U.S. Retailing & Consumer Trends

1. U.S. Retailing & Consumer Trends August 27, 2009 Todd Hale SVP Consumer & Shopper Insights Version 8

2. Agenda • Economic Update • Retail Trends • Retail Channel Demographics • Buying Trends • Consumer Trends U.S. Retailing & Consumer Trends

3. Economic Update Page 3 U.S. Retailing & Consumer Trends

4. 4th Quarter Free Fall Over, But July Weaker Than Expected +1% +.7% 0.5% 0.3% Apr Mar Nov Dec Oct Sep Jul Feb May Jun Jan -0.2% -0.6% -0.9% 1999 2001 2002 2003 2004 2005 2006 2007 2008 vs. prior month* % change in retail sales (ex-auto) * Seasonally Adjusted Dept of Commerce: % Chg vs. previous year U.S. Retailing & Consumer Trends

5. Discretionary Spending Value & Convenience Stock Up & Save Same Store Sales Reflect Consumer Actions Home Depot Lowe’s JCPenney Macys Nordstrom Target Whole Foods Rite Aid Kmart Walmart Same Store Sales Growth SuperValu Safeway Costco Source: Company press releases; July‘09 results (excl fuel) for al but Sam’s Club, Kroger, Safeway, SuperValu, Dollar General, Family Dollar, Walmart, Dollar Tree, CVS, Kmart, Whole Foods, Home Depot, Lowe’s – latest quarterly report U.S. Retailing & Consumer Trends

6. Buying Trends U.S. Retailing & Consumer Trends

7. Softness in Recent Quarter Driven in Part by Price Cuts in Dairy & Other Departments Unit prices for fresh eggs & milk down 20% & 18% in latest quarter Latest Source: Scantrack, a service of The Nielsen Company; (FDM w/ Walmart) 52 weeks ending 07/11/09 (versus prior year) U.S. Retailing & Consumer Trends

8. Enhanced Unit Sales in Recent Quarter in Total & in Six of Eleven Departments Latest General Merch Non Food HBA Alco Bev Fresh Meat Deli Pkgd Meat Dairy Fresh Produce Frozen Dry Grocery Total Source: Scantrack, a service of The Nielsen Company; (FDM w/ Walmart) 52 weeks ending 07/11/09 (versus prior year) U.S. Retailing & Consumer Trends

9. Consumers Turn to Store Brands In Down Economy—Improved Brand Performance in Recent Periods Store Brands Avg Unit Sales Growth: 5.8% Driver of growth: Consumables* Departments: Fresh Produce, Fresh Meat, Packaged Meat, Dairy, Dry Grocery, Frozen, Deli Store Brands * Latest Quarter % Unit Sales Growth for last 6 (4-week) periods Branded Avg Unit Sales Growth: -2.2% Driver of growth: Discretionary plus* Departments: General Merchandise, Non-Foods, Health & Beauty, Dry Grocery Branded * Latest Quarter Source: Nielsen Scantrack, a service of The Nielsen Company; (FDM w/ Walmart) 52 weeks ending 07/11/09 (versus prior year) U.S. Retailing & Consumer Trends

10. SB Growth Driven First by Higher Prices, But Unit Growth Indicates Real Shifting 2008+ Real Shifting from Brands to PL 2007 Higher Prices Drive PL Growth Source: Nielsen Scantrack, a service of The Nielsen Company; (FDM ex-Walmart) U.S. Retailing & Consumer Trends

11. Consumer Trends Page 11 U.S. Retailing & Consumer Trends

12. How Consumers Have Reacted During The “Great Recession”? • Still very much in the game – only 5% in panic mode • What didn’t change? Big, enduring trends never went on vacation: • Health & Wellness • Convenience • Demographics (aging, ethnic, haves vs. have nots) • What did change?Near-term trade-offs numerous & different: • Reordering shopping lists: Back to Basics • Changing where & how they shop • Opting out of certain categories entirely • Redefining discretionary versus essential spending • Trading across categories • Trading down on brands U.S. Retailing & Consumer Trends

13. How Consumers Have Reacted During The “Great Recession”? • Some huge macro-trend busters: • Away-from-home consumption took a big hit • Pampering shift from spas & salons to at-home solutions • Savings rates go to black • Store Brands a viable choice for more consumers • Questions: • Will we see long lasting changes in consumer buying & shopping? • Return to normalcy or continued restraint • Did you, or are you, going on the offensive or defensive to exploit what has changed or what hasn’t changed? U.S. Retailing & Consumer Trends

14. Demographic Trends U.S. Retailing & Consumer Trends

15. We Are Aging Because We Aren’t Having Kids Live births per 1,000 population Source: U.S. Census Bureau U.S. Retailing & Consumer Trends

16. U.S. Population Growth At All Time Low Average 1% growth for decades to come Much higher than the rest of the developed world, but much slower than we are used to Strongly dependent on new immigrants & their children – 82% of growth (100% of growth among children) Source: The Nielsen Company & Pew Research Center U.S. Retailing & Consumer Trends

17. 2037 Will Be Our Oldest Year Nearly 30% of HHs will be headed by a person over the age of 65 Over 72% of 65+ HOHs will be white (non Hispanic) 48% of 65+ HOHs will be in single person HHs 45% male / 55% female Source: The Nielsen Company U.S. Retailing & Consumer Trends

