers are concerned about overall calories, not whether they come from sugar or HFCS • “Consumers aren’t responding to product formulation or menu item adjustments based on specific sweetening ingredients.” • - Sara Martens, Mintel Research Consultancy

30. Consumer Trends 2013 • What’s on the horizon? • Per capita sweetener deliveries (U.S.D.A.) Pounds per person before spoilage & waste

31. Consumer Trends 2013 • Trends directly affecting food • Non-caloric sweeteners & mid-calorie beverages • Will this affect corn sweeteners more than sugar in United States? • Stevia continues to make gains, but . . . • Global stevia consumption estimated at 1,278 tonnes • Global sugar consumption near 170 million tonnes • Lawsuit against Cargill for calling Truvia “natural”

32. Consumer Trends 2013 • Trends directly affecting food • Lack of personal responsibility • “It seems like with the medical advantages that have taken place, this generation would have more of an opportunity to be healthier with what we have learned about cholesterol, diet and so forth. What I think, instead, is that the study appears to sow that they are relying on modern medicine as a rescue strategy.” • - Dr. Dana King, Chair of W.V. Dept. of Family Medicine, lead author • of study showing boomers are in worse health than their parents

33. Consumer Trends 2013 • Trends directly affecting food • Lack of personal responsibility • “While one in six boomers are willing to make changes to stay active, nearly 25% of respondents said they were unwilling to make lifestyle changes for health benefits.” • - Fonterra U.S.A. study of “healthy” boomers

34. Consumer Trends 2013 • Trends directly affecting food • Regulate the industry, not the person • Mayor Bloomberg’s attempt to ban “large sugary drinks” • Regulators can’t realistically control what people eat – but they can control (or try) what food processors produce • Political aspect • Will obesity as a disease have an effect?

35. Consumer Trends 2013 • Trends directly affecting food • Obesity classified as a disease • May lead to more personal responsibility if it means higher insurance rates based on weight • Too early to know ramifications • Certainly lead to more lawsuits

36. Consumer Trends 2013 • What consumers say they want • Food value • Food that tastes good • Food that is safe • Food that is easy • Food that is healthy

37. Consumer Trends 2013 • What consumers say they want • Food value (SympohonyIRI report) • “While an increasing number of positive signs are emerging, shoppers will remain intensely focused on value.” • “Shoppers (will) limit spending to channels that are perceived as offering the best value.” • “Negative news about the federal budget deficit and costs of the new health care law . . . will reinforce shoppers’ frugal behaviors.”

38. Consumer Trends 2013 • The consumer conundrum • Taste/comfort vs healthy/fresh • Active lifestyle vs gamer/couch potato • Headlines: • A generation after Dietary Guidelines introduced eating habits are not improving • Boomers looking for products for an active, healthy life • What consumers crave – Krispy Kreme donuts and Olive Garden breadsticks are named among top palate pleasers in Technomic survey • Health authenticity drive latest food trends

39. Consumer Trends 2013 • What’s on the horizon? • Per capita sweetener consumption has peaked U.S.D.A.

40. Consumer Trends 2013 • What’s on the horizon? • Focus on baby boomers & millennials • Less sugar, just like less salt & less fat • Competition from non-calorie sweeteners • Increased efforts by governments and special interest groups to restrict sugar consumption • Lack of personal responsibility • What people say they want and what they do often are not the same

41. Consumer Trends 2013 • Opportunities • Promote sustainability – “sells” well and saves money if done right • Take initiative rather than react • Industry needs to take lead in healthy alternatives that mean reduced sugar, such as eating in moderation, portion control, mid-calorie food and beverages

42. Consumer Trends 2013 • Conclusions • It’s going to get harder as anti-sugar battle grows, regulations focus on food processors • Consumers will continue to be bombarded by negative messages about caloric sweeteners “telling them” what is best for them • More sugar, less demand? • People like sweets • 25% of consumers across all age groups eat indulgent snacks daily SymphonyIRI Group

43. Consumer Trends 2013 Thanks