2021 TRENDS AND EMERGING GROWTH POCKETS

Discovering Pockets of Demand

2021 TRENDS AND EMERGING GROWTH POCKETS

Part June

28

2021

EXECUTIVE SUMMARY

Consumers are resuming active lifestyles while maintaining at-home habits (e.g., more meals at home). While CPG demand has remained elevated in the first half of 2021, we anticipate that demand patterns will shift as the economy reopens and there is more competition for the consumers' wallets. This report highlights key 2021 trends and identifies emerging growth pockets for CPG manufacturers and retailers.

CHANGING SHAPE OF THE CPG DEMAND CURVE ? Consumers are becoming more comfortable shopping in stores, reverting to multiple channels (i.e., non-grocery, small format),

while at the same time, many shoppers will stick with online options ? behavior that will continue to drive omnichannel sales. ? Younger and higher-income households drive increasing, smaller trips; low-income households represent the highest

growth opportunity as they continue to spend more for home consumption. ? CPG demand continues to be idiosyncratic, with highly elevated consumption of frozen foods and baking ingredients reverting

but still above the norm, while consumption of sports drinks, sleep remedies and kitchen storage and plastic drinkware remains high. Depressed categories such as cosmetics recover, yet remain below pre-pandemic sales levels. ? Consumers continue to buy premium products while shelf price increases continue to take effect. Expect increasing trade-off vs. product value as prices creep up. Store brands, which lagged or decelerated vs. national brands in the 1H 2021, are likely to gain share in 2H as national brands raise prices. ? Holiday celebrations are shifting back to larger events. ? 28% of the top 100 brands gained significant penetration in 2020, and retained >50% of gains in 2021. Manufacturers and retailers will compete to win or retain penetration acquired in the last few quarters.

EMERGING OPPORTUNITIES ? Be adept at detecting shifts in consumer needs and preferences, and react with agility as demand patterns shift. ? As significant shelf price increases occur, manufacturers and retailers will have to resort to granular revenue management

strategies to drive profitable growth (e.g., net price realization, truly incremental promotions, price-pack-channel range architecture). ? CPG companies cutting media budgets to offset cost inflation should optimize media ROI real time and focus on the right products,

vehicles (e.g., digital, social) and right segments and audiences that are most responsive to media to minimize share loss. ? Simplify the shelf set with the right placement and tailor assortment to digital and omnichannel shoppers. ? Communicate and innovate on attributes and benefits that matter to shoppers and ensure that innovation is incremental. ? CPG retailers and manufacturers must continue to invest in online platforms to retain omnichannel shoppers and carefully curate

the online vs. in-store experiences. ? Focus on winning retailers, categories, brands and channels (including on-the-go, food service) for growth.

?2021 Information Resources Inc. (IRI). Confidential and Proprietary.

2

Post-Pandemic Lifestyles Balance Out-of-Home Activity With Ongoing At-Home Tendencies

Home New household formation (especially in suburbs) continues. Ongoing enhancement of

home environment.

Leisure, Entertainment & Holidays Resumption of pro-sports events; movie theaters re-open; larger celebrations return vs. pandemic.

Self- and Societal Care

Convenience

Indulgence

Work and School Return to on-location jobs, at least part-time for office workers. Full-time at school expected for most by fall.

Consumption Return to away-fromhome consumption while maintaining some athome habits. Intense home cleaning and stockup behaviors ease.

Shopping E-commerce usage sticks. Shoppers gain comfort in-store, quick trips increase.

?2021 Information Resources Inc. (IRI). Confidential and Proprietary.

3

Household Spending Increases for Transportation and Recreation, But At-Home Consumption Remains Elevated for Now

U.S. Household Consumer Spending % Change vs. 2019

2020 PostPeak Decline COVID-19 Max Beginning 2021

Latest

Total Household Spend

% of Apr '20

Oct '20

Jan '21

Apr '21

L52 vs. Apr '19 vs. Oct '19 vs. Jan '19 vs. Apr '19

spend -19%

-1%

5%

8%

Health

22%

-26%

0%

5%

5%

Housing & Utilities

20%

4%

4%

8%

8%

Recreation

9%

-29%

-3%

6%

12%

Financial Services

9%

0%

3%

8%

9%

Transportation

9%

-44%

-10%

0%

12%

Food & Bev for At-Home

8%

9%

10%

16%

16%

Foodservices (Away From Home) 5%

-46%

-9%

-5%

4%

HH Furniture & Maintenance

5%

-12%

11%

22%

24%

Clothing

3%

-47%

-3%

4%

8%

Education

2%

-10%

-9%

-6%

-5%

Communication

2%

-4%

2%

6%

6%

Accommodations

0.5%

-83%

-55%

-55%

-43%

Other Goods

6%

-27%

-7%

-1%

2%

Opportunities

Spending on household furniture also remains elevated, and clothing

expenditures are ramping up.

Foodservice spend is starting to recover.

From a very high rate in March and April, home improvement and car sales begin to soften

from their peaks in May.

Anticipate ongoing inflation in most areas ? CPI All Items +5% May 2021 vs. YA, +0.6 vs. April ?

particularly in transportation, clothing and household maintenance.

Source: BEA, Personal Consumption Expenditures by Major Type / Type of Product, 5/28/21. BLS CPI for May 2021. US Census Retail Trade advanced estimates for May 2021. IRI analysis.

?2021 Information Resources Inc. (IRI). Confidential and Proprietary.

4

Leading Indicators Signal Decreasing At-Home CPG Demand in 2H 2021

U.S. Consumer Mobility vs. F&B At-Home Volume / % Change from Pre-COVID-19 (Jan. to Mid-Feb. 2020) Base, 4 Week Rolling Average, Est. Total Omnichannel

40

2020 F&B volume ~+8%

~+10-12% vs.

vs. Jan.-

+6%

30

Jan.-Feb. 2020

Feb. 2020

vs. Jan.Feb. 2020

+3%

vs. Jan.-

+3%

Feb. 2020 vs. Jan.-

20

Feb. 2020

Impact on In-Home CPG

Consumption

10

Median Forecast

Current Level

F&B Volume

Strong

positive

0

Workplace

Mild

Mobility

positive

-10

1/1/2020 4/1/2020 7/1/2020 10/1/2020 1/1/2021 4/1/2021 7/1/2021 10/1/2021

Mild

-20

Forecast

negative

Strong

-30

negative

Q1 `21 Q2 `21 Q3 `21 Q4 `21

-40

-50

Leading Indicators of At-Home CPG Demand

CPG Shopping Behaviors

Store trips In-store quick trips increasing

Key cohort growth Millennials and lower income driving CPG growth

Away-From-Home Activity

On-the-Go / Convenience Store Visits Boosted with Memorial Day yet remain negative vs. pre-COVID-19 and skewed toward evening activity. Rising gas prices, +~$1/gal since start of year.

Restaurant Sales Restaurant sales improving, yet below normal levels in Northeast & Great Lakes; seated dining and fine-dining improving. Dining out remains skewed toward dinner while many consumers continue to work from home.

Other Household Spend Rising inflation across all items +5% vs. YA, highest growth since 2008. Transportation costs rising most. Significant increase in entertainment activity in last month, including pro-sports events and movie theaters.

Omnichannel = MULO+C + Costco + E-commerce ? Overlap. Source: Google Mobility ? Workplace. IRI POS data. IRI Strategic Analytics models. IRI analysis.

?2021 Information Resources Inc. (IRI). Confidential and Proprietary.

5

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