18. Households With Children Will Continue to Decline Source: U.S. Census Bureau & The Nielsen Company U.S. Retailing & Consumer Trends

19. Share of Population Growth by Race / Ethnicity Source: The Nielsen Company U.S. Retailing & Consumer Trends

20. Projections for Families with Children HHs with children become more ethnic more quickly than any segment Lowest affluence group will be the only one to gain share – from a quarter to third of families by 2050 Source: The Nielsen Company U.S. Retailing & Consumer Trends

21. Thinking About Economics • HHs closest to the poverty line will grow the most, at the expense of all others, but especially the middle • Price& value will gain in importance in consumer’s purchasing decisions U.S. Retailing & Consumer Trends

22. Thinking About Families • HHs with children will continue to decrease in share & average HH size will decrease • Families with children become more ethnic more quickly than the total population • Multi-cultural marketing will not be an option U.S. Retailing & Consumer Trends

23. Thinking About Portfolios • Brands & categories with strong skews to HHs with children will experience a “demographic drag” from slow growth • Brands with older consumer franchises could enjoy a growth boom – but beware of cohort effects U.S. Retailing & Consumer Trends

24. A Challenging Future Between… …and a shrinking pie Very diverse consumer segments… - Multicultural - Aging - Economically distressed U.S. Retailing & Consumer Trends

25. Projecting Behavior into the Future - Few Categories Will Grow Faster than HHs Highest percentage growth categories • Ethnic HABA • Medications / remedies • Health aids • Vitamins • Flour / shortening / sugar / yeast / eggs U.S. Retailing & Consumer Trends

26. Projecting Behavior into the Future - Few Categories Will Grow Faster than HHs But the mix within categories may shift across value segments – Super Premium Premium Mainstream Value Highest percentage growth categories • Ethnic HABA • Medications / remedies • Health aids • Vitamins • Flour / shortening / sugar / yeast / eggs Lowest percentage growth categories • Toys & sporting goods • Breakfast foods • Baby care – diapers, food, etc. • Pet products U.S. Retailing & Consumer Trends

27. Kroger: Seniors receive a 10% discount OFF of your total purchases on the first Wednesday of every month. All Seniors, 60 years and older are eligible! (KY & TN Stores Only!)* Retailers Are Focused On Seniors Source: Company websites U.S. Retailing & Consumer Trends

28. Kmart Providing Focus & Savings for 50 + Source: kmart.com U.S. Retailing & Consumer Trends

29. A Simple Solution from Target – Large Print on Prescription Medications Source: target.com U.S. Retailing & Consumer Trends

30. HBC Senior Focus – What about Food & Beverage & Non-Food? U.S. Retailing & Consumer Trends

31. Meals For Two U.S. Retailing & Consumer Trends

32. Independent Hispanic Grocers Source: company websites and Houston Chronicle U.S. Retailing & Consumer Trends

33. Hispanic-Focused Store Formats Source: company websites and azcentral.com U.S. Retailing & Consumer Trends

34. Food Lion Converting Existing Locations to Hispanic Formats – 10% of North Carolina Stores to be Converted Source: FoodLion.com U.S. Retailing & Consumer Trends

35. Asian Supermarkets Source: company websites U.S. Retailing & Consumer Trends

36. Walgreens in Chicago’s Chinatown - Catering to the Demographics of the Neighborhood Source: Photograph taken by Nielsen employee U.S. Retailing & Consumer Trends

37. Ethnic Diversity Impacting General Population U.S. Retailing & Consumer Trends

38. Language Preference Options Source: company website U.S. Retailing & Consumer Trends

39. Link on Nestlé USA website – click on Mas Recetas in En Español box Source: company website U.S. Retailing & Consumer Trends

40. Welcome to the Cocinando con Nestlé Website Source: company website U.S. Retailing & Consumer Trends

41. Unilever Launches Hispanic Website Source: Unilever’s Vivemejor website U.S. Retailing & Consumer Trends

42. Excellent Use of Product Shots in Ethnic Marketing Source: Company website U.S. Retailing & Consumer Trends

43. Convenient Consumer Solutions U.S. Retailing & Consumer Trends

44. Retailers Winning w/Technology Today Source: Company websites U.S. Retailing & Consumer Trends

45. Competition from Companies Who Know How To Sell On-line 100 Meals for Under $10 Source: Company websites U.S. Retailing & Consumer Trends

46. Fresh Food & Prepared Meal Competition Source: Company website U.S. Retailing & Consumer Trends

47. Retailers Taking Advantage of iPhone Apps Source: Apple iTunes Store U.S. Retailing & Consumer Trends

48. Announced in September, 2008 • In 2,700 U.S. stores • On 27,000 screens • Billed as the first “shopper-intelligent network at retail” Source: mediapost.com and c3brandworks.com U.S. Retailing & Consumer Trends

49. Hy-Vee Site on “facebook” & Launches New Shopping Capabilities on Website Source: Company website U.S. Retailing & Consumer Trends

50. New Look to Target Weekly “On-Line” Ad Source: target.shoplocal.com U.S. Retailing & Consumer Trends